2016 F L A G S TA F F, A R I Z O N A Photograph courtesy Tom Bean Photograph courtesy Tom Bean Photograph courtesy Tom Bean Photograph courtesy Tom Bean Photograph courtesy Tom Bean Open Space Life at a Higher Elevation City of Flagstaff Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2016 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2016 City of Flagstaff, Arizona Prepared By: Management Services Division Finance and Budget Section City of Flagstaff Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2016 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal .................................................................................................................................................... iii GFOA Certificate of Achievement ................................................................................................................................ xii Organizational Chart .................................................................................................................................................. xiii List of Elected and Appointed Officials....................................................................................................................... xiv FINANCIAL SECTION Independent Auditor’s Report ....................................................................................................................................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ....................................................................................................................... 5 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position .............................................................................................................................. 19 Statement of Activities................................................................................................................................... 20 Fund Financial Statements: Balance Sheet – Governmental Funds ............................................................................................................ 22 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Activities ................... 25 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...................... 26 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................................. 28 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ........................................................................................................ 30 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ........................................................................................................ 31 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ........................................................................................................ 32 Statement of Net Position – Proprietary Funds............................................................................................... 34 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds .................................................................................................... 36 Statement of Cash Flows – Proprietary Funds ................................................................................................ 38 Notes to the Financial Statements ........................................................................................................................ 42 Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability................................................................................100 Schedule of Changes in Net Pension Liability and Related Ratios..........................................................................101 Schedule of the City’s Pension Contributions.......................................................................................................103 Schedule of Agent Other Post-Employment Benefit Plans Funding Progress.........................................................104 Schedule of Other Post-Employment Benefits Plan’s Funding Progress................................................................105 Notes to the Required Supplementary Information...............................................................................................106 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds ................................................................................................ .107 Combining Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ...................................................................... 108 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ................................................................................ 110 i SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity ............................................................................................................... 114 Schedule of Changes By Function and Activity............................................................................................. 116 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ................................................................................................................................................ 117 BBB Fund ..................................................................................................................................................... 118 Housing and Community Service ................................................................................................................. 119 Metropolitan Planning Organization Fund ................................................................................................... 120 General Obligation Bond Fund ..................................................................................................................... 121 Secondary Property Tax Revenue Fund ........................................................................................................ 122 Special Assessment Bond Fund..................................................................................................................123 Capital Projects Bond Construction............................................................................................................124 Financial Data Submission Schedules Net Position Accounts ................................................................................................................................. 126 Revenue, Expenses, and Changes in Fund Net Position Accounts................................................................ 128 Revenue, Expenses, and Changes in Fund Net Position Accounts-Public Housing-Consolidated ................ 132 STATISTICAL SECTION Net Position by Component ................................................................................................................................ 136 Changes in Net Position ..................................................................................................................................... 138 Fund Balances, Governmental Funds .................................................................................................................. 140 Changes in Fund Balances, Governmental Funds................................................................................................ 141 Tax Revenue by Source, Governmental Funds .................................................................................................... 142 Intergovernmental Revenue by Source, Governmental Funds ............................................................................. 143 Full Cash Value of Taxable Property ................................................................................................................... 144 City Tax Revenue for Major Categories .............................................................................................................. 145 Direct and Overlapping Property Tax Rates ........................................................................................................ 146 Principal Property Tax Payers ............................................................................................................................. 147 Property Tax Levies and Collections ................................................................................................................... 148 Direct and Overlapping Sales Tax Rates ............................................................................................................. 149 Ratios of Outstanding Debt by Type ................................................................................................................... 150 Ratios of General Bonded Debt Outstanding ...................................................................................................... 151 Direct and Overlapping Governmental Activities Debt ........................................................................................ 152 Legal Debt Margin Information........................................................................................................................... 154 Pledged Revenue Coverage ................................................................................................................................ 156 Demographic and Economic Statistics ................................................................................................................ 161 Principal Employers ............................................................................................................................................ 162 Full-time Equivalent City Government by Function/Program .............................................................................. 163 Operating Indicators by Function/Program ........................................................................................................ 164 Capital Asset Statistics by Function/Program ..................................................................................................... 166 Insurance Summary ............................................................................................................................................ 167 ii City of Flagstaff December 28, 2016 The Honorable Mayor, City Council and Citizens of the City of Flagstaff, Arizona I am pleased to submit the Comprehensive Annual Financial Report (CAFR) for the City of Flagstaff, Arizona (City) for the fiscal year ended June 30, 2016, as required by Article VI, Section 5 of the City Charter. The report was prepared by the City’s Finance Division in accordance with U.S. generally accepted accounting principles (GAAP) and audited in accordance with U.S. generally accepted auditing standards by a firm of licensed certified public accountants. This report consists of management’s representations concerning the finances of the City of Flagstaff. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Flagstaff has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City of Flagstaff’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Flagstaff’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. CliftonLarsonAllen, LLP a firm of licensed certified public accountants have audited the City of Flagstaff’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Flagstaff for the fiscal year ended June 30, 2016, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Flagstaff’s financial statements for the fiscal year ended June 30, 2016, are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report. iii The independent audit of the financial statements of the City of Flagstaff was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Flagstaff’s separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Flagstaff’s MD&A can be found immediately following the report of the independent auditors. CITY OF FLAGSTAFF PROFILE Flagstaff is located in Coconino County, Arizona at the intersection of Interstate 17 and Interstate 40. Flagstaff is the largest city in Northern Arizona and is the regional center and county seat for Coconino County, the second largest county in the 48 contiguous states. The 2010 United States Census is showed a population of 65,870. The Arizona Department of Economic Security estimates the population for 2016 at 70,320. The City of Flagstaff became a town in 1894, incorporated as a city in 1928 and its boundaries currently encompass an area of approximately 65 square miles. Flagstaff is nestled at the base of the San Francisco Peaks and is surrounded by one of the largest ponderosa pine forests on earth. Flagstaff drew its name from a very tall pine tree made into a flagpole in 1876 to celebrate our nations’ centennial. At nearly 7,000 feet, Flagstaff is one of the highest elevation cities in the United States. Flagstaff operates under a council-manager form of government as provided by its Charter. The Mayor is elected at large on a non-partisan ballot for a two-year term and six City Council members are elected at large on a non-partisan ballot for four-year terms. The City Council appoints the City Manager, who has full responsibility for carrying out Council policies and administering City operations. The City Manager, in turn, appoints City employees and department heads under service procedures specified by Charter. City service departments provide a full range of services including General Government, Police and Fire Protection, Environmental Services, Transportation, Library, Parks and Recreation, Airport, Water and Wastewater Sewer, Housing Authority, and Stormwater services. The annual budget serves as the foundation for Flagstaff’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for all funds and entities related to the City. All of these funds and entities are included in the basic financial statements. The City Manager submits to the Council each spring a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. A public hearing is held prior to the budget’s final adoption and tax levy in order to obtain taxpayer comments. The budget is legally enacted through the passage of a resolution and the tax levy is adopted by an ordinance. The resolution sets the limit for expenditures during the fiscal year. The legal level of control for the budget is the division level. Additional expenditures may be authorized for unanticipated and/or inadequately budgeted events threatening the public health or safety as prescribed in the State Constitution, Article 9, Section 20. iv FACTORS AFFECTING THE CITY’S FINANCIAL CONDITIONS Local economy The City of Flagstaff continues to experience positive economic growth in our community. The City’s general sales tax increased 4.01% in Fiscal Year (FY) 2014, 9.81% in FY 2015 and 6.97% in FY 2016. In FY 2016, general sales tax revenues increased in 7 of the 11 categories when compared to the prior year. The following chart summarizes the categorical changes from the prior fiscal year: Category Utilities Telecommunication Restaurants/Bars Amusements Commercial Property Rental Personal Property Rentals Construction Contracting Retail Hotels/Motels Use Tax Other Total FY 2015 1,095,776 360,236 2,435,598 76,022 956,828 568,935 1,912,967 8,526,964 1,089,126 263,312 171,446 17,457,210 $ $ FY 2016 1,084,743 333,716 2,516,536 82,011 998,483 596,174 1,767,414 9,465,214 1,209,951 454,616 165,346 18,674,205 % Change -1.01% -7.36% 3.32% 7.88% 4.35% 4.79% -7.61% 11.00% 11.09% 72.65% -3.56% 6.97% (Note: This table reflects an activity based reporting and will vary from the City Sales Tax amount reflected in Schedule 5 of the Statistical Section.) The City collects three different sales taxes: The first is a 1% tax on all general sales, except for food. This is a general purpose tax that benefits the General Fund. The City of Flagstaff is the only city left in the State of Arizona that has a sunset clause on the general sales tax. This tax must go before the voters every ten years and is currently authorized until November 2024. As indicated earlier, overall local sales tax increases have been realized for four years in a row. Per Schedule 5 in the Statistical Section, the 1% general city sales tax receipts have increased 7.0% from the prior fiscal year which exceeds last year’s highest collection level ever. The decrease in the Construction Contracting revenues is related to state legislative changes on what types of construction work is recognized in this category. Now contractors that are working on remodeling type projects pay the sales tax on their materials at the point of sale. These transactions are recorded in the Retail category and which is part of the reason the category increased by 11% this year. Retail sales posted the highest incremental gain at $938,251, with auto sales making up 33% of the increased revenue. The City continues to follow its’ practice to not allocate 100% of construction and auto sales related sales tax revenues to ongoing budgetary needs. The second is a 1.051% sales tax on the same types of general sales; however the tax is restricted in use to certain transportation projects. The first four components of this tax include Safety Improvements, Street Improvements, 4th Street Overpass, and Transit. These transportation tax components expire in 2020. The fifth component is for Road Repairs and Street Safety improvement that was effective January 1, 2015 as approved by voters. The proceeds from this tax are specifically dedicated to providing overdue maintenance including reconstructions on deteriorating City streets. This tax has a twenty year life and the work program is anticipated v to touch every City owned street within the corporate boundary. As similar sales are taxed with this source, revenue trends are the same as the general sales tax. The third tax is a Bed, Board, and Beverage (BBB) tax that collects an additional 2% for motel rooms/campgrounds, restaurants, and bars. This revenue is restricted in use to certain economic, arts, beautification, recreation, or tourism activities. The BBB tax also has a sunset clause and it is currently authorized until 2028. Tourism is a major industry to the City’s local economy. Overall sales decreased in FY2009 when gas prices were peaking but have since rebounded and have set record highs for five years in a row, now at $7.5 million dollars. The City receives taxes from state shared revenues: State shared revenues include a distribution of a portion of sales tax and income tax collected by the state. These distributions are made based on a city or town’s relative share of population in comparison with all other cities and towns. This relative population share was set by the 2010 census. Historically, Flagstaff’s greatest challenge was that while population was growing, it was growing at a slower pace than some of the other communities in the state. In the past, this has translated into a decreased proportionate revenue share; however the 2010 census resulted in the City’s proportionate population share increasing from 1.25% to 1.31%. For FY 2017, that state imposed legislative changes to the population component of the calculation and will use annual population estimates provided by the US Census Bureau. State shared sales tax revenues have increased for the sixth year in a row. For FY 2016 there was a 3.6% growth in these revenues. However, the state shared income tax continue to be under the FY 2009 peak revenues by 13.3%. State income tax revenues decreased by 0.5%. The State continues to implement reductions in corporate income tax liabilities which are expected to have a neutral impact on these revenues through increased economic development. Highway user revenue (gas tax) funds (HURF) increased by 5.9% in FY 2016. While this is a considerable increase, it is still 8.2% below FY 2006, the peak revenue year. These revenues are distributed based on a fairly complex Arizona Department of Transportation formula, based in part on the amount of fuel purchased in our region. The revenue decreases were initially due to the increased gas pricing resulting in lower sales. Recently we have seen lower gas prices which increases the revenues collected. Additional decreases were due to the State shifting revenues ‘off the top’ to fund other public safety and motor vehicle department needs. As evidenced by the increase in BBB taxes and other statistical data, the City remains a popular drive destination from Las Vegas, Los Angeles, and Phoenix; however, this revenue is estimated to recover very slowly and is at continued risk for future revenue sweeps by the State of Arizona. Overall these three state shared revenues grew by 2.8% in FY2016 and the State of Arizona projects continued growth. Other revenue factors for the City: Excluding new construction, total assessed valuations have increased 2.23% for tax year 2015, fiscal year 2016. Next tax year, the City will see a 1.39% increase in total assessed valuations. Even though the City is statutorily allowed to set a primary property tax rate that would allow for 2% annual growth in revenue plus the additional revenue generated from new construction, the Flagstaff City Council has established a policy of flat revenue for existing properties. When the City doesn’t take advantage of the statutorily allowed 2% annual increase, it does not lose the ability to take the increase in the future. Two percent is allowed per year and accumulates (e.g. as the increase has not been taken for four years, the City now has future authority to take a 12% levy increase for vi FY 2018). The millage rate for the primary property tax is adjusted annually to generate a levy equal to the prior year, plus new construction. While revenues fluctuations continue in some areas, the City increased General Fund budgeted revenue in FY 2017 (excluding grants and miscellaneous revenue) by 5.1 % which reflects increases in local and state revenues. The City of Flagstaff increased its overall staffing count by 15.04 full time equivalencies for the upcoming fiscal year. This is the third year the City has increased its position count since 2009. experienced staffing reductions totaling 130 full time equivalencies. Prior to this, the City Most of our community partners in the public, private, and governmental sectors are also experiencing growth. The one declining area is the Flagstaff Unified School District. After four consecutive years of increased enrollment, the 2016-2017 has seen a slight decline of less than one percent. Northern Arizona University (NAU) continues to grow. In the Fall 2016, NAU enrolled its largest freshmen class. This strong growth is a factor of having three student housing projects currently under construction and one more project considered in the next year. Development within the City continues to be very strong in every sector; single family, multifamily, commercial and mixed use. With our strong tourism sector, we currently have 3 hotels that are currently under construction. The City is currently working to bring a second airline to the community next year. The housing market continues to strengthen as we have seen average housing prices increase 5% to $354,000 in July 2016. While revenue growth is occurring, there continues to be limited resources available for new or restored services within the community. Fixed costs, primarily public safety pensions, continue to match or outpace the revenue gains. The economic analysts for our local and state region continue to expect slow and steady growth and add caution of a possible recession in the next three years. The City will plan accordingly to ensure its financial position remains strong should a recession occur. LONG-TERM FINANCIAL PLANNING The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Flagstaff’s fiscal health. The City continues to plan in a five to ten year horizon as economic conditions change. STRATEGIC FINANCIAL PLAN Flagstaff’s financial plan requires many elements working in concert with one another. Some of these financial plan elements are financial resource planning, multi-year budget planning, strategic capital improvement project planning, and financial policy impacts, all of which are further identified below. Financial Resource Planning – Strategic financial planning begins with determining the City’s fiscal capacity based upon long-term financial forecasts of recurring available revenues. Financial forecasts coupled with financial trend analysis help preserve the fiscal well being of Flagstaff. Strategic financial capacity planning is a critical element to reach long-term financial stability goals and to determine special financial needs for critical objectives of the City Council. Multi-Year Budget Planning – Multi-year budget planning encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to the community expectations and broad goals of the City Council. The multi-year approach provides a better opportunity for staff to change its financial paradigm from what do we need this year to how do we accomplish our service objectives over-time, given our financial capacity. While the City is required to adopt an annual budget to meet State statutory requirements, vii Flagstaff builds a financial plan for the next five years to help anticipate future impacts and ensure achievement of City objectives within limited or decreasing resources. Strategic Capital Improvement Project Planning – Flagstaff Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budget plans. Projects with significant operating impacts are carefully timed to avoid contingent liabilities, which future operating resources cannot meet. Pay- as-you-go funding sources are also conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used and/or required, capital project plans are sized to conform to existing debt management policies. Financial Policy Planning – The City of Flagstaff financial policies dictate minimum fund balance levels, as a percentage of operating revenues, for the General, Special Revenue, and Enterprise Funds. The General Fund is required to maintain a fund balance of 15% of ongoing revenues and special revenue and enterprise funds are to maintain a 10% fund balance, as calculated against ongoing revenues. The City has made a commitment to maintain General Fund balance at 20%, exceeding policy, to position the City better in times of economic decline. Council adopted a Water, Wastewater and Reclaimed Water policy that sets a goal of minimum fund at 25% and we recently adopted new rates to achieve this goal. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2015, City Council discussed updating the City Council goals. This work was completed in November 2014. The City Council adopted a budget for FY 2016 and FY 2017 aligned with these goals. City staff has worked diligently over the last year to advance the goals. The following are the Council’s eleven goals and associated accomplishments. Invest in our employees and implement retention and attraction strategies • • • • Planned and budgeted for a three year phase in to bring staff up to the 2016 market pay plan Planned and budgeted for two years of a minimum 2% market increase for all staff Reduced our gap in market based pay from 8.32% to 5.21% Implemented retention strategies in the Police Department and saw a reduction in turnover of Police Officer and Dispatch Staff by 43% • Implemented a pay stipend for snow removal resulting in a 70% increase to our staffing pool for snow operations • • Continuing an Employer Assisted Housing program for officers and dispatch employees Provided an additional $215,000 for employee training citywide Ensure Flagstaff has a long-term water supply for current and future needs • Council adopted new rates for water, wastewater and Stormwater in FY 2016 which included additional funding for an improved water conservation program • The Arizona Department of Transportation and the City signed an agreement that would allow the City to use ADOT right-of-way for future construction of a waterline from Red Gap Ranch • Water and Wastewater plants continue to invest in pumps and motor that increase energy efficiency resulting in lower energy cost for FY 2016 viii Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics • • Added Sunday hours to the Main Library which was previously closed on Sundays Spent over $10 million in the last year and a half for street improvement from the road repair and street safety improvements related to a voter approve sales tax • • • • Created a Facilities Contingency Fund to assist with future city facilities’ needs Created an Information Technology catastrophic fund to assist in emergency replacement of hardware Voters approved $12M in general obligation debt for a new courthouse Design work for the new Core Services Maintenance Facility is near completion and construction is expected to be completed by December 2017 • • Funded purchases of cardio equipment for several recreation activity centers Funded the first phase of the Library Master Plan to address materials circulation management, ADA improvements and signage Develop and implement guiding principles that address public safety service levels through appropriate staffing levels • • • Completed a Market Based pay plan for sworn officers and dispatch Reduced patrol vacancy by 15%, patrol was fully staffed during November 2016 Instituted a three-year contract for new hires, a housing incentive program, dispatch shift differential and channel certification pay, and Field Training Officer and dispatch training officer incentive pay • The Fire Department Community Alternative Response Team program continues to be successful and is positioning to be a partner in the Community Paramedicine community and reduce citizen re- admittance to the clinical setting, and response to low acuity non-emergency calls to reduce impacts on availability of our paramedic resources Explore and adopt policies to lower the costs associated with housing to the end user • Council completed a full day Housing Roundtable retreat to review housing affordability issues for our community and invited member of the community to participate in the discussions • Provided community members with Do It Yourself home energy efficiency kits and training Provide for a well-managed transportation system • Created a Regional Transportation Planning Steering Committee which included many community members and partners such as Arizona Department of Transportation, Coconino County, Northern Arizona University, and Northern Arizona Intergovernmental Public Transportation Authority. This committee met to review transportation needs for our community and provided Council with a comprehensive list of transportation needs. • Continue to promote the Flagstaff Airport. This year we increased enplanements by 1.4% with a marketing campaign to Always Fly Flagstaff First. Also provided terminal improvements such as enhanced Wi-Fi and charging stations • Funded Sunnyside infrastructure improvements for Phase 5C Continue to implement the Flagstaff Regional Plan and focus efforts on specific plans • • • Staff summaries to Council include how the item before Council address goals in the Regional Plan Funded an intern position for comprehensive planning projects Partnered with NAU on a Community Liaison position to help bridge communication and needs between the two organization and the citizens • Funded work related to a High Occupancy Housing Plan and a Southside Neighborhood Plan ix Improve effectiveness of notification, communication, and engagement with residents, neighborhoods and businesses and about City services, programs, policies, projects and developments • Completed improvements to the FUTS signage program to provide better information at the many FUTS trailhead in a consistent manner • Continuing work with the Army Corp of Engineering to address the Rio de Flag drainage issues in our community, the design concept report was completed • Completed the Environmental Impact Study for the Flagstaff Watershed Protection program which allows forest treatments to begin • • Implemented video streaming of all City Commission meetings Provided the citizens with a Community Engagement Forum to one-stop service for citizens and staff on surveys and online discussions concerning city issues, proposals and policies Improve the economic quality of life for Flagstaff through economic diversification and by fostering jobs and programs that grow wages and revenues • Assisted with business retention and expansion to help create an additional 136 jobs of which 33 jobs were with new businesses in Flagstaff • We opened a Business Accelerator building to provide office, laboratory and manufacturing space to developing companies • • Provided funding for additional economic development marketing and analytics Provided funding for an Arts and Economic Prosperity study to help understand the impact of the arts and science commitments in our community Support and assist the most vulnerable • Staff prepared and presented to Council a comprehensive list of City services that provide support and • Voters adopted a Livable Wage for the City of Flagstaff which will provide requirements for minimum • The summer reading program which resulted in an increase of 124% in participation. This program assistance for the most vulnerable. wage levels. Minimum wage is now expected to be $12 per hour effective July 1, 2017. helped to serve our community by getting patrons busy reading and offering assistance on how to find resources at the library • Continue to work with service partners to provide services to the community. These include United Way, Boys and Girls Club and Family and Community Teaming for Students (FACTS) • • Funded improvement to Thorpe Park for an adaptive playground unit and surfacing Implemented a pilot program for an after school program at Siler Homes, an affordable housing community Ensure that we are as prepared as possible for extreme weather events • Completed revisions to the Continuity of Operations Plan (COOP) in coordination with the County and City staff • Investing in Upper Lake Mary Watershed monitoring including flowtography and rain gages to help understand the impact of rain and snow events • Continuing to work on the voter approved Flagstaff Watershed Protection Project and leveraging the work with state and federal grant funding x xi xii CITY ADMINISTRATION Citizens of Flagstaff City Council (Elected) Special Committees (Appointed) Flagstaff Municipal Court Magistrates (Appointed) City Court Boards and Commissions (Appointed) 1 City Manager (Appointed) 1 Deputy City Manager City Attorney (Appointed) 1 Deputy City Manager Legal Administration City Clerk Fire Community Development Human Resources Economic Vitality Risk Management Information Technology Police Management Services Public Works Real Estate Utilities xiii City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2016 Mayor Elected Officials Gerald (Jerry) W. Nabours Vice Mayor Celia Barotz Councilmember Coral Evans Councilmember Karla Brewster Councilmember Scott Overton Councilmember Jeff Oravits Councilmember City Manager Eva Putzova Appointed Officials Josh Copley City Attorney Sterling Solomon City Treasurer Rick Tadder City Clerk Elizabeth Burke xiv CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS' REPORT The Honorable Mayor and Members of City Council City of Flagstaff, Arizona Flagstaff, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Flagstaff, Arizona (City), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 The Honorable Mayor and Members of City Council City of Flagstaff, Arizona Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Flagstaff, Arizona as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 5 – 18 and the required supplementary information for the City’s pension plans and other postemployment benefits on pages 100 – 105 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Flagstaff, Arizona’s basic financial statements. The combining and individual nonmajor fund financial statements, supplementary information and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and the supplemental information (capital assets used in the operations of the government, budgetary comparison schedules for nonmajor governmental funds and the financial data submission schedules) are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. 2 The Honorable Mayor and Members of City Council City of Flagstaff, Arizona Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 28, 2016, on our consideration of the City of Flagstaff, Arizona's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Flagstaff, Arizona’s internal control over financial reporting and compliance. a CliftonLarsonAllen LLP Phoenix, Arizona December 28, 2016 3 4 MANAGEMENT DISCUSSION AND ANALYSIS As management of the City of Flagstaff (the City), we offer readers of the City’s Financial Statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii –xi of this report. FINANCIAL HIGHLIGHTS  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $570.0 million (net position).  The government’s total net position increased by $18.7 million during the fiscal year. This is a result of an increase in net position in the governmental activities of $16.6 million and an increase in net position in the business type activities of $2.1 million.  As of June 30, 2016, the City’s governmental funds reported combined ending fund balances of $92.3 million, an increase of $7.7 million in comparison to the prior fiscal year. Approximately 26.5% of this total amount ($24.5 million) is unassigned fund balance available for spending at the government’s discretion.  As of June 30, 2016, total unassigned fund balance for the general fund was $27.4 million, or 50.7% of  As of June 30, 2016, the City’s proprietary funds reported combined total net position of $335.7million, total general fund expenditures ($54.1 million). and total unrestricted of $21.2 million. The largest unrestricted component of net position is in the Water and Wastewater Fund ($16.0 million) and in the Environmental Services Fund ($6.8 million). OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: (1) Government-wide Financial Statements, (2) Fund Financial Statements, and (3) Notes to the Financial Statements. This report also contains other Supplemental Information in addition to the basic financial statements themselves. Government-wide Financial Statements The Government-wide Financial Statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the City’s assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources, which equal net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes or expenses pertaining to earned but unused vacation leave. Both of the Government-wide Financial Statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government activities) from other functions that are 5 intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The sections are demonstrated in the table below. Government Activities Business-type Activities Beautification Human Resources Airport Cemetery Information Services Environmental Services City Attorney Library Housing Authority City Council Municipal Courts Stormwater Operations City Manager Parks Wastewater Community Development Police Water Economic Development Recreation Facilities Maintenance Risk Management Financial Services Streets and Transportation Fire Tourism Fleet Management The Government-wide Financial Statements include not only the City itself (known as the primary government), but also the Municipal Facilities Corporation (MFC). The MFC, although legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government as a blended component unit. The Government-wide Financial Statements can be found on pages 19-21 of this report. Fund Financial Statements The Fund Financial Statements are designed to report information about groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds: Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the Government-wide Financial Statements, Governmental Funds Financial Statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of Governmental Funds is narrower than that of the Government-wide Financial Statements, it is useful to compare the information presented for Governmental Funds with similar information presented for governmental activities in the Government-wide Financial Statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between Governmental Funds and Governmental Activities. The City maintains several individual governmental funds organized according to their type (Special Revenue, Capital Projects, and Debt Service). 6 Information is presented separately in the Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, Highway User Revenue Fund, and Transportation Fund, which are all considered major funds. Data from the remaining governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements on pages 108-111. The City adopts an annual appropriated budget for its General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Enterprise Funds. A budgetary comparison statement has been provided for the General and Special Revenue major governmental funds to demonstrate compliance with the respective budgets. The basic Governmental Fund Financial Statements can be found on pages 22-32 of this report. Proprietary Funds: Proprietary Funds are generally used to account for services for which the City charges customers – either outside customers, or departments of the City. Proprietary Funds provide the same type of information shown in the Government-wide Financial Statements, only in more detail. The City maintains the following two types of proprietary funds:  Enterprise Funds are used to report the same function presented as business-type activities in the Government-wide Financial Statements. The City uses Enterprise Funds to account for Water and Wastewater, Airport, Environmental Services, Stormwater, and the Housing Authority. All are considered to be major funds of the City with the exception of the Housing Authority Fund.  Internal Service Funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses an Internal Service Fund to account for its workers compensation, health insurance, other risk related activity, including claims adjustment, and general liability and property insurance. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the Government-wide Financial Statements. The Internal Service Fund is combined into a single, aggregated presentation in the Proprietary Fund Statements. The Basic Proprietary Fund Financial Statements can be found on pages 34-41 of this report. Notes to the Financial Statements The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the Government-wide and Fund Financial Statements. The notes to the Financial Statements can be found on pages 42-97 of this report. Combining statements The Combining Statements referred to earlier in connection with non-major governmental funds are presented on pages 108-111. Other information In addition to the Basic Financial Statements and accompanying Notes to the Financial Statement, this report also presents certain other Supplemental Information concerning the City’s capital asset activity, budgetary 7 comparison of other major and non-major governmental funds, and financial data submission schedules. Other Supplemental Information can be found on pages 114-134 of this report. GOVERNMENT WIDE STATEMENTS FINANCIAL ANALYSIS Analysis of Net Position As noted earlier, Net Position may serve as a useful indicator of a government’s financial position. For the City, assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by $570.0 million as of June 30, 2016. Of the City’s Net Position, 98.0% reflects its investment of $558.5 million in capital assets (e.g. land, buildings, and equipment), less any outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. Net Position June 30, 2016 and 2015 ( in thousands of dollar s) Go v er n m en tal A c tiv ities Current and other assets Capital assets Total assets Total deferred outflows of resources $ 109,908 308,986 Bu s in es s -ty pe A c tiv ities 2015 2016 $ 418,894 106,317 $ 305,103 411,420 51,565 349,375 To tal 2015 2016 $ 400,940 49,150 352,650 2016 $ 401,800 161,473 658,361 2015 $ 819,834 155,467 657,753 813,220 23,319 23,713 1,785 2,206 25,104 25,919 Long-term liabilities 180,555 187,552 59,233 61,399 239,788 248,951 Total liabilities 201,848 208,615 66,410 68,583 268,258 277,198 5,408 8,197 1,229 2,405 6,637 10,602 Net investment in capital assets 246,897 230,659 311,645 311,963 558,542 542,622 Unrestricted (72,922) (72,233) 20,538 18,391 (52,384) (53,842) Other liabilities Total deferred inflows of resources Restricted Total net position 21,293 21,063 60,982 $ 234,957 7,177 59,895 $ 7,184 2,903 218,321 $ 335,086 28,470 2,664 $ 333,018 28,247 63,885 $ 570,043 62,559 $ 551,339 Total assets increased mainly due to the net change of restricted and unrestricted cash and investments along with the change in capital assets in the governmental activities offset by decreases in intergovernmental and special assessment receivables. Total liabilities decreased primarily due to decreases in bonds, notes and lease payables and special assessment debt offset by increases in net pension obligation and net OPEB obligation. A portion of the City’s net position, $63.9 million (11.2%), represents resources that are subject to external restriction on how they may be used. The unrestricted component of net position may be used to meet the government’s ongoing obligations to citizens and creditors. 8 At the end of the current fiscal year, the City is able to report positive balances in two of the three categories of net position for governmental activities, and in all three categories for business-type activities. Governmental activities are reporting a negative unrestricted net position due to the recording of the City’s net pension obligation. Current assets for governmental activities have increased by 3.4% ($3.6 million). The largest increase was in restricted cash and investments ($6.3 million) while the largest decreases are in specials assessment receivable ($4.6 million) and intergovernmental receivable ($1.0 million). Deferred outflows of resources for the governmental activities have decreased $400,000 and is mostly related to the pension related deferred outflows. Capital assets of the governmental activities, funded through operations, debt proceeds, grants, and contributions, increased by 1.3% ($3.9 million) due to capital outlays and capital contribution in excess of depreciation and deletions. Major capital outlays include the Road Repair and Street Safety projects ($5.7 million) and 38 vehicles and heavy equipment purchases. Governmental activities long-term liabilities decreased by 3.7% ($7.0 million) due to a $13.0 million decrease in long term portion of special assessment debt, bonds, notes and lease payables offset by increases of 6.0 million net pension liability, net OPEB liability and compensated absences. Other liabilities increased by 1.1% ($230,000) primarily due to the increase in the accrued payroll ($384,000) and advance revenues ($281,000) offset by decrease in interest payable ($225,000) and current portion of special assessment debt ($165,000). Deferred inflows of resources for governmental activities decreased $2.8 million related to pension related deferred inflows. Total assets for business-type activities have decreased by 0.2% ($0.9 million). The largest increase was for cash and cash equivalents ($1.8 million). The largest decrease was for capital assets ($3.3 million). Total liabilities for business type activities decreased by 3.2% ($2.2 million). Major changes include the decreases in bonds, notes and leases payable ($2.9 million) and increase in net pension liability ($530,000). Overall, the business-type net position has increased by 0.6% ($2.1 million) due to increases in unrestricted net position ($2.1 million) related overall increase in operating and non-operating revenues. The changes are primarily in the Water and Wastewater Fund, Environmental Services fund and Stormwater Fund. 9 Analysis of Change in Net Position The City’s overall net position has increased by $18.7 million during the current fiscal year. These increases are explained in the government and business-type activities discussion to follow. Changes in Net Position For the Years Ended June 30, 2016 and 2015 (in thousands of dollars) Revenues Program Revenues: Charges for services Operating grants and contributions Capital grants and contributions General Revenues: Property taxes Sales taxes State shared taxes Investment earnings Other Total revenues Expenses General government Public safety Public works Economic and physical development Culture and recreation Highways and streets Interest on long-term debt Water Wastewater Environmental Airport Housing Authority Stormwater Total expenses Increase in net position before transfers Transfers Change in net position Net position at beginning of year, as restated Net position at end of year Governmental Activities 2016 2015 $ $ 9,291 7,599 11,806 $ 7,906 6,671 13,009 Business-type Activities 2016 2015 $ 41,293 4,776 4,340 11,341 48,343 17,080 1,668 1,420 108,548 11,211 42,539 16,684 1,179 728 99,927 337 376 51,122 17,083 34,711 1,650 10,259 12,975 13,059 2,296 92,033 16,515 121 16,636 218,321 234,957 17,627 35,256 1,664 9,343 12,511 18,175 2,944 97,520 2,407 (1,408) 999 217,322 218,321 14,674 10,491 12,087 4,308 6,126 1,245 48,931 2,191 (121) 2,070 333,018 335,088 $ $ $ $ 39,620 4,743 4,749 2016 $ 50,584 12,375 16,146 Total $ 2015 47,526 11,414 17,758 304 1,613 51,029 11,341 48,343 17,080 2,005 1,796 159,670 11,211 42,539 16,684 1,483 2,341 150,956 14,308 10,880 12,072 4,540 6,084 1,184 49,068 1,961 1,408 3,369 329,649 333,018 17,083 34,711 1,650 10,259 12,975 13,059 2,296 14,674 10,491 12,087 4,308 6,126 1,245 140,964 18,706 18,706 551,339 570,045 17,627 35,256 1,664 9,343 12,511 18,175 2,944 14,308 10,880 12,072 4,540 6,084 1,184 146,588 4,368 4,368 546,971 551,339 $ $ Governmental activities Governmental activities increased the City’s net position by $16.6 million. The key factors for this increase are as follows:    Revenues exceeded expenses by $16.5 million as compared to last years’ of $1.0 million. Net transfers increased to a positive $121,000 versus last years’ of negative $1.4 million. Capital grants and contributions had the largest decrease by dollars at $1.2 million (9.2%). Economic and physical development decreased by $3.2 million related to the Business Accelerator Project. Highway and street increased $3.3 million related to developer capital contribution and transportation contributions.  City sales tax revenues increased by 13.6% ($5.8 million). Comparing actual revenues to budgeted revenues the city exceeded the estimates by $4.3 million. The increase in the city general sales tax, the transportation taxes, and the Bed, Board, and Beverage sales taxes are $1.3 million, $3.9 million, and $516,000 respectively. The major increase in the transportation tax is related to a new voter approved sales tax for the Street Safety and Road Repair Initiative. The city has seen positive sales tax growth in the last five years.  Charges for services increased 17.5% ($1.4 million) related primarily to an increase in building and construction permits and fees due to the increase in construction in the community.  Operating grants and contribution increased 13.9% ($0.9 million) due to increases in public safety and economic and physical development grants.  State shared taxes had a 2.4% increase as the economy in the region and at the state level continues to recover.  Expenses have decreased by $5.5 million (5.6%) due largely to a loss on the sale of land in the prior year as well as a delay in street preservation contracted services to early fiscal year 2017. There were 10 decreases in general government ($0.5 million), public safety ($0.5 million), and highways and streets ($5.1 million). Increases were in culture and recreation ($0.5 million) and economic and physical development ($0.9 million). Business-type activities Business type activity had a net position increase of $2.1 million. The key factors for this increase include:  Charges for service have increased by 4.2% ($1.7 million). Funds with increases were Water ($0.5 million), Wastewater ($0.5 million), Environmental Services ($114,000), Airport ($76,000), Stormwater ($29,000), and Housing Authority ($428,000).  Capital grants and contributions have decreased by 8.6% ($0.4 million) due to decreased grant funded construction at the Airport offset by an increase in developer contribution utility infrastructure.   Investment earnings are up slightly ($33,000) and other revenues decreased by $1.2 million. Expenses have decreased over the prior year by 0.3% ($0.1 million). There were increases in the Water Fund ($0.4 million), Housing Authority Fund ($42,000), and Stormwater Fund ($61,000), and Environmental Services Fund ($15,000). Airport Fund ($232,000). There were decreases in the Wastewater ($0.4 million), and The following two charts illustrate the City's governmental expenses by function and its revenues by source. Expenses and Program Revenues – Governmental Activities $40,000,000 Expenses $35,000,000 Program Revenues $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Public safety Public works Econ & phys development 11 Culture & recreation Highways & streets Interest on long-term debt Revenues by Source – Governmental Activities Investment earnings 1.5% State shared tax 15.8% Miscellaneous 1.0% Charges for services 8.6% Operating grants and contributions 7.0% Sales tax 44.7% Property taxes 10.5% Capital grants and contributions 10.9% As shown, Public Safety is the largest function as measured by expense ($34.7 million, 37.7%) followed by General Government ($17.1 million, 18.6%), and Highways & Streets ($13.1 million, 14.2 %). General revenues such as sales taxes, state shared taxes, and property taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, sales tax is the largest single source of funds ($48.3 million, 44.7%), followed by state shared tax ($17.1 million, 15.8%) and capital grants and contributions ($11.8 million, 10.9%). The top three revenues make up 71.4% of total revenues compared to last year’s top three of 71.1%. Last year was the same ranking of revenues. The following two charts illustrate the City's business type expenses by function and its revenues by source. Expenses and Program Revenues – Business Type Activities $20,000,000 Expenses Program Revenues $15,000,000 $10,000,000 $5,000,000 $0 Water Wastewater Environmental 12 Airport Housing Authority Stormwater Revenues by Source – Business-type activities As shown, Water has expenses of $14.7 million for the fiscal year, followed by Environmental Services with $12.1 million, Wastewater with $10.5 million, Housing Authority with $6.1 million, the Airport with $4.3 million and Stormwater with $1.2 million. For the fiscal year, program revenue exceeded expense for the Water and Wastewater Fund, Environmental Services Fund, Housing Authority Fund and Stormwater Fund. The Airport Funds program expenses exceeded revenues mainly due to depreciation of capital assets. Water, Wastewater, Environmental Services, Airport and Stormwater Funds received the majority of their program revenues through charges for services (86.1%, 85.4%, 99.9%, 92.1% and 89.3% respectively). The Housing Authority Fund receives the majority of its program revenue through operating grants and contributions (71.8%). Charges for services provided the largest share of revenues (80.8%) for all of the business-type activities, followed by operating grants and contributions (9.3%). The expenses for the business type activities decreased (0.3%, $0.1 million) as there were decreases in Wastewater (3.6%, $389,000) and Airport (5.1%, $232,000) offset by increases in Water (2.6%, $366,000), Housing Authority (0.7%, $42,000), Environmental Services (0.1%, $15,000), and Stormwater (5.2%, $61,000). The last water and wastewater user fees rate increase was January 1, 2015. Water, Wastewater, Environmental Services, Airport, Stormwater and Housing Authority Funds increased charges for service revenue at 3.9%, 5.4%, 0.9%, 5.0%, 2.0% and 41.6%, respectively. Financial Analysis of the City’s Funds As noted earlier, the City uses Fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City’s Governmental Funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a 13 government’s net resources available for spending at the end of the fiscal year. Types of Governmental Funds reported by the City include the General Fund, Special Revenue Funds, Capital Project Funds, and Debt Service Funds. At the end of the fiscal year, the City’s Governmental Funds reported combined ending fund balances of $92.3 million, an increase of $7.7 million in comparison with the prior year. Approximately $24.5 million of the total ending fund balance constitutes unassigned fund balance, which is available for spending at the City’s discretion. The remainder of fund balance is (1) non spendable ($8.7) for inventory, debt service and perpetual care, (2) restricted ($50.2 million) for special revenue funds, debt service, development fee projects, court improvements and operations, grant purposes, perpetual care, and capital projects, and (3) assigned ($8.9 million) for court services, capital reserves, and real estate. Revenues for governmental functions overall totaled $111.1 million in the fiscal year ended June 30, 2016 which represents an increase of 11.5% or $11.5 million from the prior fiscal year. All revenue categories show increases over prior year except for grants and entitlements and charges for services. These include taxes (11.1%, $6.0 million), intergovernmental (3.9%, $807,000), special assessments (155.5% $2.9 million), licenses and permits (68.9%, $1.3 million), fines and forfeitures (9.7%, 135,000), rents (2.1%, $35,000), investment earnings (42.9%, $491,000), contributions (433%, $1.6 million) and miscellaneous (117.5%, $759,000). The increase in taxes is due to the new Road Repair and Street Safety sales taxes approved by voters in November 2014 and steady growth in our local economy. Grants and entitlements experienced a decrease of 18.2% or $2.5 million), Grants and entitlement decrease is related to an unusually large grant in the prior year. Expenditures for governmental functions ($104.3 million) increased by 5.0% ($4.9 million) from the prior fiscal year. Most of the increase in expenditures is related to debt service expenditures (39.5%, $4.4 million). Operation expenditures also increased (1.9%, $1.4 million) which is related to increases in public safety, economic and physical development and culture and recreation and partially offset by decreases in general government, public works and highway & streets. In the fiscal year ended June 30, 2016 revenues for governmental functions exceeded expenditures by approximately $6.8 million. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $27.4 million. As a measure of liquidity, it may be useful to compare total unassigned fund balance and total fund balance to total fund expenditures. The unassigned fund balance represents 50.7% of General Fund expenditures. The total fund balance in the City’s General Fund increased by $5.3 million during the fiscal year as revenue increased 8.5% and expenditures increased 7.1%. Overall, the General Fund’s performance resulted in revenues in excess of expenditures in the fiscal year ended June 30, 2016 of $4.0 million. This is an increase of approximately $1.0 million over the comparable figure from the prior year which resulted in expenditures in excess of revenues of $3.1 million. The Highway User Revenue Fund balance has increased by $3.2 million. Revenues increased $2.0 million primarily due to transportation contributions and property sales. Expenditures decreased by $1.0 million or 9.4% overall with small decreases in both operation and capital expenditures. Debt service payments remained level this year. Net transfers decreased by $46,000 over the prior year. 14 Transportation Fund balances increased by $1.1 million. Revenues increased $3.9 million due to the new Road Repair and Street Safety (RR & SS) sales tax approved by voters in November 2014. Expenditures increased $4.5 million again due to the capital expenditures related to RR & SS sales tax. Proprietary funds The City’s Proprietary Funds provide the same type of information found in the Government-wide Financial Statements, but in more detail. At the end of the fiscal year, the unrestricted component of net position had positive balances for Water and Wastewater, Environmental Services, Airport, Housing Authority, and Stormwater. The Internal Service Fund, which is used to account for risk management and health insurance activities, had an unrestricted net position of $3.8 million. Revenues and transfers in exceeded expenses and transfers out in the proprietary funds by $2.2 million for the fiscal year ended June 30, 2016. All funds, except the Airport Fund, had positive growth in their net position for the fiscal year ended June 30, 2016. The Airport Fund decrease of $2.3 million was due to depreciation exceeding grant and other funding for capital replacements. The major part of the increase was related to capital contributions ($4.5 million). Budget Highlights The City’s final budget matches the original budget which was approved by Council in June, 2015. The City looks at the budget to actual at the division level and no division exceeded its appropriation. There were two revenue transfers that were not budgeted. One transfer was made from the Water and wastewater fund to the Capital project fund ($207,072) to reimburse the costs overage for a Street & Utility bond project. There is transfer from the Capital Project Fund to the General Fund totaling ($54,396) to reimburse for the grant match of Flagstaff Watershed Protection project related grant. The General Fund was less than 4% ($2.0 million) over the final budgeted total revenues primarily due to taxes, which exceeded budget by $1.7 million and licenses and permits by $1.4 million and was offset by grants and entitlements and fines and forfeitures being under budget by $0.9 million and $1.5 million, respectively. License and permit exceeded budget due to conservative budget estimates and several large commercial construction projects in fiscal year 2016. Some of the reasons for grants and entitlements being under budget are due to the City not receiving several larger grants for Fire and Police or not receiving at the level budgeted including the Assistance to Firefighters, Wildland Urban Interface, DUI Enforcement and Gang Task Force grants. Expenditures are under budget in all divisions except for Economic Vitality due to controlled spending and carryover of some capital projects. Economic Vitality expenditures over budget are due to a brownfield grant not being budgeted. The divisions that are under budget by larger amounts are related to capital purchases or projects budgeted but not completed. Both transfers-in and transfers-out are less than budgeted as many transfers are based on the actual year end expenditure, most significant of which is the budgeted transfer from the General Fund to the Stormwater Fund of $3.3 million for the Rio de Flag Flood Control Project, of which only $187,371 actually transferred at year end. The other significant transfer under budget by $2.3 million is related to the funding of court facility construction which was not needed in fiscal year 2016. 15 Capital Assets and Debt Administration Capital Assets The City’s capital assets (net of accumulated depreciation) for its governmental and business-type activities as of June 30, 2016 amount to $658.3 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current year was 0.1% ($608,000). The following table reflects the capital assets at the end of the fiscal year C apital A s s ets , Net o f Depr ec iatio n Ju n e 30, 2016 an d 2015 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities Bu s in es s -Ty pe A c tiv ities 2016 2016 Land and other non-depreciable assets $ Buildings Improvements Machinery and equipment Infrastructure Construction in progress Total 64,882 60,731 2015 $ 6,743 64,845 54,416 6,623 9,865 156,062 $ 308,986 $ 305,103 13,810 14,120 48,168 246,272 9,347 158,631 8,134 $ 19,265 - 21,550 $ 349,375 To tal 2015 $ 14,120 50,459 248,997 20,466 - 18,608 $ 352,650 2016 $ 79,002 108,899 253,015 29,130 2015 $ 78,965 104,875 255,620 29,813 158,631 156,062 $ 658,361 $ 657,753 29,684 32,418 Construction-in-progress had a net decrease of 8.4% ($2.7 million). Major completed construction-inprogress includes the completion of the Business Accelerator ($7.6 million), Industrial Drive ($1.9 million), Bushmaster Park Improvements ($1.7 million) and Bonito Sewerline ($1.8 million). Major construction in progress at June 30 includes the Rio de Flag Drainage Project ($14.4 million), West/Arrowhead Phase 2 ($4.7 million), Red Gap Pipeline ($1.7 million), and Leroux Waterline ($2.5 million). The increase to buildings ($4.0 million) is related the completion of the Business Accelerator. The decrease in improvements ($2.6 million) is related to depreciation less the completion of Bonito Sewerline ($1.8 million) and developer contributed capital. Machinery and equipment decreased by $0.7 million mainly due to depreciation. Major additions include 38 vehicles and heavy equipment replacements ($2.6 million). Infrastructure increase ($2.6 million) is related to Road Repair and Street Safety projects ($5.7 million) and contributed capital off set by depreciation expense. For Government-wide Financial Statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. purchases as expenditures. Fund Financial Statements record capital asset Please refer to Note IV C on pages 64-65 of the Notes to the Financial Statements for further information regarding capital assets. Long Term Debt At the end of the current fiscal year, the City had total long-term debt outstanding of $99.7 million. Of this amount, $45.1 million is general obligation bonds backed by the full faith and credit of the City, $2.2 million is improvement district bonds, $15.7 million is revenue bonds, $2.2 million is for certificates of participation, and $34.4 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. 16 O u ts tan din g Debt Ju n e 30, 2016 an d 2015 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2016 General obligation debt Special assessment bonds $ Revenue bonds Other debt 43,817 2,215 $ Total debt payable $ 2016 48,920 6,705 12,750 14,675 1,049 946 2,170 Lease/Loans Bu s in es s -ty pe A c tiv ities 2015 62,001 $ $ 74,776 1,375 - $ - 3,530 - $ To tal 2015 36,289 37,664 2016 1,441 - $ 2,215 $ 50,361 6,705 3,285 12,750 17,960 35,880 37,338 36,826 - $ 45,192 2015 40,606 2,170 $ 99,665 3,530 $ 115,382 During fiscal year 2016, the City’s total bonded debt decreased by $16.2 million. The City did not issue any new debt during the year. The special assessment debt decreased due to early pay off of debt from a developer ($4.5 million) and the all remaining debt decreases are due to annual schedule debt service payments. The State constitution imposes certain debt limitations on the City of six percent (6%) and twenty percent (20%) of the outstanding assessed valuation of the City. The City’s available debt margin at June 30, 2016 is $41.1 million in the 6% category and $91.8 million in the 20% capacity. The allowable debt increased from prior year due to higher assessed valuations and decreasing debt balances. Additional information on the Debt Limitations and Capacities may be found in Schedule 16 in the Statistical Section of this report. During the year, the City maintained the following bond ratings: C ity o f F lag s taff Bo n ded Debt Ratin g s A s o f Ju n e 30, 2016 Mo o dy ' s In v es to r s Stan dar d & Aa2 AA Ser v ic e General Obligation Revenue Bonds n/a Po o r ' s AA- Additional information on the City’s long-term debt can be found in Section IV F on pages 69-78 of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2016/2017 budget preparation was influenced by the following factors:  The City’s General Fund budget was approved with no structural deficit in ongoing expenditures exceeding ongoing revenues, except for public safety pension funding discussed below.  Unrestricted fund balance in the General Fund continues to be above the fiscal policy of 15% of operating revenues. It is currently projected to be 25%. General sales tax revenues exceeded budget by $1.8 million in FY 2016 and are expected grow less than 1% in FY 2017 due to the uncertainty of revenues caused by the Arizona Department of Revenue starting to collect the city sales taxes on the City’s behalf during FY 2017.  Building permits exceeded budget by $1.4 million. However, we remain conservative in our projections for FY 2017 as we rely on these types of revenues as a one-time impact rather than an ongoing source of funding. 17  The focus of the FY 2017 budget was for Council Priorities related to economic growth and development strategies, employee compensation and investment, infrastructure, support and assistance to the most vulnerable member of the population, regional plan implementation and transportation. o The FY 2017 budget includes a three year plan to transition to market based pay for all employees, new positions related to capacity needs, infrastructure and economic development funding and services to support the most vulnerable. o Some of the larger items are $8.9 million for road repair & street safety road improvements, $21.2 million for the construction of Core Services Facility, $8.0 million for Courthouse construction and $3.2 million programmed for the Airport runway overlay construction.  The total authorized positions increased by 12.76 positions. While 14.51 FTEs were added, there were offsetting decreases of 3.68 positions that were either one-time funded or reduced to fund some of the new positions.  Public Safety pension (PSPRS) funding continues to be major funding issue. Public Safety pension required contributions to be increased over $1.5 million (32%) in FY 2016 and $240,000 in FY2017 due to pension contribution rate increases. With the FY2017 budget, 100% of this increase is funded with ongoing dollars within the General Fund.   The City continues to monitor the State legislature to be aware of potential budget impacts on cities. Property assessments continue to increase at a slow, steady rate. Primary assessed values increased by an average of 2.8%. The City adjusted the tax rate on primary property tax to maintain revenue levels. The secondary property tax rates remain flat.   The City continues to pursue federal and state grant dollars to enhance the local economy. The City continues implementation of the electronic information sharing technology to facilitate transparency in service provision.  The City will continue to work on the development of the new Core Maintenance Facility which was approved by voters.  The city will continue to work on the Flagstaff Watershed Protection Program which was approved by voters.   An updated Utilities Rate Study was completed in FY 2016 and new rates were adopted in FY 2017. User fee studies relating to the services provided by Community Development, Recreation and Fire are expected to be completed in FY 2017. Requests for Information The Financial Report is designed to provide a general overview of the City’s finances for all of those with an interest in the government’s finances. If you have questions about this report or need additional financial information, contact: City of Flagstaff Finance Section 211 W. Aspen Ave Flagstaff, AZ 86001 Main (928) 213-2000 Arizona Relay 7-1-1 18 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position June 30, 2016 Governmental Activities ASSETS Cash, investments and equivalents Accounts receivable, net $ 82,798,262 Interest Receivable Intergovernmental receivable Special assessments receivable Note receivable Internal balance Deposits Inventory Prepaid items Restricted cash and investments Capital assets, non-depreciable Capital assets, depreciable, net Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions Deferred charge on debt refundings Total deferred outflows of resources LIABILITIES Accounts payable Accrued payroll Construction retainage payable Interest payable Advanced revenue Deposits payable Noncurrent liabilities: Due within one year: Compensated absences Claims and judgements $ 32,967,106 Total $ 115,765,368 9,371,860 199,858 2,359,651 2,120,411 326,600 620,748 - 5,627,279 83,972 307,011 (620,748) 8,763 14,999,139 283,830 2,666,662 2,120,411 326,600 8,763 383,553 11,727,300 73,015,667 235,970,154 418,894,064 56,128 13,135,055 35,669,310 313,705,704 400,939,580 383,553 56,128 24,862,355 108,684,977 549,675,858 819,833,644 22,502,916 815,903 23,318,819 1,784,946 1,784,946 24,287,862 815,903 25,103,765 5,547,335 1,706,675 341,507 1,097,023 782,173 1,653,344 1,551,294 315,509 65,547 602,055 612,283 688,764 7,098,629 2,022,184 407,054 1,699,078 1,394,456 2,342,108 1,667,159 57,917 315,281 - 1,982,440 57,917 Special assessment debt, government commitment Bonds, notes and leases payable, net Due in more than one year: Compensated absences Claims and judgements Landfill closure and postclosure care costs Primary Government Business-type Activities 96,868 - 96,868 8,342,911 3,026,459 11,369,370 2,306,593 148,960 - 406,879 8,155,675 2,713,472 148,960 8,155,675 Net OPEB obligation 4,942,102 1,114,034 6,056,136 Net pension liability 116,811,023 14,917,793 131,728,816 2,148,025 54,198,258 34,638,143 2,148,025 88,836,401 201,847,873 66,409,716 268,257,589 5,408,331 1,228,738 6,637,069 246,897,365 311,644,865 558,542,230 21,024,366 18,056,249 21,625,108 2,903,553 - 23,927,919 18,056,249 21,625,108 23,257 252,973 - 23,257 252,973 Special assessment debt, government commitment Bonds, notes and leases payable, net Total liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions NET POSITION Net investment in capital assets Restricted for: Capital projects Debt service Specific programming Perpetual care: Expendable Nonexpendable Unrestricted Total net position (72,922,639) 234,956,679 $ The notes to the financial statements are an integral part of this statement 19 $ 20,537,654 335,086,072 $ (52,384,985) 570,042,751 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2016 Program Revenues Indirect Expense Allocation Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ $ Primary government Governmental activities: General government $ Public safety 17,210,187 $ (1,086,016) 34,711,251 Public works $ 3,241,987 - 647,910 529,220 1,979,260 164,071 563,746 1,650,323 (257,048) 605 - - Economic and physical development 10,259,240 (446,804) 3,767,060 1,949,358 847,181 Culture and recreation 12,974,830 470,178 1,633,338 3,238,800 Highways and streets 13,059,212 1,319,690 - 29,974 2,295,418 - - - - 92,160,461 - 9,290,900 7,726,612 11,806,049 Interest on long-term debt Total governmental activities 10,231,051 Business-type activities: Water 14,674,337 14,589,041 11,032 2,351,053 Wastewater 10,490,816 9,387,949 2,303 1,607,472 Environmental 12,087,144 12,760,747 13,000 316 Airport 4,307,615 1,603,852 125,613 12,889 Housing authority 6,125,950 1,455,715 4,503,849 309,044 Stormwater 1,245,532 1,495,296 120,000 59,003 48,931,394 41,292,600 4,775,797 4,339,777 Total business-type activities Total primary government $ 141,091,855 $ 50,583,500 $ 12,502,409 General revenues: Property tax, levied for general purposes Property tax, levied for debt service Sales taxes State shared sales taxes - unrestricted Investment earnings Miscellaneous Contributions to permanent fund Transfers in (out) Total general revenues, contributions and transfers Change in net position Net position - beginning Net position - ending The notes to the financial statements are an integral part of this statement 20 $ 16,145,826 Net (Expenses) Revenues and Changes in Net Position Primary Government Governmental Activities $ Business-type Activities (12,188,893) $ $ (12,188,893) - (31,520,335) (1,392,670) - (1,392,670) (3,248,837) - (3,248,837) (8,572,870) - (8,572,870) (4,117,877) - (4,117,877) (2,295,418) - (2,295,418) (63,336,900) - (63,336,900) - 2,276,789 2,276,789 - 506,908 506,908 - 686,919 686,919 (2,565,261) (2,565,261) - 142,658 - 428,767 428,767 - 1,476,780 1,476,780 (63,336,900) $ 1,476,780 142,658 $ (61,860,120) 5,620,832 - 5,620,832 5,718,942 - 5,718,942 48,343,259 - 48,343,259 17,080,154 - 17,080,154 1,668,431 336,685 2,005,116 1,404,390 375,716 1,780,106 15,470 - 15,470 121,320 (121,320) 79,972,798 $ - (31,520,335) - $ Total - 591,081 80,563,879 16,635,898 2,067,861 18,703,759 218,320,781 333,018,211 551,338,992 234,956,679 $ 335,086,072 $ 570,042,751 21 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2016 Highway User Revenue Fund General Fund Transportation Tax Fund ASSETS Cash and investments $ Accounts receivable, net Interest receivable Intergovernmental receivable 36,447,427 $ 7,179,722 $ 15,491,455 5,341,673 828,896 2,084,547 78,747 8,753 44,479 295,446 26,893 1,112,085 3,000,000 - - Special assessments receivable - - - Notes receivable - - - 335,134 - - - - 2,057,737 Interfund receivable Inventory Restricted cash and investments Total assets $ 45,498,427 $ 8,044,264 $ 20,790,303 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences 2,499,327 $ 139,768 $ 1,980,408 1,495,344 56,782 - Retainable payable - 84,622 188,868 Interfund payable Advanced revenue 11,752 411,881 - 75,795 Guaranty and other deposits 1,653,344 - - 6,071,648 281,172 2,245,071 Unavailable revenue - court fines 302,967 - - Unavailable revenue - property taxes 204,099 - - - - - Total liabilities Deferred inflows of resources: Unavailable revenue - special assessments Unavailable revenue - notes receivable Total deferred inflows of resources - - - 507,066 - - Fund balances: Nonspendable Restricted Assigned Unassigned (deficit) Total fund balances Total liabilities, deferred inflows and fund balances $ 335,134 - 2,057,737 2,255,454 7,763,092 16,487,495 8,903,561 - - 27,425,564 - - 38,919,713 45,498,427 The notes to the financial statements are an integral part of this statement 22 $ 7,763,092 8,044,264 $ 18,545,232 20,790,303 Other Governmental Funds $ $ $ 19,514,977 $ 78,633,581 1,065,487 9,320,603 59,634 191,613 925,227 2,359,651 - 3,000,000 2,120,411 2,120,411 326,600 326,600 48,419 383,553 9,669,563 11,727,300 33,730,318 $ 108,063,312 681,741 154,549 $ Total Governmental Funds $ 5,301,244 1,706,675 68,017 341,507 3,000,000 293,501 3,011,752 781,177 - 1,653,344 4,197,808 12,795,699 - 302,967 - 204,099 2,119,987 2,119,987 326,600 326,600 2,446,587 2,953,653 6,322,007 8,714,878 23,698,000 50,204,041 - 8,903,561 (2,934,084) 24,491,480 27,085,923 33,730,318 92,313,960 $ 108,063,312 23 24 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES JUNE 30, 2016 Fund balances - total governmental funds balance sheet $ 92,313,960 Amounts reported for governmental activities in the statements of net position are different because (also see note II. A.): Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less: accumulated depreciation 525,850,392 (216,864,571) 308,985,821 22,502,916 815,903 (5,408,331) 17,910,488 Deferred outflows and inflows of resources related to pensions and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the governmental funds. Deferred outflows related to pensions Deferred outflows related to debt refunding Deferred inflows related to pensions For purposes of measuring the net pension liability, the long-term liabilities are not due and payable in the current period and, therefore, are not reported as a liability in the governmental funds. ASRS pension benefits PSPRS pension benefits EORP pension benefits (33,461,078) (81,832,177) (1,517,768) (116,811,023) (62,000,895) (1,097,023) 68,443 (2,853,610) (4,942,102) (3,973,752) (74,798,939) Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Governmental bond and lease payable Governmental interest payable Bond discount Bond premium Other postemployment benefits Compensated absences Certain revenues are not available to pay for current period expenditures and, therefore, are unavailable in the governmental funds. Promissory note Fines and forfeitures Property tax Unavailable revenue for long-term special assessments is shown on the governmental fund balance sheet, but is reflected on the statement of net position Special assessments 326,600 302,967 204,099 833,666 2,119,987 2,119,987 The internal service fund is used by management to charge the cost of self insurance programs to individual funds. The assets and liabilities of the internal service fund that are reported with governmental activities. Net position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement 25 4,402,719 $ 234,956,679 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2016 Highway User Revenue Fund General Fund Transportation Tax Fund REVENUES: Taxes $ Intergovernmental Grants and entitlements 27,306,792 $ - $ 19,147,378 18,214,988 - - 1,217,424 7,292,355 69,040 Special assessments - - - Charges for services 2,916,164 - - Licenses and permits 3,153,135 - - Fines and forfeitures 1,524,856 - - Rents 1,615,190 - - Investment earnings 1,210,140 34,774 155,736 Contributions 566,242 943,358 - Miscellaneous 390,086 601,550 10 58,115,017 8,872,037 19,372,164 9,007,957 - 4,786,119 Public safety 30,074,183 - - Public works 1,207,776 - - Economic and physical development 4,787,402 - - Culture and recreation 5,949,635 - 120,721 500 5,230,421 435,718 998,203 464,718 1,795,000 55,632 81,948 437,000 Total revenues EXPENDITURES: Current: General government Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 1,992,283 3,838,489 7,041,363 54,073,571 9,615,576 14,615,921 4,041,446 (743,539) 4,756,243 OTHER FINANCING SOURCES (USES): Sale of capital assets 5,325 Issuance of capital debt Transfers in Transfers out Net change in fund balances Fund balances, beginning of year $ - 204,956 - - 3,110,079 3,958,100 - (2,063,183) Total other financing sources (uses) Fund balances, end of year - (13,000) (3,684,143) 1,257,177 3,945,100 (3,684,143) 5,298,623 3,201,561 1,072,100 33,621,090 4,561,531 17,473,132 38,919,713 The notes to the financial statements are an integral part of this statement 26 $ 7,763,092 $ 18,545,232 Other Governmental Funds $ 13,257,386 Total Governmental Funds $ 3,140,720 21,355,708 2,444,672 11,023,491 4,747,237 4,747,237 - 2,916,164 - 3,153,135 - 1,524,856 80,880 1,696,070 236,000 1,636,650 452,764 1,962,364 412,744 1,404,390 24,772,403 111,131,621 767,437 14,561,513 - 30,074,183 - 1,207,776 4,743,379 9,530,781 5,371,492 11,441,848 249,993 5,916,632 9,722,348 12,980,269 1,946,016 2,520,596 3,218,555 16,090,690 26,019,220 104,324,288 (1,246,817) 6,807,333 - 5,325 - 204,956 8,823,742 15,891,921 (9,471,023) (15,231,349) (647,281) 870,853 (1,894,098) 7,678,186 28,980,021 $ 59,711,556 27,085,923 84,635,774 $ 92,313,960 27 CITY OF FLAGSTAFF RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 Net change in fund balances - total governmental funds $ 7,678,186 Amounts reported for governmental activities in the statements of activities are different because (also see note II. B.): Government funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Expenditures for capital assets Less current year depreciation 16,090,690 (13,331,288) 2,759,402 (28,705) (2,490,780) (319,207) 127,314 (204,956) 1,995,338 (103,686) (597,899) 12,980,269 225,179 (161,308) 299,591 11,721,150 245,000 (10,200) 234,800 Some items reported in the governmental funds are not sources and uses of current financial resources and therefore are not reported as revenues or expenses in the statement of activities. These items include: Net pension expense related to ASRS Net pension expense related to PSPRS Net pension expense related to EORP Pension contribution for EORP Issuance of Capital lease Donated capital Compensated absences Other postemployment benefits Principal payments on debt Interest accural on debt Refunding loss amortization Bond premium amortization Providing long-term loans are reported as an expenditures in the governmental funds but are reported as notes receivable on the statement of net position. However, other expenditures that are unrecognized in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Note Receivable Available portion of promissory note Certain transactions related to capital assets in the governmental funds reflect proceeds. However, in the statement of activities these transactions reflect net gain (loss). Loss on disposal of capital assets Transfer of capital assets to business-type activities Transfer of capital assets from business-type activities The notes to the financial statements are an integral part of this statement 28 (332,459) (1,203,904) 664,652 (871,711) (continued) CITY OF FLAGSTAFF RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 Certain revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. However, other revenues that are unearned in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Court (Fines and forfeitures) Special assessments Property tax 675 (4,583,166) (28,524) (4,611,015) (306,695) 31,781 (274,914) Internal service funds are used by management to charge the costs of certain activities, such as the City's self-insurance program to individual funds. The following activities of the internal service fund is reported with governmental activities. Net allocated (loss) assigned to governmental activities Investment income Change in net position of governmental activities - statement of activities $ The notes to the financial statements are an integral part of this statement (concluded) 29 16,635,898 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Taxes $ Intergovernmental 25,417,564 $ 25,417,564 $ 27,147,586 $ 1,730,022 17,658,575 17,658,575 18,134,353 Grants and entitlements 2,117,510 2,117,510 1,217,424 Charges for services 3,216,146 3,216,146 3,235,827 19,681 Licenses and permits 1,614,980 1,614,980 3,061,098 1,446,118 Fines and forfeitures 3,058,550 3,058,550 1,524,856 (1,533,694) Rents 1,264,965 1,264,965 1,615,190 Investment earnings 221,050 221,050 286,233 65,183 Contributions 334,100 334,100 566,242 232,142 Miscellaneous 475,778 (900,086) 350,225 171,205 171,205 243,085 71,880 55,074,645 55,074,645 57,031,894 1,957,249 General administration 9,914,497 9,914,497 9,149,940 764,557 Management services 3,633,521 3,633,521 3,426,864 206,657 Fire 12,083,375 12,083,375 11,686,616 396,759 Police 20,237,676 20,237,676 19,221,487 1,016,189 4,294,597 4,294,597 4,182,581 112,016 12,049,297 12,049,297 9,344,457 2,704,840 Total revenues EXPENDITURES: Current: Community development Public works Economic vitality 174,071 Non-departmental 174,071 (2,053,888) Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 341,971 (2,053,888) (167,900) (3,369,808) 1,315,920 625,000 625,000 - 625,000 60,958,146 60,958,146 53,984,108 6,974,038 3,047,786 8,931,287 (5,883,501) (5,883,501) OTHER FINANCING SOURCES (USES): Issuance of capital debt Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances , beginning of year Fund balances, end of year $ 250,000 250,000 204,956 20,200 20,200 5,325 (45,044) (14,875) 3,511,286 3,511,286 3,110,079 (401,207) (7,987,026) (7,987,026) (2,063,183) 5,923,843 (4,205,540) (4,205,540) 1,257,177 5,462,717 (10,089,041) (10,089,041) 4,304,963 14,394,004 23,294,618 23,294,618 33,621,900 - 13,205,577 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 13,205,577 $ 37,926,863 $ 4,304,963 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 1,083,123 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 30 (89,463) 5,298,623 $ 14,394,004 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 6,862,720 $ Variance with Final Budget REVENUES: Grants and entitlements $ Investment earnings 6,862,720 $ 7,292,355 $ 429,635 5,000 5,000 34,774 29,774 - - 29,144 29,144 6,867,720 6,867,720 7,356,273 488,553 Community development 9,151,127 9,151,127 3,113,597 6,037,530 Public works 8,935,092 8,935,092 5,532,457 3,402,635 969,522 969,522 969,522 - 100,000 100,000 - 100,000 19,155,741 19,155,741 9,615,576 9,540,165 (12,288,021) (12,288,021) (2,259,303) 10,026,612 10,026,612 3,958,100 Miscellaneous Total revenues EXPENDITURES: Current: Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 10,028,718 OTHER FINANCING SOURCES (USES): Transfers in Transfers out (13,000) Total other financing sources (uses) Net change in fund balances budgetary basis Fund balances, beginning of year Fund balances, end of year (13,000) 10,013,612 $ (6,068,512) (13,000) 10,013,612 - 3,945,100 (6,068,512) (2,274,409) (2,274,409) 1,685,797 3,960,206 3,441,139 3,441,139 4,561,531 - 1,166,730 $ 1,166,730 $ 6,247,328 $ 1,685,797 The notes to the financial statements are an integral part of this statement Adjustment of budgetary basis to GAAP basis net change in fund balances The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 1,515,764 Adjusted net change in fund balance - GAAP basis $ 31 3,201,561 $ 3,960,206 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Taxes $ Grants and entitlements 17,585,692 $ 183,597 Investment earnings 17,585,692 $ 183,597 19,083,049 $ 69,040 1,497,357 (114,557) 71,750 71,750 155,736 83,986 17,841,039 17,841,039 19,307,825 1,466,786 Community development 5,317,280 5,317,280 1,629,549 3,687,731 Public works 6,110,000 6,110,000 5,741,757 368,243 Non-departmental 7,756,109 7,756,109 7,162,572 593,537 19,183,389 19,183,389 14,533,878 4,649,511 4,773,947 6,116,297 Total revenues EXPENDITURES: Current: Total expenditures Excess (deficiency) of revenues over (under) expenditures (1,342,350) (1,342,350) OTHER FINANCING SOURCES (USES): Capital bonds issued 10,000,000 10,000,000 - Sale of capital assets 6,000 6,000 - Transfers out (9,723,012) Total other financing sources (uses) 282,988 Net change in fund balances 282,988 (1,059,362) Fund balances, beginning of year Fund balances, end of year (9,723,012) (1,059,362) 15,586,164 $ 14,526,802 15,586,164 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 14,526,802 $ $ 6,038,869 (3,684,143) (3,967,131) 1,089,804 2,149,166 17,473,132 - 18,562,936 1,089,804 64,339 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 32 (6,000) (3,684,143) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (10,000,000) (82,043) 1,072,100 $ 2,149,166 33 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position Proprietary Funds June 30, 2016 Business-type Activities - Enterprise Funds Water and Wastewater Fund ASSETS Current assets: Cash and investments Receivable, net Interfund receivables Intergovernmental receivable Prepaid items Total current assets Noncurrent assets: Restricted cash and investments Refundable deposits Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets $ Deferred outflows of resources Deferred outflows related to pension Total assets and deferred outflows of resources 21,323,419 4,094,323 48,358 25,466,100 Environmental Services Fund $ 8,999,630 1,282,071 316 10,282,017 Airport Fund $ 397,279 111,968 52,907 562,154 1,719,393 8,763 17,408,764 241,055,444 260,192,364 285,658,464 11,415,662 1,911,870 6,620,222 19,947,754 30,229,771 126,857 36,786,318 36,913,175 37,475,329 620,839 456,875 456,436 286,279,303 30,686,646 37,931,765 LIABILITIES Current liabilities: Accounts payable Construction retainage payable Accrued payroll Accrued compensated absences Interest payable Advanced revenue Claims and judgements Deposits payable Bonds and lease payable, net - current Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Net pension liability Claims and judgements Landfill closure and postclosure care costs Capital lease payable Bonds and notes payable, net Total noncurrent liabilities Total liabilities 989,957 65,547 144,954 150,321 602,055 530,600 583,971 2,852,431 5,919,836 173,353 99,747 82,250 39,763 28,937 424,050 88,415 23,234 18,080 2,032 2,489 174,028 308,278 179,798 494,963 5,990,235 1,579,997 31,653,931 39,898,924 45,818,760 68,181 380,034 4,586,274 8,155,675 13,190,164 13,614,214 14,158 63,741 1,814,153 1,404,215 3,296,267 3,604,545 Deferred inflows related to pension Total deferred inflows and liabilities 538,228 46,356,988 412,081 14,026,295 51,364 3,655,909 222,312,302 8,532,092 35,334,932 1,593,915 16,016,098 239,922,315 1,309,638 6,818,621 16,660,351 NET POSITION Net investment in capital assets Restricted: Capital projects Unrestricted (deficit) Total net position $ The notes to the financial statements are an integral part of this statement 34 $ $ (1,059,076) 34,275,856 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund Housing Authority $ $ $ 1,291,098 203,322 120,000 1,614,420 955,680 19,567 11,752 85,430 56,128 1,128,557 Internal Service Fund Total $ 32,967,106 5,711,251 11,752 307,011 56,128 39,053,248 $ 4,164,681 59,502 4,224,183 14,699,923 25,767,498 40,467,421 42,081,841 1,521,896 3,476,222 4,998,118 6,126,675 13,135,055 8,763 35,669,310 313,705,704 362,518,832 401,572,080 48,312 202,484 1,784,946 42,130,153 6,329,159 403,357,026 4,224,183 103,730 11,640 8,566 30,564 154,500 195,839 35,934 56,064 9,324 73,367 370,528 1,551,294 65,547 315,509 315,281 602,055 612,283 688,764 3,026,459 7,177,192 246,091 996 57,917 305,004 7,510 50,886 514,786 573,182 727,682 137,232 124,410 2,012,345 2,273,987 2,644,515 406,879 1,114,034 14,917,793 8,155,675 2,984,212 31,653,931 59,232,524 66,409,716 148,960 148,960 453,964 46,254 773,936 180,811 2,825,326 1,228,738 67,638,454 453,964 40,467,421 4,998,118 311,644,865 - 888,796 41,356,217 (1,494,285) 3,503,833 2,903,553 21,170,154 335,718,572 3,770,219 3,770,219 $ $ Some amounts reported for business-type activities in the statement of net position are different because certain internal service fund assets and liabilities are included with business-type activities Net position of business-type activities $ (632,500) 335,086,072 35 4,224,183 - $ CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2016 Business-type Activities - Enterprise Funds Water and Wastewater Fund OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ 23,976,990 54,752 24,031,742 OPERATING EXPENSES: Personnel services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain (loss) on disposal of capital asset Passenger facility charges Interest expense Total non-operating revenues (expenses) $ 4,442,095 6,661,478 925,818 12,029,391 336,950 765,397 46,055 3,825,716 5,441 (711,064) 2,335,070 Total net position, beginning of year 237,587,245 $ 239,922,315 The notes to the financial statements are an integral part of this statement 36 Airport Fund $ (2,593,150) 8,964 125,613 256,541 (95,827) 295,291 877,748 (2,297,859) 316 (245,190) 632,874 12,889 (2,284,970) 16,027,477 $ 1,603,852 1,603,852 535,451 1,096,002 2,565,549 4,197,002 115,649 13,000 (16,298) 112,351 (831,078) Capital contributions related to grants Capital contributions from external sources Transfers in Transfers out Change in net position 12,760,747 34,041 12,794,788 5,218,378 9,921,920 8,554,494 23,694,792 202,642 13,335 (134,290) (1,249,715) (1,168,028) Income (loss) before capital contributions and transfers Total net position, end of year Environmental Services Fund 16,660,351 36,560,826 $ 34,275,856 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund Housing Authority $ $ 1,495,296 1,495,296 268,902 415,564 522,832 1,207,298 $ 1,453,957 4,226,844 444,952 6,125,753 41,292,600 119,175 41,411,775 $ 11,918,783 22,321,808 13,013,645 47,254,236 6,227,133 6,227,133 6,680,688 6,680,688 287,998 (4,639,656) (5,842,461) 9,430 120,000 (33,971) 95,459 4,503,849 (197) 4,503,652 336,685 4,775,797 (184,756) 256,541 (1,345,542) 3,838,725 (136,004) (2,003,736) (421,774) 309,044 19,952 192,992 368,304 4,510,725 671,856 (1,332,428) 2,214,721 (421,774) 383,457 685,009 646,463 (376,174) 1,338,755 40,017,462 $ 1,455,715 30,382 1,486,097 Internal Service Fund Total 41,356,217 $ 3,310,841 333,503,851 3,503,833 $ 335,718,572 Some amounts reported for business-type activities on the statement of activities are different because the net revenue (expense) of certain internal service funds is reported with business-type activities Change in net position of business-type activities $ (146,860) 2,067,861 37 (453,555) 31,781 31,781 4,191,993 $ 3,770,219 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2016 Business-type Activities - Enterprise Funds Water and Wastewater Fund Cash flows from operating activities: Receipts from customers Interfund services provided Other receipts Payments to suppliers Interfund services used Interfund reimbursement used Payments to employees Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds Interfund loans provided Interfund loans received Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Receipts from grantors Capital contributions Acquisition and construction of capital assets Principal payments on capital debt Interest paid on capital debt Proceeds from insurance reimbursements Proceeds from sales of capital assets Net cash provided (used) by capital and related financing activities 22,703,368 255,300 (7,848,591) (59,925) (2,119,644) (5,014,769) 7,915,739 Environmental Services Fund $ 12,736,436 132,244 (5,184,887) (4,666) (1,182,783) (4,276,759) 2,219,585 - (246,531) (245,190) - 417,669 2,248,761 (5,860,521) (2,750,875) (1,296,348) - 13,000 (907,814) 29,250 170,994 (13,492) (190,858) (95,827) - (7,241,314) (865,564) (129,183) 109,999 109,999 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 616,988 22,425,824 23,042,812 1,218,830 19,196,462 20,415,292 $ $ 21,323,419 1,719,393 23,042,812 The notes to the financial statements are an integral part of this statement 38 1,522,748 256,740 (749,087) (32,610) (298,898) (766,180) (67,287) (245,190) - 189,094 189,094 Classified as: Cash, cash equivalents, and investments Restricted cash and cash equivalents Totals $ 5,441 (251,972) - Cash flows from investing activities: Interest received on investments Net cash provided (used) by investing activities $ Airport Fund $ $ $ 8,999,630 11,415,662 20,415,292 8,090 8,090 $ $ $ (188,380) 585,659 397,279 397,279 397,279 Governmental Activities Business-type Activities - Enterprise Funds Stormwater Fund $ $ $ $ 1,395,714 32,683 (226,490) (107,773) (380,080) 714,054 Housing Authority $ 1,541,596 30,382 (3,913,038) (224,750) (1,650,961) (4,216,771) Total $ 39,899,862 420,227 287,122 (17,922,093) (321,951) (3,709,098) (12,088,749) 6,565,320 Internal Service Fund $ 6,227,940 (6,740,160) (512,220) 187,371 (376,174) - 8,200 - 201,012 (873,336) - - (188,803) 8,200 (672,324) - 55,564 (307,989) - 4,817,315 (600,550) 249,544 - 5,474,542 2,248,761 (7,690,366) (2,941,733) (1,392,175) 249,544 29,250 - (252,425) 4,466,309 (4,022,177) - 8,477 8,477 - 315,660 315,660 281,303 1,009,795 1,291,098 257,738 697,942 955,680 2,186,479 43,915,682 46,102,161 1,291,098 1,291,098 $ $ $ 955,680 955,680 $ $ $ 32,967,106 13,135,055 46,102,161 (continued) 39 30,350 30,350 $ $ $ (481,870) 4,646,551 4,164,681 4,164,681 4,164,681 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2016 Business-type Activities - Enterprise Funds Environmental Services Fund Water and Wastewater Fund Airport Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ 336,950 $ 765,397 $ (2,593,150) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 8,554,494 925,818 Landfill closure and postclosure costs - 260,057 2,565,549 - Other receipts - - 256,541 (Increase) decrease in assets: Accounts receivable Allowance for doubtful accounts (977,854) 85,932 (3,000) 6,000 - - - 29,085 15,406 Prepaid items - (28,407) Increase (decrease) in liabilities: Accounts payable (106,240) Accrued payroll, compensated absences 13,695 (61,745) OPEB 59,923 43,575 129,991 183,506 Pension expense (contribution) Deposits payable 162,140 Advanced revenue (254,360) Total adjustments Net cash provided (used) by operating activities Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers $ Capital assets transferred to other funds Capital assets transferred from other funds Total noncash investing, capital and financing activities 5,722 (12,373) (40,124) 1,454,188 2,525,863 7,915,739 $ 2,219,585 $ 1,663,709 $ - $ (1,123,744) 577,898 $ 7,203 (246,176) (23,762) 7,578,789 $ 8,244 1,117,863 The notes to the financial statements are an integral part of this statement 40 $ (67,287) - - - - - - $ - Governmental Business-type Activities - Enterprise Funds Housing Authority Stormwater Fund $ 287,998 $ Internal Service Fund Total (4,639,656) $ (5,842,461) $ (453,555) 522,832 444,952 13,013,645 - - 260,057 - - - 256,541 - (65,899) 71,163 (1,000) 17,728 19,728 3,508 3,508 85,548 105,100 81,301 (2,202) (42,726) 4,692 19,637 (113,668) (33) - (2,977) 714,054 $ $ 59,003 $ (4,216,771) - 155,456 - (321,223) 408 12,407,781 $ $ $ 1,722,712 $ 1,085,098 - 1,662,996 $ (58,665) 6,565,320 (1,123,744) - - (220,262) - $ (59,472) 135,030 - 1,144,101 399 (84,734) 422,885 $ - (915,065) (173,915) 426,056 $ Activities 2,261,964 (concluded) 41 (512,220) - $ - CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2016 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity The City of Flagstaff (the City) was incorporated as a town in 1894 and as a city in 1928. The current City Charter was approved June 29, 1998. The Charter provides for the Council-Manager form of government and the authority to provide municipal services, as limited by the State Constitution. The accounting policies of the City of Flagstaff conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to Governmental Units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. For the year ended June 30, 2016, the City adopted the provisions of GASB Statement No.72 Fair Value Measurement and Application and GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. GASB 72 requires the City to use various valuation techniques which are appropriate under the circumstances and for which sufficient data are available to measure fair value. The techniques should be consistent with one or more of the following approaches: the market approach, the cost approach or the income approach. GASB Statement No. 76 identifies the hierarchy of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. The City also early implemented GASB 82 Pension Issues—An Amendment of GASB Statements No. 67, No. 68, and No. 73. This Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The City of Flagstaff is a municipal corporation governed by an elected Mayor and six-member council. The accompanying financial statements include the City and all of its component entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. Discretely presented component units are reported in a separate column in the Government Wide Statement of Net Position and Activities to emphasize they are legally separate from the government. The City of Flagstaff has no discretely presented component units. Blended Component Unit: The Municipal Facilities Corporation (MFC) is a non-profit corporation created by the City for the purpose of constructing, acquiring and equipping municipal facilities. For financial reporting purposes, transactions of the MFC are included as if it were part of the City’s operations. In fiscal year 2001 the MFC issued $4.7 million in bonds for construction on additional facilities owned by the City and currently leased to the United States Geological Survey (USGS). These bonds will be repaid through USGS lease proceeds. Related Organizations: The City of Flagstaff officials are also responsible for appointing board members of other organizations. However, as the City’s control is limited to making the appointments and there is not a significant 42 operational nor a significant financial relationship between these organizations and the City, they are not included as part of these financial statements. B. Government-Wide and Fund Financial Statements The government-wide financial statements (statement of net position and statement of activities) report on the City and its component units as a whole. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported by fees and charges for services. The government-wide statement of activities demonstrates the degree to which the direct expenses of the various functions and segments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long-term debt and depreciation expense on assets shared by multiple functions are not allocated to the various functions. Program revenues include: 1) charges to customers or users who purchase, use or directly benefit from goods, services or privileges provided by a particular function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, investment income and other revenues not identifiable with particular functions or segments are included as general revenues. The general revenues support the net costs of the functions and segments not covered by program revenues. Generally, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Interdepartmental services performed by one department for another are credited to the performing department and charged to the receiving department to reflect the accurate costs of programs. These indirect costs have been eliminated as part of the program expenses reported for the various functional activities. The rates used are intended to reflect full costs in accordance with generally accepted cost accounting principles and are part of the fund statements. Interfund services provided and used are eliminated in the process of consolidation. The government-wide statement of net position reports all financial and capital resources of the government. It is displayed in a format of assets plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted, and 3) unrestricted. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in the net position. The portion of unspent related debt proceeds or deferred inflows of resources at the end of the reporting period is not included in the calculation of net investment in capital assets; instead that portion of the debt or deferred inflows of resources is included in the same net position component as the unspent amount. Restricted net position occurs when a constraint is placed on its use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or law or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, is shown as unrestricted. Generally, the City would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. 43 Also part of the basic financial statements are fund financial statements for governmental funds and proprietary funds. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Although the reporting model sets forth minimum criteria for determination of major funds (a percentage of assets and deferred outflows, liabilities and deferred inflows, revenues, or expenditures/expenses of fund category and of the governmental and enterprise funds combined), it also gives governments the option of displaying other funds as major funds, which the City has not elected. Other non-major funds are combined in a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary funds. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recorded as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are prepared on a current financial resources measurement focus and modified accrual basis of accounting. This is the traditional basis of accounting for governmental funds. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses of liquid resources, and 3) demonstrate how the City’s actual revenues and expenditures conform to the annual budget. Since the governmental fund financial statements are presented on a different basis than the governmental activities column of the governmental-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements. The proprietary fund financial statements are prepared on the same basis (economic resources measurement focus and accrual basis of accounting) as the government-wide financial statements. Therefore, most lines for the total enterprise funds on the proprietary fund financial statements will directly reconcile to the business-type activities column on the government-wide financial statements. Because the enterprise funds are combined into a single business-type activities column on the government-wide financial statements, certain interfund activities between these funds may be eliminated in the consolidation for the government-wide financial statements, but are included in the fund columns in the proprietary fund financial statements. The net costs/income of the internal service fund is also partially allocated to the business-type activities column on the government-wide financial statements. On the proprietary fund financial statements, operating revenues are those that flow directly from the operations of that activity, i.e. charges to customers or users who purchase or use the goods or services of that activity. Operating expenses are those that are incurred to provide those goods or services. Non-operating revenues and expenses represent items like investment income, interest expense, and other items that do not fit in any other category and are not a result of the direct operations of the activity. The City uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, deferred outlflows of resources, liabilities, deferred inflows of resources, fund balance, revenues and expenditures/expenses. 44 The City uses the following fund categories: Governmental Fund Types Governmental Funds are those through which most of the governmental functions of the City are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. General Fund is the primary operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The General fund will always be considered a major fund in the basic financial statements. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments or major capital projects) that are legally restricted to expenditures for specified purposes. There are two special revenue funds that are presented as major funds in the basic financial statements. They are the:  Highway User Revenue Fund, which receives and expends the City’s allocation of the Highway User Revenue money. Resources allocated to this fund come mainly from the State and must be used for street construction, reconstruction and maintenance.  Transportation Tax Fund accounts for the receipt and expenditures of the transportation tax money as authorized by voters on May 16, 2000. These resources are restricted to financing improvements in the areas of the 4th Street overpass project, safe to school/pedestrian and bike projects, traffic flow and safety improvements, transit service operations and enhancements, and to repay the bonding related to the 4th Street overpass. Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term obligation principal and interest. Capital Projects Fund is used to account for major capital acquisition and construction separate from ongoing operating activities. Resources for capital projects typically result from the issuance of general obligation or other government debt. No Capital Projects Funds are presented as major funds. Permanent Funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. Resources are generated from ongoing plot sales with a portion allocated to perpetuity. Proprietary Fund Types Proprietary Funds are used to account for the City’s ongoing organizations and activities, which are similar to those found in the private sector and where cost recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, net position, and cash flows. Enterprise Funds are used to account for operations that provide services to the general public for a fee. Under GASB Statement No. 34, enterprise funds are also required for any activity whose principal revenue sources meet any of the following criteria: 1) any activity that has issued debt backed solely by the fees and charges of the activity, 2) if the cost of providing services for an activity, including capital costs such as depreciation or debt service, must legally be recovered through fees and charges, or 3) it is the policy of the City to establish activity fees or charges to recover 45 the cost of providing services, including capital costs. The City has five enterprise funds, all of which are presented as major funds in the basic financial statements.  Water and Wastewater Fund accounts for the City water pumping, treatment and distribution systems and the City wastewater collection and treatment systems.  Environmental Services Fund accounts for the operations of City refuse, management of the City landfill, recycling collection services and the management of sustainability programs.  Airport Fund that accounts for the construction, operations and maintenance of the City airport.  Stormwater Fund accounts for the construction, operations and maintenance activities of the City stormwater system.  Housing Authority Fund accounts for low income rental assistance along with federal housing programs such as low income public housing and voucher programs that enhance this funds ability to provide services. Internal Service Fund accounts for the operations that provide services to other departments of the government on a cost-reimbursement basis, thus the internal service fund is presented with the proprietary fund financial statements. The internal service fund represents the self-insurance services provided to other departments and accounts for the risk management function of the City as well as maintaining the costs of the City’s liability insurance and any claims paid under the City’s self-insurance program. These costs are allocated to all operational activities of the City. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds are accounted for using a current financial resources measurement focus whereby only current assets plus deferred outflows of resources, equals current liabilities plus deferred inflows of resources, plus fund balance. Operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net change in fund balances. Enterprise funds are accounted for on a flow of economic resources measurement focus whereby all assets plus deferred outflows of resources, less liabilities and deferred inflows of resources associated with the operation of these funds, equals net position, as presented on the statement of net position. Operating statements present increases (i.e., revenues) and decreases (i.e., expenses) in net total position. The modified accrual basis of accounting is used by governmental funds. Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures are generally recorded when the related fund liability is incurred, as under accrual accounting. Principal and interest on general long-term debt are recorded as fund liabilities when due. However, debt service expenditures, as well as, expenditures related to compensated absences, claims and judgments are recorded only to the extent they have matured. Revenues susceptible to accrual include property tax, privilege license tax, highway user tax, state shared sales tax, vehicle license tax, and interest earned on investments. 46 Licenses and permits, charges for services, fines and forfeitures, parks and recreation charges and miscellaneous revenues are recorded when received in cash since they are generally not measurable until actually received. Only the portion of special assessment receivables due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. The accrual basis of accounting is followed for all enterprise funds. Revenues are recognized in the accounting period in which they are earned and become measurable, and expenses are recognized when incurred. Enterprise funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund’s principal ongoing operations. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating items. Budgets and Budgetary Accounting The City uses the following procedures in establishing the budgetary data reflected in the accompanying financial statements. • The maximum legal expenditure permitted for the year is the total budget as adopted. The expenditure appropriations in the adopted budget are maintained in the City’s financial system by department within individual funds. Department appropriations may be amended during the year, within administrative guidelines and adopted Council policies. • The initial budget for the fiscal year may be amended during the year in a legally permissible manner. • The City Manager is generally authorized to transfer budgeted amounts within any specific section’s expenditure appropriation. Any budget revisions requiring a transfer between divisions must be approved by the City Council. City manager, human resources, and information technology are example sections of the general administration division. • All unencumbered expenditure appropriations expire at the end of the fiscal year. • Encumbered amounts are re-budgeted in the following year as deemed appropriate and necessary after review by the Budget Committee. Budgetary carry forwards are approved by the City Council as part of the budget adoption process. • All funds of the City have legally adopted budgets with the exception of the internal service fund and perpetual care fund. Formal integration of these budgets into the City’s financial systems is employed as a management control device during the year for all funds. The City prepares its annual budget on a modified cash basis, which differs from GAAP. GASB Statement No. 34 requires that budgetary comparison statements for the General Fund and major special revenue funds be presented in the annual financial statements. These statements must display original budget, amended budget and actual results on a budgetary basis at the legal level of budgetary control. The City’s legal level of budgetary control is at the division level; however the City’s financial statements are presented at the functional level of detail. Budgetary comparisons provided in the basic financial section are presented for the general fund and major special revenue funds at the division level; these are presented as statements. The supplemental section provides budgetary comparisons for non-major special revenue funds, capital projects funds and debt service funds at the same functional level of detail used in financial statements presentation; these are presented as schedules. 47 D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position Cash and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the government to invest in the State’s Local Government Investment Pool (LGIP), obligations of the U.S. Treasury, commercial paper and repurchase agreements. Investment Income from pooled cash and investments is allocated monthly based on the percentage of a fund’s average daily equity in pooled cash and investments to the total average daily-pooled equity in pooled cash and investments. Investments are stated at fair value based on quoted market prices. The City also has an investment policy. Details of the City’s investment policy can be found in Note IV.A. The LGIP is a part of the State of Arizona Treasurer’s office. The State Board of Deposit provides oversight for the State Treasurer’s pools, and the LGIP Advisory Committee provides consultation and advice to the Treasurer. Investments in the State of Arizona LGIP are stated at fair value, which also approximates the value of the investment upon withdrawal. For purposes of the statement of cash flows, the City considers cash and cash equivalents, including restricted cash and cash equivalents, to be currency on hand, demand deposits with banks, amounts included in pooled cash and investment accounts and liquid investments with a maturity of three months or less. Cash and cash equivalents are included in both unrestricted as well as restricted assets. Receivables and Payables Accounts receivable and taxes receivable are shown net of an allowance for uncollectible accounts. The City’s property tax is levied each year on or before the third Monday in August based on the previous January 1, full cash value as determined by the Coconino County Assessor. Levies are due and payable in two installments on September 1 and March 1. First half installments become delinquent on November 1; second half installments become delinquent on May 1. Interest at the rate of 12% per annum accrues following delinquent dates. Coconino County bills and collects all property taxes, at no charge to the taxing entities. A lien against property assessed attaches on the first day of January preceding assessment and levy thereon. Under Arizona tax laws there are two property tax levies: primary and secondary. Primary property taxes are not restricted as to use and are used to finance the general operations of the City. Secondary property taxes are restricted for general obligation bonded debt service. The secondary property tax levy is recorded as revenue in a debt service fund and transferred to the Water and Wastewater Fund and the General Obligation Bond Fund. Secondary property taxes are restricted for general obligation bonded debt service. The secondary property tax levy is recorded as revenue in a debt service fund and transferred to the Water and Wastewater Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is classified as interfund receivables and payables. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balance. Deferred Outflows of Resources When a consumption of net position/fund balance applies to a future period it should not be recognized as an outflow of resources, expense or expenditure until that time. Current refunding and advance refunding resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt is 48 reported as a deferred outflow of resources or a deferred inflow of resources and recognized as a component of interest expense in a systematic and rational manner over the remaining life of the old debt or the life of the new debt, whichever is shorter. Inventory and Prepaids Inventory is valued at cost, which approximates market, using the weighted average cost method. Inventory consists of expendable supplies held for consumption and is charged to expenditure accounts as consumed. Prepayments of the governmental funds, which are prepared using the modified accrual basis of accounting, are recorded under the purchases method, and are therefore recorded as expenditures when purchased. Within the government-wide statements, which are prepared using the accrual basis of accounting, prepayments are recorded as assets and amortized over the life of the related agreement. Prepaid items contain payments made to vendors applicable to future accounting periods in both the government-wide and proprietary fund financial statements. The cost of a prepaid item is recorded as an expense when consumed rather than purchased. Restricted Assets Certain debt proceeds of the City’s bonds, as well as certain resources set aside for their repayment, are classified as restricted on the balance sheet or statement of net position, because they are maintained in trust accounts and their use is limited by applicable debt covenants. Typically, restricted assets, committed assets and assigned assets are used prior to using unassigned assets when both are available for the same purpose. Grant Revenue The City recognizes grant revenues (net of estimated uncollectible amounts, if any), when all applicable eligibility requirements, including time requirements, are met. Resources transmitted to the City before the eligibility requirements are met are reported as advance revenues. Some grants and contributions consist of capital assets or resources that are restricted to purchase, construct, or renovate capital assets associated with a specific program. These are reported separately from grants and contributions that may be used either for operating expenses or for capital expenditures of the program at the discretion of the City. Deferred Inflows of Resources Revenues and other governmental fund financial resources are recognized in the accounting period in which they become both measurable and available. When an asset is recorded in the governmental fund financial statements but the revenue is not available, the government reports a deferred inflow of resources until such time as the revenue becomes available. Revenue related to property tax and special assessment liens are recorded in governmental funds but the revenue is not available in the current period so it is reported as a deferred inflow of resources. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, pension expense, information about the pension plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Capital Assets Capital assets, whether owned by governmental activities or business-type activities, are recorded and depreciated (unless the modified approach is used) in the government-wide financial statements. The City has chosen not to apply the modified approach to any networks or subsystems of infrastructure assets. depreciation are shown in the governmental fund financial statements. 49 No long-term assets or Capital assets, including public domain infrastructure (i.e., roads, bridges, curbs and gutters, streets and sidewalks, and other assets that are immovable and of value only to the City) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $5,000 ($25,000 for capital improvement projects and infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost or estimated historical cost if actual amounts are unknown. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life, are not capitalized. Major improvements are capitalized and depreciated over the remaining useful life of the related asset. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, if material. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives (land and construction-in-progress are not depreciated): Assets Useful life (years) Buildings 10-50 Improvements 10-20 Machinery and Equipment 5-25 Infrastructure 25-75 Compensated Absences Vacation and sick leave is granted to all regular and part-time permanent employees. The annual amount of vacation time accrued varies depending on classification and years of service. Accumulated vacation leave vests and the City is obligated to make payment if the employee terminates. Sick leave accrues at rates based on the full time equivalency status of each employee. Sick leave is vested with 20 years of service. Sick leave is payable upon termination (if vested) or retirement, up to 50 percent (not more than 520 hours) of accumulated sick leave. For the governmental fund financial statements, the current payroll and current portion of the compensated absences are recorded as a current liability of the applicable funds. Long-term liabilities of governmental funds are not shown on the fund financial statements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the accrued liabilities for compensated absences are recorded as a liability. Other Postemployment Benefits Retirees are allowed to participate in the same healthcare plan as active employees and pay the same premium for this benefit which results in an implicit rate subsidy. Even though the City makes no direct payments on behalf of the retirees the City is required to report this implicit cost for active employees who will be able to continue to purchase health insurance once they retire. To recognize the cost of other postemployment benefits (OPEB) for healthcare over the active service life of the employee rather than on a pay-as-you-go basis, the net OPEB obligation includes the amortized future cost of the 50 unfunded actuarial accrued liability. In the government-wide statements, and proprietary fund types in the fund financial statements, the net OPEB obligations are reported as long-term liabilities in the statement of net position. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net position. Bond premiums and discounts are amortized over the life of the bonds using a method which approximates the effective interest method. In the fund financial statements, governmental fund types recognize bond premiums and discounts as well as bond issuance costs in the period in which the bonds are issued. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Interfund Transactions Interfund transactions, consisting of services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as a reimbursement reducing expenditures in the fund performing the services. Exceptions include water sales, sewer charges, and environmental service charges that are recorded as revenue in the enterprise funds and expenses or expenditures in the department receiving the service. In addition, transfers are made between funds to shift resources from a fund legally authorized to receive revenue to a fund authorized to expend the revenue. Fund Balance In the fund financial statements, restricted fund balance is defined as that portion of fund balance that can be spent only for the specific purposes stipulated by constitution, external resource or through enabling legislation. Committed fund balance includes amounts constrained to specific purposes determined by a formal action of the City itself, using its highest level of decision-making authority (i.e. City Council). To be reported as committed, amounts cannot be used for any other purpose unless the City takes the same highest level action to remove or change the constraint; this action would represent a city ordinance. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Intent can be expressed by the City Council or by the budget committee with final review completed during the annual budget process; the City has no formal policy in place. Assigned fund balance represents the remaining amount that is not restricted or committed in governmental funds other than the general fund, which is classified as unassigned. Nonspendable fund balance represents amounts that are required to be maintained intact, such as inventories, and nonexpendable portion of permanent funds. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 51 II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of Certain Differences between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliations briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each fund financial statement. Reconciliation of Governmental Funds Balance Sheet and the government-wide Statement of Net Position: Total Governmental Funds Long-Term Internal Reclass Statement of Capital Assets - Service and Net Position Assets (1) Liabilities (2) Fund (3) Eliminations (4) Totals Assets Cash and cash equivalents $ 78,633,581 $ - $ - $ 4,164,681 $ - $ Cash with fiscal agents 82,798,262 - Accounts receivable, net Interest receivable Intergovernmental receivables Note Recevable 9,320,603 - - 51,257 - 9,371,860 191,613 - - 8,245 - 199,858 2,359,651 - - - - 2,359,651 326,600 - - - - 326,600 Special assessments receivable 2,120,411 - - - - 2,120,411 Interfund receivable 3,000,000 - - 383,553 - - - - - Inventory Restricted cash and cash equivalents 11,727,300 632,500 (3,011,752) 620,748 383,553 - - - 11,727,300 308,985,821 - - - 308,985,821 108,063,312 308,985,821 - Deferred pension - - 22,502,916 - - Deferred loss on bond refunding - - 815,903 - - 815,903 - - 23,318,819 - - 23,318,819 Capital assets - Total assets Deferred Outflows of Resources Total deferred outflows of rescources Total Assets and Deferred Outflows of Resources $ 108,063,312 $ 308,985,821 $ 4,856,683 23,318,819 $ (3,011,752) 4,856,683 $ 418,894,064 22,502,916 (3,011,752) $ 442,212,883 Liabilities Accounts and retainage payable $ Accrued payroll & compensated absences 5,642,751 Advanced revenue Guaranty and other deposits - $ - $ $ - $ 5,888,842 - - 3,011,752 - - - 781,177 - - 996 - 782,173 1,653,344 - - - - 1,653,344 - - 2,853,610 - - - - Unamortized bond premium - - Unamortized bond discount - - Compensated absences - - - 246,091 - Interest payable Interfund payable $ 1,706,675 1,097,023 2,853,610 (68,443) 3,973,752 Claims and judgements - - Other postemployment benefits - - 4,942,102 - - - 1,706,675 - - 1,097,023 206,877 - (3,011,752) - (68,443) 3,973,752 - 206,877 - 4,942,102 116,811,023 Net pension liability - - 116,811,023 - - Unmatured long-term debt - - 62,000,895 - - 12,795,699 - 191,609,962 Unavailable revenue - court fines 302,967 - (302,967) - - - Unavailable revenue - note receivable 326,600 - (326,600) - - - Unavailable revenue - property taxes 204,099 - (204,099) - - - 2,119,987 - (2,119,987) - - - - 5,408,331 - - 5,408,331 - 2,454,678 - - 5,408,331 Total liabilities 453,964 62,000,895 (3,011,752) 201,847,873 Deferred inflows of resources Unavailable revenue - special assessments Deferred inflow related to pension - Total deferred inflows of resources 2,953,653 Fund Balance - Net Position Fund balance/Net Position Total liabilities, deferred inflows and fund balance-net position 92,313,960 $ 308,985,821 108,063,312 $ 308,985,821 $ (170,745,821) 23,318,819 $ 52 4,402,719 4,856,683 $ (3,011,752) $ 234,956,679 442,212,883 (1) Capital assets (land, buildings, equipment, etc.) used in governmental activities are purchased or constructed with the costs of those assets reported as expenditures in governmental funds, and thus a reduction in fund balance. However, the statement of net position includes those capital assets among the assets of the City as a whole and amortizes the cost over the life of the asset as depreciation expense. Costs of capital assets Accumulated depreciation $ 525,850,392 (216,864,571) 308,985,821 (2) Certain receivables are reported as unavailable in the governmental funds, but are earned in the statement of net position. Promissory note forgivable Note receivable Court receivables $ 81,600 245,000 302,967 629,567 Certain deferred outflows and inflows of resources are applicable to future periods and, therefore, not recognized in the governmental funds, but are reported in the statement of net position. Deferred outflows related to pensions Deferred loss on bond refunding Deferred inflows related to pensions $ 22,502,916 815,903 (5,408,331) 17,910,488 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental fund statement. All liabilities, both current and longterm are reported in the statement of net position. Governmental bond and lease payable Governmental interest payable Compensated absences Other postemployment benefits Net pension liability Unamortized bond premium Unamortized bond discount $ 62,000,895 1,097,023 3,973,752 4,942,102 116,811,023 2,853,610 (68,443) 191,609,962 Revenue for the long-term special assessment receivables and property tax shown on the governmental fund statements is not reflected on the statements of net position. Special assessment Property tax $ 2,119,987 204,099 2,324,086 (3) Internal service funds are used by management to charge the costs self insurance to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position, but are not included on the governmental fund balance sheet. ISF net position (4) $ 4,402,719 Certain interfund transactions between governmental activities and between business-type activities are eliminated in the consolidation of those activities for the statement of net position. Interfund receivables Interfund payables $ 3,011,752 (3,011,752) - 53 B. Explanation of Certain Differences between the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances and the Government-Wide Statement of Activities Reconciliation of Governmental Funds Statements of Revenues, Expenditures and Changes in Fund Balance and the government-wide Statement of Activities: Total Capital Governmental Funds Revenues and Other Sources Taxes Intergovernmental $ Grants and entitlements 59,711,556 21,355,708 - - Licenses and permits - 3,153,135 - 1,524,856 Rent 1,696,070 Investment earnings Contributions Total revenue Expenditures/Expenses General governmental Public works Transfers out 49,347 (225,179) - - - 16,090,690 (16,090,690) 5,325 (5,325) (2,432,268) - - (15,231,349) $ 257,048 (163,459) 1,855,429 870,853 7,678,186 - $ (5,325) 4,422,281 $ 54 101,604 (12,980,269) - (10,038,254) 119,058 46,127 - - 306,695 - - - - (204,956) 5,349,597 $ (274,914) $ (204,956) - - 4,762 8,576,382 (41,353) - 1,086,016 33,654 15,891,921 - - 53,747 (112,550) 204,956 Transfers in 628,238 2,754,714 31,781 360,551 222,090 104,324,288 Sale of capital assets (4,483,701) - - $ - - 127,314 - Activities Totals - - - Statement of (7,292,355) - 880,674 2,520,596 Issuance of capital debt - - 9,530,781 12,980,269 OTHER FINANCING SOURCES (USES): - 1,763,296 Principal retirement Total expenditures/expenses - 30,074,183 5,916,632 Capital outlay - - (9,787,800) - 1,995,338 11,441,848 Interest and other charges - $ 17,080,155 - 31,781 111,131,621 Culture and recreation Highways and streets (4,583,166) - - - 1,207,776 Economic and physical development - and Eliminations (4) - 1,995,338 14,561,513 Public safety - Adjustments Service Fund (3) 675 1,962,364 1,404,390 (28,524) $ Internal - - 1,636,650 Miscellaneous $ - 2,916,164 Fines and forfeitures Revenues/ Expenses (2) - 4,747,237 Charges for services Total other financing sources (uses) Net change for the year $ 11,023,491 Special assessments Long-Term Related Items (1) - 446,804 (470,178) (1,319,690) - 76,763,187 11,567,908 3,731,136 164,071 2,916,164 3,153,135 1,525,531 1,696,070 1,668,431 4,085,016 1,404,390 108,675,039 17,210,188 34,711,251 1,650,323 10,259,240 12,974,830 13,059,212 - - 2,295,417 - 92,160,461 - - - 664,652 (1,203,904) (539,252) (539,252) $ - - - 16,556,573 (16,435,253) 121,320 16,635,898 (1) When capital assets that are to be used in the governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. Capital outlay Depreciation expense Disposal of capital assets $ Donated capital assets 16,090,690 (13,331,288) (332,459) 1,995,338 4,422,281 (2) Special assessment principal payments received are reported as revenue on the governmental fund statements, but are reductions to the outstanding special assessment debt for government-wide reporting. Property tax revenue not received within 30 days of year end are unearned for governmental fund reporting, but are not for government-wide reporting. Special assessment received Property tax Fines & forfeitures $ (4,583,166) (28,524) 675 (4,611,015) When bonds are issued the proceeds and related premiums are reported as an other financing sources (uses) in the governmental funds. However, the bond premium and any loss on bond refunding are amortized (expensed) over the life of the bonds. Amortization of bond premium Amortization of refunding loss on debt $ 299,591 (161,308) 138,283 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Delivery of forgivable promissory note Issuance of capital debt $ Accrual of long-term compensated absences Accrual of bond interest Pension contributions (10,200) (204,956) (103,686) 225,179 9,411,570 Pension benefits earned net of employee contributions Accrual of other postemployment benefits (12,122,948) (597,899) (3,402,940) Certain expenses reported in the statement of activities require the use of current financial resources and therefore are not reported as expenditures in the government wide statement of activities. Note Receivable $ 245,000 Repayment of bond principal is reported as an expenditure in governmental funds and thus has the effect of reducing fund balance because current financial resources have been used. For the City as a whole, however, the principal payments reduce the long-term liabilities in the statement of net position and do not result in an expense in the statement of activities Principal bond payments $ 12,980,269 (3) Internal service funds are used by management to charge the costs of self insurance to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. Revenue $ 31,781 Expenditures (306,695) (274,914) (4) Certain interfund transactions between governmental activities and between business-type activities are eliminated in the consolidation of those activities for the statement of net position. Transfer of capital assets to business-type activities Transfer of capital assets from business-type activities 55 $ (1,203,904) 664,652 (539,252) Fund Balance Classification Fund balances for governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of nonspendable, restricted, committed, assigned, and unassigned designate the relative strength of the constraints placed on how the amounts can be spent. Classification of fund balances imposed by the reporting government, whether by administrative policy or legislative action of the City Council, are shown in aggregate on the government fund financial statements, but not on the proprietary statement of net position. Restricted net position on the government-wide financial statements reflects restrictions imposed by external sources. Nonspendable fund balance represents amounts that are nonspendable such as inventories and nonexpendable portion of permanent funds. Restricted fund balances represent constraints placed on the use of resources imposed externally by creditors, grantors, contributors, or laws and regulations of other governments. Resources imposed by constitutional provisions of enabling legislation that allows the ability to levy, charge, or mandate payment of resources are also classified as restricted. Committed fund balance includes amounts that can be used only for the specific purposes determined by adoption of a city ordinance by the City Council, the government’s highest level of decision-making authority. A formal action would also be required to modify or rescind an established commitment as related to the adopted city ordinance. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Assigned fund balance is expressed by the direction of the City Council and budget committee as part of the annual budgeting process. Authority to assign amounts used for specific purposes is confirmed as part of the annual budgeting process, the City has no formal policy that establishes this practice. Unassigned fund balance represents the remaining amount that is not restricted, committed, nonspendable nor assigned in the general fund. Consideration is made that restricted amounts are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes which both restricted and unrestricted fund balance is available. Also, committed, assigned, or unassigned amounts are considered to have been spent when expenditure is incurred for purposes for which amounts in unrestricted fund balance classification could be used. Absent of a minimum fund balance policy, the City, through the budgeting process, establishes a minimum fund balance level to maintain as part of that process. A minimum balance of 12% is suggested in the general fund and a 10% fund balance is suggested for special revenue and enterprise funds. Deficit Fund Balance A deficit unassigned fund balance of $2,934,084 exists in the capital projects bond fund. The deficit is a result of beginning construction of bonded projects prior to the receipt of proceeds. Bonding, as approved by voters, will be issued in the next reporting period. 56 Governmental fund balances as of June 30, 2016 are as follows: General Fund Highway User Revenue Fund Transportation Fund Other Governmental Funds Total Governmental Funds Fund balances: Nonspendable: Perpetual care Debt service Inventory $ - $ - - $ - 335,134 2,057,737 $ 252,973 $ 252,973 6,020,615 8,078,352 - - 48,419 383,553 Restricted for: Library services - - - 1,632,867 1,632,867 Library branch services - - - 1,086,681 1,086,681 Library programs externally directed - - - 877,811 - - Court improvements and operations 952,758 Debt service - - - - Street improvements - Transit - - Public art - - - 644,643 644,643 Parks operations - - - 2,211,328 2,211,328 Economic Development - - - 727,768 727,768 Tourism - - - 1,110,965 1,110,965 - Development fee projects Other capital projects - 7,763,092 8,872,061 4,599,902 7,743,044 877,811 952,758 Regional planning Perpetual care 114,866 17,293 17,293 - 16,635,153 - 4,599,902 - - 23,257 1,246,081 - - - 56,615 - 7,782,432 - 1,121,129 - - 27,425,564 - - 2,900,666 7,857,910 7,622,343 23,257 1,246,081 10,579,624 Assigned to: Capital reserve Real estate Unassigned: Total fund balances $ 38,919,713 $ 7,763,092 - $ 18,545,232 (2,934,084) $27,085,923 7,782,432 1,121,129 24,491,480 $92,313,960 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Information Budget Basis of Accounting The City's accounting records for general government operations (general, special revenue and debt service funds) are essentially maintained on a basis consistent with Generally Accepted Accounting Principles (GAAP) except for 60 days sales tax accrual, unrealized gain or loss on investments and allowance for doubtful accounts. Measurable revenues are recorded when they become available to finance expenditures in the current fiscal year. "Available" is defined as: collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures, other than principal and interest on debt, are recognized in the accounting period in which the liability arises. State statute allows for encumbrances to be recognized for a 60-day period following the end of the prior fiscal year as uses of prior year appropriations. To ensure that appropriations do not lapse, departments are directed to re-budget for all items delivered after June 30. 57 For the enterprise funds, the annual budget is prepared on a basis that differs from GAAP because state law requires capital purchases and debt service payments to be budgeted as expenses, and bond proceeds and grants that are to be utilized are to be budgeted as revenues. The accounting and budgeting systems for the City are in accordance with Generally Accepted Accounting Principles (GAAP) format, with minimal variances between the two systems. Budget basis for enterprise funds differ primarily due to state laws. The major differences are as follows: • Encumbrances (contractual commitments) are considered the equivalent of expenditures. Encumbrances at yearend for goods or services which are not received prior to the end of the fiscal year are cancelled. • • Fund balances reserved for inventory and bonded debt are not included in the budget. Certain expenditures, such as depreciation, compensated absences and landfill closure and post closure accruals, are not included in the budget. • • Enterprise funds budget capital expenditures and debt service payments as expenses. Enterprise funds budget bond proceeds as revenues. The City will utilize a number of different fund types to segregate the financial activity within the City either due to regulatory reasons or as designated internally. The fund classifications are Governmental funds, Proprietary funds and Fiduciary funds. Review and Approval Issues presented during the review and approval period include discussion topics of the Council during the fall and spring retreats. The fall and spring retreats were held in November and February respectively, to give City staff the opportunity to present major discussion points to Council and the public. The goal is for Council to make policy decisions and direct staff in preparing the budget. This provides adequate time for the Council to gather input on major budget issues prior to preparation of the budget. The City Council holds Study Sessions in April. The Council reviews and discusses the issue papers included in the Budget Review Book as well as all personnel recommendations, capital equipment recommendations and the capital improvement plan. The Council arrives at a consensus for all decisions needed. The Study Sessions provide the opportunity for City management, departments and the public to offer information and recommendations to the City Council. The proposed budget is presented to Council for tentative adoption on or before the third Tuesday in June. Two public hearings are held on the content of the budget. State law requires the operating budget to be all-inclusive. Therefore, the budget includes provisions for contingent revenues, e.g., passenger facility charges, and expenditures that cannot be accurately determined when the budget is adopted, e.g., grants. The Resolution adopting the annual budget requires Council authorization for any expenditure from contingencies, as well as transfer of budget authority between departments. The City operates under the State Expenditure Limitation with a one-time adjustment to the base. The adjustment provided for an increase to the base limit to allow for the expenditure of funds resulting from the addition of a 2% Bed, Board and Beverage Tax. Flagstaff is not a Home Rule city. municipalities require voter approval every four years. Alternative Home Rule Expenditure Control The adopted budget reflects the total funds appropriated. Certain exclusions are allowed by the state (e.g., bond proceeds, debt service and grants) in computing the Expenditure Limitation and this total cannot be exceeded. Budget authority can be transferred between line items within a section. At year-end, division budgets are reviewed and budget authority is transferred from contingencies by Resolution, if between divisions, as necessary. Council 58 can also amend total appropriations for a division during the year by Resolution as long as there is a corresponding increase/decrease in another division so that the expenditure limitation is not exceeded. B. Excess of Expenditures over Appropriations Expenditure appropriations are adopted in the budget at the division level. For presentation purposes, we have elected to show any deficits at the division level within funds. In the General Fund, Economic Vitality exceeded appropriations by $167,900. This deficit was funded by available fund balances in the General Fund. The deficit was mainly the result of an unbudgeted grant. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The City maintains a cash and investment pool that is available for use by all funds. Each fund type’s portion of this pool is displayed on the government-wide Statement of Net Position as “Cash and cash equivalents,” “Investments,” and “Restricted cash and investments.” Deposits At June 30, 2016, the carrying amount of the City’s deposits was $32,139,770 and the bank balance was $33,506,371. The $1,366,601 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2016. There is an additional $8,203,831 reported as restricted cash as it is held with paying or fiscal agent on June 30, 2016 for debt service payments due on July 1, 2016. Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. Statutes and the City’s investment policy require collateral for demand deposits, certificates of deposit, and repurchase agreements at 102 percent of all deposits not covered by federal depository insurance. All investments are either registered in the City’s name or are held by a third party in the City’s name. All deposits were collateralized at June 30, 2016. Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy matches maturities with cash flow dates, unless matched to a specific requirement the City may not invest more than 25 percent of the portfolio for a period greater than three years or any portion of the portfolio for a period greater than 10 years. 59 At June 30, 2016, the City’s investments included the following: Investment Type Federal agency notes Municipal obligations U.S. treasuries State investment pool Corporate notes Money market Total fair value of investments Portfolio weighted average maturity $ $ Fair Value 27,751,658 1,352,712 50,931,636 11,557,984 8,579,668 96,534 100,270,192 Weighted Average Maturity (in years) 1.833 0.448 3.189 0.060 3.068 0.000 2.403 Credit Risk City resolution and State Statutes authorized the City to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, repurchase agreements, SEC registered money market accounts, certificates of deposit within the top three ratings by a nationally recognized rating agency, and the State of Arizona Local Government Investment Pool (LGIP). The credit quality ratings of investments as described by nationally recognized Standard and Poor’s and Moody’s rating service as of June 30, 2016 is as follows: Investment Type Federal agency notes Municipal obligations U.S. treasuries State investment pool Corporate notes Money market Total Fair Value $ 27,751,658 1,352,712 50,931,636 11,557,984 8,579,668 96,534 $ 100,270,192 Moody's Rating AAA AAA/ AA2 AAA N/A AAA/ AA3/ A1/ A2/ A3 Aa1 S&P Rating AA+ AA- / AAA AA+ AAA f / S1+ AAA/ AA+/ AA-/ A-/ A AAAm % of Investment 27.67 1.35 50.79 11.53 8.56 0.10 100% Concentration of Credit Risk The City’s investment policy establishes that its investment portfolio, to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities shall not exceed the following. Fully insured or collateralized CD’s no more than 25%, US agency securities 100%, State, county, school district and other district municipal bonds or debt with an A rating or better no more than 25%, repurchase agreements 100%, and local government investment pool 100%. 60 At June 30, 2016, the City’s cash and investments included the following: Total City cash deposits and investments at fair value are as follows: Carrying amount of investments Carrying amount of cash deposits Cash on deposit with paying agent Cash on hand Total pooled cash and investments $ Pooled cash, equivalents and investments - unrestricted Restricted cash and investments Total pooled cash and investments $ $ $ 100,270,192 32,139,770 8,203,831 13,930 140,627,723 115,765,368 24,862,355 140,627,723 Cash and cash equivalents at June 30, 2016 consisted of the following: Investments included in cash and cash equivalents Carrying amount of unrestricted city deposits Cash on hand Total cash, investments, and cash equivalents per statement of net position $ $ 88,712,208 27,039,230 13,930 115,765,368 Investment income comprises the following for the year ended June 30, 2016: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income per statement of activities $ $ 1,081,209 923,907 2,005,116 Fair Value Measurement The net increase in the fair value of investments during fiscal year 2015-2016 was $923,907. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. The unrealized gain (loss) on investments held at June 30, 2016 was $962,553. In determining fair value, the City uses various valuation approaches within the fair value measurement framework. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Fair value measurements framework establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Fair value measurements define levels within the hierarchy based on the reliability of inputs as follows: Level 1 – Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets; Level 2 – Valuations based on quoted prices for similar assets or liabilities or identical assets or liabilities in less active markets, such as dealer or broker markets; and Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable, such as pricing models, discounted cash flow models and similar techniques not based on market, exchange, dealer or broker-traded transactions. 61 The City’s investments at June 30, 2016, categorized within the fair value hierarchy detailed above were as follows: Inve stme nts b y fair value le ve l Investment Type Federal agency notes Municipal obligations U.S. treasuries Corporate notes Money market Total Investments by fair value level Fair Value Measurements Using (Level 2) (Level 1) Total Fair Value $ $ 27,751,658 1,352,712 50,931,636 8,579,668 96,534 88,712,208 Ex te rnal inve stme nt p o o ls me asure d at fair value State Treasurer's Investment Pool Total Investments measured at fair value $ 11,557,984 $ 11,557,984 Total Investments $ 100,270,192 $ $ 50,931,636 96,534 51,028,170 $ $ 27,751,658 1,352,712 8,579,668 37,684,038 (Level 3) $ $ - Investments in the State Treasurer’s investment pools are valued at the pool’s share price multiplied by the number of shares the City held. The fair value of a participant’s position in the pools approximates the value of that participant’s pool shares. The State Board of Investment provides oversight for the State Treasurer’s investment pools. In previous years, the City recognized a decrease in fair value of $1,473,712 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool. The State and numerous other bondholders filed suit against the principals, underwriters, trustees, accountants, and others in May 2003. The case is presently pending litigation. There have been several distributions since June 2006. The distributions include payments from the trustee and settlement proceeds received from pending litigation. The City did not receive a distribution this year and the total recovery to date is $1,126,225. In previous years, the City recognized a decrease in fair value of $289,104 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool relating to Lehman Brothers Chapter 11 filing. The State has filed claims on behalf of the LGIP investors. The City received a distribution this year in the amount of $8,895 and the total recovery to date is $109,792. 62 B. Receivables Receivables as of June 30, 2016, including allowances for uncollectible accounts, are as follows: Fund Accounts Governmental Activities General fund Highway user revenue fund Transportation fund Special assessment fund Other governmental funds Less: allowance for uncollectibles Total government funds Internal services funds Total governmental activities Business-Type Activities Water Wastewater Environmental services Airport Stormwater Flagstaff housing authority Less: allowance for uncollectibles Total business-type activities Total activities $ 6,238,992 828,896 2,159,547 1,090,987 (997,819) Intergovernmental Interest $ 78,747 8,753 44,479 476 59,158 - $ 295,446 26,893 1,112,085 925,227 - Special Assessments $ 2,120,411 - Notes Receivable $ Total Receivables 326,600 - $ 6,613,185 864,542 3,316,111 2,120,887 2,401,972 (997,819) 9,320,603 51,257 191,613 8,245 2,359,651 - 2,120,411 - 326,600 - 14,318,878 59,502 9,371,860 199,858 2,359,651 2,120,411 326,600 14,378,380 2,641,547 1,504,022 1,291,709 110,739 204,695 65,479 (190,912) 28,215 27,539 23,362 2,229 2,627 - 48,358 316 52,907 120,000 85,430 - - - 2,669,762 1,579,919 1,315,387 165,875 327,322 150,909 (190,912) 5,627,279 83,972 307,011 - - 6,018,262 $ 14,999,139 $ 283,830 63 $ 2,666,662 $ 2,120,411 $ 326,600 $ 20,396,642 C. Capital Assets A summary of capital asset activity, for the government-wide financial statements, as of June 30, 2016 is as follows: Governmental activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets Balance July 1, 2015 $ Depreciable assets: Buildings Improvements Machinery and equipment Infrastructure Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Infrastructure Total accumulated depreciation Governmental activities capital assets, net $ 64,845,212 13,810,087 78,655,299 Increase $ 36,911 7,843,545 7,880,456 Transfers In (out) Decrease $ (12,316,184) (12,316,184) $ (1,203,904) (1,203,904) Balance June 30, 2016 $ 64,882,123 8,133,544 73,015,667 75,827,306 21,359,152 31,745,480 301,666,214 430,598,152 8,123,834 1,102,302 2,336,382 10,641,692 22,204,210 (611,148) (611,148) (21,141) 664,652 643,511 83,951,140 22,461,454 33,449,573 312,972,558 452,834,725 (21,411,268) (14,736,642) (22,398,563) (145,604,187) (204,150,660) (1,809,290) (981,763) (1,803,034) (8,737,201) (13,331,288) 596,236 596,236 21,141 21,141 (23,220,558) (15,718,405) (23,584,220) (154,341,388) (216,864,571) 305,102,791 $ 16,753,378 $ (12,331,096) $ (539,252) Less: associated debt Less: unamortized premium Plus: unamortized discount Less: construction retainage Plus: unamortized loss on current refunding Plus: unspent capital related debt, series 2013 Plus: non-capital related debt, series 2013 Net investment in capital assets 64 308,985,821 $ (62,000,895) (2,853,610) 68,443 (341,507) 815,903 380,910 1,842,300 246,897,365 Busine ss-typ e a ctivitie s: Non-depreciable assets: Land Construction -in-progress Balance July 1, 2015 $ Total non-depreciable assets $ 32,727,441 Depreciable assets: Buildings Improvements 4,929,242 45,608,653 535,280,359 1,437,841 6,367,083 (50,344,052) (139,871,238) (25,142,175) (215,357,465) $ 352,650,335 5,939,946 5,939,946 100,803,144 388,868,562 Machinery and equipment Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Total accumulated depreciation Business-type activities capital assets, net 14,119,715 18,607,726 Increases $ (2,998,077) (706,616) $ (2,998,077) 539,252 (1,496,580) (1,496,580) 21,141 560,393 1,386,700 1,386,700 $ (3,107,957) - - (2,290,817) (8,193,706) (2,529,122) (13,013,645) $ Transfers In (out) Decreases (21,141) (21,141) $ 539,252 Less: associated debt Less: construction retainage Net investment in capital assets Balance June 30, 2016 $ 14,119,715 21,549,595 35,669,310 100,803,144 394,337,056 45,571,055 540,711,255 (52,634,869) (148,064,944) (26,305,738) (227,005,551) 349,375,014 (37,664,602) (65,547) $ 311,644,865 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: G ove rnme nta l Activitie s: General government Public safety $ Public works Economic and physical development Culture and recreation Highway and streets Total depreciation expense - governmental activities 65 $ 553,540 1,763,296 222,090 360,551 1,855,429 8,576,382 13,331,288 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $485,640 are included in the government-wide financial statements at June 30, 2016. The interfund balances at June 30, 2016 are short-term loans to cover temporary cash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbursements. All interfund balances outstanding at June 30, 2016 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2016: Interfund Receivables Interfund Payables Fund G ove rnme nta l Activitie s: General fund Other governmental funds Total governmental activities $ 3,000,000 3,000,000 $ Busine ss-T yp e Activitie s: Housing authority fund Total business-type activities Total governmental and business-type activities 11,752 11,752 $ 3,011,752 $ 3,011,752 Less: fund eliminations Adjustment for internal service fund elimination Total government-wide statement of net position 66 11,752 3,000,000 3,011,752 (3,000,000) (632,500) $ (620,748) Transfers The net transfers of $121,320 from business-type activities to governmental activities on the government-wide statement of activities are primarily debt service. There were no significant transfers during fiscal year 2016 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. The following transfers are reflected in the fund financial statements for the year ended June 30, 2016: Fund Governmental Activities: General fund Highway user revenue fund Transportation fund Other governmental funds Transfers out Transfers In $ 2,063,183 13,000 $ 3,110,079 3,958,100 15,231,349 15,231,349 15,891,921 15,891,921 711,064 245,190 5,441 - 3,684,143 9,471,023 Total governmental funds Internal service fund Total governmental activities Business-Type Activities: Water and Wastewater fund Environmental services fund Airport fund Stormwater fund Other business-type fund Total business-type activities Total governmental and business-type activities Less: fund eliminations Add: net capital assets transfer 376,174 1,332,428 $ 16,563,777 8,823,742 646,463 19,952 671,856 $ 16,563,777 (17,224,349) 539,252 Total government-wide statement of activities $ (121,320) The BBB fund transferred $2,678,317 to the General fund for it’s share of the operating cost of the services performed by General fund divisions and sections. The Transportation fund transferred $3,661,643 to the Highway user revenue fund for the transportation fund’s portion of capital projects and debt service expenditures. The General fund transferred $1,604,860 to the Library fund for City share of expenditures for the libraries within the City limits. 67 E. Leases Operating Leases Expenditures The City leases library spaces under both non-cancellable and cancellable operating leases. The non-cancellable lease is for the East Flagstaff Library. The initial intergovernmental agreement was dated September 10, 2002, and was amended on September 8, 2008, to reflect an ending date of June 30, 2017. The agreement has automatic renewal for an additional two years, terminating on June 30, 2019, if neither party send a written notice of intent to terminate to the other party at least 60 days prior to the expiration of the initial term. Either party may terminate the lease at any time for any reason or no reason, without penalty, upon 180 days written notice. Fiscal year 2016 lease expense for the library was $89,216. The schedule below for future minimum lease expenses reflects the change in the rental rate as of June 30, 2016. The additional non-cancellable lease is with the Chevelon Butte School District #5 for facility use. It is a four (4) year lease beginning September 1, 2011, and is automatically renewed an additional four years, indefinitely, unless 30 days notice is given by either party. Total lease expense was $7,200 for FY 2016. Operating Lease Expenditures Year Ending June 30 2017 2018 2019 2020 Total East Flagstaff Library $ 92,563 92,563 92,563 277,689 Forest Lakes Library (Chevelon Butte SD) $ 7,200 7,200 7,200 7,200 28,800 In addition, the City has entered into several operating lease agreements, with cancellation provisions, for the purpose of leasing office space and land. Lease expenditures for these items for the period ending June 30, 2016 were $178,052 (Cancelable and Non-cancelable) which include the East Flagstaff Library and Forest Lakes Library). Operating Lease Revenues The City leases several City-owned buildings under cancellable and non-cancellable agreements. Certain leases contain provisions for future rate increases based on changes in the consumer Price Index. Total revenue for fiscal year 2016 was $1,695,536. The City currently has three leases with non-cancellable terms as well as future cancellable terms that are for the USGS buildings 3, 4/5, and 6, which are guaranteed thru the dates indicated below. The following table represents the future minimum lease receivable from the lease with non-cancellable terms. The amounts shown include revenue related to the asset and the operational expenses. The USGS Lease for Buildings 4/5 has recently been renewed effective January 1, 2017 thru December 31, 2019. The first two years are firm (as shown below), and the remaining three years are on a month-to-month basis with a required Thirty (30) day notice for cancellation. The USGS Lease renewal for Building 6 was taken to Council for approval on August 16, 2016. The terms were approved for the Twenty (20) year lease, of which Ten (10) years are firm and Ten (10) years are month-to-month, with a Sixty (60) day notice of lease cancellation required for the month-to-month portion of the lease. The debt for Building 6 was paid off in full, resulting in a decrease in lease payments from the USGS to the City of Flagstaff. 68 Year Ending June 30 2016 - Actual 2017 2018 Non-Cancellable USGS $ 2019 2020 2021 Building 3 1,403,361 - Non-Cancellable USGS $ - 2022 2023 2024 $ 1,403,361 $ - - 2025 2026 2027 Building 4/5 352,267 176,400 - Non-Cancellable USGS 293,692 293,692 293,692 - $ 528,668 Building 6 801,212 335,977 293,692 293,692 293,692 293,692 $ 293,692 293,692 24,474 3,804,890 In addition, the Airport Fund has several leases under cancellable agreements. The leases are for terminal space, hangars, shades, tie downs, ground leases, rental car agencies and a cafe. Lease revenue in the airport fund for fiscal year 2016 was $1,457,186. F. Long-Term Debt General Obligation Debt The City of Flagstaff issues general obligation debt to provide funds for the acquisition and construction of major capital facilities. General obligation debt has been issued for both governmental and business-type activities. General obligation debt are direct obligations and pledge the full faith and credit of the government. The water and wastewater general obligation debt is a water infrastructure and finance authority note backed by the ultimate taxing power and general revenues of the City; however, the debt is carried as a liability of the water and wastewater fund to reflect the intention of the City to retire those bonds from resources in the water and wastewater funds. Advance Refunding In 2014, the City issued bonds to advance refund $8,565,000 of outstanding series 2006A general obligation bonds. The City used the net proceeds along with other resources to purchase U.S. Treasury securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2006A series bonds. As a result, that portion of the 2006A series bonds is considered defeased, and the City has removed the liability from its accounts. The outstanding principal of the defeased bonds at June 30, 2016 is $8,565,000. General obligation debt outstanding at June 30, 2016: Purpose Governmental activities Governmental activities - advance refunding Business-type activities Total general obligation debt outstanding 69 $ $ Amount 35,547,310 8,270,000 1,375,362 45,192,672 General obligation debt at June 30, 2016 consist of the following individual issues: General Obligation Debt Governmental activities: $31,500,000 Capital projects, series 2006 due in annual installments of $1,180,000 to $2,445,000 through July 1, 2023; interest rate at 3.25% to 5.25%. Construction related to recreation facilities, fire facilities and equipment, and open space acquisition. This series was partially refunded on April 8, 2014. $ 7,750,000 $8,270,000 Capital projects, series 2014B partial refunding of series 2006 due in annual installments of $1,940,000 to $2,205,000 through July 1, 2021; interest rate at 3.00% to 5.00%. Construction related to recreation facilities, fire facilities and equipment, and open space acquisition. 8,270,000 $12,845,000 Capital projects, series 2011 due in annual installments of $335,000 to $2,320,000 through July 1, 2020; interest rate at 1.0% to 4.0%. Construction related to fire facilities, streets and utility improvements, and public safety communication system. 8,635,000 $3,952,287 Public safety communications, series 2011 due in annual installments of $289,956 to $446,582 through July 1, 2021; interest rate at 2.40%. Construction related to public safety communication system. 2,527,310 $11,460,000 Capital projects, series 2013 due in annual installments of $560,000 to $950,000 through July 1, 2028; interest rate at 1.625% to 4.0%. Construction related to forest initiative, streets and utility improvements, and open space/Flagstaff Urban Trail System. 10,235,000 $6,600,000 Capital projects, series 2014A due in annual installments of $200,000 to $460,000 through July 1, 2034; interest rate at 1.5% to 5.0%. Construction related to parks and recreation facilities improvements and land purchase for open space/Flagstaff Urban Trail System. 6,400,000 Total governmental activities 43,817,310 Business-type activities: $1,633,933 Water infrastructure finance authority, due in annual installments of $61,745 to $107,043 through July 1, 2031; interest at 3.104%. Original amount $1,833,828 less deobligated amount of $199,895. Red Gap Wells. 1,375,362 Total business-type activities 1,375,362 Total General Obligation Debt $ 70 45,192,672 Annual debt service requirements to maturity for general obligation debt are as follows: Year Ending Governmental Activities Business-type Activities June 30 Principal Interest Principal Interest 2017 $ 5,441,644 $ 1,430,852 $ 67,675 $ 41,641 2018 4,886,164 1,277,993 69,775 39,508 2019 4,920,912 1,128,478 71,941 37,308 2020 5,030,894 964,608 74,174 35,041 2021 5,001,115 789,026 76,477 32,702 2022-2026 12,216,581 2,031,703 419,500 125,820 2027-2031 4,580,000 670,300 488,776 55,469 2032-2035 1,740,000 142,601 107,044 1,661 Total $ 43,817,310 $ 8,435,562 $ 1,375,362 $ 369,150 Statutory Debt Limitation Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets and public safety purposes may not exceed 20 percent of the City of Flagstaff’s net secondary assessed valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6 percent of the City’s net secondary assessed valuation. The City’s computation of legal debt margins available for creation of additional debt at June 30, 2016 was $91,752,994 and $41,083,700 for the 20 percent and 6 percent debt limits, respectively. Also, see Schedule 16 in the Statistical Section for related information. Special Assessment Bonds Proceeds from special assessment bonds are used for improvements such as paving, sidewalks and sewers. Payments made by the assessed property owners are pledged as collateral. In the event of default by a property owner, the lien created by the assessment is sold at public auction and the proceeds are used to offset the defaulted assessment. If there is no purchase at the public auction, the City is required to buy the property with funds appropriated from the General Fund. On August 28, 2015, $4,400,000 of Aspen Place at the Sawmill Improvement District bonds were defeased as related to the early pay off of debt by the developer. Special assessment bonds outstanding at June 30, 2016: Purpose Governmental activities $ Amount 2,215,000 Special assessment bonds payable at June 30, 2016 consist of the following individual issues: Special Assessment Bonds Governmental activities: $8,900,000 Improvement district bonds, due in annual installments of $95,000 to $195,000, through January 1, 2032; interest at 5.0%. Aspen Place at the Sawmill district improvements. $ 2,215,000 Total Special Assessment Bonds $ 2,215,000 71 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032 Total $ $ Governmental Activities Principal Interest 95,000 $ 110,750 100,000 106,000 105,000 101,000 110,000 95,750 115,000 90,250 650,000 361,000 845,000 179,250 195,000 9,750 2,215,000 $ 1,053,750 Revenue Bonds Highway User Revenue Fund (HURF) bonds are issued specifically for the purpose of constructing street and highway projects. These bonds are repaid out of HURF by gas tax revenues collected by the State of Arizona and distributed to cities and towns based on a formula of population and gas sales within each county. In fiscal year 2004, the MFC issued $25 million in bonds for the construction of the Fourth Street Overpass on land owned by the City. The City will make lease payments equal to the debt service on both issues and will obtain legal title upon payment in full of the bonds. The City has collateralized the contracts payable to the MFC by a pledge of the City’s state shared revenues which are comprised of sales and income taxes imposed and collected by the State and distributed to counties and municipal governments pursuant to law and State revenue sharing which the City presently or in the future receives from the State and which are not earmarked by the State for a contrary or inconsistent purpose. Greater Arizona Development Authority revenue bonds are issued specifically for the purpose of constructing public infrastructure projects. These bonds have state shared revenue pledged as a repayment revenue stream. These bonds funded the Business Incubator building. Revenue bonds outstanding at June 30, 2016: Purpose Governmental activities Governmental activities - partial advance refunding Total revenue bonds outstanding 72 $ $ Amount 2,710,000 10,040,000 12,750,000 Revenue bonds at June 30, 2016 consist of the following individual issues: Governmental activities: $12,530,000 Fourth Street pledged revenue refunding bonds, series 2012 due in annual installments of $695,000 to $2,165,000 through July 1, 2020; interest at 3.0% to 5.0%. Street and bridge infrastructure. $ 10,040,000 $3,370,000 Greater Arizona Development Authority revenue bonds, series 2010A, due in annual installments of $50,000 to $240,000 through August 1, 2030; interest at 2.0% to 4.625%. Business incubator construction. Total governmental activities 2,710,000 $ 12,750,000 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2017 2018 2019 2020 2021 2022-2026 2027-2031 Total Governmental Activities $ Principal 1,990,000 2,060,000 2,155,000 2,240,000 $ 2,320,000 885,000 1,100,000 $ 12,750,000 Interest 485,663 403,063 312,113 224,413 135,425 $ 351,169 131,813 2,043,659 Other Debt Certificates of Participation Capital lease certificates of participation series 2009 were issued to complete various street overlay projects and to finance fire operating equipment. Principal and interest on the bonds are payable from capital lease payments and are not considered general obligations of the City. They are appropriated along with all other expenditures of the general government. Certificates of participation bonds outstanding at June 30, 2016: Purpose Governmental activities $ 73 Amount 2,170,000 Certificates of participation at June 30, 2016 consist of the following individual issues: Governmental activities: $4,690,000 Certificates of participation, series 2009 due in annual installments of $515,000 to $575,000, through October 1, 2019; interest at 3.3137%. Roadway overlay improvements and fire equipment. $ 2,170,000 Total Certificates of Participation $ 2,170,000 Annual debt service requirements to maturity for certificates of participation debt are as follows: Year Ending June 30 2017 2018 2019 2020 Total $ $ Governmental Activities Principal Interest 515,000 $ 70,673 530,000 52,900 550,000 33,313 575,000 11,500 2,170,000 $ 168,385 The following is a summary of debt service requirements, including interest requirements, to maturity for longterm debt at June 30, 2016: Fiscal Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Less interest $ $ General Obligation Debt 6,981,812 6,273,440 6,158,639 6,104,717 5,899,320 4,412,496 3,986,992 3,302,659 1,544,899 1,546,558 1,543,553 1,541,021 1,546,914 581,803 581,255 580,105 469,700 472,300 469,201 (8,804,712) 45,192,672 $ $ Special Assessment Bonds 205,750 206,000 206,000 205,750 205,250 199,500 203,750 202,500 201,000 204,250 207,000 204,250 206,250 202,750 204,000 204,750 (1,053,750) 2,215,000 $ $ 74 Revenue Bonds 2,475,663 2,463,063 2,467,113 2,464,413 2,455,425 249,982 247,862 245,531 247,881 244,913 246,250 246,769 246,825 246,417 245,552 (2,043,659) 12,750,000 $ $ Cetificates of Participation 585,673 582,900 583,313 586,500 (168,385) 2,170,000 $ $ Total 10,248,897 9,525,403 9,415,065 9,361,380 8,559,995 4,861,978 4,438,604 3,750,690 1,993,780 1,995,721 1,996,803 1,992,040 1,999,989 1,030,970 1,030,807 784,855 469,700 472,300 469,201 (12,070,506) 62,327,672 Authorized and Issued Debt The voters of the City authorize capital projects and the related debt mechanism to finance these capital projects. On May 18, 2004, voters approved $47.4 million for various capital projects and $46.6 million for future water rights and production. As of June 30, 2016, $5.0 million remains unissued for capital projects and $.8 million remains unissued for future water rights and production. On November 2, 2010, voters approved $21.2 million for public safety communication system and various street and utilities improvements. As of June 30, 2016 $.4 million remains unissued. On November 6, 2012, voters approved $14.0 million for a Core Service Maintenance Facility and $10.0 million for Forest Health and Watershed Protection. As of June 30, 2016 $14.0 million and $8.0 million remains unissued, respectively. Loans Payable The City of Flagstaff has various loan agreements with the Water and Wastewater Infrastructure Finance Authority (WIFA) of Arizona Revolving Fund Loan Program for the acquisition and construction of water and wastewater facilities and obtaining water rights. The Airport has an agreement with the Arizona Department of Transportation which provides financing for the construction of fourteen T hangars at the City Airport. Loans outstanding as of June 30, 2016: Purpose Business-type activities $ 75 Amount 32,799,860 Loan payables at June 30, 2016 consist of the following individual financing options: Water and wastewater: $7,900,000 Water infrastructure finance authority due in annual installments of $380,000 to $525,000 through July 1, 2026; interest at 3.28%. Water infrastructure acquisition. $ 4,925,000 $23,100,000 Wastewater infrastructure finance authority due in annual installment of $1,114,667, to $1,629,449 through July 1, 2027; interest at 3.512%. Sewer treatment plant improvements. 16,287,404 $8,500,000 Water infrastructure finance authority due in annual installment of $377,927 to $591,940 through July 1, 2028; interest at 3.810%, as adjusted on 12/7/12. Water production improvements and acquisition. 6,209,093 $2,100,000 Water infrastructure finance authority due in annual installment of $92,862 to $138,320 through July 1, 2029; interest at 3.113%. Amount issued to date $1,550,712. Remaining available $594,288. Water feasibility study. 1,005,654 $232,500 Water infrastructure finance authority due in annual installment of $10,374 to $15,054 through July 1, 2029; interest at 2.905%. Well improvements. 176,123 $594,950 Water infrastructure finance authority due in annual installment of $24,531 to $33,603 through July 1, 2029; interest at 2.45%. Original amount issued $1,000,000, amount deobligated $405,050. Well infrastructure improvements. 403,871 $1,100,000 as amended 10/02/09, $800,000 Water infrastructure finance authority due in annual installment of $51,224 to $70,168 through July 1, 2029; interest at 2.45%. Amount issued to date $1,100,000. Local aquifer study. 843,338 $6,775,760 Water Infrastructure Finance Authority due in annual installments of $375,127 to $462,398 through July 1, 2022, interest at 3.548%. Water and sewer improvements. 2,922,468 Total water and wastewater 32,772,951 Airport: $600,000 Arizona Department of Transportation due in quarterly installments of $13,361 to $13,548 through November 1, 2016; interest at 5.60%. Hangar construction. Total Loans Payable 26,909 $ 76 32,799,860 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 2017 2018 2019 2020 2021 2022-2026 2027-2030 Total $ $ Business-type Activities Principal Interest 2,453,617 $ 1,117,617 2,508,609 1,031,250 2,598,050 942,454 2,690,121 850,493 2,779,915 755,349 13,871,354 2,307,467 5,898,193 278,395 32,799,860 $ 7,283,025 Obligations under Capital Leases Capital lease agreements related to governmental activities consist of renewable energy solar equipment assets of $895,967 (net of accumulated depreciation) and heart monitors of $204,956 (net of accumulated depreciation). Capital lease agreements related to business-type activities consist of a co-generator at the Wildcat Wastewater Treatment Plant of $895,172 (net of accumulated depreciation), airport hangars of $434,822 (net of accumulated depreciation) and renewable energy solar equipment of $1,583,280 (net of accumulated depreciation). These lease agreements generally require annual payments and the lease terms vary from ten to twenty-one years. The lease agreements qualify as capital leases for accounting purposes and, therefore have been recorded at the present value of their future minimum lease payments as of the date of inception. Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021 2022-2026 2027-2029 Total future minimum lease payments Less: interest costs Present value of future minimum lease payments Governmental Activities $ 130,002 130,571 131,163 131,779 87,742 434,002 188,239 1,233,498 (184,913) $ 1,048,585 Business-type Activities $ 645,550 395,680 396,810 397,986 399,206 1,639,443 359,273 4,233,948 (744,568) $ 3,489,380 Pledged Revenues The City has pledged future water and wastewater utility revenues to repay Water Infrastructure Financing Authority loans issued during the period of 1992-2015. The various bonds were issued for the purchase or construction of various water or wastewater infrastructure including wells, water distribution lines, wastewater collection lines and treatment plant improvements. At June 30, 2016, $34,148,313 remains outstanding to be repaid by future water and wastewater revenues, if such revenues prove insufficient, the remainder will be repaid as a general obligation of the City. For the fiscal year ended June 30, 2016, net revenue available for service of this debt was $9,094,086. The debt principal and interest paid in fiscal year 2016 equal $3,014,756 (33.15% of available pledged net revenues). For additional information on pledged revenues related to revenue bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $25,000,000 in Municipal Facility Corporation bonds issued in 2004. The bonds were issued to construct transportation infrastructure. The bonds have a senior lien on the 0.16% transportation sales tax and a secondary lien on the excise taxes and state shared revenues not specifically 77 reserved by law or other regulation to be expended for other purposes. On March 21, 2012 a partial advance refunding of $12,530,000 was completed on the 2004 bonds and replaced with pledged revenue refunding bonds series 2012, holding the 2004 bonds senior. At June 30, 2016, $10,040,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2016, net revenues available for service of the debt were $33,176,241. The debt principal and interest paid in fiscal year 2016 was $2,227,400 (6.71% of available pledged net revenues). For additional information on pledged revenues for MFC transportation bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $3,370,000 Greater Arizona Development Authority (GADA) revenue bonds issued in 2011 for the construction of a business incubator facility at the U.S. Geological Survey Campus. The bonds are secured by a pledge of the City’s state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2016, $2,710,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2016, net revenues available for the service of this debt were $10,809,451. The debt principal and interest paid in fiscal year 2016 was $250,088 (2.31% of available pledged net revenues). For additional information on pledged revenues for GADA revenue bonds, refer to Schedule 17 in the Statistical Section of this report. Changes in Long-term Liabilities Liquidation of compensated absences, other postemployment benefits and net pension liability for governmental funds has been made out of the General, Library, HURF, BBB, Library and FMPO funds. Non-current liability activity for the year ended June 30, 2016 was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corporate bonds Certificates of participation Total bonds payable Beginning Balance $ Capital leases Bond premium Bond discount Compensated absences Other postemployment benefits Net pension liabilty Claims and judgements Governmental activity long-term liabilty $ Business-type activities: Bonds payable: General obligation debt $ Water loan payable Wastewater loan payable Airport loan payable Capital lease payable Total loan and leases payable Compensated absences Other postemployment benefits Net pension liabilty Landfill closure/postclosure Business-type activity long-term liability 48,919,658 6,705,000 14,675,000 860,000 2,670,000 73,829,658 946,550 3,153,201 (68,443) 3,870,066 4,344,203 111,543,325 277,820 197,896,380 1,440,999 Additions $ $ 840,012 979,004 14,383,459 7,895,618 64,704,428 - $ 204,956 1,772,104 597,899 33,228,928 $ 35,803,887 $ 17,750,963 17,364,247 78,532 3,971,594 39,165,336 - $ 78 Ending Balance Reductions (5,102,348) (4,490,000) (1,925,000) (860,000) (500,000) (12,877,348) $ $ (102,921) (299,591) (1,668,418) (27,961,230) (70,943) (42,980,451) $ $ (65,637) $ 43,817,310 2,215,000 12,750,000 2,170,000 60,952,310 1,048,585 2,853,610 (68,443) 3,973,752 4,942,102 116,811,023 206,877 190,719,816 1,375,362 Due Within One Year $ 5,441,644 95,000 1,990,000 515,000 8,041,644 $ 97,964 300,171 1,667,159 57,917 10,164,855 $ 67,675 2 2 (1,265,416) (1,076,843) (51,623) (482,216) (2,876,098) 16,485,547 16,287,404 26,909 3,489,380 36,289,240 1,312,046 1,114,662 26,909 505,167 2,958,784 245,921 135,030 3,877,155 260,057 4,518,165 (363,773) (3,342,821) (6,648,329) 722,160 1,114,034 14,917,793 8,155,675 62,574,264 315,281 3,341,740 $ $ $ V. OTHER INFORMATION A. Risk management The City is exposed to various risks of loss related to torts and public officials’ errors and omissions. The City purchases commercial insurance to cover these losses. However, $75,000 of each claim resulting in a loss is retained by the City. The City provides for the self-insurance retention in the internal service fund. Outstanding claims as of June 30, 2016 have potential exposure to the City of approximately $206,877 based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City uses an application of historical experience to determine claims payable. However, due to the preliminary status of the claims, no determination can be made as to the likelihood, if any, of an unfavorable outcome. The net position of the Internal Service Fund is designated for future losses related to the self-insurance retention. Settled claims have not exceeded commercial coverage in the last three fiscal years. Fiscal Year 2013-14 Beginning of Year Liability $ 314,074 Current Year Claims and Changes in Estimates $ 127,779 End of Claim Payments $ 222,158 Year Liability $ 219,695 2014-15 219,695 194,064 135,939 277,820 2015-16 277,820 205,242 276,185 206,877 The City of Flagstaff participates in a risk sharing pool for employee health care, through the Northern Arizona Public Employees Trust, a public entity risk pool. Members do not bear any risk of loss. The overall experience rating of the trust determines premium charges. B. Commitments and contingent liabilities The city is involved in litigation arising in the ordinary course of it operations. The City believes that its ultimate liability, if any, in connection with these matters will not have a material adverse effect on the City’s financial position, changes in financial position, or liquidity. See schedule 23 in the statistical section for further information related to the City’s insurance coverage. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. 79 The following table presents the City’s construction commitments and encumbrances as of June 30, 2016: Construction Commitments as of June 30, 2016 Capital Project Program Classification Buildings Communication Streets Water Wastewater Stormwater Other land improvements Total Construction Commitments Spent to date $ 762,200 307,950 11,420,405 2,663,082 484,984 100,178 635,045 $ 16,373,844 Remaining Commitment $ 2,404,588 342,050 1,337,174 2,572,233 620,657 750,335 125,714 $ 8,152,752 Outstanding Encumbrances at June 30, 2016 Governmental Activities: General fund Highway users revenue fund Transportation fund Capital projects bond fund Other government funds Total governmental activities $ Business - Type Activities: Water and wastewater fund Environmental services fund Airport fund Stormwater fund 761,725 111,200 103,200 783,085 615,296 2,374,506 476,612 1,205,852 775,358 33,820 Total business-type activities Total governmental and business-type activities $ 2,491,642 4,866,148 C. Retirement and pension plans All full-time employees of the City are covered by one of three pension plans. The Arizona State Retirement system is for the benefit of the employees of the state and certain other governmental jurisdictions. All full-time City employees, except sworn fire and police personnel, are included in the Arizona State Retirement System. Sworn police and fire personnel participate in the Public Safety Retirement System. In addition, the Mayor and City Council members are covered by the State’s Elected Officials Plan. Plan Descriptions - The City contributes to the three plans described below. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The plans are component units of the State of Arizona. The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer defined benefit pension plan that covers general employees of the City. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, and Article 2 and 2.1. The Public Safety Personnel Retirement System (PSPRS) is an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan that covers public safety personnel who are regularly assigned hazardous duty as employees of the State of Arizona or one of its political subdivisions. The PSPRS, acting as a common investment and administrative agent, is governed by a seven-member 80 board, known as The Board of Trustees, and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The Elected Officials Retirement Plan (EORP) is a cost-sharing multiple-employer defined benefit pension plan and a cost-sharing, multiple-employer defined benefit health insurance premium benefit (OPEB) plan that covers elected officials and judges of certain state and local governments who were members of the plan on December 31, 2013. This plan was closed to new members as of January 1, 2014. The EORP is governed by Board of Trustees of the PSPRS according to the provisions of A.S.R. Title 38, Chapter 5, and Article 3. Each plan issues a publicly available financial report that includes its financial statements and required supplementary information. A report can be obtained by writing or calling the applicable plan. ASRS PSPRS and EORP P.O. Box 33910 Phoenix, AZ 85016-4416 3300 N. Central Ave. 3010 E. Camelback Rd., Suite 200 Phoenix, AZ 85067-3910 (602) 240-2200/(800) 621-3778 (602) 255-5575 www.azasrs.gov www.psprs.com At June 30, 2016, the City reported the following aggregate amounts related to pensions for all plans to which it contributes: Statement of Net Position and Statement of Activities as of June 30, 2016 Governmental Activities Net pension liabilities Deferred outlfows of resources Deferred inflows of resources Pension expense $ 116,811,023 $ 22,502,916 (5,408,331) 11,710,778 Business-Type Activities 14,917,793 $ 1,784,946 (1,228,738) 966,791 Total 131,728,816 24,287,862 (6,637,069) 12,677,569 The City reported accrued employee benefits of $11,436 for governmental activities and $13,364 for business-type activities as related to outstanding pension contribution amounts payable to all pension plans for the year ended June 30, 2016. Arizona State Retirement System (ASRS) Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and the City's contribution rates. Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefits terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and served credit as follows: 81 Initia l Me mb e rship Da te : Years of service and age required to receive benefit On or a fte r J uly 1 , 2 0 1 1 Be fore J uly 1 , 2 0 1 1 Sum of years and age equals 80 30 years age 55 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 any years age 65 5 years age 50* any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost- of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a members’ death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the members’ account balance that includes the members’ contribution and employer’s contributions, plus interest earned. Contributions - For the year ended June 30, 2016, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.47% (11.35% retirement and 0.12% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 11.47% (10.85% retirement, 0.50% for health insurance premium, and 0.12% long-term disability) of the active members’ annual covered payroll. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.36% (9.17% for retirement, 0.13% for health and 0.06% for long-term disability) of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the ASRS. The City's contributions to ASRS for the years ended June 30, 2016, 2015, and 2014 were $3,344,492, $3,229,757, and $3,074,097 respectively, inclusive of Housing Authority. The City contribution for the current and two preceding years, all of which were equal to the required contributions, were as follows: $ Retirement 3,168,876 3,002,707 2,837,013 $ Health Benefit 140,778 161,281 173,151 Long-term Disability 34,838 $ 65,769 63,933 During fiscal year 2016, the City paid for ASRS pension and related OPEB contributions (health benefit) 73% from governmental funds and 27% from enterprise funds. Pension Liability At June 30, 2016, the City reported a liability of $46,798,712 for its proportionate share of the ASRS net pension liability. The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2014, to the measurement date of June 30, 2015. 82 The City’s reported liability at June 30, 2016 increased by $2,020,422 from the City’s prior year liability of $44,778,290 due to changes in the ASRS net pension liability and the City’s proportionate share of that liability. The ASRS publicly available financial report provided details on the change in the net pension liability. The City’s proportion of the net pension liability was based on the actuarially determined amount provided by the system. The City’s proportion measured as June 30, 2015, was .3005%, which was a decrease of .0021% from its proportion measured as of June 30, 2014, 0.3026%. Pension Expense and Deferred Outflows – Inflows of Resources For the year ended June 30, 2016, the City recognized pension expense of $2,776,005. At June 30, 2016, the city reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources: Deferred Deferred Outflows of Resources Differences between expected and actual $ Inflows of Resources 1,277,035 Changes of assumptions - Net difference between projected and actual earnings on pension plan investments - $ (2,452,300) - (1,499,795) Changes in proportion and differences between city contributions and proportionate share of contributions 479,344 City contributions subsequent to the measurement date Total (252,813) 3,168,876 $ 4,925,255 $ (4,204,908) The $3,168,876 reported as deferred outflows of resources related to ASRS pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year ending June 30, 2017 $ 2018 2019 2020 2021 Thereafter $ 83 (739,356) (1,685,098) (1,106,739) 1,082,664 - (2,448,529) Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Investment rate of return Projected salary increases Inflation factor Permanent benefit increase Mortality rates June 30, 2014 June 30, 2015 Entry age normal 8% 3-6.75% 3% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2014, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Commodities Multi Real Estate Fixed Income Equity Total Target Allocation 2% 5% 10% 25% 58% 100% Arithmetic Real Rates of Return 3.93% 3.41% 4.25% 3.70% 6.79% Discount Rate The discount rate used to measure the ASRS pension liability was 8 percent, which is less than the long-term expected rate of return of 8.79 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates as determined by the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payment to determine the total pension liability. Sensitivity of the City’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate The following table presents the City’s proportionate shares of the net pension liability calculated using the discount rate of 8 percent, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: City's proportionate share of the net pension liability Current Discount Rate (8%) 1% Decrease (7%) $ 61,322,306 84 $ 46,798,712 1% Increase (9%) $ 36,845,291 Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. Public Safety Personnel Retirement System (PSPRS) Benefits provided – The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute established benefits terms. Retirement disability and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: P SP R S Initia l Me mb e rship Da te : Years of service and age required to receive benefit Be fore J a nua ry 1 , 2 0 1 2 On or a fte r J a nua ry 1 , 2 0 1 2 20 years any age 25 years and age 52.5 15 years age 62 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 2.5% per year of credited service, not to exceed 80% Be ne fit p e rce nt Normal retirement Accidental disability Catastrophic disability Ordinary disability Survivor b e ne fit Retired members Active members 50% or normal reitrement, whichever is greater 90% for the first 60 months then reduced to either 62.5% or normal reitrement, whichever is greater Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by eyars of credited service (not to exceed 20 years) divided by 20 80% of retired member's pension benefit 80% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earnings. PSPRS also provides temporary disability benefits of 50 percent of the members’ compensation for up to 12 months. 85 Employees covered by Benefit Terms At June 30, 2016, the following employees were covered by the agent pension plans’ benefit terms: PSPRS Police Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Fire 68 83 30 16 113 Total 75 211 174 Contributions and Annual OPEB Cost State statutes establish the pension contrition requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Benefit and contribution provisions are established by state law and may be amended only by the State of Arizona Legislature (A.R.S. Section 38-843). Annual Pension Cost - The City's pension cost for the agent plan for the year ended June 30, 2015, the date of the most recent actuarial valuation, and related information follow. Police Contribution rates FY15-2016: Pension Health insurance (OPEB) Combined city Active plan members As of actuarial valuation date: PSPRS Fire 43.26 0.03 43.29% 11.65% 67.71 0.00 67.71% 11.65% 6/30/2015 6/30/2015 Required Contributions Pension contributions made $ $ 3,401,213 3,483,157 $ $ Annual OPEB costs - Health Insurance OPEB contributions made $ $ 2,414 2,414 $ $ Active members pension contributions Net pension liability $ $ 915,318 39,519,008 $ $ 3,769,503 3,769,503 638,468 43,893,328 *Actuary estimates payroll while the City reports on actual payroll In addition, the City was required by statute to contribute at the actuarially determined rate of 19.65 percent for the PSPRS of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the PSPRS. During fiscal year 2016, the City paid for PSPRS pension and OPEB contributions for police with 100% general fund dollars and 94.8% from the general fund plus 5.2% from the airport fund as related to fire contributions. 86 Pension Liability At June 30, 2016, the City reported net pension liability of $39,519,008 and $43,893,328 for police and fire respectively. The net pension liabilities were measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Pension Actuarial Assumptions Actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. PSPRS Police Fire Level percent-of- Level percent-of- Remaining amortization period-UAL 23 years 23 years Remaining amortization period-excess 20 years 20 years Amortization method Asset valuation method Actuarial assumptions: Discount rate pay closed 7-year smoothed market; 20% corridor 7.85% Projected salary increases Inflation 4.5% - 8.5% 3.0%-4.0% Permanent benefit increase not included pay closed 7-year smoothed market; 20% corridor 7.85% 4.5% - 8.5% 3.0%-4.0% no explicit RP-2000 mortality table (adjusted by 105% for both males and females) Mortality rates The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.85 percent using a building-block method in which best-estimated ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: PSPRS Asset Class Short term investments Target Allocation Absolute return Risk parity Fixed income Long-Term 2% Expected Real Rate of Return 0.75% 8% 10% 11% 0.05% 4.38% 9.50% 5% 4% 7% Real assets GTAA Private equity Real estate Credit opportuities Non-U.S. equity 10% 13% 14% U.S. equity Total 16% 100% 87 4.11% 5.13% 2.92% 4.48% 7.08% 8.25% 6.23% The projection of cash flows used to determine the discount rates assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rate and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Net Pension Liability PSPRS - Fire Balances at June 30, 2015 Changes for the year: Total Pension Liability (a) $ 69,057,692 Service cost Interest on the total pension liability 973,454 5,239,671 Differences between expected and actual experience in the measurement of the pension liability Contributions- employer Contributions- employee Benefit payments, including refunds of employee contributions Net investment income Administrative expense Other changes Net changes Balances at June 30, 2016 PSPRS - Police Balances at June 30, 2015 Changes for the year: Service cost Interest on the total pension liability (5,594,036) 671,586 $ 69,729,278 Total Pension Liability (a) $ 60,311,715 (5,594,036) 963,491 (23,873) 48,864 (1,453,962) 25,835,950 (963,491) 23,873 (48,864) 2,125,548 43,893,328 $ Net Pension Liabilty (a) - (b) $ 37,704,111 1,373,545 - 4,650,797 - (3,505,319) - 88 52,497 (2,418,742) (732,850) - (346,202) 2,172,821 $ 62,484,536 973,454 5,239,671 2,418,742 732,850 Increase (Decrease) Plan Fiduciary Net Postion (b) $ 22,607,604 4,650,797 Benefit payments, including refunds of employee contributions Net investment income Net changes Balances at June 30, 2016 $ 1,373,545 Contributions- employer Contributions- employee Net Pension Liabilty (a) - (b) $ 41,767,780 - 52,497 - Differences between expected and actual experience in the measurement of the pension liability Administrative expense Other changes Increase (Decrease) Plan Fiduciary Net Postion (b) $ 27,289,912 $ (346,202) 2,578,489 841,533 (2,578,489) (841,533) (3,505,319) 821,133 (20,411) (357,501) 357,924 22,965,528 (821,133) 20,411 357,501 1,814,897 39,519,008 $ Sensitivity of the City’s Net Pension Liability to Changes in the Discount Rate The following table presents the City’s net pension liabilities calculated using the discount rates noted above as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: 1% Decrease PSPRS - Police Rate Net pension liability PSPRS - Fire Rate Net pension liability Current 1% Discount Rate 6.85% $ 47,162,300 6.85% $ 51,614,762 Increase 7.85% 8.85% $ 39,519,008 $ 33,173,736 7.85% 8.85% $ 43,893,328 $ 37,400,017 Pension Plan Fiduciary Net Position Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS financial reports. Pension Expense For the year ended June 30, 2016, the City recognized $4,791,291 and $4,878,656 pension expense related to police and fire, respectively. Pension Deferred Outflows/Inflows of Resources At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total PSPRS - Police Deferred Outflows of Resources $ PSPRS - Fire Deferred Inflows of Resources 4,539,277 $ Deferred Outflows of Resources (721,130) - $ 965,804 4,683,693 748,306 (682,052) 867,106 3,483,157 $ 8,770,740 $ (1,403,182) 3,769,503 $ 10,286,106 Deferred Inflows of Resources $ (842,748) $ (842,748) The amounts reported as deferred outflows of resources related to pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows or resources related to pensions will be recognized in pension expense as follows: Year ending June 30, 2017 2018 2019 2020 2021 Thereafter PSPRS Police $ $ 89 1,005,000 1,005,000 1,004,998 909,235 (39,832) 3,884,401 PSPRS Fire $ $ 1,492,879 1,492,879 1,492,879 1,189,056 6,162 5,673,855 Agent Plan OPEB Trend Information The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and 2 preceding years: Annual OPEB Plan Cost Percentage of Annual Cost Net OPEB Obligation Contributed PSRS - Police - Health Insurance 6/30/2016 $ 6/30/2015 6/30/2014 2,414 67,477 50,498 100% 100% 100% $ -0-0-0- PSRS - Fire - Health Insurance 6/30/2016 $ 6/30/2015 6/30/2014 96,788 84,384 100% 100% 100% $ -0-0-0- Agent Plan OPEB Actuarial Assumptions Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as understood by the City and plans’ members and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the City and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all PSPRS plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2016 contribution requirements are as follow: PSPRS OPEB Contribution Requirements Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth June 30, 2014 Entry age normal Level percent closed 22 years for unfunded actuarial accrued liability, 20 years for overfunded 7 year smoothed market value; 80%/120 % market 7.85% 4.0% - 8.0% 4% PSPRS OPEB Funded Status Actuarial valuation date Actuarial cost method Amourtization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth June 30, 2016 Entry age normal Level percent closed 20 years for unfunded actuarial accrued liability, 20 years for overfunded 7 year smoothed market value; 80%/120 % market 7.50% 4.0% - 8.0% 4% 90 Agent Plan OPEB Funded Status The following table presents the funded status of the health insurance premium benefit plans as of the most recent valuation date, June 30, 2016. Actuarial value of plan assets Actuarial accrued liability (AAL) $ Police 1,500,199 1,341,133 $ Fire 2,688,016 1,599,024 Unfunded actuarial accrued liability (UAAL) $ (159,066) $ (1,088,992) $ 111.9% 7,318,199 $ 168.1% 5,491,792 Funded ratio (actuarial value of plan assets/AAL) Covered payroll Unfunded actuarial accued liability as a percentage of covered payroll 0.0% 0.0% The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Elected Officials’ Retirement Plan (EORP) Benefits Provided The EORP provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average yearly compensation, and service credit as follows: EORP Initial Membership Date: Years of service and age required to receive benefit Final average salary is based on Benefit percent Normal retirement Disability retirement Before December 31, 2011 On or after January 1, 2012 20 years any age 10 years and age 62 10 years age 62 5 years and age 65 5 years and any age* any years and age if disabled 5 years and age 65 Highest 36 months of last 10 years Highest 60 months of last 10 years 4% per year of service, not to exceed 80% 80% with 10 or more years of service 40% with 5 to 10 years of service 3.0% per year of service, not to exceed 75% 75% with 10 or more years of service 37.5% with 5 to 10 years of service 20% with less than 5 years of service 18.75% with less than 5 years of service 75% of retired member's pension benefit 50% of retired member's pension benefit 75% of disability retirement benefit 50% of disability retirement benefit any years and age if disabled Survivor benefit Retired members Active members and Other Inactive Members * With reduced benefits of 0.25% for each month early retirement precedes the member's normal retirement age, with a maximum reduction of 30% Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. Contributions State statutes establish active member and employer contribution requirements. Statute also appropriates $5 million annually through fiscal year 2043 for the EORP from the State of Arizona to supplement the normal cost plus an amount to amortize the unfunded accrued liability. For the year ended June 30, 2016, active EORP members were 91 required by statute to contribute 13.00% of the members’ annual covered payroll. And the City was required contribute a designated portion of certain court fees and 23.5 percent (23.50% for retirement and 0.0% for health insurance premium benefit) of active EORP members’ annual covered payroll. In addition, the City was required to contribute the actuarially determined rate of 12.15% for members who meet certain criteria. The City’s contribution to the pension plan for the year ended June 30, 2016, and 2 preceding years for OPEB, all of which were equal to the required contributions, were as follows. Plan EORP - Health Insurance 6/30/2016 $ 6/30/2015 6/30/2014 Annual OPEB Cost Percentage of Annual Cost Contributed 3,467 2,898 100% 100% 100% Net OPEB Obligation $ -0-0-0- Pension Liability At June 30, 2016, the City reported a liability for its proportionate share of the EORP’s net pension liability that reflected a reduction for the City’s proportionate share of the State’s appropriation for EORP. The amount the city recognized as its proportionate liability that was associated with the City was as follows: City's proportionate share of the EORP net pension liability State's proportionate share of the EORP net pension liability associated with the city $ 1,517,768 Total $ 1,990,944 473,176 The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City reported a liability at June 30, 2016, which decreased by $158,835 from the City’s prior year liability of $1,676,603 due to changes in the EORP’s net pension liability and the City’s proportionate share of the liability. The EORP’s publicly available financial report provides details on the change in the net pension liability. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2016, the City recognized pension expense for the EORP of $358,933 and revenue of $127,314 for the City’s proportionate share of the State’s appropriation to EORP. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions form the following sources: Deferred Deferred Outflows of Inflows of EORP Resources Resources Differences between expected and actual experience $ Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between city contributions and proportionate share of contributions City contributions subsequent to the measurement date Total 92 2,427 $ 254,314 - 9,205 - - $ (16,898) 39,815 305,761 (169,333) $ (186,231) The $39,815 reported as deferred outflows of resources related to EORP pensions resulting from city contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to EORP pensions will be recognized in pension expense as follows: Year ending June 30 2017 2018 2019 $ 2020 100,249 (28,222) 758 6,930 2021 Thereafter 79,715 $ Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: EORP Contribution rates FY15-2016: City 23.50% Plan members 13.00% Required contributions Pension contributions made $ $ Annual OPEB costs - Health Insurance OPEB contributions made As of actuarial valuation date: (based on experience study) Active members pension contributions $ $ $ Net pension liability Actuarial cost method 39,815 39,815 6/30/2015 6/30/2015 20,280 Entry age normal Actuarial assumptions: Investment rate of return Projected salary increases Inflation Permanent benefit increase 4.86% 4.25% 3.00% 3% of benefit RP-2000 mortality table (unadjusted males and females) Mortality rates 93 The long-term expected rate of return on EORP pension plan investments was determined to be 4.86 percent using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimated of geometric real rates of return for each major asset call are summarized in the following table: EORP Asset Class Short term investments Absolute return Risk parity Fixed income Real assets GTAA Private equity Real estate Credit opportuities Non-U.S. equity U.S. equity Total Target Allocation 2% 5% 4% 7% 8% 10% 11% 10% 13% 14% 16% 100% Expected Real Rate of Return 0.75% 4.11% 5.13% 2.92% 0.05% 4.38% 9.50% 4.48% 7.08% 8.25% 6.23% Discount Rate The discount rate used to measure the EORP total pension liability was 4.86 percent. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate, employer contributions will be made at the statutorily set rates, and state contributions will be made as currently required by statute. Based on those assumptions, the pension plans’ fiduciary net position was projected to be insufficient to make all project future benefit payments of current plan member. Therefore, to determine the total pension liability for the plan, the long-term expected rate of return on pension plan investments of 7.85 percent was applied to period of projected benefit payments through the year ended June 30, 2028. A municipal bond rate of 3.8 percent obtained from the 20-year Bond Buyer Index, as published by the Federal Reserve as of June 25, 2015, was applied to period of projected benefit payments after June 30, 2028. Sensitivity of the City’s Proportionate Share of the EORP Net Pension Liability to Changes in the Discount Rate The following table presents the city’s proportionate share of the net pension liability calculated using the discount rate of 4.86 percent, as well as what the city’s proportionate share to the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate. EORP Rate Net pension liability 1% Decrease $ 3.86% 1,766,873 Pension Plan Fiduciary Net Position Current Discount Rate $ 4.86% 1,517,768 1% Increase $ 5.86% 1,308,283 Detailed information about the pension plans’ fiduciary net position is available in the separately issued EORP financial report. 94 D. Other Post Employment Benefits (OPEB) Plan Postemployment Healthcare Plan Plan description. The City of Flagstaff provides post-retirement healthcare insurance benefits for its retirees as an agent multiple-employer plan which is administered through Northern Arizona Public Employee Benefit Trust (NAPEBT). NAPEBT provides benefits to eligible retirees through the same plan as active city employees and their beneficiaries up to the age of 65; because retirees are able to participate in the same plan and pay the same rates as active employees, an implicit rate subsidy exists through the duration of the coverage. Substantially, all of the City’s employees may become eligible for those benefits when they qualify for retirement. To be eligible a retiree must qualify to receive retirement benefits from the Arizona State Retirement System and elect coverage at date of retirement. NAPEBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on their website: www.napebt.com/community_docs. As of June 30, 2016, there were 83 retirees who elected coverage. Funding Policy. The contribution requirements of plan members and the city are established and may be amended by the NAPEBT board. Eligible retirees up to the age of 65 have the option to participate in the healthcare plan that is currently offered to active employees and must pay 100% of the premium less any reimbursement from the Arizona State Retirement System, currently, a monthly stipend of $150 for single coverage and $260 for family coverage. The City has elected to not fund the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. For fiscal year 2016, the City’s annual required contribution of $1,076,520 is 2.5% of covered payroll. The City’s implicit subsidy contribution, determined as the excess of retiree medical costs over retiree contributions, was $256,335 during fiscal year 2016. Annual OPEB Cost and Net OPEB Obligation. For 2016, the City’s annual OPEB cost (expense) of $989,264 was equal to the ARC, as adjusted by any ARC adjustments ($326,800), and interest on the net OPEB obligation of $239,544. On June 30, 2016, the net increase in NOO for governmental activities was $597,898 and for business-type activities was $135,031. The City annual OPEB costs for the current year and the related information for the plan as follows for June 30, 2016: Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution $ Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year 989,264 $ 95 1,076,520 239,544 (326,800) (256,335) 732,929 5,323,207 6,056,136 The City’s annual OPEB cost; inclusive of Housing Authority, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and two preceding years were as follows: Funded Status and Funding Progress. The fundied status of the plan as of July 1, 2015 (Latest actuarial data available) is as follows: Actuarial value of plan assets Actuarial accrued liability (AAL) $ 9,362,006 Unfunded actuarial accrued liability (UAAL) $ 9,362,006 Funded ratio (actuarial value of plan assets/AAL) Covered payroll Unfunded actuarial accued liability as a percentage of covered payroll 0% $ 42,359,280 22.1% The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2015, actuarial valuation, the entry age level dollar actuarial cost method, which uses the member’s hire date as the entry age, represents the actuarial cost method used. The actuarial assumptions included a 4.5 percent investment rate of return with no inflation rate factor and no projected salary increases factor, due to level dollar valuation used. Healthcare cost trend rate of 7.0 percent initially, reduced by decrements to an ultimate rate of five percent over eight years. The remaining amortization period at July 1, 2015, was 30 years, open, level dollar payment. The City has elected to perform biennial actuary valuations. 96 E. Landfill closure and postclosure care cost State and federal laws and regulations require the City to place a final cover on its Cinderlake landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and postclosure care costs that will be incurred near or after the date the landfill no longer accepts waste. The City reports a portion of these closures and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The estimated liability for landfill closure and postclosure care costs has a balance of $8,155,675 as of June 30, 2016, which is based on 77.334 percent usage of the landfill. The remaining $2,390,411 will be accrued over the remaining life of the landfill, which is currently estimated to be 11 years. The accrual for the closure and postclosure care costs for fiscal year 2016 is $260,057. Based on current estimates for landfill closure and postclosure care costs, the City is setting aside legally restricted funds to ensure sufficient funds will be available to meet these requirements. The City makes annual contributions to finance closure and postclosure care costs; at June 30, 2016 the balance of the investments held for those purposes is $10,126,500. The investments are reported as restricted cash and investments in the City’s Environmental Service Fund, and are held by the State of Arizona Local Government Investment Pool. The estimated total current cost of the landfill closure and postclosure care, $10,546,086, is based on the amount that would be paid if all equipment, facilities, and services required to care, monitor and maintain the landfill were acquired as of June 30, 2016. However, the actual cost of closure and postclosure care may be higher or lower due to other factors such as; inflation, changes in technology, or changes in landfill laws and regulations. According to state and federal laws and regulations, the City must comply with the local government financial test requirements that assure the City can meet the cost of landfill closure, post-closure and corrective action when needed. The City, which has pledged its full faith and credit to meet state financial responsibility requirements, is in compliance with these requirements. In March of 1999, the City purchased 343.9 acres of land from the U.S. Forest Service. This land is adjacent to the existing landfill and will be used to open additional cells as needed. As these cells are utilized, additional liabilities for closure and postclosure care requirements will be accrued. The City applied existing policy to the Environmental services fund increasing its’ expenditures as City residential and commercial collection programs are now charged for landfill fees. F. Subsequent Events On August 9, 2016, the City issued $16.1 million of general obligation bonds for Core Services Facility, Open Space and Forest Initiative Projects and $8.93 million of revenue bonds for Road Repair and Street Safety program construction. On January 1, 2017, the City will defease the remaining $5,960,000 Series 2006 A General Obligation bonds by prepaying the outstanding bonds from cash on hand. 97 98 Required Supplementary Information Page Schedule of the City’s Proportional Share of the Net Pension Liability Cost-Sharing Pension Plans 100 Schedule of the Changes in Net Pension Liability and Related Ratios Agent Pension Plans – PSPRS Police 101 Agent Pension Plans – PSPRS Fire 102 Schedule of The City’s Pension Contributions 103 Schedule of Agent Other Post-Employment Benefits Plan's Funding Progress 104 Schedule of Other Post-Employment Benefits Plan's Funding Progress 105 Notes to the Required Supplementary Information 106 99 CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the City's Proportionate Share of the Net Pension Liability Cost-Sharing Pension Plans June 30, 2016 Measurement Date* 2015 2014 2013 through 2006 Arizona State Retirement System Proportion of the net pension liability 0.300450% 0.302625% Information Proportionate share of the net pension liability $ 46,798,712 $ 44,778,290 not Covered employee payroll Proportionate share of the net pension liability as a percentage of its coveredemployee payroll $ 27,573,067 $ 26,638,622 available Plan fiduciary net position as a percentage of the total pension liability 169.73% 168.09% 68.35% 69.49% - EORP Proportion of the net pension liability City's Proportionate share of the net pension liability 0.1942242% 0.2500258% Information $ 1,676,603 not 1,990,934 $ 2,190,665 157,579 $ 204,400 $ 1,517,768 Total $ Covered employee payroll City's Proportionate share of the net pension liability as a percentage of its covered-employee payroll $ State's Proportionare Share of the net pension liability associated with the City 473,166 Plan fiduciary net position as a percentage of the total pension liability 514,062 963.18% 820.26% 28.32% 31.91% * Measurment date is one year prior to reporting date and is the latest information available at the time of report issuance 100 available CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the Changes in Net Pension Liability and Related Ratios Agent Pension Plans - PSPRS Police June 30, 2016 Reporting Fiscal Year (Measurement Date)* 2015 PSPRS Police Total pension liability Service cost Interest on the total pension liability Changes of benefit terms differences between expected and actual experience in the measurement of the pension liability changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Pension plan administrative expenses Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll $ $ $ 1,373,545 4,650,797 (346,202) (3,505,319) 2,172,821 60,311,715 62,484,536 2014 $ $ 1,312,430 3,904,338 1,353,950 (671,478) 6,987,647 (3,311,491) 9,575,396 50,736,319 60,311,715 $ $ 2,578,489 841,533 821,133 (3,505,319) (20,411) (357,501) 357,924 22,607,604 22,965,528 $ 2,311,119 768,029 2,757,888 (3,311,491) (1,371,053) 1,154,492 21,453,112 22,607,604 $ 39,519,008 $ 37,704,111 $ Net pension liability as a percentage of covered employee payroll 36.75% 7,526,730 $ 525.05% * Measurment date is one year prior to reporting date and is the latest information available at the time of report issuance 101 37.48% 7,425,908 507.74% 2013 through 2006 Information not available CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the Changes in Net Pension Liability and Related Ratios Agent Pension Plans - PSPRS Fire June 30, 2016 Reporting Fiscal Year (Measurement Date)* 2015 PSPRS Fire Total pension liability Service cost Interest on the total pension liability Changes of benefit terms differences between expected and actual experience in the measurement of the pension liability changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan Fiduciary net position Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Pension plan administrative expenses Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll Net pension liability as a percentage of covered employee payroll $ $ $ 973,454 5,239,671 52,497 (5,594,036) 671,586 69,057,692 69,729,278 $ 2,418,742 732,850 963,491 (5,594,036) (23,873) 48,864 (1,453,962) 27,289,912 25,835,950 $ 43,893,328 $ 37.05% 4,847,679 905.45% 2014 $ $ $ 950,445 4,390,766 1,553,904 1,431,974 7,269,797 (3,994,598) 11,602,288 57,455,404 69,057,692 $ 2,030,211 525,878 3,407,667 (3,994,598) (1,831,071) 138,087 27,151,825 27,289,912 $ 41,767,780 $ 39.52% 4,788,197 872.31% * Measurement date is one year prior to reporting date and is the latest information available at the time of report issuance 102 2013 through 2006 Information not available CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of the City's Pension Contributions June 30, 2016 Reporting Fiscal Year 2016 2015 2014 2013 through 2007 Arizona State Retirement System Statutorily required contributions $ 3,168,876 Contributions in relation to the statutorily required contribution 3,168,876 Contribution deficiency (excess) $ Covered-employee payroll $ Contributions as a percentage of covered-employee payroll 28,842,056 $ 3,002,707 $ 3,002,707 $ $ 10.99% 27,573,067 2,837,013 2,837,013 $ $ 10.89% - Information not available 26,638,622 10.65% Elected Officials Retirement Plan Statutorily required contributions $ Contributions in relation to the statutorily required contribution Contribution deficiency (excess) $ Covered-employee payroll $ Contributions as a percentage of covered-employee payroll 39,815 $ 39,815 189,999 37,483 $ 37,483 $ $ 20.96% 157,579 $ $ 23.79% 50,732 Information 50,732 not - available 204,400 24.82% PSPRS - Police Statutorily required contributions $ 3,401,213 Contributions in relation to the statutorily required contribution 3,483,157 Contribution deficiency (excess) $ Covered-employee payroll $ Contributions as a percentage of covered-employee payroll (81,944) 7,856,809 $ 2,578,489 $ 2,578,489 $ $ 44.33% 7,526,730 2,311,119 2,311,119 $ $ 34.26% - Information not available 7,425,908 31.12% PSPRS - Fire Statutorily required contributions $ 3,769,503 Contributions in relation to the statutorily required contribution 3,769,503 Contribution deficiency (excess) $ Covered-employee payroll $ Contributions as a percentage of covered-employee payroll 5,480,416 68.78% 103 $ 2,418,742 $ 2,418,742 $ $ 4,847,679 49.89% 2,030,211 1,784,136 $ 246,075 $ 4,788,197 37.26% Information not available CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of Agent Other Post-Employment Benefits Plan's Funding Progress June 30, 2016 (2) Actuarial (6) (1) Accrued (3) (4) (5) Unfunded AAL Actuarial Liability Percent Unfunded Annual as a Percentage Value of (AAL) Entry Funded AAL Covered of Covered Assets Age (1) / (2) (2) - (1) Payroll Payroll (4) / (5) PSRS - Police Health Insurance 6/30/2016 $ 1,500,199 1,341,133 111.9% (159,066) $ 7,318,199 0.0% 6/30/2015 1,479,701 $ 1,273,131 116.2% $ (206,570) 7,526,730 0.0% 6/30/2014 1,383,853 1,103,593 125.4% (280,260) 7,425,910 0.0% 0.0% PSRS - Fire Health Insurance 6/30/2016 2,688,016 1,599,024 168.1% (1,088,992) 5,491,792 6/30/2015 2,620,900 1,599,792 163.8% (1,021,108) 4,847,679 0.0% 6/30/2014 2,489,925 1,554,131 160.2% (935,794) 4,788,198 0.0% 104 CITY OF FLAGSTAFF, ARIZONA Required Supplementary Information Schedule of Other Post-Employment Benefits Plan's Funding Progress June 30, 2016 (2) (6) (1) Actuarial (3) (4) (5) Unfunded AAL Actuarial Actuarial Accrued Percent Unfunded Annual as a Percentage Valuation Value of Liability Funded AAL Covered of Covered Assets (AAL) (1) / (2) (2) - (1) Payroll Payroll (4) / (5) Date 7/1/2015 - 9,362,006 0.0% 42,359,280 22.1% 7/1/2013 - $ 9,905,500 0.0% $ 9,808,514 33,304,177 29.5% 7/1/2011 - 9,808,514 0.0% 9,808,514 31,191,746 31.4% 105 9,362,006 $ CITY OF FLAGSTAFF, ARIZONA Notes to the Required Supplementary Information June 30, 2016 I. ACTUARIALLY DETERMINED CONTRIBUTION RATES Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial valuation date June 30, 2014 Actuarial cost method Entry age normal Amortization method Level percentage of payroll, closed Remaining amortization period 22 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable Asset valuation method 7-year smoothed market; 80%/120% market Actuarial assumptions: Investment rate of return Projected salary increases Includes inflation Retirement age 7.85%, net of investment and administrative expenses 4.0% - 8.0% 4% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011. Mortality RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females) Assumed future permanent benefit increases Members retired on or before July 1, 2011: 2% compounded on average. Members retired on or after August 1, 2011: 0.5% compounded on average. Since all current retirees receive the same dollar increase amount, approximation techniques were used to develop the assumed PBI for each member II. FACTORS THAT AFFECT THE IDENTIFICATION OF TRENDS Beginning in fiscal year 2014, PSPRS established separate funds for pension benefits and health insurance premium benefits. Previously, the plan recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plan transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from the plan’s Pension Fund to the new Health Insurance Fund. III. INFORMATION PRIOR TO MEASUREMENT DATE Information prior to the measurement date (June 30, 2014) was not available. 106 NON-MAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. activities. They are usually required by statute, charter provision or ordinance to finance particular functions or Library Fund The City Library is financed through City sales tax allocations, State and County grants and individual contributions. Funds provided must be used for library activities such as cultural and educational programs and technical services. Bed, Board and Beverage Tax Fund This fund accounts for the Bed, Board and Beverage tax revenues as approved by voters in the 2010 general election and related expenditures. These resources are restricted for use in the areas of Beautification, Economic Development, Tourism, Arts & Science, and Recreation. Housing and Community Services Fund This fund was established in fiscal year 1997 to account for the funding received for the Community Development Block Grant program and affordable housing activities. Metropolitan Planning Organization This fund was established in fiscal year 1997 to account for funding derived from the City’s status as a Metropolitan Planning Organization. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and the payment of, general longterm debt principal, interest and related costs. General Obligation Bond Fund This fund accounts for the accumulation of resources for, and the payments of, general long-term obligation principal and interest. Secondary Property Tax Revenue Fund This fund is used to account for secondary property tax revenues. Monies received by this fund are legally restricted to payment of general obligation debt. Special Assessment Bond Fund This fund accounts for the accumulation of resources for and the payment of principal, interest and related costs for all improvement district bonds issued by the City and repaid by the special assessment district. Capital Projects Funds Capital projects fund is used to account for major capital acquisition and construction separate from ongoing operating activities. Resources for capital projects typically result from the issuance of general obligation or other government debt. Permanent Fund Permanent funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. Perpetual Care This fund accounts for the perpetual care of the City’s cemetery. 107 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2016 Special Revenue Funds Library Fund Metropolitan Planning Organization Fund Housing & Community Services Fund BBB Fund ASSETS Cash and investments $ 2,033,921 Accounts receivable, net $ 8,485,354 $ 1,189,069 $ 8,301 95,627 969,230 630 - 8,709 18,955 2,816 538,649 Interest receivable Intergovernmental receivable 507 - 300,305 Special assessments receivable - - - - Notes receivable - - 326,600 - Inventory Restricted cash and investments Total assets - 48,419 - - 1,964,492 193,740 - - $ 4,103,256 $ 9,715,698 $ 1,819,420 $ 546,950 $ 180,520 $ 31,899 $ 21,698 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences $ 349,114 87,348 38,322 Construction retainage payable Interfund payable Advanced revenue Total liabilities 2,059 7,959 500,000 61,378 - - - 69,435 9,444 214,622 - 505,897 289,664 248,580 529,657 - - - - Deferred inflows of resources: Unavailable revenue - property taxes Unavailable revenue - notes receivable Total deferred inflows of resources 326,600 - - 326,600 - Fund balances: Nonspendable: Perpetual care - - - - Debt service paying agent - 193,740 - - Inventory - 48,419 - - Library services 1,632,867 - - - Library branch services 1,086,681 - - - 877,811 - - - Debt service - - - - Public art - 644,643 - - Economic Development - 727,768 - - - Restricted for: Library programs board directed Tourism 1,110,965 Park maintenance and operations - 2,211,328 - Other capital projects - 4,489,171 1,244,240 - Regional planning - - - 17,293 Perpetual care - - - - - - - - 3,597,359 9,426,034 1,244,240 17,293 Unassigned (deficit): Total fund balances Total liabilities and fund balances $ 4,103,256 108 $ 9,715,698 $ 1,819,420 $ 546,950 Capital Projects Debt Service Funds General Obligation Bond Fund $ - Secondary Property Tax Revenue Fund $ 7,405,819 Funds Permanent Fund Special Assessment Bond Fund Capital Projects Bond Construction Perpetual Care $ $ $ 310,133 59,764 22,616 Total Other Governmental Funds $ 19,514,977 - - - - - 1,065,487 - 26,192 476 1,845 641 59,634 - - - 85,766 - 925,227 - - 2,120,411 - - 2,120,411 - - - - - 326,600 - - - - - 48,419 - 5,771,500 55,375 1,431,483 252,973 9,669,563 $ - $ 13,203,511 $ 2,486,395 $ 1,578,858 $ 276,230 $ 33,730,318 $ - $ - $ - $ 98,510 $ - $ 681,741 - - - 18,861 - 154,549 6,639 68,017 - - - 2,500,000 - - - - - - 3,000,000 293,501 - - - 2,624,010 - 4,197,808 - - 2,119,987 - - 2,119,987 326,600 - - 2,119,987 - - 2,446,587 - - - - 252,973 252,973 - 5,771,500 55,375 - - 6,020,615 - - - - - 48,419 - - - - - 1,632,867 1,086,681 - - - - - - - - - - 877,811 - 7,432,011 311,033 - - 7,743,044 - - - - - 644,643 - - - - - 727,768 1,110,965 - - - - - 2,211,328 - - - 1,888,932 - 7,622,343 - - - - - 17,293 - - - - 23,257 - - - $ - 13,203,511 $ 13,203,511 (2,934,084) 366,408 $ 2,486,395 109 (1,045,152) $ 1,578,858 23,257 - (2,934,084) 276,230 $ 276,230 27,085,923 $ 33,730,318 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2016 Special Revenue Funds Library Fund Metropolitan Planning Organization Fund Housing & Community Services Fund BBB Fund REVENUES: Taxes $ Intergovernmental - $ 7,538,444 $ - $ - 3,088,137 - 47,583 5,000 691,976 Grants and entitlements 33,946 29,974 923,438 Special assessments - - - - Rents - 72,823 8,057 - Investment earnings 33,032 82,582 9,368 - Contributions 29,014 649 357,631 25,000 Miscellaneous Total revenues 53,837 157,757 201,150 - 3,237,966 7,882,229 1,547,227 721,976 - - - - EXPENDITURES: Current: General government Economic and physical development Culture and recreation - 2,795,932 1,170,060 777,387 4,693,570 677,922 - - - 249,993 - - Highways and streets Debt service: Principal retirement - 130,000 - - Interest and other charges - 120,554 - - Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures - 2,087,380 181,843 - 4,693,570 6,061,781 1,351,903 777,387 (1,455,604) 1,820,448 195,324 251,000 - (55,411) OTHER FINANCING SOURCES (USES): Transfers in 1,641,360 Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year (2,714,817) - - 1,641,360 (2,463,817) - 22,500 185,756 (643,369) 195,324 3,411,603 $ 22,500 - 3,597,359 110 10,069,403 $ 9,426,034 (32,911) 1,048,916 $ 1,244,240 50,204 $ 17,293 Capital Projects Funds Debt Service Funds General Obligation Bond Fund $ Secondary Property Tax Revenue Fund - $ 5,718,942 - - - Special Assessment Bond Fund $ Permanent Fund Capital Projects Bond Construction - $ - Total Other Governmental Funds Perpetual Care $ - $ - 13,257,386 - - 3,140,720 - - 765,338 - 2,444,672 - 4,747,237 - - 4,747,237 - - - - - 80,880 - 95,619 2,278 10,781 2,340 236,000 - - - 25,000 15,470 452,764 - - - - - 412,744 - 5,814,561 4,749,515 801,119 17,810 24,772,403 - - 767,437 - 767,437 - - - - - 4,743,379 - - - - - 5,371,492 - - - - - 249,993 - - 9,722,348 - 1,946,016 5,102,348 - 4,490,000 1,599,462 - 226,000 - - 6,701,810 - 4,716,000 5,814,561 33,515 6,701,810 - - - (6,701,810) - 6,701,810 (6,701,810) - - (887,249) 33,515 332,893 (6,701,810) $ - 14,090,760 - $ 13,203,511 $ 949,332 - 3,218,555 1,716,769 - 26,019,220 (915,650) 17,810 207,072 - 8,823,742 - (9,471,023) - (647,281) (762,974) 17,810 (1,894,098) (282,178) 258,420 (54,396) 152,676 366,408 $ 111 (1,246,817) (1,045,152) $ 276,230 28,980,021 $ 27,085,923 112 Other Supplementary Information Page Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity 114 Schedule of Changes By Function and Activity 116 Budgetary Comparison Schedules - Non-Major Governmental Funds Library Fund 117 BBB Fund 118 Community Redevelopment Fund 119 Metropolitan Planning Organization Fund 120 General Obligation Bond Fund 121 Secondary Property Tax Revenue Fund 122 Special Assessment Bond Fund 123 Capital Projects Bond Construction 124 Financial Data Submission Schedules Net Position Accounts 126 Revenue, Expenses, and Changes in Fund Net Position Accounts 128 Revenue, Expenses, and Changes in Fund Net Position AccountsPublic Housing-Consolidated 132 113 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2016 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Land $ Subtotal Less: accumulated depreciation Total governmental funds capital assets Buildings 3,811,946 3,936,510 90,547 81,783 24,419,584 32,541,753 $ 64,882,123 $ 64,882,123 114 $ 13,514,271 27,151,960 5,343,042 15,137,462 22,702,096 102,309 Improvements $ 2,975,159 113,946 221,973 95,128 16,775,814 2,279,434 83,951,140 22,461,454 (23,220,558) (15,718,405) 60,730,582 $ 6,743,049 Machinery and Equipment $ 1,324,942 16,855,884 1,410,149 778,090 3,942,537 9,137,971 Construction In Progress $ 33,449,573 9,865,353 411,519 107,427 172,881 461,856 6,979,861 $ 8,133,544 (23,584,220) $ Infrastructure $ 8,133,544 115 $ 1,117,226 865,220 10,599,379 300,390,733 Total $ 22,037,837 48,058,300 8,290,364 17,130,564 78,901,266 351,432,061 312,972,558 525,850,392 (154,341,388) (216,864,571) 158,631,170 $ 308,985,821 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2016 Balance July 1, 2015 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total Additions Transfers In (out) Retirements Balance June 30, 2016 $ 21,738,396 47,403,623 8,131,723 15,977,670 76,784,165 339,217,874 $ 447,441 828,561 296,317 1,019,935 3,155,798 12,337,978 $ (173,884) (137,800) (617,011) $ (148,000) (137,676) 132,959 (900,897) 493,220 $ 22,037,837 48,058,300 8,290,364 17,130,564 78,901,266 351,432,061 $ 509,253,451 $ 18,086,030 $ (928,695) $ (560,394) $ 525,850,392 116 CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 4,882,490 $ Variance with Final Budget REVENUES: Intergovernmental $ Grants and entitlements Investment earnings Miscellaneous Total revenues 4,882,490 $ 3,088,137 $ (1,794,353) 188,625 188,625 33,946 (154,679) 37,812 37,812 33,032 (4,780) 20,474 20,474 53,837 5,129,401 5,129,401 3,208,952 (1,920,449) 33,363 6,822,523 6,822,523 4,693,570 2,128,953 434,390 434,390 - 434,390 100,000 100,000 - 100,000 7,356,913 7,356,913 4,693,570 2,663,343 (2,227,512) (2,227,512) (1,484,618) 1,641,360 1,641,360 1,641,360 - - 250,000 1,641,360 250,000 156,742 992,894 3,411,603 - EXPENDITURES: Current: Culture and recreation Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 742,894 OTHER FINANCING SOURCES (USES): Transfers in Transfers out (250,000) Total other financing sources (uses) 1,391,360 Net change in fund balances 1,391,360 (836,152) Fund balances, beginning of year Fund balances, end of year (250,000) (836,152) 1,144,079 $ 1,144,079 307,927 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 307,927 $ 3,568,345 $ 156,742 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 29,014 Adjusted net change in fund balance - GAAP basis $ 117 185,756 $ 992,894 CITY OF FLAGSTAFF, ARIZONA BBB Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 6,700,000 $ Variance with Final Budget REVENUES: Taxes $ 6,700,000 $ 7,453,377 $ 753,377 Grants and entitlements 200,000 200,000 29,974 (170,026) Rents 167,994 167,994 72,823 (95,171) Investment earnings 42,705 42,705 82,582 39,877 Miscellaneous 98,261 98,261 157,755 59,494 7,208,960 7,208,960 7,796,511 587,551 3,086,423 3,086,423 2,785,184 301,239 757,958 757,958 667,880 90,078 - - 190,930 130,000 130,000 130,000 6,889 Total revenues EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets (190,930) Debt service: Principal retirement Interest and other charges Capital Outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 127,443 127,443 120,554 6,488,993 6,488,993 2,142,435 135,000 135,000 - 135,000 10,725,817 10,725,817 6,036,983 342,276 1,759,528 929,827 251,000 - (3,516,857) (3,516,857) OTHER FINANCING SOURCES (USES): Transfers in 251,000 Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year $ 251,000 (2,846,254) (2,846,254) (2,714,817) 131,437 (2,595,254) (2,595,254) (2,463,817) 131,437 (6,112,111) (6,112,111) (704,289) 1,061,264 8,178,846 8,178,846 2,066,735 $ Adjustment from budgetary basis to GAAP basis net change in fund balances 2,066,735 10,069,403 $ $ 9,365,114 (704,289) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 85,718 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis (24,798) Adjusted net change in fund balance - GAAP basis $ 118 (643,369) $ 1,061,264 CITY OF FLAGSTAFF, ARIZONA Housing & Community Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 2,538,468 $ Variance with Final Budget REVENUES: Grants and entitlements $ 2,538,468 $ 923,438 $ (1,615,030) Intergovernmental - - 47,583 47,583 Rent - - 8,057 8,057 - 9,368 9,368 50,127 50,127 201,150 151,023 2,588,595 2,588,595 1,189,596 (1,398,999) 3,692,923 3,692,923 1,351,903 2,341,020 1,351,903 2,341,020 Investment earnings - Miscellaneous Total revenues EXPENDITURES: Current: Economic and physical development Total expenditures Excess (deficiency) of revenues over (under) expenditures 3,692,923 3,692,923 (1,104,328) (1,104,328) (162,307) 942,021 Net change in fund balances (1,104,328) (1,104,328) (162,307) 942,021 1,298,024 1,298,024 Fund balances, beginning of year Fund balances, end of year $ 193,696 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 193,696 1,048,916 $ 886,609 $ (162,307) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. Adjusted net change in fund balance - GAAP basis $ 119 357,631 195,324 $ 942,021 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 1,521,290 $ Variance with Final Budget REVENUES: Grants and entitlements $ Intergovernmental Contributions Total revenues 1,521,290 $ 691,976 $ (829,314) 5,000 5,000 5,000 - - - 25,000 25,000 1,526,290 1,526,290 721,976 (804,314) 1,048,790 1,048,790 777,387 271,403 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 500,000 500,000 - 500,000 1,548,790 1,548,790 777,387 771,403 (55,411) (32,911) (22,500) (22,500) OTHER FINANCING SOURCES (USES): Transfers in 22,500 22,500 22,500 - 22,500 22,500 22,500 - Net change in fund balances - - (32,911) Fund balances, beginning of year - - 50,204 Total other financing sources (uses) Fund balances, end of year $ - $ 120 - $ 17,293 (32,911) $ (32,911) CITY OF FLAGSTAFF, ARIZONA General Obligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 5,102,348 $ Variance with Final Budget EXPENDITURES: Debt service: Principal retirement $ 5,102,348 $ 5,102,348 $ - Interest and other charges 2,334,252 2,334,252 1,599,462 734,790 Total expenditures 7,436,600 7,436,600 6,701,810 734,790 (7,436,600) (7,436,600) (6,701,810) 734,790 7,436,600 7,436,600 6,701,810 (734,790) 7,436,600 7,436,600 6,701,810 (734,790) Net change in fund balances - - - - Budgetary fund balances, beginning of year - - - - Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Budgetary fund balances, end of year $ - $ 121 - $ - $ - CITY OF FLAGSTAFF, ARIZONA Secondary Property Tax Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis 5,728,437 $ Variance with Final Budget REVENUES: Taxes $ Investment earnings Total revenues 5,728,437 $ 5,718,942 $ (9,495) 64,000 64,000 95,619 31,619 5,792,437 5,792,437 5,814,561 22,124 OTHER FINANCING SOURCES (USES): Transfers out (7,436,600) (7,436,600) (6,701,810) 734,790 (7,436,600) (7,436,600) (6,701,810) 734,790 Net change in fund balances (1,644,163) (1,644,163) (887,249) 756,914 Fund balances, beginning of year 13,497,618 13,497,618 Total other financing sources (uses) Fund balances, end of year $ 11,853,455 $ 122 11,853,455 14,090,760 $ 13,203,511 $ 756,914 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original Final Actual Amounts Budgetary Basis Variance with Final Budget REVENUES: Special assessments $ Investment earnings Total revenues 595,250 $ 595,250 $ 4,747,237 $ 4,151,987 1,800 1,800 2,278 478 597,050 597,050 4,749,515 4,152,465 (4,230,000) EXPENDITURES: Debt service: Principal retirement 260,000 260,000 4,490,000 Interest and other charges 340,850 340,850 226,000 Total expenditures 600,850 600,850 4,716,000 Excess (deficiency) of revenues over (under) expenditures (3,800) Fund balances, beginning of year Fund balances, end of year (3,800) 306,646 $ 306,646 302,846 $ 123 302,846 $ 114,850 (4,115,150) 33,515 37,315 332,893 - 366,408 $ 37,315 CITY OF FLAGSTAFF, ARIZONA Capital Projects Bond Construction Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2016 Budget Original REVENUES: Grants and entitlements $ Investment earnings Contributions 454,197 $ 454,197 $ 765,338 Variance with Final Budget $ 311,141 630 630 10,781 10,151 454,827 454,827 801,119 346,292 - Total revenues Actual Amounts Budgetary Basis Final - 25,000 25,000 EXPENDITURES: Current: Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 39,698,616 39,698,616 1,716,769 37,981,847 39,698,616 39,698,616 1,716,769 37,981,847 (39,243,789) (39,243,789) 36,762,245 36,762,245 - (36,762,245) 6,990,000 6,990,000 207,072 (6,782,928) - - 43,752,245 43,752,245 4,508,456 4,508,456 (762,974) (5,271,430) 82,104 82,104 (282,178) - (915,650) 38,328,139 OTHER FINANCING SOURCES (USES): Bonds issued Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year $ 4,590,560 $ 124 4,590,560 (54,396) (54,396) 152,676 $ (1,045,152) (43,599,569) $ (5,271,430) 125 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2016 Assets: Current Assets: Cash: Cash - Unrestricted Cash - Other Restricted Cash - Tenant Security Deposits Total Cash Accounts Receivables: Accounts Receivable - PHA Projects Accounts Receivable - HUD Other Projects Accounts Receivable - Other Government Accounts Receivable - Miscellaneous Accounts Receivable - Tenants Allowance for Doubtful Accounts -Tenants Allowance for Doubtful Accounts - Other Fraud Recovery Allowance for Doubtful Accounts - Fraud Accrued Interest Receivable Total Receivables, Net Current investments Investments - Unrestricted Investments - Restricted Prepaid Expenses and Other Assets Inventories Allowance for Obsolete Inventories Inter Program Due From Assets Held for Sale Total Current Assets Noncurrent Assets: Capital Assets: Land Buildings Furniture, Equipment & Machinery - Dwellings Furniture, Equipment & Machinery - Administration Leasehold Improvements Accumulated Depreciation Construction in Progress Total Capital Assets, Net Notes receivable - Noncurrent Other Assets Total Non-Current Assets Deferred Outflow of Resources Total Assets and Deferred Outflow of Resources Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Moderate Rehabilitation 14.856 $ 527,000 73,367 $ 600,367 $ $ $ 76,623 3,263 3,687 (1,327) 25,878 (17,281) 90,843 54,901 746,111 69,942 174,503 $ 244,445 15,928 15,928 185 2,403 262,961 $ 89,160 89,160 32,650 (27,304) 5,346 1,042 5,611 101,159 $ 21,708 21,708 Elimination $ - $ Total $ 707,810 174,503 73,367 $ 955,680 4,631 4,631 - 81,254 15,928 35,913 3,687 (1,327) (27,304) 25,878 (17,281) 116,748 26,339 - 56,128 8,014 1,136,570 1,446,035 9,189,257 - - - - 1,446,035 9,189,257 887,236 - - - - 887,236 507,549 (7,107,820) 75,862 4,998,119 - - - - 507,549 (7,107,820) 75,862 4,998,119 4,998,119 - - - - 4,998,119 - - 202,484 - 6,337,173 129,265 31,944 41,275 5,873,495 294,905 142,434 (continued) 126 26,339 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2016 Public Housing 14.850 & 14.872 Liabilities and Net Position: Liabilities: Current Liabilities: Bank Overdraft Accounts Payable <= 90 Days Accrued Wage/Payroll Taxes Payable Accrued Compensated Absences Accrued Interest Payable Accounts Payable - HUD PHA Programs Account Payable - PHA Projects Accounts Payable - Other Government Tenant Security Deposits Unearned Revenues Current Portion of L-T Debt - Capital Current Portion of L-T Debt - Operating Other Current Liabilities Accrued Liabilities - Other Inter Program - Due To Total Current Liabilities Noncurrent Liabilities Long-term Debt, Net of Current - Capital Long-term Debt, Net of Current - Operating Non-current Liabilities - Other Accrued Compensated Absences Accrued Pension and OPEB Liabilities Total Non-Current Liabilities Total Liabilities Deferred Inflow of Resources Net Position: Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Equity/Net Position Total Liabilities, Deferred Inflows of Resources and Equity/Net Position Housing Choice Vouchers 14.871 104,767 28,060 44,204 - Business Activities 5,496 7,331 10,817 23,644 72,466 73,367 9,324 4,345 336,533 669 543 1,043 2,403 4,658 106,980 1,461,738 1,568,718 28,113 255,530 283,643 2,139 419,487 421,626 1,905,251 307,287 426,284 130,830 16,325 33,655 4,998,119 (1,160,705) 3,837,414 $ 5,873,495 174,503 (203,210) (28,707) $ 294,905 $ 142,434 Elimination 260 12,181 1,266 13,707 - 13,707 - (317,505) (317,505) (concluded) 127 Moderate Rehabilitation 14.856 12,632 12,632 $ 26,339 - 111,192 35,934 56,064 12,181 72,466 73,367 9,324 8,014 378,542 - 137,232 2,136,755 2,273,987 - 2,652,529 - 180,810 - - $ Total - 4,998,119 174,503 (1,668,788) 3,503,834 $ 6,337,173 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Year Ended June 30, 2016 Housing Choice Vouchers 14.871 Public Housing 14.850 & 14.872 Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Proceeds -Disposition of Assets Held for Sale Cost of Sale of Assets Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Allocated Overhead Other Total Administrative Tenant Services Asset Management Fee Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Fuel Labor Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities $ 1,036,391 23,874 1,060,265 721,380 309,044 15,383 8,467 (197) 2,114,342 418,651 6,300 430 71,210 56,920 7,303 20,731 3,150 584,695 $ 213 213 3,703,477 - Moderate Rehabilitation 14.856 Business Activities $ - $ - Elimination $ Total - $ 1,036,391 24,087 1,060,478 78,992 - - 4,503,849 309,044 - 320 32,985 3,736,995 368,465 368,465 78,992 - 15,703 409,917 (197) 6,298,794 199,395 634 98 25,198 28,650 118,598 500 - 1,266 70 10,362 11,698 - 736,644 8,700 528 127,233 103,078 7,428 30,008 18,969 1,032,588 2,472 539 256,986 30,825 17,438 125 6,805 4,918 179,209 204 204 - - - - 204 204 120,457 19,775 133,256 50,501 323,989 - 735 56 791 - - 120,457 20,510 133,312 50,501 324,780 128 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Year Ended June 30, 2016 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Moderate Rehabilitation 14.856 Elimination Total (continued) Ordinary Maintenance and Operations Labor Materials and Other Ordinary Maintenance and Operations Contracts Employee Benefit Contributions - Ordinary Maintenance Total Maintenance 342,325 43,151 - 129,166 1,386 - - 471,491 44,537 93,959 - 847 - - 94,806 54,394 533,829 - 131,399 - - 54,394 665,228 . Protective Services Protective Services - Labor Protective Services - Other Contract Costs Protective Services - Other Employee Benefit - Protective Services Total Protective Services General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Total insurance Premiums Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Mortgages Bad debt - Other Severance Expense Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Interest on Notes Payable (Short & Long Term) Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses 22,152 22,152 - 5,265 5,265 - - 27,417 27,417 55,556 18,187 34,960 16,679 125,382 23,889 9,599 72,466 7,132 113,086 55,556 16,599 13,877 14,037 100,069 1,588 3,312 2,342 7,242 17,771 300 18,071 - - 12,515 9,447 72,466 7,132 101,560 7,374 7,374 4,000 152 4,152 - - - - - - - - - - - - - - 1,666,498 271,602 338,887 11,698 - 2,288,685 447,844 3,465,393 29,578 67,294 - 4,010,109 (continued) Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Fraud Losses Capital Outlays - Governmental Funds Debt Principal Payment - Governmental Funds Dwelling Units Rent Expense Total Other Expense Total Expenses 444,952 29,577 - 3,273,654 21,595 - - 67,292 - - 3,340,946 21,595 444,952 29,577 - 474,529 3,295,249 - 67,292 - 3,837,070 2,141,027 3,566,851 78,990 - 6,125,755 129 338,887 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Year Ended June 30, 2016 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 71,536 (71,536) - Other Financing Sources (Uses) Operating Transfer In Operating transfer Out Operating Transfers from/to Primary Government Operating Transfers from/to Component Unit Proceeds from Notes, Loans and Bonds Proceeds from Property Sales Extraordinary Items, Net Gain/Loss Special Items (Net Gain/Loss) Inter Project Excess Cash Transfer In Inter Project Excess Cash Transfer Out - Transfers between Program and Project - In Transfers between Project and Program Out Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Changes in Compensated Absence Balance Ending Net Position Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased Excess Cash Land Purchases Building Purchases Furniture & Equipment - Dwelling Purchases Furniture & Equipment - Administrative Purchases Leasehold Improvements Purchases Infrastructure Purchases CFFP Debt Service Payments Replacement Housing Factor Funds $ $ - - 71,536 (71,536) - - - 19,952 - - - - - - - - - - - - - - 19,952 2 - 192,991 12,630 - - 3,310,843 - 19,952 3,864,099 - Changes in Contingent Liability Balance Changes in Unrecognized Pension Transition Liability Changes in Special Term/Severance Benefits Liability Changes in Allowance for Doubtful Accounts - Dwelling Rents Changes in Allowance for Doubtful Accounts - Other - Total - (26,685) Beginning Net Position Required Annual Debt Principal Payments Prior Period Adjustments, Equity Transfers and Correction of Errors Elimination Business Activities 19,952 - Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Moderate Rehabilitation 14.856 190,096 29,578 (218,803) - (347,083) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,837,414 - $ 3,150 3,092 217,588 $ 222,764 $ (28,707) $ (203,210) $ 174,503 4,788 4,535 $ (317,505) $ $ $ - 12,632 144 132 $ - $ 3,503,834 $ - $ (203,210) $ 174,503 8,082 7,759 $ 217,588 $ $ 222,764 $ $ $ $ $ $ 10,419 75,862 - $ $ $ $ $ (concluded) 130 10,419 75,862 - 131 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2016 Capital Fund Operating Fund Program Grants Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $ 1,036,391 23,874 1,060,265 628,405 92,975 309,044 15,383 8,467 (197) 1,712,323 Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Allocated Overhead Other Total Administrative $408,610 $6,300 $430 $68,298 $49,402 $7,303 $19,969 $3,150 563,462 Tenant Services Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services 204 204 Utilities Water Electricity Gas Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities 402,019 10,041 721,380 309,044 15,383 8,467 (197) 2,114,342 418,651 6,300 762 21,233 3,150 584,695 - 204 204 - 120,457 19,775 133,256 50,501 323,989 (continued) 132 $ 1,036,391 $ 23,874 1,060,265 430 71,210 56,920 7,303 20,731 2,912 7,518 $120,457 $19,775 $133,256 $50,501 323,989 Other Project Total CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2016 Operating Capital Fund Fund Program Grants Ordinary Maintenance and Operations 342,325 Labor 43,151 Materials and Other 93,959 Contracts 54,394 Employee Benefit Contributions 533,829 Total Maintenance Protective Services Protective Services - Labor Protective Services - Other Contract Costs Protective Services - Other Employee Benefit - Protective Services Total Protective Services 22,152 22,152 General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Total insurance Premiums $55,556 $16,599 $13,671 $14,037 99,863 12,515 9,447 72,466 7,132 201,423 Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Mortgages Bad debt - Other Severance Expense Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses - - Other Project Total 342,325 43,151 93,959 54,394 533,829 22,152 22,152 206 55,556 16,599 13,877 14,037 100,069 206 12,515 9,447 72,466 7,132 201,629 206 - - 1,645,059 21,439 1,666,498 67,264 380,580 447,844 Excess of Operating Revenue over Operating Expenses (continued) 133 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expenses, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2016 Operating Capital Fund Fund Program Grants Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Fraud Losses Total Other Expense Total Expenses 444,952 29,577 474,529 2,119,588 Other Financing Sources (Uses) Operating Transfer In Operating transfer Out Operating Transfers from/to Primary Government Operating Transfers from/to Component Unit Proceeds from Notes, Loans and Bonds Proceeds from Property Sales Extraordinary Items, Net Gain/Loss Special Items (Net Gain/Loss) Inter Project Excess Cash Transfer In Inter Project Excess Cash Transfer Out Transfers between Program and Project - In Transfers between Project and Program - Out Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses (71,536) - 71,536 (71,536) Beginning Net Position Required Annual Debt Principal Payments Prior Period Adjustments, Equity Transfers and Correction of Errors Changes in Compensated Absence Balance Changes in Contingent Liability Balance Changes in Unrecognized Pension Transition Liability Changes in Special Term/Severance Benefits Liability Changes in Allowance for Doubtful Accounts - Dwelling Rents Changes in Allowance for Doubtful Accounts - Other 3,864,099 - Ending Net Position 3,528,370 309,044 - 444,952 29,577 474,529 2,141,027 71,536 (71,536) - (26,685) 3,864,099 - - - - - - - 3,150 3,135 217,588 - 134 21,439 71,536 - (335,729) Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased Excess Cash Land Purchases Building Purchases Furniture & Equipment - Dwelling Purchases Furniture & Equipment - Administrative Purchases Leasehold Improvements Purchases Infrastructure Purchases CFFP Debt Service Payments Replacement Housing Factor Funds - Other Project Total 309,044 3,837,414 222,764 10,419 75,862 (concluded) 3,150 3,135 217,588 222,764 10,419 75,862 - Statistical Section This part of the City of Flagstaff's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city's overall financial health. Contents: Page Financial Trends 136 These schedules contain trend information to help the reader understand how the city’s financial performance and well-being have changed over time. Revenue Capacity 144 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 150 These schedules present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. Demographic and Economic Information 161 These schedules offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place. Operating Information 163 These schedules contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the city provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 135 136 (1) (2) (3) (4) FY FY FY FY 2007 2007 2008 2009 $ $ $ $ $ $ 468,976,704 16,220,550 55,782,138 540,979,392 264,381,730 2,424,615 19,267,461 286,073,806 204,594,974 13,795,935 36,514,677 254,905,586 2007 $ 491,051,611 16,469,767 55,498,587 $ 563,019,965 $ 276,783,163 1,593,915 16,250,436 $ 294,627,514 (1) $ 214,268,448 14,875,852 (2) 39,248,151 $ 268,392,451 2008 $ 507,380,743 9,569,184 46,314,394 $ 563,264,321 $ 291,707,810 1,593,915 11,547,792 $ 304,849,517 $ 215,672,933 7,975,269 34,766,602 (3) $ 258,414,804 2009 restated for retroactive reporting of infrastructure restated for retroactive reporting due to an accounting error change in calculations within categories due to calculation error. No net change to total net position. restated for change due to accounting error Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position Business-type activities Net investment in capital assets Restricted Unrestricted Total business-type activities and net position Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position (accrual basis of accounting) Schedule 1 City of Flagstaff Net Position by Component Last Ten Fiscal Years (4) $ 516,547,022 20,423,156 60,359,442 $ 597,329,620 $ 302,784,152 2,209,327 10,895,855 $ 315,889,334 $ 213,762,870 18,213,829 49,463,587 $ 281,440,286 2010 $ $ $ $ $ $ 520,993,388 26,974,999 60,053,883 608,022,270 303,113,402 3,003,129 17,190,191 323,306,722 217,879,986 23,971,870 42,863,692 284,715,548 Fiscal Year 2011 $ $ $ $ $ $ 523,530,862 37,484,442 61,278,603 622,293,907 304,418,393 2,805,002 23,968,903 331,192,298 219,112,469 34,679,441 37,309,699 291,101,609 2012 $ $ $ $ $ $ 527,251,882 46,550,506 61,483,885 635,286,273 304,560,897 2,694,262 29,195,853 336,451,012 222,690,985 43,856,244 32,288,032 298,835,261 2013 $ $ $ $ $ $ 537,900,100 46,253,718 68,304,802 652,458,620 310,552,949 2,492,562 31,128,319 344,173,830 227,347,151 43,761,156 37,176,483 308,284,790 2014 $ 542,621,942 55,856,610 (47,139,560) $ 551,338,992 $ 311,963,433 2,664,263 18,390,515 $ 333,018,211 $ 230,658,509 53,192,347 (65,530,075) $ 218,320,781 2015 $ 558,542,230 63,885,506 (52,384,985) $ 570,042,751 $ 311,644,865 2,903,553 20,537,654 $ 335,086,072 $ 246,897,365 60,981,953 (72,922,639) $ 234,956,679 2016 137 138 Program Revenues Governmental activities: Charges for services: General government Public safety Public works Economic and physical development Culture and recreation Highways and streets Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 4,171,853 704,800 1,455,461 562,135 742,088 2,062,329 19,356,271 29,054,937 $ 3,746,890 1,227,979 1,483,275 315,462 762,410 3,320,597 16,324,928 27,181,541 $ 120,403,137 39,612,372 34,200,858 $ 106,358,761 Total business-type activities expense Total primary government expense 11,423,164 3,608,322 1,160,604 80,790,765 11,271,031 27,030,331 1,894,089 10,556,175 11,607,116 15,515,643 2,916,380 23,420,282 $ 10,073,853 3,162,391 1,019,248 72,157,903 9,035,268 23,994,991 1,882,489 9,508,406 10,089,469 14,557,140 3,090,140 2008 19,945,366 $ 2007 Business-type activities: Water Wastewater Environmental Airport Housing Authority Stormwater Total governmental activities expense Expenses Governmental activities: General government Public safety Public works Economic and physical development Culture and recreation Highways and streets Interest on long-term debt (accrual basis of accounting) Schedule 2 City of Flagstaff Changes in Net Position Last Ten Fiscal Years 39,985,739 11,782,540 4,197,447 1,203,436 22,802,316 88,726,876 10,913,187 29,287,433 2,109,221 10,346,982 13,120,917 19,297,615 3,651,521 $ 3,099,884 1,451,405 1,350,832 369,987 1,559,617 5,990,756 9,880,762 23,703,243 $ 128,712,615 $ 2009 38,354,045 11,091,078 4,273,609 1,258,072 21,731,286 79,443,260 8,238,178 26,592,968 1,502,626 8,827,578 12,507,679 17,856,121 3,918,110 $ 3,285,242 1,283,697 1,471,550 291,211 1,420,094 6,654,978 36,949,681 51,356,453 $ 117,797,305 $ 2010 44,619,819 11,610,370 4,584,733 5,811,922 1,121,555 21,491,239 79,568,079 7,850,954 25,987,193 1,754,033 8,474,776 12,854,824 19,275,381 3,370,918 $ 2,646,424 1,144,636 1,537,188 162,715 1,442,901 7,965,474 9,226,778 24,126,116 $ 124,187,898 $ Fiscal Year 2011 42,332,291 7,828,286 4,268,099 6,165,612 1,361,658 22,708,636 79,544,593 9,406,406 27,175,720 1,615,941 9,639,003 12,434,695 16,328,771 2,944,057 $ 3,364,479 1,611,109 1,551,419 53,747 1,455,067 7,414,767 12,200,969 27,651,557 $ 121,876,884 $ 2012 46,650,101 11,671,366 5,226,977 5,986,508 1,196,589 22,568,661 80,318,169 10,442,808 27,269,325 1,718,767 9,210,500 13,342,588 15,431,985 2,902,196 $ 3,448,665 1,491,842 1,611,306 52,386 1,507,855 6,866,279 11,318,522 26,296,855 $ 126,968,270 $ 2013 47,789,629 11,637,566 4,118,280 6,090,790 1,576,865 24,366,128 83,619,164 10,732,510 28,730,111 1,573,541 9,018,496 12,919,475 17,698,346 2,946,685 $ 4,568,438 628,038 1,215 903,233 1,656,628 7,071,557 14,603,667 29,432,776 $ 131,408,793 $ 2014 49,067,696 14,307,902 10,879,594 12,071,509 4,540,208 6,084,019 1,184,464 97,519,389 17,625,846 35,255,450 1,664,308 9,343,417 12,511,424 18,174,944 2,944,000 $ 3,091,342 879,755 520 2,329,258 1,605,120 6,670,678 13,008,629 27,585,302 $ 146,587,085 $ 2015 48,931,394 14,674,337 10,490,816 12,087,144 4,307,615 6,125,950 1,245,532 92,160,461 17,210,187 34,711,251 1,650,323 10,259,240 12,974,830 13,059,212 2,295,418 $ 3,241,987 647,910 605 3,767,060 1,633,338 7,726,612 11,806,049 28,823,561 $ 141,091,855 $ 2016 139 Change in Net Position Governmental activities Business-type activities Total primary government $ $ 14,302,264 33,342,355 47,644,619 68,217,508 Total primary government 12,169,247 32,334,785 16,276,354 4,108,861 1,377,552 242,167 19,460 (9,123,196) 57,405,230 (43,102,966) 22,530,077 (20,572,889) 1,546,893 110,835 31,354 9,123,196 10,812,278 $ $ $ $ $ 17,337,916 9,839,486 1,122,274 1,042,701 19,500 27,369,058 56,730,935 85,785,872 Business-type activties: Investment earnings Miscellaneous Gain (loss) on sale of capital assets Transers in (out) Total business-type activities General Revenues and Other Changes in Net Position Governmental activities: Taxes Property taxes Sales taxes State shared sales taxes - unrestricted Investment earnings Miscellaneous Gain on sale of capital assets Contributions to permanent fund Transers in (out) Total governmental activities Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense Business-type activities: Charges for services: Water Wastewater Environmental Airport Housing Authority Stormwater Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues (accrual basis of accounting) Schedule 2 (continued) City of Flagstaff Changes in Net Position Last Ten Fiscal Years $ $ $ $ $ $ $ 13,486,865 8,563,922 22,050,787 71,856,150 964,237 127,423 78,248 3,590,153 4,760,061 13,664,791 33,129,731 16,992,017 3,903,839 819,325 2,160,339 16,200 (3,590,153) 67,096,089 (53,609,224) 3,803,861 (49,805,363) 17,947,605 10,813,177 1,207,831 1,137,402 67,651 12,242,567 43,416,233 70,597,774 $ $ $ $ $ $ $ (12,503,209) 10,222,003 (2,281,206) 62,663,602 206,154 166,158 119,366 9,651,500 10,143,178 12,262,185 31,420,047 16,628,652 1,465,731 381,984 13,325 (9,651,500) 52,520,424 (65,023,633) 78,825 (64,944,808) 17,328,927 11,545,472 1,187,105 1,247,878 10,966 8,744,216 40,064,564 63,767,807 $ $ $ $ $ $ $ 23,025,482 11,053,585 34,079,067 62,022,480 111,251 194,547 79,467 10,524,926 10,910,191 12,798,495 30,429,840 14,880,073 449,394 228,969 2,831,308 19,136 (10,524,926) 51,112,289 (28,086,807) 143,394 (27,943,413) 17,539,873 11,329,336 1,359,029 1,358,438 120,054 6,790,709 38,497,439 89,853,892 $ $ $ $ $ $ $ 3,275,262 1,261,934 4,537,196 60,212,679 107,543 150,129 47,818 1,189,964 1,495,454 12,645,717 31,355,882 13,148,252 246,093 1,741,338 744,957 24,950 (1,189,964) 58,717,225 (55,441,963) (233,520) (55,675,483) 18,781,751 12,010,554 1,388,076 1,437,841 1,456,894 5,090,475 4,220,708 44,386,299 68,512,415 $ $ $ $ $ $ $ 6,386,061 7,885,576 14,271,637 59,705,039 118,247 173,313 1,134,382 1,425,942 11,974,341 33,401,021 13,189,822 322,126 510,695 15,474 (1,134,382) 58,279,097 (51,893,036) 6,459,634 (45,433,402) 19,937,196 12,030,990 1,492,559 1,299,987 1,446,602 4,624,234 7,960,357 48,791,925 76,443,482 $ $ $ $ $ $ $ 7,733,652 5,258,714 12,992,366 63,591,748 194,306 581,015 243,700 817,761 1,836,782 11,821,650 35,188,913 14,630,891 (396,124) 1,285,289 18,173 23,935 (817,761) 61,754,966 (54,021,314) 3,421,932 (50,599,382) 22,629,862 12,000,124 1,486,247 994,123 1,455,405 4,884,129 6,622,143 50,072,033 76,368,888 $ $ $ $ $ $ $ 10,114,468 7,726,965 17,841,433 68,063,886 213,335 567,079 73,916 2,908,700 3,763,030 11,044,817 37,675,638 15,666,968 749,038 1,813,164 241,231 18,700 (2,908,700) 64,300,856 (54,186,388) 3,963,935 (50,222,453) 23,432,153 12,490,237 1,504,703 974,184 1,465,522 4,051,236 7,835,529 51,753,564 81,186,340 $ $ $ $ $ $ $ 999,001 3,368,630 4,367,631 74,257,521 303,863 1,119,502 493,358 1,407,710 3,324,433 11,211,038 42,539,371 16,683,665 1,179,131 645,571 65,201 16,821 (1,407,710) 70,933,088 (69,934,087) 44,197 (69,889,890) 14,043,177 8,907,760 12,646,619 1,528,202 1,027,945 1,466,347 4,742,685 4,749,158 49,111,893 76,697,195 $ $ $ $ $ $ $ 16,635,898 2,067,861 18,703,759 80,563,879 (121,320) 591,081 336,685 375,716 11,339,774 48,343,259 17,080,154 1,668,431 1,404,390 15,470 121,320 79,972,798 (63,336,900) 1,476,780 (61,860,120) 14,589,041 9,387,949 12,760,747 1,603,852 1,455,715 1,495,296 4,775,797 4,339,777 50,408,174 79,231,735 140 $ $ 16,332,830 6,567 63,689,857 $ $ $ 47,350,460 1,260,236 29,960,235 31,220,471 $ $ $ 2007 16,498,123 (763,744) 9,916 36,355,874 20,611,579 308,979 27,492,853 27,801,832 2008 $ $ $ $ 216,878 4,299,450 8,955,106 13,471,434 - 280,376 106,144 22,203,764 22,590,284 2009 (1) FY2007 : As restated for accounting error related to the accural of state shared revenues * FY2010 : Implementation of GASB-54 Fund Balance Classification All Other Governmental Funds Reserved Unreserved, reported in: Special revenue funds Capital project funds Permanent fund Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds General Fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund (modified accrual basis of accounting) Schedule 3 City of Flagstaff Fund Balances, Governmental Funds Last Ten Fiscal Years $ $ $ $ 206,678 19,720,079 2,228,605 651,650 22,807,012 - 376,728 785,720 86,568 8,595,100 13,412,219 23,256,335 2010* $ $ $ $ 214,333 23,012,954 (2,863,781) 20,363,506 - 427,267 796,345 85,119 6,882,947 15,160,509 23,352,187 2011 $ $ $ $ 219,564 33,743,091 33,962,655 - 359,923 758,303 282,888 7,075,902 17,203,207 25,680,223 2012 $ $ $ $ 247,436 42,466,792 42,714,228 - 390,882 800,953 386,518 7,335,230 19,410,597 28,324,180 2013 $ $ $ $ 271,477 48,320,324 48,591,801 - 440,644 1,698,333 8,063,998 21,559,814 31,762,789 2014 $ $ $ $ 293,238 51,003,624 (282,178) 51,014,684 - 323,792 1,951,220 8,192,178 23,153,900 33,621,090 2015 $ $ $ $ (2,934,084) 53,394,247 8,379,744 47,948,587 - - 335,134 2,255,454 8,903,561 27,425,564 38,919,713 2016 141 12.69% 13,098,494 $ Net change in fund balances Debt service as a percentage of non capital expenditures 19,075,000 46,707 252,329 17,756,847 (19,488,466) 17,642,417 OTHER FINANCING SOURCES (USES): Proceeds of refunding bonds Issuance of capital debt Payment to bond refunding escrow agent Lease issued Bond premium Insurance recoveries Sale of capital assets Transfers in Transfers out Total other financing sources (uses) $ (4,543,923) Excess of revenues over (under) expenditures 10.80% (30,752,621) 2,176,808 17,181,576 (20,085,809) (727,425) (30,025,196) 5,046,398 3,020,927 46,465,549 121,185,508 43,964,317 20,425,088 13,556,680 2,704,333 2,449 1,815,062 1,336,146 1,496,858 3,731,116 1,308,938 819,325 91,160,312 5,313,222 3,210,879 26,403,203 93,583,397 $ 10,229,814 25,696,174 1,617,311 10,335,964 10,267,649 8,505,722 41,976,134 18,779,168 12,185,406 2,605,880 2,927 2,438,599 1,290,667 1,480,686 3,920,473 2,981,982 1,377,552 89,039,474 2008 8,194,214 22,994,522 1,615,049 9,344,676 8,648,628 7,859,004 $ 2007 EXPENDITURES: General governmental Public safety Public works Economic and physical development Culture and recreation Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Total expenditures REVENUES: Taxes Intergovernmental Grants and entitlements Charges for services Special assessments Licenses and permits Fines and forfeitures Rents Investment earnings Contributions Miscellaneous Total revenues (modified accrual basis of accounting) Schedule 4 City of Flagstaff Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years $ $ 10.85% (28,095,989) 109,352 63,894 21,626,308 (23,359,573) (1,560,019) (26,535,970) 5,034,991 3,750,657 30,796,072 111,787,174 9,848,252 27,374,083 1,645,703 9,991,927 12,158,087 11,187,402 43,555,388 21,364,739 9,609,508 3,324,838 2,382 1,377,580 1,517,558 1,421,772 1,366,931 1,328,524 381,984 85,251,204 2009 $ $ 13.78% 6,849,473 8,330,000 58,370 1,920,000 1,084,211 15,224,243 (18,525,100) 8,091,724 (1,242,251) 6,065,522 3,996,963 12,446,280 85,486,435 7,926,726 25,159,777 1,360,447 8,601,808 10,615,754 9,313,158 43,200,268 19,450,213 11,172,862 3,057,423 1,510,217 1,441,874 1,636,157 1,588,214 413,594 544,393 228,969 84,244,184 2010 $ $ 14.05% (2,347,654) 1,058,985 45,655 13,661,630 (14,268,052) 498,218 (2,845,872) 6,761,179 3,451,706 11,785,480 84,484,834 7,113,922 24,476,615 1,299,027 8,202,024 10,782,848 10,612,033 43,799,128 17,488,021 10,583,483 2,926,237 701,447 739,040 1,673,306 1,617,912 224,363 166,417 1,719,608 81,638,962 2011 $ $ 21.34% 15,927,185 13,924,136 16,797,287 (15,394,336) 2,264,386 43,890 14,872,935 (15,074,950) 17,433,348 (1,506,163) 13,654,681 3,346,253 11,951,834 91,609,695 7,453,963 25,301,495 1,146,692 8,584,826 10,576,877 9,593,074 45,577,128 17,230,696 9,721,569 3,220,137 8,286,453 1,681,874 1,601,044 1,605,166 296,241 390,253 492,971 90,103,532 2012 $ $ 12.52% 11,395,530 12,474,557 542,689 49,750 12,870,788 (12,458,747) 13,479,037 (2,083,507) 6,175,303 2,902,196 16,656,392 89,160,366 8,480,086 25,099,149 1,219,324 8,296,367 11,292,517 9,039,032 47,084,446 18,713,646 11,369,392 3,237,728 722,733 1,656,135 1,540,989 1,667,562 (429,656) 252,377 1,261,507 87,076,859 2013 $ $ 14.57% 3,021,505 $ 8,270,000 6,600,000 (9,382,710) 1,317,667 727,996 12,102,855 (11,659,441) 7,976,367 (4,954,862) 8,287,457 3,126,469 24,062,755 102,398,300 9,041,946 26,567,511 1,031,983 8,212,772 11,446,096 10,621,311 48,806,758 $ 19,584,399 15,313,742 2,894,898 2,734,095 1,952,731 1,428,401 1,651,032 722,878 541,340 1,813,164 97,443,438 2014 13.48% 4,281,184 $ 3,013,051 17,376,813 (16,384,283) 4,005,581 275,603 8,313,298 2,798,182 16,944,654 99,402,636 14,974,692 27,583,880 1,216,083 8,506,794 11,029,832 8,035,221 53,725,196 $ 20,549,000 13,483,604 1,857,884 2,986,151 1,866,792 1,389,663 1,660,635 1,145,686 368,057 645,571 99,678,239 2015 17.57% 7,678,186 5,325 15,891,921 (15,231,349) 870,853 204,956 6,807,333 12,980,269 2,520,596 16,090,690 104,324,288 14,561,513 30,074,183 1,207,776 9,530,781 11,441,848 5,916,632 59,711,556 21,355,708 11,023,491 4,747,237 2,916,164 3,153,135 1,524,856 1,696,070 1,636,650 1,962,364 1,404,390 111,131,621 2016 142 5,597 5,650 26.88% 2016 Change 2007-2016 5,473 2012 2015 5,259 2011 5,571 5,150 2010 2014 4,882 2009 5,472 4,616 2008 2013 4,453 General Property Tax 2007 Fiscal Year (modified accrual basis of accounting) (dollars in thousands) 10.24% 5,719 5,586 5,560 6,423 6,703 7,184 7,620 7,254 6,219 5,188 Secondary Property Tax Schedule 5 City of Flagstaff Tax Revenue by Source, Governmental Funds Last Ten Fiscal Years 39.66% 2,567 2,467 2,487 2,303 2,348 2,339 2,133 2,246 2,189 1,838 Franchise and Other Taxes 18.79% 19,090 17,845 17,042 15,760 14,900 13,893 13,595 14,384 16,150 16,071 City Sales Tax 51.02% 7,539 7,022 6,310 5,911 5,626 5,259 5,074 5,052 5,187 4,992 Bed, Board and Booze Tax 102.96% 19,147 15,208 11,837 11,215 10,527 9,865 9,628 10,035 9,605 9,434 Transportation Tax 42.25% 59,712 53,725 48,807 47,084 45,577 43,799 43,200 43,853 43,966 41,976 Total 143 5,623,144 4,868,072 4,490,087 4,711,821 5,147,101 5,391,580 5,733,507 6,019,776 6,238,827 2008 2009 2010 2011 2012 2013 2014 2015 2016 7,930,739 7,973,971 7,342,048 6,728,479 5,559,476 5,955,305 7,899,626 9,149,290 8,610,567 6,946,680 State Income Tax 2,910,589 2,689,916 2,591,413 2,510,832 2,483,245 2,481,126 2,490,360 2,611,289 2,758,307 2,792,404 County Auto In-Lieu Tax * - As restated due to change in accounting error identified in FY2010 5,815,473 State Sales Tax 2007 Fiscal Year (modified accrual basis of accounting) Schedule 6 City of Flagstaff Intergovernmental Revenue by Source, Governmental Funds Last Ten Fiscal Years 7,292,355 6,884,173 6,168,102 6,007,741 5,576,167 6,300,885 6,429,355 6,412,329 7,422,359 7,855,427 Highway User Tax - - - - - 156,218 251,536 225,965 293,502 Local Transportation Assistance - - - - - - - 58,782 - State HB 2565 2,867,675 4,993,449 2,281,211 2,105,827 3,544,253 3,181,076 3,885,697 1,711,609 4,868,431 2,822,315 Federal Grants 863,461 1,605,982 6,864,429 3,255,824 601,149 1,101,522 701,592 1,234,065 981,142 1,214,162 State Grants & Other State 902,472 800,478 793,898 791,906 759,606 744,070 757,241 897,337 668,153 721,797 County LEAF IGA 3,088,137 2,969,669 3,063,343 3,214,133 3,163,052 3,531,607 3,762,831 4,125,223 3,559,362 2,559,375 County Library District Funding * - - 284,944 95,190 60,190 76,716 118,216 64,092 50,068 32,795 Other 32,379,199 34,032,604 34,898,141 30,083,038 26,952,265 28,071,504 30,623,075 31,293,545 34,776,212 31,021,135 Total 144 28,051,846 28,940,765 27,478,520 25,750,042 26,651,155 28,837,059 28,918,422 30,046,573 29,641,213 2008 2009 2010 2011 2012 2013 2014 2015 2016 225,831,427 217,466,880 215,081,441 255,823,684 265,230,915 274,992,074 286,101,952 281,348,845 261,009,908 237,795,313 Commercial Property 124,316,511 123,834,908 123,988,197 124,373,673 133,909,755 146,079,309 151,630,088 140,117,313 125,377,258 100,985,606 Vacant, Agricultural, and Government Property 467,023,686 429,223,625 389,760,175 436,787,954 447,421,001 502,351,037 529,950,871 500,150,890 398,783,838 315,182,546 Residential Property 88,231,085 88,064,490 87,055,619 80,555,433 81,844,375 85,132,993 78,819,714 71,775,990 62,684,483 57,296,001 Less: Tax-exempt Property Note: A portion of city property is reassessed every year. Property is assessed at actual value, therefore, the assessed values are equal to actual value. Tax rates are per $100 of assessed value. Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll 27,532,435 2007 Fiscal Year Centrally Valued Property (modified accrual basis of accounting) Schedule 7 City of Flagstaff Full Cash Value of Taxable Property Last Ten Fiscal Years 758,581,752 712,507,496 670,692,616 765,266,937 791,368,451 864,039,469 916,341,717 878,781,823 750,538,367 624,199,899 Total Taxable Assessed Value 1.6600 1.6784 1.6795 1.5497 1.5283 1.4845 1.4913 1.5519 1.5519 1.5929 Total Direct Tax Rate 145 $ $ 260,024 79,703 133,497 248,819 637,225 154,183 68,840 1,582,291 2007 $ $ 263,386 75,493 118,282 255,578 619,805 163,463 71,299 1,567,306 2008 $ $ 181,245 66,641 78,819 250,555 582,029 155,193 69,175 1,383,657 2009 $ $ 150,239 60,143 85,806 251,271 546,765 152,042 66,392 1,312,658 2010 $ $ 166,894 61,781 99,786 261,384 544,356 151,461 63,784 1,349,446 2011 *NOTES: FY13 reflects a change in tax categories reported to proactively reflect possible New State Sales Tax Codes a) Building Materials is no longer tracked individually, now is tracked as part of Retail b) Prior to FY13, Auto Sales included Auto Services which is now included in Retail c) Prior to FY13, Hotel/Motel was included with Restaurant and Bars Construction Building Materials Auto Sales Restaurants and Bars Hotel/Motel Retail Other Utilities TOTAL (dollars in thousands) Schedule 8 City of Flagstaff City Taxable Revenue for Major Categories Last Ten Fiscal Years $ $ 150,868 62,665 121,296 277,954 557,375 154,497 116,273 1,440,928 2012 $ $ 164,971 148,211 206,617 88,924 630,898 196,534 92,968 1,529,123 2013* $ $ 169,933 163,657 218,790 95,263 638,142 200,109 103,895 1,589,789 2014 $ $ 191,297 173,371 243,560 108,913 679,325 213,248 109,578 1,719,292 2015 $ $ 176,741 205,200 251,654 120,995 741,322 246,500 108,474 1,850,886 2016 146 5.9009 0.5269 0.7521 8.7728 School District Maintenance Adjacent Ways 15% M&O Override Capital Override Class B Bond Community College Maintenance Bond County General Fund Library District Fire District Assistance Total Note: Tax rates are per $100 assessed valuation. 1.5929 Total City Primary Secondary 2007 Schedule 9 City of Flagstaff Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years (rate per $100 of assessed value) 7.5685 0.7588 0.4865 4.7713 1.5519 2008 7.6099 0.7603 0.4643 4.8334 1.5519 2009 6.5284 0.7244 0.4267 3.8860 1.4913 2010 7.3170 0.7245 0.4308 4.6772 1.4845 Fiscal Year 2011 7.7131 0.7656 0.4734 4.9458 1.5283 2012 7.6983 0.7847 0.4480 0.2367 0.1000 0.4927 0.3875 0.1052 4.8712 3.6182 0.0459 0.6126 0.1833 0.4112 1.5497 0.7131 0.8366 2013 8.3635 0.9022 0.5466 0.2556 0.1000 0.5879 0.4636 0.1243 5.1939 3.9803 0.0096 0.7061 0.0000 0.4979 1.6795 0.8429 0.8366 2014 8.3909 0.9202 0.5646 0.2556 0.1000 0.6056 0.4788 0.1268 5.1867 3.7886 0.0259 0.7138 0.0357 0.6227 1.6784 0.8418 0.8366 2015 8.6551 0.9291 0.5735 0.2556 0.1000 0.6105 0.4864 0.1241 5.4555 4.0824 0.0216 0.7265 0.1735 0.4515 1.6600 0.8234 0.8366 2016 147 3,314,514 3,257,520 2,905,193 2,687,608 2,442,648 2,379,836 2,365,429 2,318,899 2,209,379 1,987,617 1,862,948 1,848,278 72,949,373 Little America Hotels & Resorts Inc Qwest Corporation BACM 2005-6 N US HWY 89 LLC Unisource Energy Corporation RRIM Ridge Holdings LLC Pacific Prime Properties Village at Aspen Place LLC Elevation Flagstaff AZ LLC BNSF Railway Company Northern Arizona Healthcare Corp Campus Crest at Flagstaff LLC Flagstaff Medical Center Inc Total Principal Taxpayers Source: Coconino County Assessor Office 3,445,405 Wal-Mart Stores 18,164,529 18,192,334 3,567,236 $ $ Total Assessed Value Nestle Purina PetCare Company W L Gore & Associates Arizona Public Service Company Taxpayer * Schedule 10 City of Flagstaff Principal Property Tax Payers Current Year and Ten Years Ago 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Rank 2016 9.60% 0.24% 0.25% 0.26% 0.29% 0.31% 0.31% 0.31% 0.32% 0.35% 0.38% 0.43% 0.44% 0.45% 0.47% 2.39% 2.40% As a Percentage of the City Total Secondary Assessed Valuation $ $ 46,339,755 3,196,125 2,831,882 8,174,915 3,729,503 4,396,489 11,048,603 12,962,238 Total Assessed Value 9 10 3 7 4 2 1 Rank 2006 8.32% 0.57% 0.51% 1.47% 0.67% 0.79% 1.98% 2.33% As a Percentage of the City Total Secondary Assessed Valuation 148 9,615,015 10,935,835 12,253,760 12,750,836 12,497,535 12,015,988 11,828,399 11,050,626 11,172,785 11,355,520 2008 2009 2010 2011 2012 2013 2014 2015 2016 Taxes Levied for the Fiscal Year 2007 Fiscal Year Ended June 30, Schedule 11 City of Flagstaff Property Tax Levies and Collections Last Ten Fiscal Years 11,156,213 11,002,896 10,778,695 11,553,471 11,635,211 12,113,128 12,477,413 11,934,997 10,728,465 9,495,935 98.2% 98.5% 97.5% 97.7% 96.8% 96.9% 97.9% 97.4% 98.1% 98.8% Collected within the Fiscal Year of the Levy Percentage Amount of Levy - 157,905 147,594 315,452 300,272 473,992 289,056 309,257 223,024 141,012 Collections in Subsequent Years 11,156,213 11,160,801 10,926,289 11,868,923 11,935,484 12,587,120 12,766,469 12,244,255 10,951,489 9,636,947 98.2% 99.9% 98.9% 100.3% 99.3% 100.7% 100.1% 99.9% 100.1% 100.2% Total Collections to Date Percentage Amount of Levy 149 1.0000% 1.0000% 1.0000% 1.0000% 2011 2012 2013 2014 Source: 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% City Bed, Board & Beverage 1.0510% 1.0510% 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.6010% 0.6010% Transportation City of Flagstaff - Sales Tax / Business Licenses http://www.flagstaff.az.gov/index.aspx?nid=53 1.0000% 1.0000% 2010 2016 1.0000% 2009 1.0000% 1.0000% 2008 2015 1.0000% General Sales Tax 2007 Fiscal Year Schedule 12 City of Flagstaff Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 5.6000% 5.6000% 5.6000% 6.6000% 6.6000% 6.6000% 6.6000% 5.6000% 5.6000% 5.6000% State of Arizona 1.3000% 1.3000% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% Coconino County 10.9510% 10.9510% 10.4460% 11.4460% 11.4460% 11.4460% 11.4460% 10.4460% 10.3260% 10.3260% Total 150 29,350 27,645 25,865 24,015 38,449 48,134 55,571 50,857 45,820 2008 2009 2010 2011 2012 2013 2014 2015 2016 * 2,245 6,737 8,639 11,055 11,365 18,130 18,615 19,169 19,257 19,339 13,495 15,781 16,603 16,328 15,615 4,930 6,665 4,865 6,325 7,725 Revenue Bonds Governmental Activities Special Assessment Bonds - 860 1,260 1,260 3,205 18,095 19,890 21,625 23,000 24,315 Municipal Facility Corporation Bonds 3,226 3,625 4,400 5,335 5,200 1,542 6,964 2,430 2,728 3,097 COP Capital Leases These amounts are presented on the accrual basis of accounting. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 18 for personal income and population data. * - As restated due to refunding loss 31,230 2007 Fiscal Year General Obligation Bonds (dollars in thousands, except per capita) Schedule 13 City of Flagstaff Ratios of Outstanding Debt by Type Last Ten Fiscal Years 1,375 1,441 1,752 1,748 3,125 3,830 5,690 7,460 10,515 13,310 General Obligation Debt 3,285 3,635 3,634 3,972 4,299 4,614 4,918 5,212 5,496 Revenue Bonds 32,800 31,909 33,873 33,873 35,689 37,491 36,257 37,006 32,275 32,957 Term Loan Payable Business-Type Activities 3,489 3,972 4,431 4,686 3,075 3,384 3,679 3,960 4,227 4,482 Capital Leases 102,450 118,467 130,164 126,053 119,695 115,716 128,239 129,078 132,889 141,951 Total Primary Government 1.9% 2.4% 2.8% 2.8% 2.7% 3.1% 3.4% 3.4% 3.8% 4.1% Percentage of Personal Income 1,476.42 1,755.01 1,976.07 1,913.66 1,817.14 1,766.06 1,982.27 2,010.56 2,142.33 2,288.42 Per Capita 151 43,817 2016 1,375 1,441 1,752 1,752 3,125 3,830 5,690 7,460 10,515 13,310 (13,204) (14,091) (13,822) (8,821) (6,234) (6,234) (3,408) (2,573) (2,433) (1,716) Restricted for General Obligation Bonds 31,988 36,270 41,270 39,966 35,340 21,611 28,147 32,532 37,432 42,824 Total These amounts are presented on the accrual basis of accounting. 4.2% 5.1% 6.2% 5.2% 4.5% 2.5% 3.1% 3.7% 5.0% 6.9% Percentage of Actual Taxable Value of Property Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. a: See Schedule 7 for property value data b: Population data can be found in Schedule 18 48,920 38,449 2012 2015 24,015 2011 53,340 25,865 2010 2014 27,645 2009 47,035 29,350 2008 2013 31,230 2007 Fiscal Year General Bonded Debt Outstanding Business-Type Governmental Activities Activities General General Obligation Obligation Bonds Bonds (dollars in thousands, except per capita) Schedule 14 City of Flagstaff Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (a) 460.98 537.32 626.54 606.74 536.51 329.83 435.09 506.73 603.45 690.38 Per Capita (b) 152 * For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. This approach was also used for Coconino County's revenue bonds and certificates of participation. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Flagstaff. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. 84,561 $ Total direct and overlapping debt - 19,775 64,786 0.00% 65.48% City direct debt 260 30,200 Estimated Share of Overlapping Debt 19,775 $ Debt Outstanding Estimated Percentage Applicable* Subtotal, overlapping debt Coconino County Special Assessments Other debt Debt repaid with property taxes Flagstaff Unified School District Governmental Unit (dollars in thousands, except per capita) Schedule 15 City of Flagstaff Direct and Overlapping Governmental Activities Debt 153 154 Total net debt applicable to the 6% limit as a percentage of debt limit Legal debt margin (Available borrowing capacity) Total net debt applicable to 6% limit Debt limit equal to 6% of assessed valuation 6% Debt Limit Total net debt applicable to the 20% limit as a percentage of debt limit Legal debt margin (Available borrowing capacity) Total net debt applicable to 20% limit Debt limit equal to 20% of assessed valuation 20% Debt Limit (dollars in thousands) Schedule 16 City of Flagstaff Legal Debt Margin Information Last Ten Fiscal Years $ $ $ $ $ $ 1.53% 44,352 $ 680 45,032 2007 41.28% 106,248 $ 43,860 150,108 2007 $ $ 0.67% 52,376 $ 351 52,727 2008 29.00% 136,242 $ 39,514 175,756 2008 $ $ 0.00% 54,981 $ - 54,981 2009 23.69% 148,163 $ 35,105 183,268 2009 $ $ 0.00% 51,842 $ - 51,842 2010 25.49% 137,703 $ 35,105 172,808 2010 $ $ 0.00% 47,482 $ - 47,482 2011 21.35% 130,429 $ 27,845 158,274 Fiscal Year 2011 $ $ 0.00% 45,917 $ - 45,917 2012 37.62% 111,214 $ 41,841 153,055 2012 0.00% 39,664 $ - 39,664 $ 2013 58.48% 83,425 $ 48,788 132,213 $ 2013 0.00% 40,242 $ - 40,242 $ 2014 70.33% 78,751 $ 55,388 134,139 $ 2014 0.00% 42,750 $ - 42,750 $ 2015 54.66% 92,140 $ 50,361 142,501 $ 2015 0.00% 41,084 - 41,084 2016 49.25% 91,753 45,193 136,946 2016 155 Legal 6% debt margin (Available borrowing capacity) Debt applicable to limit: General Obligation Bonds $ $ 6% Limitation Debt Limit of 6% of Assessed Value 41,083,700 - 41,083,700 91,752,994 $ Legal 20% debt margin (Available borrowing capacity) 136,945,666 45,192,672 $ 20% Limitation Debt Limit of 20% of Assessed Value 684,728,330 Debt applicable to limit: General Obligation Bonds $ Net Secondary Assessed Value as of June 30, 2016 Legal Debt Margin Calculation for Fiscal Year 2016 Schedule 16 (continued) City of Flagstaff Legal Debt Margin Information 156 (1) (2) (3) (4) 22,846,487 2013 15,140,298 15,345,504 14,739,788 12,810,177 12,655,773 11,663,208 11,758,135 14,633,986 16,229,816 12,892,795 Expenses (2) 9,094,086 8,107,874 8,903,004 10,036,310 7,340,343 7,161,052 5,827,063 2,825,119 2,150,535 5,342,376 Net Revenue Available for Debt Service 2,342,259 2,328,839 2,252,132 2,252,132 2,540,658 2,443,196 2,356,705 2,130,093 283,832 274,108 Principal (3) 672,497 741,086 785,567 807,256 1,449,842 1,475,327 1,483,072 1,287,569 194,969 204,693 Interest (4) Debt Service Requirements Water and Sewer Revenue Bonds 3,014,756 3,069,925 3,037,699 3,059,388 3,990,500 3,918,523 3,839,777 3,417,662 478,801 478,801 Total Includes total operating revenues and investment income of the water and wastewaste fund. Includes total operating expenses of the water and wastewater fund less depreciation. Includes principal for water and sewer revenue bonds, water infrastructure finance authority (WIFA). Bond interest payments only. Does not include amortization of loss on refunding, capitalized interest, agent fees or amortization of bond issuance costs that are included in interest expense on the statement of revenues, expenses, and changes in net position. 24,234,384 19,996,116 2012 2016 18,824,260 2011 23,453,378 17,585,198 2010 2015 17,459,105 2009 23,642,792 18,380,351 2008 2014 18,235,171 Gross Revenues (1) 2007 Fiscal Year Schedule 17 City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years 3.02 2.64 2.93 3.28 1.84 1.83 1.52 0.83 4.49 11.16 Coverage 157 7,422,359 6,412,329 6,429,355 6,300,885 5,576,167 6,007,741 6,168,102 6,884,173 7,292,355 2008 2009 2010 2011 2012 2013 2014 2015 2016 - - - - 1,725,000 1,620,000 1,520,000 1,460,000 1,400,000 1,940,000 Principal (1) - - - - 94,875 190,455 280,135 344,010 411,385 469,585 Interest (2) Debt Service Requirements - - - - 1,819,875 1,810,455 1,800,135 1,804,010 1,811,385 2,409,585 Total Highway User Revenue Bonds - - - - 3.06 3.48 3.57 3.55 4.10 3.26 Coverage (1) Includes 1992 Jr. Lien and Series 2003 Refunding. (2) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, and changes in fund balances. 7,855,427 Highway User Tax Revenue 2007 Fiscal Year Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years 158 11,657,403 2013 860,000 400,000 385,000 385,000 365,000 350,000 335,000 320,000 310,000 295,000 Principal (2) 22,627 50,350 68,753 77,656 94,446 110,371 125,614 139,534 152,398 164,198 Interest (3) Debt Service Requirements 882,627 450,350 453,753 462,656 459,446 460,371 460,614 459,534 462,398 459,198 Total Municipal Facility Corporation Bonds MFC Debt other than Transportation 15.05 30.07 27.82 25.20 22.30 22.17 25.90 29.50 29.78 26.79 Coverage (1) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. (2) MFC 1992 Refunding series 12 2001 - USGS projects. (3) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, and changes in fund balances. 13,286,939 10,247,131 2012 2016 10,206,755 2011 13,543,397 11,929,099 2010 2015 13,557,828 2009 12,621,802 13,771,313 2008 2014 12,302,955 Revenue (1) 2007 Fiscal Year Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years 159 27,255,501 2013 1,795,000 695,000 1,560,000 1,560,000 1,500,000 1,445,000 1,400,000 1,055,000 1,005,000 1,000,000 Principal (2) 432,400 469,750 511,375 542,575 574,838 814,700 860,200 891,850 942,100 964,600 Interest Debt Service Requirements 2,227,400 1,164,750 2,071,375 2,102,575 2,074,838 2,259,700 2,260,200 1,946,850 1,947,100 1,964,600 Total 14.89 26.84 14.45 12.96 12.47 14.95 15.80 19.82 21.31 20.20 Coverage Municipal Facility Corporation Bonds As Parital Refunded with Pledged Revenue Bonds Transportation MFC Debt (1) Pledged revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, francise sales tax, licenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service requirements for transportation MFC bonds. Refunding Series 2012 excludes state revenue sharing income and sales tax (2) MFC revenue bond series 2004 Fourth Street, partial advance refunding pledged revenue series 2012 33,176,241 25,880,472 2012 2016 33,777,368 2011 31,266,313 35,708,503 2010 2015 38,586,144 2009 29,928,813 41,483,415 2008 2014 39,681,382 Revenue (1) 2007 Fiscal Year Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years 160 7,657,621 9,340,790 10,302,188 12,129,085 10,809,451 2012 2013 2014 2015 2016 130,000 125,000 120,000 120,000 120,000 115,000 Principal (3) 120,088 124,562 128,237 130,037 133,638 135,938 Interest Debt Service Requirements 250,088 249,562 248,237 250,037 253,638 250,938 Total Greater Arizona Development Authority Revenue Bonds (1) New Issue no trend information available, prior to fiscal year 2010 (2) Pledges revenues on the Greater Arizona Development Authority Bonds include the state revenue sharing. Less the debt service . (3) GADA infrastructure revenue bond series 2010A 7,169,310 Revenue (2) 2011 Fiscal Year (1) Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Six Fiscal Years 43.22 48.60 41.50 37.36 30.19 28.57 Coverage 161 69,391 70,643 2015 2016 3,472,652 5,669,894 * 5,399,899 4,906,294 4,620,811 4,481,137 4,481,137 3,767,194 3,767,194 3,767,194 (1) 53,244 * 52,509 51,809 47,363 48,371 42,317 37,629 37,100 39,934 38,119 Per Capita Personal Income 26.6 * 26.6 26.6 26.6 26.6 26.6 26.8 26.8 26.8 26.8 Median Age 90.6% * 90.6% 90.6% 90.6% 90.6% 90.6% 89.8% 89.8% 89.8% 89.8% Education Level - Percent High School Grad or Higher (*) Estimated (1) Reflects Coconino County Personal Income Sources: Population - Arizona Department of Administration--Employment and Population Statistics Personal Income - Economic Research Federal Reserve Bank of St. Louis for Coconino County Per Capita Income - Economic Research Federal Reserve Bank of St. Louis Median Age - 2010 US Census Education Level - 2010 US Census School Enrollment - National Center for Education Statistics Unemployment - Arizona Department of Administration - Office of Employment and Population Statistics 65,870 67,502 2013 2014 65,870 65,870 2011 2012 64,693 65,522 2009 2010 62,030 64,200 2007 2008 Population Year Personal Income (thousands of dollars) Schedule 18 City of Flagstaff Demographic and Economic Statistics Last Ten Fiscal Years 41.8% * 41.8% 41.8% 41.8% 41.8% 41.8% 39.4% 39.4% 39.4% 39.4% Education Level - Percent Bachelor's Degree or Higher 12,505 11,766 10,623 10,623 10,623 11,839 12,600 12,910 13,040 13,453 School Enrollment 6.18% 6.48% 6.90% 8.10% 9.20% 8.90% 7.70% 7.50% 4.60% 3.40% Unemployment Rate 162 55,170 2010 & 2000 U.S. Census Labor Force 1 2 3 4 5 6 7 8 9 10 10 11 12 13 14 15 16 17 18 Rank 2016 (2) 25.79% 5.10% 4.26% 3.99% 2.60% 2.35% 1.58% 1.14% 0.76% 0.51% 0.45% 0.44% 0.40% 0.40% 0.36% 0.34% 0.34% 0.28% 0.25% 0.24% Percentage of Total City Employment Source: (1) Arizona Department of Economic Security (2) Economic Collaborative of Northern Arizona (3) Includes part-time employees excluded from Sched. 20 (4) Dramatic reflects number of employees in 2007 vs. number of Full-time Equivalents in 2016. 14,228 2,815 (4) 2,350 2,200 1,436 1,294 872 630 421 279 250 240 220 219 200 189 (4) 188 152 140 133 Closed 2015 Northern Arizona University Flagstaff Medical Center W.L. Gore & Associates Flagstaff United School District Coconino County City of Flagstaff (3) Walmart Grand Canyon Railway SCA Tissue Dell Systems Nestle Purina PetCare Little America Hotel Guidance Center US Forest Service Coconino Community College North Country Healthcare Pepsi-Cola Bottling Peaks Senior Living Center Joy Cone Walgreens Distribution Center Total Employees Employer Schedule 19 City of Flagstaff Principal Employers Current Year and Nine Years Prior 30,822 Estimated 12,545 8 7 580 434 1 2 4 3 5 6 10 9 Rank 3,778 1,985 1,300 1,560 1,205 901 400 402 Employees 2007 (1) 40.70% 1.41% 1.88% 12.26% 6.44% 4.22% 5.06% 3.91% 2.92% 1.30% 1.30% Percentage of Total City Employment 163 811.69 876.18 47.14 98.23 40.56 80.25 61.60 10.50 6.50 - 58.50 20.88 16.75 52.25 21.75 15.75 43.13 68.82 37.25 79.00 62.60 10.00 6.50 - 174.00 101.75 31.00 27.63 26.50 164.00 100.75 27.00 87.39 13.50 2008 82.89 13.50 2007 906.52 53.77 99.69 41.06 81.75 68.10 10.50 6.50 - 57.50 24.88 16.75 181.00 101.75 31.00 29.63 89.14 13.50 2009 (1) 827.48 50.77 87.86 36.31 64.50 65.58 9.50 6.00 - 47.20 24.38 15.75 168.00 99.00 29.00 25.88 86.75 11.00 2010 (2) 825.33 50.77 86.86 36.31 62.50 63.58 9.50 6.00 23.50 41.00 22.88 13.25 168.00 92.00 26.50 25.18 86.50 11.00 2011 812.42 51.40 88.81 36.31 61.50 59.60 9.50 6.00 23.50 39.20 22.88 12.49 172.00 85.00 26.50 25.18 84.55 8.00 2012 802.50 51.40 84.88 34.97 61.50 58.50 9.50 6.00 24.00 39.20 21.88 12.49 171.00 85.00 26.00 24.18 85.00 7.00 2013 (1) City-wide reorganization affected distribution of employees. Customer Service moved from Water/Wastewater to Management Services. (2) In fiscal year 2011, the city began reporting the Housing Authority in the financial statements. Total Library Parks, recreation, and beautificatioin Highways and Streets Water and wastewater Environmental services Airport Stormwater Flagstaff Housing Authority Public Safety Police Fire Public Works Economic and physical development Building Planning Tourism Culture and recreation City Court General Government Management services Capital management Function/Program Schedule 20 City of Flagstaff Full-time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 799.04 51.40 86.03 35.52 62.00 55.43 9.50 5.50 22.00 41.50 20.88 12.93 169.00 85.00 25.00 24.35 86.00 7.00 2014 801.71 52.30 85.50 35.52 64.00 55.00 9.50 4.50 22.00 43.98 13.88 13.93 169.00 87.00 25.00 25.35 87.25 8.00 2015 814.07 53.43 90.13 33.02 66.00 56.25 9.50 4.50 21.60 44.98 14.88 13.93 167.00 88.00 25.50 26.35 91.00 8.00 2016 164 Calls dispatched to Police/Sheriff Calls dispatched to Fire Calls dispatched to Medical 75,791 12,364 9,960 4,973 13,123 1,625 8,913 3,374 764 1,173 1,210 Fuel Management Plan Assessment (Acres) Site Marking (Acres) Site Thinning (Acres) Prescription Burn (Acres) Police Felony reports Misdemeanor reports Domestive violence incidents Non-crime reports Accident reports 8,227 314 1,472 1,984 1,314 - 9,553 8,951 530 2007 Emergency incidents Fires incidents Other calls Inspections assigned Plan Reviews Fire Purchasing Credit card rebates received Court Criminal Filings Traffic filings Domestic Violence/Other filings Function/Program Schedule 21 City of Flagstaff Operating Indicators by Function/Program Last Ten Fiscal Years 73,364 11,907 - 3,978 13,413 1,573 11,043 3,322 400 178 902 1,070 7,616 267 1,573 1,981 1,284 - 11,659 10,665 744 2008 70,908 12,527 - 3,661 12,939 1,470 10,996 2,917 224 761 1,190 7,550 263 2,151 1,794 1,250 23,348 9,330 10,639 445 2009 61,175 11,011 - 3,073 12,293 1,953 9,480 2,776 294 376 551 6,668 247 1,906 572 401 21,677 9,326 13,471 468 2010 Fiscal Year 586 809 342 57,899 11,130 - 2,973 11,786 1,923 9,827 2,735 N/A* 7,274 175 2,378 1,174 528 31,878 8,531 12,010 370 2011 128 197 697 57,188 13,320 - 2,940 11,253 1,961 9,886 2,574 N/A* 7,438 213 2,226 1,468 535 33,923 8,857 9,217 547 2012 284 276 540 60,003 11,497 - 2,910 11,040 2,023 9,841 2,568 N/A* 8,023 185 2,298 1,411 559 34,395 8,695 8,340 477 2013 511 541 778 56,373 11,464 - 2,564 10,383 1,688 7,174 2,180 N/A* 8,730 177 2,532 1,340 512 48,128 8,375 7,726 468 2014 58,590 11,777 - 2,511 8,980 1,550 6,036 2,590 2,300 70 820 333 9,432 184 2,654 2,341 659 72,037 7,273 8,428 554 2015 62,228 13,565 - 2,769 9,553 1,541 6,660 2,985 1,500 555 700 650 12,775 168 742 2,217 639 94,873 6,924 8,190 1,357 2016 165 (1) (1) $ 66.86 643,174 789,621 $ 60.52 680,253 782,908 $ 25,278,055 $ 27,199,698 157,792 10,472 651,814 44,088 4,032 2008 $ 43.21 738,603 887,887 $ 31,498,803 $ 18,594,665 142,409 9,842 627,202 65,418 4,373 2009 $ 43.05 743,169 979,962 $ 9,314,074 $ 13,395,325 121,529 10,610 651,373 68,296 3,256 2010 $ $ $ 45.26 763,928 1,029,062 8,472,938 17,703,762 138,703 8,869 850,327 63,407 1,498 2011 (1) This informaition is gathered and reported on a calendar year basis versus a fiscal year basis for all other measurements * Records no longer tracked Sources: Various city departments Tourism Revenue Per Available Room (RevPar) Library Visits Circulation $ 38,895,496 $ 37,962,373 153,121 10,356 Refuse collection Refuse collected (Landfill tonnage) Recyclables collected (total tons) Community Development Residential Permit Valuation Commercial Permit Valuation 642,643 44,598 2,443 2007 Airport Fuel Flowage (Gallons Sold) Enplanements Streets Potholes repaired Function/Program Schedule 21 (continued) City of Flagstaff Operating Indicators by Function/Program Last Ten Fiscal Years $ $ $ 50.94 739,706 1,182,956 65,299,515 20,338,552 137,815 8,101 526,406 62,872 1,877 2012 $ $ $ 54.61 715,033 1,164,789 43,609,942 14,479,348 145,793 8,388 490,401 60,190 2,054 2013 $ $ $ 59.99 687,735 1,117,652 75,489,761 19,978,010 144,411 8,343 544,028 61,691 3,605 2014 $ 69.19 673,246 1,002,125 $ 61,522,426 $ 32,396,234 143,528 8,340 566,387 62,578 1,174 2015 $ 74.14 660,974 1,055,176 (1) (1) 143,639 12,191 603,382 69,485 1,437 2016 166 (1) In Fiscal Year 2008, transition made from street miles to lane miles. This more accurately reflects the level of service required to maintain the surfaces. (2) Database Correction Airport Fixed base operators Locally based aircraft Tiedowns Enclosed hangars Open hangars Water and wastewater Miles of sewer (2) Number of manholes Total active water accounts Average gallon water usage per household per month Highways and Streets Miles of streets, alleys, and sidewalks (1) Number of street lights Culture and recreation Number of developed parks Number of undeveloped parks Park acreage Flagstaff Urban Trail System - Miles Recreational Buildings Public Safety Police patrol units (Includes Motorcycle units) Number of fire hydrants Numer of fire stations Function/Program Schedule 22 City of Flagstaff Capital Asset Statistics by Function/Program Last Ten Fiscal Years 1 134 11 61 48 309 6,906 18,758 5,600 403 3,107 27 4 705 34 5 31 2,743 6 2007 1 134 11 61 48 265 7,107 18,849 5,456 690 3,201 26 4 712 48 6 34 3,148 6 2008 1 134 11 61 48 270 7,261 18,371 5,010 695 3,220 26 4 712 51 6 34 3,150 7 2009 1 120 14 61 48 270 7,261 19,042 5,123 813 3,350 26 4 712 51 6 35 3,143 7 2010 1 122 11 61 48 271 7,308 22,092 5,107 814 3,466 24 5 735 53 4 37 3,176 7 1 125 11 61 48 271 7,308 19,020 5,339 814 3,466 23 4 680 53 4 37 3,179 7 2012 Fiscal Year 2011 1 209 11 61 48 274 7,403 20,107 6,326 814 3,466 23 4 710 55 4 37 3,242 6 2013 1 134 11 61 48 274 7,403 19,961 5,022 844 3,466 23 4 710 55 4 37 3,242 6 2014 1 134 11 61 48 276 7,493 19,934 4,562 844 3,466 23 4 736 55 4 37 3,254 6 2015 1 132 12 61 36 276 7,493 20,717 3,901 844 3,466 23 5 741 59 4 39 3,254 6 2016 167 $ $ $ $ $ $ each wrongful act aggregate each accident $1000/comprehensive $5000/collision deductible each wrongful act aggregate each wrongful act aggregate each employee aggregate each offense aggregate 1,000,000 / each accident 1,000,000 / disease employee 1,000,000 / disease policy limit Statutory Money Orders & Counterfeit, 20,000,000 / general aggregate $ Aviation: General Liability Products/Completed Operations Personal Injury, Advertising & Malpractice Hangar Keepers Liability $ $ $ $ $ 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 / / / / / each occurrence aggregate aggregate each aircraft each occurrence Kidnap and Extortion Worldwide (some countries excluded) International Travel - Executive Assistance Credit, Debit or Charge Card forgery Forgery or Alteration 20,000,000 / each occurrence 10,000 retained limit (ded) (Excludes Airport, Housing Authority, Employment related practices, Failure to Supply Services, Mold, Terrorism, Asbestos, Lead, Condemnation, Sexual Abuse) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ / $25,000 deductible $25,000 deductible / $50,000 deductible / $25,000 deductible / 48 hours / / / / / / / / $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 deductible deductible deductible deductible deductible deductible deductible deductible 1,500,000 / Medical Assistance 250,000 Accidental death 250,000 Each Loss 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible $250,000 per item $1,000,000 aggregate 250,000 included included included 250,000 500,000 242,000 / building 122,700 / contents 5,000 / each building 222,844,488 included 10,000,000 15,000,000 2,500,000 Limit of Liability Crime: Blanket Public Employees and Treasurer $ Dishonesty Bond Including Faithful Performance of Duty Computer & Funds Transfer Fraud $ Theft, Disappearance, & Destruction (Inside and Outside) $ Fine Arts & exhibition floater City Hall, Visitor Center, Airport Terminal Bookmobile book collection Employee Hand Tools Computer Equipment and Peripherals Data and Media Contractors Equipment (actual cash value) Flood Zone A Properties Municipal Court Deductible Property Insurance: Blanket Buildings and Personal Property Boiler and Machinery Flood Zones B and C Earthquakes Business Income/Extra Expense Coverage $ Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employer's Liability Public Entity Management, Employee Benefits / / / / / / / / / / / / / 1,000,000 1,000,000 5,000,000 5,000,000 1,000,000 3,000,000 1,000,000 1,000,000 Retention 1,000,000 / each wrongful act 1,000,000 / aggregate 1,000,000 1,000,000 1,000,000 26,042,495 1,000,000 / per occurrence 2,000,000 / aggregate Limit of Liability $ $ $ $ $ $ $ $ * Liability Claims are Subject to a $75,000 Self Insurance Public Entity Cyber Liability $ (Claims Made Retro Date 6-1-09) $ ($5,000 deductible each wrongful act) Employer's Liability $ $ $ Worker's Compensation Public Entity Management Liability* (Claims Made Retro Date 6-1-95) Employment Practices Liability* (Claims Made Retro Date 6-1-95) Employee Benefits Liability* (Claims Made) Limited Abuse or Molestation Liability Auto Liability Auto Physical Damage Liability Insurance: General Liability* (Includes 2 skateboard parks, bike freestyle park, EMT's) Law Enforcement Liability* Coverage Schedule 23 as of 7/1/2016 City of Flagstaff Insurance Summary Effective July 1, 2015 to June 30, 2016 168 Photograph courtesy Tom Bean Photograph courtesy Tom Bean Photograph courtesy Tom Bean F E AT U R E D O P E N S PAC E P R O J EC T S : Observatory Mesa Picture Canyon Flagstaff Urban Trails System (FUTS) Frances Short Pond City of Flagstaff 211 W. Aspen Ave. Flagstaff, Arizona 86001 flagstaff.az.gov