City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2015 City Council: Mark Mitchell, Mayor Corey Woods, Vice Mayor Robin Arredondo-Savage Kolby Granville Lauren Kuby Joel Navarro David Schapira Administrative Staff: Andrew Ching, City Manager Presented by: Kenneth Jones, Deputy City Manager - Chief Financial Officer Renie Broderick, Internal Services Director Jerry Hart, CPA, Deputy Internal Services Director - Finance Karen Huffman, CPA, Controller 1 City of Tempe, Arizona 2 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting List of Principal Officials City Organizational Chart 7 12 13 14 FINANCIAL SECTION Independent Auditor’s Report Management’s Discussion and Analysis (required supplementary information) 15 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities 37 38 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - Transit Special Revenue Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Net Position - Fiduciary Fund Statement of Changes in Net Position - Fiduciary Fund 52 53 54 54 Notes to the Financial Statements 55 40 42 44 46 47 48 50 Required Supplementary Information: Schedules of Required Supplementary Information Schedule of Contributions- All Pension Funds Schedule of the Proportionate Share of the Net Pension Liability – ASRS Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS: Police Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS: Fire Schedule of Funding Progress- PSPRS: Other Post Employment Benefits 117 118 119 120 121 Notes to Required Supplementary Information 122 3 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona FINANCIAL SECTION (continued) Combining Fund Financial Statements: Non-Major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 126 130 Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows 135 136 137 Other Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual: General, Debt Service, Special Revenue, Capital Projects and Enterprise Fund Types General Obligation Debt Service Fund Special Assessment Debt Service Fund Performing Arts Fund Highway User Revenue Fund Community Development Fund Housing Assistance Fund Donations and Court Awards Fund Grants Fund Community Facilities District Fund Transit Capital Projects Fund Streets Capital Projects Fund Police Capital Projects Fund Fire Capital Projects Fund Storm Sewers Capital Projects Fund Parks Capital Projects Fund Rio Salado Capital Projects Fund Community Development Capital Projects Fund Signals Capital Projects Fund Community Facilities District Capital Projects Fund Water and Wastewater Fund Solid Waste Fund Golf Fund 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting) Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting) Fund Balances, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) S-1 S-2 165 166 S-3 169 S-4 170 Changes in Fund Balance, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) 4 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona STATISTICAL SECTION (continued) Revenue Capacity Taxable Sales and Percentage of Taxable Sales by Category - Last Ten Fiscal Years (cash basis) Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years General Property Tax Information Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Property Tax Rates - All Direct and Overlapping Governments - Last Ten Fiscal Years S-5 S-6 S-7 172 173 174 S-8 175 S-9 176 S-10 S-11 S-12 S-13 177 178 179 180 S-14 S-15 S-16 S-17 S-18 S-19 S-20 S-21 S-22 181 182 183 184 185 186 187 188 189 S-23 190 S-24 S-25 191 192 S-26 S-27 S-28 193 194 195 Property Tax Levies - All Direct and Overlapping Governments - Last Ten Fiscal Years Property Tax Levies and Collections - Last Ten Fiscal Years Principal Tax Payers, Property Tax - Current Year and Nine Years Prior Principal Tax Payers, Sales and Use Tax - Current Year and Nine Years Prior Debt Capacity Excise Tax Collections - Last Ten Fiscal Years Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt- Property Tax Supported Total Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information - Last Ten Fiscal Years Remaining General Obligation Bond Authorizations Pledged-Revenue Coverage - Last Ten Fiscal Years Pledged Revenue, Projected Debt Service and Estimated Coverage - Excise Tax Obligation (Excluding Transit Excise Tax Obligations) Pledged Revenue, Projected Debt Service and Estimated Coverage - Transit Excise Tax Obligations Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Prior Operating Information Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years Operating Indicators by Function/Program - Last Nine Fiscal Years Capital Asset Statistics by Function/Program - Last Nine Fiscal Years 5 City of Tempe, Arizona 6 This section provides general information on the government’s structure and information useful in assessing the City’s financial condition. Introductor y Section 196 CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 CITY MANAGER’S OFFICE December 11, 2015 To the Honorable Mayor, Members of the City Council and Citizens of the City of Tempe, Arizona: The Comprehensive Annual Financial Report, including the Independent Auditor’s Report, for the fiscal year ended June 30, 2015 is submitted in accordance with Article V of the City Charter for your review. Responsibility for the accuracy and completeness of the presented data, including all disclosures, rests with management. To the best of our knowledge and belief, this report is accurate in all material respects and is presented in a manner designed to fairly set forth the financial position and results of operations of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. This Comprehensive Annual Financial Report (CAFR) represents management's report to its governing body, constituents, legislative and oversight bodies, investors and creditors. Copies of this report will be sent to elected officials, City management personnel, bond rating agencies, nationally recognized municipal securities information repositories and other agencies that have expressed an interest in Tempe's financial condition. Copies of this financial report will also be placed in the City library and on the City’s web site at http://www.tempe.gov/accounting/ for use by the general public. Management is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft, or misuse and that adequate accounting data are compiled to allow for the preparation of the basic financial statements in conformity with generally accepted accounting principles (GAAP). The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the valuation of costs and benefits requires estimates and judgments by management. The accounting firm of Heinfeld, Meech & Co., P.C., an independent certified public accounting firm, performed the City’s annual financial statement audit. The auditor’s unmodified “clean” Independent Auditor’s Report on the financial statements is included in the financial section of this report. The City’s independent auditors also perform the Single Audit of the City's federal grant programs. The Single Audit Reporting Package is issued separately from this financial report and is available upon request. Generally Accepted Accounting Principles (GAAP) require 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 MD&A can be found immediately following the Independent Auditors’ Report. 7 CITY OF TEMPE PROFILE History - Tempe’s history dates back to 1867 when Mr. Charles T. Hayden, father of former U.S. Senator Carl Hayden, constructed a cable ferry on the then uncontrollable waters of the Salt River. In 1871, Mr. Hayden and four others organized the Hayden Milling operations and related agricultural enterprises. Soon after, the Town of Hayden’s Ferry was founded. The name of the town was changed from Hayden’s Ferry to Tempe in 1880 and was incorporated in 1894. Current Profile - The boundaries of Tempe encompass an area approximately 40.1 square miles with an estimated population of 169,000 residents as of the 2010 census. Tempe offers more than 330 days of sunshine each year with rainfall amounts of approximately 7 inches a year. The City is located in Maricopa County, Arizona and is bordered by the cities of Phoenix, Scottsdale, Mesa, Chandler and the Town of Guadalupe. Tempe is surrounded by five major freeways and is only minutes away from Phoenix Sky Harbor International Airport, making it the most accessible City in the metropolitan Phoenix area. Government and Organization - On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government. The Mayor is elected for four years and six Councilmembers are elected at large on a non-partisan ballot for staggered fouryear terms. The City Council appoints the City Manager who has full responsibility for carrying out Council policies and administering City operations. The City provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, community development and general administration. The Rio Salado Community Facilities District is a separate component unit of the City and facilitates the development around Tempe Town Lake. Budgetary Controls - The City maintains budgetary controls that are designed to ensure compliance with budgetary and legal provisions embodied in the annually appropriated operating and capital project budgets approved by the City Council. Activities of the General Fund, Special Revenue Funds, General Obligation Debt Service Fund, and Proprietary Funds are included in the annually appropriated operating budget. Projectlength budgets are developed for capital projects and appropriated annually in the Capital Projects Funds. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is at the city-wide level consisting of the total operating budget and the total capital projects budget, as adopted by the City Council. However, for budget administrative purposes, the City maintains budgeting controls at department appropriation levels. In addition to maintaining budgetary control via a formal appropriation, the City maintains an encumbrance accounting system. Encumbrances are made against appropriations upon the issuance of a purchase order. As part of the annual budgeting process, encumbrances outstanding at each fiscal year end are re-appropriated through City Council action in order to be included in the adopted budget of the following year. LOCAL ECONOMY The economy continues to gradually improve as the metro area recovers from the effects of the recession. With its access to the broad and diverse regional economic base, Tempe's economy is considered to be strong. The city's pipeline of new construction activity remains full, which is expected to contribute to the city's continued medium-term economic growth. Considerable progress was made during the year in development projects including most notably, the 1.9 million square foot office project (Marina Heights) anchored by State Farm Insurance; tenants began occupying the completed portions of this project this fall. Overall property valuation in the City has regained a considerable portion of the losses sustained during the downturn. Improving consumer confidence has provided a boost to taxable sales activity for the year. Additionally, the City’s unemployment rate, estimated at 5.1 % at the end of the fiscal year, remains below both the statewide (6.3%) and national (5.3%) averages. As a result, improvement was experienced in all major categories of revenue including sales taxes and property taxes as indicated below. 8 Sales Tax Growth continued in the local sales tax base across many categories including retail, utilities/communication, contracting, hotel/motel and restaurants. Total taxable sales increased by 10.0%. Retail taxable sales (comprising 50% of total taxable sales) grew by 6.9%. General Fund sales tax revenues decreased by $4.1 million (4.0%) for the year to $94.2 million. This decrease, though anticipated due to the June 30, 2014 expiration of the 0.2% temporary sales tax, was minimized due to the strong growth in taxable sales. Sales tax revenue represented 49.7% of total General Fund revenues for the year. State-Shared Revenue State-shared sales tax revenue ($14.8 million) increased by 5% compared to the prior year, reflecting increased taxable sales throughout the state and minimal impact of the U.S. Census. The 2010 Census counts are used in the distribution formula for state-shared revenues. As the City’s proportionate share of total state population continues to decline over time due to its landlocked status, the percentage of state-shared revenues allocated to the City also declines. Despite this decline in the percentage proportionate share, the City experienced an increase in state-shared income tax of $1.6 million (8.6%) due to the continuing growth in the pool of state income tax revenues shared with cities and towns. State shared income tax received during the fiscal year ($19.6 million) is from actual collections by the State for fiscal year 2012-13. Auto lieu tax ($6.2 million) increased by $0.2 million (2.7%) compared to the prior year, reflective of continuing strong auto sales. These state-shared revenues combined represented about 21.0% of General Fund revenue for the year. Property Tax Property tax revenues grew by $0.7 million (4.4%) to $17.2 million and by $0.9 million (3.6%) to $24.4 million over the prior year in the General Fund and General Obligation Debt Service Fund, respectively. Again, the modest increases are reflective of the property tax revenue stabilization policy recently implemented by the City to mitigate the impact of the decline in property valuation due to the recession. This stabilization has ensured the City’s ability to service currently outstanding debt and maintain basic infrastructure. Property tax comprised approximately 9.0% of General Fund revenues for the year. Though the economy has continued to provide the City with financial challenges, we expect conditions to continue improving over the long-term. Through sound management of resources and continued focus on long-range financial planning, the City will continue to adapt to changing conditions and be on a strong foundation for the future. LONG-TERM FINANCIAL PLANNING The City prepares a five-year, comprehensive long-range financial forecast for each of its major operating funds in the fall and spring of each fiscal year. In addition, the city annually updates the debt management plan. These forecasts are critical to identifying and establishing the budgetary parameters that guide management and policy makers in the budget allocation process. The latest forecast projects continuing growth in the sales tax, state shared, and property tax revenues as reflected earlier. This is due to continued recovery in both the local and state economies. However, Tempe’s economy continues to outperform the forecasts for state and regional growth. We are projecting that Tempe’s retail and development activity will continue to outperform our surrounding cities for the near term. Overall, our five-year forecast for local revenues is better than our spring projections. In particular, construction sales tax collections continued at a very strong rate throughout the fiscal year 2014/15 (principally due the Marina Heights development), easing the adjustment to the expiration of the temporary sales tax. Improvement in local taxable sales activity as well as other local taxes is expected to offset reduced tax collection related to the decelerating construction activity associated with the nearing completion of Marina Heights. 9 CITY COUNCIL STRATEGIC PRIORITIES The City Council strategic priorities were reviewed and updated after a series of open meetings to discuss, identify and prioritize their collective vision for the future of Tempe. The resulting five priorities provide the framework to align our top strategic priorities through city staff in creating goals that support the City Council’s vision and achieve operational and sustainable accountability. This means continually finding ways to transform our strategic priorities into strategies that guide the development of the budget, allocation of resources and citywide departmental performance goals in getting the most important things accomplished. The following represent the priorities: 1. Ensure safe and secure community 2. Develop and maintain strong community connection 3. Enhance quality of life for all Tempe residents and workers 4. Implement sustainable growth and development strategies 5. Maintain long-term financial stability and vitality The overarching intention is to delineate long-range goals, formulate a cohesive strategy for each of the defined areas and develop departmental action plans to advance the City toward those strategic goals. MAJOR INITIATIVES During the year, the City embarked on a new planning effort to help guide future development decision-making. The City was divided up into eight distinct “character areas” for the purpose of discovering what residents value most about their area, what they would like to see improved and what would make their life more livable. The City is looking at Light Rail Station areas, streetscapes, bike paths, commercial corners, housing options, public transit, parks, historic preservation and much more. The planning process for each area takes about a year and produces a plan that is approved by the Development Review Commission and the Tempe City Council. For 2015-16, the City is working on Apache (Character Area 4) and Alameda (CA5). Kiwanis / The Lakes (CA7) and Corona / South Tempe (CA8) were completed in 2014. A Character Area Plan is a way of conveying the vision and goals of an area to create positive change. The City’s Economic Development team can refer to the plan to see what kinds of businesses would be most appreciated in an area. City Planners can refer to this when working with businesses and developers to help guide landscape treatments and housing options, or when creating new bike paths, planning public art or designing streetscapes. During the budget process, City staff can look to these plans to see where residents most want city amenities. The City’s Development Review Commission may also consult Character Area Plans before making decisions and making recommendations. The plan cannot supersede the General Plan, Zoning & Development Code or existing state and city laws. The State of Arizona enacted a new law during the spring 2013 legislative session mandating that the Department of Revenue (DOR) would be responsible for all privilege tax licensing, collection, and auditing in the state beginning January 1, 2015. As a result of extensive discussions between state agencies, cities and the League of Arizona Cities & Towns, the start date for administration of transaction privilege tax for the 18 selfcollecting cities by the DOR is not expected to occur prior to July 1, 2016. This is to allow time for the computer system changes at DOR required to handle the necessary level of detail reporting for the additional cities. Specifically, DOR will be collecting and reporting by separate business location with detailed tax data including separately stated gross receipts by classification, and itemized deductions claimed. While the DOR currently performs these services for the majority of cities/towns in the state, approximately eighteen of the largest jurisdictions (including the cities of Phoenix, Tucson, Mesa, Scottsdale, Chandler, and Tempe) in the state provide these services directly to taxpayers located within their boundaries. The intent of the legislation is to streamline the tax reporting and remitting process for taxpayers throughout the state without any loss of revenue and tax data for each of the jurisdictions. The City is unable to estimate the potential impact of the change at this time. Construction continued during the fiscal year on the replacement of the Tempe Town Lake downstream dam. The original dam, consisting of four rubber bladders constructed over 10 years ago, experienced a rupture in one of the bladders in July of 2010. All four bladders were replaced under an agreement with the manufacturer that required the dam to be replaced by December 31, 2015. The new structure will feature steel-hinged crest gates. Replacement of the dam is critical to continuing economic development of the area around the lake. The total 10 11 12 City of Tempe, Arizona List of Principal Officials City Council Mark Mitchell, Mayor Corey Woods, Vice Mayor Robin Arredondo-Savage Kolby Granville Lauren Kuby Joel Navarro David Schapira Administrative Staff For the Fiscal Year Ended June 30, 2015 Andrew Ching, City Manager Ken Jones, Deputy City Manager-Chief Financial Officer Steven Methvin, Deputy City Manager-Chief Operating Officer Tom Ryff, Police Gregory Ruiz, Fire Shelley Hearn, Community Services Don Bessler, Public Works David Nakagawara, Community Development Naomi Farrell, Human Services MaryAnne Majestic, Municipal Court Judith R. Baumann, City Attorney Barbara Blue, Internal Audit Office Cecilia Velasco-Robles, Municipal Budget Office Brigitta Kuiper, City Clerk and Elections Renie Broderick, Internal Services 13 City Organizational Chart Residents of Tempe Mayor and City Council City Attorney City Manager City Clerk City Court Community Relations Economic Development Government Relations Mayor/Council Staff/311 Deputy City Manager, Chief Operating Officer Deputy City Manager, Chief Financial Officer Internal Audit Office Community Development Community Services Human Services Development Services Arts, Cultural Services and Library Services Community Resources Planning Recreation Diversity Social Services Municipal Budget Office Public Works Fire Medical Rescue Police Construction Management/ Engineering Emergency/ Medical Services Field Operations Fire Prevention Investigations/ Organizational Services Homeland Security/ Special Operations Support Services Transit/ Transportation Water Utilities Support Services/ Personnel Safety Training/ Professional Development Assistant City M 14 Operations Internal Services Finance Human Resources Information Technology This section contains the independent auditor’s report, management’s discussion and analysis, and basic financial statements. Also included are financial statements for individual funds and a component unit for which data is not provided separately in the basic financial statements, and other useful supplementary information. Financial Section 197 3033 N. Central Ave., Suite 300 Phoenix, Arizona 85012 Tel (602) 277-9449 Fax (602) 277-9297 INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the City Council City of Tempe, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Tempe, Arizona (the City), as of and for the year ended June 30, 2015, 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. Auditor’s 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 auditor’s 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 entity’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 entity’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. 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 Tempe, Arizona, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons for the General Fund and the Transit Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com 15 Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, for the year ended June 30, 2015, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and schedules of funding progress for other postemployment benefits as listed in the table of contents, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Combining Fund Financial Statements, Other Supplementary Information, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining Fund Financial Statements and Other Supplementary Information 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 Combining Fund Financial Statements and Other Supplementary Information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section 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 them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2015, on our consideration of City of Tempe, 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 results of that testing, and not to provide an opinion on the 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 City of Tempe, Arizona’s internal control over financial reporting and compliance. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 11, 2015 16 Internal Services Department MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Tempe’s (the City) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2015. Readers are encouraged to consider the information presented here in conjunction with additional information that has been furnished in the letter of transmittal. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $874.6 million (net position). Of this amount, $71.8 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net position decreased by $7.2 million during the fiscal year compared to an increase of $9.4 million in the prior year. The governmental activities experienced a decrease in net position of $10.5 million compared to an increase of $1.4 million in the prior year and the business-type activities experienced an increase of $3.3 million compared to an increase of $8.1 million in the prior year. • For the fiscal year ended June 30, 2015, the City’s governmental revenues overall increased by $5.1 million. Even though there was a decrease in operating grants and contributions of $4.9 million, this was offset by an increase of $3.4 million in charges for services, $1.3 million in capital grants and contributions, $2.4 million in intergovernmental revenue, unrestricted, $1.4 million in property taxes as well as an increase of $1.5 million in the gain on sale of capital assets category. Expenses increased by $17.4 million. The increase in expenses was primarily in the area of the Police, Fire, Public Works and the Community Development functions. • At June 30, 2015, the City’s governmental funds reported combined ending fund balances of $200.5 million. Approximately 58.9% of this total amount ($118.1 million) is for spending at the government’s discretion (committed, assigned, or unassigned). • At June 30, 2015, total fund balance for the General Fund was $83.5 million, which represents an increase of $8.8 million over the prior year’s fund balance as revenues continued to exceed expenditures. Although revenues only increased by a modest $0.7 million, related expenditures decreased by $2.4 million. The increase in prior year fund balance was $13.3 million. A factor which contributed to the decrease in the net change in fund balance was transfers in decreased by $4.9 million while transfers out increased by $3.1 million. • At June 30, 2015, the City’s enterprise funds reported combined total net position of $232.8 million, and total unrestricted net position of $90.6 million. $96.5 million of the unrestricted net position was in the Water and Wastewater Fund. • At June 30, 2015, the total long-term obligations of the City increased by $15.4 million due primarily to the net increase in pension liabilities. 17 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 are comprised of three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains required supplementary information and other supplementary 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, liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not 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 current 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 related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. Both of the government-wide statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include police, fire, community services, public works, community development, human services, municipal court, mayor and council, city manager, city attorney, internal audit office, municipal budget office, city clerk and elections, and internal services. The business-type activities of the City include water and wastewater, solid waste, and golf operations. Included within the government-wide financial statements are the operations of the Rio Salado Community Facilities District. Although legally separate from the City, this component unit is blended with the primary government (the City) because of its governance or financial relationships with the City. 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 financerelated legal requirements. All of the funds of the City can be divided into the following three categories: governmental, proprietary, and fiduciary. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Most of the City’s basic services are reported in governmental funds. These statements, however, focus on near-term inflows and outflows of spendable resources and spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. 18 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 funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Other than the General Fund, the City maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General Fund, Transit Special Revenue Fund, General Obligation Debt Service Fund, Special Assessment Debt Service Fund and the Transit Capital Projects Fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for the General, Special Revenue, Debt Service, and Proprietary Funds along with a Capital Improvement Program Budget for the Capital Projects Funds. The legal level of budgetary control is at the citywide level (incorporating both the operating and capital budgets). Budgetary comparison statements have been provided in the basic financial statements for the General and Transit Special Revenue Funds to demonstrate compliance with the budget. Budgetary comparison schedules for other Non-major Special Revenue, Debt Service, Capital Projects, and Enterprise Funds are included in Other Supplementary Information. Proprietary funds. Proprietary funds are generally used to account for services provided to customers to whom the City charges user fees that are designed to fully recover the cost of providing the service. Proprietary fund statements 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 functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water and wastewater, solid waste and golf course operations. All enterprise funds are considered to be major funds of the City. • Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal service funds to account for its employee and retiree health insurance programs, its workers compensation claims, and its risk management services including general liability and property liability claims. 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 funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The City uses a fiduciary fund to account for other post-employment benefits provided to retirees. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. 19 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. COMBINING STATEMENTS The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the notes to the financial statements. GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Net position- June 30, 2015 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ Deferred outflows of resources Deferred charge on refunding Deferred outflow from pensions Total deferred outflows of resources Liabilities Long-term liabilities Other liabilities Total liabilities Deferred inflows of resources Deferred inflow from pensions Total deferred inflows of resources Net position Net Investment in capital assets Restricted Unrestricted Total net position $ 596,318,121 852,123,016 1,448,441,137 266,561,764 348,522,776 615,084,540 Total $ 862,879,885 1,200,645,792 2,063,525,677 7,921,287 55,736,537 63,657,824 7,629,226 2,707,177 10,336,403 15,550,513 58,443,714 73,994,227 752,719,932 89,059,027 841,778,959 348,852,731 38,578,934 387,431,665 1,101,572,663 127,637,961 1,229,210,624 28,478,077 28,478,077 5,203,286 5,203,286 33,681,363 33,681,363 519,040,090 141,565,366 (18,763,531) 641,841,925 142,208,059 90,577,933 232,785,992 661,248,149 141,565,366 71,814,402 874,627,917 20 $ $ Net position- June 30, 2014 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ Deferred outflows of resources Deferred charge on refunding Total deferred outflows of resources 569,046,890 845,731,031 1,414,777,921 263,602,102 352,748,536 616,350,638 Total $ 832,648,992 1,198,479,567 2,031,128,559 8,189,289 8,189,289 5,098,378 5,098,378 13,287,667 13,287,667 Liabilities Long-term liabilities Other liabilities Total liabilities 388,539,260 111,158,243 499,697,503 323,813,515 40,937,852 364,751,367 712,352,775 152,096,095 864,448,870 Net position Net Investment in capital assets Restricted Unrestricted Total net position 537,940,057 148,338,902 236,990,748 923,269,707 137,971,614 118,726,035 256,697,649 675,911,671 148,338,902 355,716,783 $ 1,179,967,356 $ $ ANALYSIS OF NET POSITION As noted earlier, net position may serve as a useful indicator of a government’s financial position. With the current year implementation of Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, the Net Position- June 30, 2015 table presents a new line item of deferred outflows of resources called deferred outflow from pensions along with a new category of deferred inflows of resources containing a deferred inflow from pensions. These were not existing line items as of June 30, 2014 and therefore do not have comparable data. As the beginning Net Position balance for June 30, 2015 was restated, the following analysis restates the Net Position components for comparison purposes. For the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $874.6 million and $881.8 million as of June 30, 2015 and 2014, respectively. The largest portion of the City’s net position reflects its investment in capital assets (e.g. land, buildings, infrastructure, improvements, machinery and equipment and construction in progress) less any related debt used to acquire those assets. The net position invested in capital assets, net of related debt were $661.2 million and $675.9 million at June 30, 2015 and 2014, respectively. These totals represent 75.6% and 76.7% of total net position at June 30, 2015 and 2014, respectively. 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. 21 An additional portion of the City’s net position represents resources that are subject to external restriction on their usage. The net position subject to external restrictions was $141.6 million (16.2% of total net position) at June 30, 2015. At June 30, 2014 restricted net position was $148.3 million (16.8% of total net position). With the implementation of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, new categories of net position were established and existing ones redefined. One new category represents nonspendable items which are inventories, prepaid items, and notes receivable. This category is considered unrestricted. The remaining balance of net position is also unrestricted (committed, assigned, and unassigned), and may be used to meet the government’s ongoing obligations to citizens and creditors. The total balance of unrestricted net position was $71.8 million (8.2% of total net position) and $57.6 million (6.5% of total net position) at June 30, 2015 and 2014, respectively. At the end of each fiscal year, the City reported $18.7 million in negative unrestricted net position in the governmental funds but was able to report positive balances in the other two categories. The business-type activities as a whole reported positive fund balances in all applicable categories. ANALYSIS OF CHANGE IN NET POSITION The City’s net position decreased by $7.2 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. The Changes in Net Position- June 30, 2015, “net position at the beginning of the year, restated” does not agree to the prior year Changes in Net Position- June 30, 2014 “net position at end of year” due to the implementation of GASB Statement No. 68 and No. 71. In addition, in the current year the City reorganized its structure. A portion of Community Services along with the Diversity office were combined into a new department called Human Services. Economic Development was moved into the City Manager’s department. The Budget division of the Finance and Technology department became the Municipal Budget Office and the Finance and Technology department along with the Human Resources Department were combined into a new department called Internal Services. The expenditures in the Changes in Net Position- June 30, 2014 table have been reallocated according to the new structure for comparison purposes. 22 Changes in Net Position- June 30, 2015 Governmental Activities Business-type Activities $ $ Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes Intergovernmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues 53,082,399 19,784,859 7,258,243 95,016,093 - $ 148,098,492 19,784,859 7,258,243 147,787,315 40,571,933 41,457,646 2,933,239 889,594 5,042,875 2,170,917 320,979,020 488,477 142,914 247,296 95,894,780 147,787,315 40,571,933 41,457,646 2,933,239 1,378,071 5,185,789 2,418,213 416,873,800 92,214,451 32,914,994 29,239,583 107,411,254 18,832,177 13,374,117 4,028,068 330,042 7,045,783 3,712,245 433,339 415,774 751,331 6,403,407 1,955,520 12,882,924 331,945,009 (10,965,989) 73,548,319 15,868,498 2,685,634 92,102,451 3,792,329 92,214,451 32,914,994 29,239,583 107,411,254 18,832,177 13,374,117 4,028,068 330,042 7,045,783 3,712,245 433,339 415,774 751,331 6,403,407 1,955,520 12,882,924 73,548,319 15,868,498 2,685,634 424,047,460 (7,173,660) 479,071 (10,486,918) 652,328,843 $ 641,841,925 (479,071) 3,313,258 229,472,734 $ 232,785,992 (7,173,660) 881,801,577 $ 874,627,917 Expenses Police Fire Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Water/wastewater Solid waste Golf Total expenses Increase(decrease) in net position before transfers Transfers Change in net position Net position at beginning of year, restated Net position at end of year 23 Changes in Net Position- June 30, 2014 Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes Intergovernmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues Governmental Activities Business-type Activities $ $ 49,723,023 24,668,792 5,933,017 98,051,546 - Total $ 147,774,569 24,668,792 5,933,017 147,815,825 38,155,275 40,074,441 3,310,940 725,099 4,114,557 657,224 315,178,193 436,821 1,643,570 52,947 100,184,884 147,815,825 38,155,275 40,074,441 3,310,940 1,161,920 5,758,127 710,171 415,363,077 78,658,426 31,103,237 29,363,339 102,892,245 16,981,026 13,716,960 4,288,787 408,196 7,220,482 2,844,965 392,629 284,816 844,934 7,058,541 1,331,649 17,153,207 314,543,439 634,754 73,208,373 15,379,174 2,799,922 91,387,469 8,797,415 78,658,426 31,103,237 29,363,339 102,892,245 16,981,026 13,716,960 4,288,787 408,196 7,220,482 2,844,965 392,629 284,816 844,934 7,058,541 1,331,649 17,153,207 73,208,373 15,379,174 2,799,922 405,930,908 9,432,169 746,902 1,381,656 921,888,051 $ 923,269,707 (746,902) 8,050,513 248,647,136 $ 256,697,649 9,432,169 1,170,535,187 $ 1,179,967,356 Expenses Police Fire Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit/consulting Municipal budget office City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Water/wastewater Solid waste Golf Total expenses Increase in net position before transfers Transfers Change in net position Net position at beginning of year, restated Net position at end of year 24 Governmental activities. The governmental net position decreased by $10.5 million for the fiscal year ended June 30, 2015. The fiscal year ended June 30, 2014 had a $1.4 million increase in net position. Overall revenues increased by $5.8 million while expenditures increased by $17.4 million. The key factors contributing to the change in net position compared to the prior year are as follows: • The largest component contributing to the decrease in net position was an increase in expenses for Police of $13.6 million (17.2%). This is due primarily to the implementation of GASB Statement No. 68 and No. 71. The net current year pension expense for Police was $9.2 million. In addition, Public Works increased expenses by $4.5 million (4.4%). Again, this was due to the implementation of the pension reporting along with the moderate increase in employee compensation. • Interest on long-term debt decreased by $4.2 million (24.9%) due primarily to the general obligation refunding that occurred in late Fiscal Year 2014 which contributed to Fiscal Year 2015 savings along with the general obligation refunding which occurred in early Fiscal Year 2015. • The increase in expenses was offset with an increase in charges for services of $3.4 million (6.8%) over prior year. The increase was due to factors such as an increase in planning and engineering fees and recreational revenue. • Intergovernmental revenue, unrestricted increased in the amount of $2.4 million (6.3%) due to an increase in state shared income tax. • Property taxes increased by $1.4 million (3.5%) due to the continuation of the property tax stabilization policy implemented by the City in Fiscal Year 2012. The following charts, over the next few pages, illustrate the City’s governmental expenses and program revenues by function and its revenues by source for the current fiscal year: 25 A comparison of expenses by function and the percentage of Fiscal Year Ended total expenses for the largest June 30, 2015 June 30, 2014 functions are presented in the chart. Total expenses for the Public works $107,411,254 32.4% $102,892,245 32.7% City’s governmental activities Police 92,214,451 27.8 78,658,426 25.0 increased from prior year by Fire 32,914,994 9.9 31,103,237 9.9 $17.4 million (5.5%). Within Community services 29,239,583 8.8 29,363,339 9.3 the functions, there was an 18,832,177 5.7 16,981,026 5.4 increase in expenses for Community development Police, Fire, Public Works and Community Development due to employee compensation along with the changes resulting from the pension expenses associated with the implementation of GASB No. 68 and No. 71. The increases in expenses were offset with a decrease in interest on long-term debt. 26 General revenues such as sales taxes, property taxes, intergovernmental revenue, unrestricted and other excise taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, a comparison of the largest general revenues and their percentage of total revenues (excluding transfers) is presented below. As stated previously, property taxes and intergovernmental revenue, unrestricted each displayed growth by increasing by $1.4 million and $2.4 million, respectively. In addition, the Fiscal Year Ended category of June 30, 2015 June 30, 2014 Miscellaneous/ Other also Sales taxes $147,787,315 46.1% $147,815,825 46.9% increased due Property taxes 41,457,646 12.9 40,074,441 12.7 to the $1.5 Intergovernmental revenue, unrestricted 40,571,933 12.6 38,155,275 12.1 million increase Miscellaneous/Other 7,213,794 2.2 4,771,781 1.5 in the sale of Franchise taxes 2,933,239 0.9 3,310,940 1.1 land. Business-type activities. Business-type activities increased the City’s net position by $3.3 million for the year ended June 30, 2015 compared to an increase of $8.1 million for the year ended June 30, 2014. The prior year increase was derived primarily from water and wastewater rate increases which resulted in charges for services increasing in the Water and Wastewater Fund. In the current year, water consumption was down due to more annual rain than usual along with the City’s continuing promotion of its water conservation program. 27 For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2015 Charges for services Unrestricted investment earnings/ other Total Water and Wastewater Solid Waste Golf Total $ 78,043,384 $ 14,216,743 $2,755,966 $ 95,016,093 714,483 $ 78,757,867 113,172 $ 14,329,915 51,032 $2,806,998 878,687 $ 95,894,780 Water and Wastewater Solid Waste Golf Total $ 80,989,551 $ 14,400,476 $2,661,519 $ 98,051,546 2,059,645 $ 83,049,196 68,702 $ 14,469,178 4,991 $2,666,510 2,133,338 $100,184,884 For the Year Ended June 30, 2014 Charges for services Unrestricted investment earnings/ other Total As shown in the Analysis of Change in Net Position schedules presented previously, the largest of the City’s business-type activities, Water and Wastewater, had expenses of $73.5 million for the fiscal year, followed by Solid Waste with $15.9 million and Golf with $2.7 million. Expenses for the Water and Wastewater Fund remained fairly consistent increasing minimally by $0.3 million (0.5%). The current year charges for services however were reduced by $2.9 million (3.6%). Thus, bringing the change in net position from $9.4 million in fiscal year 2014 to $4.7 million in Fiscal Year 2015. The Solid Waste Fund incurred a moderate increase of expenses of $0.5 million (3.2%) while charges for services decreased by less than $0.2 million (1.3%). As a result, the change in net position increased from a deficit of $1.3 million in prior year to a deficit of $1.6 million in the current year. The Golf Fund improved between years. Charges for services increased by $0.1 million (3.5%) while operating expenses decreased by approximately $0.1 million (4.2%). This resulted in an increase in the net position of $0.2 million from a prior year deficit balance of less than $0.1 million. 28 FUND STATEMENTS FINANCIAL ANALYSIS 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. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. Fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. The amount that represents available resources for spending is the total of Committed, Assigned, and Unassigned. The unrestricted fund balance, less the non-spendable portion, may serve as a useful measure of a government’s net resources available for spending at each fiscal year end. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $200.5 million, an increase of $17.1 million from the prior year. Approximately $118.1 million of this total amount pertained to the categories of committed, assigned or unassigned, all of which is available for spending at the City’s discretion. The combined categories reflect an increase of 15.1 million over the prior year’s combined balance of $103.1 million. The increase is due primarily to a combination of moderate increases in property taxes, state sales taxes, state income taxes, charges for services and fines and forfeitures. The remainder of fund balance contains two components: Non-spendable and Restricted. Non-spendable fund balance includes amounts that cannot be spent as they are not in a spendable form. At June 30, 2015, the fund balance included amounts for inventories ($1.6 million) and prepaid items ($0.7 million). Restricted fund balances are amounts that have externally (outside the City) enforceable limitations or enabling legislation (City Charter).The restricted portion of fund balance consists primarily of amounts for debt service ($21.1 million), public works ($48.8 million) and community development ($9.3 million). Revenues for governmental functions overall totaled $325.7 million in the fiscal year ended June 30, 2015, which represents an increase of $8.9 million (2.8%) from the fiscal year ended June 30, 2014. This change is primarily due to the increase in the following areas: $1.6 million (4.0%) in property taxes, $1.6 million (6.9%) in state sales taxes, $1.6 million (8.6%) in state income taxes, $1.1 million in charges for services (2.8%) and $1.1 million in fines and forfeitures (12.1%). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $83.5 million; the fund did not have any restricted fund balance. As a measure of the General Fund’s liquidity, it may be useful to compare fund balances to total fund revenues. The total fund balance in the City’s General Fund experienced an increase in the current year of $8.8 million. In the prior year the net increase was $13.3 million. Total revenues increased by $0.7 million (0.4%) from the prior year. Due to the expiration of the temporary 0.2% sales tax, sales taxes decreased by $4.1 million (4.1%). The decrease in sales taxes was offset by increases in other taxes such as property taxes of $0.7 million (0.4%), state sales taxes of $0.7 million (0.5%), state income taxes of $1.6 million (8.6%), and charges for services of $0.7 million (4.1%), all of which was due to the natural growth in the economy. Adding Fiscal Year Ended to the net favorable change in June 30, 2015 June 30, 2014 fund balances, overall $ 189,202,478 $ 188,451,965 expenditures decreased by Revenues $2.4 million (1.4%). Total fund balance 83,547,447 44.2 % 74,754,916 39.7 % Unassigned fund balance 73,879,480 39.0 63,878,841 33.9 29 The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues continued to increase in the current year by a net $3.1 million. Transit sales tax revenues increased by $2.6 million. The fund balance totaled $37.8 million at June 30, 2015, compared to a $31.1 million fund balance at June 30, 2014. The fund balance was able to grow by $6.7 million compared to last year’s growth of $3.5 million due to the increase in revenues (predominately from sales taxes) along with a slight decrease in expenditures of $0.3 million. In addition, in the current year there was $1.3 million in proceeds from the sale of land. The General Obligation Debt Service Fund accounts for the accumulation of resources for and payments of general obligation debt. Total fund balance (which other than the $2.6 million assigned, is restricted for general obligation debt service payments) decreased from $35.5 million at June 30, 2014 to $23.6 million at June 30, 2015. The decrease in fund balance was due primarily to a planned payoff of the 2014A General Obligation payment of $11.7 million. There was a modest increase in property tax revenues ($0.9 million), which was offset by an increase in expenditures of $14.1 million. The additional expenditures were due not only to the 2014A General obligation debt service payment but also the debt service on a current refunding. See the Debt Administration section for further analysis. The total debt service fund balance will be used for future debt service payments consistent with the City’s Debt Management Plan. The Special Assessment Debt Service Fund accounts for the accumulation of resources for and payments of special assessment debt to which the City acts as a trustee for the established improvement districts. Total fund balance (restricted for special assessment debt service payments) maintained at $0.1 million for fiscal year June 30, 2014 and fiscal year June 30, 2015. Improvement District 175 made its final payment in the current fiscal year leaving only two remaining improvement districts with debt outstanding (refer to Note 9 of the Notes to the Financial Statements). The Transit Capital Projects Fund accounts for the acquisition of buses, streetscapes, the East Valley Bus Maintenance Facility upgrades and other traffic flow improvements. Total fund balance had a $2.0 million increase from $14.1 million at June 30, 2014 to $16.1 million at June 30, 2015. The net increase was similar to the prior year net increase of $2.2 million. Federal grants increased in the current year by $2.9 million along with an increase in Transfers from the Transit Special Revenue Fund of $1.6 million which covered the increase in expenditures of $4.2 million. 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 indicated, the total net positions for the proprietary funds were as follows: Fiscal Year Ended June 30, 2015 June 30, 2014, restated Water and wastewater fund Solid waste fund Golf fund Internal service funds 30 $ 230,826,449 1,716,145 243,398 3,740,168 $226,091,894 3,356,679 24,161 3,312,430 The Water and Wastewater Fund accounts for the provision of water and sewer services to the City and the adjoining Town of Guadalupe. The fund experienced an increase in total net position of $4.7 million (2.1%) for the fiscal year ended June 30, 2015 versus an increase in net position of $9.4 million (4.0%) for the fiscal year ended June 30, 2014. As mentioned earlier, the demand for water services decreased in the current year resulting in a decrease in charges for services by $2.9 million (3.6%) while certain costs such as employee compensation increased resulting in operating costs increasing by $1.0 million (1.9%). The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. Revenues slightly decreased in the current year by less than $0.2 million (1.3%) while operating expenses increased by $0.5 million (3.2%) due to the increase in employee compensation. This resulted in the change in net position growing from a decrease of $1.3 million (11.2%) in the prior fiscal year to a decrease of $1.6 million (48.9%) in net position in the current year. The increase in the percentage of the deficit in comparison to the fund balance was due to the restatement of the beginning fund balance in the current year changing it from $10.2 million to $3.4 million due to the implementation of GASB Statement No. 68 and No. 71. The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund recognized a $0.2 million (907.4%) increase in total net position for fiscal year ending June 30, 2015 as compared to the prior year’s reduction of less than $0.1 million (6.6%). In an effort to stabilize the fund, an improved operating model has been implemented at the golf courses. As a result, charges for services increased by approximately $0.1 million (3.5%) while operating expenses decreased by a little over $0.1 million (4.2%). The Internal Service Funds account for the risk management, worker’s compensation and health insurance activities of the City. The $0.4 million increase in net position is due primarily to contributions exceeding operating expenses in the Health fund. FIDUCIARY FUND The Other Post-Employment Benefits Trust Fund accounts for activities of the Other Post-Employment Benefits Plan, which accumulates resources for health care benefit payments to qualified retirees. The increase of $1.0 million in net position was due primarily to the current year contribution of $0.7 million and investment income of $0.3 million. BUDGET HIGHLIGHTS The City’s final General Fund expenditure budget of $182.3 million differs from the original budget of $182.6 million due to budget transfers to other funds. During the year, actual revenues were greater than budgetary estimates by $14.6 million (8.3% of total budgeted revenue) in the General Fund. This is due primarily to the increase in taxes and charges for services. Actual expenditures were less than budgetary estimates by $5.0 million (2.8% of final budgetary estimates) in the General Fund. This positive variance was attributable to continuing cost minimizing efforts despite the improvement in the economy. 31 CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2015 were $1.2 billion (net of accumulated depreciation). 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 fiscal year was $2.2 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2015 and 2014, respectively. Capital Assets, Net of Depreciation- June 30, 2015 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 195,544,647 359,460,282 127,177,711 45,493,934 34,841,269 $ 852,123,016 Business-type Activities $ 6,693,377 26,608,188 168,947,571 123,572,197 12,978,476 9,722,969 $ 348,522,778 Total $ 96,298,550 222,152,835 528,407,853 250,749,908 58,472,410 44,564,238 $ 1,200,645,794 Capital Assets, Net of Depreciation- June 30, 2014 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 206,591,618 368,559,197 130,453,884 43,919,299 6,601,860 $ 845,731,031 Business-type Activities $ 6,693,377 27,871,635 173,671,445 130,544,677 13,556,158 411,244 $ 352,748,536 Total $ 96,298,550 234,463,253 542,230,642 260,998,561 57,475,457 7,013,104 $ 1,198,479,567 Major capital asset events during the current fiscal year included the following: Governmental Activities • The City completed several improvement projects including $1.3 million in the Transit Liquid Natural Gas expansion, $5.7 million in arterial roadways, $0.5 million in traffic signals, $0.3 million in landscape replacement, $0.3 million in the fire training room renovation, and $0.3 million in library improvements. There were also various other infrastructure and improvement projects for parks and buildings. • In addition, there were $22.9 million of expenditures added to construction in progress for the Tempe Town Lake Downstream Dam. This project is expected to be completed in spring of 2016. 32 Business-type Activities • The Water and Wastewater Fund incurred $16.6 million in construction in process costs in the current year. Of that cost, $3.7 million was capitalized for waterline replacement during the fiscal year. In addition, projects that incurred costs but were not completed as of year-end included $3.8 million for an environmental lab facility, $1.3 million for a well site, and $1.0 million for waterline upgrades. For government-wide financial statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Please refer to Note 8 of the Notes to the Financial Statements for further information regarding capital assets. DEBT ADMINISTRATION With the implementation of GASB Statement No. 68 and No. 71, the City restated the Outstanding Long-term Obligations as of June 30, 2014 to reflect the pension payable amount. At the end of the current fiscal year, the City had total long-term obligations outstanding of $1,101.6 million, which is an increase of $15.4 million over the prior fiscal year. In the current year, the City issued general obligation bonds along with excise tax obligations. In addition, the City refunded general obligation debt to take advantage of lower interest rates. The Golf Fund received a capital improvement loan from the Water and Wastewater Fund. The issuance of these current year obligations were in large part offset by the current year payments. Therefore, the primary increase in long-term obligations is due to the pension addition of $20.1 million in the governmental activities which was offset by a $4.3 million reduction in pensions for the business-type activities. Outstanding Long-term Obligations - June 30, 2015 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations Premium on debt payable HUD Section 108 loan WIFA loan Capital improvement note Total debt payable $ 181,905,000 21,175,000 134,746,000 18,668,237 4,552,000 361,046,237 $ 204,970,000 84,839,000 13,905,913 11,832,282 2,500,000 318,047,195 $ 386,875,000 21,175,000 219,585,000 32,574,150 4,552,000 11,832,282 2,500,000 679,093,432 Capital leases Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 87,082 27,244,931 5,761,075 48,099,064 310,481,543 $ 752,719,932 283,594 6,047,388 24,474,554 $ 348,852,731 370,676 27,244,931 5,761,075 54,146,452 334,956,097 $1,101,572,663 33 Outstanding Long-term Obligations- June 30, 2014, as restated Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations Premium on debt payable Capital improvement note payable HUD Section 108 loan WIFA loan Total debt payable $ 163,205,000 23,930,000 144,606,000 19,542,476 509,804 4,907,000 356,700,280 $ 223,495,000 76,109,000 11,158,485 12,551,554 323,314,039 $ 386,700,000 23,930,000 220,715,000 30,700,961 509,804 4,907,000 12,551,554 680,014,319 Capital leases Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 26,011,933 5,827,048 48,585,216 290,400,432 $ 727,524,909 499,476 6,056,815 28,820,311 $ 358,690,641 499,476 26,011,933 5,827,048 54,642,031 319,220,743 $ 1,086,215,550 The City issued $89.6 million in general obligation debt during the current fiscal year which consisted of $43.9 million of new money and $45.7 million to refund existing general obligation debt. The new money was for public safety, parks, municipal infrastructure preservation and street improvements in the amounts of $4.0 million, $34.0 million, $3.5 million, and $2.4 million, respectively. The primary purpose of refunding $45.7 million of existing debt was to take advantage of lower interest rates thereby reducing future debt service payments which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $2.4 million in the City’s General Obligation Debt Service and Water and Wastewater funds. The City also issued $11.8 million in excise tax obligations for water related projects. In addition, the Golf Fund received a capital improvement loan from the Water and Wastewater Fund in the amount of $2.5 million for a new irrigation system at the Rolling Hills golf course. The City’s total net general obligation bonded debt (total bonded debt, including the enterprise funds and Water Infrastructure Finance Authority loans, less debt service reserves) outstanding increased by approximately $11.3 million from the fiscal year ended June 30, 2014 to the fiscal year ended June 30, 2015. The ratio of net general obligation bonded debt for governmental purposes to taxable valuation and the amount of bonded debt per capita are useful indicators of the City’s debt position to management, citizens, oversight bodies and investors. Additional information can be located in the Statistical Section (Exhibit S-15). A comparison of these indicators follows: Fiscal Year Ended June 30, 2015 June 30, 2014 Net general bonded debt Net general bonded debt per capita Ratio of net general bonded debt to net assessed value Debt service secondary tax rate per $100 of taxable valuation 34 $ 375,097,197 2,213 23.0% $ 1.51 $ 363,773,211 2,140 24.0% $ 1.57 The State constitution imposes certain debt limitations on the City of 6% and 20% of the assessed valuation of the City. The City’s available debt margin at June 30, 2014 is $16.2 million under the 6% limitation. Due to the fall in property values, the City currently does not have any available borrowing capacity under the 20% limitation. Additional information on the statutory debt limitations may be found in Note 9 of the Notes to the Financial Statements and the Statistical Section (Exhibit S-19) of this report. During the year, the City maintained ratings on its outstanding general obligation bonds of AAA from Standard & Poors Corporation, Aa2 from Moody’s Investors Service, and AAA from Fitch Ratings. Additional information on the City’s long-term debt can be found in Note 9 of the Notes to the Financial Statements. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, city council, customers, investors and creditors with a general overview of the City’s finances. If you have questions about this report or need additional information, contact: City of Tempe Internal Services Department Accounting Division 20 E. Sixth Street Tempe, AZ 85281 480.350.8350 35 City of Tempe, Arizona 36 Statement of Net Position June 30, 2015 City of Tempe, Arizona Governmental Activities Business-type Activities Total Assets Pooled cash and investments Receivables: Taxes Accounts, net Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Special assessment receivables Capital improvement notes receivable Equity in joint venture Capital assets not being depreciated: Land Construction in progress Capital assets (net of accumulated depreciation): Buildings Infrastructure Improvements Machinery and equipment Total assets $ 221,188,494 $ 82,689,943 $ 303,878,437 16,247,292 5,511,827 353,014 7,396,386 1,618,670 686,362 47,472,609 21,727,590 13,328,689 260,787,188 12,986,438 318,669 793,274 39,795,001 3,744,069 126,234,370 16,247,292 18,498,265 671,683 7,396,386 2,411,944 686,362 87,267,610 21,727,590 17,072,758 387,021,558 89,605,173 34,841,269 6,693,377 9,722,968 96,298,550 44,564,237 195,544,647 359,460,282 127,177,711 45,493,934 1,448,441,137 26,608,187 168,947,571 123,572,197 12,978,476 615,084,540 222,152,834 528,407,853 250,749,908 58,472,410 2,063,525,677 7,921,287 55,736,537 63,657,824 7,629,226 2,707,177 10,336,403 15,550,513 58,443,714 73,994,227 20,708,298 7,445,585 15,747,184 2,189,977 42,967,983 5,290,826 685,266 4,529,350 144,778 27,928,714 25,999,124 8,130,851 20,276,534 2,334,755 70,896,697 Deferred Outflows of Resources Deferred charge on refundings Deferred outflow from pensions Total outflow of resources Liabilities Accounts payable Deposits Accrued expenses Unearned revenue Liabilities payable from restricted assets Long-term liabilities: Special assessment debt with a governmental commitment: Due within one year Due in more than one year Other long-term liabilities: Due within one year Due in more than one year Total liabilities 1,195,000 19,980,000 - 1,195,000 19,980,000 38,728,465 692,816,467 841,778,959 31,829,364 317,023,367 387,431,665 70,557,829 1,009,839,834 1,229,210,624 28,478,077 28,478,077 5,203,286 5,203,286 33,681,363 33,681,363 519,040,090 142,208,059 661,248,149 100,498 106,904 155,347 73,791,187 9,317,498 354,988 115,674 57,623,270 (18,763,531) 641,841,925 90,577,933 232,785,992 100,498 106,904 155,347 73,791,187 9,317,498 354,988 115,674 57,623,270 71,814,402 874,627,917 Deferred Inflows of Resources Deferred inflow from pensions Total inflow of resources Net Position Net investment in capital assets Restricted for: Police Fire Community Services Public Works Community Development Human Services City Manager Debt Service Unrestricted Total net position $ 37 $ The notes to the financial statements are an integral part of this statement. $ Statement of Activities For the fiscal year ended June 30, 2015 Charges for Services Expenses Program Revenues Operating Grants and Contributions Capital Grants and Contributions Functions/Programs Governmental activities: Police Fire Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Total governmental activities Business-type activities: Water and wastewater Solid waste Golf course Total business-type activities Total government $ 92,214,451 32,914,994 29,239,583 107,411,254 18,832,177 13,374,117 4,028,068 330,042 7,045,783 3,712,245 433,339 415,774 751,331 6,403,407 1,955,520 12,882,924 331,945,009 73,548,319 15,868,498 2,685,634 92,102,451 $ 424,047,460 $ 1,712,306 334,158 7,589,603 19,786,216 13,065,445 80,237 8,302,032 2,212,402 53,082,399 78,043,384 14,216,743 2,755,966 95,016,093 $ 148,098,492 General revenues: Sales taxes Intergovenmental revenue, unrestricted Property taxes Franchise taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position - beginning, restated Net position - ending 38 $ $ 2,492,117 760,528 1,089,189 5,524,104 8,484,216 429,637 1,005,068 19,784,859 19,784,859 $ $ 7,258,243 7,258,243 7,258,243 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Position Governmental Activities $ $ (88,010,028) (31,820,308) (20,560,791) (74,842,691) 2,717,484 (12,864,243) 4,273,964 (330,042) (6,040,715) (3,712,245) (433,339) (415,774) (751,331) (4,191,005) (1,955,520) (12,882,924) (251,819,508) Business-type Activities $ - Total $ (88,010,028) (31,820,308) (20,560,791) (74,842,691) 2,717,484 (12,864,243) 4,273,964 (330,042) (6,040,715) (3,712,245) (433,339) (415,774) (751,331) (4,191,005) (1,955,520) (12,882,924) (251,819,508) (251,819,508) 4,495,065 (1,651,755) 70,332 2,913,642 2,913,642 4,495,065 (1,651,755) 70,332 2,913,642 (248,905,866) 147,787,315 40,571,933 41,457,646 2,933,239 889,594 5,042,875 2,170,917 479,071 241,332,590 (10,486,918) 652,328,843 641,841,925 488,477 142,914 247,296 (479,071) 399,616 3,313,258 229,472,734 232,785,992 147,787,315 40,571,933 41,457,646 2,933,239 1,378,071 5,185,789 2,418,213 241,732,206 (7,173,660) 881,801,577 874,627,917 $ $ The notes to the financial statements are an integral part of this statement. 39 Balance Sheet Governmental Funds June 30, 2015 Transit Special Revenue General General Obligation Debt Service Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other funds Due from other governments Inventories Prepaid items Restricted cash and investments Special assessments Capital improvement notes receivable Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ 86,293,946 $ 10,634,797 5,367,271 177,349 1,419,572 346,364 5,718 2,748,743 250,000 107,243,760 $ Deferred Inflows of Resources Unavailable revenue- courts Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- notes receivable Unavailable revenue- other Unavailable revenue- property tax Unavailable revenue- special assessments Total deferred inflows of resources 35,370,485 $ 3,272,541 4,409,526 3,200,344 1,703,793 47,956,689 $ 4,034,303 $ 40 5,142,845 139,730 1,745,000 1,455,344 8,482,919 $ 21,550,201 $ 733,860 32,162,650 11,374,896 65,821,607 $ - - Fund Balances Fund balances: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances 5,546,129 5,501,937 7,556,282 206,860 18,811,208 $ 29 26,470,000 3,945,278 30,415,307 - 605,087 245,715 4,885,105 1,703,793 1,703,793 11,374,896 421,319 11,796,215 346,364 520,770 8,800,833 73,879,480 83,547,447 23,519,355 9,280,064 4,970,558 37,769,977 20,960,171 2,649,914 23,610,085 107,243,760 $ 47,956,689 $ 65,821,607 City of Tempe, Arizona Special Assessment Debt Service $ 233,098 $ 8,900 171,682 1,468,095 21,727,590 23,609,365 $ $ 10,000 119,000 925,000 543,095 1,597,095 $ 16,041,750 $ 979,307 17,021,057 $ 482,112 256,959 739,071 21,899,272 21,899,272 166,001 166,001 112,998 112,998 16,115,985 16,115,985 23,609,365 Other Governmental Funds Transit Capital Projects $ 17,021,057 $ 49,312,681 $ 1,606,094 135,656 3,983 2,007,553 1,272,306 680,644 7,892,777 62,911,694 $ $ 8,921,500 1,943,648 629,766 1,419,572 1,607,158 6,910,000 974,266 22,405,910 Total Governmental Funds $ 208,802,161 $ 16,247,292 5,511,827 353,014 1,419,572 7,396,386 1,618,670 686,362 47,472,609 21,727,590 13,328,689 324,564,172 $ 20,102,615 7,445,585 8,325,778 1,419,572 2,189,977 36,050,000 6,917,983 82,451,510 852,826 241,302 79,051 1,173,179 4,034,303 1,018,827 241,302 13,078,689 684,138 667,034 21,899,272 41,623,565 1,952,950 19,341,223 12,645,088 8,315,345 (2,922,001) 39,332,605 2,299,314 80,049,732 22,445,922 24,736,650 70,957,479 200,489,097 62,911,694 $ 324,564,172 The notes to the financial statements are an integral part of this statement. 41 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2015 City of Tempe, Arizona Fund balances- total governmental funds $ 200,489,097 Amounts reported for the governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Accumulated depreciation 1,508,614,972 (656,491,956) 852,123,016 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 260,787,188 Other assets are not available to pay current-period expenditures and, therefore, are offset by unavailable revenue. Unavailable special assessment revenue Unavailable tax and other revenue Unavailable notes receivable revenue Unavailable court revenue Capital grant and contribution monies not received within 60 days 22,103,973 1,351,172 13,078,689 4,034,303 1,260,129 41,828,266 Bond premiums and the deferred charge on refundings are not financial resources and, therefore, are not reported in the funds. (10,746,950) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds. Compensated absences Claims and judgments Net pension liability (excluding internal service) Other post employment benefits (excluding internal service) Bonds, capital improvement notes and capital leases (27,244,931) (5,761,075) (282,831,845) (48,075,926) (342,465,082) (706,378,860) Internal service funds are used by management to charge the costs of self insurance to individual funds. The assets and liabilities of the internal service funds are reported with governmental activities. Net position of governmental activities 3,740,168 $ The notes to the financial statements are an integral part of this statement. 42 641,841,925 City of Tempe, Arizona 43 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2015 General General Obligation Debt Service Transit Special Revenue Revenues: Taxes: Sales taxes Property taxes Franchise taxes Intergovernmental: Federal grants State grants State sales tax State income tax Auto lieu tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues $ 94,165,762 17,170,286 2,933,239 $ 36,147,640 - $ 24,446,996 - 11,450 14,779,296 19,577,085 6,215,552 612,410 652,081 17,026,161 8,436,300 1,687,074 5,935,782 189,202,478 3,297,616 2,717,897 209,723 16,766,419 889,214 60,028,509 1,489,500 10,428 25,946,924 73,601,357 26,043,036 18,426,853 18,876,157 14,006,840 3,706,750 4,058,927 345,501 6,331,195 2,845,192 432,384 271,516 751,978 7,224,416 44,620,190 - 176,922,102 1,745,000 2,912,848 49,278,038 29,300,000 7,858,201 37,158,201 12,280,376 10,750,471 (11,211,277) 353,428 (4,711,726) 111,827 758,626 (3,487,845) (5,389,812) 1,339,227 (4,050,585) 5,914,626 (10,087,236) 1,269,813 6,780,000 (4,534,184) (656,981) 8,792,531 74,754,916 83,547,447 6,699,886 31,070,091 37,769,977 (11,868,258) 35,478,343 23,610,085 Expenditures: Current: Police Fire Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) - Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Issuance of refunding bonds Payment to refunded bonds escrow agent Total other financing sources (uses) Net change in fund balance Fund balance at beginning of year Fund balance (deficit) at end of year $ 44 $ $ City of Tempe, Arizona Special Assessment Debt Service $ - $ 2,324 3,862,306 18,758 3,883,388 - $ 4,254,167 11,749 4,265,916 7,460,054 - Total Governmental Funds $ 137,773,456 41,617,282 2,933,239 12,213,147 251,878 10,013,859 3,554,948 17,362 4,867,668 1,549,926 1,093,272 1,342,426 42,364,540 19,764,930 263,328 24,793,155 19,577,085 6,215,552 8,374,755 889,594 38,662,572 9,986,226 1,093,272 3,862,306 1,687,074 8,197,929 325,691,755 4,500,687 759,118 3,813,560 8,917,775 3,425,821 9,764,802 252,438 945,287 52,160 - 78,102,044 26,802,154 22,240,413 72,414,122 17,432,661 13,471,552 4,058,927 345,501 6,583,633 3,790,479 432,384 323,676 751,978 7,232,975 7,644,744 7,644,744 7,265,000 2,262,287 41,982,237 83,941,172 41,065,000 14,164,594 49,626,981 358,839,074 (11,429) (3,378,828) (41,576,632) (33,147,319) - 5,389,812 5,389,812 14,779,180 (5,769,201) 43,965,000 91,719 53,066,698 26,437,046 (25,957,975) 43,965,000 1,269,813 111,827 2,189,572 6,780,000 (4,534,184) 50,261,099 2,010,984 14,105,001 16,115,985 11,490,066 27,842,539 39,332,605 17,113,780 183,375,317 200,489,097 8,559 - 2,755,000 1,131,258 3,894,817 $ Other Governmental Funds Transit Capital Projects (11,429) 124,427 112,998 $ $ $ The notes to the financial statements are an integral part of this statement. 45 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Net change in fund balances- total governmental funds $ 17,113,780 Amounts reported for the governmental activities in the statement of activities are different because: Certain expenditures 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. Compensated absences and long-term claims and judgements Other post employment benefits (excluding internal service) (1,167,025) 509,290 (657,735) Certain revenues in the statement of activities do not provide current financial resources and, therefore, are not reported as revenues in the governmental funds. Property tax and charges for services revenue Court revenue Grants and contributions Special assessments received/recognized (3,364,309) 3,670,303 (4,600,980) (2,588,672) (6,883,658) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay 49,626,981 Miscellaneous net capital expenditures (7,556,309) Depreciation expense (45,034,426) (2,963,754) Government funds report pension contributions as expenditures. However, they are reported as deferred outflows of resources in the Statement of Net Position. The change in the net pension liability, adjusted for deferred pension items, is reported as pension expense in the Statement of Activities. Current year pension contributions 20,623,340 Pension Expense (32,935,784) (12,312,444) Lease payments are reported as expenditures in the governmental funds when paid. For the City as a whole, however, the principal portion of the payments serve to reduce the liability in the statement of net position while the acquisition of new leases increase the liability. Principal payments made 24,745 Capital lease proceeds (111,827) (87,082) Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Amortization of deferred outflow- refunding (852,186) Amortization of bond premium 2,144,052 Payment to refunded bonds escrow agent 4,534,184 5,826,050 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental funds. Neither transaction, however, has any effect on net position. Issuance of debt (50,745,000) Premium on issuance of debt (1,269,813) Principal payments made 41,065,000 (10,949,813) Internal service funds are used by management to charge the costs of self-insurance to individual funds. The adjustments for internal service funds close those funds by charging additional amounts to participating governmental activities to completely cover the internal service funds' costs. Change in net position of governmental activities 427,738 $ The notes to the financial statements are an integral part of this statement. 46 (10,486,918) Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Total revenues Expenditures Police Fire Community services Public works Community development Human services Mayor and council Municipal court City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Contingency Interdepartmental charges Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 107,682,162 40,338,841 450,100 11,452,301 7,943,080 1,636,750 4,903,462 174,406,696 $ 107,682,162 40,338,841 450,100 11,452,301 7,943,080 1,636,750 4,903,462 174,406,696 Actual Amounts (Budgetary Basis) $ 114,269,287 41,195,793 578,317 16,958,006 8,436,300 1,687,074 5,838,464 188,963,241 Variance with Final Budget Positive (Negative) $ 6,587,125 856,952 128,217 5,505,705 493,220 50,324 935,002 14,556,545 73,979,887 28,093,376 19,234,206 19,996,857 14,546,208 4,086,134 377,787 4,137,407 6,281,558 2,821,756 439,959 251,902 1,098,536 19,862,245 1,000,000 (13,648,944) 182,558,874 74,436,180 28,313,501 18,962,271 19,895,828 14,838,876 4,581,504 377,787 4,164,010 6,461,060 2,852,189 451,999 256,136 1,088,410 18,382,019 887,684 (13,648,944) 182,300,510 73,673,647 26,142,560 18,603,169 19,024,031 13,617,114 4,002,516 353,692 4,056,636 6,351,588 2,845,336 432,633 271,663 766,811 20,688,054 (13,544,869) 177,284,581 762,533 2,170,941 359,102 871,797 1,221,762 578,988 24,095 107,374 109,472 6,853 19,366 (15,527) 321,599 (2,306,035) 887,684 (104,075) 5,015,929 98,713 (4,509,006) 419,608 (3,990,685) $ (12,142,863) 98,713 (4,509,006) 419,608 (3,990,685) $ (11,884,499) 353,428 (4,711,726) 758,626 (3,599,672) 8,078,988 254,715 (202,720) 339,018 391,013 19,963,487 Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes encumbrances as expenditures for budgetary purposes but not for GAAP purposes The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures and changes in fund balances- governmental funds 73,764 11,211 630,973 (2,405) $ 8,792,531 The notes to the financial statements are an integral part of this statement. 47 $ Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Sales taxes Intergovernmental revenue Investment income Charges for services Miscellaneous Total revenues Expenditures Current: Public works Contingency Debt service: Principal retirement Interest and fiscal fees Total expenditures Other financing uses Transfers to other funds Proceeds from sale of capital assets Total other financing uses Net change in fund balance Actual Amounts (Budgetary Basis) Variance with Final Budget Positive (Negative) $ $ $ 33,346,352 7,079,753 148,000 15,789,572 706,130 57,069,807 $ 33,346,352 7,079,753 148,000 15,789,572 706,130 57,069,807 49,077,057 108,000 49,077,057 108,000 44,628,732 - 4,448,325 108,000 1,745,000 2,918,188 53,848,245 1,745,000 2,918,188 53,848,245 1,745,000 2,912,848 49,286,580 5,340 4,561,665 (5,389,812) 1,339,227 (4,050,585) 6,667,566 1,339,227 1,339,227 8,835,816 (5,389,812) (5,389,812) $ (2,168,250) (5,389,812) (5,389,812) $ (2,168,250) Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 36,147,640 6,015,513 185,945 16,766,419 889,214 60,004,731 23,778 (1,163) 9,705 $ 6,699,886 The notes to the financial statements are an integral part of this statement. 48 $ 2,801,288 (1,064,240) 37,945 976,847 183,084 2,934,924 City of Tempe, Arizona 49 Statement of Net Position Proprietary Funds June 30, 2015 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Total Governmental ActivitiesInternal Service Funds Assets Current assets: Pooled cash and investments Restricted cash and investments Accounts receivable Accrued interest receivable Inventories Total current assets Noncurrent assets: Notes receivable Equity in joint venture Capital assets: Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets $ 75,419,004 39,795,001 12,076,205 282,891 793,274 128,366,375 $ 4,877,031 910,233 24,694 5,811,958 2,393,908 11,084 2,404,992 $ 82,689,943 39,795,001 12,986,438 318,669 793,274 136,583,325 $ 12,386,333 12,386,333 3,744,069 126,234,370 - (8,820,340) 362,548 1,822,663 1,066,729 1,391,911 282,372 (2,820,615) 6,693,377 49,802,668 307,054,468 186,858,206 28,658,231 9,722,968 (240,267,142) - 340,019,099 469,997,538 6,398,069 6,398,069 2,105,608 2,105,608 348,522,776 478,501,215 - 598,363,913 12,210,027 4,510,600 615,084,540 12,386,333 7,629,226 1,935,469 9,564,695 692,920 692,920 7,629,226 2,707,177 10,336,403 68,199 68,199 3,744,069 126,234,370 6,330,829 46,714,222 307,054,468 185,791,477 13,313,694 9,440,596 (228,626,187) - $ - 1,265,783 13,952,626 - Deferred Outflows of Resources Deferred charge on refunding Deferred outflows related to pensions Total deferred outflows of resources - - 50 78,788 78,788 - Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Total Governmental ActivitiesInternal Service Funds Liabilities Current liabilities: Accounts payable Deposits Accrued expenses Unearned revenue Accrued interest payable General obligation bonds- current Excise tax revenue obligations- current WIFA loan payable- current Capital leases payable- current $ 3,819,206 685,266 3,306,733 144,778 6,323,714 18,525,000 3,080,000 734,520 $ 36,619,217 2,286,533 - 212,971,890 90,743,023 11,097,762 236,494 171,210 219,844 $ 5,290,826 685,266 4,529,350 144,778 6,323,714 18,525,000 3,080,000 734,520 219,844 $ 810,383 7,421,406 - 627,548 39,533,298 8,231,789 212,971,890 90,743,023 11,097,762 63,750 2,500,000 6,047,388 24,474,554 347,898,367 23,138 378,886 402,024 - 4,351,148 17,581,331 336,745,154 1,432,034 6,158,862 7,590,896 63,750 2,500,000 264,206 734,361 3,562,317 373,364,371 9,877,429 4,189,865 387,431,665 8,633,813 3,737,788 3,737,788 1,309,373 1,309,373 156,125 156,125 5,203,286 5,203,286 80,551 80,551 142,208,059 90,577,933 $ 232,785,992 3,740,168 3,740,168 - Total liabilities $ - - Total current liabilities Noncurrent liabilities: General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable Capital improvement note payable OPEB obligation Pensions Total noncurrent liabilities 1,235,126 1,051,407 Deferred Inflows of Resources Deferred inflows related to pensions Total deferred inflows of resources Net Position Net investment in capital assets Unrestricted Total net position 134,294,221 96,532,228 $ 230,826,449 $ 6,398,069 (4,681,924) 1,716,145 $ 1,515,769 (1,272,371) 243,398 The notes to the financial statements are an integral part of this statement. 51 $ Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2015 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Total Governmental ActivitiesInternal Service Funds Operating revenues: Charges for services Miscellaneous Total operating revenues $ 78,043,384 135,560 78,178,944 $ 14,216,743 7,255 14,223,998 $ 2,755,966 99 2,756,065 $ 95,016,093 142,914 95,159,007 $ 30,631,732 7,825 30,639,557 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 13,558,340 3,395,264 19,160,825 18,641,564 54,755,993 23,422,951 554,013 389,654 1,397,797 341,178 2,682,642 73,423 19,161,407 4,338,327 29,412,963 20,394,436 73,307,133 21,851,874 30,222,211 30,222,211 417,346 Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital assets Net loss from joint venture Income (loss) before contributions and operating transfers Transfers in Transfers out Change in net position Total net position- beginning, as restated Total net position- ending 5,049,054 553,409 8,854,341 1,411,694 15,868,498 (1,644,500) 459,141 (11,666,246) 119,782 (7,126,080) 18,296 87,621 - 11,040 (2,992) 39,893 - 488,477 (11,669,238) 247,296 (7,126,080) 10,392 - 5,209,548 (1,538,583) 121,364 3,792,329 427,738 5,162,636 (5,637,629) 4,734,555 (101,951) (1,640,534) 97,873 219,237 5,260,509 (5,739,580) 3,313,258 - 226,091,894 $ 230,826,449 3,356,679 $ 1,716,145 $ 24,161 243,398 229,472,734 $ 232,785,992 The notes to the financial statements are an integral part of this statement. 52 427,738 3,312,430 $ 3,740,168 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2015 City of Tempe, Arizona Business-type Activities- Enterprise Funds Water and Wastewater Cash flows from operating activities: Receipts from customers Receipts from other funds Payments to employees for services Payments to suppliers for goods and services Payment for premiums and settlement of claims Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from issuance of bonds Proceeds from note Principal paid on long-term debt Principal paid on capital leases Interest and fiscal fees Change in capital assets Investment in joint venture Deferred revenue Gain from the sale of assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received Issuance of notes receivable Net cash provided (used) by investing activities $ 14,289,089 (5,068,145) (8,733,158) 487,786 Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in deposits Increase (decrease) in payables Increase (decrease) in accrued expenses (Increase) decrease in deferred outflows Increase (decrease) in deferred inflows Increase (decrease) in pension Increase (decrease) in net OPEB obligation Net cash provided (used) by operating activities Golf Course $ 2,756,065 (602,854) (1,619,513) 533,698 Total $ 94,655,972 (19,418,602) (31,347,796) 43,889,574 $ 30,639,557 (30,046,593) 592,964 243,368 5,162,636 (5,637,629) (231,625) (101,951) (101,951) (243,368) 97,873 (145,495) 5,260,509 (5,739,580) (479,071) - 11,810,000 (17,906,844) (14,547,114) (14,116,875) (196,807) (4,824) 119,782 (1,722,590) 87,621 2,500,000 (215,882) (2,992) (329,211) 39,893 11,810,000 2,500,000 (17,906,844) (215,882) (14,550,106) (16,168,676) (196,807) (4,824) 247,296 - (34,842,682) (1,634,969) 1,991,808 (34,485,843) - 13,897 13,897 529,782 (1,817,279) (1,287,497) 10,392 10,392 496,441 (1,817,279) (1,320,838) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Noncash investing, capital, and financing activities: Net loss from joint venture Total noncash investing, capital, and financing activities: 77,610,818 (13,747,603) (20,995,125) 42,868,090 Solid Waste Governmental ActivitiesInternal Service Funds 19,444 19,444 6,472,945 108,741,060 (1,229,690) 6,106,721 2,393,908 - 7,637,163 114,847,781 603,356 11,782,977 $ 115,214,005 $ 4,877,031 $ 2,393,908 $ 122,484,944 $ 12,386,333 $ 23,422,951 $ (1,644,500) $ 73,423 $ 21,851,874 $ 417,346 18,641,564 1,411,694 341,178 20,394,436 $ (568,126) 27,237 55,290 1,478,437 (12,313) (789,414) 3,737,788 (3,121,781) (3,543) 42,868,090 $ 65,091 674,592 50,554 (291,449) 1,309,373 (1,093,581) 6,012 487,786 167,938 (31,758) (30,918) 156,125 (130,395) (11,895) 533,698 $ (503,035) 27,237 55,290 2,320,967 6,483 (1,111,781) 5,203,286 (4,345,757) (9,426) 43,889,574 $ $ $ (7,126,080) (7,126,080) $ $ $ $ (7,126,080) (7,126,080) $ $ - 53 $ $ $ The notes to the financial statements are an integral part of this statement. - 713,880 (498,486) (43,501) 80,551 (67,274) (9,552) 592,964 - Statement of Net Position Fiduciary Fund June 30, 2015 City of Tempe, Arizona Other Post Employment Benefits Trust Assets Cash and investments Employer contribution receivable Total assets $ Net Position Held in trust for other post employment benefits Total net position $ 10,211,086 742,000 10,953,086 10,953,086 10,953,086 Statement of Changes In Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Other Post Employment Benefits Trust Additions: Employer contributions Net investment income Total additions $ 742,000 333,064 1,075,064 Deductions: Administrative expenses Total deductions 49,636 49,636 Change in net position 1,025,428 Net position at beginning of year Net position at end of year $ 9,927,658 10,953,086 The notes to the financial statements are an integral part of these statements. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona The City of Tempe, Arizona (the "City") was incorporated on November 26, 1894. On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government and provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, community development, and administrative. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying summary of the City's significant accounting policies is presented to assist the reader in interpreting the basic financial statements. The basic financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") as applied to governmental units. During the year ended June 30, 2015, the City implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. This Statement requires governments providing defined benefit pensions to recognize the long-term obligation for pension benefits as a liability, and to more comprehensively and comparably measure the annual costs of pension benefits. This Statement also enhances accountability and transparency through revised note disclosures and new required supplementary information. A. Reporting Entity The accompanying basic financial statements include the City and its component unit, collectively referred to as "the financial reporting entity". In accordance with the Governmental Accounting Standards Board's ("GASB") Statement 14, as amended, the component unit discussed below has been included in the City's financial reporting entity because of the significance of its financial relationships with the City. Rio Salado Community Facilities District: The Rio Salado Community Facilities District (CFD) was organized on February 20, 1997, under the laws of the State of Arizona to facilitate development of the Rio Salado Town Lake project. The board of the district is comprised of the same members as the City’s council. Data for this component unit has been included in the City's basic financial statements utilizing the "blending" method because its sole purpose is to finance public facilities and facilitate development for the City. Blending involves aggregating the component unit’s data and data from the City at the government-wide and fund financial statement level. Separately issued financial statements are not available for the City's component unit. B. Basic Financial Statements The basic financial statements include both government-wide (based on the City as a whole and its component unit) and fund financial statements. Both the government-wide and fund financial statements categorize activities as either governmental activities or business-type activities. Governmental activities are normally supported by taxes and intergovernmental revenues. Business-type activities rely to a significant extent, on fees and charges for support. All activities, both governmental and business-type, are reported in the government-wide financial statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets as well as long-term obligations. The government-wide financial statements focus more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The government-wide financial statements exclude the fiduciary fund. The government-wide Statement of Activities demonstrates the degree to which the direct expenses, including depreciation, of the various departments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific department. Interest on long-term debt and depreciation expense on assets shared by multiple departments, are not allocated to the various departments. 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basic Financial Statements (Continued) Program revenues include revenues from fines and forfeitures, licenses and permit fees, special assessment taxes, certain intergovernmental grants, other entities participation and charges for services. Taxes and other items not properly included among program revenues are reported as general 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. The City does not currently utilize an indirect cost allocation system. The General Fund charges certain administrative fees to departments within other operating funds to support general services used by those funds. The expenditures/expenses are recorded as a reduction of expense in the allocating fund. Therefore, no elimination is required from either the government-wide or fund level financial statements. The fund financial statements are, in substance, very similar to the financial statements presented prior to the adoption of GASB Statement 34. Emphasis here is on the major funds in either the governmental, business-type or fiduciary categories. Non-major funds are summarized into a single column. Unless an internal service fund is combined with the business-type activities (deemed to be an infrequent event), totals on the proprietary fund statement should directly reconcile to the business-type activity column presented in the government-wide statements. Internal service funds of a government (which traditionally provide services primarily to other funds of the City) are presented as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements of internal service funds are consolidated into the governmental activities column when presented at the government-wide level. To the extent possible, the costs of these services are reflected in the appropriate department. C. Basis of Presentation The City uses funds to report on its financial position and the results of its operations. A fund is a separate accounting entity with a self-balancing set of accounts. Fund accounting is designed to demonstrate legal compliance and to aid in the City's financial management by segregating transactions related to certain functions or activities. The following fund categories are used by the City: Governmental Funds Governmental Funds are those through which most of the governmental functions of the City are financed. The focus of Governmental Fund measurement, in the fund financial statements, is upon determination of financial position and changes in financial position rather than upon net income. 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Governmental Funds (Continued) Governmental Funds include the following fund types: General - The General Fund is the general operating fund of the City. It is used to account for all activities of the City not accounted for in some other fund. Special Revenue - Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally or otherwise restricted to expenditures for specified purposes. There is one special revenue fund presented as a major fund in the basic financial statements, it is as follows: Transit Special Revenue Fund - accounts for the receipt and expenditures of the Transit Tax monies. These monies are restricted to financing transit operations and improvements. Debt Service - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, long term debt not being accounted for in the Special Revenue Funds and Enterprise Funds. Both debt service funds are presented as major funds in the basic financial statements: General Obligation Debt Service Fund - accounts for the accumulation of resources and payments of general obligation and other debt. Special Assessment Debt Service Fund - accounts for the accumulation of resources and payments of special assessment debt. Capital Projects - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities and improvements (other than those financed by Enterprise Funds). The following capital project fund is presented as a major fund in the basic financial statements: Transit Capital Projects Fund - used for the acquisition of buses, the light rail system, and other traffic flow improvements. Proprietary Funds Proprietary funds are used to account for the City's ongoing operations and activities, which are similar to those often found in the private sector. The focus of Proprietary Fund measurement is upon the determination of operating income, changes in net position, financial position and cash flows. Each proprietary fund is reported as a major fund in the basic financial statements. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Proprietary Funds (Continued) Proprietary funds include the following fund types: Enterprise - Enterprise Funds are used to account for operations, including debt service, (a) that are financed and operated in a manner similar to private businesses - where the intent of the government body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis is financed or recovered primarily through user charges; or (b) where the governing body has determined that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Equity in Joint Venture - The equity method is used to account for the City's equity interest in a joint venture (See Note 7). Under this method, the equity interest is recorded in the balance sheet as a single amount. In addition, the City's share of the net income or loss is reported in the Statement of Revenues, Expenses and Changes in Fund Net Postion - Proprietary Funds, as a nonoperating revenue or expense. The following enterprise funds are used by the City: Water and Wastewater Fund – accounts for the provision of water and sewer services to the residents of the City and some residents in the adjoining Town of Guadalupe. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing and related debt service, billing and collection. Solid Waste Fund – accounts for the provision of refuse collection and disposal services for both residential and commercial customers. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing, billing and collection. Golf Course Fund - accounts for the operation of the Rolling Hills and Ken McDonald golf courses. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance and financing. Internal Service - Internal Service Funds account for operations that provide services to other departments or agencies of the government, or to other governments, on a cost-reimbursement basis. The following internal service funds are used by the City: Risk Management Fund – accounts for expenses incurred for automobile liability, general liability, and property claims under the City’s self-insurance program. Worker’s Compensation Fund – accounts for expenses incurred for worker’s compensation claims under the City’s self-insurance program. Health Fund – accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside of the City. The fiduciary fund is reported by fund type. The following fiduciary fund is used by the City. Other Post Employment Benefits Trust Fund – accounts for activities of the Other Post Employment Benefits Plan, which accumulates resources for health care benefit payments to qualified retirees. D. Measurement Focus and Basis of Accounting The government-wide, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the source and use of liquid resources, and 3) demonstrate how the City’s actual experience conforms to the annual budget. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" is defined as collectible within the current period or within 60 days of the end of the current fiscal period. Expenditures, other than interest on long-term debt, are recorded when the related fund liability is incurred, if measurable. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgements, are recorded only when payment is due. Revenues susceptible to accrual include property tax, local sales tax, state-shared sales tax, highway user tax, vehicle license tax, franchise fees, special assessments and interest earned on pooled investments. Licenses and permits, charges for services, fines and forfeitures and miscellaneous revenues are generally recorded as revenues when received in cash because they are not measurable until actually received. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended for a specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to the purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The City reports unearned revenues in the governmental funds if the potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for the unearned revenue is removed and revenue is recognized. Since the governmental fund financial statements are presented on a basis different than the governmental activities column of the government-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the governmental fund financial statements into the governmental activities column of the government-wide financial statements. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting (Continued) As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. An exception to this rule is charges between the government’s water and sewer function and various functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the applicable functions. Amounts reported as program revenue include 1) charges to customers or users who purchase, use or directly benefit from goods or services provided by a particular department 2) operating grants and contributions that are restricted to meeting the operational requirements of a particular department and 3) capital grants and contributions that are restricted. Taxes, investment income and other revenues not identifiable with a particular department are included as general revenues. The general revenues support the net costs of the departments not covered by program revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing goods and services of the fund’s principal ongoing operations. Operating expenses include the cost of providing the goods and services, administrative expenses, and depreciation on capital assets. Non-operating revenues and expenses are items such as investment income and interest expense, which are not a result of the direct operations of the activity. E. Budgetary Data State law mandates that cities and towns adopt a budget annually. As a result, an operating budget is legally adopted each fiscal year for the General, Special Revenue, Debt Service, and Proprietary Funds on a modified accrual basis plus encumbrances. The separately issued annual budget may be obtained from the City's Municipal Budget Office, 20 East Sixth Street, Tempe, Arizona, 85281. Certain differences as described in Note 2 exist between the basis of accounting used for budgetary purposes and that used for reporting purposes in accordance with GAAP. The legal level of budgetary control is at the city-wide level consisting of the total operating budget and the total capital projects budget, as adopted. Management may amend the budget at any level below the total budget as adopted. The total budget can only be amended by the City Council subject to limitations in the State law (see Note 1F). At the end of each fiscal year, all amounts encumbered are reappropriated as part of the following year’s operating or capital projects budget. Any appropriations that are either unexpended or unencumbered, lapse at fiscal year-end. No supplemental appropriations were necessary during the year. The City adheres to the following procedures in establishing the budgetary data reflected in the basic financial statements: 1) Prior to May 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed revenues and expenditures. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to July 1, the budget is legally enacted through passage of a resolution. 60 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Expenditure Limitation On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments, which restricts the annual growth of expenditures to a percentage determined by population and inflation. Certain types of expenditures are excluded from the limitation. Article 9, Sections 20 and 21 of the Arizona Constitution require the Economic Estimates Commission to determine each year the expenditure limitation for the following fiscal year for each city. The limitation is calculated based upon the amount of FY 1979-80 actual payments of local revenues, referred to as the “base limit”. Each year, the base limits for local jurisdictions are adjusted for population and inflation to reach the expenditure limitations. The City of Tempe’s 2014-15 Expenditure Limitation is $300,050,818. Local governments may carry forward to later year’s revenues, which are not subject to the expenditure limitation and were not expended in the year of receipt. G. Pooled Cash and Investments Cash resources of the City are combined to form a pool of cash and investments managed by the Accounting Division. Excluded from this pool are certain legally restricted cash resources. In accordance with the City’s legally adopted budget, the interest earned on pooled investments is recorded in the General Fund, except for the earnings of Enterprise Funds and other funds whose interest earnings are specifically mandated by law or an outside regulating agency to remain in those funds. Investments are stated at fair value. The City's investment policy permits investment in the following instruments: 1) Obligations of the United States Government, its agencies and instrumentalities; 2) Fully insured or collateralized certificates of deposit and other evidences of deposit at banks and savings and loan associations; 3) Bankers' acceptances issued by the 10 largest domestic banks and the 20 largest international banks, provided collateral meets the standards set by the Investment Advisory Committee; 4) A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by U.S. government securities; 5) Repurchase agreements whose underlying collateral consist of the foregoing; 6) Money market funds whose portfolios consist of the foregoing; and 7) The State of Arizona's Local Government Investment Pools 5 and 7. H. Receivables For accounts receivable, all amounts outstanding in excess of 120 days are included in the allowance. I. Inventories and Prepaid Items All inventories are valued using the average cost method. They consist of expendable supplies held for consumption and are accounted for using the consumption method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Restricted Assets Certain 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. In addition, the Industrial Commission of Arizona requires a restricted security for self-insured entities. As the City is self-insured, a security of $2.7 million is included in restricted assets in the General Fund. K. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 ($25,000 for infrastructure assets) and an estimated useful life greater than one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market 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 lives of the related capital assets. 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 are 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 Infrastructure Improvements Machinery and equipment 10-70 7-70 10-50 3-15 L. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. M. Compensated Absences Accumulated unpaid vacation, vested sick pay and vested "Mediflex" supplementary health maintenance benefits are accrued in the Government-wide and all Proprietary Fund statements. Compensated absences are only reported in the governmental funds if they have matured (i.e. unused reimbursable leave still outstanding following an employee’s resignation or retirement). These long-term liabilities of the governmental funds are not shown on the fund financial statements, as the benefits are not expected to be liquidated with expendable available financial resources. 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Compensated Absences (Continued) Vacation leave will be absorbed by time off from work or, within certain limitations, may be payable to the employees. Sick leave is accumulated at the rate of 96 hours (or a proportionate equivalent for employees with workweeks other than 40 hours) per year up to a maximum of 480 hours. Each year, hours accumulated in excess of 480 hours are either converted to cash at a 4-for-1 rate or accumulated in a “sick bank”. Upon retirement or resignation, employees with at least 10 years of service are eligible for compensation of up to 50 percent of accumulated sick leave. Each employee with 3 years of service receives a "Mediflex" allowance each year as reimbursement for all otherwise nonreimbursed health maintenance costs. Benefits are prorated based on length of service and increase up to a maximum of $650 a year. Unused credits are cumulative and upon employee termination are "banked" at the following rates: after 10 years, 50 percent; after 15 years, 75 percent; after 20 years, 100 percent. N. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. 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. O. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. 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 issuances 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. P. Interfund Transactions Interfund transactions consist of identified services performed for other funds or costs billed to other funds and are recorded as expenditures in the fund receiving the services and as a reimbursement, reducing expenditures, in the fund performing the services except for sales of water, sewer and refuse services to other City departments and the internal service risk management, worker’s compensation or health charges which are recorded as revenue and expenditures in the appropriate funds. All other interfund transactions are reported as transfers. Q. Fund Equity In the fund financial statements, the classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent the “restricted” classifications and Committed, Assigned, and Unassigned represent the “unrestricted” classifications (see Note 11). 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) R. Statements of Cash Flows The City considers all highly liquid investments (including restricted assets) with an original maturity of three months or less to be cash equivalents. For the purposes of the statement of cash flows, all pooled cash and investments are also considered to be cash equivalents, although there are investments with maturities in excess of three months when purchased in the portfolio. This is due to the fact that the Proprietary funds may deposit or withdraw cash at any time without prior notice or penalty, having the characteristics of demand deposits. In a statement of cash flows, cash receipts and payments are classified according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. S. Use of Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses/expenditures, and the disclosure of contingent assets and liabilities at the date of the basic financial statements. Actual results could differ from those estimates. NOTE 2 - BUDGET BASIS OF ACCOUNTING Arizona state statutes require accounting for certain transactions to be on a basis other than GAAP. The actual results of operations, in accordance with state statutes ("budget basis") are presented in the Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual for the General Fund and Transit Special Revenue Fund (major funds) to provide a meaningful comparison of actual results with the budget. Budgetary statements include a reconciliation of the adjustments required to convert the budgetary basis to GAAP basis. The major differences between the budget and GAAP bases are: 1) Encumbrances are recorded as the equivalent of expenditures (budget) as opposed to a reservation of fund balance (GAAP). 2) Certain revenues and expenditures not recognized in the budgetary year are accrued (GAAP). 3) Changes in the fair value of investments (GAAP) are not budgeted. NOTE 3 - PROPERTY TAXES Under Arizona law a two-tiered tax system exists: (1) a primary system for taxes levied to pay for current operation and maintenance expenses, and (2) a secondary system for taxes levied to pay principal and interest on bonded indebtedness as well as for the determination of the maximum permissible bonded indebtedness. Specific provisions are made under each system for determining full cash values of property, the basis of assessment, and the maximum annual tax levies on certain types of property and by certain taxing authorities. Under the primary system, the full cash value of locally assessed real property (consisting of residential, commercial, industrial, agricultural and unimproved property) may increase by more than 10% only under certain circumstances. Under the secondary system, there is no limitation on annual increases in full cash value of any property. Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. 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 Maricopa County Assessor. Levies are due and payable in two installments on October 1 and March 1, and become delinquent on November 1 and May 1, respectively. Delinquent amounts bear interest at the rate of 16%. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 3 - PROPERTY TAXES (continued) Public auctions of properties which have delinquent real estate taxes are held in February following the May 1 date upon which the second installment becomes delinquent. The purchaser is given a Certificate of Purchase issued by the County Treasurer. Five years from the date of sale, the holder of a Certificate of Purchase, which has not been redeemed, may demand of the County Treasurer a County Treasurer's Deed. Additionally, a lien against property assessed attaches on the first day of January preceding the assessment and levy thereof. Using the accrual basis of accounting, property taxes are recognized as revenue when earned in the governmentwide financial statements. In the governmental funds, property taxes are recognized as revenue on the modified accrual basis, i.e., when both measurable and available. Property taxes levied in August 2015 are not available for the current year; accordingly, such taxes will not be recognized as revenue until the subsequent fiscal year. Prior year levies were recorded using these same principles, and remaining receivables from such levies are also recognized as revenue, when available. NOTE 4 - CASH 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 Statement of Net Position and on the Balance Sheet as "Pooled cash and investments." Pooled cash and investments are stated at fair value, with accrued interest shown under “Accrued interest receivable”. The change in fair value of the investments is recorded in investment income. Restricted cash and investments are amounts held separately by trustees and segregated due to their source and future intent. Amounts held by trustees are invested in money market securities, maturing within one year from the time of purchase, or US treasury obligations and are reported at amortized cost. Deposits At year-end, the carrying amount of the City's deposits with financial institutions was $1,128,066 and the bank balance was $2,244,568; $1,744,568 of that amount was exposed to custodial credit risk because it was uninsured and is collateralized with securities held by the pledging financial institution. Investments City Charter, Ordinance, and Trust Agreements authorize the City to invest in US treasury obligations, US agency obligations, certificates of deposit that are fully insured or collateralized, banker’s acceptances issued by the 10 largest domestic banks and the 20 largest international banks, A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by US government securities, repurchase agreements whose underlying collateral consist of the foregoing, money market funds whose portfolios consist of the foregoing and the Arizona Local Government Investment Pools 5 and 7. Cash and investments as of June 30, 2015 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $400,229,067 1,128,066 $401,357,133 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total pooled cash and investments $303,878,437 87,267,610 10,211,086 $401,357,133 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) The City had a net increase in the fair value of investments during fiscal year 2014-15 of $401,295. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. At June 30, 2015, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Repurchase agreements Cash held with trustee Mutual funds State investment pool Fair Value 12 Months or Less 13 - 24 Months 25 - 36 Months $ 99,255,208 157,171,321 72,880,707 3,181,621 11,837,797 10,199,545 45,702,868 $400,229,067 $ 25,166,143 55,714,607 72,880,707 3,181,621 11,837,797 10,199,545 45,702,868 $224,683,288 $ 21,298,931 74,486,575 $95,785,506 $52,790,134 26,970,139 $79,760,273 Interest rate risk. One of the ways the City limits its exposure to fair value losses arising from rising interest rates is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Although the City’s formal investment policy allows for investment maturities up to 5 years from the date of purchase, in general, the City limits all securities to a final maturity of no more than three years and assumes that its callable investments will not be called. In general, it is the City’s intent to hold investments to maturity. Credit risk. The City addresses credit risk through the investment policy by restricting the allowable investment instruments. The investments in the US agency obligations were rated AA+ and money market funds were rated AAAm by Standard & Poor’s. The repurchase agreements are between JP Morgan and the City of Tempe, Arizona and are considered a short term debt obligation of the bank. The Arizona Local Government Investment Pool 5 is currently rated AAAf/S1+ by Standard & Poor’s. Concentration of Credit Risk. The City policy places no limit on the amount that the City may invest in any one issuer of the US treasury obligations and the US agency obligations. The investment policy does establish a maximum percentage of 10% in banker’s acceptances, 20% in commercial paper and 25% in repurchase agreements. The maximum investment in any one issuer for certificates of deposits is 33% and for repurchase agreements is 10%. The City is required to disclose if 5% or more of its investments are in securities of a single issuer. As of June 30, 2015, 24.80% of the City’s investments are in US Treasuries, 12.08% of the City’s investments are in Fannie Mae, 15.40% of the City’s investments are in Federal Home Loan Bank, 8.09% of the City’s investments are in Federal Home Loan Mortgage Corporation securities, 18.21% in money market funds and 11.42% of the City’s investments are in the State of Arizona Local Government Investment Pool 5. Custodial Credit Risk. The City’s investment in the State of Arizona Local Government Investment Pool (LGIP) is stated at fair value, which approximates the value of the City’s pool shares. The LGIP is operated by the Arizona State Treasurer’s Office, as authorized by Arizona Revised Statutes, §35-326. Arizona Revised Statutes, §35-312 and §35-313, regulate authorized investments. The Arizona State Legislature has created the Arizona Board of Investments which reviews the investment of state monies, serves as trustees of the Permanent Land Trust Funds, and approves the State Treasurer’s Office Investment Policy. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS AND INTERFUND TRANSFERS Due to/from other funds consisted of the following at June 30, 2015: Due to 1,419,572 $ 1,419,572 General fund Non-major governmental funds Total governmental funds Due from $ 1,419,572 $ 1,419,572 $ The interfund balances at June 30, 2015 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2015 are expected to be repaid within one year. The interfund balances between the governmental funds and interfund balances between the proprietary funds have been eliminated in the government-wide statement of net position. Transfers Out Transit Special Revenue General Transfers In General General Obligation Debt Service Transit Capital Projects Non-major Governmental Water and Wastewater Golf Total $ - $ - 657,920 $ - - - $ - - 4,924,600 - 5,162,636 - - 5,389,812 Non-major Governmental $ 332,678 - 5,389,812 4,053,806 $4,711,726 General Obligation Debt Service $10,087,236 4,951 5,407,699 - Water and Wastewater $ Solid Waste 20,750 $ 5,246,804 296,075 - 23,873 $ 5,769,201 74,000 $ 5,637,629 $ - Total $ 353,428 4,951 5,914,626 - 5,389,812 97,000 14,779,180 - 5,162,636 - 97,873 101,951 $ 31,697,555 The interfund transfers generally fall within one of the following categories: 1) pay-as-you-go financing transfers into capital project funds; 2) transfers to cover debt service payments; or 3) transfers to cover operating expenditures in accordance with City policy. 67 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE On November 10, 2004 the City entered into an intergovernmental agreement with the Arizona Tourism and Sports Authority (“TSA”) for the renovation of the Tempe Diablo Stadium Complex. On September 1, 2005, the City funded the project through the issuance of municipal bonds (see Note 9). The TSA agreed to reimburse the City $12,000,000 for their contribution, plus interest at the bond rate (3.50% to 5.00%). A note receivable was recorded in the General Obligation Debt Service Fund for the TSA’s portion. Payments are received semi-annually and any unpaid interest is capitalized. Due to capitalizing interest, at June 30, 2015 the note receivable balance is $11,374,896. In August 2008, the City advanced to the Downtown Tempe Community (DTC) $250,000 to begin operations. The DTC is to repay the advance at zero percent interest rate when the district is terminated. During the construction of the light rail, the City entered into two development agreements to add a light rail station at Washington and Center Parkway. Each agreement has a total contribution to the City of $1.3 million, payable at $130,000 annually over a five and six year period with the remaining balance due the following year. In addition, there is an option for a prepayment equal to the net present value of the unpaid balance calculated using a 4.50% discount rate. At June 30, 2015 the note receivable balance in the Transit Special Revenue fund is $1,703,793 and the corresponding revenue has been reported as a deferred inflow of resources. In accordance with a development agreement, the City has deferred certain water and sewer development fees. Commencing in August 2011, the City receives $12,324 monthly over a 10 year period with an interest rate of 4.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2015 was $797,366. In August 2011, in accordance with a development agreement, the City has deferred certain water and sewer development fees. The City will use the sales tax rebate due to the developer to pay for the deferred development fees. The outstanding fees accrue at an interest rate of 2.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2015 was $446,703. In two installment payments in 2015, the Water and Wastewater Enterprise Fund loaned the Golf Enterprise Fund a total of $2.5 million for an irrigation system at Rolling Hills Golf Course. Currently the interest rate is .90% and can fluctuate based on the City’s average earnings on its investments. The loan is repaid in an annual installment of $137,150 commencing June 30, 2017 through June 30, 2036. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2015 was $2,500,000 (see Note 9). NOTE 7 - JOINT VENTURE The City currently participates in two joint ventures, the Subregional Operating Group and Valley Metro Rail, Inc. Subregional Operating Group (SROG) The City participates with the cities of Phoenix, Mesa, Scottsdale, and Glendale in an intergovernmental agreement for the construction, operation and maintenance of jointly used facilities including the 91st Avenue Wastewater Treatment Plant, the Salt River Project Outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix is the management agency who has agreed to be responsible for the planning, designing, constructing, operating and maintaining of the jointly used sewage facilities and to perform the required accounting, administrative and other support functions. The agreement provides for the formation of a Multicity Subregional Operating Group Committee ("Multicity SROG"), whose members are composed of a representative officially appointed upon motion and order of each city, for the specific purpose of making recommendations concerning specific decisions or courses of action for the jointly used facilities. The Multicity SROG annually reviews and approves the capital improvements and replacements budget and also the operating budget for the jointly used facilities. 68 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Subregional Operating Group (SROG) (Continued) As of June 30, 2014 (the latest information available), the City has a 15.68% equity interest or purchased capacity in the 91st Avenue Wastewater Treatment Plant and other varied, yet less significant percentages of equity interest in the other jointly used facilities. Purchased capacity is a measure of the right of use owned by the City in the total capacity of the wastewater treatment plant. The City contributes to capital improvements based upon equity interest and contributes to operating and maintenance expenses based upon proportional flow and sewage strength. The City has financed its share of capital improvement costs through the issuance of general obligation bonds, excise tax bonds, development fees and grants. The joint venture has not issued any debt. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2014 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 828,545 (28,732) $ 799,813 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net position $ 52,348 (81,581) (2,341) ($ 31,574) The City's net investment and its share of operating and maintenance expenses are recorded in the Water and Wastewater Enterprise Fund. The City's equity in joint venture at June 30, 2015, was $ 126,234,370. The City’s net loss from joint venture was $ 7,126,080 for the fiscal year ended June 30, 2015. Separately audited financial statements for the jointly used wastewater treatment and transportation facilities may be obtained from the Arizona Municipal Water Users Associations, 3003 North Central, Suite 1550, Phoenix, Arizona, 85012. Valley Metro Rail, Inc. (VMRI) The City currently participates with the cities of Phoenix, Mesa and Glendale in a joint powers agreement for the design, construction and operation of a light rail transit system. Valley Metro Rail, Inc. (VMRI) is the management agency that was incorporated to administer the joint powers agreement between the cities. In addition, VMRI has oversight responsibility for the planning, designing, construction and operation of a regional mass transit light rail system. The agreement provides voting rights for members of the representative cities related to strategic initiatives including passage of an annual capital program and annual operating budget. As of June 30, 2015, the City has a 21.44% (unaudited) equity interest in the joint venture. The light rail project was completed and began operations in December 2008. Member contributions to the joint venture were offset by a Federal funding agreement from the U.S. Department of Transportation. These contributions were recognized as intergovernmental revenue in the Transit Capital Projects fund. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2014 (the latest information available) is as follows: Total assets Total liabilities Total net position $ 1,312,800,805 (118,498,222) $ 1,194,302,583 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Valley Metro Rail, Inc. (VMRI) (Continued) Total revenues Total expenses Total non-operating revenues Total non-operating expenses Net increase in net position $ 147,264,391 (79,012,484) 7,096,046 (26,468,938) $ 48,879,015 The City has an ongoing financial responsibility as a result of the joint powers agreement to participate in the cost to construct and operate the light rail project and related improvements less any federal reimbursements and operating fares. The equity interests will be determined, and periodically adjusted, based on the number of rail mileage located within each city. The City’s equity in joint venture at June 30, 2015 was $ 260,787,188. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. NOTE 8 - CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2015 is as follows: Balances June 30, 2014 Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment $ 89,605,173 6,601,860 96,207,033 Additions $ 49,626,981 49,626,981 310,876,270 728,566,961 198,893,270 178,939,155 1,417,275,656 (104,284,652) (360,007,764) (68,439,386) (135,019,856) 3,635,359 3,635,359 Transfers in (out) Retirements $ (1,817,273) (1,817,273) Balances June 30, 2015 $ $ 89,605,173 (19,570,299) 34,841,269 (19,570,299) 124,446,442 (734,581) (6,182,468) (17,950,971) (31,444,763) (56,312,783) 7,776,149 4,669,569 7,124,581 19,570,299 310,141,689 730,160,642 185,611,868 158,254,332 1,384,168,531 (11,046,971) (16,875,064) (7,927,086) (9,185,305) 734,581 6,182,468 17,932,315 31,444,763 - (114,597,042) (370,700,360) (58,434,157) (112,760,398) Total accumulated depreciation (667,751,658) (45,034,426) Governmental activities capital assets, net $ 845,731,031 $ 8,227,914 56,294,127 - (656,491,957) - $ 852,123,016 70 $ (1,835,929) $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2014 Business-type activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 6,693,377 411,244 7,104,621 $ Additions Retirements 17,031,867 17,031,867 $ 52,533,286 319,592,976 229,071,414 57,145,781 658,343,457 Accumulated depreciation: Buildings (24,661,651) Infrastructure (145,921,531) Improvements (98,526,737) Machinery and equipment (43,589,623) Total accumulated depreciation (312,699,542) Business-type activities capital assets, net $ 352,748,536 2,066,626 2,066,626 $ (2,730,617) (17,162,982) (42,278,912) (30,654,326) (92,826,837) (1,263,447) (9,348,348) (7,038,184) (2,744,458) (20,394,437) $(1,295,944) (2,929,814) (2,929,814) Transfers in (out) (4,790,328) (4,790,328) $ 6,693,377 9,722,969 16,416,346 4,624,474 65,704 100,150 4,790,328 49,802,669 307,054,468 186,858,206 28,658,231 572,373,574 2,730,617 17,162,982 42,278,912 30,654,326 92,826,837 $ (2,929,814) $ Balances June 30, 2015 - (23,194,481) (138,106,897) (63,286,009) (15,679,755) (240,267,142) $348,522,778 For the year ended June 30, 2015, the City capitalized net interest costs of $259,596. Total interest expense in the Business-type Activities Enterprise Fund before capitalization was $12,462,957. Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Police Fire Community services Public works Community development Human services Municipal court City manager City attorney Internal services Unallocated depreciation Total depreciation expense 71 $ $ 5,625,790 2,205,963 6,723,135 26,285,987 1,668,105 997 42,105 38,556 659 487,609 1,955,520 45,034,426 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT General Obligation Bonds. The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both general government and proprietary activities. Bonds issued for proprietary activities are reported in the Proprietary Funds as they are to be repaid from proprietary revenues. In the current year, $43,965,000 was issued to finance improvements for Street Improvements and Infrastructure Preservation, Community Services, Parks, and Public Safety. In addition, general obligation bonds have been issued to refund previously issued general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds are generally issued as 10-20 year serial bonds with varying amounts of principal maturing each year. General obligation bonds outstanding at June 30, 2015, were as follows (the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated): $74,495,000 2006 Capital Improvement Serial Bonds due in annual installments of $2,150,000 to $5,900,000 through July 1, 2025; interest at 3.50% to 5.00% $20,690,000 2007 Capital Improvement Refunding Issue Serial Bonds due in annual installments of $20,000 to $5,860,000 through July 1, 2018; interest at 3.75% to 5.00% $76,485,000 2007A Capital Improvement Serial Bonds due in annual installments of $2,220,000 to $5,350,000 through July 1, 2026; interest at 3.50% to 4.50% $66,365,000 2008A Capital Improvement Serial Bonds due in annual installments of $1,870,000 to $5,080,000 beginning July 1, 2009 through July 1, 2028; interest at 3.375% to 4.375% $56,055,000 2009A Capital Improvement Serial Bonds due in annual installments of $1,760,000 to $4,200,000 beginning July 1, 2011 through July 1, 2029; interest at 3.00% to 4.375% $16,755,000 2010A Capital Improvement Serial Bonds due in annual installments of $500,000 to $2,160,000 beginning July 1, 2011 through July 1, 2019; interest at 2.50% to 5.00% $28,410,000 2010B Capital Improvement Serial Bonds due in annual installments of $2,250,000 to $2,295,000 beginning July 1, 2020 through July 1, 2030; interest at 4.21% to 5.719%, net of 35% federal credit $60,280,000 2010C Capital Improvement Refunding Issue Serial Bonds due in annual installments of $1,225,000 to $7,735,000 through July 1, 2022; interest at 1.25% to 5.00% $5,375,000 2011A Capital Improvement Serial Bonds due in annual installments of $475,000 to $605,000 beginning July 1, 2013 through July 1, 2021; interest at 2.00% to 4.00% $7,005,000 2012A Capital Improvement Serial Bonds due in annual installments of $635,000 to $765,000 beginning July 1, 2013 through July 1, 2022; interest at 2.00% to 2.25% $12,765,000 2012B Capital Improvement Refunding Serial Bonds due in annual installments of $1,055,000 to $3,320,000 beginning July 1, 2013 through July 1, 2023; interest at 2.00% to 3.50% $13,675,000 2013A Capital Improvement Serial Bonds due in annual installments of $515,000 to $940,000 beginning July 1, 2014 through July 1, 2033; interest at 1.00% to 4.00% $41,070,000 2013B Capital Improvement Refunding Serial Bonds due in annual installments of $90,000 to $8,205,000 beginning July 1, 2014 through July 1, 2024; interest at 1.00% to 5.00% $15,550,000 2014B Capital Improvement Refunding Serial Bonds due in annual installments of $1,025,000 to $5,320,000 beginning July 1, 2015 through July 1, 2023; interest at 2.00% to 4.00% $45,675,000 2014C Capital Improvement Refunding Serial Bonds due in annual installments of $1,095,000 to $14,190,000 beginning July 1, 2015 through July 1, 2024; interest at 1.00% to 4.00% $43,695,000 2015A Capital Improvement Serial Bonds due in annual installments of $1,740,000 to $2,925,000 beginning July 1, 2016 through July 1, 2035; interest at 1.00% to 3.75% Total general obligation bonds outstanding (excluding current portion of general obligation bonds outstanding) 72 $ 13,685,000 4,610,000 23,240,000 50,110,000 43,780,000 8,185,000 28,410,000 43,490,000 3,385,000 5,050,000 9,530,000 12,625,000 37,705,000 14,525,000 44,580,000 43,965,000 $ 386,875,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) General Obligation Bonds (Continued) The following is a summary of total debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 Principal Interest Total $ 30,725,000 31,920,000 32,070,000 30,460,000 31,525,000 148,665,000 65,175,000 16,335,000 $ 14,564,773 13,317,247 12,090,259 10,991,997 9,941,434 31,642,801 9,518,020 1,789,413 $ 45,289,773 45,237,247 44,160,259 41,451,997 41,466,434 180,307,801 74,693,020 18,124,413 $ 386,875,000 $ 103,855,944 $ 490,730,944 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 Principal Interest Total $ 13,680,000 14,035,000 13,945,000 12,865,000 13,295,000 59,820,000 37,930,000 16,335,000 $ 6,558,267 5,995,591 5,527,147 5,085,935 4,667,429 16,430,665 7,134,639 1,789,413 $ 20,238,267 20,030,591 19,472,147 17,950,935 17,962,429 76,250,665 45,064,639 18,124,413 $ 181,905,000 $ 53,189,086 $ 235,094,086 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 Principal Interest $ 17,045,000 17,885,000 18,125,000 17,595,000 18,230,000 88,845,000 27,245,000 $ $ 204,970,000 $ 73 8,006,506 7,321,656 6,563,112 5,906,062 5,274,006 15,212,135 2,383,382 50,666,859 Total $ 25,051,506 25,206,656 24,688,112 23,501,062 23,504,006 104,057,135 29,628,382 $ 255,636,859 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Special Assessment Bonds Payable with Governmental Commitment. As trustee for improvement districts, the City is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2015, the special assessments receivable of $21,727,590, together with amounts paid in advance and interest to be received over the life of the assessment period, are adequate for the scheduled maturities of the bonds payable and the related interest. Improvement bonds are collateralized by properties within the districts. In the event of default by the property owner, the City may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. As of June 30, 2015, there is $203,536 in delinquent receivables. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. In addition, there are $357,652 in special assessments that are due to be received upon meeting the conditions in the development agreement. Special assessment bonds payable with governmental commitment outstanding at June 30, 2015, were as follows (the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated): $4,405,000 ID 179 Special Assessment Bonds Payable with Governmental Commitment issued June 1, 2005; maturing January 1, 2021; due in annual installments of $220,000 to $385,000; interest at 4.10% $25,190,000 ID 180 Special Assessment Bonds Payable with Governmental Commitment issued February 27, 2008; maturing January 1, 2029; due in annual installments of $760,000 to $1,925,000; interest at 5.00% Total special assessment bonds outstanding $ 1,165,000 20,010,000 $ 21,175,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2016 2017 2018 2019 2020 2021-2025 2026-2029 $ 1,195,000 1,250,000 1,315,000 1,380,000 1,445,000 7,420,000 7,170,000 $ 1,019,178 959,650 897,190 831,570 762,768 2,732,533 738,750 $ 2,214,178 2,209,650 2,212,190 2,211,570 2,207,768 10,152,533 7,908,750 $ 21,175,000 $ 7,941,639 $ 29,116,639 74 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations. On September 1, 2005, the City issued $21,315,000 of Excise Tax Revenue Obligations. The proceeds were used to finance the construction and renovation of various projects for Tempe Diablo Stadium, various cemetery improvements and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $21,315,000 2005 Excise Tax Revenue Obligations due in annual installments of $345,000 to $2,135,000 through July 1, 2016; interest at 3.50% to 5.00% The following is a summary of the debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2016 $ 1,390,000 Interest 75 $ 55,600 Total $ 1,445,600 $ 1,390,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Excise Tax Revenue Obligations. On May 1, 2006 the City issued $22,265,000 of Excise Tax Revenue Obligations. The proceeds were used to fund a portion of the cost of the Tempe Center for the Arts Project and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.10% performing arts center tax, approved by voters on May 16, 2000, which are restricted to the Tempe Center for the Performing Arts Project. Additionally, the payments to be made by the City are secured by a subordinate lien pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing, including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Performing Arts Center Excise Taxes and the Excise Taxes which it presently imposes will continue to be imposed in each Fiscal Year so that the sum of (A) the Performing Arts Center Excise Taxes for such Fiscal Year plus (B) the excess of the Excise Taxes for such Fiscal Year over the Debt Service requirements on the Outstanding Senior Excise Tax Obligations for such Fiscal Year, shall be equal to at least three times the total of the Debt Service with respect to Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. The City further covenants and agrees that so long as any Special Parity Obligations are outstanding, the Performing Arts Center Excise Taxes, the Excise Taxes and the Special Excise Taxes will be imposed in each Fiscal Year so that the sum of (A) Performing Arts Center Excise Taxes for such Fiscal Year, plus (B) Special Excise Taxes for such Fiscal Year plus (C) the excess of the Excise Taxes for such Fiscal Year over the Debt Service on the Outstanding Senior Excise Tax Obligations for such Fiscal Year shall be equal to at least three times the total of the Debt Service with respect to the Parity Obligations and the Special Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year's actual Debt Service with respect to Parity Obligations and Special Parity Obligations, the City will either impose new Excise Taxes or Special Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations and Special Parity Obligations and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year’s Debt Service with respect to Parity Obligations and Special Parity Obligations. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. 76 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $22,265,000 2006 Excise Tax Revenue Obligations due in annual installments of $1,650,000 to $2,385,000 through July 1, 2016; interest at 4.00% to 4.50% $ 2,385,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2016 $ 2,385,000 Interest $ 107,326 Total $ 2,492,326 Excise Tax Revenue Refunding Obligations. On January 1, 2007, the City issued $21,310,000 of Excise Tax Revenue Obligations. The proceeds were used to refund $4,205,000 of the 2000A Excise Tax Revenue Obligations, $17,025,000 of the 2003 Excise Tax Revenue Refunding Obligations, and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, State-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $21,310,000 2007 Excise Tax Revenue Refunding Obligations due in annual installments of $25,000 to $3,100,000 through July 1, 2022; interest at 4.00% to 5.00% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2016 2017 2018 2019 2020 2021-2022 $ 2,550,000 2,675,000 2,810,000 2,955,000 3,100,000 5,410,000 $ 947,950 820,450 686,700 546,200 398,450 367,875 $ 3,497,950 3,495,450 3,496,700 3,501,200 3,498,450 5,777,875 $19,500,000 $ 3,767,625 $ 23,267,625 Interest 77 Total $19,500,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Excise Tax Revenue Obligations. On June 17, 2008 the City issued $30,170,000 of Excise Tax Revenue Obligations. The proceeds were used to fund the costs associated with a portion of the City’s light rail project and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.50% transit excise tax revenues, approved by voters on September 10, 1996, which are restricted to public transit use. The City covenants and agrees that, so long as any of the Parity Obligations remain outstanding and the principal and interest shall be unpaid, it will not further encumber the Transit Excise Taxes on a parity basis unless the Transit Excise Taxes collected in the immediately preceding fiscal year shall have amounted to at least two times the highest combined principal and interest debt service payments, or any required deposits, for any succeeding fiscal year for with respect to the transit excise tax revenue Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $30,170,000 2008 Excise Tax Revenue Obligations due in annual installments of $480,000 to $1,120,000 through July 1, 2038; interest at 3.50% to 5.00% $26,105,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 2036-2038 Principal Interest Total 675,000 705,000 730,000 760,000 790,000 4,490,000 5,610,000 7,160,000 5,185,000 $ 1,217,419 1,190,419 1,162,219 1,133,019 1,102,619 4,987,625 3,852,000 2,305,750 500,175 $ 1,892,419 1,895,419 1,892,219 1,893,019 1,892,619 9,477,625 9,462,000 9,465,750 5,685,175 $26,105,000 $17,451,245 $43,556,245 $ Excise Tax Revenue Obligations. On June 24, 2009, the City issued $23,615,000 of Excise Tax Revenue Obligations: $14,300,000 of tax-exempt obligations (Series 2009A) and $9,315,000 of taxable obligations (Series 2009B) referred to as Build America Bonds. As an issuer of Build America Bonds, the City qualifies, and intends to apply, for the interest subsidy payment directly from the US Treasury. The amount of the interest subsidy payment is 35.00% of the corresponding interest payable on the Series 2009B taxable obligations on any interest payment date. The proceeds were used to finance the construction of a public parking garage and various projects for the Tempe Water/Wastewater Department and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing 78 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $14,300,000 2009A Excise Tax Revenue Obligations due in annual installments of $770,000 to $1,340,000 through July 1, 2023; interest at 3.00% to 5.00% $9,315,000 2009B Excise Tax Revenue Obligations due in annual installments of $1,400,000 to $1,715,000 through July 1, 2029; interest at 4.23%, net of 35.00% federal credit Total $ 9,175,000 9,315,000 $ 18,490,000 The following is a summary of total debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2029 Principal $ Interest 960,000 1,010,000 1,060,000 1,115,000 1,170,000 6,715,000 6,460,000 $18,490,000 79 $ Total 827,684 779,684 729,184 676,184 620,434 2,239,169 696,069 $ 1,787,684 1,789,684 1,789,184 1,791,184 1,790,434 8,954,169 7,156,069 $ 6,568,408 $ 25,058,408 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2029 Principal $ Interest 280,000 295,000 310,000 325,000 340,000 1,960,000 1,885,000 $ 5,395,000 $ 241,544 227,543 212,795 197,303 181,049 653,615 203,011 $ 1,916,860 Total $ 521,544 522,543 522,795 522,303 521,049 2,613,615 2,088,011 $ 7,311,860 The following is a summary of enterprise debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2029 Principal $ Interest 680,000 715,000 750,000 790,000 830,000 4,755,000 4,575,000 $ 13,095,000 $ Total 586,140 552,141 516,389 478,881 439,385 1,585,555 493,057 $ 1,266,140 1,267,141 1,266,389 1,268,881 1,269,385 6,340,555 5,068,057 $ 4,651,548 $17,746,548 Excise Tax Revenue Obligations. On June 23, 2011, the City issued $39,125,000 of Excise Tax Revenue Obligations: $31,825,000 of tax-exempt obligations (Series 2011A) and $7,300,000 of taxable obligations (Series 2011B) referred to as Qualified Energy Conservation Bonds. As an issuer of these bonds, the City qualifies, and intends to apply, for the interest subsidy payment directly from the US Treasury. The amount of the interest subsidy payment is 72.38% of the corresponding interest payable on the Series 2011B taxable obligations on any interest payment date. The proceeds were used to finance the construction of energy retrofit improvements and various projects for the Tempe Water/Wastewater Department and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and 80 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $31,825,000 2011A Excise Tax Revenue Obligations due in annual installments of $1,030,000 to $2,375,000 through July 1, 2031; interest at 2.00% to 5.00% $7,300,000 2011B Excise Tax Revenue Obligations due in one installment of $7,300,000 on July 1, 2025; interest due semi-annually at 4.87%, net of 72.38% federal credit Total $ 27,440,000 7,300,000 $ 34,740,000 The following is a summary of total debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, Principal Interest Total 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031 $ 1,195,000 1,245,000 1,300,000 1,355,000 1,425,000 15,565,000 10,280,000 2,375,000 $ 1,442,108 1,394,308 1,344,508 1,282,508 1,214,758 4,930,540 2,185,000 118,750 $ 2,637,108 2,639,308 2,644,508 2,637,508 2,639,758 20,495,540 12,465,000 2,493,750 $ 34,740,000 $ 13,912,480 $ 48,652,480 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 Principal $ Interest 30,000 30,000 30,000 35,000 35,000 7,501,000 $ 7,661,000 $ 115,508 114,308 113,108 111,808 110,058 522,490 $ 1,087,280 Total $ 145,508 144,308 143,108 146,808 145,058 8,023,490 $ 8,748,280 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031 $ 1,165,000 1,215,000 1,270,000 1,320,000 1,390,000 8,064,000 10,280,000 2,375,000 $ 1,326,600 1,280,000 1,231,400 1,170,700 1,104,700 4,408,050 2,185,000 118,750 $ 2,491,600 2,495,000 2,501,400 2,490,700 2,494,700 12,472,050 12,465,000 2,493,750 $ 27,079,000 $ 12,825,200 $ 39,904,200 Excise Tax Revenue Obligations. On August 31, 2011, the City issued $18,300,000 of Excise Tax Revenue Refunding Obligations. The Obligations were issued for the purpose of providing funds (i) to refund in advance of maturity portions of certain outstanding Performing Arts Center Excise Tax Revenue Obligations (the “Obligations Being Refunded”) and (ii) to pay the costs and expenses relating to the issuance of the Obligations. The City has collateralized the obligations by a pledge of 0.10% performing arts center tax, approved by voters on May 16, 2000, which are restricted to the Tempe Center for the Performing Arts Project. Additionally, the payments to be made by the City are secured by a subordinate lien pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing, including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The general Excise Taxes do not include the Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. 82 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The City covenants and agrees that the Performing Arts Center Excise Taxes and the Excise Taxes which it presently imposes will continue to be imposed in each Fiscal Year so that the sum of (A) the Performing Arts Center Excise Taxes for such Fiscal Year plus (B) the excess of the Excise Taxes for such Fiscal Year over the Debt Service requirements on the Outstanding Senior Excise Tax Obligations for such Fiscal Year, shall be equal to at least three times the total of the Debt Service with respect to Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. The City further covenants and agrees that so long as any Special Parity Obligations are outstanding, the Performing Arts Center Excise Taxes, the Excise Taxes and the Special Excise Taxes will be imposed in each Fiscal Year so that the sum of (A) Performing Arts Center Excise Taxes for such Fiscal Year, plus (B) Special Excise Taxes for such Fiscal Year plus (C) the excess of the Excise Taxes for such Fiscal Year over the Debt Service on the Outstanding Senior Excise Tax Obligations for such Fiscal Year shall be equal to at least three times the total of the Debt Service with respect to the Parity Obligations and the Special Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year's actual Debt Service with respect to Parity Obligations and Special Parity Obligations, the City will either impose new Excise Taxes or Special Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations and Special Parity Obligations and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year’s Debt Service with respect to Parity Obligations and Special Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $18,300,000 2011 Excise Tax Revenue Refunding Obligations due in annual installments of $100,000 to $3,295,000 through July 1, 2020; interest at 2.00% to 5.00% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 Principal $ Interest 2,825,000 2,880,000 3,025,000 3,145,000 3,295,000 $ 15,170,000 83 $ Total 604,350 547,850 403,850 283,100 138,850 $ 3,429,350 3,427,850 3,428,850 3,428,100 3,433,850 $ 1,978,000 $ 17,148,000 $ 15,170,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Excise Tax Revenue Obligations. On June 11, 2012, the City issued $30,500,000 of Excise Tax Revenue and Revenue Refunding Obligations: $8,390,000 of revenue obligations and $22,110,000 of revenue refunding obligations. The proceeds were used (i) to refund in advance of maturity certain outstanding Excise Tax Revenue Obligations of the City, (ii) finance the construction and acquisition of certain water and wastewater improvements, and (iii) to pay the costs of execution and delivery of the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the taxes collected and paid to the City under the 0.50% transportation privilege (sales) and use tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, the 0.10% Performing Arts Center Excise Taxes approved by voters of the City on May 16, 2000, which are restricted to the Tempe Center for the Arts Project, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. In the following outstanding balance, the 7/1/2015 principal payment was deducted as the fiscal year 2015 resources were dedicated. $30,500,000 2012 Excise Tax Revenue and Refunding Obligations due in annual installments of $280,000 to $5,125,000 through July 1, 2032; interest at 1.50% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2032 Principal Interest Total 305,000 1,735,000 1,805,000 1,895,000 1,995,000 14,380,000 2,590,000 1,160,000 $ 1,208,975 1,196,775 1,127,375 1,037,125 942,375 2,832,125 461,863 61,250 $ 1,513,975 2,931,775 2,932,375 2,932,125 2,937,375 17,212,125 3,051,863 1,221,250 $ 25,865,000 $ 8,867,863 $ 34,732,863 $ 84 $25,865,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 Principal $ Interest 1,415,000 1,475,000 1,550,000 1,630,000 12,275,000 $ 18,345,000 $ 903,100 903,100 846,500 772,750 695,250 1,887,750 $ 6,008,450 Total $ 903,100 2,318,100 2,321,500 2,322,750 2,325,250 14,162,750 $ 24,353,450 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2032 Principal Interest $ 305,000 320,000 330,000 345,000 365,000 2,105,000 2,590,000 1,160,000 $ 305,875 293,675 280,875 264,375 247,125 944,375 461,863 61,250 $ 7,520,000 $ 2,859,413 Total $ 610,875 613,675 610,875 609,375 612,125 3,049,375 3,051,863 1,221,250 $10,379,413 Excise Tax Revenue Refunding Obligations. On September 12, 2012, the City issued $41,390,000 of Excise Tax Revenue Obligations. The proceeds (including the premium) were used to refund $45,295,000 of the 2007 Variable Rate Demand Excise Tax Revenue Obligations and pay costs incurred to issue the obligations. The payments required to be made by the City to the Trustee under the Purchase Agreement are payable from and secured by a pledge of revenues from an excise tax collected by the City under a 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which is restricted to public transit use (the “Transit Excise Taxes”). Such tax is levied by the City upon persons on account of their business activities within the City. The amount of taxes due are calculated by applying the 0.50% tax rate against the gross proceeds of sales or gross income derived from the business activities. Such taxes are collected by the City on a monthly basis. 85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Such lien on and pledge of the Transit Excise Taxes is on parity with that for the City’s Transit Excise Tax Revenue Obligations, Series 2008, currently outstanding in the aggregate principal amount of $26,105,000. $41,390,000 2012 Excise Tax Revenue Refunding Obligations due in annual installments of $430,000 to $2,645,000 through July 1, 2037; interest at 1.50% to 5.00% $38,795,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 2036-2037 $ 1,130,000 1,150,000 1,170,000 1,215,000 1,265,000 7,245,000 9,250,000 11,195,000 5,175,000 $ 1,636,044 1,613,444 1,596,194 1,549,394 1,500,794 6,562,219 4,577,119 2,629,844 351,881 $ 2,766,044 2,763,444 2,766,194 2,764,394 2,765,794 13,807,219 13,827,119 13,824,844 5,526,881 $38,795,000 $ 22,016,933 $ 60,811,933 Excise Tax Revenue Obligations. On June 26, 2013, the City issued $27,240,000 of Excise Tax Revenue Obligations to finance the construction and acquisition of various water and wastewater improvements for the City and to pay the costs of execution and delivery of the Obligations. The payments to be made by the City will be secured by a pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, State-shared sales and income taxes, fees for licenses and permits, and State revenue-sharing now or hereafter validly imposed by the City or contributed, allocated and paid over to the City and not earmarked by the contributor for a contrary or inconsistent purpose, including, without limitation, all fines and forfeitures (all such taxes and receipts herein referred to as “Excise Taxes”), but not (i) excise taxes collected and paid to the City under the 0.50% transaction privilege (sales) and use tax approved by the voters of the City on September 10, 1996, which are restricted to improvement and operation of the public transit system (such taxes and receipts herein referred to as “Transit Excise Taxes”), (ii) excise taxes collected and paid to the City under the 0.10% transaction privilege (sales) and use tax approved by the voters of the City on May 16, 2000, the use of which is restricted to the construction and operation of a performing arts center (such taxes and receipts herein referred to as the “Performing Arts Center Excise Taxes”), (iii) excise taxes collected and paid to the City under the 1.00% increase in the transient lodging tax on hotels approved by the voters of the City on September 10, 2002, which are restricted to funding programs of the Tempe Convention and Visitor’s Bureau (such taxes and receipts herein referred to as “Convention and Visitor’s Bureau Taxes”) or (iv) any other similar tax restricted as to its use. The pledge of the Excise Taxes is on a parity pledge with the Existing Obligations. 86 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $27,240,000 2013 Excise Tax Revenue Obligations due in annual installments of $905,000 to $2,025,000 through July 1, 2033; interest at 1.75% to 5.00% $25,335,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2033 Principal Interest Total 970,000 1,010,000 1,030,000 1,045,000 1,090,000 6,315,000 8,065,000 5,810,000 $ 1,142,375 1,103,575 1,085,900 1,067,875 1,026,075 4,257,625 2,512,125 530,775 $ 2,112,375 2,113,575 2,115,900 2,112,875 2,116,075 10,572,625 10,577,125 6,340,775 $ 25,335,000 $ 12,726,325 $ 38,061,325 $ Excise Tax Revenue Obligations. On May 19, 2015, the City issued $11,810,000 of Excise Tax Revenue Obligations to finance the construction and acquisition of various water and wastewater improvements for the City and to pay the costs of execution and delivery of the Obligations. The payments to be made by the City will be secured by a pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, State-shared sales and income taxes, fees for licenses and permits, and State revenue-sharing now or hereafter validly imposed by the City or contributed, allocated and paid over to the City and not earmarked by the contributor for a contrary or inconsistent purpose, including, without limitation, all fines and forfeitures (all such taxes and receipts herein referred to as “Excise Taxes”), but not (i) excise taxes collected and paid to the City under the 0.50% transaction privilege (sales) and use tax approved by the voters of the City on September 10, 1996, which are restricted to improvement and operation of the public transit system (such taxes and receipts herein referred to as “Transit Excise Taxes”), (ii) excise taxes collected and paid to the City under the 0.10% transaction privilege (sales) and use tax approved by the voters of the City on May 16, 2000, the use of which is restricted to the construction and operation of a performing arts center (such taxes and receipts herein referred to as the “Performing Arts Center Excise Taxes”), (iii) excise taxes collected and paid to the City under the 1.00% increase in the transient lodging tax on hotels approved by the voters of the City on September 10, 2002, which are restricted to funding programs of the Tempe Convention and Visitor’s Bureau (such taxes and receipts herein referred to as “Convention and Visitor’s Bureau Taxes”) or (iv) any other similar tax restricted as to its use. The pledge of the Excise Taxes is on a parity pledge with the Existing Obligations. $11,810,000 2015 Excise Tax Revenue Obligations due in two installments of $10,710,000 and $1,100,000 through July 1, 2017; interest at 2.00% $11,810,000 87 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2016 2017 $ 10,710,000 1,100,000 $ 249,978 22,000 $ 10,959,978 1,122,000 $ 11,810,000 $ 271,978 $ 12,081,978 Interest Total Section 108 Guaranteed Loan. In July 2004, the City entered into a Section 108 guaranteed loan agreement with the U.S. Department of Housing and Urban Development (HUD) for funding of $7,000,000 for on-site environmental remediation of the University/Hayden Butte Redevelopment Area 5 (Rio Salado Marketplace Redevelopment). The note required interest only payments until August 2007. At that time the note was due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 5.37% to 6.01%. On May 28, 2015, HUD refinanced the loan lowering the interest rate to 1.25% to 2.35%. The City has pledged its Community Development Block Grants as security for HUD’s guaranteed loan. The City was awarded a $1,000,000 HUD Brownfield Economic Development Initiative grant to be used to pay interest on the HUD Section 108 loan until such time the development generates sufficient tax revenue to cover the debt service of the development. $7,000,000 HUD Section 108 Guaranteed Loan due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 1.25% to 2.35% $ 4,552,000 The following discloses debt service requirements as of June 30, 2015 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 Principal 371,000 387,000 405,000 423,000 442,000 2,524,000 $ 4,552,000 $ Interest 56,976 82,533 79,044 74,348 67,380 174,488 $ 534,769 $ 88 Total 427,976 469,533 484,044 497,348 509,380 2,698,488 $ 5,086,769 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Water Infrastructure Finance Authority Loans. In September 2009, the City signed two capitalization grant agreements with the Water Infrastructure Finance Authority (WIFA). The funding from these agreements was derived from the United States Environmental Protection Agency pursuant to the federal American Recovery and Reinvestment Act (ARRA) of 2009, Public Law 111-5. The loan agreement for Loan #92A174-10 is in the principal amount of $4,084,503 of which $2,200,000 will be forgivable principal and the remaining balance bears interest and administrative fees at a combined rate of 3.06%. $1,884,503 Water Infrastructure Finance Authority Loan #92A174-10 due in annual installments of $69,678 to $123,631 through July 1, 2029; interest at 1.56% and administrative fee at 1.50% $ 1,433,075 The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2015 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2029 Principal $ 83,510 86,068 88,705 91,423 94,225 516,239 472,905 $ 1,433,075 Interest and Administrative Fee $ 43,909 41,351 38,714 35,996 33,194 120,856 36,771 $ 350,791 Total 127,419 127,419 127,419 127,419 127,419 637,095 509,676 $ 1,783,866 $ The loan agreement for Loan #92A175-10 is in the principal amount of $14,045,799 and bears interest and administrative fees at a reduced ARRA rate of 2.00%. $14,045,799 Water Infrastructure Finance Authority Loan #92A175-10 due in annual installments of $578,079 to $842,152 through July 1, 2029; interest at .50% and administrative fee at 1.50% $ 10,399,207 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2015 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2029 Principal $ 651,010 664,032 677,312 690,858 704,675 3,740,500 3,270,820 $ 10,399,207 Interest and Administrative Fee $ 207,985 194,963 181,683 168,137 154,320 554,474 165,160 $ 1,626,722 89 Total 858,995 858,995 858,995 858,995 858,995 4,294,974 3,435,980 $ 12,025,929 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Improvement Note. Capital improvement note represents a borrowing to provide long-term financing for a certain major capital improvement project (see Note 6). The capital improvement note outstanding at June 30, 2015 was as follows: $2,500,000 capital improvement note issued in 2015 due to the Water and Wastewater Enterprise Fund from the Golf Fund payable in equal annual installments of $137,150 through June 30, 2036; interest at 0.9% $ 2,500,000 The following discloses debt service requirements as of June 30, 2014 segregating principal and interest, to maturity: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 2021-2025 2026-2030 2030-2035 2036 Principal $ 114,650 115,682 116,723 117,773 604,959 632,677 661,664 135,872 $ 2,500,000 Interest 22,562 22,500 21,468 20,427 19,377 80,791 53,073 24,086 1,223 $ 265,507 Total 22,562 137,150 137,150 137,150 137,150 685,750 685,750 685,750 137,095 $ 2,765,507 $ $ Capital Leases. The City has entered into capital lease agreements for equipment. These lease agreements generally require annual payments and the lease term varies from 4 to 5 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. The governmental assets acquired through capital leases are for equipment with an original cost of $111,827. Accumulated depreciation as of June 30, 2015 totaled $22,365. The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2015. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2016 2017 2018 2019 $ Total 28,490 28,490 28,490 7,123 92,593 (5,511) Less: remaining interest at 6.33% Present value of future minimum lease payments $ 90 87,082 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) The proprietary assets acquired through capital leases are for equipment with an original cost of $892,699. Accumulated depreciation as of June 30, 2015 totaled $574,433. The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2015. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2016 2017 Total minimum lease payments Less: remaining interest at 1.24% to 1.26% Total $ 223,175 63,966 287,141 (3,547) Present value of future minimum lease payments $ 283,594 Statutory Debt Limitation. In the absence of more restrictive bond authorization ballot limitations, the City is subject to state statutory limitations on the amount of net bonded debt (exclusive of revenue and special assessment bonds and purchase contracts) it may have outstanding. The statutory debt limitation is 20 percent of the secondary assessed valuation for purposes of water, wastewater, open space preserves, artificial lighting, parks, playgrounds and recreational facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities and 6 percent of the secondary assessed valuation for all other purposes. At June 30, 2015, the 20 percent debt limitation was $325,544,180 with $361,721,555 of outstanding debt. Due to the decline in property values, there is no additional capacity in the 20 percent debt margin category. The 6 percent debt limitation was $97,663,254 with $81,495,000 of outstanding debt. This provided a 6 percent debt margin of $16,168,254. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2015, was $115,489,698. Bond Covenants. The various bond indentures contain certain limitations and restrictions on annual debt service requirements, maintenance and flow of monies through various restricted accounts, minimum amounts to be maintained in various sinking funds, and minimum revenue bond coverages. Arbitrage. Under U.S. Treasury Department regulations, all government tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. The requirements stipulate, in general, the earnings from the investment of tax exempt bond proceeds that exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City has evaluated each general obligation bond and revenue bond issue subject to the arbitrage rebate requirements and has determined that no liability exists at June 30, 2015. Debt Service Coverage for Governmental General Obligation Bonds. The governmental general obligations are payable from ad valorem tax revenues to be levied on all taxable property within the City. A total of $181,905,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2035. Annual principal and interest payments on the bonds are expected to require less than 128.48% of total 2014-15 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $235,094,086. Principal and interest paid for the current year and total ad valorem tax revenues were $31,408,941 and $24,446,996, respectively. 91 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Debt Service Coverage for Business-type Activities General Obligation Bonds. The business-type general obligations are paid from the water and wastewater utility system revenues of the City. A total of $204,970,000 is outstanding in business-type general obligation bonds. Proceeds of the bonds were used for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2030. Annual principal and interest payments on the bonds are expected to require less than 34.29% of 2014-15 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $255,636,859. Principal and interest paid for the current year and water and wastewater system revenues were $26,853,458 and $78,302,598, respectively Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $52,291,000 in outstanding governmental excise tax obligations. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2029. Annual principal and interest payments on the bonds are expected to require less than 3.51% of total 2014-15 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $65,126,812. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $5,505,271 and $156,733,794, respectively. Debt Service Coverage for Business-type Activities Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $84,839,000 in outstanding business-type activities excise tax obligations. Proceeds of the bonds were used for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2033. Annual principal and interest payments on the bonds are expected to require less than 4.18% of total 2014-15 excise taxes. The total principal and interest remaining to be paid on the bonds is $118,173,465. Principal and interest paid for the current year and total excise taxes were $6,552,729 and $156,733,794, respectively. Debt Service Coverage for Transit Excise Tax Obligations. For the repayment of transit excise tax obligation bonds, the City has pledged all future excise taxes collected and paid under the 0.50% transportation excise tax. Proceeds of the bonds were used for the construction of the City’s portion of the light rail system. The current balance outstanding is $64,900,000. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 12.88% of total 2014-15 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $104,368,175. Principal and interest paid for the current year and transit excise taxes were $4,655,688 and $36,147,640 respectively. Debt Service Coverage for Performing Arts Center Excise Taxes. For repayment of performing arts excise tax obligations, the City has pledged all future excise taxes collected and paid under a 0.10% performing arts center tax. Proceeds of the bonds were used for the construction of the Tempe Performing Arts Center. The bonds are payable primarily from performing arts excise taxes and are secured by a subordinate lien pledge of all future unrestricted excise taxes. The current balance outstanding is $17,555,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be less than 79.34% of total 2014-15 performing arts excise taxes. The total principal and interest remaining to be paid on the bonds is $19,640,326. Principal and interest paid for the current year and total available excise taxes were $5,919,026 and $152,138,598, respectively. 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Changes in Long-term Liabilities. The following is a summary of changes in long-term liabilities for the fiscal year ended June 30, 2015 (the ending balance does not include 7/1/2015 “matured” payment for general or excise tax obligations): Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Debt payable: General obligation bonds payable $163,205,000 $ 50,745,000 $ (32,045,000) $181,905,000 $13,680,000 Special assessments 23,930,000 (2,755,000) 21,175,000 1,195,000 2005 Excise tax obligations 1,850,000 (460,000) 1,390,000 1,390,000 2006 Excise tax obligations 4,665,000 (2,280,000) 2,385,000 2,385,000 2007 Excise tax refunding obligations 19,955,000 (455,000) 19,500,000 2,550,000 2008 Excise tax obligations 26,755,000 (650,000) 26,105,000 675,000 2009 Excise tax obligations 5,670,000 (275,000) 5,395,000 280,000 2011 Excise tax obligations 7,691,000 (30,000) 7,661,000 30,000 2011 Excise tax refunding obligations 17,865,000 (2,695,000) 15,170,000 2,825,000 2012 Excise tax obligations 20,265,000 (1,920,000) 18,345,000 2012 Excise tax refunding obligations 39,890,000 (1,095,000) 38,795,000 1,130,000 Premium on debt payable 19,542,476 1,269,813 (2,144,052) 18,668,237 2013 Capital improvement note 509,804 (509,804) 2004 HUD Section 108 loan 4,907,000 (355,000) 4,552,000 371,000 356,700,280 52,014,813 (47,668,856) 361,046,237 26,511,000 Capital leases 111,827 (24,745) 87,082 25,683 Compensated absences 26,011,933 11,726,734 (10,493,736) 27,244,931 10,488,536 Claims and judgments 5,827,048 3,294,449 (3,360,422) 5,761,075 2,898,246 OPEB 48,585,216 5,035,357 (5,521,509) 48,099,064 Net pension liability 290,400,432 20,081,111 310,481,543 Governmental activities long-term $727,524,909 $ 92,264,291 $ (67,069,268) $752,719,932 $ 39,923,465 Business-type activities: General obligation bonds payable General obligation premium 2009 Excise tax obligations 2011 Excise tax obligations 2012 Excise tax obligations 2013 Excise tax obligations 2015 Excise tax obligations Excise premium 2010 WIFA Loan 2010 WIFA Loan 2015 Capital improvement note Capital leases OPEB Net pension liability Business-type activities long-term $223,495,000 5,107,085 13,755,000 28,199,000 7,820,000 26,335,000 6,051,400 1,514,101 11,037,453 499,476 6,056,815 28,820,311 $358,690,641 $ 38,895,000 3,833,729 11,810,000 205,296 2,500,000 899,579 $ 58,143,604 $ (57,420,000) (938,924) (660,000) (1,120,000) (300,000) (1,000,000) (352,673) (81,026) (638,246) (215,882) (909,006) (4,345,757) $ (67,981,514) $204,970,000 $17,045,000 8,001,890 13,095,000 680,000 27,079,000 1,165,000 7,520,000 305,000 25,335,000 970,000 11,810,000 10,710,000 5,904,023 1,433,075 83,510 10,399,207 651,010 2,500,000 283,594 219,844 6,047,388 24,474,554 $348,852,731 $31,829,364 The long-term liabilities at June 30, 2015 have been reduced by deposits made with the City’s fiscal agent for July 1, 2015 maturities. In addition, in the summary noted above, the beginning balance has been restated to include the OPEB and net pension liabilities. For the governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST Advance Bond Refundings Future debt service on refunded bonds has been provided through advance refunding bond issues. Under an advance refunding arrangement, refunding bonds are issued and the net proceeds, plus any additional resources that may be required, are used to purchase securities issued or guaranteed by the United States government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. On June 11, 2012, the City issued $22,110,000 of excise tax revenue refunding obligation bonds with a premium of $3,992,095 to partially refund $6,835,000 of Series 2003 and $15,925,000 of Series 2005 outstanding excise tax revenue obligation bonds. The bonds were issued with an average interest rate of 2.50%. The net proceeds of $25,258,908 after transferring $553,944 to the debt service fund, the payment of $123,418 in issuance costs and an underwriter’s discount of $165,825, were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service, Community Facilities District, and Cemetery funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,616,232, which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $1,462,225. On June 19, 2013, the City issued $41,070,000 of general obligation refunding bonds with a premium of $4,318,047 to partially advance refund $3,865,000 of Series 2004, $16,030,000 of Series 2005 and $18,945,000 of Series 2006 outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $2,230,000 of Series 2003 bonds. The bonds were issued with an average interest rate of 3.90%. The net proceeds of $44,958,214 after the payment of $146,450 in issuance costs and an underwriter’s discount of $283,383 were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,720,519, which resulted in an economic gain of $1,552,184. On May 28, 2014, the City issued $15,550,000 of general obligation refunding bonds with a premium of $1,540,100 to partially advance refund $2,810,000 of Series 2005 and $9,545,000 of Series 2006 outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $3,195,000 of Series 2004 refunding bonds. The bonds were issued with an average interest rate of 3.97%. The net proceeds of $16,977,361 after the payment of $83,384 in issuance costs and an underwriter’s discount of $112,739 were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $976,050, which resulted in an economic gain of $1,015,727. On December 17, 2014, the City issued $45,675,000 of general obligation refunding bonds with a premium of $4,502,008 to partially advance refund $5,620,000 of Series 2006 and $28,865,000 of Series 2007 outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $11,190,000 of Series 2005 general obligation bonds. The bonds were issued with an average interest rate of 3.64%. The net proceeds of $49,715,783 after the payment of $141,500 in issuance costs and an underwriter’s discount of $319,725 were used to purchase State and local government securities. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $2,720,528, which resulted in an economic gain of $2,399,755. Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2015 are as follows: $21,315,000 excise tax revenue obligation bonds issued in 2005 and partially refunded in 2012 (final redemption date is 7/1/2015) $ 15,925,000 $52,425,000 general obligation bonds issued in 2005 and partially refunded in 2013 (final redemption date is 7/1/2015) 16,030,000 $74,495,000 general obligation bonds issued in 2006 and partially refunded in 2013 (final redemption date is 7/1/2016) 18,945,000 $52,425,000 general obligation bonds issued in 2005 and partially refunded in 2014 (final redemption date is 7/1/2015) 2,810,000 $74,495,000 general obligation bonds issued in 2006 and partially refunded in 2014 (final redemption date is 7/1/2016) 9,545,000 $52,425,000 general obligation bonds issued in 2005 and partially refunded in 2015 (final redemption date is 7/1/2015) 11,190,000 $74,495,000 general obligation bonds issued in 2006 and partially refunded in 2015 (final redemption date is 7/1/2016) 5,620,000 $76,485,000 general obligation bonds issued in 2007 and partially refunded in 2015 (final redemption date is 7/1/2017) 28,865,000 Total bonds advance refunded $ 108,930,000 NOTE 11 – FUND BALANCE CLASSIFICATIONS During the year ended June 30, 2011, the City implemented the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB Statement No. 54 establishes standards for financial reporting, including note disclosure requirements, for fund balance classifications of the governmental funds, and clarifies existing governmental fund type definitions. In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. Committed, Assigned, and Unassigned represent the amount that is available for discretionary spending. 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) Non-spendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) legally or contractually required to be maintained intact. Restricted fund balance is externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). Committed fund balance is self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval (through ordinance or resolution, both of which are considered the highest level of decision making authority of the City) is required to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. In June 2011, through resolution 2011.56, the Mayor and Council authorized the Chief Financial Officer to assign fund balance amounts for specific purposes. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. As of June 30, 2015, the fund balance details by classification are listed as follows: The Mayor and Council have established a minimum unassigned fund balance policy for the General Fund of 20% to 30% of current year operating revenues. As of June 30, 2015, the aggregate balance is 39.05% of General Fund revenues. 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) Transit Special Revenue General Fund balances: Non-spendable: Inventories Prepaid items Restricted: Debt Service reserve Police Fire Community services Public works Community development Human services City manager Committed to: Police Fire Community services Public works Community development Municpal court City manager City clerk Debt Service Assigned to: Self-insurance purposes Capital projects Reserved property lease land Reserved property lease revenue Billboard landscape Billboard revenue Other Transit TSA Unassigned: Total fund balances $ 346,364 346,364 $ - General Special Total Other Total Obligation Assessment Transit Capital Governmental Governmental Debt Service Debt Service Funds Funds Projects $ - $ - $ - $ 1,272,306 680,644 1,952,950 $ 1,618,670 680,644 2,299,314 - 23,519,355 - 20,960,171 - 112,998 - 16,115,985 - 100,498 106,904 155,347 9,190,314 9,317,498 354,988 115,674 21,073,169 100,498 106,904 155,347 48,825,654 9,317,498 354,988 115,674 - 23,519,355 20,960,171 112,998 16,115,985 19,341,223 80,049,732 149,081 230,000 101,261 25,120 15,308 520,770 5,059,799 4,220,265 9,280,064 6,841,391 405,000 838,278 492,283 25,000 98,881 100,000 8,800,833 4,970,558 4,970,558 73,879,480 $ 83,547,447 - 2,649,914 2,649,914 $ 37,769,977 $ 23,610,085 97 $ - - 392,950 837,906 137,036 413,444 10,178,256 685,496 12,645,088 542,031 837,906 367,036 5,574,504 10,178,256 685,496 25,120 15,308 4,220,265 22,445,922 - - 7,763,164 552,181 8,315,345 6,841,391 8,168,164 838,278 492,283 25,000 98,881 652,181 4,970,558 2,649,914 24,736,650 - - (2,922,001) 70,957,479 112,998 $ 16,115,985 $ 39,332,605 $ 200,489,097 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 12 - COMMITMENTS In the Governmental fund financial statements, construction commitments (encumbrances) are included in either the restricted or committed fund balances. At June 30, 2015 the City’s construction commitments are as follows: Construction in Progress Commitment Governmental funds: Transit Non-major funds $ 6,433,515 16,683,898 $ 23,117,413 $ 3,217,415 31,623,854 $ 34,841,269 Construction in Progress Commitment Proprietary funds: Water/wastewater Golf $ 7,080,756 1,345 $ 7,082,101 $ $ In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Non-major funds $ $ 522,770 287,458 810,228 Commitment Proprietary funds: Water/wastewater Solid waste $ 373,891 1,202,360 $ 1,576,251 98 9,440,597 282,372 9,722,969 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 13 - OPERATING LEASES The City leases copiers under certain non-cancelable leases accounted for as operating leases. Operating leases do not give rise to property rights or lease obligations, and therefore the results of the lease agreements are not reflected in the City’s Statement of Net Position. Current year lease costs for the fiscal year ended June 30, 2015 were $87,521. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 Total minimum payments required $ Amount 86,550 86,550 86,550 85,419 24,126 $ 369,195 NOTE 14 - RETIREMENT AND PENSION PLANS The City contributes to the pension plans described below. The City also contributes to the Elected Officials Retirement Plan; however the plan is not described below because of its relative insignificance to the financial statements. The plans are component units of the State of Arizona. The City reported $22,135,592 of pension expenditures related to all pension plans to which it contributes. A. Arizona State Retirement System Plan Description. City employees not covered by the other pension plans described after this section participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. Benefits Provided. The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: 99 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Years of service and age required to receive benefit Sum of years and age equals 80 10 years age 62 5 years age 50* Any years age 65 30 years age 55 25 years age 60 10 years age 62 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 member’s 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 member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions. In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. 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. For the current fiscal year, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.60% (11.48% for retirement and 0.12% for long-term disability) of the members’ annual covered payroll, and the City was required by statute to contribute at the actuarially determined rate of 11.60% (10.89% for retirement, 0.59% for health insurance premium benefit, and 0.12% for long-term disability) of the members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2015 were $7,738,771. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.57% (9.51% for retirement and 0.06% for long-term disability) of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to ASRS. The City’s contributions for the current and two preceding years for the Arizona State Retirement System OPEB, all of which were equal to the required contributions, were as follows: Fiscal Year Ending June 30, 2015 2014 2013 Health Benefit Supplement Fund $ 419,272 413,417 440,200 Long-Term Disability Fund $ 85,276 165,367 162,535 100 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Pension Liability. At June 30, 2015, the City reported a liability of $ 112,524,308 for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2014. 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, 2013, to the measurement date of June 30, 2014. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2014, the City’s proportion was 0.76%, which was a decrease of 0.04% from its proportion measured as of June 30, 2013. Pension Expense and Deferred Outflows/Inflows of Resources. For the year ended June 30, 2015, the City recognized pension expense for ASRS of $ 5,558,767 and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflow of Resources $ 5,718,815 Differences between expected and actual experience Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between the City contributions and proportionate share of contributions City contributions subsequent to the measurement date Deferred Inflow of Resources $ - - 19,677,027 7,738,771 Total $ 13,457,586 4,245,624 $ 23,922,651 The $ 7,738,771 reported as deferred outflows of resources related to ASRS pensions resulting from contributions subsequent to the measurement date as reported in the table above will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. 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: Fiscal Year Ending June 30, 2016 2017 2018 2019 $ (4,278,739) (4,278,739) (4,727,101) (4,919,257) Actuarial Assumptions. The significant actuarial assumptions used to measure the total ASRS pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Asset valuation Discount rate Projected salary increases Inflation Permanent base increases Mortality rates June 30, 2013 June 30, 2014 Entry age normal Fair value 8.0% 3.0-6.75% 3.0% Included 1994 GAM Scale BB 101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79% 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 of ASRS are summarized in the following table: Target Allocation 63% 25% 8% 4% 100% Asset Class Equity Fixed income Real estate Commodities Total Long-Term Expected Real Rate of Return 7.03% 3.20 4.75 4.50 Discount Rate. The discount rate used to measure the ASRS total pension liability was 8.0%, which is less than the long-term expected rate of return of 8.79%. 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 based on 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 payments to determine the total pension liability. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 8.0%, as well as what the 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: The City’s Proportionate share of the net pension liability 1% Decrease (7.0%) Current Discount Rate (8.0%) 1% Increase (9.0%) $ 142,224,954 $ 112,524,308 $ 96,410,216 Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. 102 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) B. Public Safety Personnel Retirement System Plan Descriptions. City public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan. A seven-member 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 PSPRS issues publicly available financial reports that include their financial statements and required supplementary information. This report is available on the PSPRS website at www.psprs.com. Benefits Provided. The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Certain retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS financial reports for additional benefits information. Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 Retirement and Disability: Years of service and age required to receive benefit 20 years any age 15 years age 62 25 years and age 52.5 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Normal retirement 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% Accidental disability retirement 50% or normal retirement, whichever is greater Survivor benefit: Retired members Active members 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 earning. PSPRS also provides temporary disability benefits of 50% of the member's compensation for up to 12 months. Employees Covered by Benefit Terms. At June 30, 2015, the following employees were covered by the agent pension plans’ benefit terms: PSPRS Police 213 50 322 585 Retirees and beneficiaries Inactive, non-retired members Active members Total 103 PSPRS Fire 116 23 140 279 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Contributions and Annual OPEB Cost. State statutes establish the pension contribution 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. Contributions rates for the year ended June 30, 2015 are indicated below. Rates are a percentage of active members’ annual covered payroll. Active members – pension City: Pension Health insurance PSPRS Police 11.05% PSPRS Fire 11.05% 33.67 1.45 37.11 1.68 In addition, the City was required by statute to contribute at the actuarially determined rate of 19.65 percent of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to the PSPRS. For the agent plans, the contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended were: PSPRS Police Pension: Contributions made Health insurance premium benefit: Annual OPEB cost Contributions made PSPRS Fire $ 9,727,183 $ 4,066,636 418,902 418,902 184,100 184,100 Pension Liability. At June 30, 2015, the City reported $147,170,332 for police and $75,261,457 for fire in net pension liability. The net pension liabilities were measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2014, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption. Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates PSPRS June 30, 2014 Entry age normal Market Value of Assets 7.85% 4.0 - 8.0% 4.0% Included RP-2000 mortality table, adjusted by 105% for both males and females 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, 2011. 104 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.85% 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 estimates of geometric real rates of return for each major asset class for all agent pension plans are summarized in the following table: Long-Term Target Expected Real Allocation Rate of Return Asset Class 2% 3.25% Short-term investments 4% 6.75% Absolute return 4% 6.04% Risk parity 7% 4.75% Fixed income 8% 5.96% Real assets 10% 5.73% GTAA 11% 9.50% Private equity 11% 6.50% Real estate 13% 8.00% Credit opportunities 14% 8.63% Non-U.S. equity 16% 7.60% U.S. equity 100% Total Pension Discount Rates. The discount rate of 7.85% was used to measure the total pension liability. The projection of cash flows used to determine the PSPRS 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 rates 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 Agent Plans Net Pension Liability Police: Balances at June 30, 2014 Changes for the year: 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 Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2015 Total Pension Liability $ 214,790,355 5,447,093 16,537,700 4,426,439 (2,351,309) 25,455,442 (13,685,124) 35,830,241 $ 250,620,596 105 Increase/Decrease Plan Fiduciary Net Position $ 92,205,073 - Net Pension Liability $ 122,585,282 5,447,093 16,537,700 4,426,439 9,132,346 3,253,980 12,557,318 (2,351,309) 25,455,442 (9,132,346) (3,253,980) (12,557,318) (13,685,124) (101,132) 87,803 11,245,191 $ 103,450,264 101,132 (87,803) 24,585,050 $ 147,170,332 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Changes in the Agent Plans Net Pension Liability Fire: Balances at June 30, 2014 Changes for the year: 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 Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2015 Total Pension Liability $ 130,242,089 Increase/Decrease Plan Fiduciary Net Position $ 66,111,004 Net Pension Liability $ 64,131,085 2,541,502 9,938,885 2,317,758 2,541,502 9,938,885 2,317,758 (861,599) 12,031,993 4,587,619 1,461,331 8,858,227 (861,599) 12,031,993 (4,587,619) (1,461,331) (8,858,227) (9,805,679) (71,341) 2,331 5,032,488 $ 71,143,492 71,341 (2,331) 11,130,372 $ 75,261,457 (9,805,679) 16,162,860 $ 146,404,949 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s net pension liabilities calculated using the discount rates noted above, as well as what 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: 1% Decrease Current Discount Rate 1% Increase Police: Rate Net pension liability 6.85% $ 178,684,976 7.85% $ 147,170,332 8.85% $ 121,075,104 Fire: Rate Net pension liability 6.85% $ 91,730,293 7.85% $ 75,261,457 8.85% $ 61,440,891 Pension Plan Fiduciary Net Position. Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense. For the year ended June 30, 2015, the City’s recognized $19,305,272 as pension expense for police and $9,299,523 as pension expense for fire. 106 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Pension Deferred Outflows/Inflows of Resources. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Police: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Contributions subsequent to the measurement date Total Fire: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 20,493,368 Deferred Inflows of Resources $ 1,892,964 - 10,146,085 $ 30,639,453 4,188,278 $ 6,081,242 Deferred Outflows of Resources $ 10,095,939 Deferred Inflows of Resources $ 722,960 - 4,250,736 $ 14,346,675 2,954,510 $ 3,677,470 The amounts reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability (or an increase in the net pension asset) in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30, 2016 2017 2018 2019 2020 Thereafter Total PSPRS Police $ 3,456,659 3,456,659 3,456,659 3,456,659 585,490 $ 14,412,126 107 PSPRS Fire $ 1,058,787 1,058,787 1,058,787 1,058,787 1,797,415 385,906 $ 6,418,469 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Agent Plan OPEB Trend Information. The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Police: Fiscal Year Ended June 30, 2015 June 30, 2014 June 30, 2013 Annual OPEB Cost $ 418,902 400,016 435,879 Percentage of Annual Cost Contributed 100% 100% 100% Net OPEB Obligation $ - Annual OPEB Cost $ 184,100 196,051 190,310 Percentage of Annual Cost Contributed 100% 100% 100% Net OPEB Obligation $ - Fire: Fiscal Year Ended June 30, 2015 June 30, 2014 June 30, 2013 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 inforce 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 both PSPRS plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2015 contribution requirements, are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method PSPRS June 30, 2013 Entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 23 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.85% Projected salary increases includes 4.5%-8.5% inflation at 4.5% 108 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The funded status of both the PSPRS health insurance premium benefit plans in the June 30, 2014, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement. Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method PSPRS June 30, 2014 Entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 22 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.85% Projected salary increases includes 4%-8% inflation at 4% 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, 2014. Actuarial value of assets Actuarial accrued liability Unfunded actuarial accrued liability (funding excess) Funded ratio Annual covered payroll Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll 109 PSPRS Police $ 3,908,102 5,881,593 1,973,491 PSPRS Fire $ 3,600,744 3,168,939 (431,805) 66.4% $ 28,717,531 6.87% 113.6% $12,719,049 - % Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS Other post-employment healthcare benefits, like the cost of pension benefits, constitute an exchange of compensation for employee services rendered. Similar to pension benefits, the cost of other post-employment benefits (OPEB) generally should be associated with the periods in which the exchange occurs rather than in future periods in which the benefits are provided. GASB Statement No. 45 requires the City to measure and recognize the OPEB cost while employee services are rendered, report the accumulated liability from prior years and provide information about the potential demands on the City’s future cash flows. Recognition of the liability, from the plan described below, accumulated from prior years, is being amortized over 30 years with the first period beginning with the fiscal year ending June 30, 2008. A. Plan Description The City offers (single-employer plan) the continuation of group health insurance benefits, in accordance with Resolution 2009.86 of the City Council, to all retired, benefitted employees who meet the following eligibility requirements: (a) have at least 10 years of service, (b) be enrolled in one of the City's group health insurance plans, and (c) at the time of retirement, be or have been eligible to receive benefits from one of the City sponsored state retirement plans. Due to changes effective July 1, 2009, benefitted employees hired after June 30, 1999 are not eligible to participate in the post-employment benefit plan subject to the requirements of GASB Statement No. 45. As of June 30, 2015, 831 retirees met those eligibility requirements to receive post-employment healthcare benefits. Total membership in the program is as follows: Retirees receiving benefits Active employees eligible Total 831 589 1,420 Effective with changes implemented on October 1, 2011, this OPEB plan provides medical coverage for qualified, pre-Medicare retired employees through a single-employer defined contribution plan; prior to this change, coverage was provided through a defined benefit plan. (With this change, active employees are the only group participating in a defined benefit plan for health benefits.) The plan provides benefits to eligible retirees (as outlined above), their spouses and dependents through monthly City contributions to a health reimbursement account established for each retiree. The plan benefits and contribution rates are determined by the City’s Human Resources Division based on the costs of coverage that is available through the health plan offered by the ASRS. Coverage for Medicare-eligible retirees is provided through fully-insured, City-sponsored Medicare Supplemental plans. B. Basis of accounting and valuation of investments The Other Post Employment Benefit Trust financial statements are prepared on the accrual basis of accounting. The City’s contributions are recognized when due and a formal commitment to provide the contribution has been made. Benefits are recognized when due and payable in accordance with the terms of the plan. All trust investments are reported at fair value. Fair value is determined based on quoted market prices. C. Benefits Provided For those retirees/dependents who have not reached Medicare eligibility, the City makes monthly contributions to the retiree/dependents’ health reimbursement account. For coverage to be continued for retirees and dependents reaching Medicare eligibility, beneficiaries are required to enroll in a City-sponsored Medicare Supplemental Plan. 110 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS (Continued) D. Funding Policy The pre-Medicare plan contributions are determined annually by the City’s Human Resources Division. Contributions for retirees/dependents are determined based on a review of the premiums (and changes thereto) for health care coverage that is available through the ASRS. For the City-sponsored Medicare Supplemental Plans, premiums are determined annually by the outside insurance company. Retirees/ dependents are not required to enroll in the health plan offered through the ASRS. The current employer contribution rate is 16% of annual covered payroll. Because retired employees and their dependents are enrolled in a completely separate plan than active employees, there are no implicit rate subsidies. An irrevocable trust fund (Other Post Employment Benefit Trust) has been established for the purpose of advance funding the obligation; the trust has a $11.0 million balance as of June 30, 2015. Both the Arizona State Retirement and Arizona Public Safety Personnel Retirement systems subsidize the health insurance premium of eligible retirees depending on type of health plan chosen, coverage selected, and years of service. For both the governmental and proprietary activities, the corresponding fund is used to liquidate the OPEB liability. E. Annual OPEB Cost and Net OPEB Obligation The City’s annual OPEB cost is calculated based on the annual required contribution (ARC) which is 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 30 years. The following table shows the components of the City’s annual OPEB cost for the year ended June 30, 2015, the amount actually contributed to the plan and changes in the City’s net OPEB obligation ARC ARC adjustment Interest on the net OPEB obligation Annual OPEB cost Contributions made Decrease in net OPEB obligation Net OPEB obligation – beginning of year Net OPEB obligation – end of year 111 $ 6,562,758 (4,454,310) 3,826,487 5,934,935 (6,430,514) (495,579) 54,642,031 $ 54,146,452 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) E. Annual OPEB Cost and Net OPEB Obligation (Continued) The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the new OPEB obligation for the fiscal years ended June 30, 2015, 2014, and 2013 are as follows: Fiscal Year Ended June 30, Annual OPEB Cost 2013 2014 2015 11,436,001 6,286,392 5,934,935 Employer Contributions Percentage of Annual OPEB Cost Contributed 9,547,324 10,136,943 6,430,514 83.5 161.3 108.4 Net OPEB Obligation 58,525,271 54,642,031 54,146,452 F. Health Care Cost Trend Rate The following minimum and maximum annual trend rates are applied for this projection: Benefit ASRS/PSPRS Pre-medicare Medicare supplement Minimum 4.8% 2.0 Maximum 7.0% 5.0 G. Funded Status and Funding Progress (most recent information available) Actuarial Valuation Date 7/1/2009 7/1/2011 7/1/2013 7/1/2014 Actuarial Actuarial Accrued Liability Entry Value of Assets Age 154,671,513 166,968,101 4,530,000 77,305,345 9,927,658 81,803,527 Unfunded AAL (UAAL) 154,671,513 166,968,101 72,775,345 71,875,869 Unfunded AAL Funded Annual as a % of Ratio Covered Payroll Covered Payroll 0.0 51,923,274 297.9 0.0 47,378,802 352.4 5.9 44,539,774 163.4 12.1 39,324,207 182.8 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 healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions and actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress presents multi-year 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. The City will obtain an actuarial valuation on an annual basis. H. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) 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. The investment rate reflects the expected long term rate of return for the assets expected to pay the post-employment benefits. Significant methods and assumptions used for this fiscal year valuation were as follows: 112 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) H. Actuarial Methods and Assumptions (Continued) Actuarial valuation date Actuarial cost method Remaining amortization period Asset valuation method July 1, 2014 Entry age normal 24 years, closed Market value Actuarial assumptions: Inflation rate Investment rate of return Projected payroll increases See F. Health Care Cost Trend Rate 7.0% 3% per annum Amortization method Level dollar NOTE 16 - DEFERRED COMPENSATION PLANS The City offers its employees three compensation plans created in accordance with Internal Revenue Code, Section 457 and 401(K). The plans, available to all City employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The City’s fiduciary responsibility is that of exercising “due care” in selecting a third-party administrator. Federal legislation requires that Section 457 plan assets be held in trust for employees. As a result, the employee assets held in Section 457 plans are neither the property of the City nor subject to claims of the City’s general creditors. Therefore, the plan assets are not included in the City’s basic financial statements. NOTE 17 - RISK FINANCING ACTIVITIES The City is exposed to risks arising from general liability, automobile liability (physical damage and bodily injury), property liability, workers compensation, and employee health claims. The City has established a Risk Management Fund, Worker’s Compensation Fund and Health Fund (all internal service funds) to account for and finance its uninsured risks of loss. Amounts are paid into the internal service funds by all other funds and are available to pay claims and to fund claim reserves. As with any risk retention program, the City is contingently liable in respect to claims beyond those actuarially projected. These interfund premiums are used to reduce the amount of claim expenditures reported in the internal service funds. The City is a self-insured entity with excess commercial insurance coverage purchased for general and automobile liability, property, workers' compensation/employers’ liability, crime and group health coverage. The coverage is as follows: for general and automobile liability the first $2.0 million per occurrence is self-insured and excess coverage of $40.0 million is provided; for property the self-insurance retention is the first $100,000 per occurrence of all perils with a policy limit of $769 million; for workers' compensation the first $750,000 for police, firefighters, and EMTs’ and $500,000 for all others of each claim is self-insured, with excess coverage per the Arizona statutory workers' compensation requirements and $2.0 million per occurrence in employer’s liability; and for group health the self-insurance retention is $250,000 per occurrence, with an aggregate stop loss deductible of $18.7 million. During the year there were no significant reductions in the amounts of excess coverage purchased. 113 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES At fiscal year end, the estimated, unpaid insurance claims liability was based on a case-by-case review of actual pending claims and an estimated amount for incurred but not reported claims. A liability for a known claim was established if information indicated that it was probable that a loss had been incurred as of June 30, 2015, and that the amount was reasonably estimable. A liability for incurred but not reported claims was based on historical experience. The following is a summary of changes in insurance claims liabilities, accounted for in the governmental and proprietary funds, for the last two fiscal years: General liability Automobile liability Property liability Workers' compensation Health insurance General liability Automobile liability Property liability Workers' compensation Health insurance June 30, 2014 $ 4,707,758 301,450 48,150 1,529,247 1,305,599 $ 7,892,204 Claims Incurred Net of Change in Estimates $ (817,273) 165,915 281,084 3,322,111 15,247,816 $ 18,199,653 Payments $ (964,372) (444,390) (225,227) (1,726,433) (15,342,445) $(18,702,867) June 30, 2015 $ 2,926,113 22,975 104,007 3,124,925 1,210,970 $ 7,388,990 June 30, 2013 $ 3,945,792 746,100 124,901 1,475,439 1,111,473 $ 7,403,705 Claims Incurred Net of Change in Estimates $ 962,298 (43,401) 173,027 1,470,183 13,197,283 $ 15,759,390 Payments $ (200,332) (401,249) (249,778) (1,416,375) (13,003,157) $(15,270,891) June 30, 2014 $ 4,707,758 301,450 48,150 1,529,247 1,305,599 $ 7,892,204 At June 30, 2015, the Risk Management Fund accrued expenses totaled $3,085,511. This balance includes the general liability, automobile liability and property liability of $3,053,095 and other accrued expenses of $32,416. The Worker’s Compensation Fund had accrued expenses totaling $3,148,416 consisting of worker’s compensation liability of $3,124,925 and other accrued expenses of $23,491. The Health Fund had accrued expenses totaling $1,941,035. Additionally, at June 30, 2015, the City had $6,841,391 of General Fund assigned fund balance for self-insurance purposes. NOTE 18 - CONTINGENT LIABILITIES The City is subject to a number of lawsuits, investigations, and other claims that are incidental to the ordinary course of its operations. Although the City Attorney does not currently possess sufficient information to reasonably estimate the amounts of the liabilities to be recorded upon the settlement of such claims and lawsuits, some claims could be significant to the City’s operations. While the ultimate resolution of such lawsuits, investigations, and claims cannot be determined at this time, in the opinion of City management, based on the advice of the City Attorney, the resolution of these matters will not have a materially adverse effect on the City’s financial position. The City participates in federally-funded and state-funded programs administered by various government agencies. The programs included in these financial statements may be subject to program compliance and/or financial monitoring by the granting agency or its representatives. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. 114 Notes to the Financial Statements For Fiscal Year Ended June 30, 2015 City of Tempe, Arizona NOTE 19 - RELATED ORGANIZATION The Industrial Development Authority (IDA) is a non-profit corporation established by the City in 1981 to promote industry and develop trade by inducing manufacturing, industrial and commercial enterprises to locate and remain in Tempe. The Board of Directors of the IDA is appointed by the City Council; however, the City does not have a financial benefit/burden relationship nor is the City able to impose its will on the IDA as defined in GASB Statement No. 14; therefore, data for the IDA is not included in the City’s basic financial statements. Separately issued financial statements are not available for the IDA. NOTE 20 - DEFICIT IN FUND BALANCE The Community Development Special Revenue Fund had a deficit fund balance of $224,616 at June 30, 2015. The deficit will be covered by future grant revenue. The Housing Assistance Special Revenue Fund had a deficit fund balance of $408,672 at June 30, 2015. The deficit will be covered by future grant revenue. The Grants Special Revenue Fund had a deficit fund balance of $1,467,887 at June 30, 2015. The deficit will be covered by future grant revenue to be received. NOTE 21 – PRIOR PERIOD ADJUSTMENTS Beginning Net Position Restatement. The implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, represents a change in accounting principle. Net position as of July 1, 2014 has been restated as follows for this change in accounting principle: Net position, June 30, 2014, as previously reported Net pension liability Deferred outflows – contributions during fiscal year 2014 Net position, July 1, 2014, as restated 115 Statement of ActivitiesGovernmental $ 923,269,707 (290,400,432) 19,459,568 $ 652,328,843 Statement of ActivitiesBusiness-type $ 256,697,649 (28,820,311) 1,595,396 $ 229,472,734 Statement of ActivitiesTotal $1,179,967,356 (319,220,743) 21,054,964 $ 881,801,577 Required Supplementary Information 116 Schedule of Contributions All Pension Plans For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona 2015 Arizona State Retirement System: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 8,003,335 8,003,335 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll - 69,715,464 11.48% Public Safety Personnel Retirement System- Police: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 10,178,537 10,178,537 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll - 28,982,166 35.12% Public Safety Personnel Retirement System- Fire: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 4,777,515 4,777,515 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll - 12,316,358 38.79% 117 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona 2015 City's proportion of the net pension liability 0.76% City's proportion share of the net pension liability $ 112,524,308 City's covered-employee payroll $ 69,715,464 City's proportionate share of the net pension liability as a percentage of its covered-employee payroll 161.41% Plan fiduciary net position as a percentage of the total pension liability 69.49% 118 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Police For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability- beginning Total pension liability- ending Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ $ $ $ 9,132,346 3,253,980 12,456,186 (13,685,124) (3,260,002) 7,897,386 95,552,878 103,450,264 $ 147,170,332 $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 5,447,093 16,537,700 4,426,439 (2,351,309) 25,455,442 (13,685,124) 35,830,241 214,790,355 250,620,596 41.28% $ Net pension liability as a percentage of covered-employee payroll 28,717,534 512.48% 119 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Fire For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability- beginning Total pension liability- ending Plan fiduciary net position Contributions- employer Contributions- employee Net investment income Benefit payments, including refunds Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ $ $ $ 4,587,619 1,461,331 8,786,886 (9,805,679) (3,124,665) 1,905,492 69,238,000 71,143,492 $ 75,261,457 $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 2,541,502 9,938,885 2,317,758 (861,599) 12,031,993 (9,805,679) 16,162,860 130,242,089 146,404,949 48.59% $ Net pension liability as a percentage of covered-employee payroll 12,719,039 591.72% 120 Schedule of Funding Progress Public Safety Personnel Retirement System- Other Post Employment Benefits Last Three Actuarial Valuations City of Tempe, Arizona Actuarial Valuation Date Actuarial Accrued Liability (AAL) Actuarial Valuation of Assets Unfunded AAL (UAAL) PSPRS- Police: 2014 2013 2012 $ 3,908,102 - $ 5,881,593 5,803,544 5,451,885 $ 1,973,491 5,803,544 5,451,885 PSPRS- Fire: 2014 2013 2012 $ 3,600,744 - $ 3,168,939 3,171,822 3,102,549 $ (431,805) 3,171,822 3,102,549 121 Funded Ratio Covered Payroll UAAL as a percentage of Covered Payroll 66.45% - $ 28,717,531 28,346,961 26,046,499 6.87% 20.47% 20.93% 113.63% - $ 12,719,049 12,538,385 11,373,929 - % 25.30% 27.28% Notes to Required Supplementary Information June 30, 2015 City of Tempe, Arizona Factors that Affect Trends. The actuarial assumptions used in the June 30, 2013, valuation or ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The actuarial assumptions used in the June 30, 2014, valuation for PSPRS were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The total pension liability used to calculate the net pension liability for PSPRS was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2014, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption from 4.5% to 4.0%. 122 City of Tempe, Arizona 123 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for specific revenues used to finance certain projects or activities as required by law or contractual agreement.  Performing Arts Fund. To account for the receipt and expenditure of the Performing Arts Tax monies. These monies are restricted to financing the performing and visual arts center.  Highway User Revenue Fund. To account for the receipt and expenditure of the City's share of the highway user taxes. State law restricts the use of these monies to maintenance, construction and reconstruction of streets, and repayment of transportation-related general obligation debt.  Community Development Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Community Development Block Grant and Home Program monies.  Housing Assistance Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Lower Income Housing Assistance Program grant monies.  Housing Affordability Fund. To account for the receipt and expenditure from contributions to assist in the development of long-term housing affordability solutions.  Donations and Court Awards. To account for the receipt and expenditure of miscellaneous donations and revenue received from court awarded confiscated property under both the Federal and State Organized Crime Acts.  Grants. To account for the receipt and expenditure of miscellaneous grant monies.  Community Facilities District. To account for the receipt and expenditure of monies for the Rio Salado Community Facilities District. 124 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS (continued) CAPITAL PROJECTS FUNDS Capital Projects Funds account for all current financial resources used for the acquisition of capital facilities except those financed by Enterprise Funds. Disbursements from these funds are primarily for property acquisition and the construction of permanent public improvements. The major sources of financing are derived from bond proceeds and special revenues.  Streets Fund. Used for improving, constructing and reconstructing major streets, highways, collector and local streets within the City, and to acquire rights-of-way.  Police Fund. Used for purchasing, constructing and equipping public safety buildings.  Fire Fund. Used for purchasing, constructing and equipping fire stations.  Storm Sewers Fund. Used for planning, constructing, extending and improving storm drain trunk lines and detention basins.  Parks Fund. Used for acquiring, developing and equipping parks, playgrounds and recreation facilities.  Rio Salado Fund. Used for consulting and engineering studies necessary for the design of the Rio Salado projects and for constructing a wildlife habitat.  Community Development Fund. Used for acquiring, reconstructing, remodeling, renovating and equipping existing buildings that house municipal departments, and for acquiring and constructing housing for the elderly and the redevelopment of the downtown area.  Signals Fund. Used for purchasing, constructing and equipping street light and traffic signal upgrades and for the planning of an overall transportation plan.  Community Facilities District. Used for the improving and constructing in the Rio Salado Community Facilities District. 125 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2015 Special Revenue Performing Arts Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ $ $ Deferred Inflows of Resources Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- other Total deferred inflows of resources Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances 670,593 5,447,013 6,117,606 37,420 219,049 277,088 4,975,000 472,013 5,980,570 Highway User Revenue $ 6,970,336 $ 935,501 1,272,306 9,178,143 $ 368,876 219,463 588,339 - 6,117,606 $ $ $ - 137,036 137,036 $ Community Development 9,178,143 126 245,551 15,964 261,515 1,067 18,007 214,053 7,453 240,580 $ $ $ 245,551 245,551 1,272,306 7,317,498 8,589,804 $ - Housing Assistance 1,679 159,206 928,431 1,089,316 680,644 (1,089,316) (408,672) (224,616) (224,616) 261,515 680,644 680,644 - - $ - $ 680,644 City of Tempe, Arizona Special Revenue Housing Affordability $ 50,153 $ Donations and Court Awards $ 2,326,564 50,153 $ 3,983 6,352 2,336,899 14 $ $ - 14 - 50,153 $ 1,389,385 $ 56,605 1,739,240 3,185,230 $ - 50,139 50,139 $ 2,124 1,840 3,964 Grants 2,336,899 $ 910,094 $ 2,429,800 3,339,894 $ 223,648 1,051 1,935,000 494,800 2,654,499 590,865 241,302 832,167 648,450 1,132,304 552,181 2,332,935 $ 259,126 1,943,648 11,018 1,607,158 3,820,950 Community Facilities District 3,185,230 $ 11,646,532 $ 1,606,094 56,605 3,983 1,991,143 1,272,306 680,644 7,892,777 25,150,084 $ - 140,182 (1,608,069) (1,467,887) $ Total 836,416 241,302 1,077,718 685,395 685,395 $ 3,339,894 (continued) 127 893,954 1,943,648 629,634 1,419,572 1,607,158 6,910,000 974,266 14,378,232 1,952,950 8,841,664 1,269,340 552,181 (2,922,001) 9,694,134 $ 25,150,084 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2015 Capital Projects Streets Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Due to other funds Unearned revenue Matured bonds payable Matured interest payable Total liabilities $ 8,835,829 $ 8,835,829 $ Deferred Inflows of Resources Unavailable revenue- federal grants Unavailable revenue- grants Unavailable revenue- other Total deferred inflows of resources Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances Police 3,218,203 3,218,203 $ 559,321 $ 559,321 $ 133,819 133,819 - 8,835,829 842,426 $ 842,426 $ 559,321 128 - $ 64,271 $ 64,271 $ - 392,950 32,552 425,502 $ Storm Sewers $ - 301,750 5,315,876 5,617,626 $ Fire 842,426 $ 2,511,924 $ 79,051 2,590,975 $ - 837,906 4,520 842,426 $ 29,334 29,334 Parks 79,051 79,051 1,687 9,102 24,148 34,937 $ 64,271 1,056,032 1,056,032 1,431,629 24,263 1,455,892 $ 2,590,975 City of Tempe, Arizona Capital Projects Rio Salado $ 17,879,502 $ 17,879,502 $ 3,165,267 3,165,267 Community Development $ 4,420,605 $ 4,420,605 $ - 17,879,502 Signals $ 1,372,374 $ 16,410 1,388,784 $ - 8,233,546 6,471,213 9,476 14,714,235 $ 241,088 132 241,220 4,420,605 173,832 173,832 $ 1,179,897 $ 1,179,897 $ 16,410 16,410 395,057 2,185,553 1,598,775 4,179,385 $ Community Facilities District 1,388,784 Total $ 37,666,149 $ 79,051 16,410 37,761,610 $ - 437,640 102,592 658,310 1,198,542 $ 9,971 9,971 8,027,546 132 8,027,678 $ 49,312,681 $ 1,606,094 135,656 3,983 2,007,553 1,272,306 680,644 7,892,777 62,911,694 $ $ 16,410 79,051 95,461 1,074,682 95,244 1,169,926 $ Total Nonmajor Governmental Funds 1,179,897 129 852,826 241,302 79,051 1,173,179 10,499,559 11,375,748 7,763,164 29,638,471 $ 37,761,610 8,921,500 1,943,648 629,766 1,419,572 1,607,158 6,910,000 974,266 22,405,910 1,952,950 19,341,223 12,645,088 8,315,345 (2,922,001) 39,332,605 $ 62,911,694 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2015 Special Revenue Highway User Revenue Performing Arts Community Development Housing Assistance Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ 7,460,054 $ - $ - $ - 11,536 881,551 17,200 8,370,341 10,013,859 111,183 82,761 10,207,803 909,731 5 675,958 1,585,694 8,084,829 4,266 8,089,095 2,902,924 - 8,912,570 - 914,161 - 9,206,960 - 4,975,000 949,078 8,827,002 8,912,570 355,000 320,958 1,590,119 9,206,960 Expenditures: Current: Police Fire Community services Public works Community development Human services Municipal court City manager City attorney Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) (456,661) 1,295,233 (4,425) (1,117,865) 1,149,977 - - 82,529 - (4,951) (3,277,029) 87,803 (2,044,200) - 3,916 86,445 Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) (100,000) (100,000) Net change in fund balances (556,661) Fund balance at beginning of year Fund balance at end of year (748,967) 693,697 $ 137,036 (4,425) 9,338,771 $ 8,589,804 130 (1,031,420) (220,191) $ (224,616) 622,748 $ (408,672) City of Tempe, Arizona Special Revenue Housing Affordability $ - Donations and Court Awards $ - $ - $ - Total $ 7,460,054 46,905 1,888 571,525 795,194 787,368 91,063 2,293,943 2,167,797 251,878 3,508,043 101 2,238 750,466 424,004 7,104,527 2,444,298 2,444,298 11,162,357 251,878 10,013,859 3,554,948 13,669 4,010,795 1,549,926 837,368 1,290,986 40,145,840 - 3,982 198,278 1,930 42,991 147,580 252,438 72,287 - 4,500,687 755,136 712,358 3,275 47,572 410,262 873,000 52,160 2,421,097 - 4,500,687 759,118 3,813,560 8,917,775 3,425,821 9,764,802 252,438 945,287 52,160 - 719,486 7,354,450 1,935,000 992,251 5,348,348 7,265,000 2,262,287 41,958,935 (2,904,050) (1,813,095) 2,924,600 - 1,232,506 606,440 2,924,600 - 2,924,600 (80,180) (606,440) (4,951) (3,377,029) 91,719 786,665 139 50,000 50,139 50,139 1,574,457 - 606,440 - - (80,180) 526,260 50,139 $ - Community Facilities District Grants 50,139 $ (249,923) (606,440) (606,440) 2,100,717 (856,363) 20,550 (1,026,430) 232,218 (611,524) 664,845 10,720,564 2,332,935 $ (1,467,887) $ 685,395 (continued) 131 $ 9,694,134 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2015 Capital Projects Streets Police Fire Storm Sewers Parks Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ - $ - 222,211 77 114,722 2,272 339,282 $ - $ - $ - - - - 1,768 9,798 25,000 36,566 - - - - Expenditures: Current: Police Fire Community services Public works Community development Human services City manager City attorney Internal audit/consulting Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures - Excess (deficiency) of revenues over expenditures before other financing sources (uses) 4,973,218 4,973,218 2,277,298 2,277,298 2,658,374 2,658,374 75,032 75,032 3,930,788 3,930,788 (4,633,936) (2,277,298) (2,658,374) (75,032) (3,894,222) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) 3,027,029 (252,498) 1,675,000 4,449,531 Net change in fund balances 5,617,626 1,244,525 $ 425,502 132 - 2,546,725 2,546,725 (819,023) 5,802,031 $ - 1,458,275 1,458,275 (184,405) Fund balance at beginning of year Fund balance at end of year - $ - (575,000) 100,000 (475,000) (849,230) 3,215,000 2,365,770 (111,649) (550,032) (1,528,452) 954,075 584,969 2,984,344 842,426 $ 34,937 $ 1,455,892 City of Tempe, Arizona Capital Projects Community Development Rio Salado $ - $ 1,748 1,748 - Signals $ 65 200,000 49,168 249,233 - - - (22,935,934) (3,522,310) (366,781) 2,400,000 1,000,000 1,424,230 - 421,300 100,000 1,000,000 393,075 250,000 - 30,785,000 35,609,230 (23,873) 3,530,000 5,420,502 655,000 905,000 12,673,296 1,898,192 538,219 2,040,939 2,281,193 660,323 4,179,385 $ 1,198,542 - $ 693,603 693,603 - 1,265,049 1,265,049 - $ 1,050,790 3,693 856,873 255,904 51,440 2,218,700 7,460,054 12,213,147 251,878 10,013,859 3,554,948 17,362 4,867,668 1,549,926 1,093,272 1,342,426 42,364,540 - 4,500,687 759,118 3,813,560 8,917,775 3,425,821 9,764,802 252,438 945,287 52,160 93,253 93,253 41,982,237 41,982,237 7,265,000 2,262,287 41,982,237 83,941,172 600,350 (39,763,537) (41,576,632) - 2,821,300 3,377,029 2,000,000 1,424,230 393,075 4,053,806 3,983,469 4,924,600 1,424,230 393,075 - (252,498) (1,424,230) (23,873) 43,965,000 52,280,033 (332,678) (606,440) (4,951) (4,801,259) (23,873) 43,965,000 91,719 53,066,698 600,350 12,516,496 11,490,066 569,576 17,121,975 27,842,539 1,169,926 $ 29,638,471 - $ Total Nonmajor Governmental Funds Total - - 3,771,543 3,771,543 $ $ 828,579 35 38,750 30,904 898,268 22,937,682 22,937,682 $ 14,714,235 Community Facilities District 133 $ 39,332,605 City of Tempe, Arizona INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government and to other government units, on a cost reimbursement basis.  Risk Management Fund. Used to account for the costs of general liability, automobile liability, and property liability claims by the City under a self-insurance program.  Worker’s Compensation Fund. Used to account for the costs incurred for worker’s compensation claims by the City under a self-insurance program.  Health Fund. Accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 134 Combining Statement of Net Position Internal Service Funds June 30, 2015 City of Tempe, Arizona Assets Current assets: Pooled cash and investments Total assets Deferred Outflows of Resources Deferred outflows related to pensions Total deferred outflows of resources Liabilities Current liabilities: Accounts payable Accrued expenses and claims payable Total current liabilities Noncurrent liabilities: Net OPEB obligation Net pension liability Total noncurrent liabilities Total liabilities Deferred Inflows of Resources Deferred inflows related to pensions Total deferred inflows of resources Net Position Unrestricted Total net position Risk Management Worker's Compensation $ 5,106,740 5,106,740 $ 3,151,827 3,151,827 68,199 68,199 $ 3,411 810,383 7,421,406 8,231,789 23,138 378,886 402,024 8,633,813 - 3,411 80,551 80,551 2,186,731 $ 2,186,731 12,386,333 12,386,333 68,199 68,199 1,941,035 - 1,550,026 $ - 3,148,416 80,551 80,551 4,127,766 4,127,766 730,065 1,210,970 1,941,035 - 3,544,362 Total - 23,491 3,124,925 3,148,416 23,138 378,886 402,024 135 $ - 56,827 3,085,511 3,142,338 $ 1,550,026 Health 3,740,168 $ 3,740,168 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Risk Management Worker's Compensation Health Total Operating revenues: Contributions Miscellaneous Total operating revenues $ 2,573,778 7,825 2,581,603 $ 2,230,596 2,230,596 $ 25,827,358 25,827,358 $ 30,631,732 7,825 30,639,557 Operating expenses: Fees and services Total operating expenses 2,581,603 2,581,603 2,237,577 2,237,577 25,403,031 25,403,031 30,222,211 30,222,211 424,327 417,346 Operating income (loss) Nonoperating revenues Investment income Total nonoperating revenues Changes in net position Total net position - beginning, as restated Total net position - ending - (6,981) - 10,392 10,392 - 10,392 10,392 - 3,411 424,327 427,738 1,550,026 $ 1,550,026 136 $ - 1,762,404 3,312,430 3,411 $ 2,186,731 $ 3,740,168 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Risk Management Cash flows from operating activities: Receipts from other funds Reduction in (payments for) settlement of claims Net cash provided by (used) in operating activities $ Cash flows from investing activities: Interest received Net cash provided (used) by investing activities $ - Net increase (decrease) in cash and cash equivalents (3,560,946) Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 2,581,603 (6,142,549) (3,560,946) Worker's Compensation 8,667,686 $ 5,106,740 $ 2,230,596 910,839 3,141,435 Health Total $ 25,827,358 (24,814,883) 1,012,475 $ 30,639,557 (30,046,593) 592,964 10,392 10,392 - 10,392 10,392 3,151,827 1,012,475 603,356 - 3,115,291 11,782,977 $ 4,127,766 $ 12,386,333 $ 424,327 3,151,827 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Change in assets and liabilities: Increase (decrease) in accounts payable Increase (decrease) in accrued expenses (Increase) decrease in deferred outflows Increase (decrease) in deferred inflows Increase (decrease) in net pension liability Increase (decrease) in net OPEB obligation $ Net cash provided (used) by operating activities $ - $ 7,612 (3,528,782) (43,501) 80,551 (67,274) (9,552) 137 (3,560,946) (6,981) 23,491 3,124,925 $ 3,141,435 $ 682,777 (94,629) $ 1,012,475 417,346 713,880 (498,486) (43,501) 80,551 (67,274) (9,552) $ 592,964 Other Supplementary Information BUDGETARY COMPARISON SCHEDULES 138 Combined Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General, Debt Service, Special Revenue, Capital Projects and Enterprise Fund Types For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Contingency Total revenues Expenditures Current: Police Fire Community services Public works Community development Human services Mayor and council Municipal court City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Contingency Interdepartmental charges Debt Service: Principal Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Issuance of debt Premium on issuance of debt Proceeds of refunding bonds Payment to refunded bond escrow agent Proceeds (loss) from sale of capital assets Total other financing sources (uses) Net change in fund balance Final Budget Amounts Actual Amounts (Budgetary Basis) $ 182,240,149 82,637,657 3,723,536 123,746,884 9,768,541 1,636,750 12,842,512 9,330,362 425,926,391 $ 192,347,634 70,479,572 1,242,005 133,134,171 9,986,226 1,687,074 14,546,370 423,423,052 Variance with Final Budget Positive (Negative) $ 10,107,485 (12,158,085) (2,481,531) 9,387,287 217,685 50,324 1,703,858 (9,330,362) (2,503,339) 82,702,046 32,894,462 29,214,183 221,496,919 69,545,799 5,014,137 377,787 5,414,078 7,356,077 5,122,189 736,192 256,136 1,088,410 18,382,019 7,995,095 (13,648,944) 80,560,382 29,999,020 26,717,456 178,826,107 63,649,686 4,560,358 353,692 4,309,074 7,304,840 2,897,496 432,633 271,663 766,811 20,688,054 (13,544,869) 2,141,664 2,895,442 2,496,727 42,670,812 5,896,113 453,779 24,095 1,105,004 51,237 2,224,693 303,559 (15,527) 321,599 (2,306,035) 7,995,095 (104,075) 61,246,378 29,302,993 564,495,956 63,389,273 27,125,429 498,307,105 (2,142,895) 2,177,564 66,188,851 31,697,555 (31,697,555) 43,965,000 2,561,410 6,780,000 (4,534,184) 2,436,868 51,209,094 (23,674,959) (269,139) 79,140 (26,659,870) 2,561,410 6,780,000 (4,534,184) 1,732,556 (20,310,087) 43,375,425 31,966,694 (31,776,695) 70,624,870 704,312 71,519,181 $ (67,050,384) 139 $ $ Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Revenues: Property taxes Intergovernmental other Investment income Total revenues $ Expenditures: Debt service: Principal retirement Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Premium on issuance of debt Proceeds of refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) Net change in fund balance $ Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 24,609,059 1,269,719 25,878,778 $ 24,446,996 1,489,500 10,428 25,946,924 29,232,105 8,759,781 37,991,886 29,300,000 7,858,201 37,158,201 (67,895) 901,580 833,685 (12,113,108) (11,211,277) 901,831 5,909,874 (10,082,741) (4,172,867) 5,914,626 (10,087,236) 1,269,813 6,780,000 (4,534,184) (656,981) (16,285,975) $ (11,868,258) 140 $ (162,063) 219,781 10,428 68,146 4,752 (4,495) 1,269,813 6,780,000 (4,534,184) 3,515,886 $ 4,417,717 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Special Assessment Debt Service For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Special assessments Miscellaneous Total revenues $ Expenditures: Current: Public works Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance 2,959,851 2,959,851 $ - $ 8,559 1,745,000 1,214,850 2,959,850 $ 2,324 3,862,306 18,758 3,883,388 Variance with Final BudgetPositive (Negative) 1 141 - 2,755,000 1,131,258 3,894,817 $ (11,429) 2,324 902,455 18,758 923,537 83,592 83,592 $ 839,945 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes Investment income Charges for services Miscellaneous Total revenues $ Expenditures: Current: Community services Debt service: Principal retirement Interest and fiscal fees Total expenditures Deficiency of revenues over expenditures and other uses Other financing uses: Transfers out Total other financing uses Net change in fund balance $ 6,912,473 10,000 710,872 9,050 7,642,395 $ 7,460,054 10,217 881,551 17,200 8,369,022 Variance with Final BudgetPositive (Negative) $ 547,581 217 170,679 8,150 726,627 3,037,555 2,903,392 134,163 4,975,000 951,526 8,964,081 4,975,000 949,078 8,827,470 2,448 136,611 (1,321,686) (458,448) (100,000) (100,000) (100,000) (100,000) (1,421,686) 142 $ (558,448) 590,016 $ 863,238 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Revenues: State sales tax Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 9,630,103 87,050 9,717,153 $ 10,013,859 111,183 82,761 10,207,803 10,850,234 10,850,234 9,165,347 9,165,347 1,684,887 1,684,887 (1,133,081) 1,042,456 2,175,537 1,030,000 (3,281,978) 51,247 (2,200,731) 1,149,977 (3,281,980) 87,803 (2,044,200) $ (3,333,812) $ (1,001,744) 143 $ 383,756 24,133 82,761 490,650 119,977 (2) 36,556 156,531 $ 2,332,068 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Revenues: Federal grants Investment income Miscellaneous Total revenues $ 3,611,444 3,611,444 Expenditures: Current: Community development Debt service: Principal retirement Interest and fiscal fees Total expenditures Deficiency of revenues and other financing sources over expenditures Variance with Final BudgetPositive (Negative) $ $ 914,078 3,611,882 355,000 320,958 1,590,036 (438) 144 (355,000) (320,958) 2,021,846 (3,904) $ (4,342) (2,701,713) 5 675,958 (2,025,750) 2,697,804 (4,342) (438) (438) $ 909,731 5 675,958 1,585,694 3,611,882 (438) Other financing sources: Proceeds from sale of capital assets Total other financing sources Net change in fund balance Actual Amounts (Budgetary Basis) (438) (438) $ (3,904) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Fines and forfeitures Miscellaneous Total revenues $ Expenditures: Current: Human services Total expenditures 9,496,730 9,496,730 Deficiency of revenues over expenditures - Other financing sources (uses): Transfers in Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance 9,483,630 11,750 1,350 9,496,730 190,000 190,000 $ 190,000 145 $ 8,084,829 4,266 8,089,095 9,206,716 9,206,716 (1,117,621) 82,529 3,916 86,445 $ (1,031,176) Variance with Final BudgetPositive (Negative) $ (1,398,801) (7,484) (1,350) (1,407,635) 290,014 290,014 (1,117,621) (107,471) 3,916 (103,555) $ (1,221,176) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Donations and Court Awards Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Charges for services Fines and forfeitures Miscellaneous Total revenues $ Expenditures: Current: Fire Community services Public works Community development Human services Municipal court City manager Contingency Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance 17,875 151,516 1,348,711 1,983,775 3,501,877 $ $ 29,030 1,630 420,009 (553,517) (1,105,343) (1,208,191) 111,375 408,403 5,860 119,047 432,633 1,250,068 895,017 200,000 3,422,403 3,982 198,278 1,930 42,991 147,580 252,438 80,252 727,451 107,393 210,125 3,930 76,056 285,053 997,630 814,765 200,000 2,694,952 79,474 1,566,235 1,486,761 (77,963) (77,963) $ 46,905 1,630 571,525 795,194 878,432 2,293,686 Variance with Final BudgetPositive (Negative) 1,511 146 606,440 (80,180) 526,260 $ 2,092,495 606,440 (2,217) 604,223 $ 2,090,984 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Grants Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants State grants Intergovernmental other Investment income Charges for services Fines and forfeitures Miscellaneous Contingency Total revenues $ 1,650,352 318,434 5,776,478 38,433 465,000 1,247,894 5,800,000 15,296,591 Expenditures: Current: Police Fire Community services Public works Community development Human services City manager City attorney Contingency Total expenditures Excess (deficiency) of revenues over expenditures Other financing uses: Transfers out Total other financing uses Net change in fund balance $ $ 838,371 (34,826) (1,116,466) 101 17,951 285,466 (630,031) (5,800,000) (6,439,434) 5,159,619 574,418 1,058,092 8,814 2,270,000 284,193 5,799,411 15,154,547 4,601,184 755,136 769,628 34,995 47,572 410,262 873,000 52,160 7,543,937 558,435 (180,718) 288,464 (26,181) (47,572) (410,262) 1,397,000 232,033 5,799,411 7,610,610 142,044 1,313,220 1,171,176 - $ 2,488,723 283,608 4,660,012 101 56,384 750,466 617,863 8,857,157 Variance with Final BudgetPositive (Negative) (606,440) (606,440) 142,044 147 $ 706,780 (606,440) (606,440) $ 564,736 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) $ 2,668,785 2,668,785 $ 2,444,298 2,444,298 2,668,785 2,421,097 247,688 1,935,000 994,400 5,598,185 1,935,000 992,251 5,348,348 2,149 249,837 Deficiency of revenues over expenditures (2,929,400) (2,904,050) 25,350 Other financing sources (uses): Transfers in Total other financing sources (uses) 2,924,600 2,924,600 2,924,600 2,924,600 - Revenues: Charges for services Total revenues Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance $ (4,800) 148 $ 20,550 Variance with Final BudgetPositive (Negative) $ $ (224,487) (224,487) 25,350 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Miscellaneous Contingency Total revenues Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balance $ 11,464,633 2,368,142 13,832,775 $ 4,254,167 11,749 4,265,916 23,990,535 23,990,535 14,078,259 14,078,259 (10,157,760) (9,812,343) 5,389,812 5,389,812 5,389,812 5,389,812 $ (4,767,948) 149 $ (4,422,531) Variance with Final BudgetPositive (Negative) $ (7,210,466) 11,749 (2,368,142) (9,566,859) 9,912,276 9,912,276 345,417 - $ 345,417 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Streets Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Revenues: Federal grants Investment income Charges for services Miscellaneous Contingency Total revenues $ Expenditures: Current: Public works Total expenditures 754,210 922,220 1,676,430 Actual Amounts (Budgetary Basis) $ 222,211 77 114,722 2,272 339,282 Variance with Final BudgetPositive (Negative) $ (531,999) 77 114,722 2,272 (414,928) 6,410,672 6,410,672 5,274,968 5,274,968 1,135,704 1,135,704 (4,734,242) (4,935,686) (201,444) 3,027,029 1,878,948 4,905,977 3,027,029 (252,498) 1,675,000 4,449,531 (252,498) (203,948) (456,446) 171,735 $ (486,155) Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 150 $ (657,890) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Police Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Total revenues Expenditures: Current: Police Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ - Variance with Final BudgetPositive (Negative) $ - 3,106,247 3,106,247 2,285,551 2,285,551 820,696 820,696 (3,106,247) (2,285,551) 820,696 1,894,275 1,894,275 1,458,275 1,458,275 (436,000) (436,000) $ (1,211,972) 151 $ (827,276) $ 384,696 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Fire Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Total revenues $ Expenditures: Current: Fire Total expenditures Deficiency of revenues over expenditures Other financing sources: Issuance of debt Total other financing sources Net change in fund balance $ - $ - Variance with Final BudgetPositive (Negative) $ - 3,895,168 3,895,168 3,097,342 3,097,342 797,826 797,826 (3,895,168) (3,097,342) 797,826 2,945,612 2,945,612 2,546,725 2,546,725 (398,887) (398,887) (949,556) 152 $ (550,617) $ 398,939 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Storm Sewers Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues Expenditures: Current: Public works Total expenditures $ Defiiency of revenues over expenditures Other financing sources (uses): Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ - Variance with Final BudgetPositive (Negative) $ - 85,821 85,821 85,682 85,682 139 139 (85,821) (85,682) 139 100,000 100,000 (575,000) 100,000 (475,000) 14,179 $ 153 (560,682) (575,000) (575,000) $ (574,861) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Parks Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Taxes Investment income Other entities' participation Contingency Total revenues $ Expenditures: Current: Community services Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 60,000 $ Variance with Final BudgetPositive (Negative) 200,000 260,000 9,798 1,768 25,000 36,566 5,747,862 5,747,862 4,242,989 4,242,989 1,504,873 1,504,873 (5,487,862) (4,206,423) 1,281,439 4,760,168 4,760,168 (849,230) 3,215,000 2,365,770 (849,230) (1,545,168) (2,394,398) $ (1,840,653) $ (1,112,959) (727,694) 154 $ (50,202) 1,768 25,000 (200,000) (223,434) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ - $ Variance with Final BudgetPositive (Negative) 1,748 1,748 1,748 1,748 242,426 242,426 Expenditures: Current: Community development Total expenditures 37,642,544 37,642,544 37,400,118 37,400,118 Deficiency of revenues over expenditures 37,642,544 (37,398,370) (75,040,914) 3,400,000 30,785,000 34,185,000 4,824,230 30,785,000 35,609,230 1,424,230 1,424,230 Other financing sources (uses): Transfers in Issuance of debt Total other financing sources (uses) Net change in fund balance $ 71,827,544 $ 155 (1,789,140) $ (73,616,684) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ 65 249,168 249,233 Variance with Final BudgetPositive (Negative) $ 65 249,168 249,233 7,914,867 7,914,867 4,727,986 4,727,986 3,186,881 3,186,881 7,914,867 (4,478,753) (12,393,620) 1,914,375 5,060,956 6,975,331 1,914,375 (23,873) 3,530,000 5,420,502 (23,873) (1,530,956) (1,554,829) $ 14,890,198 $ 156 941,749 $ (13,948,449) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Signals Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Charges for services Other entities' participation Contingency Total revenues $ Expenditures: Current: Public works Total expenditures $ 1,589,781 1,589,781 Deficiency of revenues over expenditures Other financing sources (uses) : Transfers in Issuance of debt Total other financing sources (uses) Net change in fund balance 872,288 40,000 912,288 $ 828,579 35 38,750 30,904 898,268 Variance with Final BudgetPositive (Negative) $ 1,458,246 1,458,246 (677,493) (559,978) 250,000 655,000 905,000 250,000 655,000 905,000 227,507 $ 157 345,022 (43,709) 35 38,750 30,904 (40,000) (14,020) 131,535 131,535 117,515 - $ 117,515 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Capital Projects Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Final Budget Amounts Revenues: Charges for services Total revenues $ Expenditures: Current: Community development Total expenditures Net change in fund balance - Actual Amounts (Budgetary Basis) $ 1,167,935 1,167,935 $ - $ 93,253 93,253 $ 158 693,603 693,603 Variance with Final BudgetPositive (Negative) 600,350 693,603 693,603 1,074,682 1,074,682 $ 600,350 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Investment income Miscellaneous Total revenues $ Expenditures: Current: Public works Contingency Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 78,051,860 308,000 831,000 79,190,860 $ 78,216,300 425,439 645,364 79,287,103 Variance with Final BudgetPositive (Negative) $ 164,440 117,439 (185,636) 96,243 79,044,794 1,000,000 59,965,268 - 19,079,526 1,000,000 21,614,273 14,464,248 116,123,315 22,324,273 12,957,843 95,247,384 (710,000) 1,506,405 20,875,931 (36,932,455) (15,960,281) 20,972,174 5,158,141 (8,133,096) 22,544,911 67,357 19,637,313 5,162,636 (5,637,629) 1,291,597 119,782 936,386 4,495 2,495,467 (22,544,911) 1,291,597 52,425 (18,700,927) (17,295,142) 159 $ (15,023,895) $ 2,271,247 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 25,000 14,796,495 14,821,495 $ 18,320 14,216,743 7,255 14,242,318 Variance with Final BudgetPositive (Negative) $ (6,680) (579,752) 7,255 (579,177) 17,178,621 17,178,621 17,624,533 17,624,533 (2,357,126) (3,382,215) (1,025,089) 100,150 (202,099) 165,662 63,713 (101,951) 87,621 (14,330) (100,150) 100,148 (78,041) (78,043) (3,396,545) $ (1,103,132) $ (2,293,413) 160 $ (445,912) (445,912) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2015 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues $ Expenditures: Current: Public works Debt service: Interest and fiscal fees Total expenditures Deficiency of revenues over expenditures Other financing sources: Transfers in Proceeds from sale of capital assets Total other financing sources Net change in fund balance $ 2,782,436 200,000 2,982,436 $ 7,910 2,755,966 99 2,763,975 Variance with Final BudgetPositive (Negative) $ 7,910 (26,470) (199,901) (218,461) 5,444,035 2,654,318 2,789,717 5,444,035 2,992 2,657,310 (2,992) 2,786,725 (2,461,599) 106,665 2,568,264 2,574,000 2,574,000 97,873 39,893 137,766 (2,476,127) 39,893 (2,436,234) 112,401 161 $ 244,431 $ 132,030 City of Tempe, Arizona 162 This section provides a broad range of trend data covering key financial indicators including general governmental revenues and expenditures, property taxes, debt burden, demographics and miscellaneous data useful in assessing the City’s financial condition. Statistical Section 198 City of Tempe, Arizona STATISTICAL SECTION The Statistical Section presents detailed information as a context for understanding the information in the financial statements, note disclosures and required supplementary information in regards to the City’s overall financial health.  Financial Trends. 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. These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax and sale and use taxes.  Debt Capacity. 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.  Economic and Demographic Information. These schedules offer economic and demographic indicators to help the reader understand the environment within which the City’s financial activities take place.  Operating Information. 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. 163 City of Tempe, Arizona 164 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 Governmental activities Net investment in capital assets Restricted (A) Unrestricted Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 $ 388,629,882 174,328,803 226,533,760 $ 397,087,925 114,918,257 414,023,370 $ 597,765,255 139,393,928 277,055,145 $ 574,872,877 181,241,102 237,470,312 $ 562,958,494 142,947,736 241,371,774 $ 571,925,061 114,643,888 259,250,692 $ 560,427,507 124,800,334 248,936,397 $ 548,739,169 119,845,935 253,302,947 $ 537,940,057 148,338,902 236,990,748 $ 519,040,090 141,565,366 (18,763,531) Total governmental activities net position $ 789,492,445 $ 926,029,552 $ 1,014,214,328 $ 993,584,291 $ 947,278,004 $ 945,819,641 $ 934,164,237 $ 921,888,051 $ 923,269,707 $ 641,841,925 Business-type activities Net investment in capital assets Unrestricted $ 174,110,077 88,802,930 $ 177,682,915 88,554,746 $ 154,867,017 103,816,965 $ 151,096,394 100,251,937 $ 144,245,429 102,511,794 $ 175,625,967 73,018,010 $ 162,774,388 92,951,764 $ 149,782,240 105,207,407 $ 137,971,614 118,726,035 $ 142,208,059 90,577,933 Total business-type activities net position $ 262,913,007 $ 266,237,661 $ 258,683,982 $ 251,348,331 $ 246,757,223 $ 248,643,977 $ 255,726,152 $ 254,989,647 $ 256,697,649 $ 232,785,992 $ 562,739,959 174,328,803 315,336,690 $ 574,770,840 114,918,257 502,578,116 $ 752,632,272 139,393,928 380,872,110 $ 725,969,271 181,241,102 337,722,249 $ 707,203,923 142,947,736 343,883,568 $ 747,551,028 114,643,888 332,268,702 $ 723,201,895 124,800,334 341,888,161 $ 698,521,409 119,845,935 358,510,354 $ 675,911,671 148,338,902 355,716,783 $ 661,248,149 141,565,367 71,814,402 $ 1,179,967,356 $ 874,627,918 Primary government Net investment in capital assets Restricted (A) Unrestricted Total primary government net position $ 1,052,405,452 $ 1,192,267,213 $ 1,272,898,310 $ 1,244,932,622 $ 1,194,035,227 $ 1,194,463,618 $ 1,189,890,389 $ 1,176,877,698 (A) With the implementation of GASB No. 54 in fiscal year 2010-11, Restricted fund balance has been redefined to include only amounts that have externally enforceable limitations or enabling legislation. 165 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 $ 59,957,698 20,098,598 22,205,153 67,537,876 30,358,768 4,342,297 362,810 412,936 2,348,553 460,824 752,336 2,499,978 534,950 4,492,161 4,256,427 2,727,058 1,462,595 6,122,335 10,821,420 $ 60,929,075 22,563,083 16,072,936 56,869,440 21,444,736 4,708,606 362,281 445,531 2,903,028 476,089 528,493 20,015,034 2,816,030 548,552 8,611,601 4,597,029 2,877,320 889,443 8,127,073 13,996,681 $ 83,613,800 30,133,124 24,070,427 82,727,089 20,037,984 6,066,038 547,453 488,323 3,641,333 558,706 870,815 20,521,457 3,179,145 687,926 8,596,785 5,969,557 3,648,975 2,677,340 3,067,647 12,091,111 $ 86,126,079 30,850,700 30,402,447 101,674,714 20,445,243 5,496,374 418,851 265,531 2,933,734 484,460 684,875 20,431,433 3,137,349 583,563 6,338,984 4,458,557 3,157,288 1,817,517 1,297,669 16,247,598 $ 78,283,021 30,542,829 21,891,886 115,283,119 23,494,471 5,245,105 387,723 369,153 3,101,845 427,828 739,884 21,238,479 4,210,261 531,651 7,107,213 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 $ 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,179,694 316,531 556,354 2,659,312 477,080 403,792 4,463,790 447,287 467,763 8,321,853 2,037,261 5,733,128 18,453,487 $ 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 3,934,716 356,468 78,458 2,854,168 338,059 910,616 7,456,756 476,011 462,817 5,325,401 2,102,617 2,301,194 14,894,293 $ 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 3,900,928 223,472 615,451 2,963,058 393,471 481,374 7,039,462 449,428 354,866 4,063,048 2,036,621 3,662,321 14,347,644 $ 78,658,426 31,103,237 29,363,339 102,892,245 30,234,017 4,288,787 408,196 477,964 2,844,965 392,629 844,934 6,416,085 463,969 326,433 4,128,800 3,214,557 1,331,649 17,153,207 $ 92,214,451 32,914,994 29,239,583 107,411,254 18,832,177 13,374,117 4,028,068 330,042 7,045,783 3,712,245 433,339 415,774 751,331 6,403,407 1,955,520 12,882,924 241,754,773 249,782,061 313,195,035 337,252,966 340,940,020 301,007,739 301,546,309 308,647,885 314,543,439 331,945,009 Business-type activities: Water and wastewater Solid waste Golf course Cemetery (E) 53,588,122 11,836,691 2,375,802 152,717 53,688,700 12,403,387 2,225,214 171,817 64,954,769 15,130,899 2,667,539 251,743 64,720,725 14,499,308 2,324,208 218,447 73,045,936 13,730,227 2,269,182 312,525 67,505,481 13,784,106 2,011,316 176,553 72,156,412 14,626,578 2,658,416 129,849 72,352,330 14,758,133 2,724,422 - 73,208,373 15,379,174 2,799,922 - 73,548,319 15,868,498 2,685,634 - Total business-type activities expenses 67,953,332 68,489,118 83,004,950 81,762,688 89,357,870 83,477,456 89,571,255 89,834,885 91,387,469 92,102,451 $ 309,708,105 $ 318,271,179 $ 396,199,985 $ 419,015,654 $ 430,297,890 $ 384,485,195 $ 391,117,564 $ 398,482,770 $ 405,930,908 $ 424,047,460 Expenses Governmental activities: Police Fire Community services Public works Community development Human services(H) Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office (H) City clerk and elections Internal services Parks and recreation (A) Community relations Diversity program (H) Tempe learning center (D)(F) Economic development (G) Development services (B) Finance and technology (C) (H) Financial services (C) Human resources (H) Information technology(C) Non-departmental Unallocated depreciation Interest on long-term debt Total governmental activities expenses Total primary government expenses (A) (B) (C) (D) (E) (F) (G) (H) In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Development Services department was merged into Community Development. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In fiscal year 2010-11, Tempe Learning Center was disaggregated from Human Resources. In fiscal year 2012-13, the Cemetery Fund was closed into the General Fund. In fiscal year 2013-14, Tempe Learning Center was reincorporated into Human Resources. In fiscal year 2013-14, Economic Development was established as it's own reporting unit. In fiscal year 2014-15, Finance and Technology and Human Resources were combined to form the Internal Services Department. A component of the Community Services Department along with Diversity formed a new department called Human Services. The budget office became a stand alone office now known as Municipal Budget Office. Economic Development and Community Relations became a part of the City Manager Office. 166 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 Program Revenues Governmental activities: Charges for services: Police Fire Community services Public works Community development Human services (D) Municipal court City attorney Internal services Parks and recreation (A) Community relations Development services Finance and technology (B) Financial Services (B) Non-departmental Operating grants and contributions Captital grants and contributions Total governmental activities program revenues Business-type activities: Charges for services: Water and wastewater Solid waste Golf course Cemetery (C) Capital grants and contributions Total business-type activities program revenues $ 877,704 566,505 5,098,319 6,594,229 637,445 7,179,554 5,566,289 1,932,684 92,827 19,903,398 54,935,929 103,384,883 $ 831,973 1,116,101 5,353,815 7,940,104 526,893 7,687,007 30,053 5,891,971 1,900,016 284,084 18,812,530 103,412,667 153,787,214 $ 1,110,714 303,824 6,924,685 11,305,217 451,535 8,211,574 27,844 6,175,963 1,728,472 79,536 15,625,633 79,670,490 131,615,487 $ 1,201,962 314,969 7,122,650 20,461,847 592,236 8,912,739 9,348 24,070 5,090,280 1,781,809 130,492 16,052,299 35,955,254 97,649,955 $ 1,052,723 912,000 6,173,870 19,596,611 1,938,184 5,868,369 126,455 3,710,512 1,997,614 18,222,849 38,709,299 98,308,486 $ 1,657,335 2,107,133 6,453,226 19,582,397 4,484,572 8,413,798 8,682 2,624,190 22,131,520 24,708,317 92,171,170 $ 1,649,775 1,642,702 7,101,043 18,136,860 7,088,168 7,826,823 2,623,338 22,450,002 15,961,785 84,480,496 $ 1,506,807 153,903 6,988,375 18,536,983 6,815,190 6,426,389 13,310 2,140,898 27,287,325 6,551,849 76,421,029 $ 1,320,177 268,938 7,445,319 19,681,176 12,035,033 6,747,891 2,224,489 24,668,792 5,933,017 80,324,832 $ 1,712,306 334,158 7,589,603 19,786,216 13,065,445 80,237 8,302,032 2,212,402 19,784,859 7,258,243 80,125,501 47,012,596 12,989,827 1,971,031 18,943 506,593 62,498,990 50,922,496 13,820,128 1,912,286 18,339 4,782,425 71,455,674 53,208,327 14,669,542 1,984,429 231,960 472,928 70,567,186 55,504,216 15,130,988 1,813,578 98,356 59,867 72,607,005 62,511,102 15,242,801 1,574,081 116,643 4,765,839 84,210,466 70,094,034 15,326,780 1,562,489 110,196 1,691,429 88,784,928 73,392,328 14,866,281 2,344,355 144,242 1,988,550 92,735,756 74,979,069 14,341,827 2,480,815 91,801,711 80,989,551 14,400,476 2,661,519 98,051,546 78,043,384 14,216,743 2,755,966 95,016,093 Total primary government program revenues $ 165,883,873 $ 225,242,888 $ 202,182,673 $ 170,256,960 $ 182,518,952 $ 180,956,098 $ 177,216,252 $ 168,222,740 $ 178,376,378 $ 175,141,594 Net (expense)/revenue Governmental activities Business-type activities Total primary government net expense $ (138,369,890) (5,454,342) $ (143,824,232) $ (95,994,847) 2,966,556 $ (93,028,291) $ (181,579,548) (12,437,764) $ (194,017,312) $ (239,603,011) (9,155,683) $ (248,758,694) $ (242,631,534) (5,147,404) $ (247,778,938) $ (208,836,569) 5,307,472 $ (203,529,097) $ (217,065,813) 3,164,501 $ (213,901,312) $ (232,226,856) 1,966,826 $ (230,260,030) $ (234,218,607) 6,664,077 $ (227,554,530) $ (251,819,508) 2,913,642 $ (248,905,866) (A) (B) (C) (D) In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In fiscal year 2012-13, the Cemetery Fund was closed into the General Fund. A component of the Community Services department along with Diversity formed a new deparment called Human Services. 167 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 $ 145,109,192 16,607,943 27,532,893 1,858,851 7,527,675 8,038,565 1,864,289 1,813,311 1,149,970 211,502,689 $ 157,488,587 18,823,759 26,826,227 2,693,256 6,870,739 13,337,247 2,780,229 3,711,910 232,531,954 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 (A) Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 $ 142,985,910 13,649,203 35,899,010 3,428,125 5,437,201 822,900 3,199,954 496,911 (508,805) 205,410,409 $ 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 278,102 2,987,769 261,764 3,763,255 219,950,670 $ 147,815,825 32,102,103 40,074,441 3,310,940 6,053,172 725,099 4,114,557 657,224 746,902 235,600,263 $ 147,787,315 40,571,933 41,457,646 2,933,239 889,594 5,042,875 2,170,917 479,071 241,332,590 General revenues and other changes in net position Governmental activities: General revenues: Sales taxes State shared income taxes, unrestricted (B) Intergovernmental revenue, unrestricted (B) Property taxes Franchise taxes Auto-lieu taxes (B) Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total governmental activities Business-type activites: Unrestricted investment earnings Miscellaneous Gain (loss) on sale of capital assets Transfers Total business-type activities Total primary government 1,909,727 993,233 265,397 (1,149,970) 2,018,387 $ 3,305,406 716,338 48,264 (3,711,910) 358,098 150,687,016 23,332,475 32,447,203 3,424,561 6,655,516 14,041,876 2,879,878 36,146,557 149,242 269,764,324 $ 4,618,383 344,449 70,495 (149,242) 4,884,085 $ 213,521,076 $ 232,890,052 $ $ 73,132,799 (3,435,955) $ 69,696,844 $ 136,537,107 3,324,654 $ 139,861,761 $ 274,648,409 134,382,181 24,832,128 35,891,803 3,976,956 6,024,595 7,410,643 4,348,126 1,491,079 615,463 218,972,974 $ 1,940,956 262,728 231,811 (615,463) 1,820,032 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 97,660 3,429,435 17,160 (115,657) 196,325,247 $ 10,698 332,955 96,986 115,657 556,296 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,229,447 2,991,971 133,677 293,418 207,378,206 459,759 1,976,132 (5,563,191) (293,418) (3,420,718) $ 220,793,006 $ 196,881,543 $ $ (20,630,037) (7,335,651) (27,965,688) $ (46,306,287) (4,591,108) (50,897,395) $ 203,957,488 335,297 3,032,990 40,582 508,805 3,917,674 115,362 923,413 21,149 (3,763,255) (2,703,331) 436,821 1,643,570 52,947 (746,902) 1,386,436 488,477 142,914 247,296 (479,071) 399,616 $ 209,328,083 $ 217,247,339 $ 236,986,699 $ 241,732,206 $ (11,655,404) 7,082,175 $ (4,573,229) $ $ $ Changes in net position Governmental activities Business-type activities Total primary government $ 88,184,776 (7,553,679) 80,631,097 $ $ $ (1,458,363) 1,886,754 428,391 (A) Due to the prolonged economic downturn, in 2009-10 the City had planned drawdown of fund balance. (B) In Fiscal Year 2014-15, State shared income taxes, unrestricted and Auto-lieu taxes were combined under the category Intergovernmental revenue, unrestricted . 168 $ (12,276,186) (736,505) (13,012,691) $ 1,381,656 8,050,513 9,432,169 $ (10,486,918) 3,313,258 (7,173,660) Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Debt service funds (A) Special revenues funds Capital projects funds Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds $ Fiscal Year 2006-07 $ $ 2,376,818 94,648,961 97,025,779 $ 4,299,060 96,883,636 101,182,696 $ 71,648,277 $ 58,559,662 $ 66,938,765 53,752,477 192,339,519 $ (66,826) 65,022,802 17,044,525 140,560,163 Fiscal Year 2007-08 $ $ 4,449,843 92,432,479 96,882,322 $ 69,814,938 $ 36,228,348 28,848,898 134,892,184 Fiscal Year 2008-09 $ $ 1,322,728 75,647,216 76,969,944 $ 59,067,648 $ (45,374) 23,220,030 71,685,317 153,927,621 Fiscal Year 2009-10 $ Fiscal Year 2010-11 (B) $ 981,529 42,832,205 43,813,734 $ $ $ 69,324,494 $ $ 32,742,748 63,078,330 165,145,572 $ 650,506 13,783,790 39,604,103 54,038,399 1,826,335 75,275,738 75,446,158 10,614,331 (1,097,095) 162,065,467 Fiscal Year 2011-12 $ $ $ $ 634,526 9,967,268 50,954,570 61,556,364 1,765,739 76,139,830 67,195,597 11,707,666 (1,733,419) 155,075,412 (A) In fiscal years 2006-07 and 2008-09, the special assessment debt service fund is reported in "unreserved" fund balance due to the current year deficit balance. (B) In fiscal year 2010-11, GASB No. 54 was implemented requiring additional classifications of fund balance. A deficit fund balance is reported in "unassigned". 169 Fiscal Year 2012-13 $ $ $ $ 643,980 8,127,268 52,658,705 61,429,953 1,733,749 75,566,724 19,054,131 14,817,549 (571,299) 110,600,854 Fiscal Year 2013-14 $ - Fiscal Year 2014-15 $ - 653,365 346,364 - $ $ $ 338,193 9,884,517 63,878,841 74,754,916 1,947,082 77,724,151 14,295,999 15,326,386 (673,217) 108,620,401 - $ $ $ 520,770 8,800,833 73,879,480 83,547,447 1,952,950 80,049,732 21,925,153 15,935,817 (2,922,001) 116,941,651 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Revenues: Taxes Intergovernmental Investment earnings Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues Fiscal Year 2005-06 Fiscal Year 2006-07 $ 146,084,925 109,213,832 8,038,565 18,304,846 8,261,486 2,382,056 2,705,348 1,389,130 3,973,800 300,353,988 $ 159,569,926 127,738,319 13,337,247 20,242,897 8,407,254 2,074,553 2,610,195 1,524,891 5,061,404 340,566,686 Fiscal Year 2007-08 $ 159,798,418 102,320,894 14,041,876 23,674,598 10,148,376 1,412,155 2,842,153 1,592,521 5,486,178 321,317,169 Fiscal Year 2008-09 $ 150,848,798 143,357,538 6,393,595 31,096,490 11,516,359 1,600,100 2,860,571 1,546,287 6,168,789 355,388,527 Fiscal Year 2009-10 $ 145,038,639 111,505,248 97,660 27,866,740 11,082,812 328,147 2,783,916 1,670,698 5,968,065 306,341,925 Fiscal Year 2010-11 $ Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 158,749,333 87,180,913 1,229,966 30,285,327 8,235,437 622,543 3,867,979 1,666,196 7,209,565 299,047,259 $ 162,157,488 72,701,235 822,900 31,615,115 8,198,638 3,542,185 2,526,283 1,650,907 7,021,832 290,236,583 $ 168,974,511 76,651,736 278,102 32,107,656 8,537,078 196,106 4,442,862 1,931,776 4,908,914 298,028,741 $ 182,032,821 74,692,323 725,099 37,600,946 8,909,849 174,954 3,605,932 2,305,786 6,707,484 316,755,194 $ 182,323,977 78,988,805 889,594 38,662,572 9,986,226 1,093,272 3,862,306 1,687,074 8,197,929 325,691,755 Expenditures: Police Fire Community services Public works Community development Human services (F) Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office (F) City clerk and elections Internal services Parks and recreation (A) Community relations (F) Diversity program (F) Economic development (E)(F) Tempe learning center (D) Development services (B) Finance and technology (F) Financial services (C) Human resources (F) Non-departmental Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures 59,977,366 19,599,806 20,743,534 48,822,208 19,795,483 4,454,473 362,810 383,025 2,345,165 450,650 747,588 2,470,215 520,748 5,768,444 3,978,571 2,730,740 3,937,911 60,200,957 21,054,670 15,289,688 49,026,864 20,566,776 4,662,214 362,281 440,915 2,844,636 462,751 484,894 15,166,076 2,773,675 542,292 17,278,332 4,342,723 2,842,328 6,031,097 71,813,995 24,413,707 20,844,315 56,316,376 18,246,591 5,563,038 367,250 294,042 3,224,007 491,057 748,371 15,826,217 2,843,668 641,719 7,394,179 4,390,171 3,282,022 3,407,427 77,046,317 28,330,453 26,158,843 73,659,648 19,515,673 5,525,601 386,483 347,556 2,914,014 506,621 633,640 17,583,861 3,095,259 555,034 6,376,874 4,211,080 3,127,479 395,648 74,747,734 27,134,920 18,254,109 72,253,980 19,343,140 5,267,930 388,486 330,992 3,117,084 514,069 799,975 16,880,739 4,217,031 520,731 7,056,690 3,842,927 3,405,582 - 65,289,995 25,639,288 22,010,148 67,998,367 22,946,249 4,051,517 318,282 521,642 2,564,283 379,752 395,778 4,332,418 427,103 445,556 6,620,247 1,945,518 - 67,325,484 25,871,390 23,473,722 66,845,601 23,572,565 3,874,634 440,161 101,885 2,648,388 393,958 899,917 7,180,324 457,292 415,447 3,572,392 2,087,079 - 72,709,534 28,056,149 24,551,075 70,784,480 25,253,707 3,830,508 244,837 617,384 3,037,216 388,263 511,960 7,088,482 441,212 418,396 3,760,937 2,045,707 - 75,135,489 28,887,609 25,579,134 72,739,804 29,460,993 4,325,838 368,846 590,201 2,912,507 426,006 885,350 6,562,909 451,293 396,577 4,558,042 3,066,799 - 78,102,044 26,802,154 22,240,413 72,414,122 17,432,661 13,471,552 4,058,927 345,501 6,583,633 3,790,479 432,384 323,676 751,978 7,232,975 - 14,580,000 12,016,680 153,861,610 377,547,027 15,765,000 15,239,760 193,312,819 448,690,748 18,121,865 16,636,211 138,410,945 413,277,173 19,656,531 17,153,400 106,066,458 413,246,473 22,212,157 16,656,095 58,406,594 355,350,965 26,062,231 18,989,678 35,348,520 306,286,572 25,756,000 15,494,153 29,512,675 299,923,067 122,595,000 15,315,235 20,874,698 402,524,780 26,105,000 14,084,299 24,192,621 320,729,317 41,065,000 14,164,594 49,626,981 358,839,074 Deficiency of revenues over expenditures before other financing sources (uses) (77,193,039) (108,124,062) (91,960,004) (57,857,946) (49,009,040) (A) (B) (C) (D) (E) (F) (7,239,313) (9,686,484) (104,496,039) In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Development Services department was merged into Community Development. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In fiscal year 2010-11, Tempe Learning Center was disaggregated from Human Resources. In fiscal year 2013-14, Economic Development was established as its own reporting area. In fiscal year 2014-15, Finance & Technology and Human Resources were combined to form the Internal Services Department. A component of the Community Services Department along with Diversity formed a new department called Human Services. The budget office became a stand alone department now known as Municipal Office. Economic Development and Community Relations became a part of the City Manager Office. 170 (3,974,123) (33,147,319) Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2005-06 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Issuance of refunding bonds Payment to refunded bond escrow agent Total other financing sources Net change in fund balances Debt service as a percentage of noncapital expenditures 23,839,365 (22,689,395) 125,845,000 1,847,396 220,940 3,090,704 132,154,010 $ 54,960,971 11.7% Fiscal Year 2006-07 Fiscal Year 2007-08 37,963,787 (34,250,777) 55,640,000 1,746,522 108,464 656,603 31,655,000 (33,017,976) 60,501,623 $ (47,622,439) 12.0% 71,362,599 (71,213,357) 71,170,000 1,242,369 9,430,040 81,991,651 $ (9,968,353) 12.5% Fiscal Year 2008-09 64,230,445 (63,614,982) 45,980,000 807,728 9,577,814 56,981,005 $ Fiscal Year 2009-10 59,305,503 (59,421,161) 26,040,000 755,553 27,986 362,900 27,070,781 (876,941) $ (21,938,259) 11.8% 12.9% Fiscal Year 2010-11 16,912,259 (16,618,841) 13,146,000 2,401,827 110,617 328,593 26,040,000 (27,936,582) 14,383,873 $ 14,383,873 16.5% $ Fiscal Year 2011-12 Fiscal Year 2012-13 18,104,564 (18,613,369) 7,005,000 6,668,536 534,963 45,181,900 (48,667,199) 10,214,395 67,438,620 (68,806,307) 13,675,000 6,392,968 270,346 53,910,000 (12,985,558) 59,895,069 527,911 15.1% $ (44,600,970) 36.0% (A) (A) In fiscal year 2012-13 the substantial increase in the Debt Service as a Percentage of Non-capital Expenditures was due to debt service expenditures containing the Transit Fund defeasance of the 2006 Variable Rate Demand Excise Tax Revenue Obligations ($53,670,000) and a current refunding of the 2007 Variable Rate Demand Excise Tax Revenue Obligations ($45,295,000). 171 Fiscal Year 2013-14 Fiscal Year 2014-15 22,217,580 (21,470,678) 11,650,000 880,967 663,658 5,645,000 (4,267,894) 15,318,633 $ 11,344,510 13.5% 26,437,046 (25,957,975) 43,965,000 1,269,813 111,827 2,189,572 6,780,000 (4,534,184) 50,261,099 $ 17,113,780 17.8% Taxable Sales and Percentage of Taxable Sales by Category (Exhibit S-5) Last Ten Fiscal Years Cash Basis City of Tempe, Arizona Taxable Sales Fiscal Year Retail 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 3,602,528,000 3,732,944,000 3,511,222,000 3,050,222,000 2,976,389,000 3,117,950,000 3,248,736,000 3,387,223,000 3,566,605,000 3,508,224,000 Rental $ 997,198,000 1,085,111,000 1,174,056,000 1,203,889,000 1,136,889,000 1,133,200,000 1,175,200,000 1,200,932,000 1,197,308,000 1,149,448,000 Utilities and Telecommunications $ 545,661,000 571,722,000 608,389,000 590,556,000 536,611,000 515,000,000 522,095,000 533,915,000 557,844,000 525,409,000 Restaurant Contracting Hotel and Motel $ 465,231,000 484,500,000 519,556,000 504,611,000 472,667,000 479,150,000 514,519,000 524,813,000 574,888,000 565,352,000 $ 523,679,000 784,444,000 738,611,000 631,556,000 400,000,000 298,450,000 341,542,000 340,870,000 404,398,000 631,183,000 $ 136,971,000 132,889,000 150,222,000 123,611,000 110,944,000 112,600,000 123,981,000 123,629,000 135,525,000 143,330,000 Restaurant Contracting City Direct Sales Tax Rate Amusements All Other Total $ 95,181,000 82,278,000 84,222,000 87,778,000 96,167,000 89,850,000 87,663,000 78,580,000 82,928,000 74,412,000 $ 109,300,000 116,722,000 100,722,000 88,167,000 66,056,000 68,550,000 66,141,000 80,020,000 71,660,000 67,279,000 $ 6,475,749,000 6,990,610,000 6,887,000,000 6,280,390,000 5,795,723,000 5,814,750,000 6,079,877,000 6,269,982,000 6,591,156,000 6,664,637,000 Percentage of Taxable Sales Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Retail 55.63 % 53.40 50.98 48.57 51.35 53.62 53.43 54.04 54.11 52.64 Rental 15.40 % 15.52 17.05 19.17 19.62 19.49 19.33 19.15 18.17 17.25 Utilities and Telecommunications 8.43 % 8.18 8.83 9.40 9.26 8.86 8.59 8.52 8.46 7.88 7.18 % 6.93 7.54 8.03 8.16 8.24 8.46 8.37 8.72 8.48 8.09 % 11.22 10.72 10.06 6.90 5.13 5.60 5.40 6.14 9.47 Hotel and Motel Amusements 2.12 % 1.90 2.18 1.97 1.91 1.94 2.04 1.97 2.06 2.15 Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2010-11, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. The tax expired on June 30, 2014. 172 1.47 % 1.18 1.22 1.40 1.66 1.55 1.44 1.25 1.26 1.12 All Other 1.68 % 1.67 1.48 1.40 1.14 1.17 1.11 1.30 1.08 1.01 Total 100 % 100 100 100 100 100 100 100 100 100 1.80 % 1.80 1.80 1.80 1.80 2.00 2.00 2.00 2.00 1.80 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona City Direct Sales Tax Rate Maricopa County Sales Tax Rate 2005-06 1.80 % 0.70 % 5.60 % 8.10 % 2006-07 1.80 0.70 5.60 8.10 2007-08 1.80 0.70 5.60 8.10 2008-09 1.80 0.70 5.60 8.10 2009-10 1.80 0.70 6.60 9.10 2010-11 2.00 0.70 6.60 9.30 2011-12 2.00 0.70 6.60 9.30 2012-13 2013-14 2014-15 2.00 2.00 1.80 0.70 0.70 0.70 5.60 5.60 5.60 8.30 8.30 8.10 Fiscal Year State Sales Tax Rate Total Sales Tax Rate Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2009-10, State of Arizona voters approved a 1.0% increase in the State sales tax. In fiscal year 2010-11, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. In fiscal year 2012-13, State of Arizona decreased the State sales tax rate by 1.0%, effective June 1, 2013. In fiscal year 2014-15, the City of Tempe, Arizona voter approved 0.2% temporary sales tax expired, effective June 30, 2014. 173 General Property Tax Information (Exhibit S-7) City of Tempe, Arizona Tax Levy Limitations Beginning in 1980-81, the total tax levy is comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy was limited to a 7% increase for 1980-81 and a 2% annual increase thereafter. In addition, the primary levy on residential property only is limited to an amount not more than 1% of market value. The secondary levy is unlimited. Assessments and Collections Since 1950-51, Maricopa County, at no charge to the cities, has assessed and collected all municipal property taxes. Remittances are made to the respective cities periodically as collections accrue. Taxes Due First installment is due October 1st; second installment is due March 1st. Taxes Payable City property taxes are payable at the office of the County Treasurer. Taxes for the first half of the year can be paid on the first of September through the first of November. Second half taxes can be paid on the first of March through the first of May. Taxes Delinquent The first half becomes delinquent on the first day of November at 5 p.m. The second half becomes delinquent on the first day of May at 5 p.m. Interest at the rate of 16% per annum attaches on the first and second installments following the delinquent dates. Tax Sale The sale of delinquent tax bills is begun on a date not earlier than February 1 nor later than March 1 following the May 1 date upon which the second half taxes become delinquent. The sale is made at public auction in the office of the County Treasurer. Tax bills are sold to the highest bidder who offers to pay the accumulated amount of tax and to charge thereon the lowest rate of interest. The maximum amount of interest allowed by law is 12% per annum. The purchaser is given a Certificate of Purchase for each parcel. Tax Deed Five years subsequent to the tax sale, the holder of a Certificate of Purchase which has not been redeemed by the delinquent property owner may demand a County Treasurer's Deed. However, at the end of three full years, a holder of a Certificate of Purchase may institute quiet title action and the court will instruct the County Treasurer to issue a County Treasurer's Deed if the suit is successful. Redemption Redemption may be made by the delinquent property owner or any interested party by payment in full of all accumulated charges at any time before issuance of the tax deed. Payment may be made to the County Treasurer. 174 Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property (Exhibit S-8) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Commercial, Manufacturing, Telecommunications Property Fiscal Year Vacant, Agricultural & Governmental Property Owner Occupied Residential Property Rental Residential Property Railroad & Airlines Property Non-commercial Historic Property 2005-06 Primary Secondary $ 1,245,827,301 1,303,026,577 $ 238,624,198 282,897,988 $ 499,989,878 528,444,640 $ 163,440,750 175,658,220 $ 2,770,242 3,046,217 $ 1,229,232 1,426,854 2006-07 Primary Secondary 1,306,192,761 1,392,698,031 249,763,558 335,482,079 515,469,816 523,973,749 175,924,392 182,197,200 3,008,952 3,198,718 2007-08 Primary Secondary 1,369,975,785 1,487,353,047 287,255,556 386,956,732 587,620,345 782,035,308 191,632,935 240,647,400 2008-09 Primary Secondary 1,416,640,407 1,605,563,621 326,359,399 439,585,924 674,491,736 901,618,735 2009-10 Primary Secondary 1,518,486,978 1,746,634,264 443,398,023 610,147,603 2010-11 Primary Secondary 1,516,407,070 1,634,522,147 2011-12 Primary Secondary 2012-13 Less: Tax-Exempt Property $ Estimated Total Actual Value (A) 350,861,051 390,074,308 $ 1,801,020,550 1,904,426,188 1,341,770 1,448,936 356,496,779 432,295,381 3,284,085 3,652,041 5,569,454 6,404,967 218,810,180 291,324,398 3,043,548 3,447,472 747,601,586 840,563,032 265,780,915 326,620,717 491,365,479 598,845,876 714,116,748 718,136,239 1,215,073,855 1,225,527,325 507,897,174 558,393,732 Primary Secondary 1,134,332,461 1,140,686,523 2013-14 Primary Secondary 2014-15 Primary Secondary Source: Arizona Departmart of Revenue - State and County Abstract of the Assessment Roll Maricopa County Tax Levy Note: Beginning in 1980-81, the total tax levy is comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy is limited to a 2% increase plus new construction. The secondary levy is unlimited. (A) Estimated Total Actual Value is the calculated value of the actual full cash value net of estimated value of property exempt from taxation. Assessed Value as a Percentage of Actual Value 0.52 0.88 $ 11,391,592,747 12,062,669,419 1,895,204,470 2,006,703,332 0.52 0.88 12,052,102,903 12,619,189,692 15.73 15.90 413,757,218 505,151,029 2,031,580,942 2,401,898,466 0.51 0.89 13,152,641,971 16,125,028,204 15.45 14.90 5,628,185 7,346,018 480,062,120 591,937,974 2,164,911,335 2,656,948,194 0.51 0.89 14,590,284,375 19,106,939,110 14.84 13.91 2,656,174 3,162,023 5,489,270 7,160,219 601,138,220 766,798,994 2,382,274,726 2,767,488,864 0.49 0.91 16,460,996,774 19,043,217,077 14.47 14.53 297,885,542 321,946,932 2,487,354 2,984,727 6,031,888 8,869,602 664,036,520 772,654,291 2,364,257,561 2,512,651,232 0.52 0.88 16,647,684,537 17,474,298,161 14.20 14.38 601,231,081 601,912,854 260,011,506 261,295,232 2,447,610 2,740,384 5,848,137 7,897,668 652,320,790 700,438,585 1,940,188,573 1,957,328,610 0.66 1.13 14,108,227,934 14,184,312,548 13.75 13.80 474,229,052 492,511,871 499,166,936 499,439,182 222,440,746 222,488,879 2,784,852 2,839,643 5,609,483 7,054,535 650,548,735 667,783,593 1,688,014,795 1,697,237,040 0.79 1.35 12,115,273,950 12,149,064,435 13.93 13.97 1,013,888,495 1,019,499,265 590,348,150 627,596,276 422,097,495 422,373,499 237,011,004 245,942,542 2,470,685 2,494,792 5,503,454 7,172,229 769,883,275 811,779,331 1,501,436,008 1,513,299,272 0.92 1.57 10,969,708,459 11,047,136,814 13.69 13.70 1,018,312,716 1,030,441,480 582,528,256 605,931,213 445,788,470 472,413,709 279,658,188 317,364,940 2,626,349 2,652,015 5,660,031 7,102,655 786,460,357 812,188,311 1,548,113,653 1,623,717,701 0.92 1.51 11,632,254,953 12,317,499,077 13.31 13.18 175 $ Total Direct Tax Rate Net Taxable Assessed Value 15.81 % 15.79 Property Tax Rates - All Direct and Overlapping Governments (Exhibit S-9) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 City of Tempe (A) Tempe Union Schools Tempe Elementary (B) East Valley Institute of Technology Maricopa County Community College County Ed Equalization Rate County-Wide Jurisdiction Central Fire Flood Arizona District District Project Assistance County Library District Primary Secondary Total 0.52 0.88 1.40 1.73 0.92 2.65 2.90 1.08 3.98 0.06 0.06 1.20 1.20 0.89 0.14 1.03 0.44 0.44 0.21 0.21 0.12 0.12 0.01 0.01 - Primary Secondary Total 0.52 0.88 1.40 1.74 0.89 2.63 2.61 1.38 3.99 0.05 0.05 1.18 1.18 0.88 0.18 1.06 - 0.20 0.20 0.12 0.12 0.01 0.01 - Primary Secondary Total 0.51 0.89 1.40 1.75 0.76 2.51 2.59 1.23 3.82 0.05 0.05 1.10 1.10 0.82 0.15 0.97 - 0.15 0.15 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.51 0.89 1.40 1.76 0.52 2.28 2.43 1.08 3.51 0.05 0.05 1.03 1.03 0.78 0.16 0.94 - 0.14 0.14 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.49 0.91 1.40 1.48 0.74 2.22 2.14 1.14 3.28 0.05 0.05 0.99 0.99 0.72 0.16 0.88 0.33 - 0.14 0.14 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.52 0.88 1.40 1.47 0.83 2.30 2.31 1.29 3.60 0.05 0.05 1.05 1.05 0.79 0.18 0.97 0.36 0.36 0.15 0.15 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.66 1.13 1.79 1.61 0.96 2.57 2.65 1.34 3.99 0.05 0.05 1.24 1.24 1.01 0.20 1.21 0.43 0.43 0.18 0.18 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.79 1.35 2.14 1.81 0.61 2.42 3.18 2.39 5.57 0.05 0.05 1.24 1.24 1.16 0.22 1.38 0.47 0.47 0.18 0.18 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.92 1.57 2.49 2.01 0.64 2.65 3.22 2.94 6.16 0.05 0.05 1.28 1.28 1.29 0.24 1.53 0.51 0.51 0.14 0.14 0.14 0.14 0.01 0.01 - Primary Secondary Total 0.92 1.51 2.43 2.43 0.63 3.06 3.30 2.45 5.75 0.05 0.05 1.32 1.32 1.28 0.24 1.52 0.51 0.51 0.14 0.14 0.14 0.14 0.01 0.01 - 0.05 0.05 0.12 0.12 6.93 3.88 10.81 0.09 0.09 6.77 3.47 10.24 0.09 0.09 6.51 3.08 9.59 0.09 0.09 6.15 3.38 9.53 0.11 0.11 6.50 3.64 10.14 0.15 0.15 7.60 4.17 11.77 0.17 0.17 8.65 5.13 13.78 0.19 0.19 9.23 5.96 15.19 0.19 0.19 9.76 5.42 15.18 0.04 0.04 0.04 0.04 0.04 0.04 0.05 0.05 0.05 0.05 0.04 0.04 0.06 0.06 Tempe property owners residing within the Kyrene Elementary School District No. 28, Scottsdale Unified School District No. 48 or Mesa Unified School District No. 4 have combined rates of $9.78, $9.86 or $13.25, respectively. Also, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). 176 7.68 3.59 11.27 0.04 0.04 Total 0.12 0.12 - 0.05 0.05 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (A) Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. (B) Special Health Care District Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year City of Tempe Tempe Union Schools Tempe Elementary (A) East Valley Institute of Technology $ Maricopa County Community College Flood District 8,400,949 8,400,949 $ 371,224,118 371,224,118 $ 277,107,904 45,791,129 322,899,033 $ 62,733,411 62,733,411 County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project $ 135,142,821 135,142,821 $ 39,800,085 39,800,085 Fire District Assistance $ County Library District Special Health Care District (B) 2,276,200 2,276,200 $ 17,295,751 17,295,751 $ 40,000,000 40,000,000 Total 2005-06 Primary Secondary Total $ 9,413,934 16,707,531 26,121,465 $ 56,658,831 31,948,408 88,607,239 $ 43,132,854 17,095,540 60,228,394 2006-07 Primary Secondary Total 9,822,845 17,693,103 27,515,948 59,625,270 32,003,893 91,629,163 40,935,824 22,931,797 63,867,621 7,877,526 7,877,526 398,725,245 398,725,245 298,014,922 66,462,148 364,477,070 67,096,622 67,096,622 - 43,585,607 43,585,607 2,466,637 2,466,637 18,401,410 18,401,410 40,000,000 40,000,000 807,124,106 318,518,743 1,125,642,849 2007-08 Primary Secondary Total 10,371,221 21,364,887 31,736,108 65,184,130 34,707,242 99,891,372 43,415,950 23,923,712 67,339,662 10,940,725 10,940,725 430,023,735 430,023,735 321,018,986 74,981,944 396,000,930 70,422,870 70,422,870 - 49,730,785 49,730,785 2,631,597 2,631,597 19,368,018 19,368,018 46,310,880 46,310,880 870,014,022 354,382,660 1,224,396,682 2008-09 Primary Secondary Total 10,976,100 23,726,547 34,702,647 71,503,299 26,355,087 97,858,386 42,985,150 23,151,705 66,136,855 12,032,028 12,032,028 463,492,311 463,492,311 347,905,170 95,293,956 443,199,126 74,674,333 74,674,333 - 58,315,605 58,315,605 3,105,495 3,105,495 20,581,183 20,581,183 49,923,129 49,923,129 936,862,030 387,159,068 1,324,021,098 2009-10 Primary Secondary Total 11,665,890 25,192,451 36,858,341 65,733,950 39,195,990 104,929,940 41,787,151 25,976,662 67,763,813 12,586,167 12,586,167 492,230,736 492,230,736 359,942,153 92,685,846 452,627,999 74,996,804 74,996,804 164,225,937 - 58,113,465 58,113,465 3,324,489 3,324,489 20,468,370 20,468,370 53,018,363 53,018,363 1,135,585,817 405,558,607 1,541,144,424 2010-11 Primary Secondary Total 12,238,972 22,174,672 34,413,644 64,028,512 38,435,006 102,463,518 44,984,350 26,867,644 71,851,994 10,970,238 10,970,238 492,224,342 492,224,342 371,276,183 89,482,591 460,758,774 68,019,592 68,019,592 166,947,807 166,947,807 49,581,306 49,581,306 3,265,310 3,265,310 20,479,676 20,479,676 55,722,300 55,722,300 1,151,700,166 384,998,335 1,536,698,501 2011-12 Primary Secondary Total 12,751,029 22,100,197 34,851,226 58,076,820 34,886,097 92,962,917 41,459,414 21,157,373 62,616,787 8,672,478 8,672,478 477,571,468 477,571,468 389,655,514 75,935,239 465,590,753 62,401,172 62,401,172 163,937,848 163,937,848 38,781,832 38,781,832 3,251,752 3,251,752 19,070,066 19,070,066 57,895,470 57,895,470 1,143,452,093 344,151,676 1,487,603,769 2012-13 Primary Secondary Total 13,271,172 23,000,956 36,272,128 56,711,827 19,078,254 75,790,081 42,911,003 32,431,353 75,342,356 7,428,442 7,428,442 425,111,491 425,111,491 396,192,808 76,200,590 472,393,398 54,584,578 54,584,578 161,622,544 161,622,544 34,465,535 34,465,535 3,782,401 3,782,401 16,925,024 16,925,024 57,895,470 57,895,470 1,095,820,845 325,792,603 1,421,613,448 2013-14 Primary Secondary Total 13,778,678 23,766,365 37,545,043 56,857,111 18,307,254 75,164,365 38,477,473 35,425,302 73,902,775 7,214,753 7,214,753 409,775,397 409,775,397 412,623,059 78,752,950 491,376,009 39,842,985 39,842,985 163,916,558 163,916,558 45,136,223 45,136,223 3,913,249 3,913,249 14,116,305 14,116,305 62,499,144 62,499,144 1,095,428,276 328,974,530 1,424,402,806 2014-15 Primary Secondary Total 14,324,634 24,609,512 38,934,146 71,480,977 19,247,913 90,728,890 40,508,811 31,649,661 72,158,472 7,676,815 7,676,815 442,762,977 442,762,977 429,857,856 82,901,341 512,759,197 43,660,332 43,660,332 170,582,239 170,582,239 49,076,612 49,076,612 3,946,541 3,946,541 19,504,284 19,504,284 65,124,108 65,124,108 1,169,517,494 347,397,119 1,516,914,613 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (A) For levies for Tempe property owners residing within Kyrene, Scottsdale or Mesa School Districts, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). (B) District which had its first secondary tax levy set in FY 2005-06. 177 $ 892,680,462 282,049,004 1,174,729,466 Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Collected within the Fiscal Year of the Levy Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Total Tax Levy For Fiscal Year (A) $ 26,366,507 27,385,069 31,520,944 35,130,400 37,081,738 34,455,730 34,856,232 36,402,794 37,675,450 38,916,826 Adjustments $ (950,618) (860,618) (328,615) (358,256) (686,613) (604,321) (318,630) (170,121) (175,020) (164,001) Adjusted Tax Levy For Fiscal Year $ 25,415,889 26,524,451 31,192,329 34,772,144 36,395,125 33,851,409 34,537,602 36,232,673 37,500,430 38,752,825 Amount $ 25,519,585 26,185,044 30,686,950 33,987,393 35,581,096 33,299,312 33,860,185 35,627,136 36,924,892 38,310,425 % of Original Levy 96.8 % 95.6 97.4 96.7 96.0 96.6 97.1 97.9 98.0 98.4 Total Collections to Date Collections in Subsequent Years (B) $ (129,582) 315,584 492,269 739,454 772,083 526,937 646,893 463,431 488,899 - Amount $ 25,390,003 26,500,628 31,179,219 34,726,847 36,353,179 33,826,249 34,507,078 36,090,567 37,413,791 38,310,425 % of Adjusted Levy 99.9 % 99.9 100.0 99.9 99.9 99.9 99.9 99.6 99.8 98.9 Source: Maricopa County Treasurer (A) The amounts listed in this column do not tie directly to the amount listed for City of Tempe in Exhibit S-10 for total of Primary and Secondary Property Tax Levy. Due to a timing difference, the amount listed on the Maricopa County Secured Tax Levy Report , from the Maricopa County Treasurer's office, is at the time the is placed on the Tax Levy report (in May/June when the property tax rate is set). The amount listed on the Secured Tax Levy Report , from the Maricopa County Treasuer's office, is at the time the levy is placed on the actual tax rolls in August. (B) Negative collections are due to successful tax protests being higher than actual tax payments being made. 178 Principal Tax Payers (Exhibit S-12) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2014-15 Taxable Secondary Assessed Value Taxpayer: Arizona Public Service Company Arizona Mills Mall LLC Verizon Wireless KBSII Fountainhead LLC Qwest Corporation Honeywell International Inc Tempe Campus SPV LLC JDM II Tempe Oc LLC Sci Real Estate Investments LLC JP Morgan Chase Bank NA Amberjack (Commercial Property) AT&T Allied Signal Papago Buttes Corporate LLC Freescale Semiconductor Inc State Farm Mutual Auto Insurance Wells Fargo Bank $ Total $ 27,461,046 26,910,887 19,994,293 17,035,781 11,545,434 10,291,550 8,325,000 8,175,835 8,098,330 7,070,939 - Rank 1 2 3 4 5 6 7 8 9 10 144,909,095 Source 2014-15: RBC Capital Markets Source 2005-06: Dain Rauscher 179 Fiscal Year 2005-06 Percentage of Total City Secondary Taxable Assessed Value Taxable Secondary Assessed Value 1.69 % 1.65 1.23 1.05 0.71 0.63 0.51 0.50 0.50 0.43 - $ 8.90 % $ 25,732,555 28,633,657 34,729,301 16,915,263 15,699,538 15,190,110 15,001,280 13,665,566 12,867,285 12,030,340 190,464,895 Rank 3 2 1 4 5 6 7 8 9 10 Percentage of Total City Secondary Taxable Assessed Value 1.34 % 1.49 1.82 0.88 0.82 0.79 0.78 0.71 0.67 0.63 9.93 % Principal Tax Payers (Exhibit S-13) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2014-15 Taxpayer Business Type Taxpayer A Taxpayer B Taxpayer C Taxpayer D Taxpayer E Taxpayer F Taxpayer G Taxpayer H Taxpayer I Taxpayer J Taxpayer K Taxpayer L Taxpayer M Utility Grocery Stores Construction Mixed Retail Mixed Retail Electronics Mixed Retail Auto Sales Auto Sales Auto Sales Auto Sales Electronics Auto Sales Total Sales and Use Tax Payments $ $ 4,997,077 3,221,822 2,956,240 2,203,303 2,121,978 2,108,273 2,104,497 1,737,818 1,372,037 1,299,182 Rank 1 2 3 4 5 6 7 8 9 10 24,122,227 Fiscal Year 2005-06 Percentage of Total Sales and Use Tax Payments 3.38 % 2.18 2.00 1.49 1.44 1.43 1.42 1.18 0.93 0.88 16.33 % Sales and Use Tax Payments $ $ Rank Percentage of Total Sales and Use Tax Payments 4,315,104 2,472,322 1 2 2.97 % 1.70 1,858,625 2,362,329 7 4 1.28 1.63 2,170,528 2,407,875 5 3 1.50 1.66 1,609,934 1,585,051 1,900,129 1,354,694 8 9 6 1.11 1.09 1.31 0.93 10 22,036,591 Source: City of Tempe, Arizona Tax and License Division Note: The identities of the ten largest revenue payers are prohibited from disclosure per State Statute. The business type of the top ten taxpayers has been disclosed along with the appropriate data. 180 15.18 % Excise Tax Collections (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona f Tempe, Arizona Fiscal Year 2005-06 Privilege and use tax (A) $ 77,080,250 Fiscal Year 2006-07 $ 86,750,870 Fiscal Year 2007-08 $ 81,108,518 Fiscal Year 2008-09 $ 74,295,074 Fiscal Year 2009-10 $ 69,043,642 Fiscal Year 2010-11 $ 83,258,888 Fiscal Year 2011-12 $ 84,937,373 Fiscal Year 2012-13 $ 89,714,946 Fiscal Year 2013-14 $ 97,169,520 Fiscal Year 2014-15 $ 92,910,407 State shared sales tax 16,810,760 15,758,491 15,237,310 13,191,255 12,167,009 12,656,738 12,636,771 13,236,998 14,076,468 14,779,296 State shared income tax 16,607,943 18,823,759 25,401,762 24,832,128 21,406,004 16,137,383 13,649,203 16,519,248 18,025,635 19,577,085 Franchise tax 1,858,851 2,693,256 3,424,560 3,980,674 3,559,615 3,821,436 3,428,125 3,253,175 3,310,940 2,933,239 Vehicle license tax 7,527,675 6,870,739 6,655,516 6,024,595 5,560,791 5,424,902 5,437,201 5,165,072 6,053,172 6,215,552 Permits and Fees (B) 6,708,183 7,300,676 7,812,768 7,227,027 6,171,045 5,491,077 7,139,843 6,896,214 12,197,631 11,881,915 Fines and forfeitures 7,287,717 7,219,328 8,616,319 9,200,777 7,108,900 7,576,496 7,731,585 8,132,195 8,190,178 8,436,300 $ 133,881,379 $ 145,417,119 $ 148,256,753 $ 138,751,530 $ 125,017,007 $ 134,366,920 $ 134,960,101 $ 142,917,848 $ 159,023,544 $ 156,733,794 Total Source: City of Tempe, Arizona Comprehensive Annual Financial Report City of Tempe, Arizona "Revenue and Expenditure by Account by Fund" report. (A) Amounts exclude the 0.5% Excise Tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which are restricted to fund programs of the Tempe Convention and Visitor's Bureau. (B) Amounts include all licenses/permits and Community Development and Public Works fees/charges for services. 181 Ratios of Net General Bonded Debt Outstanding (Exhibit S-15) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 Governmental General Obligation Debt $ 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,680,000 162,200,000 164,235,000 163,205,000 181,905,000 Enterprise General Obligation Debt and WIFA Less: Debt Service Reserves $ 180,935,000 243,265,000 282,520,000 285,735,000 303,168,706 287,621,092 270,715,646 253,760,904 236,046,554 216,802,282 $ 18,547,848 17,607,767 23,858,992 31,844,188 38,126,393 34,718,252 35,360,470 38,275,002 35,478,343 23,610,085 Total $ 279,997,152 342,157,233 383,736,008 410,155,812 437,707,313 419,582,840 397,555,176 379,720,902 363,773,211 375,097,197 Secondary Assessed Valuation (A) $ 1,904,426,188 2,006,703,332 2,401,898,466 2,656,948,194 2,767,488,864 2,512,995,468 1,957,328,610 1,697,237,040 1,513,299,272 1,627,720,901 Percentage of Governmental Debt to Assessed Value 5.2 % 4.9 4.2 4.7 4.9 5.3 6.5 7.4 8.4 9.7 Percentage of Total Assessed Value of Property 14.7 % 17.1 16.0 15.4 15.8 16.7 20.3 22.4 24.0 23.0 Net Direct Debt Per Capita $ Source: (A) Assessed valuation from Maricopa County Assessor's Office Note: General obligation debt for business-type activities is not paid by secondary property taxes and therefore the "Percentage of Governmental Debt to Assessed Value " is disclosed. 182 1,689 2,053 2,292 2,376 2,504 2,595 2,424 2,294 2,140 2,213 Ratios of Outstanding Debt by Type (Exhibit S-16) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities Fiscal Year General Obligation Bonds Special Assessment Bonds 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,580,000 162,200,000 164,235,000 163,205,000 181,905,000 $ 17,490,000 15,345,000 38,310,000 36,095,000 33,025,000 29,875,000 27,815,000 25,675,000 23,930,000 21,175,000 Refunding Certificates of Participation $ 1,780,000 1,220,000 625,000 - Excise Tax Revenue Bonds HUD Section 108 Loan $ 174,710,000 218,480,000 241,125,000 239,560,000 230,470,000 228,746,000 218,522,900 154,081,000 144,606,000 134,746,000 $ 7,000,000 7,000,000 6,739,000 6,466,000 6,181,000 5,883,000 5,572,000 5,247,000 4,907,000 4,552,000 Capital Improvement Notes $ 2,416,596 1,970,427 1,506,411 1,023,835 521,955 1,009,612 509,804 - Capital Leases $ 6,732,171 4,923,764 3,351,733 1,888,630 1,776,147 96,735 57,921 29,645 87,082 Total GovernmentType Debt $ 327,738,767 365,439,191 416,732,144 441,298,465 444,639,102 431,180,735 414,167,821 350,277,257 337,157,804 342,465,082 Business-Type Activities Fiscal Year General Obligation Bonds 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 180,935,000 243,265,000 282,520,000 285,735,000 289,895,000 273,000,000 256,770,000 240,505,000 223,495,000 204,970,000 Capital Improvement Notes (a) $ 140,000 2,500,000 Excise Tax Revenue Bonds $ 2,330,004 2,130,000 2,050,000 18,685,000 18,050,000 48,827,424 55,505,432 79,034,000 76,109,000 84,839,000 WIFA Loans $ Capital Leases 13,273,706 14,621,092 13,945,646 13,255,904 12,551,554 11,832,282 183 $ 147,089 97,439 45,352 711,466 499,476 283,594 Total BusinessType Debt Total Primary Government $ 183,405,004 245,395,000 284,570,000 304,420,000 321,365,795 336,545,955 326,266,430 333,506,370 312,655,030 304,424,876 $ 511,143,771 610,834,191 701,302,144 745,718,465 766,004,897 767,726,690 740,434,251 683,783,627 649,812,834 646,889,958 Per Capita 3,083 3,666 4,188 4,319 4,381 4,747 4,515 4,132 3,822 3,816 Percentage of Personal Income 13.09 % 14.91 15.98 18.05 16.43 14.95 16.57 16.27 14.12 14.23 Direct and Overlapping Governmental Activities Debt- Property Tax Supported (Exhibit S-17) City of Tempe, Arizona 2014-15 Net Secondary Assessed Valuation Governmental Unit: Debt Outstanding Portion Applicable To City of Tempe Percent Amount Combined Tax Rate per $100 Assessed Debt repaid with property taxes: Maricopa County Community College Tempe Elementary School District No. 3 Mesa Unified School District No. 4 Kyrene Elementary School District No. 28 Scottsdale Unified School District No. 48 Tempe Union High School District No. 213 State of Arizona Maricopa County East Valley Institute of Technology Subtotal overlapping debt (A) City direct debt (repaid with secondary property tax) $ $ 35,079,646,593 1,291,283,504 2,671,537,348 1,779,511,364 4,556,319,442 3,070,794,868 55,352,051,074 35,079,646,593 $ 654,190,000 124,260,000 246,950,000 146,365,000 239,962,500 105,000,000 None None None 4.64 % 83.71 0.73 28.91 0.28 51.95 N/A N/A N/A 1,627,720,901 $ 181,905,000 100.00 % Total direct and overlapping debt $ 30,354,416 104,018,046 1,802,735 42,314,122 671,895 54,547,500 None None None 233,708,714 1.52 5.75 7.50 4.04 4.11 3.06 0.51 1.52 N/A 181,905,000 $ 415,613,714 Source: RBC Capital Markets and Maricopa County Assessor 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 the City of Tempe. 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. The applicable percentage of each jurisdiction's assessed valuation which lies within the City's boundaries (see "Percent" column above) was derived from information obtained from the County Assessor's Office. (A) Excludes the outstanding principal amount of Maricopa County Hospital District No.1 general obligation bonds, as this obligation has historically and is presently being paid from revenues generated from the operations of the District. 184 Total Direct and Overlapping Governmental Activities Debt (Exhibit S-18) City of Tempe, Arizona Governmental Unit: Debt Outstanding Portion Applicable To City of Tempe Percent Amount Debt repaid with property taxes: Maricopa County Community College Tempe Elementary School District No. 3 Mesa Unified School District No. 4 Kyrene Elementary School District No. 28 Scottsdale Unified School District No. 48 Tempe Union High School District No. 213 State of Arizona Maricopa County East Valley Institute of Technology Subtotal overlapping debt (A) $ 654,190,000 124,260,000 246,950,000 146,365,000 239,962,500 105,000,000 None None None 4.64 % 83.71 0.73 28.91 0.28 51.95 N/A N/A N/A City direct debt $ 304,424,876 100.00 % Total direct and overlapping debt $ 30,354,416 104,018,046 1,802,735 42,314,122 671,895 54,547,500 None None None 233,708,714 304,424,876 $ 538,133,590 Source: RBC Capital Markets and Maricopa County Assessor 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 the City of Tempe. 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. The applicable percentage of each jurisdiction's assessed valuation which lies within the City's boundaries (see "Percent" column above) was derived from information obtained from the County Assessor's Office. (A) Excludes the outstanding principal amount of Maricopa County Hospital District No.1 general obligation bonds, as this obligation has historically and is presently being paid from revenues generated from the operations of the District. 185 Legal Debt Margin Information (Exhibit S-19) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 Assessed Valuation $ 1,904,426,188 $ 2,006,703,332 $ 2,401,898,466 20% Limitation: Debt limit equal to 20% of assessed valuation $ $ $ 480,379,693 Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) 219,465,000 $ Total net debt applicable to the 20% limit as a percentage of 20% debt limit 6% Limitation: Debt limit equal to 6% of assessed valuation Total net debt applicable to the 6% limit as a percentage of 6% debt limit 161,420,238 $ 114,265,571 $ 21,965,571 80.78% 29,375,666 $ 120,402,200 $ 117,337,200 2.55% Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-14 Fiscal Year 2014-15 $ 2,656,948,194 $ 2,767,488,864 $ 2,512,995,468 $ 1,957,328,610 $ 1,697,237,040 $ 1,513,299,272 $ 1,627,720,901 $ $ $ $ $ $ $ 55,704,693 $ 144,113,908 $ 142,658,908 1.01% 69,134,638 553,497,773 492,153,706 $ 61,344,067 86.99% $ 1,455,000 $ 531,389,638 462,255,000 88.40% 3,065,000 $ Fiscal Year 2008-09 424,675,000 92.68% 92,300,000 $ 401,340,666 371,965,000 57.62% Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 380,885,238 Fiscal Year 2007-08 159,416,891 1,395,000 $ 158,021,891 166,049,332 $ $ 157,764,332 Source: Maricopa County Assessor's Office City of Tempe, Arizona Accounting Division Note: Effective with fiscal years beginning 2006-07, general obligation bonded debt for transportation and public safety purposes became subject to the 20% debt limitation. Previously, general obligation debt issued for these purposes was subject to the 6% debt limitation. 4.99% 27,711,549 $ 150,779,728 $ 142,449,728 5.52% - $ 117,439,717 $ 102,409,717 12.80% - $ 101,834,222 $ 73,469,222 27.85% - $ 90,797,956 $ 51,752,956 43.00% - 111.11% $ 39,045,000 $ 325,544,180 361,721,555 129.06% 28,365,000 $ 302,659,854 390,600,904 123.21% 15,030,000 $ 339,447,408 418,225,647 114.00% 8,330,000 $ 391,465,722 446,276,092 94.49% 8,285,000 0.88% 186 474,887,545 88.92% $ 502,599,094 97,663,254 81,495,000 $ 16,168,254 83.44% Remaining General Obligation Bond Authorizations (Exhibit S-20) City of Tempe, Arizona Amount Used Authorization Transaction Remaining Authorization 2008 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvement Total 2008 Program $ 113,300,000 $ 16,970,000 18,130,302 19,125,000 Series 2009 WIFA 2009 Series 2010 75,000 1,005,000 2,915,000 4,510,000 3,040,000 2,430,000 Series 2010 Series 2011 Series 2012 Series 2013 Series 2014 Series 2015 30,225,000 5,855,000 3,140,000 2,175,000 4,355,000 3,040,000 4,005,000 Series 2010 Series 2011 Series 2012 Series 2013 Series 2014 Series 2015 9,440,000 2,390,000 12,520,000 115,000 1,915,000 2,535,000 2,630,000 29,695,000 Series 2009 Series 2010 Series 2010 Series 2012 Series 2013 Series 2014 Series 2015 - 44,200,000 32,010,000 51,800,000 241,310,000 142,570,302 $ 59,074,698 98,739,698 2012 Program: Public Safety - Police/Fire 6,400,000 - Community Services/Park Improvement 10,500,000 4,305,000 Series 2015 6,195,000 Municipal Infrastructure Preservation 12,900,000 2,275,000 2,940,000 3,530,000 Series 2013 Series 2014 Series 2015 4,155,000 Total 2012 Program 29,800,000 13,050,000 Grand Total - 6,400,000 16,750,000 $ 115,489,698 Source: City of Tempe, Arizona Internal Services Department 187 Pledged-Revenue Coverage (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 2,705,348 $ 2,610,195 2,842,153 2,860,571 2,783,916 3,867,979 2,526,283 4,442,862 3,605,932 3,862,306 Excise Tax Revenue Obligations Debt Service (D) Coverage 2,866,617 3,023,174 4,066,900 4,094,274 4,796,008 4,697,441 3,469,611 3,448,085 2,959,851 3,884,758 0.94 0.86 0.70 0.70 0.58 0.82 0.73 1.29 1.22 0.99 Excise Tax Revenue Collections (A) $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (B) Fiscal Year 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 $ 6,480,218 $ 7,007,790 6,820,193 6,158,761 5,749,649 5,979,900 6,236,500 6,236,879 6,921,904 7,460,054 126,353,704 $ 138,546,380 141,601,237 132,726,935 119,456,216 128,942,018 129,522,900 142,917,848 165,485,314 156,733,794 Debt Service (D) 5,737,352 5,783,921 5,626,868 6,177,704 6,760,138 6,761,359 9,399,739 9,931,262 11,977,968 12,055,250 Coverage 22.02 23.95 25.17 21.48 17.67 19.07 13.78 14.39 13.82 13.00 Transit Excise Tax Obligations Debt Service (D) Coverage 6,017,247 6,021,476 6,009,925 6,012,725 6,005,626 6,016,226 5,377,764 5,922,350 5,918,250 5,919,026 1.08 1.16 1.13 1.02 0.96 0.99 1.16 1.05 1.17 1.26 0.5% Privilege and Use Tax Collections (C) $ 32,440,082 $ 34,971,294 32,449,710 29,850,942 27,891,084 29,012,370 30,172,338 30,087,229 33,539,177 36,147,640 Debt Service (D) 3,301,829 5,092,190 5,449,867 4,356,904 4,428,049 4,410,547 3,685,428 4,655,713 4,655,688 Coverage 10.59 6.37 5.48 6.40 6.55 6.84 8.16 7.20 7.76 Source: City of Tempe, Arizona Accounting Division (A) Excise tax revenue collections include privilege and use tax, state shared privilege and use tax, state shared income tax, franchise tax, permits and fees, and fines and forfeitures. Note that the privilege and use tax exclude the 0.5% excise tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which is restricted to fund programs of the Tempe Convention and Visitor's Bureau. (B) The 0.1% privilege and use tax is a Performing Arts Center Tax approved by voters in September 2000. (C) The 0.5% privilege and use tax is a Transit Tax approved by voters in September 1996. (D) The debt service amount does not include fiscal agent fees. 188 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-22) Excise Tax Obligations (Excluding Transit Excise Tax Obligations) City of Tempe, Arizona Senior Excise Tax Obligations 2014-15 Pledged Excise Tax Revenues (A) Fiscal Year 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 $ 156,733,794 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (B) Coverage (C) $ 12,055,250 23,954,670 14,091,792 12,978,667 12,974,892 12,982,092 12,368,092 12,366,067 12,296,792 9,344,767 16,636,617 7,009,385 7,005,365 7,008,735 7,009,334 5,217,238 5,215,800 2,723,850 2,116,125 13.00 6.54 11.12 12.08 12.08 12.07 12.67 12.67 12.75 16.77 9.42 22.36 22.37 22.36 22.36 30.04 30.05 57.54 74.07 Revenue Available for Debt Service (D) $ Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (E) 152,138,598 $ 5,919,026 5,921,676 3,427,850 3,428,850 3,428,100 3,433,850 Coverage (F) 25.70 25.69 44.38 44.37 44.38 44.31 Source: City of Tempe, Arizona Accounting Division (A) Excise Tax Revenues received by the City in fiscal year 2014-15. See Excise Tax Collection schedule (Exhibit S-14). (B) Includes the annual debt service requirements of the City of Tempe, Arizona Excise Tax Refunding Obligations, Series 2005, currently outstanding in the principal amount of $1,390,000 and the City of Tempe, Arizona Excise Tax Revenue Refunding Obligations, Series 2007, currently outstanding in the principal amount of $19,500,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2009A+B, currently outstanding in the principal amount of $18,490,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2011A+B, currently outstanding in the principal amount of $34,740,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2012, currently outstanding in the principal amount of $25,865,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2013, currently outstanding in the principal amount of $25,335,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2015, currently outstanding in the principal amount of $11,810,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2014-15 excise tax revenues to total debt service requirements for the City's revenue bonds. (D) Consists of Performing Arts Center Excise Taxes and Excise Taxes (net of current year annual debt service on Outstanding Senior Excise Tax Obligations) received in fiscal year 2014-15. (E) Includes the annual debt service requirements of the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2006, currently outstanding in the principal amount of $2,385,000; the City of Tempe, Arizona Excise Tax Refunding Obligations, Series 2011, currently outstanding in the principal amount of $15,170,000. Debt service requirements do not include fiscal fees. (F) Pursuant to the Purchase Agreement, the City agrees that the Performing Arts Center Excise Taxes and the Excise Taxes presently imposed will continue to be imposed so that the amount of Performing Arts Center Excise Taxes and the Excise Taxes (net of maximum annual debt service on the Outstanding Senior Excise Tax Obligations) collected for any fiscal year shall be equal to at least three times the total Debt Service requirements for the Obligations and other Parity Obligations in such fiscal year. 189 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-23) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations Pledged Excise Tax Revenues (A) Fiscal Year 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 $ 36,147,640 Outstanding Senior Excise Tax Obligations Debt Service Requirements (B) $ Outstanding Senior Excise Tax Obligations Coverage (C) 4,655,688 4,658,463 4,658,863 4,658,413 4,657,413 4,658,413 4,656,213 4,656,063 4,655,763 4,659,356 4,657,450 4,660,044 4,655,294 4,659,044 4,655,544 4,659,194 4,659,319 4,656,806 4,658,931 4,657,913 4,657,625 4,659,119 4,656,963 1,895,975 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 7.76 19.07 Source City of Tempe, Arizona Accounting Division (A) Excise Tax Revenues received by the City in Fiscal Year 2014-15. (B) Includes annual debt service requirements for the Series 2008 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $26,105,000 and the Series 2012 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $38,795,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2014-15 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 190 Demographic and Economic Statistics (Exhibit S-24) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Population (A) Total Personal Income (B) 2005-06 165,796 $ 3,906,153,760 $ 23,560 $ 58,000 2006-07 166,625 4,097,808,625 24,593 59,936 31.3 26,292 63,278 3.00 2007-08 167,458 4,387,734,516 26,202 66,864 29.7 25,929 64,394 2.80 2008-09 172,641 4,131,989,694 23,934 63,866 31.6 25,780 67,082 4.20 2009-10 174,833 4,661,747,112 26,664 67,971 31.8 25,857 68,064 6.70 2010-11 161,719 5,133,769,655 31,745 68,427 35.2 26,670 70,440 8.00 2011-12 163,989 4,469,848,173 27,257 63,881 31.3 28,136 72,254 8.20 2012-13 165,499 4,203,343,602 25,398 61,201 31.5 25,510 73,378 6.80 2013-14 170,027 4,601,100,647 27,061 64,714 28.1 25,264 73,378 7.50 2014-15 169,533 4,546,705,527 26,819 62,291 28.5 25,480 83,301 6.80 Source: (A) (B) (C) (D) (E) (F) Per Capita Personal Income (C) Average Household Income (C) Median Age (C) School Enrollment (D) ASU School Enrollment (E) 31 26,800 61,033 3.50 % Estimate provided by Sites USA (June 2015) Amount is calculated using population times per capita personal income Estimate provided by Sites USA (June 2015) Arizona Department of Education (Azed.gov) ASU.edu/Headcount enrollment workforce.az.gov (June 2015) 191 Unemployment Rate (F) Principal Employers (Exhibit S-25) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2014-2015 Employers: Employees (A) Arizona State University Maricopa Community Colleges SRP Safeway Inc. Wells Fargo Banking Division Motorola Honeywell Kyrene School District Chase Manhattan Corporation US Airways Bank One Telephone Banking Division City of Tempe Medtronic Microelectronics State Farm Financial & Credit Services Group Wilson Electric Total Source: 11,185 4,611 4,374 3,996 3,576 3,000 3,000 2,401 2,377 1,898 - Rank Fiscal Year 2005-2006 Employment 1 2 3 4 5 6 7 8 9 10 40,418 27.67 % 11.41 10.82 9.89 8.85 7.42 7.42 5.94 5.88 4.70 - 12,569 3,510 2,300 3,916 1,000 1,933 1,363 1,149 914 850 100.00 % 29,504 (A) www.tempe.gov/Economic Development/Tempe's Top Employers (B) City of Tempe, Arizona Comprehensive Annual Financial Report, 2005-06 192 Employees (B) Rank 1 3 4 2 8 5 6 7 9 10 Employment 42.60 % 11.90 7.80 13.27 3.39 6.55 4.62 3.89 3.10 2.88 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-26) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 Police Fire Community services Public works Community development Human services Municipal court Mayor and council City manager City attorney Internal audit office Municipal budget office City clerk and elections Internal services Parks and recreation Community relations Diversity program Tempe learning center Development services Economic development Finance and technology Financial services Human resources Information technology Water/wastewater Total Fiscal Year 2006-07 535 171 340 380 53 41 7 4 26 4 5 18 4 52 69 19 72 135 1,935 530 160 234 307 60 41 7 4 29 4 5 208 20 4 63 72 21 73 136 1,978 Fiscal Year 2007-08 577 187 230 323 62 46 7 4 29 4 5 208 20 5 63 72 23 76 138 2,079 Fiscal Year 2008-09 580 187 232 330 62 46 7 4 29 4 5 210 20 5 62 73 24 76 143 2,097 Fiscal Year 2009-10 568 185 308 535 106 42 7 3 25 4 5 27 4 139 20 1,977 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 499 182 289 489 88 42 7 4 25 3 5 25 3 3 132 17 1,813 494 182 287 485 83 42 7 4 25 3 5 25 3 3 132 17 1,797 497 182 288 484 82 42 7 4 25 3 5 24 3 3 132 17 1,798 Fiscal Year 2013-14 497 156 314 486 90 42 7 11 25 4 5 3 139 20 1,799 Fiscal Year 2014-15 496 156 286 467 90 40 42 7 31 26 4 4 4 155 1,808 Source: City of Tempe, Arizona 2014-15 Annual Budget Note: In fiscal year 2009-10, the Parks & Recreation department was split, with Parks consolidated into Public Works and Recreation consolidated into Community Services. The Information Technology department and the Financial Services department were consolidated into the Finance and Technology department. The Development Services department was consolidated into Community Development. 193 Operating Indicators by Function/Program (Exhibit S-27) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Year 2013-2014 Fiscal Year 2014-15 Function /Program Police Crime rate (per 100,000 population) Traffic accidents Emergency service average response time (minimum) Citizen calls for police service Operating expenditures per citizen calls (C) Fire Firefighters per capita (10,000) No. of fire calls No. of medical calls No. of other assistance calls Emergency service average response time (minimum) % of emergency responses taking 5.0 minutes or less Transportation On-time performance (bus) Annual boardings (bus) Number of square yards repaired Library Registered borrowers Circulation Community development # of permits issued for commercial /industrial Valuation of commercial/industrial permits # of permits issued for residential Valuation of residential permits # of permits issued other Valuation of other permits Water/wastewater Number of customer accounts Total water gallons treated (million gallons - mg) O&M per customer account Service calls responded to within 30 min. and repaired in 24 hours Total wastewater gallons treated (million gallons per day) Solid waste collection Residential container/recycling cost per ton # of residential accounts Residential recycling diversion rate # of commercial accounts Commercial collection cost per ton $ 8,269 5,562 8,000 6,729 6,700 5,895 6,100 4,920 5,500 4,595 5,898 4,693 5,800 4,834 5,288 4,825 4:43 124,923 391.87 5:01 123,847 353.37 5:07 112,409 415.22 5:08 106,317 443.34 5:17 86,074 432.95 5:30 85,673 748.69 6:35 87,730 725.33 5:00 86,996 829.91 $ 8.52 2,097 13,059 1,722 $ 8.24 2,148 13,469 2,429 $ 9.43 1,964 13,255 2,708 $ 9.37 2,414 15,199 1,260 $ 9.13 2,144 15,413 1,253 $ 8.95 2,208 15,264 1,275 $ 9.45 2,167 17,156 1,336 $ 9.44 2,002 17,411 2,033 5,343 4,755 5,110 5,103 5:02 84,092 874.25 5:13 85,502 925.59 9.47 1,958 18,119 1,976 9.45 2,022 19,630 1,853 4:10 4:25 4:17 4:22 4:20 4:20 4:20 4:10 4:07 4:08 70% 72% 71% 72% 74% 74% 76% 76% 76% 94% 6,805,383 1,884,102 92% 8,156,782 1,136,956 89% 7,387,024 1,391,711 90% 9,157,912 2,090,504 94% 8,877,964 74,471 95% 7,971,817 64,665 95% 8,430,857 569,600 93% 8,168,990 412,739 91% 7,897,964 397,605 92% 7,178,128 302,000 141,509 1,404,318 142,323 1,246,650 142,524 1,257,336 142,500 1,250,000 147,914 1,089,174 140,600 937,500 145,948 1,015,578 140,523 933,824 143,018 814,199 143,000 930,000 69 83,599,700 1,061 $ 250,869,200 715 $ 119,168,700 69 $ 170,983,900 700 $ 152,320,600 673 $ 89,884,365 46 $ 88,143,100 675 $ 96,512,400 653 $ 188,916,700 21 $ 109,851,600 508 $ 161,914,600 577 $ 105,413,500 18 $ 86,704,700 425 $ 27,741,900 534 $ 68,502,500 8 6,874,200 314 $ 18,260,624 521 $ 77,951,841 18 $ 88,812,800 297 $ 68,954,800 600 $ 99,407,953 18 $ 26,619,100 271 $ 96,518,351 647 $ 54,339,500 30 211,281,465 451 235,037,289 660 156,702,779 678 527,389,841 646 173,004,137 4 8,758,218 42,218 15,877 217.49 42,398 16,700 249.00 42,351 16,900 278.00 42,555 15,979 309.00 42,678 $ $ $ $ 42,059 17,589 (B) 221.20 $ 42,261 16,686 (B) 316.56 $ 100% 21.5 (B) 100% 21.3 (B) 73 33,021 34% 1,976 57 $ $ 70 33,056 29% 1,861 52 42,494 17,135 (B) 251.00 $ 100% 20.9 (B) $ $ 102 32,964 28% 1,942 59 100% 19.7 (B) $ $ Source: City of Tempe, Arizona Budget and Research Division and other applicable City departments. (A) Numbers are the 2013-14 revised values as shown in City of Tempe, Arizona Annual Budget dated July 1, 2015. (B) Numbers revised by department to reflect change in methodology in tracking. (C) Fiscal Year 2009-10 and prior, the operating expenditures were based on per capita. 42,686 15,774 (B) 256.46 $ 194 71 32,916 28% 1,875 59 42,453 15,606 181.33 $ $ 100% 18.7 $ $ 114 32,886 28% 1,837 77 $ 100% 18.6 $ $ 112 33,927 29% 1,940 73 $ 100% 18.6 $ $ 115 33,759 15% 2,030 78 $ $ 100% 18.5 0 121 33,405 15% 2,133 81 100% 19.4 $ $ 108 33,440 15% 2,130 95 100% 19.4 $ $ 140 33,397 19% 1,783 95 Capital Asset Statistics by Function/Program (Exhibit S-28) Last Ten Fiscal Years City of Tempe, Arizonampe, Arizona Fiscal Year 2005-06 Police Stations Patrol Units (Squads) Fire Stations Transportation Streets (miles) Streetlights Traffic Signals Buses Parks and recreation Acreage Playgrounds Sports Fields Community centers Golf Courses Water/Wastewater Water mains (miles) Water production capacity (million gallons per day) Water storage capacity (million gallons) Sanitary sewers (miles) Storm sewers (miles) Wastewater treatment capacity (million gallons per day) Solid waste collection Collection trucks Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 Fiscal Fiscal Year 2013-14 Year 2014-15 2 22 6 2 22 6 3 22 6 3 22 6 3 22 6 3 20 6 3 20 6 3 21 6 3 24 6 3 24 6 1,241 11,754 193 123 1,241 11,774 199 115 1,241 11,810 217 148 1,241 12,021 219 198 1,241 12,428 219 188 1,241 11,778 221 188 1,241 11,778 221 140 1,241 11,797 221 135 1,241 11,849 222 124 1,241 11,904 223 125 1,684 44 195 4 2 1,684 44 195 4 2 1,872 45 200 4 2 1,872 45 200 4 2 1,872 45 200 4 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 5 2 852 852 823 825 839 839 839 833 833 833 120 53 502 174 120 53 502 174 120 53 500 193 120 53 497 193 129 53 498 195 125 42 498 194 125 42 498 194 125 42 496 173 125 42 549 173 125 42 549 173 32 32 32 38 38 33 33 19 19 19 68 56 60 58 58 58 58 51 52 47 Source: City of Tempe, Arizona Budget and Research Division and other applicable City departments. 195