City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 City Council: Mark Mitchell, Mayor Robin Arredondo-Savage, Vice Mayor Kolby Granville Randy Keating 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, 2017 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 35 36 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 Notes to the Financial Statements 38 40 42 44 45 46 48 50 51 52 52 53 Required Supplementary Information: Schedules of Required Supplementary Information Schedule of Contributions- All Pension Plans 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 Schedule of Contributions- OPEB Plan Schedule of Changes in the Net OPEB Liability and Related Ratios Schedule of investment Returns- OPEB Plan 118 119 120 121 122 123 124 125 Notes to Required Supplementary Information 126 3 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2017 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 130 134 Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows 139 140 141 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 Housing Affordability 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 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 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-2 169 170 S-3 173 S-4 174 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, 2017 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-7 176 177 178 S-8 179 S-9 180 S-10 S-11 S-12 S-13 181 182 183 184 S-14 S-15 S-16 S-17 S-18 S-19 S-20 S-21 S-22 185 186 187 188 189 190 191 192 193 S-23 194 S-24 S-25 195 196 S-26 S-27 S-28 197 198 199 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 Ten Fiscal Years Capital Asset Statistics by Function/Program - Last Ten 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. Intr oductor y Section CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 CITY MANAGER’S OFFICE December 15, 2017 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, 2017 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/cityhall/internal-services/finance/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 182,500 residents. 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 four-year terms. The City Council appoints the City Manager who has full responsibility for carrying out Council policies and administering City operations. The City 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, Special Assessments Debt Service Fund, and Proprietary Funds are included in the annually appropriated operating budget. Project-length 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 City's overall financial condition continues to be strong and stable. The City has experienced steady revenue growth over the past few years and our five-year forecast for revenues remains positive, anticipating moderate growth in taxable sales and other revenue sources. Growth of taxable sales in Tempe's hotel industry reflects recent new construction of hotels and strong occupancy rates. Commercial and residential development activity has provided a big boost to construction sales tax revenues in recent years and is projected to decline slightly. Increases in other local taxes should provide for a stable local tax revenue stream for the remainder of the current fiscal year and into fiscal year 2018-19, with moderate growth projected in the subsequent years of the forecast. During fiscal year ended June 30, 2017, the City continued to experience improvement in the three major categories of revenue including sales taxes and property taxes as indicated below: Sales Tax Growth continued in the local sales tax base across many categories including retail, rentals, restaurants and hotel/motels. On a cash basis, total taxable sales increased by 6.2% and retail taxable sales (comprising 50.7% of total taxable sales) grew by 6.6%. General Fund sales tax revenues increased by $4.2 million (or 4.0%) to $101.3 million. Sales tax revenue represented 50% of total General Fund revenues for the year. 8 State-Shared Revenue State-shared sales tax revenue increased by $0.8 million (or 5%) to $16.1 million 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 stateshared revenues allocated to the City also declines. The City experienced an increase in state-shared income tax of $2 million (or 10%), reflective of the strengthening state economy. State shared income tax received during the fiscal year ($21.5 million) is from actual collections by the State for fiscal year 2014-15. Auto lieu tax ($7 million) increased by $0.4 million (or 5.5%) compared to the prior year, reflective of continuing strong auto sales. These state-shared revenues combined represented about 22.0% of General Fund revenue for the year. Property Tax Property tax revenues grew by $0.8 million (or 4.7%) to $18.9 million and by $1.2 million (or 4.6%) to $26.4 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 changing economy has provided 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 set 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 forecast provides a long-term view of how current-year decisions will impact the City of Tempe’s future finances, and is consistent with the City Council’s stated strategic priority of achieving long-term financial stability and vitality. The latest forecast projects growth in the sales tax, state shared, and property tax revenues. 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. An economic downturn is inevitable at some point in our cyclical economy. We do not assume an economic downturn in the latest forecast but we do project healthy fund balances to overcome moderate recessionary trends. CITY COUNCIL STRATEGIC PRIORITIES The City Council continued the development of its’ strategic priorities for 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 9 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. The Office of Strategic Management and Diversity continues to work with city departments in identifying baselines, targets, and strategies in accomplishing the 102 organizational performance measures outlined under the City’s five Strategic Priorities. The Office of Strategic Management and Diversity has partnered with Information Technology to build an Open Data and Performance Measurement Portal for increased transparency of the City’s operations. The Performance Measurement Portal will be completed by January 2018. In September 2017, Tempe advanced its ability to deliver results for residents by strengthening its performance management system and processes. We began Data-Driven Strategy Sessions, entitled Tempe Accelerates, to promote employee-driven innovation, collaboration, and organization-wide support for the achievement of Council priorities and performance measures. MAJOR INITIATIVES Permanent Base Adjustment Like other governmental jurisdictions in Arizona, Tempe is subject to an annual expenditure limit that is adjusted by population and inflationary growth factors each year from the base year of 1979/80. The permanent annual expenditure base for the City of Tempe was established by the State Legislature in 1979. That expenditure base can be adjusted by voters to enable the City to spend increased revenue received by various sources during the year. Tempe voters approved a $15 million permanent increase to the base in 1996 and a $21 million permanent increase in 2002. The City of Tempe’s revenues have reached the current limit, and the City Council has adopted a resolution ordering a Special Election on March 13, 2018 and has adopted ballot language for a proposition to permanently adjust the City of Tempe’s expenditure limit base by an additional $30 million. The increase to the base is expected to accommodate the City’s budgeted expenditures for at least another five or six years. Permanent adjustments to expenditure limits do not increase taxes and have been approved for a large majority of Arizona cities and towns. Arts Tax The City currently has a 0.1 cent sales tax (Arts Tax) that has provided funding for the initial construction and the continuing operations of the Tempe Center for the Arts. The tax is set to expire on December 31, 2020. During the year, a comprehensive arts master plan was presented that included several recommendation for City Council consideration, including the extension of the tax. The City Council agreed to move forward to extend the current 0.1 cent sales tax, in perpetuity, and to place this initiative on the November 2018 election ballot. Streetcar Construction on the Valley’s first streetcar is underway. The initial phase of construction consists of underground work to make way for the future trackway. Design development continues to occur alongside early construction work and final design is on track for completion in 2018. Tempe is already one of the highest public transit ridership centers in the region and Tempe Streetcar will add another efficient transportation option. Tempe Streetcar will connect riders to neighborhoods, major business centers and regional entertainment/event destinations. The three mile route will travel on Rio Salado Parkway from the Marina Heights development west to Mill Avenue. It will make a downtown loop on Mill and Ash avenues and continue south to Apache Boulevard. It will then turn east to Dorsey Lane, connecting to the Dorsey/Apache Blvd. light rail station. The project is estimated at $186 million and will be funded using regional Proposition 400 funds, local funds, and federal grant dollars. Arizona Department of Revenue Effective January 1, 2017, the Arizona Department of Revenue (ADOR) became fully responsible for all privilege tax licensing and collection for taxing jurisdictions in the state. These responsibilities for local sales tax collection had previously been handled by approximately eighteen of the largest jurisdictions (including the cities of Phoenix, 10 11 12 City of Tempe, Arizona List of Principal Officials City Council Mark Mitchell, Mayor Robin Arredondo-Savage, Vice Mayor Kolby Granville Randy Keating Lauren Kuby Joel Navarro David Schapira Administrative Staff For the Fiscal Year Ended June 30, 2017 Andrew Ching, City Manager Ken Jones, Deputy City Manager-Chief Financial Officer Steven Methvin, Deputy City Manager-Chief Operating Officer Sylvia Moir, Police Gregory Ruiz, Fire Shelley Hearn, Community Services Don Bessler, Public Works Chad Weaver, Community Development Naomi Farrell, Human Services Kevin Kane, Municipal Court Judith R. Baumann, City Attorney Lori Cox, Internal Audit Office Cecilia Velasco-Robles, Municipal Budget Office Rosa Inchausti, Office of Strategic Management and Diversity 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 Internal Audit Office Deputy City Manager, Chief Financial Officer Municipal Budget Office Office of Strategic Management and Diversity Community Development Community Services Development Services Arts, Cultural Services and Library Services Planning Recreation Human Services Public Works Fire Medical Rescue Police Community Partnerships and Resources Construction Management/ Engineering Emergency/ Medical Services Investigations/ Organizational Services Social Services Field Operations Homeland Security/ Special Operations Transit/ Transportation Water Utilities Fire Prevention Support Services/ Personnel Safety Training/ Professional Development Assistant City M 14 Operations Support Services 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 is financial statements for individual funds and component units for which data are not provided separately in the basic financial statements, and other useful supplementary information. Financial Section 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, 2017, 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, 2017, 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. 15 Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than Pension Plans and Statement No. 77, Tax Abatement Disclosures, for the year ended June 30, 2017, which represent changes in accounting principles. 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 15, 2017, 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. Phoenix, Arizona December 15, 2017 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, 2017. 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 $871.6 million (net position). Of this amount, $129.8 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 $7.7 million during the fiscal year compared to an increase of $4.6 million in the prior year. The governmental activities experienced a decrease in net position of $24.1 million compared to a decrease of $2.4 million in the prior year and the business-type activities experienced an increase of $16.4 million compared to an increase of $7.1 million in the prior year. • For the fiscal year ended June 30, 2017, the City’s governmental revenues overall increased by $9.9 million. This was predominately due to an increase of $7.7 million in sales taxes followed by an increase in intergovernmental revenue, unrestricted by $3.2 million, gain on the sale of capital assets of $2.2 million and property taxes of $2.0 million. These increases were offset by a decrease in charges for services of $1.1 million and capital grants and contributions of $1.7 million. Expenses increased by $31.5 million. The increase in expenses was primarily in the area of the Police and Fire functions. In the current year, the Facilities Division of Public Works moved to Internal Services resulting in the corresponding expenditures being reported in the new department. • At June 30, 2017, the City’s governmental funds reported combined ending fund balances of $228.8 million. Approximately 60.3% of this total amount ($137.9 million) is for spending at the government’s discretion (committed, assigned, or unassigned). • At June 30, 2017, total fund balance for the General Fund was $96.1 million, which represents an increase of $6.2 million over the prior year’s fund balance as revenues continued to exceed expenditures. Revenues increased by $4.4 million, while related expenditures increased by $7.4 million. Transfers out decreased by $3.9 million. • At June 30, 2017, the City’s enterprise funds reported combined total net position of $256.3 million, and total unrestricted net position of $151.9 million. $157.4 million of the unrestricted net position was in the Water and Wastewater Fund. • At June 30, 2017, the total long-term obligations of the City increased by $34.1 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, office of strategic management and diversity, city clerk and elections, and internal services. The businesstype 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 Fund and the Transit Special Revenue Fund 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. 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. 19 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, 2017 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 $ 589,608,104 827,029,041 1,416,637,145 262,012,392 358,565,056 620,577,448 Total $ 851,620,496 1,185,594,097 2,037,214,593 10,355,896 80,419,146 90,775,042 13,734,782 4,460,139 18,194,921 24,090,678 84,879,285 108,969,963 804,238,327 66,312,775 870,551,102 334,743,773 44,809,709 379,553,482 1,138,982,100 111,122,484 1,250,104,584 21,600,560 21,600,560 2,927,034 2,927,034 24,527,594 24,527,594 519,530,983 117,866,229 (22,136,687) 615,260,525 104,387,674 151,904,179 256,291,853 623,918,657 117,866,229 129,767,492 871,552,378 $ $ ANALYSIS OF NET POSITION As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $871.6 million and $879.3 million as of June 30, 2017 and 2016, 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 $623.9 million and $633.6 million at June 30, 2017 and 2016, respectively. These totals represent 71.6% and 72.1% of total net position at June 30, 2017 and 2016, 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. 20 Net position- June 30, 2016 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 $ 573,495,977 852,490,752 1,425,986,729 269,328,482 345,362,391 614,690,873 Total $ 842,824,459 1,197,853,143 2,040,677,602 10,442,808 52,179,545 62,622,353 15,104,632 2,138,506 17,243,138 25,547,440 54,318,051 79,865,491 761,535,559 71,977,890 833,513,449 343,326,503 46,377,563 389,704,066 1,104,862,062 118,355,453 1,223,217,515 15,699,467 15,699,467 2,356,933 2,356,933 18,056,400 18,056,400 564,120,959 102,095,778 (26,820,571) 639,396,166 69,467,178 170,405,834 239,873,012 633,588,137 102,095,778 143,585,263 879,269,178 $ $ 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 $117.9 million (13.5% of total net position) at June 30, 2017. At June 30, 2016 restricted net position was $102.1 million (11.6% 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 $129.8 million (14.9% of total net position) and $143.6 million (16.3% of total net position) at June 30, 2017 and 2016, respectively. At the end of the fiscal year, the City reported $22.1 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 balances in all applicable categories. ANALYSIS OF CHANGE IN NET POSITION The City’s net position decreased by $7.7 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. 21 Changes in Net Position- June 30, 2017 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 48,694,535 27,582,362 6,355,742 160,218,570 44,671,765 45,308,519 3,182,193 662,115 5,435,113 7,538,846 349,649,760 104,870,388 - $ 351,831 299,116 128,394 105,649,729 153,564,923 27,582,362 6,355,742 160,218,570 44,671,765 45,308,519 3,182,193 1,013,946 5,734,229 7,667,240 455,299,489 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 Office of strategic management and diversity City clerk and elections Internal services Unallocated depreciation Interest on long-term debt Water and wastewater Solid waste Golf Total expenses Increase(decrease) in net position before transfers Transfers Change in net position Net position- beginning Net position- ending - 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 374,213,259 70,364,126 15,918,430 2,520,474 88,803,030 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 70,364,126 15,918,430 2,520,474 463,016,289 (24,563,499) 427,858 (24,135,641) 639,396,166 $ 615,260,525 16,846,699 (427,858) 16,418,841 239,873,012 256,291,853 (7,716,800) (7,716,800) 879,269,178 871,552,378 22 $ $ Changes in Net Position- June 30, 2016 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 49,788,521 26,831,238 8,091,341 99,161,714 - $ 148,950,235 26,831,238 8,091,341 152,492,065 41,472,528 43,316,151 3,363,615 1,683,445 7,419,129 5,298,681 339,756,714 841,726 152,428 572,356 100,728,224 152,492,065 41,472,528 43,316,151 3,363,615 2,525,171 7,571,557 5,871,037 440,484,938 93,057,663 34,319,479 27,402,656 112,589,913 18,372,515 17,430,250 4,354,299 337,046 7,371,101 2,961,497 425,674 259,133 868,596 8,252,013 1,785,487 12,924,841 342,712,163 75,515,527 14,881,636 2,734,351 93,131,514 93,057,663 34,319,479 27,402,656 112,589,913 18,372,515 17,430,250 4,354,299 337,046 7,371,101 2,961,497 425,674 259,133 868,596 8,252,013 1,785,487 12,924,841 75,515,527 14,881,636 2,734,351 435,843,677 (2,955,449) 509,690 (2,445,759) 641,841,925 $ 639,396,166 7,596,710 (509,690) 7,087,020 232,785,992 $ 239,873,012 4,641,261 4,641,261 874,627,917 $ 879,269,178 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 and wastewater Solid waste Golf Total expenses Increase(decrease) in net position before transfers Transfers Change in net position Net position- beginning Net position- ending 23 Governmental activities. The governmental net position decreased by $24.1 million for the fiscal year ended June 30, 2017. The fiscal year ended June 30, 2016 had a $2.4 million decrease in net position. Overall revenues increased by $9.9 million while expenses increased by $31.5 million. The key factors contributing to the change in net position compared to the prior year are as follows: • Capital grants and contributions decreased by $1.7 million (21.5%). The was primarily due to a Federal grant project for streetscape pedestrian improvements being completed in the prior year. • Sales taxes increased in the amount of $7.7 million (5.1%) due to the increase in development in the City and improvement in the overall economy. • Intergovernmental revenue, unrestricted increased by $3.2 million (7.7%) due to an increase in State shared sales tax, State shared income tax and auto lieu tax. • Property taxes increased by $2.0 million (4.6%) due to the continuation of the property tax stabilization policy implemented by the City in Fiscal Year 2012. • Gain on sale of capital assets increased by $2.2 million (42.3%) due to the sale of certain City owned land for the purposes of redevelopment. • The increase in revenues was in part offset with a $31.5 million (9.2%) increase in expenses. Police increased by 18.5 million (19.9%) and Fire increased by 14.0 million (40.9%). The increase was due to an increase in pension expense. In addition, in the current year the Arizona Supreme Court ruled that a 2011 law that increased employee contribution rates for active Public Safety Personnel Retirement System members hired prior to the law’s effective date was unconstitutional. As a result, the City accrued a claims and judgement expense of $4.0 million for Police and $1.9 million for Fire. Regarding other departments, Public Works decreased by $8.9 million (7.9%) while Internal Services increased by $10.6 million (128.1%). This was due to the Facilities Division moving from Public Works to Internal Services. Overall, expenses increased by 9.2% which not only included the above but also a moderate increase in employee compensation. 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: 24 A comparison of expenses by function and the percentage of total expenses for the largest functions are presented in the chart. As stated earlier, total expenses for the City’s governmental activities increased from prior year by $31.5 million (9.2%). The main functions which experienced increases were Police and Fire. Fiscal Year Ended June 30, 2017 June 30, 2016 Police Fire Community services Public works Community development Human services Internal services 25 $111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 18,821,669 29.8% 12.9 7.5 27.7 4.4 4.8 5.1 $ 93,057,663 34,319,479 27,402,656 112,589,913 18,372,515 17,430,250 8,252,013 27.2 10.0 8.0 32.9 5.4 5.1 2.4 General revenues such as sales taxes, property taxes, intergovernmental revenueunrestricted, miscellaneous and other and franchise taxes are not shown by program, but are effectively used to support program activities citywide. Fiscal Year Ended June 30, 2017 June 30, 2016 Sales taxes Intergovernmental revenueunrestricted Property taxes Miscellaneous and other Franchise taxes $160,218,570 44,671,765 45,308,519 12,973,959 3,182,193 45.2% $152,492,065 12.8 13.0 3.7 0.9 41,472,528 43,316,151 12,717,810 3,363,615 44.9% 12.7 12.2 3.7 1.0 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. As stated previously, sales taxes, intergovernmental revenue- unrestricted, and property taxes each displayed growth. In addition, the category of miscellaneous and other also increased due to the increase in the sale of land. Business-type activities. Business-type activities increased the City’s net position by $16.4 million for the year ended June 30, 2017 compared to an increase of $7.1 million for the year ended June 30, 2016. In January 2016, the Water and Wastewater Fund and Solid Waste Fund had both a rate increase along with a change to more of a conservation structure for its customers. In Fiscal Year 2017 the full effects of the rate increase were realized. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2017 Charges for services Unrestricted investment earnings/ other Total Water and Wastewater Solid Waste Golf Total $ 86,273,324 $ 16,274,287 $ 2,322,777 $104,870,388 689,723 $ 86,963,047 83,188 $ 16,357,475 6,430 $ 2,329,207 779,341 $105,649,729 26 For the Year Ended June 30, 2016 Charges for services Unrestricted investment earnings/ other Total Water and Wastewater Solid Waste Golf Total $ 81,265,973 $ 15,319,833 $ 2,575,908 $ 99,161,714 1,095,897 $ 82,361,870 442,564 $ 15,762,397 28,049 $ 2,603,957 1,566,510 $100,728,224 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 $70.4 million for the fiscal year, followed by Solid Waste with $15.9 million and Golf with $2.5 million. Expenses for the Water and Wastewater Fund decreased by $5.2 million (6.8%). Meanwhile, charges for services increased by $5.0 million (6.2%). The change in net position increased to $15.7 million in fiscal year 2017 from $6.1 million in fiscal year 2016. The Solid Waste Fund increased expenses by $1.0 million (7.0%) and likewise charges for services increased by $1.0 million (6.2%). The change in net position was an increase of $0.6 million in fiscal year 2017 which is lower than the increase of $1.0 million in the prior year. In the Golf Fund, charges for services decreased by $0.3 million (9.8%) while operating expenses decreased by $0.2 million (8.2%). The decrease is due to the Rolling Hills Golf Course being closed in order to replace the irrigation system. The project spanned two fiscal years. The golf course was closed one month longer in the current year than in the prior year. Another reason for the decrease in revenue was there was a reduced amount per round being collected in the current year. As total expenses decreased in the current year, there was a positive change in net position of $0.1 million compared to last year’s decrease in net position of $0.1 million. 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. 27 As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $228.8 million, an increase of $21.7 million from the prior year. Approximately $137.9 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 $16.1 million over the prior year’s combined balance of $121.8 million. The increase is due primarily to a combination of increases in charges for services, sales taxes, intergovernmental revenues- unrestricted and property taxes. 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, 2017, the fund balance included amounts for inventories ($1.3 million), prepaid items ($0.7 million) and a capital improvement note receivable reserve ($0.3 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 ($21.8 million), Public Works ($62.9 million) and Community Development ($3.2 million). Revenues for governmental functions overall totaled $344.8 million in the fiscal year ended June 30, 2017, which represents a net increase of $7.1 million (2.1%) from the fiscal year ended June 30, 2016. This change is primarily due to the increase in the following areas: $6.9 million (4.8%) in sales taxes, $2.0 million (4.6%) in property taxes, $1.7 million in state sales tax (6.5%) and $2.0 million in state income tax (10.5%). On the other hand, there was a decrease in federal grants of $1.9 million (8.6%), in charges for services of $1.6 million (5.1%) while investment income and miscellaneous decreased by approximately $1.0 million. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $96.1 million; the fund only had $0.1 million in 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 $6.2 million. In the prior year the net increase was $6.4 million. Total revenues increased by $4.4 million (2.2%) from the prior year. Sales taxes increased by $4.2 million (4.3%), property taxes increased by $0.8 million (4.7%), state sales taxes by $0.8 million (5.1%) and state income tax by $2.0 million (10.5%), all of Fiscal Year Ended which was due to the natural June 30, 2017 June 30, 2016 growth in the economy. On the Revenues $ 202,726,086 $ 198,342,932 other hand, investment income decreased by $0.8 million Total fund balance 96,076,703 47.4 % 89,859,871 45.3 % (67.1%) due to the rising rate Unassigned fund balance 80,099,820 39.5 78,629,198 39.6 environment causing the fair market value of certain securities, intended to be held to maturity, to decline. In addition, license and permits decreased by $0.8 million (13.7%) due to completing major building projects in the prior year and miscellaneous revenue decreased by $1.6 million (17.0%) due to prior year having a one-time payment resulting in an increase in facility rental. Expenditures increased by $7.4 million (4.0%) due primarily to an increase in employee compensation. With the decrease in transfers out, the net change in fund balance remained fairly constant with $6.2 million in the current year compared to $6.4 million in prior year. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues increased in the current year by $2.0 million due to an increase in sales tax revenue and expenditures increased by $3.3 million due to an increase in bus and light rail operating expenditures. The fund balance totaled $46.9 million at June 30, 2017, compared to a $42.0 million fund balance at June 30, 2016. The fund balance increased by $4.9 million the current year as compared to a $4.2 million increase in prior year. 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 $2.9 million assigned, is restricted for general 28 obligation debt service payments) increased by $1.0 million from $23.4 million at June 30, 2016 to $24.4 million at June 30, 2017. There was an increase in property tax revenues ($1.2 million) and intergovernmental- other revenues ($0.4 million). In addition, there was a decrease in expenditures of $2.0 million. Net other financing uses increased by $2.3 million as prior year included a premium on the issuance of debt that did not occur in the current year. 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) stayed consistent at $0.3 million for fiscal year ended June 30, 2017. There are 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 transit improvements. Total fund balance had a $2.6 million increase from $18.7 million at June 30, 2016 to $21.3 million at June 30, 2017. The net increase was due to a reduction in expenditures of $2.5 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, 2017 June 30, 2016 Water and wastewater fund Solid waste fund Golf fund Internal service funds $ 252,680,017 3,357,099 254,737 3,970,973 $ 236,938,032 2,747,976 187,004 4,804,342 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 $15.7 million (6.6%) for the fiscal year ended June 30, 2017 versus an increase in net position of $6.1 million (2.6%) for the fiscal year ended June 30, 2016. As mentioned earlier, the increase is due to the full year effects of a rate increase along with a new rate structure to encourage conservation. This resulted in the current year charges for services increasing by $5.0 million (6.2%) while total expenses decreased by $5.2 million (6.8%) due to a higher level of expensing items from construction in progress in the prior year versus the current year. The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. As mentioned earlier, a rate increase was implemented in January 2016. As such, charges for services increased by $1.0 million (6.2%) and total expenses increased by $1.0 million (7.0%). Net position increased by $0.6 million (22.2%) compared to prior year’s increase of $1.0 million (60.1%). The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund net position increased by $0.1 million (36.2%) compared to prior year’s net position decreasing by $0.1 million (23.2%). Charges for services decreased by $0.3 million (9.8%) and there was a corresponding decrease in total expenses of $0.2 million (7.8%). The positive change in net position was due to a transfer from the General Fund for a golf facilities asset management capital project. 29 The Internal Service Funds account for the risk management, worker’s compensation and health insurance activities of the City. The $0.8 million decrease in net position is due primarily to operating expenses exceeding contributions 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 change in net position increased from $0.2 million in prior year to $1.2 million increase in the current year. The increase was due to an increase in investment income of $1.1 million. BUDGET HIGHLIGHTS The City’s General Fund expenditure final budget of $196.7 million differs from the original budget of $197.8 million due to budget transfers to other funds. During the year, actual revenues were greater than budgetary estimates by $9.1 million (4.7% of total budgeted revenue) in the General Fund. This is due primarily to the positive variance in taxes, charges for services and licenses and permits. Actual expenditures were under budget by $2.3 million. CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2017 were $1.2 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total decrease in the City’s capital assets for the current fiscal year was $12.2 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2017 and 2016, respectively. Capital Assets, Net of Depreciation- June 30, 2017 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 173,998,770 396,996,885 124,850,118 35,158,962 6,419,133 $ 827,029,041 30 Business-type Activities $ 6,693,377 24,081,400 180,295,319 121,665,222 13,191,158 12,638,580 $ 358,565,056 Total $ 96,298,550 198,080,170 577,292,204 246,515,340 48,350,120 19,057,713 $ 1,185,594,097 Capital Assets, Net of Depreciation- June 30, 2016 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 184,501,443 407,153,642 124,689,716 45,173,129 1,367,649 $ 852,490,752 Business-type Activities $ 6,693,377 25,344,742 165,474,024 117,353,266 13,156,343 17,340,639 $ 345,362,391 Total $ 96,298,550 209,846,185 572,627,666 242,042,982 58,329,472 18,708,288 $ 1,197,853,143 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 police radio replacement system, $1.2 million in fire apparatus replacement, $2.1 million in air ventilation improvements, $1.3 million Tempe bike share equipment, $2.7 million in McClintock pool renovations and $3.9 million in roadway arterials. There were also various other infrastructure and improvement projects for parks and buildings. Business-type Activities • The enterprise funds (predominately the Water and Wastewater Fund) incurred $32.5 million in construction in progress (CIP) costs in the current year. The major CIP projects completed and capitalized in the Water and Wastewater Fund included $6.8 million was capitalized for environmental lab facility improvements, $3.7 million for water lines on Farmer Avenue, $5.4 million for well site number 16, $2.1 million for site improvements at the south Tempe water treatment plant, $2.3 million for minor improvements at the Johnny G. Martinez water treatment plant and $2.6 million for the meter replacement program. The Golf Fund capitalized $3.2 million for the Rolling Hills golf course irrigation system. There were also various other infrastructure and improvement projects. 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 At the end of the current fiscal year, the City had total long-term obligations outstanding of $1,139.0 million, which is an increase of $34.1 million over the prior fiscal year. In the current year, the City issued general obligation bonds. In addition, the City refunded excise tax obligations and Transit excise tax obligations to take advantage of lower interest rates. Due to regularly scheduled debt service payments, the general obligation debt only slightly increased by $0.6 million while excise debt obligations decreased by $18.8 million. Therefore, the primary increase in long-term obligations is due to the pension liability increase of $53.6 million in the governmental activities and $0.7 million in the business-type activities. 31 Outstanding Long-term Obligations - June 30, 2017 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 Total debt payable $ 178,555,000 18,730,000 116,009,000 20,515,300 3,794,000 337,603,300 $ 187,835,000 80,466,000 26,648,171 10,347,660 305,296,831 $ 366,390,000 18,730,000 196,475,000 47,163,471 3,794,000 10,347,660 642,900,130 Capital leases Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 34,743 31,187,868 6,704,534 47,528,205 381,179,677 $ 804,238,327 318,834 5,915,033 23,213,075 $ 334,743,773 353,577 31,187,868 6,704,534 53,443,238 404,392,752 $1,138,982,099 Outstanding Long-term Obligations - June 30, 2016 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 Total debt payable $ 180,750,000 19,980,000 123,389,000 22,291,058 4,181,000 350,591,058 $ 185,025,000 91,876,000 26,735,480 11,097,761 314,734,241 $ 365,775,000 19,980,000 215,265,000 49,026,538 4,181,000 11,097,761 665,325,299 Capital leases Compensated absences Claims and judgments OPEB Pensions Total long-term obligations 61,399 28,722,233 6,771,524 47,833,811 327,555,534 $ 761,535,559 63,750 5,992,038 22,536,474 $ 343,326,503 125,149 28,722,233 6,771,524 53,825,849 350,092,008 $1,104,862,062 The City issued $32.8 million in general obligation debt during the current fiscal year. The funding was for public safety, parks, municipal infrastructure preservation, street improvements and water and wastewater projects in the amounts of $3.6 million, $4.7 million, $1.6 million, $2.4 million and $20.5 million, respectively. The City issued $14.8 million in excise tax revenue refunding obligations through a private placement bank loan. The refunding obligations refunded the Excise Tax Revenue Refunding Obligations series 2007. The primary purpose of refunding the 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 $0.9 million in the City’s Governmental funds. 32 In addition, the City also issued $19.3 million in Transit excise tax refunding bonds which refunded the series 2008 Transit excise tax revenue obligations. The economic gain in the Transit fund was $2.4 million. The City’s total net general obligation bonded debt (total bonded debt, including the enterprise funds and Water Infrastructure Finance Authority loans, general obligation premiums less debt service reserves) outstanding increased by $0.5 million from the fiscal year ended June 30, 2016 to the fiscal year ended June 30, 2017. 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, 2017 June 30, 2016 Net general bonded debt Net general bonded debt per capita Ratio of net general bonded debt to total assessed value Debt service secondary tax rate per $100 of taxable valuation $ 382,798,272 2,098 22.9% $ 1.59 $ 382,294,786 2,053 22.3% $ 1.59 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, 2017 is $87.4 million under the 20% capacity and $47.3 million under the 6% 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, Aa1 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 480.350.8256 33 City of Tempe, Arizona 34 Statement of Net Position June 30, 2017 City of Tempe, Arizona Governmental Activities 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 $ 225,316,040 Business-type Activities $ 93,523,967 Total $ 318,840,007 23,821,584 7,926,006 631,201 5,473,834 1,309,894 931,261 35,553,016 19,223,048 9,597,272 259,824,948 15,053,981 441,557 757,225 34,771,843 885,066 116,578,753 23,821,584 22,979,987 1,072,758 5,473,834 2,067,119 931,261 70,324,859 19,223,048 10,482,338 376,403,701 89,605,173 6,419,133 6,693,377 12,638,580 96,298,550 19,057,713 173,998,770 396,996,885 124,850,118 35,158,962 1,416,637,145 24,081,400 180,295,319 121,665,222 13,191,158 620,577,448 198,080,170 577,292,204 246,515,340 48,350,120 2,037,214,593 10,355,896 80,419,146 90,775,042 13,734,782 4,460,139 18,194,921 24,090,678 84,879,285 108,969,963 10,916,546 6,414,305 17,877,920 1,465,438 29,638,566 5,451,450 710,215 3,747,611 142,463 34,757,970 16,367,996 7,124,520 21,625,531 1,607,901 64,396,536 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 1,315,000 17,415,000 - 1,315,000 17,415,000 40,245,930 745,262,397 870,551,102 30,196,584 304,547,189 379,553,482 70,442,514 1,049,809,586 1,250,104,584 21,600,560 21,600,560 2,927,034 2,927,034 24,527,594 24,527,594 519,530,983 104,387,674 623,918,657 801,833 515,107 941,456 63,206,734 2,055,328 353,134 387,432 127,172 2,000 49,476,033 (22,136,687) 615,260,525 151,904,179 256,291,853 801,833 515,107 941,456 63,206,734 2,055,328 353,134 387,432 127,172 2,000 49,476,033 129,767,492 871,552,378 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 Municpal court City manager Office of strategic management and diversity Debt service Unrestricted Total net position $ The notes to the financial statements are an integral part of this statement. 35 $ $ Statement of Activities For the fiscal year ended June 30, 2017 Charges for Services Expenses Program Revenues Operating Grants and Capital Grants Contributions and Contributions Functions/Programs Governmental activities: Police $ 111,570,351 Fire 48,345,996 Community services 27,956,647 Public works 103,728,249 Community development 16,521,932 Human services 17,777,825 Municipal court 4,909,370 Mayor and council 473,324 City manager 6,815,022 City attorney 3,160,056 Internal audit office 376,249 Municipal budget office 261,313 Office of strategic management and diversity 1,055,075 City clerk and elections 815,016 Internal services 18,821,669 Unallocated depreciation 1,777,887 Interest on long-term debt 9,847,278 Total governmental activities 374,213,259 Business-type activities: Water and wastewater Solid waste Golf course Total business-type activities Total government 70,364,126 15,918,430 2,520,474 88,803,030 $ 463,016,289 $ 1,021,670 1,869,840 8,283,698 16,585,374 13,250,819 7,820 5,852,849 7,597 16,940 1,797,928 48,694,535 86,273,324 16,274,287 2,322,777 104,870,388 $ 153,564,923 $ $ 4,404,313 286,619 1,565,013 8,452,705 6,872 12,224,718 91,080 515,293 20,532 12,422 2,795 27,582,362 27,582,362 $ $ 252,506 193,564 5,778,849 130,823 6,355,742 6,355,742 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 Net position - ending The notes to the financial statements are an integral part of this statement. 36 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Position Governmental Activities $ $ (105,891,862) (45,995,973) (18,107,936) (72,911,321) (3,133,418) (5,545,287) 1,034,559 (473,324) (6,292,132) (3,122,584) (376,249) (261,313) (1,042,653) (815,016) (17,020,946) (1,777,887) (9,847,278) (291,580,620) Business-type Activities $ - Total $ (105,891,862) (45,995,973) (18,107,936) (72,911,321) (3,133,418) (5,545,287) 1,034,559 (473,324) (6,292,132) (3,122,584) (376,249) (261,313) (1,042,653) (815,016) (17,020,946) (1,777,887) (9,847,278) (291,580,620) (291,580,620) 15,909,198 355,857 (197,697) 16,067,358 16,067,358 15,909,198 355,857 (197,697) 16,067,358 (275,513,262) 160,218,570 44,671,765 45,308,519 3,182,193 662,115 5,435,113 7,538,846 427,858 267,444,979 (24,135,641) 639,396,166 615,260,525 351,831 299,116 128,394 (427,858) 351,483 16,418,841 239,873,012 256,291,853 160,218,570 44,671,765 45,308,519 3,182,193 1,013,946 5,734,229 7,667,240 267,796,462 (7,716,800) 879,269,178 871,552,378 $ $ 37 Balance Sheet Governmental Funds June 30, 2017 General Obligation Debt Service Transit Special Revenue General 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 $ $ 15,658,863 7,238,759 364,739 276,938 388,686 228,670 3,300,075 250,000 116,973,766 $ 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 Fund Balances Fund balances: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances 89,267,036 $ The notes to the financial statements are an integral part of this statement. 38 4,238,471 6,324,635 3,955,088 416,685 14,934,879 41,919,009 $ 5,284,995 58,974 2,256,823 2,973,900 1,526,260 54,019,961 $ 2,588,651 47,510 1,855,000 1,115,357 5,606,518 21,499,628 768,286 23,250,258 7,821,012 53,339,184 $ 35,247 16,710,000 3,929,509 20,674,756 4,956,171 729,781 276,232 5,962,184 1,526,260 1,526,260 7,821,012 463,378 8,284,390 638,685 100,000 475,531 14,762,667 80,099,820 96,076,703 28,238,205 11,201,499 7,447,479 46,887,183 21,456,909 2,923,129 24,380,038 116,973,766 $ 54,019,961 $ 53,339,184 City of Tempe, Arizona Special Assessment Debt Service $ 414,691 $ 198,994 464,605 19,223,048 20,301,338 $ 101,999 464,605 566,604 $ $ 298,832 298,832 $ 21,295,767 21,295,767 $ 21,594,599 39,976,607 Total Governmental Funds $ 2,109,440 115,796 4,760 2,065,789 921,208 702,591 5,564,178 51,460,369 - 312,691 312,691 20,301,338 20,443,377 1,151,222 21,594,599 19,422,043 19,422,043 $ Other Governmental Funds Transit Capital Projects $ 3,611,677 89,670 410,209 276,938 946,754 5,070,000 494,095 10,899,343 213,520,348 23,821,584 7,354,555 627,467 276,938 5,473,834 1,309,894 931,261 35,553,016 19,223,048 9,597,272 317,689,217 $ 10,772,878 6,414,305 4,412,807 276,938 1,465,438 23,635,000 6,003,566 52,980,932 621,316 30,604 60,156 712,076 4,956,171 621,316 30,604 9,347,272 789,937 739,610 19,422,043 35,906,953 1,623,799 17,277,547 15,543,385 5,404,219 39,848,950 2,262,484 88,681,119 27,220,415 30,537,494 80,099,820 228,801,332 51,460,369 39 $ 317,689,217 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2017 City of Tempe, Arizona Fund balances- total governmental funds $ 228,801,332 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 988,783,751 (161,754,710) 827,029,041 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 259,824,948 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 19,422,043 1,529,547 9,347,272 4,956,171 651,920 35,906,953 Bond premiums and the deferred charge on refundings are not financial resources and, therefore, are not reported in the funds. (10,159,404) Public Safety Personnel Retirement System liability (see Note 22) (6,012,788) 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 (31,187,868) (6,704,533) (321,616,954) (47,468,432) (317,122,743) (724,100,530) 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 3,970,973 $ The notes to the financial statements are an integral part of this statement. 40 615,260,525 City of Tempe, Arizona 41 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2017 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 $ 101,284,241 18,895,329 3,182,193 $ 39,512,636 - $ 26,381,781 - 16,145,681 21,511,044 7,015,040 600,824 386,398 12,147,622 8,094,581 359,315 5,446,638 7,657,180 202,726,086 3,226,126 4,843,253 227,494 13,459,586 130,000 61,399,095 2,463,607 27,921 28,873,309 78,673,521 31,096,799 19,167,938 13,917,358 13,135,629 4,835,639 4,397,708 417,734 6,187,427 3,077,592 408,867 262,696 921,778 752,876 16,334,187 47,457,714 - 193,587,749 1,855,000 2,517,288 223,540 52,053,542 18,335,000 6,669,370 171,001 25,175,371 9,138,337 9,345,553 3,697,938 20,750 (7,196,114) 4,253,859 (2,921,505) (4,780,630) 82,912 19,305,000 (19,082,453) (4,475,171) 6,994,326 (11,502,150) 144,028 1,683,625 (2,680,171) 6,216,832 89,859,871 96,076,703 4,870,382 42,016,801 46,887,183 1,017,767 23,362,271 24,380,038 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 Office of strategic management and diversity City clerk and elections Internal services Debt service: Principal Interest 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 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 $ The notes to the financial statements are an integral part of this statement. 42 $ $ City of Tempe, Arizona Special Assessment Debt Service $ - $ 1,127 2,173,798 3,946 2,178,871 - $ 3,430,747 442 128,491 23,228 3,582,908 8,084,891 - Total Governmental Funds $ 148,881,768 45,277,110 3,182,193 13,644,054 452,168 11,336,801 4,714,522 19,860 4,525,773 887,628 1,298,530 1,076,937 46,041,164 20,300,927 452,168 27,482,482 21,511,044 7,015,040 12,622,206 662,115 30,134,108 8,982,209 1,916,336 2,173,798 5,446,638 8,761,291 344,801,433 3,756,152 287,076 4,602,574 9,229,396 2,201,067 12,753,946 488,402 612,722 20,532 10,422 - 82,429,673 31,383,875 23,770,512 70,604,468 15,336,696 17,589,585 4,886,110 417,734 6,800,149 3,098,124 408,867 262,696 932,200 752,876 16,334,235 5,805,934 5,805,934 18,107,000 1,542,023 173,326 24,492,648 78,277,286 39,547,000 11,688,331 569,367 30,298,582 357,111,080 (32,327) (2,223,026) (32,236,122) (12,309,647) - 4,769,750 4,769,750 16,085,959 (3,964,033) 12,290,000 1,610,000 146,710 13,106,375 39,275,011 27,870,785 (27,442,927) 12,290,000 1,754,028 4,483,481 34,095,000 (19,082,453) 33,967,914 2,546,724 18,749,043 21,295,767 7,038,889 32,810,061 39,848,950 21,658,267 207,143,065 228,801,332 48 - 1,250,000 959,650 1,500 2,211,198 $ Other Governmental Funds Transit Capital Projects (32,327) 345,018 312,691 $ $ $ 43 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Net change in fund balances- total governmental funds $ 21,658,267 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) (2,398,644) 311,921 (2,086,723) 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 (71,037) 729,619 (2,127,297) (1,221,804) (2,690,519) 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 Miscellaneous net capital expenditures Depreciation expense 30,298,582 758,569 (46,853,870) (15,796,719) 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 Pension Expense 19,877,774 (57,191,853) (37,314,079) 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 26,656 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 Amortization of bond premium (1,119,366) 3,529,786 2,410,420 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 Premium on issuance of debt Principal payments made (27,302,547) (1,754,028) 39,547,000 10,490,425 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 (833,369) $ The notes to the financial statements are an integral part of this statement. 44 (24,135,641) Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Budgeted Amounts Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Other entities' participation Miscellaneous Total revenues Variance with Final Budget Positive (Negative) Original Final (Budgetary Basis) $ 119,897,210 45,489,227 800,000 8,960,084 8,323,168 4,438,000 294,315 6,417,837 194,619,841 $ 119,313,089 45,489,227 800,000 8,960,084 8,203,068 4,438,000 294,315 7,001,958 194,499,741 $ 123,361,763 45,272,589 1,214,501 12,147,622 8,094,581 5,446,638 359,315 7,657,180 203,554,189 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 Office of strategic management and diversity 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 Actual Amounts $ $ 4,048,674 (216,638) 414,501 3,187,538 (108,487) 1,008,638 65,000 655,222 9,054,448 77,999,428 31,825,767 19,296,235 13,492,362 13,856,169 4,458,158 373,878 4,396,533 6,416,152 2,981,389 456,042 273,410 905,429 985,974 29,961,202 5,000,000 (14,900,822) 197,777,306 78,977,160 32,391,388 19,449,884 13,807,275 14,025,189 4,673,793 418,478 4,471,948 6,521,398 3,133,277 465,269 286,996 924,483 783,932 27,380,533 3,907,135 (14,900,822) 196,717,316 78,977,162 31,149,505 19,172,469 14,145,834 13,182,583 4,833,306 416,745 4,390,493 6,325,394 3,087,018 408,779 262,390 917,019 757,945 31,551,001 (15,189,422) 194,388,221 (2) 1,241,883 277,415 (338,559) 842,606 (159,513) 1,733 81,455 196,004 46,259 56,490 24,606 7,464 25,987 (4,170,468) 3,907,135 288,600 2,329,095 20,750 (5,565,942) (5,545,192) (8,702,657) 140,850 (5,565,942) (5,425,092) $ (7,642,667) 20,750 (7,196,113) 4,253,859 (2,921,504) 6,244,464 (120,100) (1,630,171) 4,253,859 2,503,588 13,887,131 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 The notes to the financial statements are an integral part of this statement. 45 (828,103) 164,598 472,385 163,489 $ 6,216,833 $ Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Sales taxes Intergovernmental revenue Investment income Charges for services Other entities' participation Miscellaneous Total revenues Variance with Final Budget Positive (Negative) $ $ $ 37,256,871 8,673,409 320,000 13,536,461 130,000 597,012 60,513,753 $ 37,256,871 8,673,409 320,000 13,536,461 130,000 597,012 60,513,753 50,087,092 112,000 50,087,092 112,000 47,167,152 - 2,919,940 112,000 1,855,000 2,813,863 54,867,955 1,855,000 2,813,863 54,867,955 1,855,000 2,740,828 51,762,980 73,035 3,104,975 (4,780,630) (4,780,630) (4,780,630) (4,780,630) (4,780,630) 82,912 19,305,000 (19,082,453) (4,475,171) 82,912 19,305,000 (19,082,453) 305,459 Expenditures Current: Public works Contingency Debt service: Principal retirement Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers to other funds Proceeds from sale of capital assets Proceeds of refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) Net change in fund balance Actual Amounts (Budgetary Basis) $ 865,168 $ 865,168 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 The notes to the financial statements are an integral part of this statement. 46 39,512,636 8,069,379 570,984 13,459,586 130,000 61,742,585 5,504,434 (343,490) (288,303) (2,259) $ 4,870,382 $ 2,255,765 (604,030) 250,984 (76,875) (597,012) 1,228,832 4,639,266 City of Tempe, Arizona 47 Statement of Net Position Proprietary Funds June 30, 2017 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 Due from other funds Inventories Total current assets Noncurrent assets: Advance to other funds 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 $ 90,067,315 34,771,843 13,872,788 398,128 308,386 757,225 140,175,685 $ 3,456,652 1,181,193 30,987 4,668,832 12,442 12,442 $ 93,523,967 34,771,843 15,053,981 441,557 308,386 757,225 144,856,959 $ 11,795,692 571,451 3,734 12,370,877 3,165,050 885,066 116,578,753 - (8,265,305) 362,548 1,822,663 3,210,587 1,066,729 1,877,883 (3,339,854) 6,693,377 49,802,667 336,910,914 199,132,543 30,779,072 12,638,580 (277,392,097) - 346,137,400 466,766,269 7,427,100 7,427,100 5,000,556 5,000,556 358,565,056 479,193,925 - 606,941,954 12,095,932 5,012,998 624,050,884 12,370,877 13,734,782 3,172,417 16,907,199 1,185,628 1,185,628 13,734,782 4,460,139 18,194,921 153,593 153,593 3,165,050 885,066 116,578,753 6,330,829 46,714,221 333,700,327 198,065,814 14,474,567 12,638,580 (265,786,938) - $ 1,265,783 14,426,622 - - Deferred Outflows of Resources Deferred charge on refunding Deferred outflows related to pensions Total deferred outflows of resources - 48 102,094 102,094 - 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 Due to other funds Unearned revenue Accrued interest payable General obligation bonds- current Excise tax revenue obligations- current WIFA loan payable- current Capital leases payable- current Total current liabilities Noncurrent liabilities: Advance from other funds General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable OPEB obligation Pensions Total noncurrent liabilities Total liabilities $ 4,659,007 710,215 2,699,343 $ - 700,798 928,556 $ - 142,463 5,637,970 17,710,000 11,410,000 766,017 43,735,015 1,629,354 - - 91,645 119,712 308,386 105,567 $ 5,451,450 710,215 3,747,611 308,386 142,463 5,637,970 17,710,000 11,410,000 766,017 105,567 $ 143,668 7,452,325 - 625,310 45,989,679 7,595,993 3,165,050 203,719,742 91,229,429 9,581,644 213,267 5,915,032 23,213,075 337,037,239 59,774 797,206 856,980 - 4,308,863 16,512,334 325,352,012 1,369,143 6,150,430 7,519,573 3,165,050 213,267 237,026 550,311 4,165,654 369,087,027 9,148,927 4,790,964 383,026,918 8,452,973 2,082,109 2,082,109 775,534 775,534 69,391 69,391 2,927,034 2,927,034 100,524 100,524 104,387,674 151,904,179 $ 256,291,853 3,970,973 3,970,973 203,719,742 91,229,429 9,581,644 - 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 95,243,164 157,436,853 $ 252,680,017 $ 7,427,100 (4,070,001) 3,357,099 The notes to the financial statements are an integral part of this statement. 49 $ 1,717,410 (1,462,673) 254,737 $ Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2017 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 $ 86,273,324 294,420 86,567,744 $ 16,274,287 1,814 16,276,101 $ 2,322,777 2,882 2,325,659 $ 104,870,388 299,116 105,169,504 $ 33,250,517 33,250,517 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 13,354,476 4,456,825 19,814,435 18,865,745 56,491,481 30,076,263 5,178,767 880,290 8,537,254 1,322,119 15,918,430 357,671 265,901 495,920 1,502,405 245,853 2,510,079 (184,420) 18,799,144 5,833,035 29,854,094 20,433,717 74,919,990 30,249,514 34,095,656 34,095,656 (845,139) 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 328,620 (7,899,134) 66,683 (5,973,511) 23,211 58,163 - (10,395) 3,548 - 351,831 (7,909,529) 128,394 (5,973,511) 11,770 - 16,598,921 439,045 (191,267) 16,846,699 (833,369) Transfers in Transfers out Change in net position 6,246,521 (7,103,457) 15,741,985 200,000 (29,922) 609,123 259,000 67,733 6,705,521 (7,133,379) 16,418,841 (833,369) Total net position- beginning Total net position- ending 236,938,032 $ 252,680,017 2,747,976 $ 3,357,099 The notes to the financial statements are an integral part of this statement. 50 $ 187,004 254,737 239,873,012 $ 256,291,853 4,804,342 $ 3,970,973 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2017 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 Proceeds 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 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 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 prepaid expenses (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 Noncash investing, capital, and financing activities: Net loss from joint venture Total noncash investing, capital, and financing activities: 85,779,553 (14,725,268) (22,945,588) 48,108,697 Solid Waste $ 16,304,707 (5,427,412) (9,170,926) 1,706,369 (308,386) 6,246,521 (7,103,457) (1,165,322) 200,000 (29,922) 170,078 20,520,000 (31,712,410) (6,375,265) (30,319,071) (1,649,562) 3,997 66,683 (49,465,628) (1,723,306) 58,163 (1,665,143) 293,762 (485,531) (191,769) 21,053 21,053 (2,714,022) 127,553,180 232,357 3,224,295 $ 2,325,659 (461,741) (2,593,671) (729,753) Total $ 308,386 259,000 567,386 1,143,834 (223,700) (10,395) (1,594,005) 3,548 (680,718) 1,094 1,094 124,839,158 $ 3,456,652 $ $ 30,076,263 $ 357,671 $ - (184,420) 104,409,919 (20,614,421) (34,710,185) 49,085,313 $ - 20,520,000 1,143,834 (31,712,410) (223,700) (6,385,660) (33,636,382) (1,649,562) 3,997 128,394 (51,811,489) 10,171 10,171 (3,323,656) 131,619,466 (857,442) 12,653,134 $ 128,295,810 $ $ 30,249,514 $ 18,865,745 1,322,119 245,853 20,433,717 $ (788,191) 284,474 (118,897) 1,160,095 (568,133) (1,650,713) 403,880 465,476 (21,302) 48,108,697 $ 28,606 246,618 (55,568) (622,833) 163,620 299,444 (33,308) 1,706,369 (5,307) (590,039) (39,639) (48,087) 2,601 (88,319) (22,396) (729,753) $ (759,585) 284,474 (124,204) 816,674 (663,340) (2,321,633) 570,101 676,601 (77,006) 49,085,313 $ $ $ (5,973,511) (5,973,511) $ $ $ $ (5,973,511) (5,973,511) $ $ - $ $ $ - 33,113,436 (33,981,049) (867,613) 6,705,521 (7,133,379) (427,858) 315,909 (485,531) (169,622) (841,991) 841,991 $ 51 The notes to the financial statements are an integral part of this statement. Golf Course Governmental ActivitiesInternal Service Funds 11,795,692 (845,139) (137,081) 73,079 (155,322) 206,190 (80,791) 21,694 43,441 6,316 (867,613) - Statement of Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Other Post Employment Benefits Trust Assets Cash and investments Total assets $ Net Position Restricted for other post employment benefits Total net position $ 12,328,580 12,328,580 12,328,580 12,328,580 Statement of Changes In Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Other Post Employment Benefits Trust Additions: Employer contributions $ Investment earnings: Net increase in fair value of investments Investment income Investment expenses Net investment earnings 6,759,218 763,186 502,940 (55,033) 1,211,093 Total additions 7,970,311 Deductions: Benefit payments Total deductions 6,759,218 6,759,218 Change in net position 1,211,093 Net position- beginning Net position- ending $ The notes to the financial statements are an integral part of these statements. 52 11,117,487 12,328,580 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2017, the City implemented the provisions of GASB Statement No. 77, Tax Abatement Disclosures. The objective of this Statement is to provide financial statement users with essential information about the nature and magnitude of the reduction in tax revenues through tax abatement programs in order to better assess (a) whether current-year revenues were sufficient to pay for current-year services, (b) compliance with finance-related legal or contractual requirements, (c) where a government’s financial resources come from and how it uses them, and (d) financial position and economic condition and how they have changed over time. In addition, during the year ended June 30, 2017, the City implemented the provisions of GASB Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than Pension Plans. The objective of this Statement is to improve the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. 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. 53 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basic Financial Statements (Continued) 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. 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. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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. 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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 Position - 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. 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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. As permitted by generally accepted accounting principles the City applies the “early recognition” option for debt service payments. Resources are provided during the current year for the payment of debt service principal and interest due early in the following year (less than one month). Therefore, the expenditures and related liabilities have been recognized in the current period. 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. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting (Continued) 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. 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, 31 East 5th 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. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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 2017 Expenditure Limitation is $322,879,964. Local governments may carry forward to future years’ 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. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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 $3.3 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 $10,000 ($25,000 for infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets, donated works of arts and capital assets received in a service concession arrangement are recorded at acquisition 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 60 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Compensated Absences (Continued) fund financial statements, as the benefits are not expected to be liquidated with expendable available financial resources. 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 receives a $500 "Mediflex" allowance each year as reimbursement for all otherwise non-reimbursed health maintenance costs. Unused balances are accumulated. Upon termination, for employees with at least 10 years of service, the balance is transferred to a “Retiree Funded Health Savings Account”. 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). 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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. In Fiscal Year 2016, with the passage of Proposition 117, the limited property tax value was required to be used in determining and levying primary and secondary taxes on all property. In May 2016, legislation was passed by the Arizona State Legislature, effective August 2016, which clarifies that the valuation for the calculation of the debt limit is the full cash (secondary) property value rather than the limited property value. 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 Limited Property Tax 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. 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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. 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 $7,622,112 and the bank balance was $7,012,125; $6,512,125 of that amount was exposed to custodial 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, 2017 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total cash and investments $393,871,334 7,622,112 $401,493,446 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total cash and investments $318,840,007 70,324,859 12,328,580 $401,493,446 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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 2017 of $823,986. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. At June 30, 2017, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Principal cash held with trustee State investment pool Mutual funds Category Fair Value 12 Months or Less 13 - 24 Months 25 - 36 Months Level 2 $ 84,332,695 $ 19,757,309 $ 17,303,438 $47,271,948 Level 2 Level 1 194,638,153 75,204,610 79,897,679 75,204,610 81,804,874 - 32,935,600 - Level 1 5,592 5,592 N/A Level 1 27,384,947 12,305,338 $393,871,335 27,384,947 12,305,338 $214,555,475 - - $99,108,312 $80,207,548 Fair Value Measurements. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. • • • Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs The State Treasurer’s pool is an external investment pool, the Local Government Investment Pool (Pool 5), with no regulatory oversight. The pool is not required to register (and is not registered) with the Securities and Exchange Commission. The activity and performance of the pool is reviewed monthly by the State Board of Investment. The fair value of each participant’s position in the State Treasurer investment pool approximates the value of the participant’s shares in the pool and the participants’ shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. 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. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) Credit risk. The City addresses credit risk through the investment policy by restricting the allowable investment instruments. The investments in the US agency obligations and US government treasuries were rated AA+ and money market funds were rated AAAm by Standard & Poor’s. The Arizona Local Government Investment Pool 5 is currently rated AAAf/S1+ by Standard & Poor’s. The mutual funds in the OPEB Trust ranged from AA to BB. 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, 2017, 22.88% of the City’s investments are in US Treasuries, 17.15% of the City’s investments are in Fannie Mae, 17.61% of the City’s investments are in Federal Home Loan Bank, 8.19% of the City’s investments are in Federal Home Loan Mortgage Corporation securities, 19.09% in money market funds and 6.95% 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. NOTE 5 - DUE TO/FROM OTHER FUNDS, INTERFUND TRANSFERS AND ADVANCES Due to/from other funds consisted of the following at June 30, 2017: General fund Non-major governmental fund Total governmental funds Due to 276,938 $ 276,938 Due from $ 276,938 $ 276,938 Water and wastewater fund Golf fund Total enterprise funds Due to 308,386 $ 308,386 Due from $ 308,386 $ 308,386 $ $ The interfund balances at June 30, 2017 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2017 are expected to be repaid within one year. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS, INTERFUND TRANSFERS AND ADVANCES (Continued) Transfers Out Transit Special Revenue General General Transfers In General Obligation Debt Service Transit Capital Projects Non-major Governmental Water and Wastewater Solid Waste Golf Total $ - $ 654,294 101,000 1 6,255,820 185,000 $ 7,196,114 $ - General Obligation Debt Service $ - - $ - - 4,668,750 111,880 5,255,629 6,246,521 4,922 3,959,111 - - - - 4,780,630 $ 11,502,150 $ Water and Wastewater $ - - - Non-major Governmental 3,964,033 Solid Waste 20,750 $ 6,330,188 478,519 - - Total $ 20,750 4,922 6,994,326 - 4,769,750 25,000 16,085,959 - 6,246,521 200,000 - 200,000 74,000 - 259,000 $ 7,103,457 $ 29,922 $ 34,576,306 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. Interfund Advance. In two installment payments in Fiscal Year 2016, the Water and Wastewater Enterprise Fund advanced the Golf Enterprise Fund a total of $2.5 million for an irrigation system at Rolling Hills Golf Course. In Fiscal Year 2017, an additional $825,000 was advanced. Currently the interest rate is .90% and can fluctuate based on the City’s average earnings on its investments. The advance is repaid in an annual installment of $182,450 commencing June 30, 2017 through June 30, 2038. The advance balance in the Water and Wastewater Enterprise Fund at June 30, 2017 was $3,165,050. 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, 2017 the note receivable balance is $7,821,012. 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, 2017 the note receivable balance in the Transit Special Revenue fund is $1,526,260 and the corresponding revenue has been reported as a deferred inflow of resources. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE (Continued) 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, 2017 was $556,273. 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, 2017 was $328,793. 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. As of June 30, 2016 (the latest information available), the City has a 15.56% 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, 2016 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net position $ 755,906 (34,002) $ 721,904 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net position 67 $ 47,708 (84,913) 166 ($ 37,039) Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Subregional Operating Group (SROG) (Continued) 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, 2017, was $ 116,578,753. The City’s net loss from joint venture was $ 5,973,511 for the fiscal year ended June 30, 2017. 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, 2017, the City has a 18.94% (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, 2016 (the latest information available) is as follows: Total assets Total liabilities Total net position $ 1,399,289,328 (154,425,916) $ 1,244,863,412 Operating revenues Operating expenses Non-operating revenues Non-operating expenses Capital Contributions Net increase in net position $ 15,038,280 (81,756,894) 31,528,315 (14,324,300) 78,630,715 $ 29,116,116 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, 2017 was $ 249,650,512. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. 68 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Regional Wireless Cooperative (RWC) The City participates in the Regional Wireless Cooperative (RWC), an association of municipalities formed in 2008 to oversee the administration, operation, management, and maintenance of an expanding regional communications network. The RWC was formed through a governance structure founded on the principles of cooperation for the mutual benefit of all members, and has expanded to serve a still-growing list of cities, towns, and fire districts, along with many other area entities who serve public safety needs. A regional radio communications network was built to seamlessly serve the interoperable communication needs of first responders and other municipal radio users in and around the Phoenix Metropolitan Region. Financial responsibilities are shared by all members based on their relative size, and is measured by the number of subscriber units (radios) on the network. Currently, the City of Phoenix is responsible for the day-to-day operations and maintenance of the network, as well as the management of the RWC’s organization and finances. The City records its share of contributions to the RWC and the equity in the joint venture in the government-wide financial statements. The City did not make a current year contribution due to a settlement credit. As of June 30, 2017, the City’s net investment in RWC was $10,174,436 (unaudited), or 12.88% of the RWC’s total net position. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2016 (the latest information available) is as follows (in thousands): Total assets Total liabilities Deferred inflow of resources Total net position $ 97,319 (3,845) (4,822) $ 88,652 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net position $ 23,359 (15,344) (15,246) ($ 7,231) The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016, for the RWC may be obtained from the Regional Wireless Cooperative, 200 West Washington Street, 12th Floor, Phoenix, Arizona, 85003-1611. 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2017 is as follows: Balances June 30, 2016 Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 89,605,173 1,367,649 90,972,822 Additions $ 30,298,582 30,298,582 310,141,689 794,928,696 191,369,661 166,779,809 1,463,219,855 2,621,298 2,621,298 Accumulated depreciation: Buildings (125,640,246) (11,005,831) Infrastructure (387,775,054) (18,358,337) Improvements (66,679,945) (8,611,429) Machinery and equipment (121,606,680) (8,878,273) Total accumulated depreciation (701,701,925) (46,853,870) Governmental activities capital assets, net $ 852,490,752 $(13,933,990) Transfers in (out) Retirements $ (3,104,940) (3,104,940) (6,000) (15,122,621) (15,128,621) $ Balances June 30, 2017 $ 89,605,173 (22,142,158) 6,419,133 (22,142,158) 96,024,306 503,158 8,201,580 8,772,741 4,664,679 22,142,158 5,090 6,700,750 6,705,840 $(11,527,721) $ - 310,644,847 803,130,276 200,136,402 158,943,165 1,472,854,690 (136,646,077) (406,133,391) (75,286,284) (123,784,203) (741,849,955) $ 827,029,041 On August 20, 2009, the City entered into an intergovernmental agreement to join the Regional Wireless Cooperative (RWC) forming an unincorporated association of other municipalities to plan, operate, maintain and finance a regional wireless cooperative public safety communications network. The City has contributed $14,334,985 to the RWC that was previously accounted for in the City’s capital assets that should have been recorded in equity in joint venture. Therefore, the asset was retired from the capital assets machinery and equipment category and reclassed to equity in joint venture. In addition, the corresponding accumulative depreciation of $5,917,719 was removed. The beginning balance of the City’s equity in the joint venture was $11,478,146 resulting in a gain of $3,060,880, which was recorded in the governmental activities of the Government-wide Statement of Activities. 70 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2016 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 17,340,639 24,034,016 Additions $ $ 32,465,770 (1,409,529) 32,465,770 (1,409,529) 2,685,575 2,685,575 49,802,667 312,697,267 187,685,383 29,635,622 579,820,939 Transfers in (out) Retirements $ (1,639,618) (1,639,618) Accumulated depreciation: Buildings (24,457,925) (1,263,342) Infrastructure (147,223,243) (9,392,352) Improvements (70,332,117) (7,135,204) Machinery and equipment (16,479,279) (2,642,816) 1,534,181 Total accumulated depreciation (258,492,564) (20,433,714) 1,534,181 Business-type activities capital assets, net $ 345,362,391 $ 14,717,631 $ (1,514,966) $ Balances June 30, 2017 $ 6,693,377 (35,758,300) 12,638,580 (35,758,300) 19,331,957 24,213,647 11,447,160 97,493 35,758,300 49,802,667 336,910,914 199,132,543 30,779,072 616,625,196 - (25,721,267) (156,615,595) (77,467,321) (17,587,914) (277,392,097) - $358,565,056 For the year ended June 30, 2017, the City capitalized net interest costs of $854,205. Total interest expense in the Business-type Activities Enterprise Funds before capitalization was $11,354,911. 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 $ $ 4,738,407 2,372,710 3,897,963 31,854,966 1,370,634 82,470 77,558 10,130 659 670,486 1,777,887 46,853,870 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, $32,810,000 was issued to finance improvements for Street Improvements and Infrastructure Preservation, Community Services, Parks, Public Safety and Water and Wastewater improvements. 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, 2017, were as follows (the 7/1/2017 principal payment was deducted as the Fiscal Year 2017 resources were dedicated): $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% $ 1,615,000 $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% 4,105,000 $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% 6,390,000 $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% 7,850,000 $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, 2030; interest at 2.50% to 5.00% 4,240,000 $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 28,410,000 $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% 28,975,000 $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% 2,320,000 $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% 3,675,000 $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% 9,530,000 $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% 11,535,000 $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% 34,580,000 $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% 9,530,000 $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% 44,580,000 $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% 40,440,000 $13,630,000 2016A Capital Improvement Serial Bonds due in annual installments of $540,000 to $880,000 beginning July 1, 2017 through July 1, 2036; interest at 2.00% to 3.00% 13,090,000 $86,440,000 2016B Capital Improvement Refunding Serial Bonds due in annual installments of $3,550,000 to $17,935,000 beginning July 1, 2017 through July 1, 2029; interest at 2.00% to 4.00% 82,715,000 $32,810,000 2017 Capital Improvement Serial Bonds due in annual installments of $970,000 to $2,390,000 beginning July 1, 2018 through July 1, 2037; interest at 2.00% to 5.00% 32,810,000 Total general obligation bonds outstanding (excluding current portion of general obligation bonds outstanding) $ 366,390,000 72 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 Principal $ 33,590,000 32,105,000 33,355,000 34,805,000 33,545,000 125,140,000 50,210,000 23,640,000 $ 366,390,000 Interest $ $ Total 13,420,636 12,199,716 11,083,703 9,840,830 8,694,667 26,898,363 9,379,167 2,619,650 $ 47,010,636 44,304,716 44,438,703 44,645,830 42,239,667 152,038,363 59,589,167 26,259,650 94,136,732 $ 460,526,732 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 Principal Interest Total $ 14,855,000 13,830,000 14,340,000 14,900,000 14,005,000 55,005,000 34,780,000 16,840,000 $ 6,235,473 5,741,491 5,291,534 4,813,728 4,349,899 15,301,498 6,555,793 1,566,649 $ 21,090,473 19,571,491 19,631,534 19,713,728 18,354,899 70,306,498 41,335,793 18,406,649 $ 178,555,000 $ 49,856,065 $ 228,411,065 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2036 Principal Interest Total $ 18,735,000 18,275,000 19,015,000 19,905,000 19,540,000 70,135,000 15,430,000 6,800,000 $ 7,185,163 6,458,225 5,792,168 5,027,102 4,344,769 11,596,865 2,823,375 1,053,000 $ 25,920,163 24,733,225 24,807,168 24,932,102 23,884,769 81,731,865 18,253,375 7,853,000 $ 187,835,000 $ 44,280,667 $ 232,115,667 73 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2017, the special assessments receivable of $18,713,763, 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, 2017, there is $143,492 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 $365,793 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, 2017, were as follows (the 7/1/2017 principal payment was deducted as the Fiscal Year 2017 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 $ 810,000 17,920,000 $ 18,730,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2018 2019 2020 2021 2022 2023-2027 2028-2029 $ 1,315,000 1,380,000 1,445,000 1,520,000 1,370,000 7,940,000 3,760,000 $ 897,190 831,570 762,768 690,533 619,250 1,971,250 190,250 $ 2,212,190 2,211,570 2,207,768 2,210,533 1,989,250 9,911,250 3,950,250 $ 18,730,000 $ 5,962,811 $ 24,692,811 Interest 74 Total Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations 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 7/1/2017 principal payment was deducted as the fiscal year 2017 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% $ 6,675,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 2038 Principal $ Interest 730,000 760,000 3,375,000 1,810,000 $ 6,675,000 $ Total 305,888 276,688 246,288 246,288 246,288 1,231,438 1,231,438 1,153,063 85,975 $ 1,035,888 1,036,688 246,288 246,288 246,288 1,231,438 1,231,438 4,528,063 1,895,975 $ 5,023,354 $ 11,698,354 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 75 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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 7/1/2017 principal payment was deducted as the fiscal year 2017 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 $ 3,345,000 9,315,000 $ 12,660,000 The following is a summary of total debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2029 Principal $ Interest 1,060,000 1,115,000 1,170,000 5,955,000 3,360,000 $ 12,660,000 76 $ Total 560,809 507,808 452,059 393,559 393,559 1,603,175 214,419 $ 1,620,809 1,622,808 1,622,059 393,559 393,559 7,558,175 3,574,419 $ 4,125,388 $ 16,785,388 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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, 2018 2019 2020 2021 2022 2023-2027 2028-2029 Principal $ Interest 310,000 325,000 340,000 1,740,000 980,000 $ 3,695,000 $ 163,707 148,215 131,961 114,941 114,956 467,936 62,530 $ 1,204,246 Total $ 473,707 473,215 471,961 114,941 114,956 2,207,936 1,042,530 $ 4,899,246 The following is a summary of enterprise debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2029 Principal $ Interest 750,000 790,000 830,000 4,215,000 2,380,000 $ 8,965,000 $ Total 397,101 359,593 320,098 278,617 278,603 1,135,241 151,889 $ 1,147,101 1,149,593 1,150,098 278,617 278,603 5,350,241 2,531,889 $ 2,921,142 $ 11,886,142 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 77 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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 7/1/2017 principal payment was deducted as the fiscal year 2017 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, 2022; 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 $ 7,150,000 7,300,000 $ 14,450,000 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 2018 2019 2020 2021 2022 2023-2025 $ 1,300,000 1,355,000 1,425,000 1,500,000 1,570,000 7,300,000 $ 452,758 390,758 323,008 251,758 176,758 294,774 $ 1,752,758 1,745,758 1,748,008 1,751,758 1,746,758 7,594,774 $ 14,450,000 $ 1,889,814 $ 16,339,814 Interest 78 Total Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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, 2018 2019 2020 2021 2022 2023-2025 Principal $ Interest Total 30,000 35,000 35,000 35,000 40,000 7,300,000 $ 107,308 105,758 104,008 102,258 100,258 294,774 $ 137,308 140,758 139,008 137,258 140,258 7,594,774 $ 7,475,000 $ 814,364 $ 8,289,364 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2018 2019 2020 2021 2022 $ 1,270,000 1,320,000 1,390,000 1,465,000 1,530,000 $ 345,450 285,000 219,000 149,500 76,500 $ 1,615,450 1,605,000 1,609,000 1,614,500 1,606,500 $ 6,975,000 $ 1,075,450 $ 8,050,450 Interest Total Excise Tax Revenue Refunding 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. 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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 7/1/2017 principal payment was deducted as the fiscal year 2017 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, 2018 2019 2020 Principal Interest Total $ 3,025,000 3,145,000 3,295,000 $ 403,850 283,100 138,850 $ $ 9,465,000 $ 825,800 $ 10,290,800 80 3,428,850 3,428,100 3,433,850 $ 9,465,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Excise Tax Revenue and Refunding 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 7/1/2017 principal payment was deducted as the fiscal year 2017 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, Principal Interest Total 2018 2019 2020 2021 2022 2023-2027 2028-2032 $ 1,805,000 1,895,000 1,995,000 2,090,000 2,195,000 11,080,000 2,765,000 $ 1,127,375 1,037,125 942,375 842,625 738,125 1,484,075 290,413 $ 2,932,375 2,932,125 2,937,375 2,932,625 2,933,125 12,564,075 3,055,413 $ 23,825,000 $ 6,462,113 $ 30,287,113 81 $ 23,825,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2025 Principal $ Interest 1,475,000 1,550,000 1,630,000 1,710,000 1,795,000 8,770,000 $ 16,930,000 $ Total 846,500 $ 772,750 695,250 613,750 528,250 745,750 2,321,500 2,322,750 2,325,250 2,323,750 2,323,250 9,515,750 $ 4,202,250 $ 21,132,250 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2032 Principal Interest $ 330,000 345,000 365,000 380,000 400,000 2,310,000 2,765,000 $ 280,875 264,375 247,125 228,875 209,875 738,325 290,413 $ 6,895,000 $ 2,259,863 Total $ 610,875 609,375 612,125 608,875 609,875 3,048,325 3,055,413 $ 9,154,863 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. 82 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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 $6,675,000. $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% $ 36,515,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 $ 1,170,000 1,215,000 1,265,000 1,310,000 1,375,000 8,000,000 10,045,000 12,135,000 $ 1,596,194 1,549,394 1,500,794 1,450,194 1,384,694 5,819,219 3,782,906 1,684,050 $ 2,766,194 2,764,394 2,765,794 2,760,194 2,759,694 13,819,219 13,827,906 13,819,050 $ 36,515,000 $ 18,767,445 $ 55,282,445 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. 83 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding 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% $ 23,355,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033 $ 1,030,000 1,045,000 1,090,000 1,140,000 1,200,000 6,965,000 8,860,000 2,025,000 $ 1,085,900 1,067,875 1,026,075 971,575 914,575 3,610,125 1,713,125 91,125 $ 2,115,900 2,112,875 2,116,075 2,111,575 2,114,575 10,575,125 10,573,125 2,116,125 $ 23,355,000 $ 10,480,375 $ 33,835,375 Excise Tax Revenue and Refunding Obligations. On June 22, 2016, the City issued $42,485,000 of Excise Tax Revenue and Revenue Refunding Obligations: $21,770,000 of revenue obligations and $20,715,000 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 84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) 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 7/1/2017 principal payment was deducted as the fiscal year 2017 resources were dedicated. $42,485,000 2016 Excise Tax Revenue and Refunding Obligations due in annual installments of $1,135,000 to $7,510,000 through July 1, 2031; interest at 2.00% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2018 2019 2020 2021 2022 2023-2027 2028-2031 $ 7,210,000 7,510,000 1,135,000 1,190,000 9,900,000 8,490,000 $ 1,709,500 1,411,250 1,035,750 1,035,750 979,000 3,518,000 1,087,000 $ 8,919,500 8,921,250 1,035,750 2,170,750 2,169,000 13,418,000 9,577,000 $ 35,435,000 $ 10,776,250 $ 46,211,250 The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2025 Principal Interest $ 332,000 345,000 482,000 $ 57,950 57,950 57,950 57,950 41,350 30,350 $ 1,159,000 $ 303,500 85 Total $ 57,950 57,950 57,950 389,950 386,350 512,350 $ 1,462,500 $ 35,435,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2031 Principal Interest Total 7,210,000 7,510,000 803,000 845,000 9,418,000 8,490,000 $ 1,651,550 1,353,300 977,800 977,800 937,650 3,487,650 1,087,000 $ 8,861,550 8,863,300 977,800 1,780,800 1,782,650 12,905,650 9,577,000 $ 34,276,000 $ 10,472,750 $ 44,748,750 $ Transit Excise Tax Revenue Refunding Obligations. On March 29, 2017, the City issued $19,305,000 of Excise Tax Revenue Refunding Obligations. The proceeds were used to refund $18,050,000 of the 2008 Excise Tax Revenue Obligations and pay costs incurred to issue the obligations. 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. $19,305,000 2017 Transit Excise Tax Revenue Refunding Obligations due in annual installments of $150,000 to $1,460,000 through July 1, 2035; interest at 2.87% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2035 Principal $ Interest 150,000 155,000 950,000 980,000 1,010,000 5,490,000 6,320,000 4,250,000 $ 19,305,000 86 $ 554,054 549,749 545,300 518,035 489,909 1,998,238 1,164,216 246,390 $ 6,065,891 Total $ 704,054 704,749 1,495,300 1,498,035 1,499,909 7,488,238 7,484,216 4,496,390 $ 25,370,891 $ 19,305,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue and Refunding Obligations (Continued) Excise Tax Revenue Refunding Obligations. On April 5, 2017, the City issued $14,790,000 of Excise Tax Revenue Refunding Obligations. The proceeds were used to refund $14,275,000 of the 2007R Excise Tax Refunding Revenue 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. $14,790,000 2017 Excise Tax Revenue Refunding Obligations due in annual installments of $2,655,000 to $3,200,000 through July 1, 2022; interest at 1.97% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Principal $ Interest Total 3,080,000 3,145,000 3,200,000 2,655,000 2,710,000 $ 291,363 230,687 168,731 105,691 53,387 $ 3,371,363 3,375,687 3,368,731 2,760,691 2,763,387 $ 14,790,000 $ 849,859 $ 15,639,859 87 $ 14,790,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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% $ 3,794,000 The following discloses debt service requirements as of June 30, 2017 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2025 Principal $ 405,000 423,000 442,000 462,000 482,000 1,580,000 $ 3,794,000 Interest $ 79,044 74,348 67,380 58,651 48,414 67,423 $ 395,260 Total $ 484,044 497,348 509,380 520,651 530,414 1,647,423 $ 4,189,260 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% 88 $ 1,263,496 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Water Infrastructure Finance Authority Loans (Continued) The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2017 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2029 Principal Interest and Administrative Fee $ 88,705 91,423 94,225 97,112 100,087 548,358 243,586 $ 1,263,496 $ $ 38,714 35,996 33,194 30,307 27,332 88,736 11,252 265,531 Total $ 127,419 127,419 127,419 127,419 127,419 637,094 254,838 $ 1,529,027 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% $ 9,084,165 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2017 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 2023-2027 2028-2029 Principal $ 677,312 690,858 704,675 718,769 733,144 3,891,617 1,667,790 $ 9,084,165 Interest and Administrative Fee $ 181,683 168,137 154,320 140,226 125,851 403,358 50,199 $ 1,223,774 89 Total $ 858,995 858,995 858,995 858,995 858,995 4,294,975 1,717,989 $ 10,307,939 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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, 2017 totaled $67,096. 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, 2017. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2018 2019 $ Total 28,490 7,123 35,613 (870) Less: remaining interest at 6.33% Present value of future minimum lease payments $ 34,743 The proprietary assets acquired through capital leases are for equipment with an original cost of $395,432. Accumulated depreciation as of June 30, 2017 totaled $6,403. 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, 2017. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2018 2019 2020 Total minimum lease payments Less: remaining interest at 1.24% to 2.90% Total $ 109,811 109,811 109,811 329,433 (10,599) Present value of future minimum lease payments $ 318,834 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, 2017, the 20 percent debt limitation was $425,141,029 with $337,734,652 of outstanding debt. This provided a 20 percent debt margin of $87,406,377. The 6 percent debt limitation was $127,542,309 with $80,243,108 of outstanding debt. This provided a 6 percent debt margin of $47,299,201. With the successful passing of the bond election in November 2016, the program increased by $254,000,000. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2017, was $318,759,698. 90 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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, 2017. 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 $178,555,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2037. Annual principal and interest payments on the bonds are expected to require less than 79.26% of total 2017 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $228,411,065. Principal and interest paid for the current year and total ad valorem tax revenues were $20,911,077 and $26,381,781, respectively. 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 $187,835,000 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, 2037. Annual principal and interest payments on the bonds are expected to require less than 28.83% of 2017 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $232,115,667. Principal and interest paid for the current year and water and wastewater system revenues were $24,868,496 and $86,273,324, respectively Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $44,049,000 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 3.96% of total 2017 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $51,423,218. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $6,576,521 and $166,058,633, 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 $80,466,000 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 9.34% of total 2017 excise taxes. The total principal and interest remaining to be paid on the bonds is $107,675,580. Principal and interest paid for the current year and total excise taxes were $15,503,905 and $166,058,633, respectively. 91 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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 $62,495,000. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 11.07% of total 2017 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $92,351,682. Principal and interest paid for the current year and transit excise taxes were $4,372,288 and $39,512,636 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 $9,465,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be less than 42.40% of total 2017 performing arts excise taxes. The total principal and interest remaining to be paid on the bonds is $10,290,800. Principal and interest paid for the current year and total available excise taxes were $3,427,850 and $137,788,099, respectively. 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2017 (the ending balance does not include 7/1/2017 “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 $180,750,000 $ 12,290,000 $ (14,485,000) $178,555,000 $14,855,000 Special assessments 19,980,000 (1,250,000) 18,730,000 1,315,000 2007 Excise tax refunding obligations 16,950,000 (16,950,000) 2008 Excise tax obligations 25,430,000 (18,755,000) 6,675,000 730,000 2009 Excise tax obligations 3,990,000 (295,000) 3,695,000 310,000 2011 Excise tax obligations 7,505,000 (30,000) 7,475,000 30,000 2011 Excise tax refunding obligations 12,345,000 (2,880,000) 9,465,000 3,025,000 2012 Excise tax obligations 18,345,000 (1,415,000) 16,930,000 1,475,000 2012 Excise tax refunding obligations 37,665,000 (1,150,000) 36,515,000 1,170,000 2016 Excise tax refunding obligations 1,159,000 1,159,000 2017 Excise tax refunding obligations 19,305,000 19,305,000 150,000 2017 Excise tax refunding obligations 14,790,000 14,790,000 3,080,000 Premium on debt payable 22,291,058 1,754,028 (3,529,786) 20,515,300 2004 HUD Section 108 loan 4,181,000 (387,000) 3,794,000 405,000 350,591,058 48,139,028 (61,126,786) 337,603,300 26,545,000 Capital leases 61,399 (26,656) 34,743 27,665 Compensated absences 28,722,233 14,123,909 (11,658,274) 31,187,868 12,201,518 Claims and judgments 6,771,524 2,980,921 (3,047,911) 6,704,534 2,786,747 OPEB 47,833,811 5,483,994 (5,789,600) 47,528,205 Net pension liability 327,555,534 53,624,143 381,179,677 Governmental activities long-term $761,535,559 $ 124,351,995 $ (81,649,227) $804,238,327 $ 41,560,930 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 2016 Excise tax obligations Excise premium 2010 WIFA Loan 2010 WIFA Loan Capital leases OPEB Net pension liability Business-type activities long-term $185,025,000 14,937,987 9,680,000 8,190,000 7,215,000 24,365,000 1,100,000 41,326,000 11,797,493 1,349,565 9,748,196 63,750 5,992,038 22,536,474 $343,326,503 $ 20,520,000 2,924,614 384,200 892,613 676,601 $ 25,398,028 $ (17,710,000) (1,977,859) (715,000) (1,215,000) (320,000) (1,010,000) (1,100,000) (7,050,000) (1,034,064) (86,070) (664,031) (129,116) (969,618) $ (33,980,758) $187,835,000 $18,735,000 15,884,742 8,965,000 750,000 6,975,000 1,270,000 6,895,000 330,000 23,355,000 1,030,000 34,276,000 7,210,000 10,763,429 1,263,495 88,705 9,084,165 677,312 318,834 105,567 5,915,033 23,213,075 $334,743,773 $30,196,584 The long-term liabilities at June 30, 2017 have been reduced by deposits made with the City’s fiscal agent for July 1, 2017 maturities. 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, 2017 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 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. 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 (the difference between the present values of the debt service payment on the old and new debt) of $2,399,755. On June 22, 2016, the City issued $20,715,000 of excise tax revenue refunding obligation with a premium of $5,179,065 to partially advance refund $3,860,000 of Series 2009 and $17,850,000 of Series 2011A outstanding excise tax revenue obligations. The bonds were issued with an average interest rate of 4.93%. The net proceeds of $25,894,065 after the payment of $77,916 in issuance costs and an underwriter’s discount of $134,648 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 Debt Service and Water and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,818,444, which resulted in an economic gain of $1,631,429. On June 23, 2016, the City issued $86,440,000 of general obligation refunding bonds with a premium of $12,092,091 to partially advance refund $11,445,000 of Series 2007A, $37,920,000 of Series 2008A and $31,190,000 of Series 2009A outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $9,890,000 of Series 2006 general obligation bonds. The bonds were issued with an average interest rate of 4.10%. The net proceeds of $98,532,091 after the payment of $255,831 in issuance costs, an underwriter’s discount of $497,030 and $2,665 deposited into the debt service fund 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 $9,822,425, which resulted in an economic gain of $8,858,944. On March 29, 2017, the City issued $19,305,000 of Transit excise tax revenue refunding obligation to partially advance refund $18,050,000 of Series 2008 outstanding excise tax revenue obligations. The bonds were issued with an average interest rate of 2.87%. The net proceeds of $19,082,453 after the payment of $217,047 in issuance costs and a bank counsel fee of $5,500 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 Transit Special Revenue fund. As a result of the advance refunding, the City reduced its total debt service requirements by $2,985,742, which resulted in an economic gain of $2,375,840. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2017 are as follows: $76,485,000 general obligation bonds issued in 2007 and partially refunded in 2015 (final redemption date is 7/1/2017) $ 28,865,000 $23,615,000 excise tax revenue obligations issued in 2009 and partially refunded in 2016 (final redemption date is 7/1/2019) 3,860,000 $31,825,000 excise tax revenue obligations issued in 2011 and partially refunded in 2016 (final redemption date is 7/1/2021) 17,850,000 $76,485,000 general obligation bonds issued in 2007 and partially refunded in 2016 (final redemption date is 7/1/2017) 11,445,000 $66,365,000 general obligation bonds issued in 2008 and partially refunded in 2016 (final redemption date is 7/1/2018) 37,920,000 $56,055,000 general obligation bonds issued in 2009 and partially refunded in 2016 (final redemption date is 7/1/2019) 31,190,000 $30,170,000 Transit excise tax revenue obligations issued in 2008 and partially refunded in 2017 (final redemption date is 7/1/2018) 18,050,000 Total bonds advance refunded $ 149,180,000 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. 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. 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) 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, 2017, 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, 2017, the aggregate balance is 38.29% of General Fund revenues. Transit Special Revenue General Fund balances: Non-spendable: Inventories Prepaid items Capital improvements notes receivable Restricted: Debt Service reserve Police Fire Community services Public works Community development Human services Municipal court City manager Strategic Mgmnt + Diversity Committed to: Police Fire Community services Public works Community development Municpal court City clerk Internal Services Debt Service Assigned to: Self-insurance purposes Capital projects Reserved property lease land Reserved property lease revenue Billboard revenue Other Transit TSA Unassigned: Total fund balances $ 388,685 250,000 638,685 $ - General Special Total Other Total Obligation Assessment Transit Capital Governmental Governmental Debt Service Debt Service Projects Funds Funds $ - $ - $ - $ 921,208 702,591 1,623,799 $ 1,309,893 702,591 250,000 2,262,484 100,000 - 28,238,205 - 21,456,909 - 312,691 - 21,295,767 - 801,833 515,107 941,456 12,094,085 2,055,328 353,134 387,432 127,172 2,000 21,769,600 801,833 515,107 941,456 61,628,057 2,155,328 353,134 387,432 127,172 2,000 100,000 28,238,205 21,456,909 312,691 21,295,767 17,277,547 88,681,119 104,588 360,433 3,146 35 7,329 475,531 6,981,234 4,220,265 11,201,499 6,841,391 1,360,593 5,959,742 600,941 14,762,667 7,447,479 7,447,479 80,099,820 $ 96,076,703 - 2,923,129 2,923,129 $ 46,887,183 $ 24,380,038 96 $ - - 137,242 510,103 9,607,676 4,763,943 524,421 15,543,385 241,830 510,103 16,949,343 4,767,089 524,421 35 7,329 4,220,265 27,220,415 - - 5,216,876 187,343 5,404,219 6,841,391 6,577,469 5,959,742 600,941 187,343 7,447,479 2,923,129 30,537,494 - - 312,691 $ 21,295,767 $ 39,848,950 80,099,820 $ 228,801,332 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2017 the City’s construction commitments are as follows: Construction in Progress Commitment Governmental funds: Transit Non-major funds $ 1,604,525 6,621,248 $ 8,225,773 $ $ Construction in Progress Commitment Proprietary funds: Water/wastewater 1,106,516 5,312,617 6,419,133 $ 8,142,388 $ 8,142,388 $ 12,638,580 $ 12,638,580 In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Non-major funds $ 472,386 $ 119,163 591,549 Commitment Proprietary funds: Water/wastewater Solid waste $ 603,879 425,000 $ 1,028,879 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, 2017 were $87,959. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Total minimum payments required $ Amount 87,959 86,827 25,535 1,408 1,056 $ 202,785 97 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona 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 $27,362,376 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: 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 11.48% (11.34% for retirement and 0.14% 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 11.48% (10.78% for retirement, 0.56% for health insurance premium benefit, and 0.14% for long-term disability) of the members’ annual covered payroll. The City’s contributions to the pension plan for the year ended June 30, 2017 were $7,877,785. 98 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) In addition, the City was required by statute to contribute at the actuarially determined rate of 9.47% (9.38% for retirement and 0.09% 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, 2017 2016 2015 Health Benefit Supplement Fund $ 404,502 352,392 419,272 Long-Term Disability Fund $ 106,304 86,816 85,276 Pension Liability. At June 30, 2017, the City reported a liability of $ 126,045,105 for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2016. 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, 2015, to the measurement date of June 30, 2016. 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, 2016, the City’s proportion was 0.78%, which was an increase of 0.02% from its proportion measured as of June 30, 2015. Pension Expense and Deferred Outflows/Inflows of Resources. For the year ended June 30, 2017, the City recognized pension expense for ASRS of $ 5,305,852 and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions and other inputs 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 Total Deferred Outflow of Resources $ 765,968 13,659,094 - 2,068,837 7,887,785 $ 99 Deferred Inflow of Resources $ 8,670,982 6,668,793 24,381,684 553,778 $ 15,893,553 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) The $ 7,887,785 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, 2018. 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, 2018 2019 2020 2021 $ (5,435,497) (3,521,567) 5,727,440 3,829,970 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, 2015 June 30, 2016 Entry age normal Fair value 8.0% 3.0-6.75% 3.0% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2015 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 8.75% 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 58% 25% 10% 5 2% 100% Asset Class Equity Fixed income Real estate Multi-asset Commodities Total 100 Long-Term Expected Real Rate of Return 6.73% 3.70 4.25 3.41 3.84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) 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 8.75%. 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%) $ 160,717,080 $ 126,045,105 $ 98,245,760 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. 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. 101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) 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 Survivor benefit: Retired members Active members 50% or normal retirement, whichever is greater 80% of retired member’s pension benefit 100% 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, 2017, the following employees were covered by the agent pension plans’ benefit terms: PSPRS Police 241 48 320 609 Retirees and beneficiaries Inactive, non-retired members Active members Total PSPRS Fire 128 25 134 287 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, 2017 are indicated below. Rates are a percentage of active members’ annual covered payroll. Active members – pension City: Pension Health insurance PSPRS Police 7.65% 44.93 0.75 102 PSPRS Fire 7.65% 53.67 - Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) In addition, the City was required by statute to contribute at the actuarially determined rate of 33.89% for police and 41.05% for fire 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: Pension: Contributions made Health insurance premium benefit: Annual OPEB cost Contributions made PSPRS Police PSPRS Fire $ 12,852,861 $ 6,621,730 214,548 214,548 - Pension Liability. At June 30, 2017, the City reported $178,861,508 for police and $99,486,139 for fire in net pension liability. The net pension liabilities were measured as of June 30, 2016, 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, 2016, 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. In May 2016 voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of two percent. In addition, Laws 2016, Chapter 2, changed the benefit formula and contribution requirements for members hired on or after July 1, 2017. The final change that impacted the actuarial assumptions was a decrease from 7.85% to 7.50% on the investment rate of return. The net pension liability measured as of June 30, 2017 will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the City's net pension liability as a result of these changes is not known. Actuarial Assumptions. The significant actuarial assumptions used to measure the total pension liability are as follows: PSPRS Actuarial valuation date June 30, 2016 Actuarial cost method Entry age normal Asset valuation Market Value of Assets Discount rate 7.50% Projected salary increases 4.0 - 8.0% Inflation 4.0% Permanent benefit increase Included Mortality rates RP-2000 mortality table, adjusted by 105% for both males and females Actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.50% 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 arithmetic real rates of return for each major asset class for all agent pension plans are summarized in the following table: 103 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Asset Class U.S. equity Non-U.S. equity Private equity Fixed income Credit opportunities Absolute return GTAA Real assets Real estate Risk parity Short-term investments Total Target Allocation 16%% 14% 11% 7% 13% 5 10% 8% 10% 4% 2 100% Long-Term Expected Real Rate of Return 6.23%% 8.25% 9.50% 2.92% 7.08% 4.11% 4.38% 4.77% 4.48% 5.13% 0.75 Pension Discount Rates. The discount rate of 7.50% 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, 2016 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, 2017 Total Pension Liability $ 258,046,807 5,378,159 19,846,810 13,183,597 (5,746,957) 10,622,755 (15,820,570) 27,463,794 $ 285,510,601 104 Increase(Decrease) Plan Fiduciary Net Position $ 105,933,583 - 12,552,708 3,597,316 653,674 (15,820,570) (94,459) (173,159) 715,510 $ 106,649,093 Net Pension Liability $ 152,113,224 5,378,159 19,846,810 13,183,597 (5,746,957) 10,622,755 (12,552,708) (3,597,316) (653,674) 94,459 173,159 26,748,284 $ 178,861,508 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Changes in the Agent Plans Net Pension Liability Fire: Balances at June 30, 2016 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, 2017 Total Pension Liability $ 150,002,751 2,601,714 11,454,692 9,445,952 Increase(Decrease) Plan Fiduciary Net Position $ 71,208,968 - Net Pension Liability $ 78,793,783 2,601,714 11,454,692 9,445,952 177,366 5,723,255 - 6,665,926 1,620,334 420,827 (10,767,917) 18,635,062 $ 168,637,813 (10,767,917) (60,954) 64,490 (2,057,294) $ 69,151,674 177,366 5,723,255 (6,665,926) (1,620,334) (420,827) 60,954 (64,490) 20,692,356 $ 99,486,139 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 6.50% $ 217,333,308 7.50% $ 178,861,508 8.50% $ 147,338,978 Fire: Rate Net pension liability 6.50% $ 120,439,284 7.50% $ 99,486,139 8.50% $ 82,118,064 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, 2017, the City’s recognized $ 33,093,280 as pension expense for police and $ 19,173,950 as pension expense for fire. 105 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Pension Deferred Outflows/Inflows of Resources. At June 30, 2017, 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 $ 19,069,165 Deferred Inflows of Resources $ 7,241,161 - 6,617,835 12,852,861 $ 38,539,861 $ 7,241,161 Deferred Outflows of Resources $ 10,985,582 Deferred Inflows of Resources $ 1,392,880 - 4,350,427 6,621,730 $ 21,957,739 $ 1,392,880 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, 2018. 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, 2018 2019 2020 2021 Thereafter Total PSPRS Police $ 6,280,593 6,280,595 3,409,420 2,471,234 3,998 $ 18,445,840 106 PSPRS Fire $ 3,386,392 3,386,394 4,125,022 2,123,433 921,889 $ 13,943,130 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2017 2016 2015 Annual OPEB Cost $ 214,548 191,805 418,902 Percentage of Annual Cost Contributed 100% 100 100 Net OPEB Obligation $ - Annual OPEB Cost $ 184,100 Percentage of Annual Cost Contributed 100% 100 100 Net OPEB Obligation $ - Fire: Fiscal Year Ended June 30, 2017 2016 2015 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 2017 contribution requirements, are as follows: PSPRS Actuarial valuation date June 30, 2015 Actuarial cost method Entry age normal Amortization method Level percent closed for unfunded actuarial accrued liability Remaining amortization period 21 years for unfunded actuarial accrued liability, 20 years for overfunded Asset valuation method 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.85% Projected salary increases includes 4.0%-8.0% inflation at 4.0% 107 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, 2016, 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, 2016 Entry age normal Level percent closed for unfunded actuarial accrued liability 20 years for unfunded actuarial accrued liability, 20 years for overfunded 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return 7.5% 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, 2016. 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 108 PSPRS Police $ 4,179,449 6,732,069 2,552,620 PSPRS Fire $ 3,777,423 3,376,002 (401,421) 62.1% $ 28,069,721 9.09% 111.9% $12,995,575 - % Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 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, “Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions”, 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. GASB Statement No. 74, “Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans”, effective with fiscal years beginning after June 15, 2016, requires certain financial reporting disclosures by plans that administer OPEB benefits; those disclosures have been incorporated throughout this report. A. Plan Description The City offers (through a single-employer plan, the “City of Tempe Post-Employment Health Plan”) the continuation of group health insurance benefits administered by the City’s Human Resources Division, 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, 2017, 889 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 889 506 1,395 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. 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. Effective August 2015, Medicare-eligible retirees who formally waive the coverage of the Medicare Supplemental plans are eligible to receive a $100 monthly contribution to a health reimbursement account established for the retiree. 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. 109 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 15 - OTHER POST-EMPLOYMENT BENEFITS (Continued) 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 either enroll in a City-sponsored Medicare Supplemental Plan, or formally waive coverage of the supplemental plans to receive a monthly contribution to a health reimbursement account. 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 16.31% 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 an $12.3 million balance as of June 30, 2017. The investments of the trust are overseen by the OPEB Retirement Investment Committee, consisting of three city employees appointed by the City’s Deputy City Manager/Chief Financial Officer. Separate financial statements are not available for the trust. 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, Net OPEB Obligation and Net OPEB Liability 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, 2017, the amount actually contributed to the plan and changes in the City’s net OPEB obligation under GASB Statement No. 45: 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 110 $ 7,171,851 (4,293,924) 3,498,680 6,376,607 (6,759,218) (382,611) 53,825,849 $ 53,443,238 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) E. Annual OPEB Cost, Net OPEB Obligation and Net OPEB Liability (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, 2017, 2016, and 2015 are as follows: Fiscal Year Ended June 30, Annual OPEB Cost 2015 2016 2017 $ 5,934,935 6,034,357 6,376,607 Employer Contributions Percentage of Annual OPEB Cost Contributed $ 6,430,514 6,354,960 6,759,218 108.4 % 105.7 106.0 Net OPEB Obligation $ 54,146,452 53,825,849 53,443,238 GASB Statement No. 74 requires the disclosure of the Changes in Net OPEB Liability for the OPEB benefit plan as follows: Balance at 6/30/2016 Changes for the year: Service cost Interest Contributions- employer Investment income Investment expenses Benefit payments Net changes Balance at 6/30/2017 Changes in Net OPEB Liability Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability $ 91,423,513 $ 11,117,487 $ 80,306,026 300,495 5,742,386 (6,759,218) (716,337) $ 90,707,176 6,759,218 1,266,126 (55,033) (6,759,218) (1,211,093) $ 12,328,580 300,495 5,742,386 (6,759,218) (1,266,126) 55,033 (1,927,430) $ 78,378,596 Plan fiduciary net position as a percentage of total OPEB liability is 13.59% as of June 30, 2017. 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 5.0% 2.50 111 Maximum 8.98% 8.64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) G. Funded Status and Funding Progress (most recent information available) Actuarial Actuarial Value of Valuation Date Assets 7/1/2015 $ 10,953,086 Actuarial Accrued Liability Entry Age $ 91,709,697 Unfunded AAL (UAAL) $ 80,756,611 Unfunded AAL Funded Annual as a % of Ratio Covered Payroll Covered Payroll 11.9% $ 40,237,602 200.7% 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 immediately following the notes 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 a comprehensive actuarial valuation on a biannual 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 longterm 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, including calculation of the AAL for the Total OPEB Liability, were as follows: Measurement date Actuarial valuation date Actuarial cost method Remaining amortization period Asset valuation method Actuarial assumptions: Inflation rate Investment rate of return Discount rate Projected payroll increases Mortality rates Amortization method June 30, 2017 July 1, 2015 Entry age normal 22 years, closed Market value See F. Health Care Cost Trend Rate 6.5% 6.5% 3% per annum Based on the RP 2000 Employee Mortality Table, Projected to 2017 using Scale AA for active employees and RP 2000 Healthy Annuitant Mortality Table, Projected to 2017 using Scale AA for retirees Level dollar The Total OPEB Liability was adjusted from the actuarial valuation date to the measurement date using standard actuarial roll-forward techniques. The long-term rate of return on OPEB plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of return (expected returns net of OPEB plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to 112 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) H. Actuarial Methods and Assumptions (Continued) 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 the geometric real rates of return for each major asset class are summarized in the following table: Asset Class Cash & Equivalents Equity Fixed Income Real Estate Other Total Long-Term Expected Real Rates of Return Not applicable 5.0% 2.5% Not applicable Not applicable 4.13% Target Allocation 0% 65% 35% 0% 0% 100% Discount rate. The discount rate used to measure the Total OPEB Liability is 6.5%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's Fiduciary Net Position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the Total OPEB Liability. I. Investments Investment policy. The City’s policy in regard to the allocation of invested assets is established and may be amended by the OPEB Retirement Investment Committee by a majority of vote of its members. It is the policy of the committee to pursue and investment strategy that reduces risk through the prudent diversification of the portfolio. For the committee’s adopted target asset allocation as of June 30, 2017, please refer to footnote H, “Actuarial Methods and Assumptions”. Rate of return. For the year ended June 30,2017, the annual money-weighted rate of return on investments, net of investment expense, was 11.41%. The money-weighted return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. J. Sensitivity of the Net OPEB Liability Discount Rate: Healthcare Cost Trend Rates: 1% Decrease No Change 1% Increase $88,038,036 63,266,315 $78,378,596 78,378,596 $71,441,175 89,063,198 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. 113 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona 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 cover 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 $870 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 $275,000 per occurrence, with an aggregate stop loss deductible of $18.1 million. During the year there were no significant reductions in the amounts of excess coverage purchased. 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, 2017, 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, 2016 $ 2,471,692 95,729 3,476,263 1,167,879 $ 7,211,563 Claims Incurred Net of Change in Estimates $ 479,927 941,848 430,892 1,238,758 18,702,903 $ 21,794,328 Payments $ (750,737) (140,513) (123,621) (2,033,041) (18,517,053) $(21,564,965) June 30, 2017 $ 2,200,882 801,335 403,000 2,681,980 1,353,729 $ 7,440,926 June 30, 2015 $ 2,926,113 22,975 104,007 3,124,925 1,210,970 $ 7,388,990 Claims Incurred Net of Change in Estimates $ 203,790 117,027 257,542 2,630,513 15,692,734 $ 18,901,606 Payments $ (658,211) (140,002) (265,820) (2,279,175) (15,735,825) $(19,079,033) June 30, 2016 $ 2,471,692 95,729 3,476,263 1,167,879 $ 7,211,563 114 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) At June 30, 2017, the Risk Management Fund accrued expenses totaled $3,416,616. This balance includes the general liability, automobile liability and property liability of $3,405,216 and other accrued expenses of $11,400. The Worker’s Compensation Fund had accrued expenses totaling $2,681,980. The Health Fund had accrued expenses totaling $1,353,729. Additionally, at June 30, 2017, 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. On October 18, 2017 HUD issued Notice CPD-17-09 providing further clarification and guidance on the Management of Community Development Block Grant Assisted Real Property. This notice defines the expectations for the acquisition, management and disposition of Real Property. The City must be in compliance and have all currently held properties fulfilling a National Objective within the specified timeframes or the expenditures would be deemed invalid and the City would be required to reimburse HUD. 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 – TAX ABATEMENTS The City has made commitments as part of our economic development programs to reimburse certain public improvement costs through transaction privilege taxes generated out of the respective development area. The total amount rebated in FY 2017 is $3,965,622. Detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. In addition, the City enters into property tax abatement agreements with local businesses under Arizona Revised Statutes 42-6201 through 42-6210- Government Property Lease Excise Tax (GPLET). State law imposes an excise tax on buildings that are owned by the City, leased by a private party and occupied/used for commercial, residential rental or industrial purposes. The City is allowed to abate the tax for a period of eight years for both existing and new projects within redevelopment areas that are part of a single central business district. 115 Notes to the Financial Statements For Fiscal Year Ended June 30, 2017 City of Tempe, Arizona NOTE 20 – TAX ABATEMENTS (Continued) For the fiscal year ended June 30, 2017, the difference between property taxes assessed and the GPLET collected totaled $1,784,049 under this program, including the following tax abatement agreements that each exceed 10% of the total amount:  A 27.4% property tax GPLET to a retail development for constructing a retail complex in the City. The GPLET amounted to $488,659.  A 14.0% property tax GPLET to a retail development in the downtown area. The difference between property taxes assessed and the GPLET collected amounted to $250,030. NOTE 21 - DEFICIT IN NET POSITION The Worker’s Compensation Fund had a deficit net position of $9,195 at June 30, 2017. The deficit will be covered by future transfers from operating funds. NOTE 22 – CLAIMS AND JUDGEMENTS During the fiscal year, the Arizona Supreme Court ruled on the Hall v. Elected Officials Retirement Plan (EORP) and the Parker v. Public Safety Personnel Retirement System Plan lawsuits. The courts found that a 2011 law’s increases in employee contribution rates for active PSPRS plan and EORP members hired prior to the law’s effective date were unconstitutional. As a result, these members are entitled to refunds of their excess employee contributions, plus interest. Employers must provide these refunds because Internal Revenue Service regulations prevent PSPRS from issuing them from the plan’s trusts. As such, the City refunded the excess contributions in August 2017. The excess contributions and interest totaling $6,012,788 is reflected on the Statement of Net Position in Accrued Expenses and Statement of Activities within the respective function. 116 City of Tempe, Arizona Required Supplementary Information 117 Schedule of Contributions All Pension Plans Last Three Fiscal Years City of Tempe, Arizona 2017 Arizona State Retirement System: Actuarially determined contribution Contributions in relation to the actuarially determined contribution $ 2016 7,887,785 $ 7,887,785 Contribution deficiency (excess) $ City's covered payroll $ 73,170,548 Contributions as a percentage of covered-employee payroll $ Contribution deficiency (excess) $ City's covered payroll $ 12,852,861 $ $ 28,606,412 Contributions as a percentage of covered-employee payroll $ $ Contribution deficiency (excess) $ City's covered payroll $ 6,621,730 $ $ 12,337,861 Contributions as a percentage of covered-employee payroll 53.67% 71,257,899 $ $ 12,604,739 28,627,615 $ 6,067,633 $ $ 12,215,891 49.67% 71,063,096 9,727,183 9,727,183 $ $ 28,889,762 33.67% $ 6,067,633 $ - 10.89% 44.03% 6,621,730 - - 7,738,771 7,738,771 12,604,739 44.93% Public Safety Personnel Retirement System Fire: Actuarially determined contribution Contributions in relation to the actuarially determined contribution $ 10.85% 12,852,861 - 7,731,482 7,731,482 10.78% Public Safety Personnel Retirement System Police: Actuarially determined contribution Contributions in relation to the actuarially determined contribution 2015 4,066,636 4,066,636 $ $ 10,958,329 37.11% Note: This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 118 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Last Three Fiscal Years City of Tempe, Arizona 2017 City's proportion of the net pension liability 2016 0.78% 2015 0.77% 0.76% City's proportion share of the net pension liability $ 126,045,105 $ 119,185,001 $ 112,524,308 City's covered-employee payroll $ 71,257,899 $ 71,063,096 $ 69,182,112 City's proportionate share of the net pension liability as a percentage of its covered-employee payroll 176.89% 167.72% 162.65% Plan fiduciary net position as a percentage of the total pension liability 67.06% 68.35% 69.49% Note: This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 119 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Police Last Three Fiscal Years City of Tempe, Arizona 2017 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 Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ $ $ $ 12,552,708 3,597,316 653,674 (15,820,570) (94,459) (173,159) 715,510 105,933,583 106,649,093 $ 178,861,508 $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll $ $ $ $ 28,069,721 637.20% 5,468,695 19,315,142 (2,753,278) (14,604,348) 7,426,211 250,620,596 258,046,807 $ 9,804,542 3,641,788 3,769,779 (14,604,348) (92,360) (36,082) 2,483,319 103,450,264 105,933,583 $ 152,113,224 $ 37.35% Net pension liability as a percentage of covered-employee payroll Note: 5,378,159 19,846,810 13,183,597 (5,746,957) 10,622,755 (15,820,570) 27,463,794 258,046,807 285,510,601 2016 2015 $ $ $ $ 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 $ 41.05% $ 29,044,518 41.28% $ 523.72% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 120 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 28,717,534 512.48% Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System- Fire Last Three Fiscal Years City of Tempe, Arizona 2017 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 Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending Net pension liability- ending $ 2,601,714 11,454,692 9,445,952 177,366 5,723,255 (10,767,917) 18,635,062 150,002,751 168,637,813 $ $ $ 6,665,926 1,620,334 420,827 (10,767,917) (60,954) 64,490 (2,057,294) 71,208,968 69,151,674 $ 99,486,139 $ $ $ Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 2016 2,527,186 11,256,214 (1,631,037) (8,554,561) 3,597,802 146,404,949 150,002,751 $ $ $ 4,553,293 1,627,959 2,537,356 (8,554,561) (62,287) (36,284) 65,476 71,143,492 71,208,968 $ 4,587,619 1,461,331 8,786,886 (9,805,679) (3,124,665) 1,905,492 69,238,000 71,143,492 $ 78,793,783 $ 75,261,457 $ $ 41.01% $ 12,995,575 Net pension liability as a percentage of covered-employee payroll 765.54% 2015 $ $ 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 47.47% $ 12,133,956 48.59% $ 12,719,039 649.37% Note: This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 121 591.72% Schedule of Funding Progress Other Post Employment Benefits Last Three Actuarial Valuations City of Tempe, Arizona Funded Status and Funding Progress (most recent information) Actuarial Valuation Date PSPRS- Police: 2016 $ 4,179,449 2015 4,145,779 2014 3,908,102 PSPRS- Fire: 2016 2015 2014 Actuarial Accrued Liability (AAL) Actuarial Valuation of Assets $ 3,777,423 3,764,839 3,600,744 Single Employer Plan: 2015 $ 10,953,086 2014 9,927,658 2013 4,530,000 Unfunded AAL (UAAL) $ 6,732,069 6,270,573 5,881,593 $ $ 3,376,002 3,215,455 3,168,939 $ $ 91,709,697 81,803,527 77,305,345 2,522,620 2,124,794 1,973,491 (401,421) (549,384) (431,805) $ 80,756,611 71,875,869 72,775,345 122 Funded Ratio Covered Payroll 62.10 % 66.11 66.45 $ 28,069,721 29,044,518 28,717,531 111.90 % 117.09 113.63 $ 12,995,575 12,133,956 12,719,049 11.9 % 12.1 5.9 $ 40,237,602 39,324,207 44,539,774 UAAL as a percentage of Covered Payroll 9.09 % 7.32 6.87 - % 200.7 % 182.8 163.4 Schedule of Contributions OPEB Plan Current Fiscal Year City of Tempe, Arizona 2017 Actuarially determined contribution Contributions in relation to the actuarially determined contribution $ Contribution deficiency (excess) $ 412,633 City's covered payroll $ 41,444,730 6,759,218 Contributions as a percentage of covered-employee payroll Note: 7,171,851 16.31% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 123 Schedule of Changes in the Net OPEB Liability and Related Ratios Current Fiscal Year City of Tempe, Arizona 2017 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 OPEB liability Total OPEB liability- beginning Total OPEB liability- ending $ $ Plan fiduciary net position Contributions- employer Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position- beginning Plan fiduciary net position- ending $ 6,759,218 1,211,093 (6,759,218) 1,211,093 11,117,487 12,328,580 Net OPEB liability- ending $ 78,378,596 $ Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll 13.59% $ Net OPEB liability as a percentage of covered-employee payroll Note: 300,495 5,742,386 (6,759,218) (716,337) 91,423,513 90,707,176 41,444,730 189.12% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 124 Schedule of Investment Returns OPEB Plan Current Fiscal Year City of Tempe, Arizona 2017 Annual money-weighted rate of return, net of investment expense Note: 11.41% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. 125 Notes to Required Supplementary Information June 30, 2017 City of Tempe, Arizona Factors that Affect Trends. The actuarial assumptions used in the June 30, 2015 valuation for 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, 2016 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, 2016, 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. 126 City of Tempe, Arizona 127 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. 128 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. 129 Combining Balance Sheet Non-major Governmental Funds June 30, 2017 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 Total fund balances Total liabilities, deferred inflows of resources, and fund balances 1,056,999 3,153,926 4,210,925 61,545 132,866 276,938 2,880,000 273,925 3,625,274 Highway User Revenue $ 9,704,366 $ 1,052,441 921,208 11,678,015 $ 246,505 78,101 324,606 - 4,210,925 $ 127,698 $ 545,740 15,991 689,429 $ - 585,651 585,651 $ Community Development 11,678,015 130 $ 210,713 $ 702,591 913,304 $ 309,692 309,692 921,208 10,432,201 11,353,409 $ 223,951 5,448 33,720 263,119 Housing Assistance - 116,618 116,618 $ 689,429 23,174 187,539 210,713 702,591 702,591 $ 913,304 City of Tempe, Arizona Special Revenue Housing Affordability $ 50,752 Donations and Court Awards $ 2,259,750 $ 4,704 10,399 15,995 2,290,848 - $ $ 56 50,808 - $ - 56,237 509 56,746 - - 50,808 50,808 $ 50,808 Grants $ 461,499 $ 1,294,257 1,755,756 $ 2,290,848 $ 2,111,004 $ 2,378,266 4,489,270 $ 58,156 2,836 2,190,000 186,450 2,437,442 96,231 30,604 126,835 1,154,706 892,053 187,343 2,234,102 $ 134,440 89,670 2,910 946,754 1,173,774 Community Facilities District 1,755,756 $ 14,925,782 $ 2,109,440 4,760 1,850,396 921,208 702,591 5,564,178 26,078,355 $ - 455,147 455,147 $ Total 405,923 30,604 436,527 2,051,828 2,051,828 $ 4,489,270 (continued) 131 804,008 89,670 410,209 276,938 946,754 5,070,000 494,095 8,091,674 1,623,799 14,846,959 892,053 187,343 17,550,154 $ 26,078,355 Combining Balance Sheet Non-major Governmental Funds June 30, 2017 rizona 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 $ 3,991,532 $ 3,991,532 $ 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 Total fund balances Total liabilities, deferred inflows of resources, and fund balances Police 995,226 995,226 $ 1,454,030 $ 1,454,030 $ 665,623 665,623 - 3,991,532 Storm Sewers $ 1,403,271 $ 28,568 $ 55,007 1,458,278 $ 28,568 $ - 71,022 2,425,022 500,262 2,996,306 $ Fire 1,454,030 132 $ - 346,686 137,242 304,479 788,407 $ 11,724 11,724 1,458,278 $ 9,272,722 $ 60,156 9,332,878 $ - 423,858 510,103 512,593 1,446,554 $ - Parks 60,156 60,156 4,420 24,148 28,568 $ 28,568 538,682 538,682 1,375,740 7,102,850 255,450 8,734,040 $ 9,332,878 City of Tempe, Arizona Capital Projects Rio Salado $ 1,075,606 $ 1,075,606 $ 36,817 36,817 Community Development $ 5,255,384 $ 5,255,384 $ - 1,075,606 Signals $ 1,005,003 $ 633 215,393 1,221,029 $ - 177,973 860,816 1,038,789 $ 387,222 387,222 5,255,384 172,375 172,375 $ 1,564,709 $ 1,564,709 $ 215,393 215,393 2,763,008 2,105,154 4,868,162 $ Community Facilities District 1,221,029 Total $ 25,050,825 $ 115,796 215,393 25,382,014 $ - 213,282 75,384 544,595 833,261 $ - 1,455,330 109,379 1,564,709 $ 1,564,709 133 Total Non-major Governmental Funds $ 2,807,669 2,807,669 $ 39,976,607 $ 2,109,440 115,796 4,760 2,065,789 921,208 702,591 5,564,178 51,460,369 $ $ 3,611,677 89,670 410,209 276,938 946,754 5,070,000 494,095 10,899,343 215,393 60,156 275,549 621,316 30,604 60,156 712,076 2,430,588 14,651,332 5,216,876 22,298,796 1,623,799 17,277,547 15,543,385 5,404,219 39,848,950 25,382,014 $ 51,460,369 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Fiscal Year Ended June 30, 2017 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 $ 8,084,891 $ - $ - $ - 785,286 403,470 23,042 9,296,689 11,336,801 131,261 3,506 11,471,568 2,701,799 19 473,559 3,175,377 8,714,550 61,501 8,776,051 3,766,752 - 9,191,444 - 2,619,170 - 9,387,893 - 2,880,000 558,073 4,746 7,209,571 9,191,444 387,000 81,195 3,087,365 9,387,893 2,087,118 2,280,124 88,012 1,115,956 - - 1,381,401 - (1,058,014) 20,455 (1,037,559) (4,922) (2,319,000) 126,255 (1,081,711) - 1,381,401 1,049,559 1,198,413 88,012 Expenditures: Current: Police Fire Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Debt service: Principal retirement Interest Fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) (611,842) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Issuance of refunding bonds Total other financing sources (uses) - Net change in fund balances Fund balance at beginning of year Fund balance at end of year (463,908) $ 585,651 10,154,996 $ 11,353,409 134 769,559 28,606 $ 116,618 (66,968) $ 702,591 City of Tempe, Arizona Special Revenue Housing Affordability $ - Donations and Court Awards $ 167 167 167 - 167 50,641 - $ 8,084,891 13,188,236 452,168 11,336,801 4,417,968 4,811 3,919,119 887,628 403,470 1,023,466 43,718,558 3,756,152 279,183 592,737 37,952 6,872 519,180 91,080 500,000 20,532 12,422 2,156,487 - 3,756,152 287,076 4,602,574 9,229,396 2,201,067 12,753,946 488,402 612,722 20,532 10,422 1,024,433 5,816,110 14,840,000 902,755 168,580 18,067,822 18,107,000 1,542,023 173,326 53,784,638 160,600 1,278,160 (15,348,419) (10,066,080) 200,000 - 3,045,950 - 2,497,357 200,000 3,045,950 - (200,000) (200,000) 200,000 13,106,375 16,152,325 (200,000) (4,922) (3,377,014) 146,710 13,106,375 15,414,456 (39,400) 1,478,160 803,906 2,273,502 $ $ 2,719,403 2,719,403 - - - Total 1,771,887 452,168 4,414,644 69 18,519 394,414 42,569 7,094,270 7,893 243,085 37,708 227,703 397,322 112,722 (2,000) - 50,808 $ 3,324 4,556 264,650 493,214 419,289 1,185,033 - $ - Community Facilities District Grants 2,234,102 (1,023,013) $ 455,147 5,348,376 1,247,922 $ 2,051,828 (continued) 135 12,201,778 $ 17,550,154 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-major Governmental Funds For the Fiscal Year Ended June 30, 2017 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 $ - $ 1,668 475,831 38,089 515,588 - $ 1,610 252,506 254,116 - $ 1,448 193,564 195,012 - $ - 296,554 9,142 284,755 590,451 Expenditures: Current: Police Fire Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Debt service: Principal retirement Interest Fiscal fees Capital outlay Total expenditures - Excess (deficiency) of revenues over expenditures before other financing sources (uses) - - - - 6,307,853 6,307,853 2,392,099 2,392,099 1,461,010 1,461,010 236,773 236,773 6,139,306 6,139,306 (5,792,265) (2,137,983) (1,265,998) (236,773) (5,548,855) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Issuance of refunding bonds Total other financing sources (uses) Net change in fund balances 20,400 - 774,000 320,000 3,184,000 2,065,000 275,000 2,360,400 (2,608,265) Fund balance at beginning of year Fund balance at end of year 90,000 2,000,000 - 2,996,306 788,407 136 1,446,554 (230,003) 4,357,300 610,000 8,182,552 (773) 878,632 $ 1,390,524 1,848,149 73,524 133,058 236,000 236,000 567,922 565,990 $ - (20,400) 1,575,000 205,000 1,833,920 222,417 5,604,571 $ 74,320 - 2,633,697 29,341 $ 28,568 6,100,343 $ 8,734,040 City of Tempe, Arizona Capital Projects Community Development Rio Salado $ - $ - 1,045 53,471 54,516 - - Signals $ - $ 455,818 136 126,146 582,100 - Total $ 130,823 130,823 - Total Non-major Governmental Funds - $ 455,818 296,554 15,049 606,654 895,060 53,471 2,322,606 - 8,084,891 13,644,054 452,168 11,336,801 4,714,522 19,860 4,525,773 887,628 1,298,530 1,076,937 46,041,164 - 3,756,152 287,076 4,602,574 9,229,396 2,201,067 12,753,946 488,402 612,722 20,532 10,422 841,047 841,047 4,931,094 4,931,094 1,993,736 1,993,736 189,730 189,730 24,492,648 24,492,648 18,107,000 1,542,023 173,326 24,492,648 78,277,286 (841,047) (4,876,578) (1,411,636) (58,907) (22,170,042) (32,236,122) 306,000 155,683 8,386 1,971,939 1,308,894 361,530 58,170 362,075 180,000 - - 3,758,463 3,488,894 2,209,679 382,097 503,519 6,255,820 3,688,894 5,255,629 382,097 503,519 (55,759) 332,700 747,010 (75,935) 1,540,000 200,000 5,726,673 1,410,000 1,590,000 - (382,097) 12,290,000 1,610,000 23,860,555 (200,000) (4,922) (3,759,111) 12,290,000 1,610,000 146,710 13,106,375 39,275,011 (94,037) 850,095 (58,907) 1,690,513 7,038,889 1,132,826 $ - Community Facilities District 1,038,789 178,364 4,018,067 $ 4,868,162 654,897 $ 833,261 1,623,616 $ 1,564,709 137 20,608,283 $ 22,298,796 32,810,061 $ 39,848,950 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. 138 Combining Statement of Net Position Internal Service Funds June 30, 2017 City of Tempe, Arizona Assets Current assets: Pooled cash and investments Accounts receivable Accrued interest receivable 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 $ 5,856,026 5,856,026 $ 2,689,918 3,734 2,693,652 153,593 153,593 $ (9,195) 143,668 7,452,325 7,595,993 59,774 797,206 856,980 8,452,973 - (9,195) 100,524 100,524 2,430,142 $ 2,430,142 11,795,692 571,451 3,734 12,370,877 153,593 153,593 1,391,057 - 1,550,026 $ - 2,702,847 100,524 100,524 3,249,748 571,451 3,821,199 37,328 1,353,729 1,391,057 - 4,359,069 Total - 20,867 2,681,980 2,702,847 59,774 797,206 856,980 139 $ - 85,473 3,416,616 3,502,089 $ 1,550,026 Health 3,970,973 $ 3,970,973 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Risk Management Worker's Compensation Health Total Operating revenues: Contributions Total operating revenues $ 3,392,193 3,392,193 $ 1,207,891 1,207,891 $ 28,650,433 28,650,433 $ 33,250,517 33,250,517 Operating expenses: Fees and services Total operating expenses 3,392,193 3,392,193 1,238,758 1,238,758 29,464,705 29,464,705 34,095,656 34,095,656 Operating income (loss) Nonoperating revenues Investment income Total nonoperating revenues Changes in net position Total net position - beginning Total net position - ending - (30,867) - 11,770 11,770 - (19,097) 1,550,026 $ 1,550,026 140 9,902 $ (9,195) (814,272) (814,272) (845,139) 11,770 11,770 (833,369) 3,244,414 4,804,342 $ 2,430,142 $ 3,970,973 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2017 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 1,207,891 (2,047,096) (839,205) Health Total $ 28,513,352 (29,296,423) (783,071) $ 33,113,436 (33,981,049) (867,613) 10,171 10,171 754,663 Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 3,392,193 (2,637,530) 754,663 Worker's Compensation - (829,034) 5,101,363 (783,071) 3,518,952 $ 5,856,026 $ 2,689,918 $ - $ (30,867) $ (8,538) (799,800) (839,205) 10,171 10,171 $ (857,442) 4,032,819 12,653,134 3,249,748 $ 11,795,692 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 receivables (Increase) decrease in prepaid expenses 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 $ 141 (56,137) 820,140 (80,791) 21,694 43,441 6,316 754,663 $ (814,272) $ (137,081) 73,079 (90,647) 185,850 (783,071) $ (845,139) $ (137,081) 73,079 (155,322) 206,190 (80,791) 21,694 43,441 6,316 (867,613) City of Tempe, Arizona Other Supplementary Information BUDGETARY COMPARISON SCHEDULES 142 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, 2017 City of Tempe, Arizona Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Other entities' participation 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 Office of strategic management and diversity 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) $ 201,336,874 82,975,413 1,656,500 128,063,140 9,087,282 4,438,000 1,290,737 15,615,548 12,948,070 457,411,564 $ 208,677,872 77,806,660 2,754,501 134,921,931 8,982,209 5,446,638 1,911,822 11,529,492 452,031,125 Variance with Final Budget Positive (Negative) $ 7,340,998 (5,168,753) 1,098,001 6,858,791 (105,073) 1,008,638 621,085 (4,086,056) (12,948,070) (5,380,439) 87,883,138 36,050,779 41,932,163 235,409,452 30,734,783 10,171,334 518,478 5,765,425 8,008,634 3,323,875 465,269 286,996 954,483 783,932 27,380,533 14,241,183 (14,900,822) 85,339,649 33,549,703 31,985,662 194,826,376 16,470,914 17,578,041 416,745 4,878,895 6,938,116 3,107,550 408,779 262,390 929,441 757,945 31,551,001 (15,189,422) 2,543,489 2,501,076 9,946,501 40,583,076 14,263,869 (7,406,707) 101,733 886,530 1,070,518 216,325 56,490 24,606 25,042 25,987 (4,170,468) 14,241,183 288,600 52,928,982 25,469,050 567,407,667 69,417,099 23,168,755 506,397,639 (16,488,117) 2,300,295 61,010,028 34,501,986 (34,555,905) 32,810,000 4,765,950 34,095,000 (19,082,453) 4,717,312 57,251,890 2,885,376 1,560,791 769,972 (30,458,434) 4,765,950 34,095,000 (19,082,453) 4,637,312 (3,711,862) 51,917,727 32,941,195 (35,325,877) 63,268,434 80,000 60,963,752 $ (49,032,351) 143 $ $ Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Property taxes Intergovernmental other Investment income Total revenues $ Expenditures: Debt service: Principal 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 Total other financing sources (uses) Net change in fund balance $ Variance with Final BudgetPositive (Negative) 26,577,755 3,236,263 29,814,018 $ 26,381,781 2,463,607 27,921 28,873,309 17,125,459 8,120,042 25,245,501 18,335,000 6,840,371 25,175,371 (1,209,541) 1,279,671 70,130 4,568,517 3,697,938 (870,579) 6,912,505 (11,418,100) (4,505,595) 6,994,326 (11,502,150) 144,028 1,683,625 (2,680,171) 81,821 (84,050) 144,028 1,683,625 1,825,424 62,922 144 $ 1,017,767 $ $ (195,974) (772,656) 27,921 (940,709) 954,845 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Special Assessment Debt Service For the Fiscal Year Ended June 30, 2017 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 2,209,650 2,209,650 $ 1,250,000 959,650 2,209,650 $ - $ 145 Variance with Final BudgetPositive (Negative) 1,127 2,173,798 3,946 2,178,871 $ 1,127 (35,852) 3,946 (30,779) 48 (48) 1,250,000 961,150 2,211,198 (1,500) (1,548) (32,327) $ (32,327) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2017 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 Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures Other financing uses: Transfers out Proceeds on sale of assets Total other financing uses Net change in fund balance $ 7,548,857 7,500 1,349,100 200,000 9,105,457 $ 8,084,891 8,007 785,286 426,512 9,304,696 Variance with Final BudgetPositive (Negative) $ 536,034 507 (563,814) 226,512 199,239 4,006,160 3,759,533 246,627 2,880,000 557,850 7,444,010 2,880,000 562,819 7,202,352 (4,969) 241,658 1,661,447 2,102,344 440,897 (1,058,014) (1,058,014) (1,058,014) 20,455 (1,037,559) 20,455 20,455 603,433 146 $ 1,064,785 $ 461,352 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Revenues: State sales tax Other Charges for services Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) $ 10,640,302 450,000 84,300 2,000 11,176,602 $ 11,336,801 131,261 3,506 11,471,568 10,643,390 10,643,390 9,310,639 9,310,639 1,332,751 1,332,751 533,212 2,160,929 1,627,717 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 1,300,000 (2,323,941) (1,023,941) $ (490,729) 147 Variance with Final BudgetPositive (Negative) $ 1,115,956 (2,323,922) 126,255 (1,081,711) $ 1,079,218 696,499 (450,000) 46,961 1,506 294,966 (184,044) 19 126,255 (57,770) $ 1,569,947 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Revenues: Federal grants Investment income Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 3,277,645 919,533 4,197,178 $ 2,701,799 19 473,559 3,175,377 $ 3,727,645 2,616,379 1,111,266 387,000 82,533 4,197,178 387,000 81,195 3,084,574 1,338 1,112,604 Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance $ - 148 $ 90,803 $ (575,846) 19 (445,974) (1,021,801) 90,803 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Miscellaneous Total revenues $ Expenditures: Current: Human services Total expenditures $ 10,643,710 10,643,710 Deficiency of revenues over expenditures - 149 $ (415,422) 1,381,401 1,381,401 $ 775,979 (704,160) (973,499) (1,677,659) 1,262,237 1,262,237 (605,422) 190,000 190,000 $ 8,714,550 61,501 8,776,051 9,381,473 9,381,473 (190,000) Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balance 9,418,710 1,035,000 10,453,710 Variance with Final BudgetPositive (Negative) 1,191,401 1,191,401 $ 775,979 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Affordability Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Total revenues $ Expenditures: Current: Human services Total expenditures Net change in fund balance - $ 51,000 51,000 $ (51,000) 150 Variance with Final BudgetPositive (Negative) 464 464 $ $ 464 464 464 51,000 51,000 $ 51,464 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Donations and Court Awards Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Contigency Total revenues $ Expenditures: Current: Fire Community services Public works Community development Human services Municipal court City manager Office of strategic management and diversity Contingency Total expenditures Excess (deficiency) of revenues over expenditures 850 128,066 484,214 818,922 5,901 437,263 1,875,216 $ 2,474 7,153 136,584 9,000 (433,782) 28,248 (437,263) (687,586) 7,893 243,085 37,708 227,703 397,322 112,722 (2,000) 1,024,433 84,842 638,257 5,860 408,538 227,134 896,155 339,976 2,000 437,263 3,040,025 (2,189,242) 163,197 2,352,439 - $ 3,324 7,153 264,650 493,214 385,140 34,149 1,187,630 92,735 881,342 5,860 446,246 454,837 1,293,477 452,698 437,263 4,064,458 Other financing sources (uses): Transfers out Total other financing sources (uses) Net change in fund balance $ Variance with Final BudgetPositive (Negative) (2,189,242) 151 (200,000) (200,000) $ (36,803) (200,000) (200,000) $ 2,152,439 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Grants Fund For the Fiscal Year Ended June 30, 2017 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 Other entities' participation Miscellaneous Contingency Total revenues Expenditures: Current: Police Fire Community services Public works Community development Human services Municipal court City manager City attorney Office of strategic management and diversity Contingency Total expenditures Excess (deficiency) of revenues over expenditures $ 2,503,889 484,130 1,650,841 8,355 400,000 3,073,854 8,250,807 16,371,876 5,552,743 272,143 1,165,266 176,833 47,984 1,264,059 100,000 1,034,538 190,598 30,000 8,309,785 18,143,949 - $ (1,772,073) 152 1,539,594 429,839 4,428,860 69 18,519 394,414 13,816 28,753 6,853,864 $ 3,833,147 279,183 592,737 69,672 6,872 519,180 91,080 500,000 20,532 12,422 5,924,825 (1,772,073) Other financing uses: Transfers in Total other financing uses Net change in fund balance $ Variance with Final BudgetPositive (Negative) $ (964,295) (54,291) 2,778,019 69 10,164 (5,586) 13,816 (3,045,101) (8,250,807) (9,518,012) 1,719,596 (7,040) 572,529 107,161 41,112 744,879 8,920 534,538 170,066 17,578 8,309,785 12,219,124 929,039 2,701,112 200,000 200,000 200,000 200,000 1,129,039 $ 2,901,112 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) $ 2,793,440 2,793,440 $ 2,719,403 2,719,403 2,793,440 2,156,487 2,190,000 860,750 5,844,190 14,840,000 1,071,335 18,067,822 (12,650,000) (210,585) (12,223,632) Deficiency of revenues over expenditures (3,050,750) (15,348,419) (12,297,669) Other financing sources (uses): Transfers in Proceeds of refunding bonds Total other financing sources (uses) 3,045,950 3,045,950 3,045,950 13,106,375 16,152,325 13,106,375 13,106,375 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) 153 $ 803,906 Variance with Final BudgetPositive (Negative) $ (74,037) (74,037) 636,953 $ 808,706 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Other entities' participation 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 $ 6,679,592 2,500,000 9,179,592 $ 3,430,747 442 128,491 23,228 3,582,908 Variance with Final BudgetPositive (Negative) $ (3,248,845) 442 128,491 23,228 (2,500,000) (5,596,684) 20,197,707 20,197,707 7,410,459 7,410,459 12,787,248 12,787,248 (11,018,115) (3,827,551) 7,190,564 4,668,750 4,668,750 4,769,750 4,769,750 (6,349,365) 154 $ 942,199 101,000 101,000 $ 7,291,564 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Streets Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Charges for services Other entities' participation Miscellaneous Contingency Total revenues Expenditures: Current: Public works Total expenditures $ 427,831 315,000 830,000 1,572,831 $ 1,668 475,831 38,089 515,588 Variance with Final BudgetPositive (Negative) $ (427,831) 1,668 475,831 38,089 (315,000) (830,000) (1,057,243) 11,150,131 11,150,131 8,732,875 8,732,875 2,417,256 2,417,256 (9,577,300) (8,217,287) 1,360,013 2,090,000 2,827,572 4,917,572 2,090,000 774,000 320,000 3,184,000 (2,053,572) 320,000 (1,733,572) Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Issuance of debt Premium on issuance of debt Total other financing sources (uses) Net change in fund balance $ (4,659,728) 155 $ (5,033,287) $ (373,559) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Police Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Other entities' participation Total revenues $ Expenditures: Current: Police Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Issuance of debt Premium on isuance of debt Total other financing sources (uses) Net change in fund balance - $ $ 1,610 252,506 254,116 3,353,235 3,353,235 2,529,340 2,529,340 (3,353,235) (2,275,224) 1,078,011 3,187,034 20,400 2,065,000 275,000 2,360,400 20,400 (1,122,034) 275,000 (826,634) 3,187,034 $ 1,610 252,506 254,116 Variance with Final BudgetPositive (Negative) (166,201) 156 $ 85,176 823,895 823,895 $ 251,377 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Fire Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Other entities' participation Total revenues $ Expenditures: Current: Fire Total expenditures Deficiency of revenues over expenditures Other financing sources: Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources Net change in fund balance $ - $ - 1,448 193,564 195,012 Variance with Final BudgetPositive (Negative) $ 1,448 193,564 195,012 3,294,513 3,294,513 2,113,122 2,113,122 1,181,391 1,181,391 (3,294,513) (1,918,110) 1,376,403 3,200,110 3,200,110 74,320 (20,400) 1,575,000 205,000 1,833,920 74,320 (20,400) (1,625,110) 205,000 (1,366,190) (94,403) 157 $ (84,190) $ 10,213 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Storm Sewers Capital Projects Fund For the Fiscal Year Ended June 30, 2017 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): Issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ - Variance with Final BudgetPositive (Negative) $ - 730,193 730,193 236,773 236,773 493,420 493,420 (730,193) (236,773) 493,420 725,000 725,000 236,000 236,000 (489,000) (489,000) (5,193) 158 $ (773) $ 4,420 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Parks Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental other Investment income Other entities' participation Contingency Total revenues Expenditures: Current: Community services Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Total other financing sources (uses) Net change in fund balance $ 296,554 47,500 750,000 1,094,054 $ 296,554 9,142 284,755 590,451 Variance with Final BudgetPositive (Negative) $ 9,142 237,255 (750,000) (503,603) 16,429,511 16,429,511 8,217,838 8,217,838 8,211,673 8,211,673 (15,335,457) (7,627,387) 7,708,070 1,948,149 6,373,994 8,322,143 3,445,255 (230,003) 4,357,300 610,000 8,182,552 1,497,106 (230,003) (2,016,694) 610,000 (139,591) $ (7,013,314) 159 $ 555,165 $ 7,568,479 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ Expenditures: Current: Community development 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 - $ $ - 1,086,359 1,086,359 897,534 897,534 188,825 188,825 (1,086,359) (897,534) 188,825 470,069 (55,759) 332,700 747,010 470,069 (55,759) (67,339) 346,971 400,039 400,039 $ - Variance with Final BudgetPositive (Negative) (686,320) 160 $ (150,524) $ 535,796 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Capital Projects Fund For the Fiscal Year Ended June 30, 2017 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 Premium on issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ 1,045 53,471 54,516 Variance with Final BudgetPositive (Negative) $ 1,045 53,471 54,516 10,586,762 10,586,762 6,040,483 6,040,483 4,546,279 4,546,279 (10,586,762) (5,985,967) 4,600,795 2,007,499 4,686,854 6,694,353 4,062,608 (75,935) 1,540,000 200,000 5,726,673 (75,935) (3,146,854) 200,000 (3,022,789) $ (3,892,409) 161 $ (259,294) $ 3,633,115 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Signals Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Federal grants Investment income Other entities' participation Contingency Total revenues $ Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses) : Transfers in Issuance of debt Total other financing sources (uses) Net change in fund balance $ 836,472 180,000 1,016,472 $ 455,818 136 126,146 582,100 Variance with Final BudgetPositive (Negative) $ (380,654) 136 126,146 (180,000) (434,372) 3,081,852 3,081,852 2,156,200 2,156,200 925,652 925,652 (2,065,380) (1,574,100) 491,280 180,000 2,003,224 2,183,224 180,000 1,410,000 1,590,000 (593,224) (593,224) 117,844 $ 162 15,900 $ (101,944) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Capital Projects Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Final Budget Amounts Revenues: Charges for services Total revenues Expenditures: Current: Community development Total expenditures Net change in fund balance $ 573,000 573,000 Actual Amounts (Budgetary Basis) $ 1,691,855 1,691,855 $ (1,118,855) 163 130,823 130,823 Variance with Final BudgetPositive (Negative) $ 189,730 189,730 $ (58,907) (442,177) (442,177) 1,502,125 1,502,125 $ 1,059,948 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2017 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 $ 81,840,650 492,000 182,450 82,515,100 $ 86,452,843 872,214 454,370 87,779,427 Variance with Final BudgetPositive (Negative) $ 4,612,193 380,214 271,920 5,264,327 93,312,658 1,000,000 78,832,810 - 14,479,848 1,000,000 27,241,523 12,074,362 133,628,543 29,870,099 10,911,057 119,613,966 (2,628,576) 1,163,305 14,014,577 (51,113,443) (31,834,539) 19,278,904 9,358,492 (10,174,309) 39,864,607 80,000 39,128,790 6,246,521 (7,103,457) 20,520,000 3,011,922 66,683 22,741,669 (3,111,971) 3,070,852 (19,344,607) 3,011,922 (13,317) (16,387,121) (11,984,653) 164 $ (9,092,870) $ 2,891,783 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2017 City of Tempe, Arizona Revenues: Charges for services Investment income Miscellaneous Total revenues Expenditures: Current: Public works Contingency 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 Final Budget Amounts Actual Amounts (Budgetary Basis) $ 15,775,158 23,800 73,190 15,872,148 $ 16,274,287 37,678 1,814 16,313,779 17,296,819 475,000 17,771,819 16,770,867 16,770,867 (1,899,671) (457,088) 200,000 (4,941) 195,059 200,000 (29,922) 163,600 333,678 $ (1,704,612) 165 $ (123,410) Variance with Final BudgetPositive (Negative) $ 499,129 13,878 (71,376) 441,631 525,952 475,000 1,000,952 1,442,583 (24,981) 163,600 138,619 $ 1,581,202 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2017 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: Transfers in Proceeds from sale of capital assets Total other financing sources Net change in fund balance 13,200 2,648,826 2,662,026 $ $ (13,200) (326,049) 2,882 (336,367) 4,332,880 4,332,880 3,952,564 3,952,564 380,316 380,316 (1,670,854) (1,626,905) 43,949 899,000 899,000 $ 2,322,777 2,882 2,325,659 Variance with Final BudgetPositive (Negative) (771,854) 166 259,000 3,548 262,548 $ (1,364,357) (640,000) 3,548 (636,452) $ (592,503) 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. Statis tical Section 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. 167 City of Tempe, Arizona 168 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 Governmental activities Net investment in capital assets Restricted (a) Unrestricted Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 $ 519,530,983 117,866,229 (22,136,687) $ 564,120,959 102,095,778 (26,820,571) $ 519,040,090 141,565,366 (18,763,531) $ 537,940,057 148,338,902 236,990,748 $ 548,739,169 119,845,935 253,302,947 $ 560,427,507 124,800,334 248,936,397 $ 571,925,061 114,643,888 259,250,692 $ 562,958,494 142,947,736 241,371,774 $ 574,872,877 181,241,102 237,470,312 $ Total governmental activities net position $ 615,260,525 $ 639,396,166 $ 641,841,925 $ 923,269,707 $ 921,888,051 $ 934,164,237 $ 945,819,641 $ 947,278,004 $ 993,584,291 $ 1,014,214,328 Business-type activities Net investment in capital assets Unrestricted $ 104,387,674 151,904,179 $ 69,467,178 170,405,834 $ 142,208,059 90,577,933 $ 137,971,614 118,726,035 $ 149,782,240 105,207,407 $ 162,774,388 92,951,764 $ 175,625,967 73,018,010 $ 144,245,429 102,511,794 $ 151,096,394 100,251,937 $ 154,867,017 103,816,965 Total business-type activities net position $ 256,291,853 $ 239,873,012 $ 232,785,992 $ 256,697,649 $ 254,989,647 $ 255,726,152 $ 248,643,977 $ 246,757,223 $ 251,348,331 $ 258,683,982 $ 623,918,657 117,866,229 129,767,492 $ 633,588,137 102,095,778 143,585,263 $ 661,248,149 141,565,367 71,814,402 $ 675,911,671 148,338,902 355,716,783 $ 698,521,409 119,845,935 358,510,354 $ 723,201,895 124,800,334 341,888,161 $ 747,551,028 114,643,888 332,268,702 $ 707,203,923 142,947,736 343,883,568 $ 725,969,271 181,241,102 337,722,249 $ 752,632,272 139,393,928 380,872,110 $ 871,552,378 $ 879,269,178 $ 874,627,918 $ 1,179,967,356 Primary government Net investment in capital assets Restricted (a) Unrestricted Total primary government net position $ 1,176,877,698 $ 1,189,890,389 $ 1,194,463,618 (a) With the implementation of GASB No. 54 in Fiscal Year 2011, Restricted fund balance has been redefined to include only amounts that have externally enforceable limitations or enabling legislation. 169 $ 1,194,035,227 $ 1,244,932,622 597,765,255 139,393,928 277,055,145 $ 1,272,898,310 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 $ 111,570,351 48,345,996 27,956,647 103,728,249 16,521,932 17,777,825 4,909,370 473,324 6,815,022 3,160,056 376,249 261,313 1,055,075 815,016 18,821,669 1,777,887 9,847,278 $ 93,057,663 34,319,479 27,402,656 112,589,913 18,372,515 17,430,250 4,354,299 337,046 7,371,101 2,961,497 425,674 259,133 868,596 8,252,013 1,785,487 12,924,841 $ 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 $ 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 $ 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 $ 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 $ 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 $ 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 $ 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 $ 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 12,091,111 374,213,259 342,712,163 331,945,009 314,543,439 308,647,885 301,546,309 301,007,739 340,940,020 337,252,966 313,195,035 Business-type activities: Water and wastewater Solid waste Golf course Cemetery (e) 70,364,126 15,918,430 2,520,474 - 75,515,527 14,881,636 2,734,351 - 73,548,319 15,868,498 2,685,634 - 73,208,373 15,379,174 2,799,922 - 72,352,330 14,758,133 2,724,422 - 72,156,412 14,626,578 2,658,416 129,849 67,505,481 13,784,106 2,011,316 176,553 73,045,936 13,730,227 2,269,182 312,525 64,720,725 14,499,308 2,324,208 218,447 64,954,769 15,130,899 2,667,539 251,743 Total business-type activities expenses 88,803,030 93,131,514 92,102,451 91,387,469 89,834,885 89,571,255 83,477,456 89,357,870 81,762,688 83,004,950 $ 463,016,289 $ 435,843,677 $ 424,047,460 $ 405,930,908 $ 398,482,770 $ 391,117,564 $ 384,485,195 $ 430,297,890 $ 419,015,654 $ 396,199,985 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) Office of strategic management and diversity (g) 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 2011, 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 2011, the Development Services department was merged into Community Development. In Fiscal Year 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. In Fiscal Year 2013, the Cemetery Fund was closed into the General Fund. In Fiscal Year 2014, Tempe Learning Center was reincorporated into Human Resources. In Fiscal Year 2014, Economic Development was established as it's own reporting unit. In Fiscal Year 2015, 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. (g) In Fiscal Year 2017, the Office of Strategic Management and Diversity was created. The Diversity office which was under the City Manager's office was moved into the new office. 170 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 Program Revenues Governmental activities: Charges for services: Police Fire Community services Public works Community development Human services (d) Municipal court City manager 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 $ 1,021,670 1,869,840 8,283,698 16,585,374 13,250,819 7,820 5,852,849 7,597 16,940 1,797,928 27,582,362 6,355,742 82,632,639 $ 1,444,986 1,536,642 7,812,755 17,740,856 12,665,828 13,926 6,372,719 14,174 2,186,635 26,831,238 8,091,341 84,711,100 $ 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 $ 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 $ 1,506,807 153,903 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 $ 1,649,775 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 $ 1,657,335 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 $ 1,052,723 912,000 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 $ 1,201,962 314,969 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 $ 1,110,714 303,824 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 86,273,324 16,274,287 2,322,777 104,870,388 81,265,973 15,319,833 2,575,908 99,161,714 78,043,384 14,216,743 2,755,966 95,016,093 80,989,551 14,400,476 2,661,519 98,051,546 74,979,069 14,341,827 2,480,815 91,801,711 73,392,328 14,866,281 2,344,355 144,242 1,988,550 92,735,756 70,094,034 15,326,780 1,562,489 110,196 1,691,429 88,784,928 62,511,102 15,242,801 1,574,081 116,643 4,765,839 84,210,466 55,504,216 15,130,988 1,813,578 98,356 59,867 72,607,005 53,208,327 14,669,542 1,984,429 231,960 472,928 70,567,186 Total primary government program revenues $ 187,503,027 $ 183,872,814 $ 175,141,594 $ 178,376,378 $ 168,222,740 $ 177,216,252 $ 180,956,098 $ 182,518,952 $ 170,256,960 $ 202,182,673 Net (expense)/revenue Governmental activities Business-type activities Total primary government net expense $ (291,580,620) 16,067,358 $ (275,513,262) $ (258,001,063) 6,030,200 $ (251,970,863) $ (251,819,508) 2,913,642 $ (248,905,866) $ (234,218,607) 6,664,077 $ (227,554,530) $ (232,226,856) 1,966,826 $ (230,260,030) $ (217,065,813) 3,164,501 $ (213,901,312) $ (208,836,569) 5,307,472 $ (203,529,097) $ (242,631,534) (5,147,404) $ (247,778,938) $ (239,603,011) (9,155,683) $ (248,758,694) $ (181,579,548) (12,437,764) $ (194,017,312) (a) (b) (c) (d) In Fiscal Year 2011, 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 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In Fiscal Year 2013, 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. 171 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 $ 160,218,570 44,671,765 45,308,519 3,182,193 662,115 5,435,113 7,538,846 427,858 267,444,979 $ 152,492,065 41,472,528 43,316,151 3,363,615 1,683,445 7,419,129 5,298,681 509,690 255,555,304 $ 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 $ 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 $ 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 $ 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 Fiscal Year 2011 Fiscal Year 2010 (a) Fiscal Year 2009 Fiscal Year 2008 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 351,831 299,116 128,394 (427,858) 351,483 841,726 152,428 572,356 (509,690) 1,056,820 488,477 142,914 247,296 (479,071) 399,616 436,821 1,643,570 52,947 (746,902) 1,386,436 115,362 923,413 21,149 (3,763,255) (2,703,331) $ 335,297 3,032,990 40,582 508,805 3,917,674 141,844,739 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) $ 267,796,462 $ 256,612,124 $ 241,732,206 $ 236,986,699 $ 217,247,339 $ 209,328,083 $ $ (24,135,641) 16,418,841 $ (7,716,800) $ (2,445,759) 7,087,020 $ 4,641,261 $ $ $ $ (11,655,404) 7,082,175 $ (4,573,229) $ 203,957,488 125,186,698 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 96,986 115,657 556,296 134,382,181 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) 1,820,032 150,687,016 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 $ 196,881,543 $ 220,793,006 $ $ (46,306,287) (4,591,108) (50,897,395) $ (20,630,037) (7,335,651) (27,965,688) $ 274,648,409 Changes in net position Governmental activities Business-type activities Total primary government $ (10,486,918) 3,313,258 (7,173,660) $ 1,381,656 8,050,513 9,432,169 $ (12,276,186) (736,505) (13,012,691) (a) Due to the prolonged economic downturn, in Fiscal Year 2010 the City had planned drawdown of fund balance. (b) In Fiscal Year 2015, State shared income taxes, unrestricted and Auto-lieu taxes were combined under the category Intergovernmental revenue, unrestricted . 172 $ (1,458,363) 1,886,754 428,391 $ $ $ 88,184,776 (7,553,679) 80,631,097 Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 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 (b) Total all other governmental funds $ $ $ $ 638,685 100,000 475,531 14,762,667 80,099,820 96,076,703 1,623,799 88,581,119 26,744,884 15,774,827 132,724,629 Fiscal Year 2016 $ $ $ $ 782,276 100,000 147,036 10,291,768 78,629,198 89,950,278 1,594,761 82,863,821 20,404,290 15,186,266 (2,856,351) 117,192,787 Fiscal Year 2015 $ - Fiscal Year 2014 $ 346,364 - $ $ $ 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 $ $ $ Fiscal Year 2013 653,365 338,193 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 $ 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 2012 $ $ $ $ 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 2007 and 2009, the special assessment debt service fund is reported in "unreserved" fund balance due to the current year deficit balance. (b) In Fiscal Year 2011, GASB No. 54 was implemented requiring additional classifications of fund balance. A deficit fund balance is reported in "unassigned". 173 Fiscal Year 2011 (b) $ $ $ $ 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 2010 $ Fiscal Year 2009 $ $ 981,529 42,832,205 43,813,734 $ 69,324,494 $ 32,742,748 63,078,330 165,145,572 Fiscal Year 2008 $ $ 1,322,728 75,647,216 76,969,944 $ 4,449,843 92,432,479 96,882,322 $ 59,067,648 $ 69,814,938 $ (45,374) 23,220,030 71,685,317 153,927,621 $ 36,228,348 28,848,898 134,892,184 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 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 $ 197,341,071 89,383,867 662,115 30,134,108 8,982,209 1,916,336 2,173,798 5,446,638 8,761,291 344,801,433 $ 188,672,865 85,856,572 1,683,445 31,752,038 9,357,450 1,751,971 2,439,086 6,308,241 9,867,156 337,688,824 $ 182,323,977 78,988,805 889,594 33,520,741 9,986,226 1,093,272 3,862,306 6,828,905 8,197,929 325,691,755 $ 182,032,821 74,692,323 725,099 33,268,236 8,909,849 174,954 3,605,932 6,638,496 6,707,484 316,755,194 $ 168,974,511 76,651,736 278,102 30,183,216 8,537,078 196,106 4,442,862 3,856,216 4,908,914 298,028,741 $ 162,157,488 72,701,235 822,900 29,451,269 8,198,638 3,542,185 2,526,283 3,814,753 7,021,832 290,236,583 Fiscal Year 2011 $ 158,749,333 87,180,913 1,229,966 28,981,943 8,235,437 622,543 3,867,979 2,969,580 7,209,565 299,047,259 Fiscal Year 2010 $ 145,038,639 111,505,248 97,660 26,142,181 11,082,812 328,147 2,783,916 3,395,257 5,968,065 306,341,925 Fiscal Year 2009 $ 150,848,798 143,357,538 6,393,595 28,655,422 11,516,359 1,600,100 2,860,571 3,987,355 6,168,789 355,388,527 Fiscal Year 2008 $ 159,798,418 102,320,894 14,041,876 21,319,744 10,148,376 1,412,155 2,842,153 3,947,375 5,486,178 321,317,169 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) Office of strategic management and diversity (g) 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 Interest Fiscal fees Capital outlay Total expenditures 82,429,673 31,383,875 23,770,512 70,604,468 15,336,696 17,589,585 4,886,110 417,734 6,800,149 3,098,124 408,867 262,696 932,200 752,876 16,334,235 - 81,154,550 30,724,706 22,516,873 73,771,025 16,321,778 17,388,871 4,262,778 342,645 7,292,703 2,920,857 403,108 236,768 850,235 7,433,821 - 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 - 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 - 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 - 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 - 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 - 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 - 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 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 39,547,000 11,688,331 569,367 30,298,582 357,111,080 29,686,000 13,356,740 437,027 45,373,210 354,473,695 41,065,000 13,619,726 544,868 49,626,981 358,839,074 26,105,000 13,853,239 231,060 24,192,621 320,729,317 122,595,000 14,442,661 872,574 20,874,698 402,524,780 25,756,000 13,853,998 1,640,155 29,512,675 299,923,067 26,062,231 17,728,802 1,260,876 35,348,520 306,286,572 22,212,157 15,489,383 1,166,712 58,406,594 355,350,965 19,656,531 15,839,389 1,314,011 106,066,458 413,246,473 18,121,865 15,490,615 1,145,596 138,410,945 413,277,173 Deficiency of revenues over expenditures before other financing sources (uses) (12,309,647) (16,784,871) (33,147,319) (49,009,040) (57,857,946) (91,960,004) (3,974,123) (a) (b) (c) (d) (e) (f) (104,496,039) (9,686,484) (7,239,313) In Fiscal Year 2011, 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 2011, the Development Services department was merged into Community Development. In Fiscal Year 2011, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In Fiscal Year 2011, Tempe Learning Center was disaggregated from Human Resources. In Fiscal Year 2014, Economic Development was established as its own reporting area. In Fiscal Year 2015, 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. (g) In Fiscal Year 2017, the Office of Strategic Management and Diversity was created. The Diversity office which was under the City Manager's office was moved into the new office. 174 Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2017 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 Fiscal Year 2016 27,870,785 (27,442,927) 12,290,000 1,754,028 4,483,481 34,095,000 (19,082,453) 33,967,914 $ 21,658,267 15.5% Fiscal Year 2015 30,410,514 (29,900,824) 13,630,000 5,413,632 5,350,923 34,422,798 (35,888,204) 23,438,839 $ 6,653,968 13.8% Fiscal Year 2014 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 17.6% Fiscal Year 2013 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 13.4% Fiscal Year 2012 67,438,620 (68,806,307) 13,675,000 6,392,968 270,346 53,910,000 (12,985,558) 59,895,069 $ (44,600,970) 35.7% (a) Fiscal Year 2011 18,104,564 (18,613,369) 7,005,000 6,668,536 534,963 45,181,900 (48,667,199) 10,214,395 $ 527,911 14.5% 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 16.0% Fiscal Year 2010 59,305,503 (59,421,161) 26,040,000 755,553 27,986 362,900 27,070,781 $ (21,938,259) 12.5% (a) In Fiscal Year 2013 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). 175 Fiscal Year 2009 Fiscal Year 2008 64,230,445 (63,614,982) 45,980,000 807,728 9,577,814 56,981,005 $ (876,941) 11.4% 71,362,599 (71,213,357) 71,170,000 1,242,369 9,430,040 81,991,651 $ (9,968,353) 12.1% 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 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 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 3,651,319,000 3,890,741,000 Utilities and Telecommunications Rental $ 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 1,207,853,000 1,252,064,000 $ 608,389,000 590,556,000 536,611,000 515,000,000 522,095,000 533,915,000 557,844,000 525,409,000 493,994,000 485,528,000 Restaurant Contracting Hotel and Motel $ 519,556,000 504,611,000 472,667,000 479,150,000 514,519,000 524,813,000 574,888,000 565,352,000 590,614,000 611,907,000 $ 738,611,000 631,556,000 400,000,000 298,450,000 341,542,000 340,870,000 404,398,000 631,183,000 588,436,000 589,450,000 $ 150,222,000 123,611,000 110,944,000 112,600,000 123,981,000 123,629,000 135,525,000 143,330,000 149,550,000 165,971,000 Restaurant Contracting City Direct Sales Tax Rate Amusements All Other Total $ 84,222,000 87,778,000 96,167,000 89,850,000 87,663,000 78,580,000 82,928,000 74,412,000 80,335,000 86,449,000 $ 100,722,000 88,167,000 66,056,000 68,550,000 66,141,000 80,020,000 71,660,000 67,279,000 68,390,000 68,125,000 $ 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 6,830,491,000 7,150,235,000 Percentage of Taxable Sales Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Retail 50.98 % 48.57 51.35 53.62 53.43 54.04 54.11 52.64 53.46 54.42 Rental 17.05 % 19.17 19.62 19.49 19.33 19.15 18.17 17.25 17.68 17.51 Utilities and Telecommunications 8.83 % 9.40 9.26 8.86 8.59 8.52 8.46 7.88 7.23 6.79 7.54 % 8.03 8.16 8.24 8.46 8.37 8.72 8.48 8.65 8.56 10.72 % 10.06 6.90 5.13 5.60 5.40 6.14 9.47 8.61 8.24 Hotel and Motel Amusements 2.18 % 1.97 1.91 1.94 2.04 1.97 2.06 2.15 2.19 2.32 Source: City of Tempe, Arizona Tax and License Division Note: In Fiscal Year 2011, 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. 176 1.22 % 1.40 1.66 1.55 1.44 1.25 1.26 1.12 1.18 1.21 All Other 1.48 % 1.40 1.14 1.17 1.11 1.30 1.08 1.01 1.00 0.95 Total 100 % 100 100 100 100 100 100 100 100 100 1.80 % 1.80 1.80 2.00 2.00 2.00 2.00 1.80 1.80 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 2008 1.80 % 0.70 % 5.60 % 8.10 2009 1.80 0.70 5.60 8.10 2010 (a) 1.80 0.70 6.60 9.10 2011 (b) 2.00 0.70 6.60 9.30 2012 2.00 0.70 6.60 9.30 2013 (c) 2014 2015 (d) 2016 2017 2.00 2.00 1.80 1.80 1.80 0.70 0.70 0.70 0.70 0.70 5.60 5.60 5.60 5.60 5.60 8.30 8.30 8.10 8.10 8.10 Fiscal Year State Sales Tax Rate Total Sales Tax Rate % Source: City of Tempe, Arizona Tax and License Division (a) (b) (c) (d) In Fiscal Year 2010, State of Arizona voters approved a 1.0% increase in the State sales tax. In Fiscal Year 2011, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. In Fiscal Year 2013, State of Arizona decreased the State sales tax rate by 1.0%, effective June 1, 2013. In Fiscal Year 2015, the City of Tempe, Arizona voter approved 0.2% temporary sales tax expired, effective June 30, 2014. 177 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. 178 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 287,255,556 386,956,732 $ 587,620,345 782,035,308 $ 191,632,935 240,647,400 $ 3,284,085 3,652,041 $ 5,569,454 6,404,967 $ 413,757,218 505,151,029 Railroad & Airlines Property Non-commercial Historic Property Less: Tax-Exempt Property 2008 Primary Secondary $ 1,369,975,785 1,487,353,047 2009 Primary Secondary 1,416,640,407 1,605,563,621 326,359,399 439,585,924 674,491,736 901,618,735 218,810,180 291,324,398 3,043,548 3,447,472 5,628,185 7,346,018 480,062,120 591,937,974 2010 Primary Secondary 1,518,486,978 1,746,634,264 443,398,023 610,147,603 747,601,586 840,563,032 265,780,915 326,620,717 2,656,174 3,162,023 5,489,270 7,160,219 2011 Primary Secondary 1,516,407,070 1,634,522,147 491,365,479 598,845,876 714,116,748 718,136,239 297,885,542 321,946,932 2,487,354 2,984,727 2012 Primary Secondary 1,215,073,855 1,225,527,325 507,897,174 558,393,732 601,231,081 601,912,854 260,011,506 261,295,232 2013 Primary Secondary 1,134,332,461 1,140,686,523 474,229,052 492,511,871 499,166,936 499,439,182 2014 Primary Secondary 1,013,888,495 1,019,499,265 590,348,150 627,596,276 2015 Primary Secondary 1,018,312,716 1,030,441,480 2016 Primary Secondary 2017 Primary Secondary Total Direct Tax Rate Net Taxable Assessed Value $ 2,031,580,942 2,401,898,466 $ Estimated Total Actual Value (a) Assessed Value as a Percentage of Actual Value 0.51 0.89 $ 13,152,641,971 16,125,028,204 15.45 % 14.90 2,164,911,335 2,656,948,194 0.51 0.89 14,590,284,375 19,106,939,110 14.84 13.91 601,138,220 766,798,994 2,382,274,726 2,767,488,864 0.49 0.91 16,460,996,774 19,043,217,077 14.47 14.53 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 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 13.80 222,440,746 222,488,879 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 13.97 422,097,495 422,373,499 237,011,004 245,942,542 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 13.70 582,528,256 605,931,213 445,788,470 472,413,709 279,658,188 317,364,940 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 1,040,045,065 1,119,535,292 604,094,072 681,597,591 458,995,411 569,311,744 303,832,779 395,569,487 2,453,154 2,501,825 5,495,047 6,440,828 820,971,174 901,610,148 1,593,944,354 1,873,346,619 0.93 1.59 12,152,815,646 14,573,138,077 13.12 12.85 1,066,869,523 1,066,869,523 604,354,126 604,354,126 480,671,687 480,671,687 340,922,305 340,922,305 2,213,159 2,213,159 5,507,068 5,507,068 831,185,771 831,185,771 1,669,352,097 1,669,352,097 0.94 1.59 12,936,980,827 16,688,127,422 12.90 10.00 Source: Arizona Departmart of Revenue - State and County Abstract of the Assessment Roll Maricopa County Tax Levy. Maricopa County Tax Levy - Schedule B & C: Cities and Towns Tax Levies, Primary & Secondary Note: The total tax levy was 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. In Fiscal Year 2016, with the passage of Proposition 117, the limited property tax value is required to be used in determining and levying primary and secondary taxes on all property. Prior to Fiscal Year 2016, the primary levy was based on the limted property tax value and the secondary levy was based on the secondary property tax value. (a) Estimated Total Actual Value is the calculated value of the actual full cash value net of estimated value of property exempt from taxation. 179 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 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 City of Tempe (a) Primary Secondary Total $ 0.51 0.89 1.40 Tempe Union $ 1.75 0.76 2.51 Schools Tempe Elementary (b) $ 2.59 1.23 3.82 East Valley Institute of Technology Maricopa County Community College County Ed Equalization Rate $ $ $ $ 0.05 0.05 1.10 1.10 0.82 0.15 0.97 - County-Wide Jurisdiction Central Fire Flood Arizona District District Project Assistance $ 0.15 0.15 $ 0.10 0.10 $ 0.01 0.01 County Library District $ - $ - 0.04 0.04 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 - Primary Secondary Total 0.93 1.59 2.52 2.22 0.66 2.88 3.22 2.25 5.47 0.05 0.05 1.36 1.36 1.26 0.23 1.49 0.51 0.51 0.16 0.16 0.14 0.14 0.01 0.01 - Primary Secondary Total 0.94 1.59 2.53 2.24 0.66 2.90 3.09 2.20 5.29 0.05 0.05 1.40 1.40 1.24 0.23 1.47 0.50 0.50 0.18 0.18 0.14 0.14 0.01 0.01 - $ 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 0.19 0.19 9.50 5.34 14.84 0.20 0.20 9.41 5.32 14.73 0.04 0.04 0.04 0.04 0.05 0.05 0.05 0.05 0.04 0.04 0.06 0.06 0.06 0.06 0.06 0.06 (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) 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 $13.82, $13.30 or $17.00, respectively. Also, see the Direct and Overlapping Governmental Activities Debt- Property Tax Supported Schedule (Exhibit S-17). Total 0.09 0.09 - 0.04 0.04 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication 180 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 2008 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 2009 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 2010 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 2011 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 2012 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 2013 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 2014 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 2015 Primary Secondary Total 14,324,634 24,609,512 38,934,146 71,480,977 19,247,913 90,728,890 2016 Primary Secondary Total 14,877,877 25,281,551 40,159,428 2017 Primary Secondary Total 15,690,240 26,577,755 42,267,995 County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project Fire District Assistance $ $ County Library District Special Health Care District 2,631,597 2,631,597 $ 19,368,018 19,368,018 $ 46,310,880 46,310,880 - $ 49,730,785 49,730,785 - 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 1,324,021,098 164,225,937 - 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 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 1,536,698,501 389,655,514 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 1,487,603,769 425,111,491 425,111,491 396,192,808 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 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 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 67,301,586 19,895,071 87,196,657 40,281,153 28,161,726 68,442,879 7,614,014 7,614,014 471,193,529 471,193,529 437,227,709 80,036,848 517,264,557 49,512,136 49,512,136 174,988,030 174,988,030 48,660,147 48,660,147 4,013,398 4,013,398 19,250,761 19,250,761 67,273,204 67,273,204 1,205,869,884 349,698,856 1,555,568,740 70,920,943 20,881,916 91,802,859 40,273,959 28,658,765 68,932,724 8,034,256 8,034,256 506,222,142 506,222,142 447,212,880 82,211,035 529,423,915 58,463,580 58,463,580 181,352,524 181,352,524 50,677,352 50,677,352 4,030,569 4,030,569 20,091,335 20,091,335 70,777,141 70,777,141 1,261,672,688 370,403,704 1,632,076,392 Source: Maricopa County Assessor's Office Maricopa County Tax Levy Publication (a) Total 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). 181 $ 870,014,022 354,382,660 1,224,396,682 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 Total Tax Levy For Fiscal Year (a) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 31,520,944 35,130,400 37,081,738 34,455,730 34,856,232 36,402,794 37,675,450 38,916,826 40,471,289 42,580,125 Adjustments $ (328,615) (358,256) (686,613) (604,321) (318,630) (170,121) (175,020) (164,001) (138,077) (338,449) Adjusted Tax Levy For Fiscal Year $ 31,192,329 34,772,144 36,395,125 33,851,409 34,537,602 36,232,673 37,500,430 38,752,825 40,333,212 42,241,676 Amount $ 30,686,950 33,987,393 35,581,096 33,299,312 33,860,185 35,627,136 36,924,892 38,310,425 39,886,362 41,757,608 % of Original Levy 97.4 % 96.7 96.0 96.6 97.1 97.9 98.0 98.4 98.6 98.1 Total Collections to Date Collections in Subsequent Years (b) $ 492,269 739,454 772,083 526,937 646,893 463,431 488,899 370,628 135,250 - Amount $ 31,179,219 34,726,847 36,353,179 33,826,249 34,507,078 36,090,567 37,413,791 38,681,053 40,021,612 41,757,608 % of Adjusted Levy 100.0 % 99.9 99.9 99.9 99.9 99.6 99.8 99.8 99.2 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 levy 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. 182 Principal Tax Payers (Exhibit S-12) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2017 Taxable Secondary Assessed Value Taxpayer: Verizon Wireless Arizona Public Service Company Arizona Mills Mall LLC KBSII Fountainhead LLC Qwest Corporation Honeywell International Inc Tempe Campus SPV LLC JDM II Tempe OC LLC JP Morgan Chase Bank NA Tempe Rio West Business Park LLC Wells Fargo Bank NA Tempe Fountainhead Corporate LLC Freescale Semiconductor Inc State Farm Mutual Auto Insurance Target Corporation T-9420 Safeway Incorporated Tempe Commerce Park $ Total $ 30,559,748 27,334,259 26,286,573 11,466,843 10,611,863 9,258,581 8,305,133 8,188,702 7,195,978 7,195,035 - Rank 1 2 3 4 5 6 7 8 9 10 146,402,715 Source 2017: RBC Capital Markets Source 2008: Dain Rauscher 183 Fiscal Year 2008 Percentage of Total City Secondary Taxable Assessed Value Taxable Secondary Assessed Value 1.83 % 1.64 1.57 0.69 0.64 0.55 0.50 0.49 0.43 0.43 - $ 8.77 % $ 25,399,699 33,315,991 32,202,927 24,496,477 16,784,317 15,735,130 14,242,975 11,074,026 11,006,714 9,972,397 194,230,653 Rank 3 1 2 4 5 6 7 8 9 10 Percentage of Total City Secondary Taxable Assessed Value % 1.06 1.39 1.34 1.02 0.70 0.66 0.59 0.46 0.46 0.42 8.10 % Principal Tax Payers (Exhibit S-13) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2017 Taxpayer 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 Total Sales and Use Tax Payments Business Type Service Grocery Stores Electronics/Software Mixed Retail Mixed Retail Mixed Retail Auto Sales Auto Sales Mixed Retail Auto Sales Construction Service Electronics/Software $ $ 5,049,709 3,566,675 2,551,329 2,237,101 2,223,552 2,064,256 1,734,728 1,584,776 1,436,221 1,405,761 - Rank Fiscal Year 2008 Percentage of Total Sales and Use Tax Payments 3.42 % 2.41 1.73 1.51 1.50 1.40 1.17 1.07 0.97 0.95 1 2 3 4 5 6 7 8 9 10 Sales and Use Tax Payments $ - 23,854,108 16.13 % $ Rank Percentage of Total Sales and Use Tax Payments 5,561,156 1,613,083 1 6 3.83 % 1.11 1,961,805 1,895,197 1,721,109 2,106,153 1,041,581 3 4 5 1.35 1.31 2 9 1.45 0.72 1,099,650 1,042,867 1,034,472 7 8 0.00 0.76 0.72 0.71 10 19,077,073 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. 184 11.96 % Excise Tax Collections (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2017 Privilege and use tax (a) $ 99,865,430 Fiscal Year 2016 $ 95,804,083 Fiscal Year 2015 $ 92,910,407 Fiscal Year 2014 $ 97,169,520 Fiscal Year 2013 $ 89,714,946 Fiscal Year 2012 $ 84,937,373 Fiscal Year 2011 $ 83,258,888 Fiscal Year 2010 $ 69,043,642 Fiscal Year 2009 $ 74,295,074 Fiscal Year 2008 $ 81,108,518 State shared sales tax 16,145,681 15,357,220 14,779,296 14,076,468 13,236,998 12,636,771 12,656,738 12,167,009 13,191,255 15,237,310 State shared income tax 21,511,044 19,470,946 19,577,085 18,025,635 16,519,248 13,649,203 16,137,383 21,406,004 24,832,128 25,401,762 Franchise tax 3,182,193 3,363,615 2,933,239 3,310,940 3,253,175 3,428,125 3,821,436 3,559,615 3,980,674 3,424,560 Vehicle license tax 7,015,040 6,644,362 6,215,552 6,053,172 5,165,072 5,437,201 5,424,902 5,560,791 6,024,595 6,655,516 Permits and fees (b) 10,244,664 11,543,817 11,881,915 12,197,631 6,896,214 7,139,843 5,491,077 6,171,045 7,227,027 7,812,768 Fines and forfeitures 8,094,581 8,464,633 8,436,300 8,190,178 8,132,195 7,731,585 7,576,496 7,108,900 9,200,777 8,616,319 $ 166,058,633 $ 160,648,676 $ 156,733,794 $ 159,023,544 $ 142,917,848 $ 134,960,101 $ 134,366,920 $ 125,017,007 $ 138,751,530 $ 148,256,753 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. 185 Ratios of Net General Bonded Debt Outstanding (Exhibit S-15) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental General Obligation Debt $ 125,075,000 156,265,000 172,665,000 166,680,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 Enterprise General Obligation Debt and WIFA $ 282,520,000 285,735,000 303,168,706 287,621,092 270,715,646 253,760,904 236,046,554 216,802,282 196,122,761 198,182,660 $ General Obligation Premium Less: Debt Service Reserves 10,094,930 9,793,498 11,561,343 11,610,013 14,741,563 26,115,095 27,517,521 $ 23,858,992 31,844,188 38,126,393 25,526,885 32,062,939 33,262,194 33,699,262 20,960,171 20,693,070 21,456,909 Total $ 383,736,008 410,155,812 437,707,313 438,869,137 410,646,205 396,295,053 377,162,305 392,488,674 382,294,786 382,798,272 Percentage of Percentage of Secondary/Limited Governmental Total to Assessed Debt to Assessed Value Valuation (a) Assessed Value (b) of Property $ 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 1,593,944,354 1,669,352,097 4.2 % 4.7 4.9 5.6 6.6 7.7 8.6 9.9 10.0 9.4 Source: Secondary assessed valuation from Maricopa County Assessor's Office for fiscal years prior to Fiscal Year 2016. In Fiscal Year 2016, the assessed valuation used is the Limited Property Value from Maricopa County Assessor's office Net Assessed Value Detail schedule. (a) In Fiscal Year 2016, with the passage of Proposition 117, the Limited Assessed Value is required to be used for the calculation of the tax levy. (b) General obligation debt for business-type activities is not paid by property taxes and therefore the "Percentage of Governmental Debt to Assessed Value " is disclosed. 186 16.0 % 15.4 15.8 17.5 21.0 23.3 24.9 24.1 22.3 22.9 Net Direct Debt Per Capita 2,292 2,376 2,504 2,595 2,424 2,294 2,140 2,213 2,053 2,098 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 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 125,075,000 156,265,000 172,665,000 166,580,000 162,200,000 164,235,000 163,205,000 181,905,000 180,750,000 178,555,000 $ 38,310,000 36,095,000 33,025,000 29,875,000 27,815,000 25,675,000 23,930,000 21,175,000 19,980,000 18,730,000 Refunding Certificates of Participation $ 625,000 - Excise Tax Revenue Bonds $ 241,125,000 239,560,000 230,470,000 228,746,000 218,522,900 154,081,000 144,606,000 134,746,000 123,389,000 116,009,000 HUD Section 108 Loan Premium on Debt Payable $ 9,234,152 15,054,997 20,176,543 19,542,476 18,668,237 22,291,058 20,515,300 $ 6,739,000 6,466,000 6,181,000 5,883,000 5,572,000 5,247,000 4,907,000 4,552,000 4,181,000 3,794,000 Capital Improvement Notes $ 1,506,411 1,023,835 521,955 1,009,612 509,804 - Capital Leases $ 3,351,733 1,888,630 1,776,147 96,735 57,921 29,645 87,082 61,399 34,743 Total GovernmentType Debt $ 416,732,144 441,298,465 444,639,102 440,414,887 429,222,818 370,453,800 356,700,280 361,133,319 350,652,457 337,638,043 Business-Type Activities Fiscal Year General Obligation Bonds 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 282,520,000 285,735,000 289,895,000 273,000,000 256,770,000 240,505,000 223,495,000 204,970,000 185,025,000 187,835,000 Excise Tax Revenue Bonds $ 2,050,000 18,685,000 18,050,000 48,827,424 55,505,432 79,034,000 76,109,000 84,839,000 91,876,000 80,466,000 Premium on Debt Payable $ 8,932,839 8,579,661 11,487,656 11,158,485 13,905,912 26,735,479 26,648,171 WIFA Loans $ 13,273,706 14,621,092 13,945,646 13,255,904 12,551,554 11,832,282 11,097,761 10,347,660 Capital Leases $ 187 147,089 97,439 45,352 711,466 499,476 283,594 63,750 318,834 Total BusinessType Debt Total Primary Government $ 284,570,000 304,420,000 321,365,795 345,478,794 334,846,091 344,994,026 323,813,515 315,830,788 314,797,990 305,615,665 $ 701,302,144 745,718,465 766,004,897 785,893,681 764,068,909 715,447,826 680,513,795 676,964,107 665,450,447 643,253,707 Per Capita $ 4,188 4,319 4,381 4,860 4,515 4,132 3,822 3,816 3,553 3,525 Percentage of Personal Income 15.98 % 18.05 16.43 15.31 16.57 16.27 14.12 14.23 12.63 12.53 Direct and Overlapping Governmental Activities Debt- Property Tax Supported (Exhibit S-17) City of Tempe, Arizona 2017 Net Limited 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 Maricopa Special Health Care District 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 City direct debt (repaid with property tax) $ $ 36,135,494,474 1,304,786,663 36,135,494,474 2,692,702,270 1,865,513,124 4,740,996,146 3,170,299,787 56,589,592,481 36,135,494,474 16,589,181,992 $ 509,430,000 147,675,000 73,000,000 280,905,000 197,285,000 242,065,000 96,300,000 None None None 4.62 % 84.31 4.62 0.69 29.48 0.27 52.05 N/A N/A 10.06 1,669,352,097 $ 178,555,000 100.00 % Total direct and overlapping debt $ 23,535,666 124,504,793 3,372,600 1,938,245 58,159,618 653,576 50,124,150 None None None 262,288,648 178,555,000 $ 440,843,648 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. 188 1.46 5.28 0.31 7.56 4.38 3.86 2.90 0.50 1.79 0.05 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 Maricopa Special Health Care District 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 $ 509,430,000 147,675,000 73,000,000 280,905,000 197,285,000 242,065,000 96,300,000 None None None 4.62 % 84.31 4.62 0.69 29.48 0.27 52.05 N/A N/A N/A City direct debt $ 337,638,043 100.00 % Total direct and overlapping debt $ 23,535,666 124,504,793 3,372,600 1,938,245 58,159,618 653,576 50,124,150 None None None 262,288,648 337,638,043 $ 599,926,691 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. 189 Legal Debt Margin Information (Exhibit S-19) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2017 Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Assessed Valuation $ 2,125,705,145 $ 1,593,944,354 $ 1,627,720,901 $ 1,513,299,272 $ 1,697,237,040 $ 1,957,328,610 $ 2,512,995,468 $ 2,767,488,864 $ 2,656,948,194 $ 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) 337,734,652 $ 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 87,406,377 $ 127,542,309 $ 47,299,201 62.91% - $ 95,636,661 $ 13,731,661 85.64% - $ 97,663,254 $ 16,168,254 83.44% - $ 90,797,956 $ 51,752,956 - $ 101,834,222 $ 43.00% 73,469,222 27.85% - $ 117,439,717 102,409,717 12.80% Source: Maricopa County Assessor's Office City of Tempe, Arizona Accounting Division Note 1: Prior to Fiscal Year 2016, the Assessed Valuation was based on the Net Assessed Secondary Value . Due to a change in the legislation (Proposition 117), in Fiscal Year 2016, the City was required to use the Limited Property Value. In Fiscal Year 2017, the law changed again to allow the Full Cash Value to be used in the legal debt margin calculation. Note 2: Effective with Fiscal Year 2007, 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. 190 $ 27,711,549 $ 150,779,728 $ 142,449,728 5.52% 61,344,067 $ 166,049,332 $ 157,764,332 4.99% 69,134,638 $ 159,416,891 $ 158,021,891 0.88% $ 2,006,703,332 $ 55,704,693 $ 144,113,908 142,658,908 1.01% 29,375,666 92.68% $ 120,402,200 $ 117,337,200 1,455,000 $ 401,340,666 371,965,000 $ 88.40% 1,395,000 $ Fiscal Year 2007 424,675,000 86.99% 8,285,000 $ 531,389,638 462,255,000 88.92% 8,330,000 $ 553,497,773 492,153,706 94.49% 15,030,000 $ 502,599,094 474,887,545 114.00% 28,365,000 $ 391,465,722 446,276,092 123.21% 39,045,000 $ 339,447,408 418,225,647 129.06% 81,495,000 $ 302,659,854 390,600,904 111.11% 81,905,000 $ 325,554,180 361,721,555 103.65% 80,243,108 $ 318,788,871 330,432,281 79.44% Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 425,141,029 Fiscal Year 2008 3,065,000 2.55% Remaining General Obligation Bond Authorizations (Exhibit S-20) City of Tempe, Arizona Authorization WIFA Funding (A) Prior Issues Current Year Issue (B) Remaining Authorization 2008 Program: Water/Wastewater $ 113,300,000 Streets/Transportation/Storm Drains 44,200,000 Public Safety - Police/Fire 32,010,000 Community Services/Park Improvements 51,800,000 $ 18,130,302 - $ 36,095,000 17,465,000 27,305,000 51,800,000 $ 23,200,000 2,740,000 4,120,000 - $ 18,130,302 132,665,000 30,060,000 60,454,698 Total 2008 Program 2012 Program: Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation Total 2012 Program 2016 Program: Water/Wastewater Streets/Transportation/Storm Drains Public Safety - Police/Fire Community Services/Park Improvements Municipal Infrastructure Preservation Total 2016 Program Grand Total 241,310,000 35,874,698 23,995,000 585,000 - 6,400,000 10,500,000 12,900,000 - 6,110,000 12,345,000 4,390,000 555,000 6,400,000 - 29,800,000 - 18,455,000 4,945,000 6,400,000 148,000,000 25,000,000 20,000,000 34,000,000 27,000,000 - - 910,000 1,185,000 148,000,000 25,000,000 20,000,000 33,090,000 25,815,000 254,000,000 - - 2,095,000 251,905,000 $ 37,100,000 $ 318,759,698 $ 525,110,000 $ 18,130,302 $ 151,120,000 Source: City of Tempe, Arizona Internal Services Department (A) The WIFA funding includes a "forgivable" principal portion of $2.2 million. Per the loan agreement, the forgivable portion could be added back should the City not comply with the terms of the agreement. As some of the terms are not fulfilled until the end of the loan period, the forgivable portion will continue to utilize authorization until the loan is paid off (FY 2028-29). At that time, the authorization will be restored. (B) The current year issuance includes a portion of the premium that was allocated to fund projects. 191 Pledged-Revenue Coverage (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 2,842,153 $ 2,860,571 2,783,916 3,867,979 2,526,283 4,442,862 3,605,932 3,862,306 2,439,086 2,173,798 Excise Tax Revenue Obligations Debt Service (d) Coverage 4,066,900 4,094,274 4,796,008 4,697,441 3,469,611 3,448,085 2,959,851 3,884,758 2,214,178 2,209,650 0.70 0.70 0.58 0.82 0.73 1.29 1.22 0.99 1.10 0.98 Excise Tax Revenue Collections (a) $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (b) Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 6,820,193 $ 6,158,761 5,749,649 5,979,900 6,236,500 6,236,879 6,921,904 7,460,054 7,656,210 8,084,891 141,601,237 $ 132,726,935 119,456,216 128,942,018 129,522,900 142,917,848 165,485,314 156,733,794 160,648,676 166,058,633 Debt Service (d) Coverage 5,626,868 6,177,704 6,760,138 6,761,359 9,399,739 9,931,262 11,977,968 12,055,250 45,696,593 36,355,425 25.17 21.48 17.67 19.07 13.78 14.39 13.82 13.00 3.52 4.57 Transit Excise Tax Obligations Debt Service (d) Coverage 6,009,925 6,012,725 6,005,626 6,016,226 5,377,764 5,922,350 5,918,250 5,919,026 5,921,676 3,427,850 1.13 1.02 0.96 0.99 1.16 1.05 1.17 1.26 1.29 2.36 0.5% Privilege and Use Tax Collections (c) $ 32,449,710 $ 29,850,942 27,891,084 29,012,370 30,172,338 30,087,229 33,539,177 36,147,640 37,288,527 39,512,636 Debt Service (d) Coverage 5,092,190 5,449,867 4,356,904 4,428,049 4,410,547 3,685,428 4,655,713 4,655,688 4,658,463 4,372,288 6.37 5.48 6.40 6.55 6.84 8.16 7.20 7.76 8.00 9.04 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. 192 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 Fiscal Year 2017 2018 2016 Pledged Excise Tax Revenues (a) $ 166,058,633 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (b) Coverage (c) $ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 36,355,425 20,712,705 4.57 8.02 20,710,504 12,827,997 12,120,957 12,120,404 12,109,267 9,248,517 16,538,617 6,909,885 6,903,865 6,911,235 6,910,834 5,117,988 5,116,050 2,723,850 2,116,125 8.02 12.95 13.70 13.70 13.71 17.96 10.04 24.03 24.05 24.03 24.03 32.45 32.46 60.96 78.47 Revenue Available for Debt Service (d) $ 137,788,099 Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (e) $ Coverage (f) 3,427,850 3,428,850 40.20 40.18 3,428,100 3,433,850 40.19 40.13 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2016. See Excise Tax Collection schedule (Exhibit S-14). (b) Consists of the annual debt service requirements (not including fiscal fees) of the following Excise Tax Revenue/Refunding Obligations: Series 2009A+B 2011A+B 2012 2013 2016 2017R Remaining Obligation $ 12,660,000 14,450,000 23,825,000 23,355,000 35,435,000 14,790,000 $ 124,515,000 (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2017 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 2017. (e) (f) Includes the annual debt service requirements of the City of Tempe, Arizona Excise Tax Refunding Obligations, Series 2011, currently outstanding in the principal amount of $9,465,000. Debt service requirements do not include fiscal fees. 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. 193 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 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 $ 39,512,636 Outstanding Senior Excise Tax Obligations Debt Service Requirements (b) $ Outstanding Senior Excise Tax Obligations Coverage (c) 4,372,288 4,506,135 4,505,830 4,507,381 4,504,516 4,505,890 4,503,153 4,511,199 4,509,490 4,508,170 4,506,882 4,510,590 4,503,794 4,511,036 4,511,606 4,506,533 4,508,344 4,509,363 4,509,715 4,659,119 4,656,963 1,895,975 9.04 8.77 8.77 8.77 8.77 8.77 8.77 8.76 8.76 8.76 8.77 8.76 8.77 8.76 8.76 8.77 8.76 8.76 8.76 8.48 8.48 20.84 Source: City of Tempe, Arizona Accounting Division (a) Excise Tax Revenues received by the City in Fiscal Year 2017. (b) Includes annual debt service requirements for the Series 2008 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $6,675,000; the Series 2012 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $36,515,000; the Series 2017R City of Tempe, Arizona Transit Excise Tax Refunding Obligations in the principal amount of $19,305,000. Debt service requirements do not include fiscal fees. (c) The estimated coverage figures shown reflect the ratio of actual Fiscal Year 2017 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 194 Demographic and Economic Statistics (Exhibit S-24) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Total Personal Income (b) Population (a) 4,387,734,516 Average Household Income (c) Median Age (c) $ 26,202 $ 66,864 29.7 25,929 64,394 2.80 % School Enrollment (d) ASU School Enrollment (e) Unemployment Rate (f) 2008 167,458 2009 172,641 4,131,989,694 23,934 63,866 31.6 25,780 67,082 4.20 2010 174,833 4,661,747,112 26,664 67,971 31.8 25,857 68,064 6.70 2011 161,719 5,133,769,655 31,745 68,427 35.2 26,670 70,440 8.00 2012 163,989 4,469,848,173 27,257 63,881 31.3 28,136 72,254 8.20 2013 165,499 4,203,343,602 25,398 61,201 31.5 25,510 73,378 6.80 2014 170,027 4,601,100,647 27,061 64,714 28.1 25,264 73,378 7.50 2015 169,533 4,546,705,527 26,819 62,291 28.5 25,480 83,301 6.80 2016 173,510 4,881,183,320 28,132 65,814 28.7 25,656 74,293 5.90 2017 182,498 5,134,033,736 28,531 67,501 29.5 24,891 75,729 4.30 Source: $ Per Capita Personal Income (c) (a) Estimate obtained from Sites USA through Fiscal Year 2015. From Fiscal Year 2016 and forward the estimate is obtained from State Shared Revenue Report published by the League of Arizona Cities & Towns (b) Amount is calculated using population times per capita personal income (c) Estimate provided by Sites USA (June 2016) (d) Arizona Department of Education (Azed.gov) (e) ASU.edu/Headcount enrollment (f) workforce.az.gov (June 2016) 195 Principal Employers (Exhibit S-25) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2017 Employers: Employees (a) Arizona State University Maricopa Community Colleges SRP Safeway Inc Wells Fargo Freescale Semiconductor (Motorola) Honeywell Kyrene School District Chase Manhattan Corporation US Airways Insight Direct Bank One Telephone Banking Division City of Tempe Total Source: 11,185 4,611 4,374 3,996 3,576 3,000 3,000 2,401 2,377 2,377 - Rank Fiscal Year 2008 Employment 1 2 3 4 5 6 7 8 9 10 40,897 27.35 % 11.27 10.70 9.77 8.74 7.34 7.34 5.87 5.81 5.81 - 10,336 3,331 3,406 3,000 2,000 2,860 2,800 2,500 2,000 1,740 100.00 % 33,973 (a) Maricopa Association of Governments; 2015 MAG Employer Database (b) City of Tempe, Arizona Comprehensive Annual Financial Report, Fiscal Year 2008 196 Employees (b) Rank 1 3 2 4 8 5 6 7 9 10 Employment 30.42 % 9.80 10.03 8.83 5.89 8.42 8.24 7.36 5.89 5.12 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-26) Last Ten Fiscal Years Fiscal year 2017 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 Strategic Mgmt & Diversity Human resources Information technology Water/wastewater Total Fiscal Year 2016 505 155 297 430 83 46 43 7 33 25 4 4 5 206 Fiscal Year 2015 500 156 286 470 88 49 42 7 32 26 4 4 4 156 - 6 6 1,849 1,824 496 156 286 467 90 40 42 7 31 26 4 4 4 155 1,808 Fiscal Year 2014 Fiscal Year 2013 497 156 314 486 90 42 7 11 25 4 5 3 139 20 1,799 497 182 288 484 82 42 7 4 25 3 5 24 3 3 132 17 1,798 Fiscal Year 2012 494 182 287 485 83 42 7 4 25 3 5 25 3 3 132 17 1,797 Fiscal Year 2011 499 182 289 489 88 42 7 4 25 3 5 25 3 3 132 17 1,813 Fiscal Year 2010 568 185 308 535 106 42 7 3 25 4 5 27 4 139 20 1,977 Fiscal Year 2009 580 187 232 330 62 46 7 4 29 4 5 210 20 5 62 73 24 76 143 2,097 Fiscal Year 2008 577 187 230 323 62 46 7 4 29 4 5 208 20 5 63 72 23 76 138 2,079 Source: City of Tempe, Arizona Fiscal Year 2016 Annual Budget Note: In Fiscal Year 2010, 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. 197 Operating Indicators by Function/Program (Exhibit S-27) Last Ten Fiscal Years Fiscal Fiscal Year 2016 Year 2017 Fiscal Year 2015 Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 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 (a) 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 5,063.0 5,638.0 $ 6.36 88515 917 $ 11.6 2,565 26,633 2,637 4,900 5,376 5,110 5,103 5,343 4,755 5,288 4,825 5,800 4,834 5,898 4,693 5,500 4,595 6,100 4,920 6,700 5,895 6.83 86,229 926 5:13 85,502 926 5:02 84,092 874 5:00 86,996 830 6:35 87,730 725 5:30 85,673 749 5:17 86,074 433 5:08 106,317 443 5:07 112,409 415 $ 8.82 1,944 20,021 1,963 $ 9.45 2,022 19,630 1,853 $ 9.47 1,958 18,119 1,976 $ 9.44 2,002 17,411 2,033 $ 9.45 2,167 17,156 1,336 $ 8.95 2,208 15,264 1,275 $ 9.13 2,144 15,413 1,253 $ 9.37 2,414 15,199 1,260 9.43 1,964 13,255 2,708 4.15 4:16 4:10 4:08 4:07 4:10 4:20 4:20 4:20 4:22 74% 73% 75% 76% 76% 76% 74% 74% 72% 71% 90% 6,484,875 731,425 90% 6,841,497 402,900 92% 7,178,128 302,000 91% 7,897,964 397,605 93% 8,168,990 412,739 95% 8,430,857 569,600 95% 7,971,817 64,665 94% 8,877,964 74,471 90% 9,157,912 2,090,504 89% 7,387,024 1,391,711 97,443 855,055 140,000 800,000 143,000 930,000 143,018 814,199 140,523 933,824 145,948 1,015,578 140,600 937,500 147,914 1,089,174 142,500 1,250,000 142,524 1,257,336 644 $ 270,664,400 122 $ 157,887,839 1 $ 60,000 775 $ 333,250,987 474 $ 274,402,813 1 $ 150,000 678 $ 527,389,841 646 $ 173,004,137 4 $ 8,758,218 30 $ 211,281,465 451 $ 235,037,289 660 $ 156,702,779 18 $ 26,619,100 271 $ 96,518,351 647 $ 54,339,500 18 $ 88,812,800 297 $ 68,954,800 600 $ 99,407,953 8 6,874,200 314 $ 18,260,624 521 $ 77,951,841 18 $ 86,704,700 425 $ 27,741,900 534 $ 68,502,500 21 $ 109,851,600 508 $ 161,914,600 577 $ 105,413,500 46 $ 88,143,100 675 $ 96,512,400 653 $ 188,916,700 42,647 15,506 953 43,061 15,278 941 42,678 15,130 878 42,555 15,979 309 42,351 16,900 278 42,398 16,700 249 $ $ 100% 19.4 $ $ 139 33,160 19% 1,671 93 $ 100% 19.4 $ $ 138 33,001 21% 1,709 91 $ 100% 19.4 $ $ 140 33,397 19% 1,783 95 $ $ Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. (a) For Fiscal Year 2010 and prior, the operating expenditures were based on per capita. (b) The numbers are revised by department to reflect change in methodology in tracking. $ 100% 19.4 198 108 33,440 15% 2,130 95 $ $ 100% 18.5 0 121 33,405 15% 2,133 81 $ $ $ 100% 18.6 $ $ 115 33,759 15% 2,030 78 42,218 15,877 (b) 217 $ 100% 18.6 (b) $ $ 112 33,927 29% 1,940 73 42,453 15,606 (b) 181 $ 100% 18.7 (b) $ $ 114 32,886 28% 1,837 77 42,686 15,774 (b) 256 $ 100% 19.7 (b) $ $ 71 32,916 28% 1,875 59 42,494 17,135 (b) 251 100% 20.9 (b) $ $ 102 32,964 28% 1,942 59 Capital Asset Statistics by Function/Program (Exhibit S-28) Last Ten Fiscal Years Fiscal Fiscal Year 2016 Year 2017 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 Fiscal Year 2015 Year 2014 Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 3 21 6 3 24 6 3 24 6 3 24 6 3 21 6 3 20 6 3 20 6 3 22 6 3 22 6 3 22 6 1241 12,026 229 125 1,241 11,969 228 125 1,241 11,904 223 125 1,241 11,849 222 124 1,241 11,797 221 135 1,241 11,778 221 140 1,241 11,778 221 188 1,241 12,428 219 188 1,241 12,021 219 198 1,241 11,810 217 148 1875 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 1,872 45 200 5 2 1,872 45 200 5 2 1,872 45 200 4 2 1,872 45 200 4 2 1,872 45 200 4 2 850 833 833 833 833 839 839 839 825 823 137 54 495 231 125 54 495 231 125 42 549 173 125 42 549 173 125 42 496 173 125 42 498 194 125 42 498 194 129 53 498 195 120 53 497 193 120 53 500 193 29 29 19 19 19 33 33 38 38 32 43 45 47 52 51 58 58 58 58 60 Source: City of Tempe, Arizona Municipal Budget Office and other applicable City departments. 199