JOHN TIMKO Financial Services Director 700 West Beale Street P.O. Box 7000 Kingman, AZ 86402-7000 Phone: (928) 753-0735 Fax: (928) 753-0704 Management’s Discussion and Analysis Our discussion and analysis of the County’s financial performance provides an overview of the County’s financial activities for the year ended June 30, 2009. Please read it in conjunction with the County’s basic financial statements, which begin on page 16. Financial Highlights       Total assets of the County exceeded its liabilities at the close of the fiscal year by $283 million, an increase of 6.2% from the prior year. Of this amount, $77.8 million is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. Property tax revenue increased by $8.26 million. This increase is due to a 5.2% increase in the tax levy for the primary government, arising from a 2-year lag in recording new construction. The amount of increase for primary property taxes is limited to 2% for existing taxpayers. The tax increase for secondary taxes of 29% was created by higher assessed values. The secondary taxes are not currently limited by statute for increase. The secondary taxes are collected predominantly for special districts such as the library and flood control districts. The County’s total net assets as reported in the Statement of Activities increased by $16.5 million. Of this amount, $15.7 million (95.2%) is attributable to governmental activities and $.8 million (4.8%) is attributable to business-type activities. As reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances, the County’s governmental funds reported combined fund balances of $140.6 million, a decrease of $5.1 million. This decrease resulted from payments made for debt service and capital projects from funds collected in previous years. The unreserved fund balance for the General Fund decreased by $75 thousand (.6%), General Fund revenues were below budgeted revenues by $3.6 million, and expenditures were only 81% of both the original adopted and final General Fund budget. Overview of the Financial Statements The intent of this discussion and analysis is to serve as an introduction to Mohave County’s basic financial statements. Mohave County’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 other required supplementary information in addition to the basic financial statements themselves. Government-wide financial statements are designed to provide readers with a broad overview of Mohave County’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of Mohave County’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of Mohave County is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets 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 fiscal periods (e.g., uncollected taxes and earned but unused accrued leave). Both of these government-wide financial statements distinguish functions of Mohave County 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 Mohave County include general government, public safety, highways and streets, health, 3 welfare, education, and culture and recreation. The business-type activities of Mohave County include water companies, recreation, and landfill operations. The government-wide financial statements include not only Mohave County itself (known as the primary government), but blended component units. The blended component units are legally separate entities for which Mohave County is financially accountable. Blended component units include the following: a television district, two tax-levying districts, special assessment districts, and two finance corporations. The County’s Board of Supervisors serves as the board of directors for all of the component units except for the finance corporations, which have a separate board of directors made up of County management. The list of blended component units follows:       Mohave County Television District provides and maintains communication equipment for TV signals. Mohave County Library District provides and maintains library services for County residents. Mohave County Flood Control District provides flood control systems for the County. Mohave County Special Assessment Districts provide funds to construct or improve roads, bridges, and water distribution systems. Mohave Administration Building Finance Corporation provides financing and oversight of the operation of the Mohave County administration building. Mohave Jail Finance Corporation provides financing and oversight of the construction and equipping of a jail facility for use of and ultimate ownership by Mohave County. Financial information for the blended component units is combined with the financial information presented for the primary government itself. The government-wide financial statements are on pages 16-17 of this report. Fund financial statements are groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. Mohave County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Mohave County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. 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. The governmental funds financial statements can be found on pages 18-21 of this report. Mohave County maintains 180 individual governmental funds. 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, Road Fund, Flood Control Fund, Scenic Debt Service Fund, and the County Capital Improvement Fund, all of which are major funds. Data from the other 175 governmental funds are combined into a single, aggregated presentation, under the heading Other Governmental Funds. Mohave County adopts an annual appropriated budget for all its funds. A budgetary comparison schedule has been provided for the General Fund and the major special revenue funds to demonstrate compliance with their budgets. These schedules are presented on pages 54 to 59. Proprietary funds - Mohave County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Mohave County uses enterprise funds to account for its water companies, park services, and landfill operations. Internal Service Funds are an accounting device used to accumulate and allocate costs internally among Mohave County’s various functions. Mohave County uses internal service funds to account for its fleet of vehicles, employee 4 benefit health insurance trust, self-insurance trust, janitorial services, communication services, and for its management information systems. Because all of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds financial statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for the water companies and the landfill operations, which are major funds of Mohave County. Conversely, all of the internal service funds are combined into a single, aggregated presentation in the proprietary funds financial statements. The proprietary funds financial statements are located on pages 22-24 of this report. Fiduciary funds - Fiduciary funds account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support Mohave County’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary funds financial statements can be found on pages 25-26 of this report. Notes to the financial statements - The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements are located on pages 27-53 of this report. Other information - In addition to the basic financial statements and accompanying notes, pages 54-61 present required supplementary information including budgetary comparison schedules and Mohave County’s progress in funding its obligation to provide pension benefits to some of its employees. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of Mohave County, assets exceeded liabilities by $283 million at the close of the most recent fiscal year. By far the largest portion of Mohave County’s net assets (58%) reflects its investment in capital assets (e.g., land, buildings, infrastructure, machinery, and equipment) less accumulated depreciation and any related debt used to acquire those assets that is still outstanding. Mohave County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Mohave County’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 used to liquidate these liabilities. 15% of Mohave County’s net assets represent resources subject to external restrictions on how they may be used. The remaining $78 million (27%) of unrestricted net assets may be used to meet the government’s ongoing obligations to citizens and creditors. The largest changes in the net assets occurred in the governmental funds. The changes are discussed separately under the following sections; Governmental activities – net assets highlights, Business-type activities – net assets highlights, and Capital Asset and Debt Administration. 5 Government-wide Net Assets As of June 30, 2008 Current assets and other assets Capital assets Total assets Long-term liabilities outstanding Other liabilities Total liabilities 2009 Increase (Decrease) % Change $ 187,002,666 $ 183,807,661 $ (3,195,005) -1.71% 163,063,496 179,461,188 16,397,692 10.06% 350,066,162 363,268,849 13,202,687 3.77% 77,354,822 73,166,384 (4,188,438) -5.41% 5,850,965 6,769,895 918,930 15.71% 83,205,787 79,936,279 (3,269,508) -3.93% 145,237,151 163,310,188 18,073,037 12.44% 52,295,029 42,253,846 (10,041,183) -19.20% Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 69,328,195 77,768,536 8,440,341 12.17% $ 266,860,375 $ 283,332,570 $ 16,472,195 6.17% Governmental activities - net assets highlights: The net assets invested in capital assets, net of related debt had a net increase of $17.6 million. The details of the increase in capital assets are discussed later in this report under the Capital Asset and Debt Administration heading. Total liabilities decreased $3.7 million from last year. The decrease was due to principal payments made on the County’s Beneficial Interest Certificates (BIC’s) and special assessment bonds payable, without incurring any new long-term debt. Governmental Activities Net Assets As of June 30, 2008 Current assets and other assets Capital assets Total assets Long-term liabilities outstanding Other liabilities 2009 Increase (Decrease) % Change $ 170,372,431 $ 166,419,607 $ (3,952,824) -2.32% 147,618,188 163,554,563 15,936,375 10.80% 317,990,619 329,974,170 11,983,551 3.77% 73,256,888 68,581,024 (4,675,864) -6.38% 5,525,496 6,511,158 985,662 17.84% 78,782,384 75,092,182 (3,690,202) -4.68% 129,792,188 147,403,563 17,611,375 13.57% Restricted 43,106,732 33,014,116 (10,092,616) -23.41% Unrestricted 66,309,315 74,464,309 8,154,994 12.30% $ 239,208,235 $ 254,881,988 $ 15,673,753 6.55% Total liabilities Net assets: Invested in capital assets, net of related debt Total net assets The restricted net assets reflected a net decrease of $10 million from the prior year, mostly due to spending resources on capital projects. Unrestricted net assets increased by $8 million from the prior year, primarily due to unspent tax revenue in flood control, library, and the T.V. districts’ funds. These resources are intended to be used for major capital projects in the next couple of years. 6 Governmental activities – comparative statement of activities highlights: The current year governmental activities financial statements reflect an increase of $1.4 million in total revenues due to several factors. Mohave County continues to have steady population growth while the economy continues to decline. While the downturn in the housing market reduced the number of homes built during the year, there is up to a 2-year lag time in getting new construction on the rolls. Higher assessed values on all property, along with new construction, resulted in increased property tax revenues. Most of the increase is due to secondary property taxes, as the primary property tax amount is limited to a 2% increase per year. It rose because of an increase in the tax levies of anywhere from 2% to 25%, depending on the tax authority. Property tax revenue was the only revenue that increased. There was a decrease in other taxes, including sales tax, auto-lieu tax, and capital projects sales tax. These decreases were due to the downturn in all sales, reflecting the current decline in the economy. Investment earnings decreased $2.9 million from the prior year due to a decrease in the return on investments and an increase in the amount of unrealized loss recorded in the current year. Even fines, fees and other miscellaneous income were affected by the downturn. The expenses stayed unchanged, in total, from the prior year. The County has managed to maintain moderate growth in controllable expenses, due to increased efficiency, and offsetting increased costs with vacancy savings and suspending step increases. The non-controllable expenses such as court costs from increased caseloads and indigent support continue to rise. Interest on long-term debt increased due to payments made on the jail BICs issued in prior years. Governmental Activities Comparative Statement of Activities Year Ended June 30, 2008 Revenues: Program revenues Charges for services Operating grants & contributions Capital grants & contributions Total program revenues General revenues Property taxes Other taxes Other revenues Total general revenues Total revenues Expenses: General government Public safety Highways and streets Health Welfare Culture and recreation Education Interest on long-term debt Total expenses Increase in net assets before transfers Transfers Increase in net assets Net assets beginning of year Net assets end of year $ $ Increase (Decrease) 2009 19,059,248 32,256,844 553,940 51,870,032 $ 18,139,455 29,968,968 92,004 48,200,427 $ % Change (919,793) (2,287,876) (461,936) (3,669,605) -4.83% -7.09% -83.39% -7.07% 51,324,812 40,180,676 5,251,614 96,757,102 148,627,134 59,585,358 39,416,103 2,865,225 101,866,686 150,067,113 8,260,546 (764,573) (2,386,389) 5,109,584 1,439,979 16.09% -1.90% -45.44% 5.28% 0.97% 58,984,470 24,363,170 23,413,885 14,927,310 5,194,166 4,687,004 1,493,095 978,783 134,041,883 14,585,251 (3,763) 14,581,488 224,626,747 239,208,235 58,616,197 25,318,232 20,449,462 15,176,533 5,129,308 5,391,550 1,714,370 2,541,037 134,336,689 15,730,424 (56,671) 15,673,753 239,208,235 254,881,988 (368,273) 955,062 (2,964,423) 249,223 (64,858) 704,546 221,275 1,562,254 294,806 1,145,173 (52,908) 1,092,265 14,581,488 15,673,753 -0.62% 3.92% -12.66% 1.67% -1.25% 15.03% 14.82% 159.61% 0.22% 7.85% 1406.01% 7.49% 6.49% 6.55% 7 $ $ The chart below represents all revenues collected from governmental activities, including general revenues, as reported in the Statement of Activities. Revenues by source - Governmental Activities Charges for services 12% $18,139,455 Other 11% $16,482,888 Sales taxes 17% $25,798,440 Operating grants and contributions 20% $29,968,968 Capital grants and contributions 0% $92,004 Property taxes 40% $59,585,358 The following graph represents the expenses and program revenues for governmental activities as reported in the Statement of Activities. Program revenue does not include the general revenues listed on the bottom portion of the Statement of Activities. Total revenues generated by governmental activities (program revenues and general revenues) were $150.1 million. $101.8 million of general revenues, which are not included in this graph, represents 68% of total revenues reported for governmental activities. While this graph indicates expenses exceeded program revenues, the addition of general revenues produced an increase to net assets of $15.7 million for the fiscal year as indicated on the Statement of Activities. Expenses and program revenues - Governmental activities Expense Revenue $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $- General government Public safety Highways and streets Health Welfare Culture and recreation Education Interest on longterm debt Expense $58,616,197 $25,318,232 $20,449,462 $15,176,533 $5,129,308 $5,391,550 $1,714,370 $2,541,037 Revenue $15,256,393 $8,931,625 $11,650,153 $4,916,336 $4,900,410 $948,611 $1,596,899 $- 8 Business-type activities - net assets highlights: Net assets increased by $.8 million. The 3% increase to invested in capital assets, net of related debt was due to Golden Valley Improvement District (G.V.I.D.) adding an arsenic removal system. The 9.4% increase to unrestricted net assets was due to a one-time capital contribution to G.V.I.D. from the construction reserve fund of $1 million, offset by operating losses in all the funds, excluding the landfill. Business-type Activities Net Assets As of June 30, 2008 Current assets and other assets $ Capital assets Total assets Long-term liabilities outstanding 16,630,235 Net assets: Invested in capital assets, net of related debt $ 17,388,054 $ % Change 757,819 4.56% 15,445,308 15,906,625 461,317 2.99% 32,075,543 33,294,679 1,219,136 3.80% 4,097,934 4,585,360 487,426 11.89% (66,732) -20.50% Other liabilities Total liabilities Increase (Decrease) 2009 325,469 258,737 4,423,403 4,844,097 420,694 9.51% 15,444,963 15,906,625 461,662 2.99% Restricted 9,188,297 9,239,730 51,433 0.56% Unrestricted 3,018,880 3,304,227 285,347 9.45% 798,442 2.89% Total net assets $ 27,652,140 $ 28,450,582 $ The chart below represents all revenues collected from business-type activities, including general revenues, as reported in the Statement of Activities. Revenues by source - Business-type Activities Charges for services 73%, $4,373,982 Capital grants and contributions 17%, $1,004,449 Operating grants and Unrestricted contributions investment earnings Other 6%, $366,003 2%, $110,470 2%, $105,179 Analysis of revenue changes - The Business-type Activities Comparative Statement of Activities schedule on the following page shows the increases and decreases in revenue with an overall .5% decrease to total revenues. The I-40 water corridor saw the biggest decrease due to not receiving any “one-time” fees in 2009 for new customer hook-ups or water rights. In addition, there was an 80% decrease in other revenues due to reduced returns on interest income, and increased investment losses, which affected all funds. The $945,272 increase in capital grants and contributions was due to a one-time transfer from the capital reserve fund to G.V.I.D. for the purchase of the arsenic removal equipment. 9 Business-type activities - comparative statement of activities highlights: The increase in net assets for the enterprise funds decreased by $1.1 million (59%) from the prior year. This decrease was due to increases in expenditures described in the following discussion. Landfill expenses increased by 136% for two reasons. The waste-tire removal services were performed during the year. This service has a two-year rotating schedule, so fiscal year 2009 saw a marked increase in spending of $473,000. In addition, the closure/postclosure costs increased by $471,000, while all other expenses decreased by $21,000. Recreation expenses increased 38% or $405,000. In the prior year, some personnel costs associated with a capital improvement grant were absorbed by the grant, reducing total costs. This year, approximately $200,000 of those costs was reflected in personnel expenses. In 2009, a new special events program at Davis Camp was started, which increased costs by $150,000. In addition, an increase of $55,000 in all other expenses occurred. Business-type Activities Comparative Statement of Activities Year Ended June 30, 2008 Revenues: Program revenues Charges for services Operating grants & contributions Capital grants & contributions Total program revenues General revenues Property taxes Other taxes Other revenues Total general revenues Total revenues Expenses: Landfill Recreation Water companies Total expenses Increase in net assets before transfers Transfers Increase in net assets Net assets beginning of year Net assets end of year $ $ Increase (Decrease) 2009 4,853,971 403,198 59,177 5,316,346 $ 4,373,982 366,003 1,004,449 5,744,434 $ % Change (479,989) (37,195) 945,272 428,088 -9.89% -9.22% 1597.36% 8.05% 119 100,000 576,182 676,301 5,992,647 100,000 115,649 215,649 5,960,083 (119) (460,533) (460,652) (32,564) -100.00% 0.00% -79.93% -68.11% -0.54% 676,358 1,065,797 2,321,962 4,064,117 1,928,530 3,763 1,932,293 25,719,847 27,652,140 1,599,618 1,470,652 2,148,042 5,218,312 741,771 56,671 798,442 27,652,140 28,450,582 923,260 404,855 (173,920) 1,154,195 (1,186,759) 52,908 (1,133,851) 1,932,293 798,442 136.50% 37.99% -7.49% 28.40% -61.54% 1406.01% -58.68% 7.51% 2.89% $ $ The graph below represents the expenses and program revenues for business-type activities as reported in the Statement of Activities. Please note that program revenue does not include the general revenues on the bottom portion of the statement. Expenses and program revenues - Business-type activities Expense Revenue $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Landfill Recreation Water companies Expense $1,599,618 $1,470,652 $2,148,042 Revenue $1,743,358 $1,253,312 $2,747,764 10 Financial Analysis of the Government’s Funds As noted earlier, Mohave County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds - The focus of Mohave County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable sources. Such information is useful in assessing Mohave County’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, Mohave County’s governmental funds reported combined ending fund balances of $140.6 million, a decrease of $5.1 million in comparison with the prior year. The reserved fund balances consist of $7.8 million reserved for debt service and $288,650 invested in inventory. The General Fund is the chief operating fund of Mohave County. At the end of the current fiscal year, the unreserved fund balance of the General Fund was $11.6 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. The General Fund unreserved fund balance equals 17% of total General Fund expenditures, unchanged from the prior year. During the current fiscal year, the fund balance of Mohave County’s General Fund decreased by $75 thousand. This represents a .6% decrease from the fiscal year 2008 ending balance. Revenues increased by $1.8 million (3%), while expenditures stayed unchanged from the previous year. Total expenditures as a percentage of the total original budget were only 80.6% in fiscal year 2009. The increases in revenue were from property tax revenue, as a result of increased assessed values and new construction. The County addressed personnel requirements to provide services to a growing Mohave County population by giving a ½-step increase of 2.5%. These increases, netted against a reduction in personnel from a hiring freeze, resulted in a less than 1% decrease in personnel costs. Other costs had similar minor differences. The Road Fund had a total fund balance of $10.2 million, of which $288,650 is reserved for inventories and $9.9 million is unreserved and will be used for road maintenance. The net increase in unrestricted fund balance during the current year in the Road Fund was $.9 million. The increase results from fewer road projects completed in this fiscal year than the amount of funds collected. The balance reflects funds available for ongoing road projects of the County. The Flood Control Fund - fund balance increased by $4.9 million. The majority of revenue for this fund comes from secondary taxes, which increased due to the rise in assessed values, as previously discussed. Also, an intergovernmental agreement with the City of Kingman brought in $.4 million. The expenses remained unchanged from the prior year. The Scenic Debt Service Fund had an ending fund balance of $1.1 million. This balance is comprised of early payments from special assessments. The fund balance decreased by $107,745. The County Capital Improvement Fund had an ending fund balance of $66 million. This was a decrease of $17 million from the prior year. The majority of the decrease results from construction costs totaling $20.3 million related to various projects including the County Jail, the Development Services building, and various other building projects, along with transfers out for debt service payments of $6.8 million. These were offset by tax revenue of $6.4 million, investment earnings of $1.8 million and transfers in from other governmental funds of $1.8 million. The Other Governmental Funds had a combined fund balance of $32.9 million at year-end. This was a net increase of $6.3 million from the prior year. The increase is primarily from transfers in exceeding transfers out by $10.2 million, net of excess expenditures over revenue of $3.9 million. Comparing the prior year to the current year, the increase in revenues was a result of a $2.9 million increase in property tax revenues net of a decrease in grant revenues. This, coupled with a $5.5 million increase in expenditures from the prior year, resulted in net excess of expenditures over revenues of almost $4 million, versus net revenue over expenditures of $.3 million in 2008. In the prior year, there was a net transfer in of $3.7 million. This year the net transfer in was $10.2 million. The difference was a new transfer in from the County Capital Improvement Fund for the jail debt service payment of $5 million. There was also a reduction of transfers out for a one-time transfer to the capital projects fund of $1 million from the Probation Fee Fund for a building remodel and $.5 million from court automation in 2008. 11 Proprietary funds Reports for Mohave County’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. In response to the economic downturn, County departments cut expenses wherever possible. Even with these measures, some funds reflected in the statements show decreases to net assets. Statement of Net Assets-Business-type Activities - Net assets for all enterprise funds increased $.8 million. At the end of the year, the unrestricted net assets of the water companies and other enterprise funds, which includes park services, was $3.3 million. The increase of $.3 million in unrestricted net assets and $.5 million in invested in capital assets, was due to a capital contribution from a Governmental Reserve Fund to the G.V.I.D. Fund of $1 million. All the funds except the Landfill Fund showed a net loss before contributions and transfers. The Landfill Fund’s net assets increased by $.23 million. The increase was smaller than usual due to increased expenses for waste tire disposal and closure/postclosure costs, due to expanded capacity. The accumulated net assets are restricted and will be used for future expansion, as well as closure and postclosure costs. Governmental Activities-Internal Service Funds - Net assets for the internal service funds decreased by $.3 million. The decrease was from an Employee Benefit Trust Fund (EBT) loss of $1 million, offset by small increases in the other funds. The investment in capital assets, net of related debt decreased due to depreciation expense exceeding purchases in the current year, primarily in the Motor Pool Fund. Statement of Revenues, Expenses, and Changes in Fund Net Assets-Business-type Activities - The only difference between this statement and the Statement of Activities-Business type discussed previously on page 10, is the presentation. The expenses are broken out in more detail on this report and the revenues are shown as either operating or non-operating. As previously discussed, the majority of the increase in net assets was due to capital contributions in the G.V.I.D. Fund. Statement of Revenues, Expenses, and Changes in Fund Net Assets-Governmental Activities Internal Service Funds - Total Internal Service Funds operating expenses decreased $1.2 million or 5% from last year, while revenues decreased $2 million or 9.5%. Investment income decreased in all funds, by approximately $.5 million. However, the largest decrease in revenue was in the EBT Fund. This decrease was due to claims experience and expenses exceeding revenue during the year. Rates have not increased in the trust fund for two years. In the prior year, the EBT received $2 million in excess charges reimbursement from its insurance carrier. No significant claims reimbursements were received this year. The other internal service funds reflected small increases in net assets. General Fund Budgetary Highlights Revenues: The General Fund revenue was below the total amount budgeted by $ 3.6 million (4.8 percent). Although the 2009 budget reflected a 2 percent decrease in budgeted revenues from 2008, it was still overly optimistic due to the economic downturn. While actual revenues were above the previous year’s total by $1.8 million, they were still below budgeted expectations. Expenditures: Differences between the original budget and the final amended budget line items resulted from moving expenditures between departments and categories of budget. There was net decrease of $4,400 in total expenditures, which resulted from an increase in split-funded salaries from the General Fund to Other Governmental Funds. Total actual expenditures were below budgeted expenditures by $16.7 million, which was comprised mostly of unspent contingency funds. Actual expenditures remained substantially unchanged from 2008. Variances between actual revenues, expenditures, and final budgeted amounts will be discussed below for all significant differences, as related to the schedule in required supplementary information on pages 55-56. Revenues: Overall, revenues fell short of the budgeted amounts for all categories except fines and forfeits and miscellaneous revenues. Court fines increased by $123 thousand due to additional fees charged and an increase in court cases. Miscellaneous revenue exceeded budgeted because items such as cancelled warrants, auction proceeds, and Community Facilities District (CFD) fees are not budgeted. All major revenue sources were lower than expected. Intergovernmental revenue, a major revenue source, was under-budgeted by $1.7 million. This was primarily due to major declines in sales tax and auto lieu, which were under budget by $4.1 million. This decease was partially offset by the federal PILT revenue, which was unexpectedly fully funded with an additional $2.4 million. The charges for services variance of $1 million is due to the economy, especially the construction industry and real estate decline, and is reflected primarily in recorder fees and planning and zoning fees. 12 Expenditures: Expenditures were less than budgetary estimates by $16.7 million. Of the County contingency budget of $13.1 million, $.6 million was transferred to other departments and $12.5 million remained unused. There was an additional $1.7 million excess budget due to personnel vacancies. As a hedge against the declining economy, the Board of Supervisors have put in place a hiring freeze on most vacant positions. In addition to vacant positions, the following departments had these specific savings: General Administration had lower than budgeted legal expense and did not complete some budgeted projects, totaling $.9 million. The Development Services and Building Inspection departments had excess budget of $.6 million from not outsourcing the plans review function. The remaining balance of available budget is scattered throughout the other departments in supplies and other services. Actual expenditures increased over the prior year by $187,493, or less than 1/2%. Most departments were able to maintain expenses at the prior year level. The employees were given a 2.5% merit increase along with increased costs of benefits. These increases were offset by attrition due to the hiring freeze. Capital Asset and Debt Administration Capital assets – Mohave County’s investment in capital assets for its governmental and business-type activities as of June 30, 2009 amounts to $179 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, water systems, improvements other than buildings, machinery and equipment, park facilities, roads, highways, and bridges. The increase in capital assets of $16.4 million (net of depreciation) resulted from the following major projects and purchases: Mohave County Jail, Development Services building, Beaver Dam Bridge, G.V.I.D. arsenic removal system, road additions, and the purchase of additional fleet vehicles. Capital Assets, net of accumulated depreciation As of June 30, 2008 2009 Increase % (Decrease) Change Governmental activities Capital assets, not being depreciated $ Capital assets, being depreciated Total governmental assets 34,198,621 $ 113,419,567 $ 53,101,816 $ 110,452,747 147,618,188 $ 1,668,990 $ 163,554,563 $ 1,630,859 $ 18,903,195 55.27% (2,966,820) -2.62% 15,936,375 10.80% Business-type activities Capital assets, not being depreciated $ Capital assets, being depreciated Total business-type assets 13,776,318 $ 14,275,766 15,445,308 $ 35,867,611 $ (38,131) -2.28% 499,448 3.63% 15,906,625 $ 461,317 2.99% 54,732,675 $ 18,865,064 52.60% Total governmental and business-type activities Capital assets, not being depreciated $ Capital assets, being depreciated Total capital assets 127,195,885 $ 163,063,496 124,728,513 $ 179,461,188 $ (2,467,372) -1.94% 16,397,692 10.06% Major capital asset events during the current fiscal year include the following:     The Beaver Dam Bridge project is still in process with $2 million spent to date and an estimated $5.9 million additional cost to complete. The Golden Valley Improvement District spent $1 million to complete an arsenic removal system. FaulknerUSA continued work on the County Correctional Facility with expenditures of $15.5 million for the year. The project is scheduled for completion in the summer of 2010 with total estimated expenditures of $70 million. The County replaced 39 aging vehicles from the fleet at a total cost of $1.2 million. Twenty-one vehicles were purchased using general government funding, two from the General Fund, two from Road funds, one from Flood Control, twelve from Other Governmental funds and one from business-type funds. 13  The County is building a Development Services building behind the current Public Works building to house various departments including Public Works, Flood Control, Planning and Zoning, and Environmental Health. A total of $2.5 million has been spent and an additional $2.4 is estimated to complete the building. The project is scheduled for completion in the spring of 2010. The 55% increase to governmental activities capital assets not being depreciated reflects an additional $19.6 million in costs added to construction in process (as discussed above) less $1.5 million completed projects transferred, plus $.9 million additions to land. The projects transferred were the G.V.I.D arsenic removal and Ranch Palo Verde road project. Upon completion, the assets were reclassified as depreciable assets. Notes 5 and 6, on pages 38-39 of this report, contain additional information on Mohave County’s capital assets. Long-term liabilities - At the end of the current fiscal year, Mohave County had total long-term liabilities outstanding of $73.2 million. Of this amount, $59.9 million is related to construction projects and special assessment debt, backed as follows: $62.1 million of unspent proceeds and reserves, $16.3 million backed by buildings of the government used as collateral for Beneficial Interest Certificates issued and $1.9 million is special assessment debt for which the government can sell the taxpayer’s property, to cover the debt, in the event of default by the property owners subject to the assessment. The remainder of Mohave County’s long-term liabilities are comprised of claims and judgments payable, landfill closure and postclosure care costs payable, and compensated absences payable incurred during normal operations. For details see note 8. State statutes limit the amount of general obligation debt a government entity may issue to 6% of its total secondary assessed valuation, without taxpayer approval, and up to 15% with the approval of a majority of taxpayers. The debt limitation for Mohave County for fiscal year 2008/2009 was $194 million (6% of $3.2 billion secondary assessed value). Mohave County does not have any outstanding general obligation debt and therefore has its full debt limit capacity available for future needs. Note 8, on pages 40-44 of this report, contains additional information on Mohave County’s long-term debt. Economic Factors and Next Year’s Budgets and Rates Population growth has leveled off, but there are still significant service demands for the existing population. A declining economy creates additional costs and additional demand for public services. The revenue trend for governments is declining. This decline is predicted to continue for the next year or two. All of these factors were considered in preparing Mohave County’s budget for the 2010 fiscal year. In an effort to keep expenses down and avoid layoffs, the County has not budgeted any step or cost of living increases for FY 2010 and will continue to reduce the labor force through attrition. The unemployment rate for Mohave County was 8.9% in June 2009, which is an increase from an average rate of 5.1% in 2008. The unemployment rate in Mohave County exceeded the state’s unemployment rate of 8.7% and compares favorably to the national average rate of 9.7%. The rates within the state vary greatly and continue to climb. In December 2009, Mohave County’s rate was at 10.3% while the state average was 9.1% and the Federal average was 10%. The highest rate in the state was 19.5% in Yuma County with the lowest rate being 7.2% in Cochise County. Requests for Information This financial report is designed to provide a general overview of Mohave County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Mohave County Finance P.O. Box 7000 Kingman, AZ 86402-7000 14