COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 425 10TH STREET, DOUGLAS, ARIZONA 85607 Telephone (520) 417-7333 Fax (520) 417-7162 THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2017 Robert Uribe Mayor Councilmembers Danny Morales Ken Nelson Donald Huish Patricia Lopez Ivan Huish Fernando Betancourt Jim Russell City Manager Prepared by: Finance Department THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS YEAR ENDED JUNE 30, 2017 INTRODUCTORY SECTION LETTER OF TRANSMITTAL 1 LIST OF PRINCIPAL OFFICIALS 6 ORGANIZATIONAL CHART 7 GFOA CERTIFICATE OF ACHIEVEMENT 8 FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT 9 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS 12 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 23 STATEMENT OF ACTIVITIES 25 BALANCE SHEET – GOVERNMENTAL FUNDS 27 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION 28 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES – GOVERNMENTAL FUNDS 29 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES IN THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 30 STATEMENT OF NET POSITION – PROPRIETARY FUNDS 31 STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET POSITION – PROPRIETARY FUNDS 32 STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS 33 NOTES TO BASIC FINANCIAL STATEMENTS 35 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY’S PROPORTIONATE SHARE OF NET PENSION LIABILITY – COST SHARING PENSION PLANS 75 SCHEDULE OF CHANGES IN THE CITY’S NET PENSION LIABILITY AND RELATED RATIOS – AGENT PENSION PLANS 76 SCHEDULE OF CITY PENSION CONTRIBUTIONS 78 NOTES TO PENSION SCHEDULES 79 CITY OF DOUGLAS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONTINUED) YEAR ENDED JUNE 30, 2017 SCHEDULE OF AGENT OPEB PLANS’ FUNDING PROGRESS 80 NOTES TO SCHEDULE OF AGENT OPEB PLANS’ FUNDING PROGRESS 81 BUDGETARY COMPARISON SCHEDULE – GENERAL FUND 82 NOTES TO BUDGETARY COMPARISON SCHEDULE – GENERAL FUND 84 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 85 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES 87 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – HURF FUND 89 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GRANTS FUND 90 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – POLICE GRANTS FUND 91 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – JCEF RESTRICTED COURT FUND 92 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – CAPITAL PROJECTS FUND 93 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – DEBT SERVICE FUND 94 STATISTICAL SECTION (UNAUDITED) FINANCIAL TRENDS NET POSITION BY COMPONENT 95 CHANGES IN NET POSITION 97 GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 101 FUND BALANCES OF GOVERNMENTAL FUNDS 102 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 104 CITY OF DOUGLAS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT TABLE OF CONTENTS (CONTINUED) YEAR ENDED JUNE 30, 2017 REVENUE CAPACITY TAXABLE SALES BY CATEGORY 106 DIRECT AND OVERLAPPING SALES TAX RATES 108 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY 109 PROPERTY TAX RATES – DIRECT AND OVERLAPPING GOVERNMENTS 110 PRINCIPAL PROPERTY TAXPAYERS 111 PROPERTY TAX LEVIES AND COLLECTIONS 112 DEBT CAPACITY RATIOS OF OUTSTANDING DEBT BY TYPE 114 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 115 LEGAL DEBT MARGIN INFORMATION 116 CALCULATION OF LEGAL DEBT MARGIN 118 PLEDGED-REVENUE COVERAGE 119 DEMOGRAPHIC AND ECONOMIC INFORMATION DEMOGRAPHIC AND ECONOMIC STATISTICS 121 PRINCIPAL EMPLOYERS 122 OPERATING INFORMATION FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION 123 OPERATING INDICATORS BY FUNCTION 124 CAPITAL ASSETS STATISTICS BY FUNCTION 126 THIS PAGE BLANK INTRODUCTORY SECTION THIS PAGE BLANK THE CITY OF DOUGLAS 425 10TH STREET, DOUGLAS, ARIZONA 85607 Telephone (520) 417-7333 Fax (520) 417-7162 FINANCE DEPARTMENT December 21, 2017 Mayor and City Council Citizens of the City of Douglas, Arizona The Arizona Auditor General Office requires all local government entities to file a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with the generally accepted auditing standards by a licensed certified public accounting firm with their office by March 31st of each year. Pursuant of that requirement, we hereby issue the comprehensive annual financial report of the City of Douglas, Arizona for the fiscal year ended June 30, 2017. The report consists of management’s representations concerning the finances of the City of Douglas, Arizona. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Douglas, Arizona has established a comprehensive internal control framework that is designed both to protect the government assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Douglas’ financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City of Douglas’ comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The financial statements contained herein have been audited by CliftonLarsonAllen LLP a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Douglas, Arizona for the Fiscal-Year-Ended June 30, 2017 are free of material misstatements. The independent audit involved examining, on a test basis, evidence supporting the amount and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statements presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion of City of Douglas’ financial statements for the Fiscal-Year-Ended June 30, 2017, and that they are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Douglas’ MD&A can be found immediately following the reports of the independent auditors. (1) Mayor and City Council Citizens of the City of Douglas, Arizona The City of Douglas, Arizona is required to undergo an annual single audit in conformity with the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (Uniform Guidance). Information related to this single audit, including the schedule of federal awards, findings and recommendations and auditors’ reports on the internal control structure and compliance for each major federal program required by the Uniform Guidance are included in the single audit report which is available for review at the City of Douglas, Arizona offices. This report includes all funds of the City of Douglas, Arizona. The City of Douglas, Arizona provides a full range of services that includes police and fire protection; emergency medical services; water, sewer and sanitation services; the construction and maintenance of highways, streets, and infrastructure; recreational activities including an aquatic center, library, visitor center and cultural events. In addition to general government activities, the City of Douglas, Arizona reports one business-type discretely presented component unit Rancho La Perilla Apartments. Additionally, the City reports the golf course Municipal Property Corporation as a blended component unit of the City. Profile of the City The City of Douglas is located in Southeastern Arizona 117 miles southeast of Tucson on the U.S./Mexico border. Although it has a population of 16,897 people, it serves a commercial market of approximately 160,000. Agua Prieta, Sonora, Mexico (just across the international border from Douglas) is a part of our market and has a population of approximately 125,000. Our two cities share an interdependent economy and culture. Government Structure The Douglas City government is comprised of a Mayor and six Council members, elected by City residents for four year terms. The Mayor is elected at-large, which means that registered voters from all City wards cast their ballots for the mayoral candidates. Council members are elected by registered voters from their respective wards. The Mayor and Council members have equal voting power to create, pass, or disapprove local laws, ordinances, and resolutions that govern the City. The Mayor Pro Tem is appointed by the Mayor. The City Manager, who is appointed by the City Council, is responsible for the overall operation and supervision of the government functions within the policy directives of the City Council. As the administrative head of the City government, he/she is responsible for the appointment and dismissal of all employees, except for the City Magistrate, City Clerk, City Treasurer, and City Attorney who are appointed by the Mayor and Council. Economic Condition and Outlook The City’s economy is primarily based on the commercial exchange with Mexico. The Douglas/Agua Prieta connection is very strong with the coordinated efforts of both local governments for the expansion of the existing and development of a new commercial port of entry. The City’s major employers consist of governmental entities such as Customs and Border Protection, Arizona State Prison Complex, Douglas Unified School District, Cochise College and the City of Douglas. Private and major employers in our City include Advanced Call Center Technologies and Wal-Mart Stores. According to the Cochise College for Economic Research the City’s unemployment rate at the end of June 2017 was at 7.2%, which is above the national and state unemployment rates of 4.9% and 5.2% respectively. (2) Mayor and City Council Citizens of the City of Douglas, Arizona Major Initiatives The City Mayor and Council continue to pursue the development of a new commercial port of entry. The existing port of entry lacks the processing capacity for the existing demand. The existing infrastructure is also inefficient to process commercial trucks. By building a new commercial port at a separate location outside of City traffic, commercial trucks can more securely cross their products, while at the same time increasing the personal traffic processing in the existing port once commercial operations are moved. The City along with the assistance of its binational consultant have made great strides in the development of a new port as well as bringing much needed security improvements and modernization to the existing port. This year, Congresswoman Martha McSally helped to secure funding for a feasibility study at the port, where the awarded firm will recommend upgrades and possible expansion of the facility. The building in Douglas was built in 1933 with most recent renovations done in 1993. In addition, the City has garnered support throughout the region supporting a two port solution that included the Mexican authorities, our County and State government and of course our Mayor and Council along with local business groups. This year the City made approximately $2 million in capital improvements. Most notably, the City began its paving projects with the assistance of CDBG grant funding at the old railroad addition area. The City chip-sealed various streets and added curbing and sidewalk for total investment of $518,684. The parks division also received a lift with the addition of LED lighting at the Airport Park soccer field. The lighting allows leagues to set up games day or night and grants the opportunity for tournaments that can be hosted in our City. Total investment for the lights was $172,337. There was also $738,478 investment in City vehicles. Fire obtained two ambulances and a wildland vehicle, police acquired 3 new patrols, transit acquired a new 30 passenger bus and a supervisor vehicle and streets obtained a bucket truck, chip spreader and a dump truck. The rest of the capital improvements came from smaller equipment purchases and building improvements. With the stand alone Emergency Department now open in Douglas, our EMS division developed an interfacility division that transports patients from our ER to higher level of care in the area. The addition of the ER was crucial as it gives residents the care within our City as opposed to having to travel to Bisbee, about 23 miles away. In order to accomplish this, EMS added two new ambulance units this year and will be adding additional personnel to accomplish more transports through the interfacility division. The Fire division also added a Type 6 wildland vehicle that can help assist the state with resources to nearby fires and receive full reimbursement for our costs. Along with $121,433 in additional capital equipment added the Fire and EMS division placed into service two new gurneys, new jaws of life, SCBA system, cardiac monitors and new hazmat equipment. The transit division known as Douglas Rides continues to grow its program. Starting in August of 2017 transit launched a new route that will connect Douglas, Bisbee, Sierra Vista and eventually Benson. The City partnered with SEAGO and the Legacy Foundation to develop this route, by first initiating a study revealing a great need in Cochise County for transportation around the area for educational, medical and job related needs. The City added a new 30 passenger bus for this route and also added a supervisor van to the fleet. The City also installed new benches and shelters throughout the City adding to the existing stops and replacing old and worn out shelters. (3) Mayor and City Council Citizens of the City of Douglas, Arizona With a fresh new logo, the City revamped its marketing strategy, beginning with its website. The website was newly designed with a fresh new look that reflects a community that is family oriented, vibrant and culturally diverse. The site is easy to navigate and is able to inform and serve community needs with the click of a mouse. The City also heavily established its social media presence and is being followed by more than 1,400 users. A lot of residents have reported that they feel more informed with the City posting information almost daily. This year the City added two new events that included a Christmas Lighting event, and a Jazz Festival. Both of these events were successful and in line with the Mayor and Council’s direction to bring more community oriented events to the City. These events will now hosted by the City on an annual basis. Upcoming Year It’s expected that the City will begin construction of the expansion of its wastewater treatment plant in early 2018. The expansion is Phase II of this project to increase its treatment capacity from 2.0MGD to 2.6MGD. The City is able to do this in partnership with the Border Environment Cooperation Commission/NADBank and the Water Infrastructure Finance Authority. The City obtained a $7.4 million dollar grant from the NADBank and also a $5,500,000 loan from WIFA. Once the expansion is completed, the City, with the assistance of a $6.4 million dollar grant from USDA, will begin to install sewer in the Bay Acres Colonia, which is a development that is located northeast right outside the City’s limits. Doing so will eliminate failing septic tanks within the area and avoid environmental concerns as well as add more customers to the expanded treatment plant. The Sanitation division is set to begin Phase I in January 2018, their conversion to automated garbage pickup. The Mayor and Council approved this system that allows the City to provide service in a more cost efficient manner while also protecting our valued City employees from the hardships of manual pickups. Once the City is fully automated, we intend to pursue out of City limits customers that currently lack a garbage pickup service as well as service more commercial customers in the area. Long-Term Financial Planning With the establishment of written financial policies, the City has set financial goals and measures. We established reserve levels and are currently meeting all required levels at this time. The GF fund balance reserve requirement is 30% of revenues and we are currently exceeding that at 50%. We are also meeting 45 days of expense operations reserve, the 10% of average revenues for the past five years, capital (pay-as-you-go) reserve and debt reserve of one year of general government debt service obligations. Although the U.S. economy is slowly growing, our local economy has seen some regression. Local sales taxes decreased this year by 5%. The strength of the dollar has made the peso weaker, and as a result purchasing power for our visitors coming to shop from Mexico is reduced. We are also concerned about the state of our public safety retirement plan. Although new laws have passed this year that would place new hires in a more sustainable retirement plan, our current beneficiaries are seriously underfunded. Our current police unfunded liability is at 33% for police and 28% for fire as of June 30, 2016. The City’s self-funded health insurance plan did not have a good year. This year the City paid out $227,788 more in excess claims than budgeted. This is due to large claims paid out as well as overall rising health care costs. This result will affect our budgets for next year and also the coverage options offered to our employees. (4) Mayor and City Council Citizens of the City of Douglas, Arizona Although our fund balance is currently healthy, our revenues are struggling. The City has carefully managed expenses and property sales has brought in one time revenue. However, in order to continue on a path of financial sustainability we must continue to control our costs as well as enhance consistent revenues by fostering growth and job creation. With this in mind, the City is prepared to undertake all challenges and impact the essential services to our citizens as little as possible as well it is determined to preserve our valuable workforce. Our enterprise funds continue to be stable due to the rate increases passed by Mayor and Council. The City is seeking new ways to make these funds more efficient through the use of new technology in the hopes of keeping rates stable and funding capital needs without the need for new debt. Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in financial Reporting to the City of Douglas for its comprehensive annual financial report for the fiscal year ended June 30, 2016. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgement We would like to express our appreciation to each member of the Finance Department who has assisted in the preparation of this report. We are thankful for having the Finance Committee of the City of Douglas providing their support and having them evaluate this report. And also, thanks to our independent auditors CliftonLarsonAllen LLP for their assistance in this process. Finally to the Douglas Mayor and City Council we extend heartfelt thanks for their support. It is their commitment to financial reporting excellence that allows the citizens of Douglas to be fully informed about their municipal government finances. Respectfully Submitted, Jim Russell City Manager Luis Pedroza Finance Director/City Treasurer (5) THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA LIST OF PRINCIPAL OFFICIALS YEAR ENDED JUNE 30, 2017 ELECTED OFFICIALS Mayor Councilmember Councilmember Councilmember Councilmember Councilmember Councilmember Robert Uribe Danny Morales Ken Nelson Donald Huish Patricia Lopez Ivan Huish Fernando Betancourt APPOINTED OFFICIALS City Manager City Clerk City Attorney City Treasurer City Magistrate Vacant Brenda Aguilar Juan Pablo Flores Luis Pedroza Alma Vildosola DEPARTMENT DIRECTORS Finance Director Public Works Director Police Chief Fire Chief Deputy City Manager Housing Manager Luis Pedroza Lynn Kartchner Kraig Fullen Mario Novoa Ana Urquijo Xenia Gonzalez (6) City of Douglas Organizational Chart Fiscal Year 2016-2017 Adm. Assistant II Mayor & Council Account Clerk III Economic/ Comm Director City Magistrate City Treasurer Deputy City Manager (1) HR Manager (1) Administrative Assistant I (1) Library Manager (1) Library Sp II (3) Transit Manager (1) * Transit Coordinator Dispatcher / Adm Asst I Transit Drivers (5) * Tourism Specialist (1) Housing Manager (1) Leisure Services Housing Rehab Recreation/Aqua tics Supervisor Assistant Aq Sup (1) Maintenance Tech II (1) Lead Rec Aide (1) Parks Supervisor Parks Maint. Worker (8) Cemetery Lead Worker Cemetery Worker I (1) Golf Supervisor (1) Golf Maintenance Housing Programs Specialist (1) Occupancy Specialist (1) Housing Sp for Property City Manager City Attorney City Clerk (1) Fire Chief (1) Public Works Director (1) Deputy Director (1) Adm. Assistant I Operations Supervisor (1) Building / Planning & Zoning Specialist Equipment Operator III Planning & Zoning / Code Enf Officer (1) Equipment Operator II (1) Utilities Supervisor (1) Equipment Operator I (4) Water Tech IV Equipment Mechanic III Water Tech III (1) Water Tech II (1) Finance Manager (1) Captain (3) Account Clerk III (1) Lead Engineer Procurement Specialist (1) Engineer (6) Accounting Tech (1) Firefighter (12) Accounts Payable / Payroll Sp. (1) Eq Mech. I (1) Water Tech I (4) Customer Service Rep (2) Construction Supervisor (1) IT Manager (1) Waste Water Tech Collection Tech I (2) WW Plant Operator (2) Special Pr Tech III (1) Asphalt, Streets, Curb & Sidewalk Graffiti, Traffic Signage, St t Li ht Equipment Operator IV Maintenance Tech IV (1) Equipment Operator III Maintenance Tech I (1) Special Pr Tech II (1) Finance Director (.5) Administrati ve Assistant Eq. Mech. II (2) Facilities Maintenance Tech IV (1) Bldg Maint Specialist (1) Deputy City Clerk IT Specialist Police Chief (1) Adm. Assistant II (1) Lieutenant Patrol (1) Sergeant Patrol (5) Police Officer Humane Officer (2) Police Aide (.5) Lieutenant Detective (1) Adm. Assistant I Sergeant Detective Detective (5) Detention Officer (1) Senior Dispatcher Dispatcher (6) Records Clerk (1) Adm/ Accountin g Maintenance Tech III (1) Maintenance Tech I (2) Golf Laborer (1) HVAC Tech (1) Airport Attendant (1) (7) Total FTE’s: 170.5 *not counted as FTEs (8) THIS PAGE BLANK FINANCIAL SECTION THIS PAGE BLANK CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and the City Council City of Douglas, Arizona Douglas, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Douglas, Arizona (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. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Douglas Community Housing Corporation (Rancho La Perilla Apartments). Rancho La Perilla comprises 100% of the assets and operating revenues reported in the Proprietary Component Unit. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Proprietary Component Unit, is based solely on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. (9) The Honorable Mayor and the City Council City of Douglas, Arizona 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, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Douglas, Arizona as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter As discussed in Note 5 to the financial statements, the City has elected to change its method of accounting for self-insurance claims and has created an internal service fund for the fiscal year ending June 30, 2017. A restatement was recorded for this change in accounting principle. Our opinion is not modified with respect to that matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, pension schedules, agent OPEB funding progress, and the General Fund Budget and Actual Statement as listed on 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. Supplementary and 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 combining and individual fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the 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 (10) The Honorable Mayor and the City Council City of Douglas, Arizona records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2017, on our consideration of the City of Douglas, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the City of Douglas, Arizona’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Douglas, Arizona’s internal control over financial reporting and compliance. a CliftonLarsonAllen LLP Phoenix, Arizona December 21, 2017 (11) THIS PAGE BLANK REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 This section of the City of Douglas, Arizona’s (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. We encourage readers to consider the information presented here in conjunction with additional information presented in the financial statements. FINANCIAL HIGHLIGHTS ♦ The assets and deferred outflows of resources of the City at the close of the most recent fiscal year exceed liabilities and deferred inflows of resources by $19.2 million (net position). Unrestricted net position is a deficit $15.7 million due to the recognition of the City’s net pension liability and related pension inflows and outflows. ♦ Total net position decreased by $0.4 million during the fiscal year. ♦ As of June 30, 2017, the City’s governmental funds reported a combined ending fund balance of $9.1 million. Of this amount, 62% is unassigned fund balance and available for spending at the government’s discretion. ♦ At the close of the current fiscal year, unassigned fund balance for the General Fund was $5.7 million or 39.2% of the total General Fund expenditures of $14.5 million. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are separated into three component sections: 1. Government-wide financial statements. 2. Fund financial statements and schedules. 3. Notes to basic financial statements. In addition to the basic financial statements, this report also includes other supplementary information. 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 private sector business. The statement of net position presents information on all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as useful indicators of whether the City’s financial position is improving or deteriorating. The statement of activities presents data showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs regardless of the timing of the related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal years, such as revenue from uncollected taxes or expenses from earned but unused vacation and sick leave. (12) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 Both of the government-wide financial statements distinguish City functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from those functions that intend to recover all or a significant portion of their costs from user fees and charges (business-type activities). The governmental activities of the City include general government, public safety (police, fire and emergency medical services), highways and streets, culture and recreation, and redevelopment and housing. The business-type activities of the City include water, sewer, and solid waste. The government-wide financial statements include not only the City (known as the primary government), but also a legally separate non-profit corporation - proprietary component unit. The proprietary component unit is the Douglas Municipal Housing Corporation market rate apartment complex known as Rancho La Perilla. Although legally separate from the City, the component unit is discretely presented because of its financial relationship to the City. Separate financial statements for Rancho La Parilla may be obtained at the City’s Finance Department at 425 Tenth Street, Douglas, Arizona 85607. The government-wide financial statements may be found on pages 23 - 26 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Like other state and local governments, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. All of the City funds can be divided into two categories: governmental funds and proprietary funds. Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental 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. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, the reader may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities. The City of Douglas, Arizona maintains ten individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, which is considered to be the only major fund. Data from the other nine funds are combined into a single aggregate presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of the combining statements elsewhere in this report. (13) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 The City of Douglas, Arizona adopts an annual appropriated budget for its General Fund by department. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The City adopts a budget by fund for all Special Revenue Funds with the exception of the LTAF, Golf Course MPC and Public Housing Funds. Proprietary Funds – The City 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. The City uses enterprise funds to account for the operations of the water services, sewer services and sanitation services. The Internal service fund is an accounting device used to accumulate and allocate costs among the City’s various functions. The City uses an internal service fund to account for insurance services. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements, with a portion of the change in net position being allocated to the business type activities. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Sewer, Water, and Solid Waste, which are considered to be major funds of the City. The internal service fund is presented in the proprietary fund financial statements as a separate column. Notes to Basic Financial Statements The notes to basic financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. The notes to basic financial statements may be found on pages 35 - 74 of this report. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s pension and other post employment benefit plans and the budgetary schedule of the General Fund. Required supplementary information may be found on pages 75 – 84 of this report. Combining Statements The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Government-Wide Financial Analysis Comparative data is presented on the following pages for both the governmental activities and the business-type activities along with an analysis of significant variances between the current and prior year. Net Position As noted earlier, net position may serve as useful indicators of a government’s financial position. For the City of Douglas, Arizona, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $19.2 million. (14) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 Table A-1 The City’s Net Position Governmental Activities ASSETS Current and Other Assets Capital Assets: Non-Depreciable Depreciable (Net) Total Assets DEFERRED OUTFLOWS LIABILITIES Current and Other Liabilities Non-Current Liabilities: Due Within One Year Due in More Than One Year Total Liabilities DEFERRED INFLOWS NET POSITION Net Investment in Capital Assets Restricted Unrestricted Total Net Position Business-Type Activities 2017 2016 $ 10,468,143 $ 11,124,887 1,109,474 22,007,235 33,584,852 1,586,806 22,431,805 35,143,498 6,855,268 2017 2016 7,371,868 $ 18,941,859 $ 18,496,755 1,053,409 19,724,048 29,251,173 1,009,596 20,765,031 29,146,495 2,162,883 41,731,283 62,836,025 2,596,402 43,196,836 64,289,993 5,607,546 323,174 154,649 7,178,442 5,762,195 1,316,255 1,013,546 240,228 408,496 1,556,483 1,422,042 1,660,261 37,826,018 40,802,534 1,571,865 38,117,699 40,703,110 508,897 6,421,886 7,171,011 538,045 6,747,114 7,693,655 2,169,158 44,247,904 47,973,545 2,109,910 44,864,813 48,396,765 2,546,802 1,769,863 327,068 269,822 2,873,870 2,039,685 15,748,934 615,334 5,712,000 $ 22,076,268 16,301,425 893,708 4,142,534 $ 21,337,667 16,107,618 2,385,205 (21,402,039) $ (2,909,216) 2016 Total 2017 16,236,005 2,087,831 (20,045,765) $ (1,721,929) $ 8,473,716 $ 31,856,552 3,000,539 (15,690,039) $ 19,167,052 32,537,430 2,981,539 (15,903,231) $ 19,615,738 The largest portion of the City’s net position (166%) reflects its investment in capital assets (e.g. land, buildings, and equipment), less any debt used to acquire those assets. The City uses these capital assets to provide services to its citizens; therefore, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, resources needed to repay this debt must be provided from other sources since the assets themselves cannot be liquidated for these liabilities. As of June 30, 2017 the City of Douglas, Arizona reported $31.9 million as the net investment in capital assets. Another $3.0 million of the resources are subject to external restrictions on how they may be used. Unrestricted net position is a deficit $15.7 million due to the recognition of the City’s net pension liability. The City’s net position decreased approximately $0.4 million over the prior fiscal year. Net investment in capital assets decrease $0.7 million due to the net effect of a reduction in current year debt outstanding used to acquire the assets, current year depreciation, current year capital additions and contributions and the sale of capital assets. Current year debt payments were approximately $1.4 million (including payments on capital leases). (15) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 Changes in Net Position As described above, the City’s net position overall decreased by $0.4 million during the current fiscal year. The change in the governmental activities and business-type activities are discussed on the following pages. Table A-2 Changes in Net Position Governmental Activities 2017 REVENUES Program Revenues: Fees, Fines and Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues: Property Taxes Local Taxes State Shared Revenues Grants and Contributions Not Restricted to Specific Programs Investment Income Gain on Sale of Asset Other Total Revenues $ 3,466,181 Business-Type Activities 2016 $ 3,455,517 2017 $ Total 2016 5,173,231 $ 2017 5,150,992 $ 2016 8,639,412 $ 8,606,509 4,084,183 383,742 3,661,814 2,996,541 - 400,000 - 4,084,183 383,742 4,061,814 2,996,541 595,284 5,392,733 4,367,940 585,960 5,674,723 4,565,056 - - 595,284 5,392,733 4,367,940 585,960 5,674,723 4,565,056 38,171 73,269 69,902 106,863 18,578,268 37,610 39,738 (11,611) 188,576 21,193,924 37,228 5,210,459 31,585 5,582,577 38,171 110,497 69,902 106,863 23,788,727 37,610 71,323 (11,611) 188,576 26,776,501 EXPENSES General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Interest on Long-Term Debt Water Sewer Solid Waste Total Expenses 3,463,981 10,479,931 2,649,507 2,100,889 924,901 379,124 19,998,333 3,336,212 9,678,626 2,597,146 2,057,077 922,816 414,014 19,005,891 1,902,651 1,344,495 991,934 4,239,080 1,654,307 1,353,423 1,134,665 4,142,395 3,463,981 10,479,931 2,649,507 2,100,889 924,901 379,124 1,902,651 1,344,495 991,934 24,237,413 3,336,212 9,678,626 2,597,146 2,057,077 922,816 414,014 1,654,307 1,353,423 1,134,665 23,148,286 CHANGE IN NET POSITION BEFORE TRANSFERS (1,420,065) 2,188,033 971,379 1,440,182 Transfers 232,778 CHANGE IN NET POSITION (1,187,287) Net Position - Beginning of Year NET POSITION - END OF YEAR 243,898 $ (1,721,929) (2,909,216) (232,778) 2,431,931 $ (4,153,860) (1,721,929) (243,898) 738,601 $ 21,337,667 22,076,268 (448,686) - 1,196,284 $ 20,141,383 21,337,667 3,628,215 - (448,686) $ 19,615,738 19,167,052 3,628,215 $ 15,987,523 19,615,738 Governmental Activities – Governmental activities decreased the City’s net position by $1.2 million. Key factors of the overall decrease in net position are as follows: ♦ Decrease in local sales taxes compared to last year. The $0.3 million decrease was largely due to the local economy. ♦ Decrease in the City’s capital grants and contributions from prior year. The decrease was largely due to a prior year $2.8 million asset donation related to the Chino Road extension that did not reoccur in the current fiscal year. ♦ Public Safety expenses increased due to a $0.4 million refund paid to eligible employees contributing to the PSPRS retirement system as a result of the State of Arizona’s Parker-Hall lawsuit. Additionally, the City’s PSPRS pension expense increased from prior year. (16) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 City of Douglas – Fiscal Year 2016/17 Governmental Activities Revenues Expens es 10,000 9,000 Thousands 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Gen. Gov't Public Safety Highway/St. Cult./Rec. Housing/Redev. Int. Long term Debt Program Revenues and Expenses City of Douglas Revenue by Source Governmental Activities Fiscal Year 2016/17 Charges for Services, 19% State Shared Rev., 23% Other, 2% Operating Grants, 22% Property Taxes, 3% Local Taxes, 29% Capital Grants, 2% The charts above illustrate the City’s governmental expenses and revenues by function and the City’s revenues by source. As shown, Public Safety (police, fire, and emergency medical services) is the largest function in expenses (50%), followed by General Government (20%), Highway/Streets (13%), Culture/Recreation (11%), Redevelopment and Housing (5%) and the remaining attributable to Interest. General revenues such as property taxes, state shared revenues, and sales taxes are not shown by program but are effectively used to support program activities of the City as a whole. For governmental activities as a whole, sales tax revenues is the largest source of funds (29%) followed by state shared revenues (23%) as illustrated in the chart above. (17) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 Business-Type Activities – Business-type activities increased the City’s net position by $0.7 million. The increase in net position was primarily the result of salary savings on vacant positions in the water, sewer and sanitation funds, as well as the rate increases for utilities. City of Douglas 2016/17 Business-type Activities Expens es Revenues 3,000 Thousands 2,500 2,000 1,500 1,000 500 Water Sewer Solid Waste Program Revenues and Expenses City of Douglas Revenue by Source Business-type Activities Fiscal Year 2016/17 Solid Waste Charges, 24% Sew er Charges, 36% Investment Income, 1% Water Charges, 39% As shown in the chart above, the largest of the City’s business-type activities are water and sewer utilities. Sewer Fund operating expenses were $1.3 million, with Water operating expenses at $1.9 million, followed by Solid Waste at approximately $1.0 million. For this fiscal year, the change in net position in the Water Fund was a positive $52,315 while the change in net position in the Sewer Fund was a positive $533,887 and the Solid Waste Fund was a positive $194,957. The positive change in net position in the Enterprise Funds was due to revenues exceeding expenses. Revenues are budgeted to exceed expenses as the utility rate includes a capital replacement component. (18) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental Funds – The focus of the City’s governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Douglas, Arizona’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. As of the end of the current fiscal year, the City’s governmental funds reported a combined ending fund balance of $9.1 million, a slight decrease of $0.7 million from the prior year. Revenues for governmental funds overall totaled approximately $18.4 million for the fiscal year ended June 30, 2017 which represents an increase of less than 1% from the prior fiscal year. This increase is primarily due to increases in intergovernmental revenues, offset with a decrease in sales tax as a result of a decline in economic factors, including the strength of the dollar making the peso weaker. As a result, purchasing power for visitors coming from Mexico is reduced. The General Fund is the chief operating fund of the City. At the end of the fiscal year, the unassigned fund balance of the General Fund was $5.7 million. As a measure of the General Fund’s liquidity, it may be useful to compare the fund balance to total fund expenditures. Unassigned General Fund balance represents 39.2% of the total General Fund expenditures of $14.5 million. The fund balance of the City’s General Fund decreased by $0.5 million. The decrease was largely due to decreased local sales taxes as compared to prior year, the PSPSRS refund paid out to eligible plan participants, and transfer for debt service payments. The Nonmajor Governmental Funds decrease of $0.2 million was largely due to the Capital Projects Fund spending a large portion of its carryover funds offset by highway user revenues exceeding current year expenditures. 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, unrestricted net position for the Water Fund was $3.0 million, Sewer $1.5 million, and Solid Waste $1.2 million. The total increase in net position for the enterprise funds was $0.8 million largely due to revenues exceeding expenses as the utility rate includes a capital replacement component. Expenses increased in all three funds due to an increased pension expense for the Arizona State Retirement System. (19) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 GENERAL FUND BUDGETARY HIGHLIGHTS The City did not revise the budget during the current fiscal year. Actual revenues were less than the budget by $0.2 million and actual expenditures were more than budget by $0.4 million. The actual revenues were less than budget largely due to local sales tax collections and state sales tax not coming in as projected offset by more than expected charges for service revenues related to increased fire response reimbursements The City exceeded the expenditures budget due to over expenditures in the Airport, Fire, and Emergency Medical Service expenditures. The Fire deficit was largely due to PSPRS retirement refunds paid to eligible participants and additional overtime expenses required for new emergency room transports. The Airport deficit was largely due to significant expenditures of a State of Arizona grant for airport improvements. The Emergency Medical Service departments had a deficit due to additional overtime expenses for ER transports to Bisbee the first half of the year and the interfacility transports the second half when the new ER in Douglas was installed. Golf course operations exceeded budget largely due to the City making purchases for needed chemicals and seed for the golf course’s annual seeding program. It also funded the MPC’s annual liability and worker’s compensation insurance amounts. Although the MPC has control of the golf course operations, it is still unable to fully fund the entire operating expenses of the course. The legal level of budgetary control is at the departmental level in the General Fund; however, the City Council monitors the General Fund as a whole and the City Manager has the authority to make budget transfers between departments in the General Fund. The City maintains reserves for any expenditures in excess of the total General Fund budget. The reserves are monitored by City Council and the City Manager. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City’s capital assets for its governmental and business-type activities as of June 30, 2017 amount to $43.9 million (net of accumulated depreciation). Capital assets include land and improvements, infrastructure, buildings and improvements, machinery equipment, and vehicles, and construction in progress. Table A-3 Capital Assets (Net) Governmental Activities Land and Land Improvements Streets and Storm Drains Buildings and Improvements Water System Wastewater System Machinery, Equipment and Vehicles Construction In Progress Total Capital Assets $ 2017 2,723,139 9,150,256 7,948,950 3,250,200 44,164 $ 23,116,709 $ Business-Type Activities 2016 2,857,921 9,303,781 8,229,020 3,106,393 521,496 $ 24,018,611 (20) 2017 $ 4,652,897 6,303,660 8,231,290 536,201 1,053,409 $ 20,777,457 Total 2016 $ 4,823,654 6,704,901 8,571,463 665,013 1,009,596 $ 21,774,627 $ 2017 2,723,139 9,150,256 12,601,847 6,303,660 8,231,290 3,786,401 1,097,573 $ 43,894,166 $ 2016 2,857,921 9,303,781 13,052,674 6,704,901 8,571,463 3,771,406 1,531,092 $ 45,793,238 CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 Major capital asset events during the current fiscal year include the following: Governmental Activities ♦ Completion of the railroad curb and draining project of $519,000. . ♦ Purchase of 2 ambulances for $274,000. ♦ Purchase of a 30 passenger bus for $145,000. . ♦ Sulpher Springs building improvement totaling $166,000. Business-type Activities ♦ Wastewater treatment plant phase II construction for $49,000. For government-wide financial statement purposes, capital assets were depreciated from acquisition date to the end of the current fiscal year. Governmental fund financial statements record capital asset purchases as expenditures. Additional information on the City of Douglas, Arizona’s capital assets may be found in the Notes to the Basic Financial Statements in note 3.A.4. on pages 48 - 50 of this report. Debt Administration At the end of the fiscal year, the City of Douglas, Arizona had total long-term obligations outstanding of $12.0 million. The current year decrease was the net result of required principal due on outstanding debt, offset by additional loans drawn for a solar panel project. The State constitution imposes certain debt limits on the issuance of General Obligation Bonds at six percent (6%) and twenty percent (20%) of the secondary assessed valuation of the City. The City has not issued any general obligation bonds. Therefore, the City’s available debt margin at June 30, 2017 is $3.0 million in the 6% capacity and $10.0 million in the 20% capacity. Table A-4 Outstanding Debt Loans Payable Capital Lease Total Outstanding Debt $ $ Governmental Activities 2017 2016 6,110,000 $ 6,620,000 899,091 1,162,606 7,009,091 $ 7,782,606 $ $ Business-Type Activities 2016 2017 4,937,620 $ 5,263,184 90,903 210,018 5,028,523 $ 5,473,202 Total 2017 2016 $ 11,047,620 $ 11,883,184 989,994 1,372,624 $ 12,037,614 $ 13,255,808 Additional information on the City’s debt can be found in Note 3.E. on pages 53 - 55. (21) CITY OF DOUGLAS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2017 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The following factors were considered when preparing the 2017-18 budgets: ♦ A conservative economic forecast and limited revenue growth. An almost $1 million increase in revenue in the GF due to $0.4 million in one time revenue from an expected property sale and a $0.6 million increase in ambulance revenue due to the expansion into interfacility transports from the Douglas ER to higher level of care facilities. ♦ Initiate the wastewater treatment plant expansion project for a budgeted amount of $7,475,697. ♦ Budget almost $1.3 million in streets work. ♦ Implement a sanitation automated service system picking up trash curbside instead of the alleys. ♦ Consolidate our Municipal Court and partner with the County Justice Court to service all City court services. ♦ Increased contributions for Public Safety Retirement for police and fire. Direction from Mayor and Council continues to be the expansion of our port of entry with a two port solution. The City has a consultant on our budget to assist with binational relations with different government and private agencies and try and to gain support for our project. Our streets will be addressed this year with approximately $1.3 million investment. Mayor and Council recognize that much more is needed to address all streets, but this investment will help preserve our arterial streets and address poor conditioned streets as well. Starting in January 2018 the City will implement an automated garbage pickup program that will bring efficiencies and cost savings to our program. The Public Safety retirement system will require a small increase in our annual contributions, but also this year is the beginning of the new tiered retirement program for officers that are hired after July 1, 2017 that in the future will bring much needed relief to the fund. The Mayor and Council’s direction is to continue to market our City as a safe place to visit and a community oriented place where we enjoy a pleasant climate and great place to live. This marketing plan is geared to grow our City population and our business sector as well. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those interested in the government’s finances. If you have any questions about this report or need additional financial information, contact: City of Douglas Finance Department 425 Tenth Street Douglas, Arizona 85607 520-417-7333 (22) THIS PAGE BLANK BASIC FINANCIAL STATEMENTS CITY OF DOUGLAS, ARIZONA STATEMENT OF NET POSITION JUNE 30, 2017 Governmental Activities ASSETS Cash and Investments Receivables, Net: Accounts Receivable Taxes Receivable Intergovernmental Receivables Due from Component Unit Internal Balances Inventories Prepaid Items Other Assets Restricted Assets Capital Assets: Non-Depreciable Depreciable (Net) Total Assets $ $ 401,519 866,152 873,551 719,637 (75,758) 38,638 100,013 30,904 DEFERRED OUTFLOWS OF RESOURCES Pension Related LIABILITIES Accounts Payable Accrued Wages and Benefits Insurance Claims Payable Interest Payable Intergovernmental Payable Customer Deposits Payable Unearned Revenue Due to Primary Government Noncurrent Liabilities Due Within One Year Due in More Than One Year Net Pension Liability Total Liabilities DEFERRED INFLOWS OF RESOURCES Pension Related NET POSITION Net Investment in Capital Assets Restricted for: Firefighters Injured in Line of Duty Transit - Making the Connection Program Other Federal and State Grants Court Administration Public Safety Highways, Streets and Local Transportation Redevelopment and Housing Debt Service Repair and Replacement Unrestricted Total Net Position 7,513,487 Primary Government Business-Type Activities $ See accompanying Notes to Basic Financial Statements. (23) 7,274,451 Total $ 14,787,938 508,173 75,758 615,334 909,692 866,152 873,551 719,637 38,638 100,013 646,238 1,109,474 22,007,235 33,584,852 1,053,409 19,724,048 29,251,173 2,162,883 41,731,283 62,836,025 6,855,268 323,174 7,178,442 518,405 436,090 238,590 51 32,187 90,932 - 94,046 10,512 55,483 80,187 - 612,451 446,602 238,590 55,483 51 112,374 90,932 - 1,660,261 6,693,347 31,132,671 40,802,534 508,897 4,631,950 1,789,936 7,171,011 2,169,158 11,325,297 32,922,607 47,973,545 2,546,802 327,068 2,873,870 16,107,618 15,748,934 31,856,552 138,488 20,000 142,306 18,109 134,902 1,297,041 634,359 (21,402,039) (2,909,216) 481,243 134,091 5,712,000 22,076,268 138,488 20,000 142,306 18,109 134,902 1,297,041 634,359 481,243 134,091 (15,690,039) 19,167,052 $ $ Component Unit Proprietary Type Component Unit $ 21,781 508 22,744 14,212 367,114 265,000 3,087,703 3,779,062 72,630 2,489 15,230 14,635 20,745 19,901 719,637 57,916 4,806,766 5,729,949 (1,511,979) $ (438,908) (1,950,887) (24) CITY OF DOUGLAS, ARIZONA STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Program Revenues Functions/Programs Primary Government Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Interest and Fiscal Charges Total Governmental Activities Business-Type Activities: Water Sewer Solid Waste Total Business-Type Activities Total Primary Government Component Units: Proprietary Type Component Units Fee, Fines and Charges for Services Expenses $ 3,463,981 10,479,931 2,649,507 2,100,889 924,901 379,124 19,998,333 $ 1,902,651 1,344,495 991,934 1,538,549 1,603,762 21,666 302,204 3,466,181 Capital Grants and Contributions Operating Grants Contributions $ 2,031,524 1,941,864 1,199,843 199,005 859,416 2,109,292 916,470 4,084,183 $ - 130,827 19,615 148,757 84,543 383,742 - $ 4,239,080 24,237,413 $ 5,173,231 8,639,412 $ 4,084,183 $ 383,742 $ $ 690,946 690,946 $ $ 518,273 518,273 $ $ - $ $ - General Revenues Taxes: Sales Taxes Property Taxes Franchise Taxes State Revenue Sharing State Sales Tax Revenue Sharing Auto Lieu Tax Revenue Sharing Grants and Contributions not Restricted Investment Income Gain on Sale of Asset Other Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning Net Position - Ending See accompanying Notes to Basic Financial Statements. (25) Net (Expense) Revenue and Changes in Net Position Primary Government Component Unit Governmental Activities $ Business-Type Activities (1,595,600) (7,997,138) (369,792) (1,714,142) (8,431) (379,124) (12,064,227) Total $ $ 128,873 597,369 207,909 (1,595,600) (7,997,138) (369,792) (1,714,142) (8,431) (379,124) (12,064,227) 128,873 597,369 207,909 934,151 934,151 (12,064,227) Proprietary Type Component Unit 934,151 (11,130,076) (172,673) (172,673) 5,097,699 595,284 295,034 2,029,912 1,518,751 819,277 38,171 73,269 69,902 106,863 232,778 $ 10,876,940 (1,187,287) (1,721,929) (2,909,216) 37,228 (232,778) $ (195,550) 738,601 21,337,667 22,076,268 5,097,699 595,284 295,034 2,029,912 1,518,751 819,277 38,171 110,497 69,902 106,863 - $ 10,681,390 (448,686) 19,615,738 19,167,052 193 24,007 24,200 (148,473) (1,802,414) (1,950,887) $ (26) CITY OF DOUGLAS, ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2017 General Fund ASSETS Cash and Investments Receivables: Accounts Receivable Taxes Receivable Intergovernmental Receivables Due from Component Unit Due from Other Funds Inventory Prepaid Items Restricted Assets Total Assets LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES Liabilities Accounts Payable Accrued Wages and Benefits Intergovernmental Payable Due to Other Funds Unearned Revenue Customer Deposits Payable Total Liabilities $ 4,809,534 $ 394,776 864,114 491,473 719,637 10,360 38,638 100,013 7,428,545 $ Deferred Inflows of Resources Unavailable Revenue 158,979 409,204 51 90,932 659,166 Nonmajor Governmental Funds $ 2,416,284 $ 6,743 2,038 382,078 30,904 2,838,047 $ 71,754 Fund Balances Nonspendable Restricted Committed Unassigned Total Fund Balances $ See accompanying Notes to Basic Financial Statements. (27) 7,428,545 $ 7,225,818 $ 401,519 866,152 873,551 719,637 10,360 38,638 100,013 30,904 10,266,592 $ 2,204,745 195,001 (14,568) 2,385,178 $ 2,838,047 518,405 436,090 51 10,360 90,932 32,187 1,088,025 95,764 24,010 858,288 158,488 5,680,849 6,697,625 Total Liabilities, Deferred Inflows of Resources and Fund Balances 359,426 26,886 10,360 32,187 428,859 Totals 858,288 2,363,233 195,001 5,666,281 9,082,803 $ 10,266,592 CITY OF DOUGLAS, ARIZONA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2017 $ Total Fund Balances for Governmental Funds 9,082,803 Total net position reported for governmental activities in the statement of net position is different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Those assets consist of: $ Land Construction in Progress Land Improvements Streets and Storm Drains Buildings and Improvements Machinery, Equipment and Vehicles Total Capital Assets Less: Accumulated Depreciation 1,065,310 44,164 4,880,657 21,736,374 15,769,331 19,114,967 62,610,803 (39,494,094) 23,116,709 Some of the City's property taxes and sales taxes will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 73,792 Some loans receivable through the City's housing rehabilitation program are recorded as a receivable and unavailable revenue in the City's Governmental Fund financial statements, but are recognized as revenue in the governmental-wide financial statements. 21,972 Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore are not reported in the funds. Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions 6,855,268 (2,546,802) Long-term liabilities that pertain to governmental funds, including bonds payable and net pension liabilities, are not due and payable in the current period and, therefore, are not reported as fund liabilities. All liabilities - both current and and long-term - are reported in the statement of net position. (6,110,000) (31,132,671) (899,091) (1,344,517) Loans Payable Net Pension Liability Capital Lease Payable Compensated Absence Payable (39,486,279) Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the internal service funds are included in governmental activities in the statement of net position. Internal Service Fund Net Position Less: Amount Attributed to the Business-Type Activities Total Net Position of Governmental Activities 49,079 (75,758) $ See accompanying Notes to Basic Financial Statements. (28) (26,679) (2,909,216) CITY OF DOUGLAS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2017 Nonmajor Governmental Funds General Fund REVENUES Taxes: Sales Taxes Property Taxes Franchise Taxes Intergovernmental Revenues Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Contributions and Donations Investment Income Other Total Revenues $ EXPENDITURES Current: General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Debt Service: Principal Retirement Interest on Long-Term Debt Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures 5,097,988 603,407 295,034 5,441,339 153,441 151,967 2,072,475 821,410 62,094 83,825 14,782,980 $ Net Change in Fund Balances FUND BALANCES Beginning of Year, As Restated End of Year $ See accompanying Notes to Basic Financial Statements. (29) $ 5,098,139 603,407 295,034 8,750,525 157,059 151,967 2,335,745 821,410 73,271 106,863 18,393,420 2,810,185 9,416,417 527,120 1,436,990 - 28,540 36,866 1,634,771 307,483 920,658 2,838,725 9,453,283 2,161,891 1,744,473 920,658 16,037 3,005 248,247 14,458,001 897,960 376,119 876,530 5,078,927 913,997 379,124 1,124,777 19,536,928 (1,468,487) (1,143,508) 205,432 (1,270,822) 69,902 140,482 (855,006) 1,352,879 (54,711) 1,298,168 1,558,311 (1,325,533) 69,902 140,482 443,162 (530,027) (170,319) (700,346) 324,979 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds from Sale of Capital Assets Issuance of Capital Leases Total Other Financing Sources (Uses) 151 3,309,186 3,618 263,270 11,177 23,038 3,610,440 Totals 7,227,652 6,697,625 $ 2,555,497 2,385,178 $ 9,783,149 9,082,803 CITY OF DOUGLAS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES IN THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 Net Change in Fund Balances-Total Governmental Funds $ (700,346) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. Expenditures for Capital Assets Depreciation Expense $ 1,474,235 (2,502,186) (1,027,951) Contributions of capital assets are not current financial resources and are not reflected in the governmental funds. 130,827 The statement of activities reports losses arising from the disposal of existing capital assets. Conversely, governmental funds only report a gain for proceeds received on the sale of capital assets, but do not report a loss on the disposal of capital assets. (4,778) Loan receivable recorded as revenue in the government-wide statement of net position, but not yet available. Intergovernmental Receivables - June 30, 2016 Intergovernmental Receivables - June 30, 2017 29,288 21,972 (7,316) Governmental funds report City pension contributions as expenditures when made. However, in the statement of activities pension expense is the cost of benefits earned, adjusted for member contributions, the recognition of changes in deferred outflows and inflows of resources related to pensions, and the investment experience. Pension Contributions Pension Expense 2,774,652 (2,809,137) The governmental funds report the issuance of bonds as financing sources, while repayment of bond principal is reported as an expenditure. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Interest costs are recognized as an expenditure in the governmental funds when it is due. In the statement of activities, however, interest expense is recognized as it accrues. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Proceeds from Capital Leases Repayment of Long-Term Debt (140,482) 913,997 773,515 Delinquent property taxes and sales taxes receivable will be collected subsequent to year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, reported as unavailable in the governmental funds. Unavailable Revenue - June 30, 2016 Unavailable Revenue - June 30, 2017 82,355 73,792 (8,563) In the statement of activities, compensated absences are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts actually paid). (64,962) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net loss of the internal service fund is reported with governmental activities. Net Losses of the Internal Service Fund Less: Amount Attributable to the Business-Type Activities Change in Net Position of Governmental Activities (285,786) 42,558 $ See accompanying Notes to Basic Financial Statements. (30) (243,228) (1,187,287) CITY OF DOUGLAS, ARIZONA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017 Business-Type Activities Governmental Activities Internal Service Fund Water Sewer Solid Waste Totals $ 3,626,194 $ 1,931,045 $ 1,717,212 $ 7,274,451 226,252 3,852,446 173,109 2,104,154 108,812 1,826,024 508,173 7,782,624 287,669 178,376 436,958 - 615,334 - 977 6,343,075 6,522,428 1,052,432 13,177,558 14,666,948 203,415 203,415 1,053,409 19,724,048 21,392,791 - 10,374,874 16,771,102 2,029,439 29,175,415 287,669 DEFERRED OUTFLOWS OF RESOURCES Pension Related 133,700 85,470 104,004 323,174 - LIABILITIES Current Liabilities: Accounts Payable Accrued Wages and Benefits Insurance Claims Payable Interest Payable Customer Deposits Payable Compensated Absences Capital Leases Payable Loans Payable Total Current Liabilities 44,445 8,526 14,121 29,429 45,252 79,113 220,886 14,236 881 41,362 25,900 23,468 49,815 249,008 404,670 35,365 1,105 24,858 21,153 41,088 123,569 94,046 10,512 55,483 80,187 89,873 90,903 328,121 749,125 238,590 238,590 8,408 924,491 740,513 1,673,412 14,043 3,685,008 473,386 4,172,437 576,037 576,037 22,451 4,609,499 1,789,936 6,421,886 - 1,894,298 4,577,107 699,606 7,171,011 238,590 135,311 86,500 105,257 327,068 - 5,340,448 10,246,159 162,327 15,748,934 - 99,098 79,278 2,960,141 382,145 54,813 1,509,848 1,166,253 481,243 134,091 5,636,242 49,079 $ 8,478,965 $ 12,192,965 $ 1,328,580 22,000,510 ASSETS Current Assets: Cash and Cash Equivalents Receivables, Net: Accounts Receivable Total Current Assets Noncurrent Assets: Restricted Cash and Cash Equivalents Capital Assets: Non-Depreciable Depreciable (Net) Total Noncurrent Assets Total Assets Noncurrent Liabilities: Compensated Absences Payable Loans Payable Net Pension Liability Total Noncurrent Liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES Pension Related $ 287,669 NET POSITION Net Investment in Capital Assets Restricted for: Debt Service Repair and Replacement Unrestricted Total Net Position Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities See accompanying Notes to Basic Financial Statements. (31) 75,758 $ 22,076,268 $ 49,079 CITY OF DOUGLAS, ARIZONA STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET POSITION PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2017 Business-Type Activities Water Sewer Solid Waste Totals $ 1,953,677 1,953,677 $ 1,827,101 1,827,101 $ 1,199,661 1,199,661 $ 4,980,439 4,980,439 1,380,872 476,198 1,857,070 691,990 581,048 1,273,038 908,183 65,520 973,703 2,981,045 1,122,766 4,103,811 96,607 554,063 225,958 876,628 NONOPERATING REVENUES (EXPENSE) Impact Fees Intergovernmental Revenue Investment Income Interest Expense Miscellaneous Nonoperating Revenues Total Nonoperating Revenues 34,478 18,293 (28,242) 43,369 67,898 39,518 10,847 (62,830) 75,245 62,780 Income / (Loss) Before Transfers 164,505 616,843 232,589 (112,190) (82,956) (37,632) (232,778) 52,315 533,887 194,957 781,159 8,426,650 11,659,078 1,133,623 $ 8,478,965 $ 12,192,965 $ 1,328,580 OPERATING REVENUES Charges for Services Total Operating Revenue OPERATING EXPENSES Cost of Sales and Services Insurance Claims Depreciation Total Operating Expenses Operating Income / (Loss) Transfers Out Change in Net Position Total Net Position - Beginning of Year (As Restated) TOTAL NET POSITION - END OF YEAR 8,088 (1,639) 182 6,631 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities See accompanying Notes to Basic Financial Statements. (32) Governmental Activities Internal Service Fund $ 778,921 778,921 1,065,674 1,065,674 (286,753) 73,996 37,228 (92,711) 118,796 137,309 967 967 1,013,937 (285,786) (285,786) 334,865 $ $ (42,558) 738,601 49,079 CITY OF DOUGLAS, ARIZONA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2017 Business-type Activities - Enterprise Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Payments to Suppliers Payments to Employees Payment for Contributions to Internal Service Customer Deposits Other Receipts Net Cash Flows Provided by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers Out Water Sewer Solid Waste Totals $ 1,934,596 (835,338) (465,528) (55,251) 6,925 43,369 $ 1,836,073 (481,030) (330,811) (30,480) 6,094 75,245 $ 1,194,582 (562,481) (379,317) (53,596) 5,849 182 $ 4,965,251 (1,852,911) (1,175,656) (165,265) 18,868 118,796 628,773 1,075,091 205,219 Governmental Activities Internal Service Fund $ 1,909,083 778,921 (827,084) (48,163) (112,190) (82,956) (37,632) (232,778) - 34,478 (51,845) (76,948) (29,325) 39,518 (73,751) (327,595) (57,072) (40,136) (1,639) 73,996 (125,596) (444,679) (88,036) - (123,640) (418,900) (41,775) (584,315) - 18,293 10,847 8,088 37,228 411,236 584,082 133,900 1,129,218 (47,196) 3,393,334 1,783,921 1,583,312 6,760,567 334,865 $ 3,804,570 $ 2,368,003 $ 1,717,212 $ 7,889,785 $ 287,669 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET POSITION Cash and Cash Equivalents $ 3,626,194 Restricted Cash and Cash Equivalents 178,376 Total Cash and Cash Equivalents $ 3,804,570 $ 1,931,045 436,958 $ 2,368,003 $ 1,717,212 $ 1,717,212 $ 7,274,451 615,334 $ 7,889,785 $ 287,669 287,669 CASH FLOWS FROM CAPITAL AND FINANCING ACTIVITIES Impact Fees Purchases of Capital Assets Issuance of Long-Term Debt Principal Paid on Capital Debt Interest Paid on Capital Debt Net Cash Flows Used by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Investment Income NET CHANGE IN CASH AND CASH EQUIVALENTS Cash and Cash Equivalents - Beginning of Year CASH AND CASH EQUIVALENTS END OF YEAR 967 $ (Continued) See accompanying Notes to Basic Financial Statements. (33) CITY OF DOUGLAS, ARIZONA STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2017 Business-type Activities - Enterprise Funds Water RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Adjustment for Pension Expense Miscellaneous Nonoperating Revenues Change in Assets/Liabilities: Receivables, Net Accounts Payable Accrued Wages and Benefits Insurance Claims Payable Customer Deposits Payable Compensated Absences Net Cash Provided by Operating Activities $ Sewer 96,607 476,198 73,449 43,369 $ (19,081) (16,732) (28,327) (8,152) 6,925 4,517 628,773 . (34) $ 554,063 Totals Solid Waste $ 225,958 $ 876,628 581,048 (46,414) 75,245 65,520 (53,162) 182 1,122,766 (26,127) 118,796 8,972 (66,035) (28,425) (7,291) 6,094 (2,166) $ 1,075,091 (5,079) (1,414) (26,910) (8,525) 5,849 2,800 205,219 (15,188) (84,181) (83,662) (23,968) 18,868 5,151 $ 1,909,083 $ Governmental Activities Internal Service Fund $ (286,753) - $ 238,590 (48,163) THIS PAGE BLANK NOTES TO BASIC FINANCIAL STATEMENTS THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the City of Douglas, Arizona (City) have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A summary of the City’s more significant accounting policies follows. A. Reporting Entity The City is a municipal government that is governed by a separately elected governing body. It is legally separate from and fiscally independent of other state and local governments. The accompanying financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City’s operations. The business-type discretely presented component unit consists of only Rancho La Perilla and is presented in one column of the government-wide financial statements. See the descriptions below of each of the blended and discretely presented component units. Blended component unit: Douglas Public Facility Municipal Property Corporation – The Douglas Public Facility Municipal Property Corporation’s (DMPC) board of directors consists of six members which are appointed by the Douglas City Council. The DMPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was formed for the sole purpose of assisting the City in the management of the Douglas Golf Course. The DMPC operates the day-to-day operations of the golf course and receives subsidies from the City to operate. All capital assets and related debt are held by the City. The DMPC provides a service directly to the City by providing management of dayto-day operations. All related receivables and payables between the City and the DMPC have been eliminated. Separate financial statements for the Douglas Public Facility Property Municipal Property Corporation are not prepared. Douglas Housing Authority – The Douglas Housing Authority (Authority) is a public benefit corporation created by the City to provide subsidized public housing in accordance with federal legislation. The City Council acts as the governing body of the Authority and as such employs executives, authorizes contracts of subsidy with the U.S. Department of Housing and Urban Development pursuant to the latter agency’s regulations and statutory authorizations, and causes the corporation to construct, own and operate public housing facilities within the boundaries of the City. The financial liability of the housing agency is essentially supported by the operating and debt service subsidies received under contract from the federal government, although services or cash subsidies may be, and from time to time, are received from the City as well. Separate financial statements for the Douglas Housing Authority are not prepared. (35) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Reporting Entity (Continued) Discretely presented component units: Douglas Community Housing Corporation (Rancho La Perilla Apartments) – The Douglas Community Housing Corporation is a non-profit 501(c)(3) corporation created by the City to eliminate the financial burden on the City to provide financing for the construction and operation of apartments. The City Council appoints members of the Governing Board; they, in turn, elect a chairman. The Governing Board employs executives, authorizes contracts, and causes the corporation to construct and operate an apartment complex of 80 units. The Community Housing Corporation has appointed a management corporation to promote the apartments and manage the daily activities of the apartments. The financial liability of the Corporation is solely dependent upon the rental revenue received from the tenants. Financial statements of the Douglas Community Housing Corporation may be obtained at the offices of the corporation. Separately issued financial statements for Rancho La Perilla have been prepared in conformity with the Statement of Financial Accounting Standards No. 117, “Financial Statements of Not-for-Profit Organizations” and are available from the Essex Corporation. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the primary government and its component units. The effect of interfund activity has been removed from these statements except for interfund services provided and used, which are not eliminated in the consolidation. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. (36) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting, except expenditures related to compensated absences and claims and judgments, which are recorded only when payment is due. However, since debt service resources are provided during the current year for payment of long-term principal and interest due early in the following year, the expenditures and related liabilities have been recognized in the Debt Service Funds. Property taxes, intergovernmental grants and aid, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: Major Governmental Funds The General Fund is the City’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. The City reports the following major proprietary funds: The Water Fund accounts for the costs to operate, construct and finance the City’s water system. The Sewer Fund accounts for the costs to operate, construct and finance the wastewater treatment system. The Solid Waste Fund accounts for the costs to operate, construct and finance the City’s solid waste operations. (37) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Additionally, the City reports the following fund types: The Internal Service Funds account for the City’s limited risk, self-insurance program for employee and dependent medical care. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the proprietary funds are charges for services. Operating expenses for the proprietary funds include the cost of sales and services and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, for governmental activities it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. For business-type activities, the use of restricted resources is governed by the applicable bond covenants. D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity 1. Deposits and Investments The primary government and component unit cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition. Cash and investments are pooled except for funds required to be held by fiscal agents or restricted under provisions of bond indentures. Interest earned from investments purchased with such pooled monies is allocated to each of the funds based on the average daily cash balances. The City Council-approved investment policy authorizes the City to invest in obligations of the U.S. government which do not exceed three years in maturity and are guaranteed by the U.S. Treasury; Certificates of Deposit or other deposits in FDIC insured banks; obligations of FNMA and FHMA which mature the next business day; repurchase agreements of less than $5,000 which mature on the next business day; and the Local Government Investment Pools managed by the State Treasurer. Additionally, the trustee of the City’s employee retirement plan holds certain City funds in a money market mutual fund. (38) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 1. Deposits and Investments (Continued) The State Board of Deposit provides oversight for the State Treasurer’s pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. No comparable oversight is provided for the County Treasurer’s investment pool and that pool’s structure does not provide for shares. The business-type component unit invests cash and investments in local financial institutions. 2. Accounts and Property Tax Receivables All trade and property taxes receivables are shown net of an allowance for uncollectible accounts. All revenues of governmental activities were considered collectible and therefore there was no provision. The business-type activities reported an allowance of $15,939. Cochise County levies real and personal property taxes on or before the third Monday in August that become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. However, a lien against real and personal property assessed attaches on the first day of January preceding assessment and levy thereof. 3. Intergovernmental Receivables Intergovernmental receivables include amounts due from other government agencies and include Highway User Revenue fuel tax ($123,869), State sales tax ($130,446), auto lieu ($32,561), federal transit grant ($85,617), community development block grant ($45,454) homeland security grant ($157,079), rehabilitation revolving loans ($21,972), state airport and roads grants ($121,728) and other federal and state grants ($154,825) in the governmental funds and governmental activities column of the government-wide financial statements. 4. Due From Component Unit Due from component unit recorded in the governmental activities column of the government-wide financial statements represents a loan due from Rancho LaParilla Housing Corporation, a discretely presented component unit of the City. Rancho La Parilla Housing Corporation reports an offsetting due to primary government. (39) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 5. Interfund Receivables and Payables The City reports due to and due from other funds to eliminate deficit cash in individual funds through a short-term borrowing. 6. Inventories and Prepaid Items Inventories consist of expendable supplies held for consumption. Inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories are recorded as an expenditure in the governmental funds and as an expense in the governmental activities, business-type activities and proprietary funds when the resources are used. 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. Prepaids are expensed when the benefit is received. 7. Restricted Assets As required by applicable loan documents, certain resources are set aside for debt service requirements on loans and the repair and replacement of utility infrastructure. The City’s component units also record restrictions on certain assets for replacement reserves, residual receipts and funds with the escrow agent for requirements set forth by the holder of the mortgage notes payable. 8. Capital Assets Capital assets, which include property, plant, and equipment, are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Upon implementation of GASB Statement No. 34, all phase I and II governments were required to report infrastructure assets acquired by the government since 1980. The City reports all infrastructure acquired since 1980, as well as pre-1980 infrastructure assets acquired or constructed by the City and report those assets at cost, if available, or the estimated fair value of the asset at the time of acquisition or construction. (40) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 8. Capital Assets (Continued) Property, plant and equipment purchased or acquired is carried at historical cost or estimated historical cost. Contributed assets are recorded at acquisition value as of the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives: Buildings and improvements Improvements other than buildings Wastewater system Water system Infrastructure Furniture, machinery and equipment Vehicles 30 Years 6 to 50 Years 6 to 50 Years 6 to 50 Years 6 to 50 Years 3 to 6 Years 5 to 7 Years 9. Deferred Outflows of Resources The City recognizes the consumption of net position that is applicable to a future reporting period as deferred outflows of resources. Reported amounts are related to the requirements of accounting and financial reporting for pensions under GASB 68. 10. Compensated Absences The liability for compensated absences reported in the government-wide and proprietary fund financial statements consists of unpaid, accumulated leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. A liability for compensated absences are only recorded in the governmental funds to the extent they will be paid with current financial resources for employee resignations or retirement. 11. 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 fiduciary net position of the Arizona State Retirement System (ASRS) and Public Safety Personnel Retirement System (PSPRS) and additions to/deductions from ASRS/PSPRS's fiduciary net position have been determined on the same basis as they are reported by ASRS/PSPRS. 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. (41) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 12. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statements of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are recognized in the period incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. 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. 13. Deferred Inflows of Resources The deferred inflows of resources reported in the governmental fund financial statements represent resources that are not available to the City as of June 30, 2017 or within 60 days of fiscal year end. The deferred inflows of resources represent a reconciling item between the governmental fund financial statements and the government-wide financial statements. The deferred inflows of resources in the government-wide financial statements represent the acquisition of net position that is applicable to a future reporting period. Reported amounts are related to the requirements of accounting and financial reporting for pensions under GASB 68. 14. Net Position In the government-wide financial statements, net position is reported in three categories: net investment in capital assets; restricted net position; and unrestricted net position. Net investment in capital assets is separately reported because capital assets make up a significant portion of total net position. Restricted net position accounts for the portion restricted by parties outside the City. Unrestricted net position is the remaining net position not included in the previous two categories. None of the restricted net position was restricted by enabling legislation. (42) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 15. Fund Balance Classifications Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable and spendable fund balances. Spendable fund balances include restricted, committed, assigned and unassigned fund balance classifications. The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form such as inventories, or are legally or contractually required to be maintained intact. Restricted fund balances are those that have externally imposed restrictions on their usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations. The committed fund balances are self-imposed limitations approved by the City’s Council, through formal resolution. The City Council is the highest level of decision-making authority within the City and the formal commitment must occur prior to fiscal year end. Only the City Council can remove or change the constraints placed on committed fund balances through formal council action. Assigned fund balances are resources constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed. The City Council, through formal resolution, has authorized the City Manager to make assignments of resources for a specific purpose. The unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not reported in other classifications. The general fund is the only fund that reports a positive unassigned fund balance and deficits in fund balances of the other governmental funds are reported as unassigned. When an expenditure is incurred, for purposes for which both restricted and unrestricted fund balance is available, the City’s policy is to use restricted fund balance first, then unrestricted fund balance. When an expenditure is incurred for purposes for which committed, assigned and unassigned are available, the City uses, committed, assigned and finally unassigned amounts. (43) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Information The City Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the City Manager submits a proposed budget for the fiscal year commencing the following July 1, to the City Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comment. 3. Prior to the third Monday in August, the expenditure limitation for the City is legally enacted through passage of an ordinance. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year. This report, issued under a separate cover, reconciles total City expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S. §41-1279.07). 4. Expenditures may not legally exceed the expenditure limitation of all fund types as a whole. For management and legal purposes, the City Council adopts a budget by department for the General Fund and in total by other funds. The City Manager, subject to City Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity. 5. Formal budgetary integration is employed as a management control device during the year for the General, Special Revenue, Debt Service and Capital Projects Funds on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. No budget was appropriated for the LTAF, Golf Course MPC and Public Housing Funds during the fiscal year. The City is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities. This law does not permit the City to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. The City complied with this law during the year. No supplementary budgetary appropriations were necessary during the year. B. Deficit Net Position At June 30, 2017, the City reported a deficit net position in the governmental activities of $2,909,216. The deficit was due to recording the net pension liability for the City’s proportionate share of the Arizona State Retirement System and the Public Safety Retirement Plan. The City does not anticipate recovering the deficit in the near-term; however, the unfunded pension liability will be reduced through future contributions to the plans. (44) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (CONTINUED) B. Deficit Net Position (Continued) The Golf Course MPC nonmajor governmental fund reported a deficit fund balance of $14,568. The deficit is expected to be recovered through operations and General Fund subsidies. NOTE 3 DETAILED NOTES ON ALL FUNDS A. Assets 1. Deposits and Investments Deposits and investments at June 30, 2017 consist of the following: Deposits: Cash on Hand Cash in Bank Cash on Deposit with County Attorney Investments: State Treasurer's Investment Pool Total Cash and Investments Less Restricted Assets Cash and Investments - Statement of Net Position $ 3,600 5,084,638 279,306 10,066,632 15,434,176 (646,238) $ 14,787,938 Deposits The carrying value of the City’s deposits at June 30, 2017 was $5,084,638 and the bank balance was $5,410,859. Of the bank balance, $3,776,611 was covered by federal depository insurance, $1,634,248 was covered by collateral held by the City’s custodial bank in the City’s name and cash on deposit with the county attorney was insured by federal depository insurance or were collateralized by securities held by the pledging financial institution in the trustee’s name. Investments The State Board of Deposit provides oversight for the State Treasurer’s pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. The shares are not identified with specific investments and are not subject to custodial credit risk. Interest Rate Risk – In accordance with the City’s investment policy, the City manages its exposure to declines in fair value by limiting the City’s investment portfolio in maturities of more than one year to less than 20% of total investments. (45) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 1. Deposits and Investments (Continued) The City’s investments at June 30, 2017 consist of the following: Investment Type Amount State Treasurer's Investment Pool 5 State Treasurer's Investment Pool 500 $ 9,352,904 713,728 $ 10,066,632 Maturity in Years Less than 1 1-2 $ 9,352,904 $ 9,352,904 $ $ 713,728 713,728 Concentration of Credit Risk – The City invests in funds authorized by Arizona state law and currently only invests in the State Treasurer Investment Pool. Custodial Credit Risk – For an investment, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy limits investments to 1) the State of Arizona Local Government Investment Pool; 2) U.S. government obligations, U.S. government agency obligations, and U.S. government instrumentality obligations; 3) obligations of the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or any federal farm credit bank, federal land bank or federal home loan bank notes or bonds. In addition to limitations imposed by Arizona statute, City funds shall not be invested in reverse repurchase agreement, callable agency securities, or derivative type investments. Credit Risk –The City’s deposits and investments consist of insured or collateralized deposits and investments in U.S. Government Securities, U.S. Treasury Notes and the State Treasurer’s Investment Pool. The City’s investment in the State Treasurer’s investment pool did not receive a credit quality rating from a national rating agency. Cash and investments of the component unit’s at June 30, 2017 consist of: Deposits: Cash on Hand Cash in Bank Investments: Funds Held by Mortgage Restricted Assets Total Cash and Cash Equivalents $ $ 100 21,681 367,114 (367,114) 21,781 The carrying value of the component unit’s deposits at June 30, 2017 was $21,681 which was entirely covered by federal depository insurance. (46) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 2. Restricted Assets Restricted assets in the Governmental Activities, Water Fund and the Sewer Fund at June 30, 2017 consisted of the following: Business-Type Activities Governmental Activities Loan Debt Service Reserve Requirement Customer Deposits Grantor Reserve Requirement Total $ $ 9,666 21,238 30,904 Water Fund $ 178,376 $ 178,376 Sewer Fund $ 436,958 $ 436,958 Total 615,334 9,666 21,238 646,238 $ $ Restricted assets of the discretely presented component units at June 30, 2017 consisted of the following: Funds Held by Mortgage $ 367,114 3. Receivables Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also record unearned revenues in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Delinquent Property Taxes Receivable: (General Fund) Unavailable Grant Revenue: (Nonmajor Governmental Funds) Sales Tax Audit Receivable: (General Fund) (Nonmajor Governmental Funds) Unearned Revenue: (General Fund) Unearned Grant Revenue: (General Fund) $ $ (47) 54,763 Unearned $ - 21,972 - 16,991 2,038 - - 90,000 95,764 $ 932 90,932 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 4. Capital Assets Capital asset activity for the primary government’s governmental activities for the year ended June 30, 2017 was as follows: Beginning Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land $ Construction in Progress Total Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated: Land Improvements Streets and Storm Drains Buildings and Improvements Machinery and Equipment Vehicles Total Capital Assets, Being Depreciated Accumulated Depreciation for: Land Improvements Streets and Storm Drains Buildings and Improvements Machinery and Equipment Vehicles Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Governmental Activities Capital Assets, Net 1,065,310 521,496 Increases $ 716,401 $ (1,193,733) 1,065,310 44,164 716,401 (1,193,733) 1,109,474 4,815,648 21,121,318 15,533,606 12,729,700 5,441,263 65,009 615,056 235,725 428,125 738,479 (71,677) (150,923) 4,880,657 21,736,374 15,769,331 13,086,148 6,028,819 59,641,535 2,082,394 (222,600) 61,501,329 (3,023,037) (11,817,537) (7,304,586) (10,974,335) (4,090,235) (37,209,730) (199,791) (768,581) (515,795) (520,376) (497,643) (2,502,186) 66,899 150,923 217,822 (3,222,828) (12,586,118) (7,820,381) (11,427,812) (4,436,955) (39,494,094) $ 24,018,611 (419,792) $ 296,609 (4,778) 22,007,235 $ (1,198,511) $ 23,116,709 Depreciation expense was charged to functions/programs as follows: (48) $ 1,586,806 22,431,805 Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Total Depreciation Expense, Governmental Activities Ending Balance Decreases $ 647,074 607,908 821,086 421,875 4,243 $ 2,502,186 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 4. Capital Assets (Continued) Capital assets activity for the primary government’s business-type activities for the year ended June 30, 2017 was as follows: Beginning Balance Business-Type Activities: Capital Assets, Not Being Depreciated: $ Construction in Progress Capital Assets, Being Depreciated: Buildings and Improvements Water System Wastewater System Machinery, Equipment, and Vehicles Total Capital Assets, Being Depreciated 1,009,596 Increases $ 43,813 $ $ 1,053,409 4,996 51,845 24,942 - 7,913,936 16,052,359 14,848,511 2,958,112 41,691,135 81,783 - 41,772,918 (175,753) (453,086) (340,173) (153,754) (1,122,766) - (3,261,039) (9,748,699) (6,617,221) (2,421,911) (22,048,870) (1,040,983) - 19,724,048 - $ 20,777,457 $ (997,170) $ Depreciation expense was charged to functions/programs as follows: (49) - 7,908,940 16,000,514 14,848,511 2,933,170 Accumulated Depreciation for: Buildings and Improvements (3,085,286) Water System (9,295,613) Wastewater System (6,277,048) Machinery, Equipment, and Vehicles (2,268,157) Total Accumulated Depreciation (20,926,104) Total Capital Assets, Being Depreciated, Net 20,765,031 Business-Type Activities Capital Assets, Net $ 21,774,627 Business-Type Activities: Water Sewer Solid Waste Total Depreciation Expense, Business-Type Activities Ending Balance Decreases $ 476,198 581,048 65,520 $ 1,122,766 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 4. Capital Assets (Continued) Capital asset activity for the business-type discretely presented component units for the year ended June 30, 2017 were as follows: Business-Type Discretely Presented Component Unit Beginning Balance Capital Assets, Not Being Depreciated: Land $ Capital Assets, Being Depreciated: Buildings and Improvements Furniture and Equipment Total Capital Assets, Being Depreciated Accumulated Depreciation for: Buildings and Improvements Furniture and Equipment Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Business-Type Activities Capital Assets, Net $ 265,000 $ Ending Balance Decreases Increases - $ - - - 5,207,564 26,278 5,233,842 - - 5,233,842 (1,994,474) (20,718) (2,015,192) (130,189) (758) (130,947) - (2,124,663) (21,476) (2,146,139) 3,218,650 (130,947) - 3,087,703 3,483,650 $ (130,947) $ (50) 265,000 5,207,564 26,278 $ - Depreciation expense was charged to functions/programs as follows: Business-type Activities: Rancho La Perilla $ 130,947 $ 3,352,703 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) B. Interfund Receivables, Payables and Transfers Interfund receivables and payables at June 30, 2017 were recorded to eliminate a deficit cash balance in the LTAF Fund and consisted of the following: Due From Nonmajor Governmental Due To General Fund $ 10,360 Cash was received subsequent to year end to cover the deficit. Interfund transfers for the year ended June 30, 2017 consisted of the following: General Fund Transfers Out General Fund Nonmajor Governmental Funds Water Fund Sewer Fund Solid Waste Fund 41,119 64,113 69,364 30,836 205,432 $ $ Transfers In Nonmajor Governmental Funds $ $ Total 1,270,822 13,592 48,077 13,592 6,796 1,352,879 $ $ 1,270,822 54,711 112,190 82,956 37,632 1,558,311 Transfers were used to fund capital outlay and indirect administrative costs. General Fund transfers were also used to subsidize the operating costs of Nonmajor Governmental Funds. The Business-type funds were used to allocate a percentage of their costs of goods sold to the General Fund for indirect administrative costs and to allocate costs for the use of certain facilities owned and operated by the General Fund. C. Obligations Under Capital Leases The City acquired furniture, equipment and vehicles under the provisions of long-term lease agreements classified as capital leases. Accordingly, the principal amount of the assets totaling $2,603,018 and $583,553 are capitalized as governmental activities and business-type activities, respectively. The assets acquired through capital leases are as follows: Governmental Activities Asset: Furniture, Equipment and Vehicles Less: Accumulated Depreciation Total $ $ (51) 2,603,018 (1,369,642) 1,233,376 Business-Type Activities $ $ 583,553 (256,514) 327,039 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Obligations Under Capital Leases (Continued) Amortization expense on the capital leases is included in depreciation expense. Future principal and interest payments due on capital leases are as follows: Year Ending June 30, 2018 2019 2020 2021 2022 Total Governmental Activities Principal Interest $ 427,406 $ 17,990 208,098 10,584 205,437 5,675 28,740 1,189 29,410 515 $ 899,091 $ 35,953 Business-type Activities Principal Interest $ 90,903 $ 1,344 $ 90,903 $ 1,344 D. Lease Revenue During fiscal year 2009, the City established a lease agreement for the City’s new call center. Revenue related to this lease totaled $669,266 during the current fiscal year. Future minimum lease payments related to the call center lease are as follows: Year Ending June 30, 2018 2019 2020 2021 2022 2023-2024 $ $ Amount 647,076 623,964 600,852 600,852 600,852 901,278 3,974,874 The City leases land to various third parties. Annual rental revenues from the lease agreements are recognized in the General Fund. Payments on the leases totaled $122,161. The future minimum lease payments required under the leases at June 30, 2017 are as follows: Year Ending June 30, 2018 2019 2020 2021 2022 Thereafter $ $ (52) Amount 93,120 31,923 1,320 1,320 1,320 35,640 164,643 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) E. Long-Term Obligations The City has loans payable issued to provide funds for the acquisition and construction of major capital facilities. The debt is being repaid by the Highway User Revenue and Debt Service Funds. Compensated absences are paid by the applicable fund where each employee is regularly paid, primarily the General Fund. The City of Douglas, Arizona reports the following outstanding loans: Description Governmental Activities Loans Payable: Greater Arizona Development Authority, Series 2008A; original issue $3,000,000 Call Center Purchase Agreement; collateralized by the building and equipment acquired with the debt; original issue $9,000,000 Total Governmental Loans Payable Maturity Interest Rate (%) 8/1/17-28 4.00-5.25% 7/31/17-28 4.29-5.63% Outstanding at June 30, 2017 $ 1,985,000 $ 4,125,000 6,110,000 $ 3,105,437 Business-Type Activities Water Infrastructure Finance Authority of Arizona Issued 2009-2010: Authorized Loan $9,000,000 7/1/17-29 2.00% Water Infrastructure Finance Authority of Arizona Issued 2015-2016, Authorized Loan $900,000 7/1/17-34 2.00% 828,579 Water Infrastructure Finance Authority of Arizona Issued 2009-2010; Authorized Loan $1,500,000 7/1/17-27 2.814% 1,003,604 7/1/17-37 1.89% $ 4,937,620 Water Infrastructure Finance Authority of Arizona Issued 2016-2017; Authorized Loan $3,000,000 Total Business-Type Loans Payable The City has pledged future state shared revenue and City excise taxes, transaction privilege tax and other miscellaneous revenues to repay $2.0 million in GADA loans, Series 2008A. Proceeds of the loan provided financing for the Regional Service Center project, including the purchase and renovation of buildings, land purchase, and upgrades and renovations to the existing City Hall. The loan is payable solely from pledged revenues discussed previously and are payable through 2029. Annual principal and interest payments on the bonds are expected to require 2% of pledged revenues. The total principal and interest remaining to be paid on the loan is $2,552,494. Principal and interest paid for the current year and total excise taxes and shared revenues were $233,725 and $8,646,362, respectively. (53) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) E. Long-Term Obligations (Continued) In 2009, the City issued two loans totaling $9,000,000 for the acquisition and construction of a call center. The IT loan for $2,400,000 is payable from a 0.3% City sales tax, and the building loan for $6,600,000 is payable from lease revenues received on the lease agreement with a third-party. The IT Loan was paid in full on June 30, 2013. The lease of the call center is a 15 year lease with annual payments of $670,182 plus property expenses. The lease revenues are to be used for payment of the debt, then for maintenance and operations costs. Annual principal and interest payments on the loans are expected to exceed revenue by 21%. The call center lease agreement expires fiscal year 2023; however, the City anticipates extending the lease agreement to cover the loan obligation period. The total principal and interest remaining to be paid on the loan is $5,519,293. Principal and interest paid for the current year was $631,869 and the City sales tax and lease revenues were $8,683,759 and $669,266, respectively. The City has four loans through the Water Infrastructure Financing Authority of Arizona (WIFA). In June 2017, the City acquired a $3,000,000 loan from WIFA for the expansion and rehabilitation of its wastewater treatment plant. The loans are structured where the City draws on the loans as funds are needed. To-date, the City has drawn down $-0-, $1.5 million, $5.5 million and $900,000 from the total authorized loan of $3.0 million, $1.5 million, $9.0 million and $900,000, respectively, for the acquisition and construction of water and sewer facilities and improvements. The loans are payable from water and sewer charges for services through the fiscal year 2034. The City draws the loan as funds are utilized and pays interest on the outstanding principal balance. Annual principal and interest payments on the bonds are expected to require approximately 65-75% of net available revenue. The total principal and interest remaining to be paid on the loans are $5,779,564. Principal and interest paid for the current year and total pledged revenues were $408,287 and $872,420. The City’s component units have outstanding mortgage notes payables collateralized by an insured mortgage on the projects land and buildings. The notes are being repaid through federal subsidies and tenant rents. The governmental component units’ outstanding debt consisted of interest only mortgage notes payable at 1% per annum. The future principal payments are scheduled based on estimated principal retirement. The component units pay principal as cash is available; the maturity date of the outstanding debt is May 1, 2042. (54) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) E. Long-Term Obligations (Continued) Changes in long-term obligations for the year ended June 30, 2017 are as follows: Beginning of Year Governmental Activities: Loans Payable Other Liabilities: Capital Leases Compensated Absences Total Governmental Activities $ 6,620,000 Additions $ 1,162,606 1,279,555 End of Year Retirements - $ (510,000) $ 6,110,000 Due within One Year $ 140,482 757,052 (403,997) (692,090) $ (1,606,087) $ 8,353,608 $ 1,660,261 $ $ 4,937,620 $ 328,121 $ 9,062,161 $ 897,534 $ 5,263,184 $ - 899,091 1,344,517 520,000 427,406 712,855 Business-Type Activities: Loans Payable Other Liabilities: Capital Lease Compensated Absences Total Business-Type Activities $ 5,580,375 $ 94,770 $ (534,298) $ 5,140,847 $ 508,897 Business-Type Component Units: Notes Payable $ 5,019,698 $ - $ (155,016) $ 4,864,682 $ 57,916 210,018 107,173 94,770 (325,564) (119,115) (89,619) 90,903 112,324 90,903 89,873 Debt service requirements on long-term debt at June 30, 2017 are as follows: Primary Government Years 2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 Totals Governmental Activities Principal Interest $ 520,000 $ 321,938 525,000 294,106 530,000 267,127 540,000 238,591 545,000 209,044 2,850,000 604,180 600,000 26,801 - Business-Type Activities Principal Interest $ 328,122 $ 108,065 335,509 100,678 343,066 93,120 350,798 85,388 358,709 77,477 1,918,752 262,180 1,137,947 106,772 164,717 8,264 - $ 6,110,000 $ 4,937,620 $ 1,961,787 (55) $ 841,944 Component Units Business-type Activities Principal $ 57,916 60,306 690,494 65,385 68,083 3,922,498 $ 4,864,682 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) F. Fund Balance Classifications of Governmental Funds The City has classified its fund balances as follows: General Fund NOTE 4 Fund Balances: Nonspendable: Inventory $ Prepaid Items Due from Component Unit Total Nonspendable Restricted: Firefighters Injured in Line of Duty Transit - Making the Connection Program Federal and State Grant Programs Court Administration Law Enforcement Operations Local Transportation Highways and Streets by A.R.S. 28-6533 Housing and Redevelopment Total Restricted Committed: Capital Projects Unassigned: 5,680,849 Total Fund Balances 6,697,625 $ 38,638 100,013 719,637 858,288 Total Nonmajor Governmental Funds Governmental Funds $ $ 138,488 20,000 158,488 378,797 18,109 134,902 123,496 1,173,545 375,896 2,204,745 138,488 20,000 378,797 18,109 134,902 123,496 1,173,545 375,896 2,363,233 195,001 (14,568) $ 2,385,178 38,638 100,013 719,637 858,288 195,001 5,666,281 $ 9,082,803 OTHER INFORMATION A. Risk Management The City of Douglas, Arizona, is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters. The City’s insurance protection is provided by a private carrier (State National Insurance Company), of which the City is a participating member. The limit for basic coverage is for $1,000,000 per occurrence on a claims made basis. Excess coverage is for an additional $5,000,000 per occurrence on a follow form, claims made basis. No significant reduction in insurance coverage occurred during the year and no settlements exceeded insurance coverage during any of the past three fiscal years. The City is also insured by State Compensation Fund for workers compensation for potential worker related accidents. (56) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) A. Risk Management (Continued) The City is self-insured for individual health claims up to $50,000 per covered person. Coverage in excess of this amount is provided through the purchase of commercial insurance. Settlements for the past fiscal year did not exceed the City’s excess insurance coverage amounts for any claims. The City reports its self-insurance activity as an internal service fund. The City allocates the cost of claims by charging a premium to each fund based on a percentage of each funds estimated current-year payroll. Claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. The liability claims amount recorded in the accompanying financial statements is based on reported pending claims, effects of inflation, recent claim settlement trends and other economic and social trends. At June 30, 2017, the self-insured benefit claims payable reported within the internal service fund, including amounts incurred, but not yet reported totaled $238,590. As of June 30, 2017 and 2016, unpaid claims were as follows: 2017 2016 Beginning unpaid claims Claims incurred and changes in estimates Payments made $ 156,446 1,065,674 (983,530) $ 118,388 738,285 (700,227) Ending unpaid claims $ 238,590 $ 156,446 B. Contingent Liabilities Lawsuits The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the City’s legal counsel, the City has some exposure to loss; however, the City is vigorously defending these claims and any loss or dollar value of the loss is not determinable. (57) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans Cost-Sharing and Agent Multiple Employer Pension Plans The City contributes to the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) for police officers and firefighters. The plans are component units of the State of Arizona. At June 30, 2017, the City reported the following aggregate amounts related to pensions for all plans to which it contributes: Statement of Net Position and Statement of Activities Net Pension Liabilities Deferred Outflows of Resources Deferred Inflows of Resources Pension Expense Governmental Activities $ 31,132,671 6,855,268 2,546,802 2,809,137 Business-Type Activities $ 1,789,936 323,174 327,068 114,087 Total $ 32,922,607 7,178,442 2,873,870 2,923,224 The City reported accrued payroll and employee benefits of $51,015 for outstanding pension contribution amounts payable to all pension plans for the year ended June 30, 2017. Also, the City reported $2,774,652 of pension expenditures in the governmental funds related to all pension plans to which it contributes. Arizona State Retirement System Plan Descriptions – City employees not covered by the other pension plans described on the following pages 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); and a cost-sharing, multiple-employer defined benefit long-term disability (OPEB). 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 its Web site 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 presented on the following page. (58) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Arizona State Retirement System (Continued) Retirement Initial Membership Date Before July 1, 2011 Sum of Years and Age Equals 80 10 Years Age 62 5 Year Age 50* any Years Age 65 On or After July 1, 2011 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 Consecutive Months of Last 120 Months Highest 60 Consecutive Months of Last 120 Months Benefit Percentage Per Year of Service 2.1% to 2.3% 2.1% to 2.3% Years of Service and Age Required to Receive Benefit * 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 year ended June 30, 2017, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.48% (11.34% for retirement and 0.14 percent 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 the health insurance premium benefit, and 0.14% for long-term disability) of the active members’ annual covered payroll. (59) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Arizona State Retirement System (Continued) In addition, the City was required by statute to contribute at the actuarially determined rate of 9.47% (9.17% for retirement, 0.21 percent for health insurance premium benefit, and 0.09 percent for long-term disability) of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the ASRS. The City’s contributions to the pension plan, health benefit supplement and long-term disability for the year ended June 30, 2017, totaled $499,158. The City’s contributions for the current and two preceding years for OPEB, all of which were equal to the required contributions, were as follows: Year Ending June 30, 2017 2016 2015 Health Benefit Supplement Fund $ 24,070 20,933 24,327 Long-Term Disability Fund $ 6,018 4,970 4,948 During the fiscal year ended June 30, 2017, the City paid for ASRS pension and OPEB contributions as follows: 60% from the General Fund, 15 percent from nonmajor governmental funds, 10% from the Water Fund, 7 percent from the Sewer Fund and 8% from the Solid Waste Fund. Pension Liability – At June 30, 2017, the City reported a liability of $7,095,586 for its proportionate share of the ASRS’ net pension liability. 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 total pension liability as of June 30, 2016 reflects a change in actuarial assumption for a decrease in loads for future permanent benefit increases. The City’s reported liability at June 30, 2017, increased by $13,369 from the City’s prior year liability of $7,082,717 because of changes in the ASRS’ net pension liability and the City’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. The City’s proportion of the net pension liability was based on the City’s fiscal year 2016 pension contributions. The City’s proportion measured as of June 30, 2016, was 0.04396 percent, which was a decrease of 0.00151 from its proportion measured as of June 30, 2015. (60) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Arizona State Retirement System (Continued) Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2017 the City recognized pension expense for ASRS of $41,294. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City's contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 43,118 - $ Deferred Inflows of Resources $ 488,125 375,413 768,925 - - 433,008 469,070 1,281,113 $ 1,296,546 The $469,070 reported as deferred outflows of resources related to ASRS pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30, 2018 2019 2020 2021 (61) $ Amount (632,864) (365,031) 297,790 215,602 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Arizona State Retirement System (Continued) Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Valuation Date Actuarial Roll Forward Date Actuarial Cost Method Investment Rate of Return Projected Salary Increases Inflation Permanent Benefit Increase Mortality Rates June 30, 2015 June 30, 2016 Entry age normal 8% 3 - 6.75% 3% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.75% 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 weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Target Allocation 58% 25% 2% 10% 5% 100% Asset Class Equity Fixed Income Commodities Real estate Multi-asset class Total (62) Real Return Arithmetic Basis 6.73% 3.70% 3.84% 4.25% 3.41% CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Arizona State Retirement System (Continued) Discount Rate – The discount rate used to measure the ASRS total pension liability was 8%, 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 statutes. 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 City’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following table presents the City’s proportionate share of the net pension liability calculated using the discount rate of 8%, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7%) or 1 percentage point higher (9%) than the current rate. 1% Decrease (7%) City's proportionate share of the net pension liability $ 9,047,410 Current Discount Rate (8%) $ 7,095,586 1% Increase (9%) $ 5,530,649 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. Public Safety Personnel Retirement System (PSPRS) Plan Descriptions— City police employees and City firefighters 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 (agent plans). A nine-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 issue publicly available financial reports that include their financial statements and required supplementary information. The reports are available on the PSPRS Web site at www.psprs.com. (63) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Benefits Provided — The PSPRS provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: PSPRS Retirement and Disability Years of Service and Age Required to Receive Benefit Final Average Salary is Based on Benefit Percentage Normal Retirement Accidental Disability Retirement Catastrophic Disability Retirement Ordinary Disability Retirement Survivor Benefit Retired Members Active Members Initial Membership Date Before January 1, 2012 On or After January 1, 2012 20 Years any Age 25 Years and Age 52.5 15 Years Age 62 Highest 36 Consecutive Months of Last 20 Years Highest 60 Consecutive Months of Last 20 Years 50% Less 2.0% for Each Year of Credited Service Less Than 20 Years OR Plus 2.0% to 2.5% for Each Year of Credited Service Over 20 Years, Not to Exceed 80% 2.5% Per Year of Credited Service, Not to Exceed 80% 50% or Normal Retirement, Whichever is Greater 90% for the First 60 Months then Reduced to Either 62.5% or Normal Retirement, Whichever is Greater Normal Retirement Calculated with Actual Years of Credited Service or 20 Years of Credited Service, Whichever is Greater, Multiplied by Years of Credited Service (Not to Exceed 20 Years) Divided by 20 80-100% of Retired Member's Pension Benefit 80-100% 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. In addition, the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. PSPRS also provides temporary disability benefits of 50% of the member’s compensation for up to 12 months. (64) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Employees Covered by Benefit Terms – At June 30, 2017, the following employees were covered by the agent pension plans’ benefit terms: PSPRS Police Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active Employees Total PSPRS Firefighters 30 6 21 8 28 64 22 51 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 PSPRS Police 7.65% PSPRS Firefighters 7.65% City Pension Health Insurance Premium Benefit 61.50% 0.00% 68.82% 0.00% For the agent plans, the City’s contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended June 30, 2017, were: Pension Contributions Made Health Insurance Premium Benefit Annual OPEB Cost Contributions Made (65) PSPRS Police PSPRS Firefighters $ 1,322,559 $ 1,101,352 - - CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Contributions and Annual OPEB Cost (Continued) During the fiscal year 2017, the City paid for PSPRS pension and OPEB contributions 100% from the General Fund. Pension Liability – At June 30, 2017, the City reported the following net pension liabilities: Net Pension Liability $ 14,443,151 11,383,870 PSPRS Police PSPRS Firefighters 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 liabilities as of June 30, 2016, reflect the following changes of benefit terms and actuarial assumptions. • • • 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 of future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of 2%. Laws 2016, Chapter 2, changed the benefit formula and contribution requirements for members hired on or after July 1, 2017. The investment rate of return actuarial assumption was decreased from 7.85% to 7.50% for the PSPRS plan. The net pension liabilities 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 liabilities as a result of these changes is not known. (66) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Pension Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial Valuation Date Actuarial Cost Method Discount Rate Projected Salary Increases Inflation Permanent Benefit Increase Mortality Rates June 30, 2016 Entry Age Normal 7.50% 4.0% - 8.0% 4.0% Included RP-2000 mortality table (adjusted by 105% for both males and females) Actuarial assumptions used in the June 30, 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 are summarized in the following table: PSPRS Target Allocation 2% 5% 4% 7% 8% 10% 11% 10% 13% 14% 16% 100% Asset Class Short Term Investments Absolute Return Risk Parity Fixed Income Real Assets GTAA Private Equity Real Estate Credit Opportunities Non-U.S. Equity U.S. Equity Total (67) Long-Term Expected Arithmetic Real Rate of Return 0.75% 4.11% 5.13% 2.92% 4.77% 4.38% 9.50% 4.48% 7.08% 8.25% 6.23% CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Pension Discount Rates – The following discount rates were used to measure the total pension liabilities: Police 7.50% Discount Rates Firefighters 7.50% At June 30, 2016, the discount rate used to measure the PSPRS total pension liabilities was 7.50%, which was a decrease of 0.35 from the discount rate used as of June 30, 2015. 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 rate and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Agent Plans Net Pension Liability – The following tables present changes in the City’s net pension liability for the PSPRS – Police, PSPRS – Fire pension plans as follows: PSPRS - Police Balance - 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 Expenses Other Changes Net Changes Balance - June 30, 2017 (68) Total Pension Liability (Asset) (a) $ 20,371,541 Plan Fiduciary Net Position (b) $ 6,305,443 Net Pension Liability (Asset) (a) - (b) $ 14,066,098 348,598 1,555,542 (35,698) - 348,598 1,555,542 (35,698) (895,420) 776,728 - 1,078,409 263,157 36,786 (895,420) 776,728 (1,078,409) (263,157) (36,786) (1,460,025) 289,725 $ 20,661,266 (1,460,025) (5,693) 38 (87,328) $ 6,218,115 5,693 (38) 377,053 $ 14,443,151 CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Total Pension Liability (Asset) (a) $ 14,851,943 PSPRS - Firefighters Balance 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 Expenses Other Changes Net Changes Balances as of June 30, 2017 $ Plan Fiduciary Net Position (b) $ 3,668,071 Net Pension Liability (Asset) (a) - (b) $ 11,183,872 300,094 1,140,961 (16,539) - 300,094 1,140,961 (16,539) (610,416) 560,384 - 996,227 184,516 21,858 (610,416) 560,384 (996,227) (184,516) (21,858) (934,899) 439,585 15,291,528 $ (934,899) (3,545) (24,570) 239,587 3,907,658 $ 3,545 24,570 199,998 11,383,870 Sensitivity of the City’s Net Pension Liability to Changes in the Discount Rate – The following table presents the City’s net pension liabilities calculated using the discount rate of 7.50%, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: 1% Decrease PSPRS Police Rate Net Pension Liability (Asset) PSPRS Firefighters Rate Net Pension Liability (Asset) Current Discount Rate 1% Increase $ 6.50% 17,067,339 $ 7.50% 14,443,151 $ 8.50% 12,282,959 $ 6.50% 13,277,468 $ 7.50% 11,383,870 $ 8.50% 9,816,501 Pension Plan Fiduciary Net Position – Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS financial reports. Pension Expense – For the year ended June 30, 2017, the City recognized $1,604,317 and $1,277,613 in pension expenses for PSPRS Police and PSPRS Firefighters, respectively. (69) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (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: PSPRS - Police Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total PSPRS - Firefighters Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 1,310,026 Deferred Inflows of Resources $ 991,894 - 383,669 - $ 1,322,559 3,016,254 991,894 $ Deferred Outflows of Resources 20,754 $ 1,525,582 Deferred Inflows of Resources $ 585,430 - 233,387 - $ 1,101,352 2,881,075 585,430 $ The amounts reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 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: PSPRS Police Year Ending June 30, 2018 2019 2020 2021 2022 Thereafter (70) $ 468,551 41,357 104,357 87,536 - PSPRS Firefighters $ 294,096 294,095 332,784 300,109 (19,542) (7,249) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Agent Plan OPEB Actuarial Assumptions – The health insurance premium benefit contribution requirements for the year ended June 30, 2017, were established by the June 30, 2015 actuarial valuations, and those actuarial valuations were based on the following actuarial methods and assumptions. Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as understood by the City and plans’ members and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the City and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all PSPRS plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2017 contribution requirements, are as follows: PSPRS - OPEB Contribution Requirements Actuarial Valuation Date Actuarial Cost Method Amortization Method June 30, 2015 Entry Age Normal Level percent closed for underfunded actuarial accrued liability, open for excess 21 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market corridor Remaining Amortization Period Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Wage Growth 7.85% 4.0% - 8.0%, including inflation 4.00% (71) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 4 OTHER INFORMATION (CONTINUED) C. Retirement Plans (Continued) Public Safety Personnel Retirement System (PSPRS) (Continued) Agent Plan OPEB Trend Information – The following table presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Annual OPEB Cost Year Ended June 30 PSPRS Police 2017 2016 2015 PSPRS Firefighters 2017 2016 2015 Percentage of Annual Cost Contributed Net OPEB Obligation $ 32,639 100.00% 100.00% 100.00% $ - $ 18,775 100.00% 100.00% 100.00% $ - Agent Plan OPEB Funded Status – The funded status of the health insurance premium benefit plan as of the most recent valuation date, June 30, 2016, is as follows: PSPRS Police $ 577,822 537,943 Actuarial Value of Assets (a) Actuarial Accrued Liability (b) Unfunded Actuarial Accrued Liability (Funding Excess) (b) - (a) Funded Ratio (a) / (b) Annual Covered Payroll (c ) Unfunded Actuarial Accrued Liability (Funding Excess) as a Percentage of Covered Payroll (b) - (a) / (c ) PSPRS Firefighters $ 439,059 285,651 (39,879) 107.41% 1,824,164 (153,408) 153.70% 1,517,157 -2.19% -10.11% The funded status of the all 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: PSPRS - OPEB Funded Status Actuarial Valuation Date Actuarial Cost Method Amortization Method June 30, 2016 Entry Age Normal Level percent closed for underfunded actuarial accrued liability, open for excess 20 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market corridor Remaining Amortization Period Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Wage Growth 7.50% 4.0% - 8.0% 4.0% (72) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 5 RESTATEMENT DUE TO CHANGE IN ACCOUNTING PRINCIPAL During the year ended June 30, 2017, the City of Douglas, Arizona adopted an internal service fund to report self-insurance activity. This adoption required a restatement of the June 30, 2016 fund balance of the General Fund, Nonmajor Governmental Funds, and net position of each major proprietary fund, as follows: Governmental Funds: General Fund Nonmajor Governmenal Funds Fund Balance/Net Position at July 1, 2016, as Previously Reported $ $ Restatement Due to a Change in Accounting Principal: Fund Balance/Net Position at July 1, 2016, as Adjusted Proprietary Funds: Net Position at July 1, 2016, as Previously Reported 7,404,872 7,227,652 Water Fund $ Restatement Due to a Change in Accounting Principal: Sewer Fund (38,860) (20,822) 8,426,650 $ 11,659,078 Internal Service Funds: Internal Service Fund Net Position at July 1, 2016, as Previously Reported $ Net Position at July 1, 2016, as Adjusted 2,555,497 $ 11,679,900 $ Restatement Due to a Change in Accounting Principal: $ 8,465,510 Net Position at July 1, 2016, as Adjusted $ (39,329) (177,220) $ 2,594,826 Total 9,999,698 (216,549) $ 9,783,149 Solid Waste Fund $ $ Total 1,192,257 $ 21,337,667 (58,634) (118,316) 1,133,623 $ 21,219,351 - 334,865 $ 334,865 During the fiscal year ended June 30, 2017, the Douglas Housing Corporation II (Pioneer Village) no longer met the requirements of a discretely presented component unit and therefore has been removed from the government-wide financial statements. (73) CITY OF DOUGLAS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 6 SUSEQUENT EVENTS Subsequent to June 30, 2017, the City Council authorized a $2.0 million loan and a $0.5 million forgivable loan through the Water Infrastructure Finance Authority of Arizona (WIFA). The loan of $2.0 million and the forgivable loan in the amount of $0.5 million will be used along with a grant awarded in April 2017 in the amount of $7.4 million through the North American Development Authority to finance the expansion of the Phase II wastewater treatment plant. (74) REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY’S PROPORTIONATE SHARE OF NET PENSION LIABILITY COST SHARING PENSION PLANS JUNE 30, 2017 Arizona State Retirement System Reporting Year (Measurement Date) City's Proportion of the Net Pension Liability City's Proportionate Share of the Net Pension Liability City's Covered Payroll City's Proportionate Share of the Net Pension Liability as a Percentage of its Covered Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability See accompanying Notes to Pension Schedules. (75) 2017 (2016) 0.043960% $ 7,095,586 $ 4,074,323 2016 (2015) 0.045470% $ 7,082,217 $ 4,108,769 2015 (2014) 0.000494 $ 7,309,573 $ 4,015,976 174.15% 172.37% 182.01% 67.06% 68.35% 69.49% CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) SCHEDULE OF CHANGES IN THE CITY’S NET PENSION LIABILITY AND RELATED RATIOS AGENT PENSION PLANS JUNE 30, 2017 PSPRS Police Reporting Year (Measurement Date) 2017 (2016) Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Pension Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net Pension Liability (Asset) - Ending (a) - (b) $ 348,598 1,555,542 (35,698) Covered Payroll See accompanying Notes to Pension Schedules. (76) 350,912 1,536,369 - $ 397,560 1,299,915 572,866 (298,004) (1,227,722) 361,555 20,009,986 20,371,541 (586,401) 2,630,528 (1,330,257) 2,984,211 17,025,775 20,009,986 1,078,409 263,157 36,786 (1,460,025) (5,693) 38 (87,328) 6,305,443 6,218,115 730,718 211,626 233,285 (1,227,722) (6,060) (53,348) (111,501) 6,416,944 6,305,443 731,085 201,922 814,052 (1,330,257) (6,556) 410,246 6,006,698 6,416,944 30.10% $ 1,824,164 City's Net Pension Liability (Asset) as a Percentage of Covered Payroll $ 2015 (2014) (895,420) 776,728 (1,460,025) 289,725 20,371,541 20,661,266 $ 14,443,151 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2016 (2015) 791.77% $ 14,066,098 $ 13,593,042 30.95% 32.07% $ 1,799,959 $ 1,865,210 781.46% 728.77% CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) SCHEDULE OF CHANGES IN THE CITY’S NET PENSION LIABILITY AND RELATED RATIOS AGENT PENSION PLANS JUNE 30, 2017 PSPRS Fire Reporting Year (Measurement Date) 2017 (2016) Total Pension Liability Service Cost Interest on the Total Pension Liability Changes of Benefit Terms Differences Between Expected and Actual Experience in the Measurement of the Pension Liability Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) Plan Fiduciary Net Position Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expenses Other Changes Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net Pension Liability (Asset) - Ending (a) - (b) $ 300,094 1,140,961 (16,539) Covered Payroll See accompanying Notes to Pension Schedules. (77) 258,460 1,111,551 - $ 288,434 909,525 444,603 (86,876) (923,685) 359,450 14,492,493 14,851,943 36,351 1,830,655 (918,315) 2,591,253 11,901,240 14,492,493 996,227 184,516 21,858 (934,899) (3,545) (24,570) 239,587 3,668,071 3,907,658 570,035 151,481 133,862 (923,685) (3,626) (2,812) (74,745) 3,742,816 3,668,071 613,837 146,888 473,107 (918,315) (3,810) 22,909 334,616 3,408,200 3,742,816 25.55% $ 1,517,157 City's Net Pension Liability (Asset) as a Percentage of Covered Payroll $ 2015 (2014) (610,416) 560,384 (934,899) 439,585 14,851,943 15,291,528 $ 11,383,870 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 2016 (2015) 750.34% $ 11,183,872 $ 10,749,677 24.70% 25.83% $ 1,263,573 $ 1,273,232 885.10% 844.28% CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) SCHEDULE OF CITY PENSION CONTRIBUTIONS JUNE 30, 2017 Arizona State Retirement System Reporting Fiscal Year Statutorily Required Contribution City's Contribution in Relation to the Statutorily Required Contribution City's Contribution Deficiency (Excess) City's Covered Payroll City's Contributions as a Percentage of Covered Payroll $ 2017 469,070 469,070 $ $ 4,539,864 10.33% PSPRS Police $ 2016 449,208 449,208 $ $ 4,074,323 $ 2015 449,025 449,025 $ $ 4,108,769 11.03% $ 2014 476,481 476,481 $ $ 4,015,976 10.93% 11.86% Reporting Fiscal Year Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) City's Covered Payroll City's Contributions as a Percentage of Covered Payroll 2017 $ 1,322,559 2016 $ 1,084,052 $ 1,322,559 $ $ 2,206,930 1,084,052 $ $ 1,824,164 740,315 $ $ 1,799,959 59.93% PSPRS Fire 59.43% 2015 740,315 $ 2014 731,085 731,085 $ $ 1,865,210 41.13% 39.20% Reporting Fiscal Year Actuarially Determined Contribution City's Contribution in Relation to the Actuarially Determined Contribution City's Contribution Deficiency (Excess) City's Covered Payroll City's Contributions as a Percentage of Covered Payroll 2017 $ 1,101,352 2016 $ 1,017,407 $ 1,101,352 $ $ 1,619,974 1,017,407 $ $ 1,517,157 579,692 $ $ 1,263,573 67.99% See accompanying Notes to Pension Schedules. (78) 67.06% 2015 579,692 45.88% $ 2014 613,837 613,837 $ $ 1,273,232 48.21% CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) NOTES TO PENSION SCHEDULES JUNE 30, 2017 NOTE 1 ACTUARIALLY DETERMINED CONTRIBUTION RATES Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial Cost Method Entry age normal Amortization Level Level percent closed for unfunded actuarial accrued liability, open for excess Remaining Amortization Period as of the 2015 Actuarial Valuation 21 years for unfunded actuarial accrued liability, 20 years for excess Asset Valuation Method 7-year smoothed market value; 80%/120% corridor Actuarial Assumptions: Investment Rate of Return NOTE 2 In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85% Projected Salary Increases In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%–8.5% to 4.0%–8.0% for PSPRS Wage Growth In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0% for PSPRS Retirement Age Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006–June 30, 2011. Mortality RP-2000 mortality table (adjusted by 105% for both males and females INFORMATION PRIOR TO THE MEASUREMENT DATE Ten years of information is required; however, information prior to the measurement date (June 30, 2014) was not available. (79) CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM SCHEDULE OF AGENT OPEB PLANS’ FUNDING PROGRESS YEAR ENDED JUNE 30, 2017 Health Insurance Premium Benefits Actuarial Valuation Date June 30, PSPRS Police 2016 2015 2014 PSPRS Fire 2016 2015 2014 Actuarial Value of Assets Unfunded Actuarial Actuarial Accrued Accrued Liability (UAAL) Liability (AAL) (Funding Excess) Annual Covered Payroll Funded Ratio UAAL (Funding Excess) as a Percentage of Covered Payroll $ 577,822 589,842 557,306 $ 537,943 403,124 372,417 $ (39,879) (186,718) (184,889) 107.4% 146.3% 149.7% $ 1,824,164 1,799,959 1,865,210 (2.2)% (10.4)% (9.9)% $ 439,059 425,586 403,836 $ 285,651 246,161 203,884 $ (153,408) (179,425) (199,952) 153.7% 172.9% 198.1% $ 1,517,157 1,263,573 1,273,232 (10.1)% (14.2)% (15.7)% See accompanying Notes to Schedule of Agent OPEB Plans’ Funding Progress. . (80) CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM NOTES TO SCHEDULE OF AGENT OPEB PLANS’ FUNDING PROGRESS YEAR ENDED JUNE 30, 2017 NOTE 1 FACTORS THAT AFFECT THE IDENTIFICATION OF TRENDS Beginning in fiscal year 2014, PSPRS established separate funds for pension benefits and health insurance premium benefits. Previously, the plans recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plans transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from each plan’s pension fund to the new health insurance fund. (81) CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Taxes: Sales Taxes Property Taxes Franchise Taxes Intergovernmental Revenues Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Investment Income Other Total Revenues $ 5,490,814 570,000 323,000 5,611,927 101,500 179,250 1,634,091 813,682 10,000 225,915 14,960,179 EXPENDITURES Current: General Government: Administration Finance Personnel General Government Management Information Systems Parking Lot City Magistrate Cemetery Community Development Golf Course Economic Development Airport Call Center Total General Government Public Safety: Police Fire Emergency Medical Services Total Public Safety Highways and Streets: Public Works Actual $ 5,097,988 603,407 295,034 5,441,339 153,441 151,967 2,072,475 821,410 62,094 83,825 14,782,980 Variance With Final Budget $ (392,826) 33,407 (27,966) (170,588) 51,941 (27,283) 438,384 7,728 52,094 (142,090) (177,199) 482,327 517,124 513,987 514,870 439,745 137,778 146,828 67,710 147,092 48,517 3,015,978 453,248 485,148 402,052 219,937 422,520 1,078 30,643 137,788 79,133 164,608 48,145 325,793 40,092 2,810,185 29,079 31,976 111,935 294,933 17,225 (1,078) (30,643) (10) (79,133) (17,780) 19,565 (178,701) 8,425 205,793 5,676,942 1,354,021 1,635,081 8,666,044 5,285,561 1,837,111 2,293,745 9,416,417 391,381 (483,090) (658,664) (750,373) 656,886 527,120 129,766 (Continued) See accompanying Notes to Budgetary Comparison Schedule. (82) CITY OF DOUGLAS, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE (CONTINUED) GENERAL FUND YEAR ENDED JUNE 30, 2017 (Concluded) EXPENDITURES (CONTINUED) Culture and Recreation: Parks Recreation Library Aquatics Visitor Center Total Culture and Recreation Original and Final Budget 515,279 178,872 414,072 282,918 63,926 1,455,067 $ Debt Service: Principal Retirement Interest on Long-Term Debt Total Debt Service Capital Outlay Total Expenditures $ 503,494 191,786 402,063 283,492 56,155 1,436,990 Variance With Final Budget $ 11,785 (12,914) 12,009 (574) 7,771 18,077 18,172 18,172 16,037 3,005 19,042 2,135 (3,005) (870) 234,700 14,046,847 248,247 14,458,001 (13,547) (411,154) 913,332 324,979 (588,353) Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds from Sale of Capital Assets Issuance of Capital Leases Total Other Financing Sources (Uses) 192,110 (1,227,803) 10,000 125,000 (900,693) Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year Actual 12,639 $ See accompanying Notes to Budgetary Comparison Schedule. (83) 4,544,106 4,556,745 $ 205,432 (1,270,822) 69,902 140,482 (855,006) 13,322 (43,019) 59,902 15,482 45,687 (530,027) (542,666) 7,227,652 6,697,625 $ 2,683,546 2,140,880 CITY OF DOUGLAS, ARIZONA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE – GENERAL FUND YEAR ENDED JUNE 30, 2017 NOTE 1 BASIS OF ACCOUNTING The General Fund budgetary comparison schedule is prepared on essentially the same modified accrual bases of accounting as the statement of revenues, expenditures and changes in fund balances reported in the basic financial statements. Expenditures may not legally exceed the expenditure limitation of all fund types as a whole. For management and legal purposes, the City Council adopts an annual budget by department for the General Fund. The City Manager, subject to City Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between departments. NOTE 2 EXCESS OF EXPENDITURES OVER APPROPRIATIONS Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure General Fund: Parking Lot City Magistrate Cemetery Community Development Golf Course Airport Fire Emergency Medical Services Recreation Aquatics Debt Service Capital Outlay $ 1,078 30,643 10 79,133 17,780 178,701 483,090 658,664 12,914 574 870 13,547 Cash was available to meet all of the overexpenditures listed above. (84) COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES THIS PAGE BLANK NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Highway Users Fund (HURF) – accounts for the City’s share of state taxes on gasoline, diesel fuels, and other transportation related fees to be used solely for street and highway purposes. Eligible expenditures include the cost of right-of-way acquisitions, construction, reconstruction, maintenance, repair, roadside development of city roads, streets and bridges and the payment of the interest and principal on highway and street bonds. Grants Fund – accounts for the activity of federal and state grants received by the City restricted for specific projects and awards. Police Grants – accounts for the activity of restricted grants received by the City’s police department. LTAF Fund – accounts for the Local Transportation Assistance of the City. The LTAF receives assistance from the State of Arizona to support the development and operation of transportation programs. JCEF Restricted Court Fund – accounts for the activity of the JCEF court receipts. Golf Course Municipal Property Corporation (MPC) – accounts for operations of the golf course restricted for use of golf course operations. The MPC operates the golf course; however, the City owns all golf course assets and liabilities. Public Housing Fund – accounts for the Douglas Housing Authority component unit of the City. The Douglas Housing Authority receives federal assistance and provides low rent housing for the area. CAPITAL PROJECTS FUND Capital Projects Fund – accounts for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds. DEBT SERVICE FUND Debt Service Fund – accounts for the accumulation of resources for, and the payments of, debt service principal, interest and related debt. CITY OF DOUGLAS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2017 Special Revenue HURF ASSETS Cash and Investments Receivables Accounts Receivable Taxes Receivable Intergovernmental Receivable Restricted Assets Total Assets LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES Liabilities Accounts Payable Accrued Wages and Benefits Due to Other Funds Customer Deposits Payable Total Liabilities $ 1,333,583 $ 305,830 123,869 $ 1,457,452 $ 121,941 427,771 $ $ 283,207 700 283,907 Deferred Inflows of Resources Unavailable Revenue Fund Balances Restricted Committed Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances Grants 27,002 27,002 Police Grants $ 140,791 $ 140,791 $ 5,889 5,889 LTAF $ - $ 2,817 136,268 139,085 $ 3,991 1,238 10,360 15,589 - 21,972 - - 1,173,545 1,173,545 378,797 378,797 134,902 134,902 123,496 123,496 $ 1,457,452 (85) $ 427,771 $ 140,791 $ 139,085 Special Revenue JCEF Restricted Court Golf Course MPC $ 26,449 $ 26,449 $ 8,340 8,340 $ - $ - $ - 26,449 397,923 $ 2,204,576 $ 3,926 30,904 432,753 $ - 3,476 21,194 32,187 56,857 - (14,568) (14,568) $ Total Special Revenue $ - 18,109 18,109 $ 10,814 3,754 14,568 Public Housing 375,896 375,896 $ 432,753 Capital Projects $ 211,708 6,743 382,078 30,904 $ 2,624,301 $ 2,038 213,746 $ $ 342,719 26,886 10,360 32,187 412,152 21,972 2,204,745 (14,568) 2,190,177 $ 2,624,301 (86) $ 16,707 16,707 Total Nonmajor Governmental Funds Debt Service $ - $ - 2,416,284 $ 6,743 2,038 382,078 30,904 2,838,047 - 359,426 26,886 10,360 32,187 428,859 2,038 - 24,010 195,001 195,001 - 213,746 $ $ $ - 2,204,745 195,001 (14,568) 2,385,178 $ 2,838,047 CITY OF DOUGLAS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES YEAR ENDED JUNE 30, 2017 Special Revenue HURF REVENUES Taxes Sales Taxes Intergovernmental Revenues Fines and Forfeitures Charges for Services Investment Income Other Total Revenues $ 1,328,216 10,638 1,338,854 Grants $ Police Grants 236,013 21 236,034 $ 48,183 3,025 51,208 LTAF $ 781,076 21,666 802,742 EXPENDITURES Current General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Debt Service Principal Retirement Interest on Long-Term Debt Capital Outlay Total Expenditures 869,864 - 337 5,283 3 30,807 - 31,583 - 764,904 - 87,256 957,120 169,950 206,380 61,550 93,133 764,904 Excess (Deficiency) of Revenues Over Expenditures 381,734 29,654 (41,925) 37,838 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) (43,923) (43,923) Net Change in Fund Balances 337,811 FUND BALANCES Beginning of Year, As Restated End of Year 835,734 $ 1,173,545 (87) - - 29,654 $ 349,143 378,797 - (41,925) $ 176,827 134,902 37,838 $ 85,658 123,496 Special Revenue JCEF Restricted Court $ Golf Course MPC 3,618 3,618 $ $ 915,698 378 8,900 924,976 $ 3,309,186 3,618 263,270 3,424 19,538 3,599,036 Debt Service Capital Projects Total Special Revenue $ 39 7,753 3,500 11,292 $ 112 112 $ 151 3,309,186 3,618 263,270 11,177 23,038 3,610,440 28,203 - 276,676 - 920,658 28,540 36,866 1,634,771 307,483 920,658 - - 28,540 36,866 1,634,771 307,483 920,658 28,203 276,676 920,658 318,756 3,247,074 557,774 557,774 897,960 376,119 1,274,079 897,960 376,119 876,530 5,078,927 (24,585) (35,072) 4,318 351,962 (546,482) (1,273,967) (1,468,487) 13,500 (43,923) (30,423) 65,412 (10,788) 54,624 1,273,967 1,273,967 1,352,879 (54,711) 1,298,168 4,318 321,539 (491,858) - (170,319) 371,578 375,896 1,868,638 $ 2,190,177 (24,585) 42,694 18,109 - 13,500 13,500 - $ 241,604 241,604 Public Housing Total Nonmajor Governmental Funds (21,572) $ 7,004 (14,568) $ (88) $ 686,859 195,001 $ - $ 2,555,497 2,385,178 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL HURF FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Intergovernmental Revenues Other Total Revenues $ EXPENDITURES Current: Highways and Streets Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year $ (89) 1,276,700 35,000 1,311,700 Actual $ 1,328,216 10,638 1,338,854 Variance With Final Budget $ 51,516 (24,362) 27,154 1,858,267 55,000 869,864 87,256 988,403 (32,256) 1,913,267 957,120 956,147 (601,567) 381,734 983,301 (48,433) (43,923) (650,000) 337,811 (650,000) $ 835,734 1,173,545 4,510 987,811 $ 835,734 1,823,545 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GRANTS FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Intergovernmental Revenues Investment Income Total Revenues $ 787,357 787,357 Variance With Final Budget Actual $ 236,013 21 236,034 $ (551,344) 21 (551,323) EXPENDITURES Current: General Government Public Safety Highways and Streets Culture and Recreation Capital Outlay Total Expenditures 10,000 11,000 17,500 761,657 800,157 337 5,283 3 30,807 169,950 206,380 9,663 5,717 (3) (13,307) 591,707 593,777 Excess (Deficiency) of Revenues Over Expenditures (12,800) 29,654 42,454 OTHER FINANCING SOURCES (USES) Transfers In Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year (6,500) $ (90) (6,500) (6,300) - 6,300 29,654 $ 349,143 378,797 36,154 $ 349,143 385,297 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL POLICE GRANTS FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Intergovernmental Revenues Investment Income Total Revenues $ EXPENDITURES Current Public Safety Capital Outlay Total Expenditures $ 58,000 145,276 203,276 Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year 203,276 203,276 Actual - $ (91) - $ 48,183 3,025 51,208 Variance With Final Budget $ (155,093) 3,025 (152,068) 31,583 61,550 93,133 26,417 83,726 110,143 (41,925) (41,925) 176,827 134,902 $ 176,827 134,902 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL JCEF RESTRICTED COURT FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Fines and Forfeitures $ EXPENDITURES Current: General Government Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year $ (92) Actual - $ 3,618 Variance With Final Budget $ 3,618 30,000 28,203 1,797 (30,000) (24,585) 5,415 (30,000) $ 42,694 18,109 $ 42,694 48,109 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Taxes Investment Income Other Total Revenues $ EXPENDITURES Capital Outlay Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) $ (93) $ 39 7,753 3,500 11,292 557,774 92,226 (650,000) (546,482) 103,518 65,412 (10,788) 54,624 65,412 (10,788) 54,624 (491,858) 158,142 (650,000) $ 39 7,753 3,500 11,292 Variance With Final Budget 650,000 - Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year - Actual (650,000) $ 686,859 195,001 $ 158,142 CITY OF DOUGLAS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DEBT SERVICE FUND YEAR ENDED JUNE 30, 2017 Original and Final Budget REVENUES Taxes - $ EXPENDITURES Debt Service: Principal Retirement Interest on Long-Term Debt Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Variance With Final Budget Actual $ 112 $ 112 921,689 381,871 1,303,560 897,960 376,119 1,274,079 23,729 5,752 29,481 (1,303,560) (1,273,967) 29,593 1,303,560 1,273,967 (29,593) - - OTHER FINANCING SOURCES (USES) Transfers In Net Change in Fund Balance - FUND BALANCE Beginning of Year End of Year $ (94) - $ - $ - THIS PAGE BLANK STATISTICAL SECTION (UNAUDITED) This section of the City of Douglas, Arizona’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health. Financial Trends These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the government’s most significant local revenue source, sales tax. Debt Capacity These schedules present information to help the reader assess the affordability of the government’s current levels of outstanding debt and the government’s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government’s financial report relates to the services the government provides and the activities it performs. See the table of contents for page numbers of the schedules that encompass the above sections. CITY OF DOUGLAS, ARIZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year Governmental Activities: Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position Business-Type Activities: Net Investment in Capital Assets Restricted Unrestricted Total Business-Type Activities Net Position Primary Government: Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position 2008 2009 2010 2011 $ 13,509,453 2,939,323 3,491,020 $ 12,376,658 3,634,763 5,438,330 $ 13,775,501 477,084 7,049,956 $ 15,847,448 719,796 3,938,127 $ 19,939,796 $ 21,449,751 $ 21,302,541 $ 20,505,371 $ 12,314,881 1,815,909 $ 15,535,124 1,006,658 $ 15,872,761 1,205,402 $ 16,048,928 2,100,001 $ 14,130,790 $ 16,541,782 $ 17,078,163 $ 18,148,929 $ 25,824,334 2,939,323 5,306,929 $ 27,911,782 3,634,763 6,444,988 $ 29,648,262 477,084 8,255,358 $ 31,896,376 719,796 6,038,128 $ 34,070,586 $ 37,991,533 $ 38,380,704 $ 38,654,300 Source: The City’s Finance Department. (95) Fiscal Year 2012 2013 2014 2015 2016 2017 $ 20,735,227 871,510 3,923,990 $ 20,087,841 1,234,695 3,991,132 $ 13,255,510 1,261,605 5,512,891 $ 14,659,500 1,632,597 (20,445,957) $ 16,236,005 2,087,831 (20,045,765) $ 16,107,618 2,385,205 (21,402,039) $ 25,530,727 $ 25,313,668 $ 20,030,006 $ (4,153,860) $ (1,721,929) $ (2,909,216) $ 15,921,451 3,880,161 $ 16,866,077 443,520 3,685,177 $ 16,491,574 568,237 4,508,051 $ 16,271,458 712,773 3,157,152 $ 16,301,425 893,708 4,142,534 $ 15,748,934 615,334 5,712,000 $ 19,801,612 $ 20,994,774 $ 21,567,862 $ 20,141,383 $ 21,337,667 $ 22,076,268 $ 36,656,678 871,510 7,804,151 $ 36,953,918 1,678,215 7,676,309 $ 29,747,084 1,829,842 10,020,942 $ 30,930,958 2,345,370 (17,288,805) $ 32,537,430 2,981,539 (15,903,231) $ 31,856,552 3,000,539 (15,690,039) $ 45,332,339 $ 46,308,442 $ 41,597,868 $ 15,987,523 $ 19,615,738 $ 19,167,052 (96) CITY OF DOUGLAS, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2008 EXPENSES Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Interest on Long-Term Debt Total Governmental Activities $ Business-Type Activities: Water Sewer Solid Waste Total Business-Type Activities Total Primary Government Expenses PROGRAM REVENUES Governmental Activities: Fines, Fees and Charges for Services: General Government Public Safety Highways and Streets Culture and Recreation Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues $ 3,999,501 6,604,306 2,702,979 2,074,291 497,600 727,564 16,606,241 2010 $ 4,639,733 6,715,219 2,970,829 1,986,674 53,973 760,128 17,126,556 2011 $ 5,121,084 6,700,135 2,773,973 1,936,579 51,599 704,510 17,287,880 1,455,706 952,579 891,003 3,299,288 1,344,052 1,385,910 707,042 3,437,004 1,261,985 1,337,193 716,047 3,315,225 1,367,914 1,320,648 755,546 3,444,108 $ 18,251,845 $ 20,043,245 $ 20,441,781 $ 20,731,988 $ $ $ $ Business-Type Activities: Charges for Services: Water Sewer Solid Waste Operating Grants and Contributions Capital Grants and Contributions Total Business-Type Activities Program Revenues Total Primary Government Program Revenues 4,340,737 6,348,866 1,760,251 2,189,769 132,857 180,077 14,952,557 2009 $ 939,208 642,820 2,834 97,949 2,293,564 589,152 1,387,975 760,669 98,174 1,818,551 1,765,876 1,766,509 669,040 90,033 2,128,442 902,228 1,728,090 972,724 173,836 2,303,776 951,180 4,565,527 5,831,245 5,556,252 6,129,606 1,749,040 924,045 668,023 110,274 1,782,320 909,842 816,038 2,373,486 1,870,916 1,042,152 1,056,305 - 1,965,519 1,703,223 1,203,563 - 3,451,382 5,881,686 3,969,373 4,872,305 8,016,909 $ 11,712,931 9,525,625 $ 11,001,911 Source: The City's Finance Department. (97) $ Fiscal Year 2012 $ 4,840,153 7,186,954 2,555,331 1,827,388 664,519 17,074,345 2013 $ 4,989,484 7,799,983 2,605,395 1,868,116 1,041,957 579,592 18,884,527 2014 $ 4,499,732 8,050,797 2,394,792 1,965,397 1,064,489 530,417 18,505,624 2015 $ 3,858,018 9,792,922 1,946,662 1,680,063 954,039 478,120 18,709,824 2016 $ 3,336,212 9,678,626 2,597,146 2,057,077 922,816 414,014 19,005,891 2017 $ 3,463,981 10,479,931 2,649,507 2,100,889 924,901 379,124 19,998,333 1,698,669 1,313,976 765,647 3,778,292 1,666,863 1,310,421 785,788 3,763,072 1,839,897 1,538,514 956,297 4,334,708 1,884,943 1,472,735 930,769 4,288,447 1,654,307 1,353,423 1,134,665 4,142,395 1,902,651 1,344,495 991,934 4,239,080 $ 20,852,637 $ 22,647,599 $ 22,840,332 $ 22,998,271 $ 23,148,286 $ 24,237,413 $ $ $ $ $ $ 2,035,725 924,788 73,255 2,193,829 5,622,718 1,825,479 895,111 89,531 3,340,827 1,000,170 1,890,264 1,069,174 136,056 3,751,156 423,034 1,699,542 1,246,153 94,747 3,466,981 582,348 1,482,688 1,647,339 20,537 304,953 3,661,814 2,996,541 1,538,549 1,603,762 21,666 302,204 4,084,183 383,742 10,850,315 7,151,118 7,269,684 7,089,771 10,113,872 7,934,106 2,000,402 1,796,248 1,237,449 592,435 274,140 2,025,752 1,835,771 1,205,675 8,196 19,578 2,070,331 1,880,405 1,202,806 1,320 - 1,979,308 1,852,495 1,212,089 - 1,989,253 1,954,149 1,207,590 400,000 - 2,031,524 1,941,864 1,199,843 - 5,900,674 5,094,972 5,154,862 5,043,892 5,550,992 5,173,231 $ 16,750,989 $ 12,246,090 $ 12,424,546 $ 12,133,663 $ 15,664,864 $ 13,107,337 (98) CITY OF DOUGLAS, ARIZONA CHANGES IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year (Concluded) NET (EXPENSE)/REVENUE Governmental Activities Business-Type Activities Total Primary Government Net Expense GENERAL REVENUES AND OTHER CHANGES IN NET POSITION Governmental Activities: Taxes: Sales Taxes Property Taxes Franchise Taxes Unrestricted Grants and Contributions State Revenue Sharing State Sales Tax Revenue Sharing Auto Lieu Tax Revenue Sharing Gain on Sale of Capital Assets Investment Income Other Special Item Transfers Total Governmental Activities 2008 2009 2010 2011 $ (10,387,030) 152,094 $ (10,774,996) 2,444,682 $ (11,570,304) 654,148 $ (11,158,274) 1,428,197 $ (10,234,936) $ (8,330,314) $ (10,916,156) $ (9,730,077) $ $ $ $ Business-Type Activities: Sales Tax Investment Income (Loss) Transfers Total Business-Type Activities Total Primary Government CHANGE IN NET POSITION Governmental Activities Business-Type Activities Total Primary Government 5,095,143 462,232 349,444 49,612 2,448,141 1,580,288 845,030 280,685 1,697 (323,514) 10,788,758 6,151,531 532,028 341,702 18,467 2,608,244 1,368,088 793,358 16,212 322,889 132,432 12,284,951 5,808,108 531,489 351,635 30,274 2,245,322 1,261,862 732,787 107,495 238,124 115,998 11,423,094 5,953,998 545,995 337,029 39,082 1,687,895 1,316,667 762,824 67,493 258,705 358,411 11,328,099 224,968 99,267 323,514 647,749 77,114 21,628 (132,432) (33,690) (1,769) (115,998) (117,767) 980 (358,411) (357,431) $ 11,436,507 $ 12,251,261 $ 11,305,327 $ 10,970,668 $ $ $ $ $ 401,728 799,843 1,201,571 (99) $ 1,509,955 2,410,992 3,920,947 $ (147,210) 536,381 389,171 $ 169,825 1,070,766 1,240,591 Fiscal Year 2012 2013 2014 2015 2016 2017 $ (6,224,030) 2,122,382 $ (11,733,409) 1,331,900 $ (11,235,940) 820,154 $ (11,620,053) 755,445 $ (8,892,019) 1,408,597 $ (12,064,227) 934,151 $ (4,101,648) $ (10,401,509) $ (10,415,786) $ (10,864,608) $ (7,483,422) $ (11,130,076) $ $ $ $ $ $ 5,825,402 533,742 334,074 42,590 1,466,716 1,357,922 803,452 6,769 44,626 356,342 477,751 11,249,386 5,364,312 563,698 314,080 70,074 1,775,125 1,419,048 757,402 39,423 596,739 162,208 11,062,109 5,533,351 578,759 311,019 41,950 1,976,038 1,545,589 736,085 30,607 281,915 (5,352,178) 269,143 5,952,278 8,052 (477,751) (469,699) 23,470 (162,208) (138,738) $ 10,779,687 $ 10,923,371 $ $ $ $ (5,283,662) 573,088 $ (4,710,574) $ 5,025,356 1,652,683 6,678,039 $ (671,300) 1,193,162 521,862 5,578,165 577,360 317,610 40,417 2,119,573 1,600,126 776,774 20,480 26,489 265,826 245,316 11,568,136 5,361,849 585,960 312,874 37,610 2,108,081 1,644,426 812,549 (11,611) 39,738 188,576 243,898 11,323,950 5,097,699 595,284 295,034 38,171 2,029,912 1,518,751 819,277 69,902 73,269 106,863 232,778 10,876,940 22,077 (269,143) (247,066) 18,232 (245,316) (227,084) 31,585 (243,898) (212,313) 37,228 (232,778) (195,550) 5,705,212 $ 11,341,052 $ 11,111,637 $ 10,681,390 $ $ $ (1,187,287) 738,601 $ (448,686) $ (51,917) 528,361 476,444 (100) $ 2,431,931 1,196,284 3,628,215 THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sales Taxes 5,095,143 6,228,645 5,808,108 5,953,998 5,825,402 5,364,312 5,533,351 5,578,165 5,361,849 5,097,699 Property Taxes 462,232 532,028 531,489 545,995 533,742 563,698 578,759 577,360 585,960 595,284 Source: The City’s Finance Department. (101) Franchise Taxes 349,444 341,702 351,635 337,029 334,074 314,080 311,019 317,610 312,874 295,034 Total 5,906,819 7,102,375 6,691,232 6,837,022 6,693,218 6,242,090 6,423,129 6,473,135 6,260,683 5,988,017 CITY OF DOUGLAS, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2008 General Fund: Reserved Unreserved Non-spendable Restricted Unassigned Total General Fund All Other Governmental Funds: Reserved Unreserved, Reported in: Special Revenue Funds Capital Projects Funds Debt Service Funds Restricted Committed Assigned Unassigned Total All Other Governmental Funds $ 78,239 3,735,584 2009 $ 68,239 3,962,160 2010 $ $ 4,030,399 $ 4,174,438 $ $ $ 4,854,098 (68,512) - $ 4,795,586 10,000 5,335,420 (7,499) - $ 5,337,921 2012 4,174,438 $ 3,813,823 10,000 2011 $ 58,493 4,683,978 $ 4,742,471 $ 652,189 4,108,952 $ 4,761,141 $ 2,220,530 (29,857) $ $ 2,190,673 $ 1,099,850 15,453 4,065,860 - $ 4,081,313 871,510 228,340 - Source: The City’s Finance Department. Note 1: The City implemented the provisions of GASB Statement No. 54 in the fiscal year 2011, which required fund balances to be reported in different categories. (102) Fiscal Year 2013 2014 2015 2016 2017 $ 686,488 4,260,979 $ 4,947,467 $ 720,416 4,790,887 $ 5,511,303 $ 723,641 156,889 5,613,427 $ 6,493,957 $ 734,543 157,580 6,512,749 $ 7,404,872 858,288 158,488 5,680,849 $ 6,697,625 $ 1,174,505 224,190 - $ 1,218,198 1,033,237 320,290 - $ 1,439,415 779,693 - $ 1,900,963 693,863 - $ 2,204,745 195,001 (14,568) $ 1,398,695 $ 2,571,725 $ 2,219,108 $ 2,594,826 $ 2,385,178 (103) $ CITY OF DOUGLAS, ARIZONA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2008 REVENUES Taxes Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Contributions and Donations Investment Income Other Total Revenues $ 2009 5,914,743 7,805,787 141,232 169,697 1,059,989 36,000 280,685 307,449 15,715,582 $ 7,012,223 8,372,584 195,644 126,224 1,386,022 538,928 16,212 322,889 17,970,726 2010 $ 6,689,354 7,184,648 189,333 192,309 1,410,391 733,549 107,495 238,124 16,745,203 2011 $ 6,831,876 7,083,337 201,361 172,602 1,745,359 755,328 67,493 258,705 17,116,061 EXPENDITURES General Government Public Safety Highways and Streets Culture and Recreation Redevelopment and Housing Capital Outlay Debt Service Principal Retirement Interest on Long-Term Debt Total Expenditures 5,169,854 6,078,350 2,413,444 1,863,014 132,857 896,225 13,462,021 6,579,669 2,626,696 1,750,997 497,600 817,482 3,961,316 6,554,551 2,660,654 1,513,127 53,973 728,862 3,910,726 6,275,426 1,975,991 1,409,501 51,599 2,007,704 429,669 133,267 17,116,680 656,965 686,598 27,078,028 2,228,723 719,162 18,420,368 1,611,006 663,544 17,905,497 Excess of Revenues Over (Under) Expenditures (1,401,098) (9,107,302) (1,675,165) (789,436) 1,553,137 (1,876,651) 3,000,000 595,000 - 1,020,458 (888,026) 9,000,000 595,000 - 1,303,871 (1,002,494) 400,000 - 2,837,907 (2,479,496) 75,413 - 3,271,486 9,727,432 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Long-Term Debt Proceeds from Capital Leases Proceeds from Sale of Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balance Debt Service as a Percentage of Noncapital Expenditures $ 1,870,388 4.05% Source: The City’s Finance Department. (104) $ 620,130 9.80% 701,377 $ (973,788) 18.09% 433,824 $ (355,612) 14.02% Fiscal Year 2012 $ 6,707,653 6,783,653 319,294 196,385 1,759,653 758,436 44,626 356,342 16,926,042 2013 $ $ 6,399,692 8,455,635 311,448 201,227 1,763,797 819,022 30,607 281,915 18,263,343 2015 $ 6,476,819 8,035,692 160,870 165,004 1,895,749 818,819 136,718 26,489 265,826 17,981,986 2016 $ 6,252,364 8,446,141 202,116 152,482 2,282,537 818,382 39,738 188,576 18,382,336 2017 $ 5,996,580 8,750,525 157,059 151,967 2,335,745 821,410 73,271 106,863 18,393,420 3,555,255 6,709,042 2,093,297 1,361,590 2,620,504 3,469,997 7,139,134 1,779,871 1,407,089 1,035,816 2,007,665 3,407,238 7,295,712 1,685,298 1,513,927 1,058,347 1,806,890 3,203,318 7,030,010 1,276,388 1,337,577 947,866 1,923,777 2,863,112 8,395,922 1,909,520 1,694,211 916,674 521,648 2,838,725 9,453,283 2,161,891 1,744,473 920,658 1,124,777 1,636,402 623,553 18,599,643 1,627,585 551,097 19,018,254 1,464,848 501,922 18,734,182 1,474,930 423,879 17,617,745 907,502 414,014 17,622,603 913,997 379,124 19,536,928 (1,673,601) (1,305,260) (470,839) 364,241 759,733 2,923,356 (2,445,605) 71,676 52,021 2,480,730 (2,318,522) 1,205,911 - 2,354,892 (2,085,749) 1,041,474 897,088 1,368,119 2,207,705 601,448 $ 6,234,848 8,031,863 273,475 162,571 1,605,657 768,418 39,423 596,739 17,712,994 2014 (1,072,153) 14.27% $ 62,859 12.65% $ 1,736,866 11.68% 2,557,063 (2,311,747) 20,480 1,633,133 (1,389,235) 67,277 215,725 265,796 $ 630,037 12.10% (105) (1,143,508) 1,558,311 (1,325,533) 140,482 69,902 526,900 $ 1,286,633 7.87% 443,162 $ (700,346) 7.16% CITY OF DOUGLAS, ARIZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2008 Sales Category: Mining Communications and Utilities Transportation & Warehousing Construction Manufacturing Wholesale Trade Retail Trade Finance and Insurance Real Estate, Rental and Leases Restaurants and Bars Accommodations Public Administration Services Arts & Entertainment Other Total City Sales Tax Rate 2010 2009 2011 510,450 23,876,918 15,283 7,578,438 4,144,993 4,093,177 146,386,134 194,035 5,664,318 12,932,385 2,277,339 100,106 3,342,416 3,121,725 $ 214,237,717 2,318,215 22,195,363 48,456 15,965,933 3,945,094 3,884,491 144,710,942 93,629 6,249,386 12,500,240 2,363,017 294,021 3,242,519 56,562 2,921,447 $ 220,789,315 2,318,215 22,195,363 48,456 15,965,933 3,945,094 3,884,491 144,710,942 93,629 6,249,386 12,500,240 2,363,017 294,021 3,242,519 56,562 2,921,447 $ 220,789,315 301,452 23,550,249 66,060 19,963,998 986,650 1,226,017 147,664,164 33,753 8,690,896 14,153,836 3,652,951 1,018,073 410,600 2,599,103 $ 224,317,802 2.50% 2.50% 2.80% 2.80% $ Source: Arizona Department of Revenue. (106) $ $ $ Fiscal Year $ 6,606 21,998,591 36,614 18,615,619 136,449,566 8,369,967 15,215,328 4,552,670 1,224,696 758,552 276,830 $ 207,505,039 2.80% $ 4,715 20,996,222 34,024 4,980,458 137,243,931 7,812,435 14,682,935 3,855,249 1,152,749 642,019 196,727 $ 191,601,464 2.80% 2015 2014 2013 2012 $ 2,626 20,874,694 7,558 7,161,065 138,881,604 8,037,675 14,404,604 3,792,273 1,385,854 477,238 173,041 $ 195,198,232 $ 2,891 20,725,169 32,657 10,778,758 141,407,356 8,143,356 14,634,276 2,848,778 1,102,206 377,338 262,025 $ 200,314,810 2.80% 2.80% (107) 2017 2016 $ 20,056,514 23,200 7,836,315 134,525,779 8,776,313 14,629,652 2,685,332 709,281 342,208 177,197 $ 189,761,791 2.80% $ 17,469,469 7,646 7,855,430 124,098,318 8,341,499 14,290,984 2,646,883 2,318,353 588,899 195,312 $ 177,812,793 2.80% CITY OF DOUGLAS, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 City Direct Rate 2.50 2.80 2.80 2.80 2.80 2.80 2.80 2.80 2.80 2.80 Source: Arizona Department of Revenue. (108) Cochise County 6.10 6.10 6.10 7.10 7.10 6.10 6.10 6.10 6.10 6.10 CITY OF DOUGLAS, ARIZONA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (IN THOUSANDS OF DOLLARS) (UNAUDITED) Assessed Value Fiscal Year Real Property 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 55,520 58,804 58,950 62,801 61,660 60,730 59,500 56,289 55,812 55,327 Personal Property Less: Tax Exempt Real Property Total Taxable Assessed Value Total Direct Tax Rate Estimated Actual Taxable Value Assessed Value as a Percentage of Actual Value $ $ $ 52,821 57,027 56,350 57,777 56,188 54,892 53,400 50,476 49,885 49,971 8.87 10.55 13.07 8.23 8.36 7.21 11.64 13.79 13.90 13.53 $ 462,040 470,911 478,320 509,351 505,672 499,781 494,935 468,243 468,189 478,522 11.432 12.110 11.781 11.343 11.112 10.983 10.789 10.780 10.655 10.443 1,506 4,848 4,728 4,254 3,936 3,905 3,585 3,718 3,782 3,784 4,205 6,625 7,328 9,278 9,408 9,743 9,685 9,531 9,709 9,140 Source: The Cochise County Treasurer. (109) CITY OF DOUGLAS, ARIZONA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (UNAUDITED) Primary Rates Fiscal Year City of Douglas Cochise County Cochise County Community College 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1.02 1.00 0.98 0.98 1.05 1.08 1.15 1.18 1.19 1.19 2.68 2.64 2.63 2.63 2.63 2.63 2.63 2.63 2.63 2.67 1.66 1.61 1.60 1.67 1.73 1.85 2.03 2.18 2.29 2.37 Secondary Rates Douglas Unified School District 3.51 5.30 7.86 2.95 2.95 1.65 5.83 7.80 7.79 7.29 Source: The Cochise County Treasurer. (110) Total Direct Rate 8.87 10.55 13.07 8.23 8.36 7.21 11.64 13.79 13.90 13.53 School District 1.78 0.96 1.07 0.87 0.53 0.86 0.87 0.89 1.13 1.14 County 0.40 0.40 0.34 0.45 0.55 0.55 0.55 0.55 0.55 0.55 Rate Total 11.05 11.91 14.48 9.55 9.44 8.62 13.06 15.23 15.58 15.23 CITY OF DOUGLAS, ARIZONA PRINCIPAL PROPERTY TAXPAYERS JUNE 30, 2017 AND 2008 (UNAUDITED) 2008 2017 Taxpayer Wal-Mart Stores Inc. Arizona Public Service Phelps Dodge Corp DHD LLC BH Properties LLC Southwest Gas Corporation SFP Pool Five Shopping Centers UIRC-GSA V Douglas AZ LLC Qwest Corporation J C Penney Co Inc Safeway Inc. FAE Holdings 356216R LLC MT Development LLC Phelps Dodge Corporation JC Penney Co., Inc. SFP Pool Five Shopping Centers Taxable Assessed Value $ 2,009,437 1,932,562 651,850 571,247 517,192 484,583 427,482 359,293 336,940 306,721 $ 7,597,307 Rank 1 2 3 4 5 6 7 8 9 10 - Source: The Cochise County Assessor's Office. (111) Percentage of Total Taxable Assessed Value 4.02 % 3.87 1.30 1.14 1.03 0.97 0.86 0.72 0.67 0.61 15.23 % Taxable Assessed Value Rank $ 3,568,212 1,827,341 1 2 789,575 4 752,421 5 785,794 519,800 574,380 582,355 505,931 483,171 $ 10,388,980 3 8 7 6 9 10 Percentage of Total Taxable Assessed Value 6.43 % 3.29 1.42 1.36 1.42 0.94 1.03 1.05 0.91 0.87 18.71 % CITY OF DOUGLAS, ARIZONA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Total Tax Levy Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 485,584 542,878 546,719 555,804 538,029 552,411 562,460 565,710 586,193 587,758 Current Tax Collections $ 440,446 489,507 477,007 504,613 490,427 501,212 498,462 515,897 523,764 536,145 Percent of Current Taxes Collected 90.70 90.17 87.25 90.79 91.15 90.73 88.62 91.19 89.35 91.22 Source: The Cochise County Treasurer. (112) Delinquent Tax Collections $ 42,194 51,173 67,359 48,402 44,058 47,006 59,021 44,910 52,158 - Total Tax Collections $ 482,640 540,680 544,366 553,015 534,485 548,218 557,483 560,807 523,764 536,145 Ratio of Total Tax Collections to Total Tax Levy 99.39 99.60 99.57 99.50 99.34 99.24 99.12 99.13 89.35 91.22 Outstanding Delinquent Taxes $ 2,944 2,198 2,353 2,789 3,544 4,193 4,977 4,903 10,271 51,613 Ratio of Delinquent Taxes to Tax Levy 0.61 0.40 0.43 0.50 0.66 0.76 0.88 0.87 1.75 8.78 (113) CITY OF DOUGLAS, ARIZONA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Governmental Activities Fiscal Year Revenue Bonds Loans Payable 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 2,995,000 2,605,000 2,205,000 1,790,000 1,365,000 920,800 468,602 - $ 3,000,000 12,000,000 10,890,000 10,025,000 9,155,000 8,260,000 7,725,000 7,125,000 6,620,000 6,110,000 $ Business-Type Activities Capital Leases Loans Payable 947,738 1,275,773 957,050 701,457 431,731 1,345,057 1,911,683 1,506,753 1,162,606 899,091 3,239,489 5,857,703 5,928,449 5,457,668 5,095,574 4,604,627 5,263,184 4,937,620 Source: The City’s Finance Department. (114) Capital Leases $ 109,353 61,716 31,626 263,551 440,727 326,606 210,018 90,903 Total Primary Government Percentage of Personal Income $ 7,052,091 15,942,489 17,323,165 18,374,160 16,880,180 16,247,076 15,641,586 13,562,986 13,255,808 12,037,614 2.73% 5.65 5.62 6.24 6.44 7.15 6.68 5.79 5.66 5.15 Per Capita 371 862 864 913 854 935 893 798 757 709 CITY OF DOUGLAS, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT JUNE 30, 2017 (UNAUDITED) Governmental Unit Debt Repaid with Property Taxes Cochise County Cochise County Community College District Douglas Unified School District No. 27 Subtotal, Overlapping Debt City of Douglas, Arizona direct debt Total Direct and Overlapping Debt Outstanding Debt $ Estimated Percentage Applicable (1) 1,292,712 23,900,000 5,450,000 5.43% 5.43% 100.00% 7,009,091 100.00% Estimated Share of Overlapping Debt $ $ 70,168 1,297,292 5,450,000 6,817,460 7,009,091 13,826,551 Source: Cochise County Treasurer's Office. (1) Proportion applicable to the City of Douglas, Arizona, is computed on the ratio of secondary assessed valuation for 2015-16. (115) CITY OF DOUGLAS, ARIZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 20% Debt Limit 2008 2009 2010 2011 2012 $ 10,378,721 $ 10,890,226 $ 11,240,800 $ 11,387,094 $ 11,237,561 - - - - - $ 10,378,721 $ 10,890,226 $ 11,240,800 $ 11,387,094 $ 11,237,561 - - - - Total Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit - Fiscal Year 6% Debt Limit Total Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit 2008 2009 2010 2011 2012 $ 3,113,616 $ 3,267,068 $ 3,372,240 $ 3,416,128 $ 3,371,268 - - - - - $ 3,113,616 $ 3,267,068 $ 3,372,240 $ 3,416,128 $ 3,371,268 - - - - - Source: The City's Finance Department and the Cochise County Assessor's Office. (116) Fiscal Year 2013 2014 2015 2016 2017 $ 10,978,476 $ 10,679,957 $ 10,095,268 $ 9,977,035 $ 9,994,192 - - - - - $ 10,978,476 $ 10,679,957 $ 10,095,268 $ 9,977,035 $ 9,994,192 - - - - - Fiscal Year 2013 2014 2015 2016 2017 $ 3,293,543 $ 3,203,987 $ 3,028,580 $ 2,993,111 $ 2,998,257 - - - - - $ 3,293,543 $ 3,203,987 $ 3,028,580 $ 2,993,111 $ 2,998,257 - - - - - (117) THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA CALCULATION OF LEGAL DEBT MARGIN JUNE 30, 2017 (UNAUDITED) $ 49,970,958 Net Secondary Assessed Value Water, Sewer, Light, Parks, Open Space and Recreational Facility Bonds 9,994,192 Debt Limit - 20% of Net Secondary Assessed Value Debt Applicable to Limit General Obligation Bonds Outstanding Less: Amount Set Aside for Repayment of Debt Net Debt Applicable to Limit $ 9,994,192 20% Legal Debt Margin All Other General Obligation Bonds 2,998,257 Debt Limit - 6% of Net Secondary Assessed Value Debt Applicable to Limit General Obligation Bonds Outstanding Less: Amount Set Aside for Repayment of Debt Net Debt Applicable to Limit 2,998,257 All Other General Obligation Bonds Debt Margin $ 12,992,449 Total Legal Debt Margin Source: Cochise County Assessor's Office. Note: The City did not have any debt subject to the debt limits. (118) CITY OF DOUGLAS, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) Revenue Bonds Fiscal Year Pledged Revenue 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $ 11,942,651 12,666,703 11,803,431 11,458,594 11,017,679 10,896,218 11,462,981 11,792,995 - Less: Operating Expenses $ Net Available Revenue - $ 4,067,101 12,666,703 11,803,431 11,458,594 11,017,679 10,896,218 11,462,981 11,792,995 - Debt Service Principal $ 375,000 390,000 400,000 415,000 425,000 440,000 455,000 470,000 - Debt Service Interest $ 97,238 97,237 80,476 71,077 59,457 46,106 31,806 16,451 - Coverage 2528.94 2599.70 2456.61 2357.36 2274.23 2241.53 2354.73 2424.29 Source: The City of Douglas' internal records. Note 1: The City's bonds are secured by City sales tax revenues. Sales tax revenues are applied first to the bonds and therefore no operating expenses are presented. Note 2: Revenue bonds were paid off in fiscal year 2015. Note 3: The GADA loan is secured by state shared revenues, state sales tax, and City sales tax. Note 4: The Call Center loan is secured by state shared revenues, state sales tax, City sales tax and lease revenue received on the lease. (119) - GADA Loan Pledged Revenue Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Less: Operating Expenses $ 9,968,602 10,921,221 10,048,079 9,721,384 9,453,492 9,315,887 9,791,063 10,074,638 8,650,701 8,646,362 $ - Net Available Revenue Debt Service Principal Debt Service Interest $ 9,968,602 10,921,221 10,048,079 9,721,384 9,453,492 9,315,887 9,791,063 10,074,638 8,650,701 8,646,362 $ $ 170,000 110,000 110,000 115,000 120,000 125,000 130,000 135,000 24,369 147,935 142,812 128,638 123,775 121,264 114,974 110,172 103,922 98,725 Coverage 40906.90% 7382.45% 3212.18% 4073.69% 4043.84% 3943.00% 4166.87% 4283.94% 3698.11% 3699.37% Call Center Loan Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 City Sales Tax and Lease Revenue $ 10,286,049 9,254,791 8,996,669 8,735,260 8,593,517 9,069,283 9,353,016 9,129,585 8,683,759 Less: Operating Expenses $ - Net Available Revenue Debt Service Principal Debt Service Interest $ $ $ 10,286,049 704,620 8,996,669 8,735,260 1,215,652 9,069,283 9,353,016 9,129,585 8,683,759 1,260,000 675,000 700,000 740,000 375,000 375,000 375,000 375,000 239,925 451,849 431,325 391,310 356,805 321,086 299,680 279,037 256,869 Coverage N/A 4287.19% 41.16% 813.20% 800.44% 110.84% 1302.90% 1386.29% 1395.88% 1374.30% WIFA Loan Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 Less: Operating Expenses Water/Sewer Revenues $ 2,749,697 3,540,996 3,722,556 3,779,059 3,916,977 3,846,928 3,969,670 4,002,528 $ 2,586,553 2,688,562 2,980,047 2,974,329 3,252,197 3,250,667 2,924,914 3,130,108 Net Available Revenue $ 163,144 852,434 742,509 804,730 664,780 596,261 1,044,756 872,420 (120) Debt Service Principal Debt Service Interest $ $ 65,145 460,014 470,781 480,756 490,947 536,634 325,564 12,625 103,461 126,183 124,189 114,104 98,597 96,238 82,723 Coverage 1292.23% 505.58% 126.67% 135.26% 111.75% 101.14% 165.08% 213.68% CITY OF DOUGLAS, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Population 18,996 18,500 20,061 20,122 19,772 17,378 17,509 16,989 16,592 16,897 Personal Income $ 277,987,464 282,199,000 308,277,387 294,364,738 262,236,036 227,252,106 234,200,384 233,785,629 223,046,256 239,667,048 Per Capita Personal Income $ (121) 14,634 15,254 15,367 14,629 13,263 13,077 13,376 13,761 13,443 14,184 Median Age 30.50 31.00 31.10 32.20 32.20 32.20 32.20 32.20 32.20 32.20 Unemployment Rate 8.6 % 11.2 10.6 10.8 10.1 10.2 9.6 7.8 7.7 7.20 CITY OF DOUGLAS, ARIZONA PRINCIPAL EMPLOYERS JUNE 30, 2016 AND EIGHT YEARS AGO (UNAUDITED) 2016 Employer Arizona Department of Corrections Douglas Unified School District Advanced Call Center Technologies City of Douglas Cochise College Chiricahua Community Health Center Cochise Private Industry Council Cochise County Copper Queen Community Hospital Wal-Mart Stores, Inc Southeast Arizona Medical Center Basha's Infinia at Douglas Gadsden Hotel Employees 615 492 248 179 165 116 90 48 37 Rank 1 2 3 4 5 6 7 8 9 - 1,990 2008 Percentage of Total City Employment 12.48 % 9.98 5.03 3.63 3.35 2.35 1.83 0.97 0.75 40.37 % Employees Rank 761 546 1 2 223 248 4 5 54 9 350 171 67 56 52 2,528 3 6 7 8 10 Source: Cochise College Center for Economic Research Note: 2016 was most recent year available and only Top 9 employers were available in 2016 (122) Percentage of Total City Employment 12.54 % 9.00 3.67 4.09 0.89 5.77 2.82 1.10 0.92 0.86 41.66 % THIS PAGE BLANK CITY OF DOUGLAS, ARIZONA FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function General Government Management Services: Administration Human resources Court MIS Finance Economic Development Visitor Parking Center Total Mgmt Services 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 7.0 3.5 2.5 3.0 6.5 1.0 4.5 28.0 5.0 3.5 2.5 3.0 6.0 1.0 3.5 24.5 5.0 3.0 2.0 4.0 6.0 3.0 23.0 5.0 3.0 2.0 4.5 9.0 3.5 27.0 5.0 3.0 1.5 3.5 8.5 3.5 25.0 5.0 3.0 1.5 3.0 8.5 1.0 22.0 4.5 3.0 1.5 4.0 9.0 1.0 23.0 4.5 3.0 1.5 4.0 9.0 1.0 23.0 4.0 3.0 1.5 4.0 7.0 0.5 20.0 5.0 3.0 4.0 8.0 0.5 20.5 4.0 5.0 5.0 7.5 8.5 6.5 6.5 3.5 3.5 3.5 Police Officers Civilians Total Police 31.0 16.0 47.0 37.0 14.0 51.0 34.0 14.0 48.0 32.0 14.0 46.0 32.0 14.0 46.0 32.0 15.0 47.0 31.0 11.5 42.5 31.0 13.0 44.0 29.0 13.0 42.0 34.0 13.5 47.5 Fire Firefighters and Officers Civilians Total Fire 24.0 2.0 26.0 25.0 1.0 26.0 25.0 1.0 26.0 25.0 1.5 26.5 23.0 1.5 24.5 24.0 2.0 26.0 23.0 2.0 25.0 25.0 2.0 27.0 27.0 2.0 29.0 27.5 2.5 30.0 Public Works Engineering (PW Adm) Planning & Zoning Construction Refuse Collections Mechanics Streets Street Maintenance Airport Water Field Water CIP Water Billing Wastewater Total Public Works 4.0 3.0 4.0 7.0 4.0 11.0 4.0 9.0 8.0 4.0 8.0 66.0 6.0 2.0 4.0 5.0 4.0 8.0 4.0 8.0 7.0 4.0 7.0 59.0 4.0 2.0 6.0 6.0 4.0 7.0 4.0 6.0 6.0 4.0 7.0 56.0 3.5 2.0 7.0 6.0 3.0 7.0 4.0 7.0 4.0 6.0 49.5 4.0 2.0 6.0 5.0 2.0 6.0 4.0 7.0 4.0 5.0 45.0 2.0 1.0 6.0 7.0 2.5 8.0 1.0 7.5 2.0 5.5 42.5 2.0 2.0 5.0 8.0 3.0 7.0 1.0 7.5 2.0 5.5 43.0 1.0 2.0 5.0 9.0 3.0 5.0 1.0 7.5 2.0 5.5 41.0 1.5 5.0 8.0 3.0 5.0 2.0 2.0 5.0 7.5 3.0 8.0 0.5 7.5 2.0 1.0 9.5 5.5 38.0 5.5 43.5 Parks and Recreation Comm Dev Admin Aquatics Cemetery Parks Recreation Golf Course Library Transit Total P&R 3.0 13.5 4.0 10.0 8.5 5.5 7.5 52.0 2.0 11.5 2.0 10.0 4.5 8.0 7.0 45.0 1.0 11.0 2.0 10.0 5.0 8.0 8.0 45.0 1.0 11.5 1.0 10.5 5.5 10.5 8.0 48.0 1.0 10.5 2.0 9.5 6.5 9.5 7.0 46.0 1.0 12.5 3.0 8.5 5.5 7.5 6.5 5.5 50.0 12.0 3.0 9.0 5.5 5.5 6.5 6.5 48.0 10.5 2.0 9.0 6.5 2.5 8.0 6.0 44.5 10.5 2.0 8.5 6.0 7.5 12.0 46.5 11.5 2.0 7.5 8.0 7.5 11.5 48.0 223.0 210.5 203.0 204.5 195.0 194.0 188.0 183.0 179.0 193.0 Housing Total (123) CITY OF DOUGLAS, ARIZONA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function General Government Building Permits Issued Building Inspection Conducted Police Physical Arrests Parking Violations Traffic Violations Fire Emergency Responses Fires Extinguished Inspections Refuse Collection Refuse Collections (Tons/Day) Recyclables Collected (Tons/Day) Other Public Works Street Resurfacing (Miles) Potholes Repaired Parks and Recreation Athletic Field Permits Issued Community Center Admissions Aquatic Center Admissions Library Volumes in Collection Total Volumes Borrowed Transit Riders Miles Water New Connections Water Main Breaks Average Daily Consumption (Thousands of Gallons) Peak Daily Consumption (Thousands of Gallons) Wastewater Average Daily Sewage Treatment (Thousands of Gallons) 2008 2009 2010 2011 2012 338 858 354 400 305 344 198 305 221 778 1,475 1,562 3,814 1,917 648 4,569 1,795 646 4,300 1,564 745 4,211 554 545 3,888 2,200 201 80 2,030 216 80 2,312 198 101 2,829 61 150 2,437 55 200 30.0 0.5 30.0 0.5 16.3 - 23.5 - 26.5 - 1.4 152 1.5 195 2.1 680 1.0 1,360 0.5 2,100 117 14,660 28,369 120 9,071 36,761 119 10,036 31,408 122 11,021 14,808 125 8,812 21,301 56,961 94,955 60,856 85,595 59,649 86,098 57,684 74,141 56,715 63,180 - - - - - 28 18 68 5 10 2 16 9 10 8 3,660,000 2,638,660 3,662,519 3,500,000 3,177,000 5,380,000 3,613,013 4,101,000 5,023,000 4,725,000 2.1 1.6 1.5 1.7 1.7 Source: The City of Douglas' internal records. (124) Fiscal Year 2013 2014 2015 2016 2017 264 695 202 704 188 229 205 277 329 1,332 252 4,158 1,348 183 3,220 1,164 158 2,981 1,317 140 2,490 937 85 2,973 2,459 231 161 2,560 457 367 2,900 52 261 3,479 196 108 3,295 178 27.5 - 22.9 - 33.4 - 24.6 - 22.0 - 2.1 1,600 0.8 1,763 6.0 2,385 6.2 4,500 2.0 6,500 93 10,199 16,685 83 16,051 17,792 105 7,954 14,674 56 3,384 11,631 68 1,749 15,005 47,157 61,256 59,033 64,843 53,887 53,181 63,930 59,737 52,543 38,089 56,400 106,795 68,777 105,615 55,770 105,158 56,262 120,453 11 12 11 7 5 8 5 6 8 5 3,216,045 3,321,000 2,971,544 2,725,146 3,054,914 4,716,136 4,384,000 3,984,848 3,366,799 4,050,528 2.0 2.1 1.9 1.9 1.8 - (125) CITY OF DOUGLAS, ARIZONA CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function Police Stations Patrol Units Fire Stations Refuse Collection Collection Trucks Other Public Works Streets (Miles) Streetlights Traffic Signals Parks and Recreation Acreage Playgrounds Baseball and Softball Diamonds Soccer/Football Fields Aquatic Centers Community Centers Water Water Mains (Miles) Fire hydrants Storage Capacity (Thousands of Gallons) Wastewater Sanitary Sewers (Miles) Storm Sewers (Miles) Maximum Treatment Capacity (Thousands of Gallons) 2008 2009 2010 2012 2011 1 20 1 1 27 1 1 22 1 1 21 1 1 23 1 5 5 5 5 5 110 2,693 14 110 2,693 14 112 2,693 14 110 2,693 14 110 2,693 14 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 83 526 83 526 84 535 100 540 100 545 500,900 500,900 500,900 500,900 500,900 78 9 78 9 80 9 85 9 85 9 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Source: The City of Douglas' internal records. (126) Fiscal Year 2013 2014 2015 2016 2017 1 22 1 1 21 1 1 23 1 1 23 1 1 21 1 4 4 4 4 4 110 2,693 14 110 2,693 14 110 2,693 14 110 2,693 12 110 2,697 13 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 92 5 6 13 2 1 100 458 100 560 100 567 100 570 100 573 500,900 500,900 590,000 590,000 590,000 86 9 86 9 86 9 86 9 87 9 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 (127) THIS PAGE BLANK