TOWN OF FOUNTAIN lULLS, ARI ZONA FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Issued by: Finance Department TOWN OF FOUNTAIN HILLS, ARiZONA TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal GFOA Certificate of Ach ievement Organizational Chan List of Principal Officials X XI XII FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) 5 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Assets 20 Statement of Activities 21 Fund Financial Statements: Balance Sheet - Governmental Funds 24 Reconcil iation of the Balance Sheet Govenunental Funds to the Statement of Net Assets 27 Statement of Revenues, Expenditures and Changes in Fttnd Balances Governmental Funds 28 Reconciliation of the Statement of Revenues, Expenditures and Changes in Flllld Balances- Governmenta l Funds to the Statement of Activities 30 Notes to Financial Statements 31 TOWN OF FOUNTAIN IDLLS, AIUZONA TABLE OF CONTENTS (Con t'd) FINANClAL SECTION (Cont' d) Page SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL (Required Supplementary Information) General Fund 46 Development Fees Fund 47 Note to Required Supplementary InfornJation 48 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Other Major Governmental Funds Schedules of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual: General Obligation Debt Service Fund 52 Municipal Property Corporation Debt Service Fund 53 Capital Projects Fund 54 Non-Major Governmental Funds: Combining Balance Sheet - All Non-Major Governmental FundsBy Fund Type 56 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - All Non-Major Governmental Funds - By Fund Type 57 Non-Major Special Revenue Funds: Combining Balance Sheet 60 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 62 Com bining Schedule of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual 64 T OWN OF FO UNTAIN HILLS, ARIZONA TABLE O F CONTENTS (Cont' d) FINANCIAL SECTION (Concl' d) Page Non-Major Debt Service Funds: Combining Balance Sheet 71 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 72 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual 74 STATISTICAL SECTION Financial Trends: Net Assets by Component 79 Expenses, Program Revenues, and Net (Expense)/Revenue 80 General Revenues and Total Changes in Net Assets 81 Fund Balances- Governmental Funds 82 Governmental Funds Revenues 83 Governmental Funds Expenditures and Debt Service Ratio 84 Other Financing Sources and Uses and Net Changes in Fund Balances - Governmental Funds 86 Revenue Capacity: Taxable Sales by Category 87 Direct and Overlapping Sales Tax Rates 88 TOWN OF FOUNTAIN HILLS, AIUZONA TABLE OF CONTENTS (Coocl' d) STATISTICAL SECTION (Coocl'd) Page Debt Capacity: Outstanding Debt by Type 89 Direct and Overlapping Governmental Activities Debt 90 Legal Debt Margin Information 91 Demographic and Economic Information: Demographic and Economic Statistics 92 Principal Employers 93 Full-Time Equivalent Town Government Employees by Function/Program 94 Operating Infonnation: Operating Indicators by Function 96 Capital Assets Statistics by Function 97 Town of Fountain Hills 16705 E . Avenue of the Fountains Fountain Hills, AZ 85268 Phone: 480-816·5100 • Fax: 480-837-3145 www.tb.az.gov November 13, 2008 To the Honorable Mayor, Members of the Town Counci l, and Citizens of the Town of Fountain Hills: State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of fmancial statements presented in conformity with generally accepted accounting princ iples (GAAP) and audited in accordance with generally accepted aucliting standards by a firm ofl icensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Town of Fountain Hi lls for the fiscal year ended June 30, 2008. This report consists of management's representations concerning the finances of the Town of Fountain Hills. Consequently, management assumes full responsibi lity 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 Town of Fountain Hills has establ ished a comprehensive internal control framework that is designed both to protect the government 's assets from loss, theft, or misuse and to compi le sufficient reliable information for the preparation of the Town ofFountain Hills' financial statements in conformity with GAAP. Because the cost of internal contro ls should not outweigh their benefits, the Town of Fountain Hills ' comprehensive fran1ework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The comprehensive armual financial report is presented in three sections: introductory, financial, and statistical. The introductory section includes this transm ittal letter. the Town of Fountai n Hills ' organization chart and a list ofTown of Fountain Hills elected and appointed orficials. The financial section includes U1e fmancial statements and the combining and individual ftutd financial statements and schedules, as well as the aud itors' report on U1e financial statements and schedules. The statistical section includes certai n unaudited financ ial and demographic infom1ation, generall y presented on a multiyear basis. The Town of Fountain Hills' fmancial statements have been audited by Heinfeld, Meech & Co., P.C., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Fountain Hills for the fiscal year ended June 30,2008, are free of material misstatement The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the Town of Fountain Hills' fmancial statements for the fiscal year ended June 30, 2008, are fairly presented in conformity with GAAP. The independent auditors' report is presented as the first component of the financial section of tllis report. The independent audit of the financial statements of the Town of Fountain Hills was part of a broader, federally mandated Single Audit as required by the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, Audits ofStares, Local Governments and Non-Profit Organizations designed to meet the speciaJ needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to repon not only on the fair presentation of the financial statements, bm also on the Town of Fountain Hills' internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are avaiJable in a separately issued Single Audit Reporting Package. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analys.is (MD&A). This leuer of transnlittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fowllain Hills' MD&A can be found immediately following the repon of the independent auditors. Town of Fountain Hills Proftle The Town of Fountain Hills is a plarmed, familyoriented community established in 1970 by McCulloch Properties (now MCO Properties, lnc.). Prior to 1970 the area was a cattle ranch and was part of one of t11e largest land and cattle holdings in Arizona. It was purchased by Robert McCulloch in tbe late 1960s and designed by Charles Wood, Jr. (designer of Disneyland in southern California). The centerpiece of Fountain Hills is one of the world's taUest manmade fountains, a focal point that attracts thousands of visitors each year. ii Located on 13,006 acres ofland, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowelllndian Reservation on the east, the Salt River Indian Reservation on the south and by the McDowell Mountain Regional Park on the north. Elevation is 1,520 feet at the fountain, 3,000 feet on Golden Eagle .Boulevard, and is 500 feet above Phoenix. Over the past seventeen years Fountain Hills has grown from I 0, 190 residents to a town of almost 25,000 in 2008. The latest estimates for Fountain Hills indicate that the population will continue to grow to near 36,045 by 2025. On June 5. 2006 the Town of Fountain Hills became two square miles and about ten percent larger by annexing I ,300 acres of State Trust Land. The process to annex the State Tn.1st Land occurred over a two and one-half year period and development of the land will occur over the next decade. Annexing this property into the Town ensures that its future development will be of the highest quality under such Town's standards as the cut-and-fill ordinance and strict zoning regulations. Fountain Hills will have an opportunity to demonstrate that it is truly the best place to live in the Valley. The Town offers a range of living styles, from small community subdivisions to a nun1ber of large custom homes . Fountain Hills also offers recreational, cultural and retirement prograo1s that address the needs and lifestyles of active families and adults. The community consists of primarily residential property; of the total 20.32 square miles of land only 2.58% of the total is zoned commercial and/or industrial, 31% is reserved as open space and the remainder is residential. The Town 's Mission Statement for the Organization The Town of Fountain Hills' purpose is to serve the best interests of the community by: providing for its safety and well-being; respecting its special, small-town character and quality of life; providing superior public services; sustaining the public trust through open and responsive government; and maintaining the stewardship and preservation of its financial and natural resources. To serve and respect, and provide trust and stewardship. Fountain Hills Town Hall Ill Tbe Town of Fountain Hills is an Arizona Municipal Corporation, acting as a general law Town as prescribed in the Arizona Revised statutes. The Town was incorporated on December 5, 1989 with the governmental and administrative affairs of the Town operating under the Cow1cii-Manager form of government. The Town Council is responsible, among other things, for the adoption of local ordinances, budget adoption, the development of citizen advisory committees and hiring the Town Manager. The Town Manager is responsible for implementation of the policies of the Town Council and administering the Town's operations through five department directors and approximately 89 FTE employees. The Magistrate, Town Attorney and Town Prosecu1or are under the direction of the Town Council. The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control, building inspection); community development (code enforcement, planning, zoning and engineering); the constmction and maintenance of streets and infrastructure, municipal court, l'ecreational activities, community center, senior center and cultural events. The Town does not maintain utility or other operations that require the establishment of enterprise funds. The financial reporting entity (the Town) includes all the funds and account groups of the primary government (i.e., the Town of Fountain Hills as legally defmed) as weU as all of its component units. The component Wlits consist of legally separate entities for which the prinlary government is financially accountable. Blended component units, although legally separate entities, are, in substance, part of the primary government's operations and are included as part of the primary government. Accordingly, the Cottonwoods Maintenance District, Eagle Mountain Community Facilities District and Fountain Hills Municipal Property Corporation are included in the financial reports of the Town. The annual budget serves as the foundati on for the Town of Fountain Hills' financial planning and control. The Town CounciJ formally adopts the budget and legally allocates, or appropriates, available monies for lhe General Fw1d, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, lhese funds have appropriated budgets, and budget to actual infonnation is presented. On or before the second meeting in May the Town Manager submits to the Town Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. The Town Council is then required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the Town of Fountain Hills· fiScal year. The budget is legally enacted through passage of an ordinance and is prepared by fund and department. The ordinance sets the limit for expenditures during the fiscal year. The Town Manager may authorize transfers from and within personnel and from operating capital to services or supplies within a department. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Consti tution, Article 9, Section 20. Factors Affcetinl!, Finan cial Condition The infom1ation presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town of Fountain Hills operates. IV Local Economy. The Town ofFountain Hills, similar to other Arizona municipalities, is primarily dependent upon state revenues and l.ocal sales tax as a major source of operating revenue, accounting for 77% of total revenue for fiscal year 2007-08. Locally, 20% of the Town's sales tax is from construction activity (down from 31% last fiscal year) and 37% is generated from retail activity. The construction activity is primarily residential; fiscal year 2007-08 continued the dramatic downturn in building permit activity that is being experienced nationwide. State shared revenues increased during fiscal year 2007-08 because state income tax revenues are based on two years prior personal and corporate earnings; however future revenues from income tax are projected to decline for the next few years. The majority of land use in Fountain Hills is residential, therefore, there is not a significant amount of retai l activity that is affected locally by the economy. Revenues from retail and non-construction related activity are projected to remain flat over the next couple of years. The chart below is a breakdown of Town resources: Revenues (all funds) Fiscal Year E nding 6/30/08 r..p Me. CFD '" ,.-;. Total $25.1M The Fountain Hills Medical Plaza will complete a substantial redevelopment project in the Fall of 2008. The three buildings totaling 50,000 square feet that used to house Town municipal operations were completely renovated including new interiors and a new exterior fmish. The project has also created a shaded courtyard between the three buildings. Other improvements to the site included upgraded landscaping and covered parking areas as well as new ingress and egress to adjacent developments. v Eighteen months of discussion between Fountain Hills Town Square, LLC and the Town have resulted in a development agreement being approved for the potential development of the 13-acre downtown parcel on the Avenue of the Fountains. An aggressive development schedule has been established starting with a Phase 1 Concept Plan application submittal by October 20, 2008. The plans will be reviewed by staff and the Concept Plan is planned to be presented to the Planning and Zoning Commission and the Town Council for approval by the end of the year. Phase I will include 38,000 square feet of retail, 58,000 square feet of office and a 52,000 square foot movie theater. Firerock Plaza, located on Shea Boulevard, bas completed construction and has begun allowing tenants to occupy some suites. Included in the list of tenants so far are a beauty salon and an urgent care medical facility. Firerock Business Park industrial condominiums located on Technology Drive behind Target Plaza was approved for a revised Concept Plan for Phase II of the project to allow a re-configuration of building pads and a mini-storage facility. Fountain View Retail Plll7..a, located on Fountain Hills Boulevard just south of Safeway Plaza, completed constmction and has occupancy in a majority of their suites. Fountain Hills Plaza (Bashas Plaza) applied for and received approvals to enlarge the Bashas and Ace Hardware building footprints as well as to do a complete fa<;:ade renovation of the entire plaza. Additionally, numerous site improvements will be made including shade structures for a portion of the parking areas, more landscaping and decorative hardscape, and improved ingress and egress to the Plaza. Plaza Waterfront, located adjacent to Plll7..a Fountainside at the comer of Saguaro Boulevard and El Lago Boulevard. has completed constmction and has begun allowing tenants to occupy both their retail suites as well as the residential condominiums. The Eagle Mountain Golf Club received approval to expand and enclose their event pavilion overlooking the 181h hole. The golf club also received permits for shade stmctures over their golf cart storage area. A 9-lot, single-family residential subdivision named Serenity Estates (fom1erly High Nob Acres) and located at the end of Cerro Alto Drive was approved. A 12-lot, single-family residential subdivision named The Vista at Fountain Hi lls (formerly Lion's Spring) and located at the intersection of Cerro Alto Drive and Sierra Madre Drive was approved. The Ellman Company who purchased the former State Trusl Land in2007 requested an amendment to U1e pre-armexation agreement, a rezoning of U1e property and a General Plan amendment The requested an1endments proposed several design changes including additional park space. additional open space, a reduction in housing units and a realignment of McDowell Mountain Road. Even though all requested amendments were approved by Mayor and Council in May 2008, the amendments are still pending. vi i'nulftitl Hllll2.6°o Std~ TAX At'lhitr"Y Sr<_cor-'F\"14 thi'IJ !'\"OS ...... n - """M ........ ........ ........ ,_ _ ...... I:.OOIJIIOO ........ .. . ,___ CCIIutr'IJCUIOtl. ThiiUf'Ol ~ Mib 11ul \\llo.,_I.,'RIIt:lll nt$U\lftDt184'1rt _ _ _ _ _ __ _ _ __ __ _ _ _ _ _.J The chart to the left is a summary of local sales tax collections from fiscal year 2003-04 through fiscal year 200708 by category. Retail activity declined slighL.ly during fiscal year 2007-08 with the slowdown in the national economy. Sales tax from construction activity bas declined for three years straight; this rrend will likely continue through fiscal year2009-10. The opponunityto further expand the retail tax base in Fountain Hills is limited by Ll1e lack of available commercial land - 75% of tbe developable lots are already developed. L ong-term Financia l Planning. Over the past decade the Town of Fountain Hills nas embraced a strategic planning process that has focused on the long-term viability of the community. In late 2004, the Town initiated a compre hensive strategic planning process that involved a significant amount of citizen input. A technical Advisory Committee consisting of citizens, volunteers and Town staff met to discuss tlte Town' s long range vision for nearly a year. This citizen driven strategic planning process resulted in an expansive report entitled. "Town of Fountain HiUs Strategic P lan 2006-2010" which was adopted on December l, 2005. One of the major issues addressed in the report was the Town's projected future financ ial health. Tbe report described a growing concern witll the current reliance on construction sales tax base. Construction sales tax is considered a onetime revenue source which is driven entirely by development activity. As the Town approaches build-out construction related sales taxes and fees are likely to dwind le ; with a declining revenue base it will become a challenge for the Town to meet tile increasing demands of current service levels. The Fountain Hills Town Council maintains a fund balance policy that ensures adequate reserves that will. provide financial stabil.ity in the event of an unanticipated economic downturn. The pol icy states: 1. A contingency fund of no less than 30 days operating expenditures for lbe upcoming fiscal year to be designated for unanticipated expenditure or loss of revenue (contingency) 2. A designated unreserved fund balance of a min imun1 of ten percent (10%) of the average acwal revenues for the preceding five fiscal years designated for " pay-as-you-go" capital 3. A resetved fund balance of twenty percent (20%) of the average actual revenues for tile preceding five fiscal years which is unavailable for appropriation These amounts will not be progranlllled for expenditure and are only available for use within tile confines of expenditure limitations imposed by the State. A Capital Projects Fund has been created and is funded with proceeds from excess revenues collected over budget and any tmexpended appropriations not needed to meet fund balance requirements or re-appropriation. For the fiscalyear ending June 30, 2008 $1M of surplus revenues were transferred from the General Fund to the Capital Projects Fund. vi.i The Council also adopted financial policies that include guidelines for the issuance of debt for capital expenditures, Community Faci lity Districts, financing alternatives, expenditure controls and financial planning. The policy was an1ended during fiscal year 2006-07 to allocate a portion of the local construction sales taX to the Capital Projects Fund, thereby assuring that one time revenues are used for one time expenditures. The debt policy was prepared with a preference for "pay-as-you-go" fmancing for capital spending. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers ofUnited States and Canada. Cash Management. State statutes permit municipalities in Arizona to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase agreements, and the State Treasurer's Local Government lnvestment Pool (LGIP). The Town of Fountain Hi ll s debt policy restricts investments to securities that are 100% backed by the full faith and credit of the U.S. government. The Town of Pountain Hills invests al l idle cash in the State LGIP-GOV , which consists of government-backed securities. The year-to-date yie ld on investments as of Jnne 30, 2008 was 3.4404%. Investment income includes appreciation in the fair value of investments. Increases in fair value during the current year, however, do not necessarily represent trends that wi ll continue; nor is it always possible to realize such amounts, especially in the case oftempOr' '2 -> (") I:"" V> r:rl -0~ '2 . . . , . . . HEINFELD, MEECH & CO., P.C. ~'fi CERTIFIED PUBLIC ACCOUNTANTS Gary Heinfeld. CPA, CGFM Nancy A. Meech, CPA, CGFM Jennifer L. Shields, CPA Corey Arvizu, CPA Scott W. Kies, CPA Kimberly A. Robinson. CPA Kera Badalamenti. CPA, CGFM 3033 N. Centml Avenue, Suite 300 Phoenix, Arizono 85012 (602) 277·9449 Fax (602) 277·9297 INDEPENDENT AUDITORS' REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hill s, Arizona We have audited the accompanying financial statements of the govemmemal activities, each major fund (General Fund, Development Fees Fund, General Obligation Debt Service Fund, Municipal Property Corporation Debt Service Fund. Capital Projects Fund), and the aggregate remaining fund infonnation ofthe Town ofFow1tain Hills, Arizona (the Town}, as ofand for the year ended June 30, 2008, which collectively comprise the Town's basic financial statements as listed in rhe table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the Uoited States of America and the standards applicable to fmancial audits contained in Governmenl Audiling Standards, issued by tile Comptroller General of the United States. Those staodards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are rree of material misstatement. An audit includes examining, on a test basis, evidence supporting ti1e amounts and disclosures in the fmancial statements. An audit also includes assessing tile accounting principles used and tl1e significant esti mates made by management, as weU as evaluating the overall fi11ancial statement presentation. We believe that ow· audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activi ties, each major fund as listed above, and tile aggregate remaining fund information of the Town of Fountain Hills, Arizona as of June 30,2008, and the respective changes in ftnancial position thereof for the year then ended in conformity with accoUDting principles general ly accepted in the United States of America. ln accordance with Govemmenl Auditing Standards, we have also issued our report dated November 13, 2008, on our consideration of the Town of Fountain Hills, Arizona 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compli ance and the results of that testing, and not to provide an opinion on the internal control over fmancial reporting or on compliance. Tbat report is an integral part of an audit perfom1ed in accordance with Government Auditing S!Crndards and should be considered in assessing the results of our audit. TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmecch.com The management's d iscussion and analysis on pages S through IS and budgetary comparison information on pages 46 through 48 arc not a requ ired part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town's basic financial statements. The accompanying supplementary information such as the introductory section, combining and individual fund financial statements and schedules, and statistical section arc presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund fmancial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, arc fairly stated in all material respects ill relation to the basic linancial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and , accordingly, we express no opinion on them. ~~ M_W)t flW.;"P.CJ. HEINFELD, tv£EECH & CO., P.C. Certified Public Accountants November 13, 2008 Page2 ;,o ao (D w TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSTS (MD&A) YEAR ENDED JUNE 30, 2008 As management of the Town of Fountain Hi lls, Arizona (Town), we offer readers of the Town's financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2008. We encourage readers to consider the infom1ation presented here in conjunction wi th addilional information lhat we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIG IILIGHTS • The Town's total net assets of governmental activities increased $2.0 million which represents a 2 percent increase from fiscal year 2006-07 primarily due to lhe increase in investment of capital assets, specifically park development. • General revenues accounted for $22.3 million in revenue, or 87 percent of all fiscal year 2007-08 revenues. Program specific revenues in the fom1 of charges for services and grants and contributions accounted for $3.2 million or 13 percent of total fiscal year 2007-08 revenues. • The Town had approximately $23.5 million in expenses related to governmental activities, an increase of 5 percent from the prior fiscal year. The increase was primarily due to increased costs for pubI ic safety and public works projects. • Among major funds, the General Fund had $16.7 mill ion in fiscal year 2007-08 revenues. which primarily consisted of local sales tax and state shared revenues, and $ 15.3 million in expendit11fes. Per local policy residual General F\md revenues are transferred at year end to lhe Capital Projects Fw1d {$1.0 million for fiscal year 2007-08). Therefore, the General Fund's fund balance remains at $6.6 million. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Town' s basic financial statements. The Town's basic fmancial statements comprise three components: I) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Govc.-nmcnt-widc finan cial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town' s finances, in a manner similar to a privatesector business. Page 5 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS (MO&A) YEAR ENDED JUNE 30, 2008 OVERVIEW OF FINANCIAL ST ATEMENTS (Cont' d) The statement of net assets presents infonnation on all of the Town's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. ll1e statement of activities presents information showing how the Town's net assets changed during the most recent fiscal year. AU changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash nows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). The government-wide financial statements outline functions of the Town that are principally supported by taxes and intergovernmental revenues. The governmental activities of the Town include general government, public safety, highways and streets, culture and recreation, community development, and interest on long-tenn debt. Fund finan cial s tatements. 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. The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town are included in the governmental funds. Governmenta l 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 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 the Town's near-term fmancing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the infom1ation presented for governmental funds with similar infom1ation presented for governmental activities in the government-wide financial statements. By doing so, readers may better w1derstand the long-term impact of the Town's near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expend itures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activ ities. Page 6 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDE D JUNE 30, 2008 OVERVIEW OF FINANCIAL STATEMENTS (Concl 'd) 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, Development Fees Fund, General Obligation Debt Service Fund, Municipal Property Corporation Debt Service Fund. and Capital Projects Fund, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. Notes to the financial st~tements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town's budget process. The Town adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances- budget and actual has been provided for the General Fund and Development Fees Fund as required supplementary inforn1ation. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net assets may serve over time as a useful indicator of a government's financial position. In the case of the Town, assets exceeded liabilities by $121.0 million as of June 30, 2008. The largest portion of the Town's net assets (78 percent) reflects its investment in capital assets (e.g., land, infrastructure, buiJdings. improvements other than buiJdings. vehicles, machinery and equipment, artwork and construction in progress) Jess any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to its citizens; consequently, these assets are not avaiJable for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the Town's net assets (II percent) are restricted by statute for the specified purposes of debt service repayment, capital outlay investment, and highways and streets. Page 7 T OWN O F FOUNTAIN BILLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2008 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Cont'd) The Town's financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. The following table presents a summary of the Town's net assets for the fiscal years ended Jw1e 30, 2008 and JUile 30,2007. As of June 30, 2008 Current and other assets Capital assets, net Total assets, net Current and other liabi li ties Long-term liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets As of June 30, 2007 Percent Change 4% wtys lU1d s..... Cubure and Recn:ation • • lotcrcst on long-1erm debt Communily lkYrlop"""' The following are signi.ficant current year transactions that have had an impact on the Statement of Activities. • • Overall revenues declined 3% with increases in state shared revenues and property taxes, the majority of other revenues declined due to the poor economy. Overall expenses increased 5% primarily due to increased public safety contract costs and public works projects. The following table presents tl1e cost of the six major Town functional activities: general gove=ent, public safety, highways and streets, culture and recreation, community development and interest on long-term debt. The table also shows each function's net cost (total cost less charges for services generated by tlle activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the State and Town' s taxpayers by each of these functions. Year Ended June 30, 2008 Total Net (E.xpenseY Ex~ses Gcncml Government Public Safety Highways and Streets Culture and Recreation Community Development Interest on Long-Tenn Debt Page 10 $3,921,588 6,532,292 5,981.347 3,092,661 2,861.653 1.132.947 $23.522.488 Revenue ($3,080,625) (5,739,263) (5.957.647) (1,9 18,670) (2.471.064) (1. 132.947) ($20.300.216) Ye:tr Ended June 30,2007 Total Net (Expense)/ Ex~nses S4,292,515 5,935,742 5,225,835 3,282, 160 2,512,170 1,163.370 S22.411.792 Rev~1ue ($3,38 1,537) (4,953.083) (5, 197,650) (2,139,842) (2,067, 142) (1.163,370) ($18.902,624) TOWN OF FOUNTAIN EITLLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSi S (MD&A) YEAR ENDED J UNE 30, 2008 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Concl' d) • The cost of all governmental activities this year was $23.5 million. • State government and charges for services subsidized certain programs with grants and contributions and other local revenues of $3.2 million. • Net cost of governmental activities ($20.3 million) was financed by general revenues, which arc made up of primarily sa les taxes ($1 0.5 million) and state shared revenue ($8.8 million). Investment earnings accounted for $780,935 of funding. FINANCIAL ANA LYS IS OF THE TOWN'S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with fmancerelatcd legal requirements. Gove rnmental funds. The focus of the Town' s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unreserved fund balance may serve as a useful measure of the Town's net resources available for spending at the end of the fiscal year. The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmenta l funds reported a combined fund balance of $22.8 million, a decrease of$401 ,593 due primarily to use of reserves for plruu1cd capital projects in the Development Fees Fund. The General Fund comprises 29 percent of the total fund balance. Approximately $3.5 million, or 54 percent of the General Fund 's fund balance constitutes unreserved fund balance. The remaining fund balance is reserved to indicate that it is not available for spending because it has already been committed as follows: • • $17,925 for inventory $3,035,145 for other purposes The Genera l Fund is the principal operating fund of the Town. The fund balance of$6.6 million in the General Fund as of June 30, 2008 has remained constrult over the past three years due to the annua l transfer of residual revenues from the General Fund to the Capital Projects Fw1d ($1.0 million for fiscal year 2007-08). Expenditures within the General Fund increased 7% over the priorycar due to increased costs for public safety contracts (police and fire), public works projects and recreation programs. Revenues declined 1% overall from the prior fiscal year particularly in building related revenue categories and interest earnings. Page II TOWN OF FOUNTAIN HILLS, ARI ZONA MANAGEMENT'S DISCUSSION AND ANALYS1S (MD&A) YEAR ENDED JUNE 30, 2008 FIN ANCiAL ANALYSIS OF TH E T OWN'S FUNDS (Coocl'd) Other !i.wd balance variances include Developmen t Fees Fund that expended accumulated funds for capital park projects. The !i.md balance in the General Obligation Debt Service Fund declined as property tax revenues decl ined. The fw1d balance in the Municipal Property Corporation Debt Service Fund increased due to local sales tax collections derived from other funds exceeding the allJlual debt service payment during the year. BUDGETARYfllGHLIGHTS A schedule showing the original and final budget amounts compared to the Town's actual financial acti vity for the General Fund is provided in this report as required supplementary infonnation. The significant variances are summarized as follows: • The unfavorable variance of$377,486 in intergovernmental revenues was a result of the continued downturn in the state economy, affecting collections and distribution of state sales tax to cities and towns. • The unfavorable variance of$311,430 in licenses and permits was a result of the continued downturn in construction related activities, including building pern1its. Building permits are down 50% from the prior fiscal year. • The unfavorable varianc.e of$83,990 in investment income was a result of decreased rate of rerum on Town investments on deposit with the Arizona State Treasurers Local Government Investment Pool where the Town's idle funds are maintained in a pool of government securi ties. • The favorable variance of $633,896 in culture and recreation was a result of a deferral of costs related to engineering and design fees for a joint use park with the Fountain Hills Unified School District. This project wi ll move forward when the funds to complete the project become available. • The favorable variance of $584,46 1 in community development was due to the deferral of design costs for capital projects that are partially funded with federal grants; these costs were deferred to fiscal year 2008-09. • The favorable variance of$221 ,222 in capital outlay was due to the elimination of a capital expenditure for new communications equipment; it was dctcm1ined that this equipment could be defe1Ted to a future year. Page 12 TOWN OF FOUNTAIN lOLLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30,2008 CAPITAL ASSETS AND DEBT ADMTNISTRATION Capita l Assets . As of June 30, 2008, the Town had invested $186.8 million in capital assets, including buildings, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase prior to depreciation of$5.1 million from last year, primari ly due to major park improvements at two Town parks (Fountain Park and Desert Vista Neighborhood Park). Total depreciation expense for the year was $4.7 mi ll ion. The following schedule presents a sununary of capital asset balances for the fiscal years ended June 30, 2008 and June 30, 2007. Capital assets - non-depreciable Capital assets - depreciable, net T ota l As of Jtme 30, 2"008 $ 26,971' 14 7 92,900,976 $ 119,872, 123 As of June 30, 2007 $ 24,623,735 94,795,369 $ 119,419,104 Additional information on the Town's capital assets can be found in Note 5. Debt Administration. At year-end, the Town had $24.9 million in long-tenn debt outstanding, $2.2 million due within one year. This represents a net decrease of$2.0 million. The Town's general obligation bonds are subject to two limits; the Con.stitutiooal debt limit (total debt limit) on all general obligation bonds (up to 20 percent of the total secondary assessed valuation) and the statutory debt limit on general municipal purpose bonds (up to six percent of the total secondary assessed valuation). The current total debt limitation for the Town is $ 178.0 million, which is more than the Town's outstanding general obligation debt. Additional infom1ation on the Town's long-term debt can be found in Notes 6 and 7. ECONOMl C FACTORS The Town continues to maintain strong reserves for unforeseen circWllStances, whether of a financial nature or a natural (or other) disaster. The Town's reserves, i11 combination with our consistent adherence to adopted financial policies and management practices, proved big factors in the credit rating awarded to Fountain Hills by the major credit rating companies. The housing market has cooled significantly (both nationally and regionally), indicating that the overall economy may experience slow growth in the year ahead. The Town's local housing economy provides building permit and construction sales tax revenue, which have declined over the past two fiscal years. It is not anticipated to recover until a recently annexed parcel begins development (currently projected for fiscal year 2010-1 1). Page 13 TOWN OF FO UNTAl N lULLS, ARIZONA MANAGEMENT'S DISCUSSIO N AND ANALYSIS (MD&A) YEAR ENDED J UNE 30,2008 ECONOMIC FACTORS (Concl'd) The Town's local sales tax collections. which represent the largest Town revenue source, are projected to decrease by 5% in fiscal year 2008-09. The Town's share of the state-shared revenue is expected to see a 3% reduction, largely based upon the State's declining sales tax collections. However, our financial forecasting is based upon the assumption that the economy will continue to lag for the foreseeable future. Rapid ly rising costs in health care, maintenance contracts and fuel, have increased departmental expenses. The Town is aggressively pursuing economic vitality and redevelopment opportunities, specifically a proposed development in the downtown center including a movie theater, residential and retail stores. The Town has made significant quality of life investments including the major improvements to both Fountain Park and Desert Vista Neighborhood Park. As of June 30, 2008 the Town had set aside $10.0 million in the Capital Projects fund. The majority of these funds have been earmarked for future projects within the Capita! Improvement Plan. NEXT YEAR'S BUDGETS AND RAT ES Current economic conditions allow U1e Town to maintain core services and, in some cases, to provide enhancements to existing service levels. However, pntdent long-tem1 fiscal planning dictates that we remain conservative, focus on the highest Council and citizen priorities, and fund only those enhancements we can sustain fmancially. The operating budget for fiscal year 2008-09 is $23.9 million representing a 3% decrease from fiscal year 2007-08. The operating budget is comprised of the costs to continue operations from year to year without any capital expenditures. It encompasses all the basic services provided to Fountain Hills' residents: police and fire protection; parks, recreation, streets maintenance; planning and zoning; building inspection: economic development and administrative services. The capital budget for fiscal year 2008-09 is set at $4.4 million, a 25% decrease over fiscal year 2007-08. II includes projects and new programs that are included in the five-year plan and considered affordable within current revenue sources. Capital budgets tend to rise and fall each year depending on Lhc timing of projects - especially if a Town, such as Fountain Hi lls, is primarily on a "pay-as-you-go" program. Page 14 TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED J UNE 30, 2008 NEXT YEAR'S BUDGETS AND RATES (Concl'd) The Capital Improvement Program (CIP) is the Town's financial plan for supporting large capital projects. The five-year CTP addresses the growing needs of the community and enhances the quality oflife through major public investment, and is an essential ingredient in the Town's service delivery plan. The CIP is closely aligned with the General Plan, and integrates a number of specialized facility and infrastructure master plans. Looking ahead, the five-year CrP totals $53.0 mi llion; with the Capital Budget for fiscal year 2008-09totaling $4.4 million (which includes carryover fi.mds for some large projects currently underway). lo fiscal year 2008-09, the CIP places major emphasis on street maintenance and park improvement projects. Many factors were considered by the To"'m's administration during the process of developing the fiscal year 2008-09 budget. The fiscal year 2008-09 budget could not be prepared without considering the condition of the regional, state and national economies, specifically the real estate and construction industry. Construction related revenue-s are declining and the Town is projecting growth by only l percent over the fisca.l year 2007-08 budget. Expenditures are projected to decrease by 10 percent over the prior year, including capital. Additional concerns are the increased cost of doing business. The Town is a service organization; public safety services are provided by contract. The cost of providing those services exceeds the rate of revenue growth. The Town's overall authorized full-time equivaleut positions have not increased over the prior year. The Town has maintained a General Fund reserve balance of30 percent of revenues; the budgeted expenditures do not include any use of fi.md balance. CONTACT rNG THE TOWN'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the Town's finances and to demonstrate the Town's accountability for the resource-s it receives. Ifyou have questions about this report or need additional information, contact the Finance Department, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268. Page 15 00 TOWN OF FOUNiAIN HILLS, ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2008 Governmental ActivitJes ASSETS Current assets: Cash ru1d investments s Ta.'Xc.s receivable Special assessments receivable 25.474,675 38.285 4,7 10 696.789 1,611,594 17,925 117.548 27,96 1,526 Accounts receivable Due from governmental entities lnvemory, at cos( Deferred charges Total current assets Noncurrc.nt assets: Deferred charges Lond In frastructure 1,246,827 23.57 1.668 125,508,736 17,896,595 11.805.869 4.65 1,525 1.376,500 2,022,979 (66.961,749) 121. 11 8,950 149,080,476 Buildings I mprovemems other thnn buildings Vehicles. machinery. and equipment Ar1work Construc.tion in progress Accumulated depreciation Totul noncurrent assets Total assel$ L IABILIT I ES Currcm liabilities: Accounl> payable Accrued payroll and employee benefits Compensated absences paynblc 1,396,966 25.338 35.000 502.399 951,573 2. 150,000 9921 5,071. 197 Accrued interest payable Uneamed revenue Bonds payable Bonds premium payable Total current liabilities Noncurrent liabilities: Non-c.urrent ponion or long-teml obligations Total non~currcnt liabilities 1"otal linbilitie.s 23.039.246 23,039.246 28,1 10.443 NET ASSt:iS Invested in capital assets, net of related debt Restricted for: 1-fighways. and streets Debt service Capital outlay Unres1ricted Total net sasstts 94.939.805 $ 438,535 1.596.110 10,764,857 13,230,726 120,970.033 The notes to the financial statements are an integral part of this statement. Page 20 TOWN OF FOUNT AIN HILLS, ARIZONA STATEMENT OF ACTIV ITIES YEAR ENDED JUNE 30, 2008 Net (Expense) Revenue and Changes in Net Assets Functions/Programs Expenses Prog[am Revenues Operating Capital Grants and Charges for Grants and Governmental Services Contributions Contributions Activities Governme-ntal activities: Genera I government Public safety Highways and streets Culture and recreation Community development Intcrest on long-term debt Toul governmental uctivities s s 3,921,588 s 830,963 6,532,292 746,227 23,700 5.98 1,347 3,092,661 338,332 2,86 1,653 390,589 1, 132,947 23,5_22,4j!Ji _$ _ 2,329,811 s 10,000 46,802 835,659 s 56,802 $ General rc·venues: Taxes: Sales taxes Property taxes Franchise taxes State shared revenue Investment income Miscellaneous Total general revenues Changes in net assets Net assets, beginn ing or yea r Net assets, end of ycor The notes to the financial statements nrc an integral part of this statement. Pagc2 1 s $ (3,080,625) {5, 739,263) {5,957,647) {1.918,670) {2,471,064) (1.132,947) 835,659 _Q(),IoQ.~J~) 10,489,591 1,635.542 336,290 8,848, 199 780,935 183,963 22.274,520 1,974,304 118,995,729 s 120,970,033 TOWN OF FOUNTAIN HJ LLS, ARIZONA BALANCE S HEET- GOVERNMENTAL FUNDS JUNE 30,2008 Fees General Obligation Debt Service 2,540,062 $ Development General ASSETS Cash and investments Taxes receivable Special assessments receivable Accounts receivable Due From governmental entities Due from other funds Inventory, at cost Total assets LIABILITIES AND FUND BALANCES Liabi lities: Accounts payable Due to other funds Accrued payroll and employee benefits Bond interest payable Deferred revenue Bonds payable Total liabilities $ $ s 173,070 956,617 141 ,917 17.925 7,448,463 $ 3,309,635 $ $ 823,185 s 121,837 $ 517,573 252,000 1,222,267 13,947 32,656 1,268,870 37,860 23,470 169,798 Fund balances: Reserved for inventory Reserved for other purposes Unreserved: Undesignated Designated for non-recurring items Unreserved reponed in: Special revenue funds Debt service funds Tot:lll'und bal:mces Total liabilities and fund balances 6, 135,076 23,858 22,000 929,573 5,888 868 655 I 05 1 410 1,050,000 I 263 546 2,009,165 1,517,573 2,258,225 5,324 6,579,808 2.258.225 5 324 17,925 3,035, 145 $ 7,448.463 $ 3,309,635 $ 1,268,870 The notes to the financinl statements nre an integral part of this statement. Page24 Municipal Propcny Corporation Debt Service s 2.525.357 Capillll Projects Non-Major Governmental Funds 2,621,349 s Fun~ s 11,015,638 s 2,036,275 480 4,7 10 6, 146 274,329 s $ II 015,638 S 2,321,940 s $ 250,78 1 s 201,163 104,057 1.868 90,514 4,482 295 000 697,084 $ 95,992 $ Total Governmental 242.087 805.090 1,047J087 250.781 25.474,675 38.285 4,710 696,789 1,6 11,594 14 1,917 17 925 ~Wi.89s 1,396,966 141,917 25,338 502.399 961,943 2.150,000 5,178,563 17,925 3,035,145 1,574,262 2,621,349 Page 25 $ 11,015,638 1.618,702 6.154 22,807,332 1,618.702 6 154 1.624.856 10,764,857 1.574.262 s 16,61 1,833 1.517,573 10,764,857 $ 2,321,940 s 27,985,895 TOWN OF FOUNTA IN IHLLS, ARI ZONA RECONCILIATION OF THE BALANCE SHEET - GOVERNM ENTA L FUNDS T O T HE STATEM ENT OF NET ASSETS JUNE 30, 2008 s Total gover·nmcnla l fund balances 22,807,332 Amounls reported for governmental activities in the Slalemenl of Ne1 Assets are differem because: Deferred charges related 10 lhe issuance of refunding bonds are amortized over the life oflhe associa1ed refunding issue in lhe government-wide statements but not reported in the funds. 1,364,375 Capital assets used in govcmmemal activities are no! financial resources and therefore are not reported in !he funds. Govemmenlal capilal assets Less accumulated depreciation s 186,833,872 (66.96 1,749) 119,872.1 23 Some revenues arc not available 10 pay for currenl period expenditures and, therefore, arc deferred in the funds. Special assessments Property !axes 4,482 5,888 10,370 Long-temt liabililies are not due and payable in the current period and therefore are not reported in lhe funds. Compensated absences payable Bonds payable Bonds premium payable (3 11 ,770) (22,668,225) ( 104,172) Net assets of governm enta l activities Th e notes to th e fin ancial sta tements a re an integra l part or !his statement. Page27 (23,084, 167) s 120,970,033 TOWN OF FOUNTAIN triLLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES· GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2008 General Development Fees General Obligation Debt Service Rcvcnue.s: Taxes Intergovernmental Fines and forfeitures Licenses and pem1its Charges for services Rents and royalties Special assessments $ Invesnncnt income 7,502,526 6,831,804 260,044 1,124,405 210,560 296.434 266,010 182,196 16 673 979 Miscellaneous Tolal revenues Expenditures: Current· General government Public safely Highways and streets Culture and recrearion Community developmenl Capiral outlay Debt service · s s 359,735 99, 139 716 221 Excess (de!icienry) of revenues ovor expendilurcs Or her financing souo·ccs (uses): Transfers in Transfers out Toho l olher financing souo·ces (uses) Changes in fund ba lances Fund bnlanccs, beginning of year Fund bnlan~es. end of yenr 31 43 1,302,798 3,303,201 6,320,030 2,606 2,200,484 2,74 1,740 689,241 2,018,824 Principal retirement Interest and fiscal charges Tolal expendilurcs 1,302,724 257,347 15,254.696 2.02 1,430 1,050,000 343 844 I 393,844 14 19,28J_ _ _(1,305,209} 426 ( 1,440,050} _ _ {1 .439,62<1) (20,341) ( 1,305.209} (91.046) 6,600.149 3,563,434 96,370 s~7_MOj_ _s__z,m,22~ s The notes to the linancinl statements are llll integral part of this statement. Page 28 !9J~()4(i) 5,324 Municipnl Propeny Corporation Debt Service s s s s _ _],067,265 4,337 71,353 I 724 4 298 051 2,219.078 245.094 1.639 2,21 1,95 I 56,523 10,000 312.026 3.548,295 6,321,669 2,214,557 2,257,007 2,751,740 5.239. 169 2,153,228 1,025,320 __ 2,2J9.m 298,228 182,598 3,31 8,059 (1.252,8.QQ) (151,8 13) 979 992 1,564,973 1,000,000 1.564,971. 1.000,000 312.173 - 848,187 1,262,089 9,916,670 51.078 287,324 51,078 1,574,262 Page 29 1.752.724 27,217 . s 10,764 ,857 1.899,112 2,236,892 27.076 1,552 50.005 Total Govcmmenllll Funds 12,457,086 9,353,260 287,120 1,125,957 620,300 296,434 4,337 780,935 183,963 25, 109,392 805,000 498,878 I ,303,878 s Capital Projects Non-Major Governmental Fuods 25~ 1 0,98 5 . (401,593) 2,756,988 191.589 (1,316,938) ____12,756.~ (1 ,125.34?.) (401,593) ·--(t~5~ 1,770.213 $ 1,624 ,856 23,208,925 s 22,8Q.1.)32 TOWN OF FOUNTAIN EllLLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENlJES, EXPENDITlJRES AND CHANCES IN F UND BALANCES- GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED Jl.JNE 30, 2008 s Net clumges in fund balances - total governmental funds (40 1,593) Amounts reported for governmemal acfivilies in the Statement of Activities are diffcrenl because: Govcmmenlal funds repon capital ou1lay as expendiiUres. However, in1he S1a1emem of Activities, the cost of those assets are allocated over their estimated useful lives as deprecia1ion expense. Expendilures for capila1ized asse1s Less curreru year deprecialion $ 5,171,5 11 (4,7 18,492) 453,019 Repaymenl of long-1em1 dcb1 is an cxpcndilurc in 1hc govcmmcmal funds, but the repayment reduces long-term liabililies in !he Statement ofNet Assc1s. 2,163, 149 Some expenses reponed in the Statcmcnl of Activities do no1require the use of current financial resources and therefore are not reponed as expenditures in governmenta1 funds. Amonization of deferred charges Compensated absences ( 11 7,548) ( 122,723) Change in net assets in go,,ernmcntnl activities 1'age 30 The notes to the fionncinl statements arc an integral part of this sta tement (240,271) s 1,974,304 TOWN OF FOUNTAIN HJLLS, ARIZONA NOT ES TO FINANCIAL STATEMENTS J UNE 30, 2008 NOTE I -SUMMARY OF SIGNIF ICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformiry with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accow1ting and financial reporting principles. The more significant of the Town's accounting policies are described below. A. Rep orting Enti ty The Town is a municipal entity governed by an elected Mayor and council. As required by accounting principles generally accepted in the United States of America. these financial statements present the Town and its component units, entities for which the Town is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the Town's operations and so data from these units are combined with data of the Town, the primary government. The financial reporting entiry consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in confonnity with generall y accepted accounting principles. The Town is a primary government that has a separately elected govern ing body, is legally separate, and is fiscally ind ependent of other state or local governments. Furthermore, component wtits combined wi th the Town for financial statement presentation purposes and the Town are not included in any other governmental reporting entity. Consequently, the Town's financial statements include only the funds of those organizational entities for which its elected governing body is financially accountable. The Eagle Mountain Community Facilities Town and the Col/om••oods Improvement Town. As special purpose districts and separate political subdivisions under the Arizona Constitution, the districts can levy taxes and issue bonds independently of the Town. Property owners in the designated areas are assessed for Town taxes, and thus for the costs of operating the districts. The Town Council serves as the Board of Directors; however, the Town has no liability for t11e districts' debt. For financial reporting purposes, transactions of tbe Towns are combined together and included as if they were part of the Town's operations. Page 3 1 TOWN OF FOUNT AIN HILLS, ARIZ ONA NOTES TO FI NANCI AL STATEMENTS J UN E 30, 2008 NOT E I -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Town ofFormtain Hills, Arizona Municipal Property Corporation. The Town of Fountain Hills, Arizona Municipal Property Corporation's (MPC) Board of Directors consists of three members which are appointed by the Fountain Hills Town Council. The MPC, which is a nonprofit corporation incorporated under the laws of the State of Arizona, was fom1ed for the sole purpose of assisting the Town in obtaining financing for various projects of the Town. The Town has a " moral obligation" for the repayment of the MPC's bonds. For financial reporting purposes, transactions of the MPC are combined together and included as if they were part ofthe Town's operations. B. Government-Wide a nd Fund Fina ncial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) present financial infonnation about the Town as a whole. The reported information includes all of the nonfiduciary activities of the Town. For the most part, the eiTcct of internal activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the Town. Governmental activities normally arc supported by taxes and intergovernmental revenues. The Town does not have any businesstype activities. 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 arc clearly identifiable with a specific fullction or segment. Program revenues include I) charges to customers or applicants who purchase, usc, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that arc restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, state shared revenues, investment income and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. C. Mcnsuremeo t Focus, Basis of Accounting, and Financial Statement Prcsentution Govcnun ent-wide Financial Statements - The government-wide fimmcial statements are reported using the economic resources measurement focus and the accnral 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 e ligibility requirements imposed by the grantor or provider have been met. As a general rule, the eiTect of internal activity has been eliminated from the govemmenl-\vide financial statements: however, the effects of interfund services provided and used between functions are reported as expenses and program revenues at amounts approximating their external exchange value. Page 32 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Fund Financial Statements - Governmental fund fmancial 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 Town 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 liabili ty is incurred, as under accrual accounting. However, debt service resources are provided during the current year for payment oflong-terrn debt principal and interest due early in the following year (not to exceed one month) and therefore the expendit·ures and related liabilities have been recognized. Compensated absences are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses and pem1its, charges for services, special assessments and investment income associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been mel. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Grants and similar awards arc recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Deferred revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to meeting all eligibility requirements imposed by the provider. Delinquent property taxes have been recorded as deferred revenue. Receivables that will not be collected within the available period have also been reported as deferred revenue on the governmental fund financial statements. The Town reports the following major governmental funds. General Fund -This fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. Development Fees Fund - This fund accow1ts for development fees collected from developers restricted for projects approved by the Town Council. General Obligation Debt Service Fund - This fund accounts for the Town's property tax revenues received to pay the debt service of the Town's general obligation bonds. Mun icipal Property Comoration Debt Service Fund - This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. Page 33 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont' d) Capital Projects Fund - This fund accounts for the capital improvements to various projects of the Town. When both restricted and unrestricted resources are available for use, it is the Town' s policy to use restricted resources first, then unrestricted resources as they are needed. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single co lumn. D. Investments Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest investment contracts with a remaining maturity ofone year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. E. Investment Income Investment income is composed of interest and net changes in the fair value of applicable investments. F . Receivables and P ayables Activity between funds that is representative oflending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either "due to/from other fi.mds" ( i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). AU other outstanding balances between funds are reported as "due to/from other funds. " All trade and property tax receivables are shown net of an al lowance for uncollectibles. Property taxes are levied by the Town and collected by the Maricopa County Treasurer. Property taxes are levied no later than the third Monday in August and are payable in two installments due October I of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day ofNovember and May, respectively. Interest attaches on installments after the delinquency date. Page34 TOWN OF FOU NTAIN HILLS, ARIZONA NOTES TO F INANCIAL STATEMENTS J UNE 30, 2008 NOTE I -SUMMARY OF SIGNfFICANT ACCOUNTING POLICIES (Cont'd) Pursuant to A.R.S. a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise. The State Constitution and State law specify a property tax levy limi tation system. The system consists of two levies, a limited levy known as the primary property tax levy and an unlimited levy referred to as the secondary levy, which may only be used to retire bonded indebtedness. The primary tax levy is limited to an increase of2 percent over the previous year's max imum allowable primary levy, plus an increased dollar amount because of a net gain in property not taxed the previous year. Also, the primary property tax from all taxing jurisdictions for homeowners may not exceed I percent of the market value of their homes. If the combined primary property tax (for the Town, County, School Town, etc.) exceeds I percent of the market value of the homes, the school districts will reduce their rate until the homeowners' aggregate rate is equal to or less than the allowable I percent. The State will then subsidize the school districts for the reduced revenue. This I percent limitation applies to primary property taxes only and does not affect the secondary property tax levy. 1l1ere is also a control on the assessed value of property for primary tax purposes. 1l1e base year for the new tax system is fiscal year 1978-79. From this base year, two assessed values evolve. The primary assessed values are allowed to increase by no more than I0 percent a year. The dollar amount of the secondary property tax levy is "unl imited" and the actual full cash value of property is used in determining the tax rate. G. Inventory Inventories are stated at average cost using the first-in/first-out (F[f0) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the govemmenHvide financial statements, and as expenditures when consumed on the fund financial statements. H . Capital Assets Capital assets, which include land, artwork, buildings, improvements other than bu ildi ngs, vehicles, machinery, and equipment, construction i.o progress, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable govemmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of$5,000 or more and an estimated useful life of more than one year. Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at estimated fair market value at the date of donation. Page 35 TOWN OF F O UNTAIN BJLLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 1 - SUMMARY OF S IG NIFICANT ACCO UNTING POLICIES (Cont' d) The costs of normal maintenance and repairs that do not add to the value of the asset or mate.rial ly extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constmcted. Capital assets of the Town are depreciated using the straight-line method over the following estimated useful Jives: Assets lnfrastmcture Buildings lmprovements other than buildings Vehicles, machinery and equipment Years 15-50 50 20 5-15 I. Compensated Absences The Town's employee vacation and sick leave policies generally provide for granting vacation and sick leave with pay. Sick leave and vacation benefits vest after 30 days at the employee' s current rate of pay. The current and long-term liabilities, including related benefits, for accwnulated vacation and sick leave are reported on the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations and retirements. Generally, resources from the General Fund are used to pay for compensated absences. J. Long-term Obligations In the govermnent-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net assets. Bond premiums and discounts, as well as issuance costs and the difference between the reacquisition price and the net ca:rryi ng amount of the old debt, are deferred and amortized over the life of the bonds using the straight-line method over the term of the related debt. 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 amowlt of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts of debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from tbe actual debt proceeds received, are reported as debt service expenditures. Page 36 TOWN OF FOUNTAI N HlLLS, ARIZONA NOTES TO FIN ANCIAL ST ATEMENTS JUNE 30, 2008 NOT E I -SUMMARY OF SIGNlFICANT ACCOUNTING POLICIES (Concl' d) K. Fu nd E q uity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for expenditures or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that arc subject to change. L. l n tcrfund Activ ity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. lnterfund transfers between governmental funds are elim inated in the Statement of Activities. lnterfund transfers in lhe fund Statements are reported as other financing sources/uses in governmental funds. M. Estimates The preparation of the financial statements in confonnity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOT E 2 - ST EWARDSHIP, COMPL IANCE AND ACCOUNTABIL ITY Excess Exp enditures Over Budget - At June 30, 2008, the foUowing individual major governmental funds had expenditures that exceeded the budget. Budget Major Funds: General Obligation Debt Service Municipal Property Corporation Debt Service $ 1,392,350 I ,296,350 Expenditures $ Cash was available to cover all of the overexpcnditures listed above. Page 37 I ,393,844 $ I ,303.878 Excess 1.494 7,528 TOWN OF FOUNT ATN FULLS, ARIZONA NOTES TO FINANCIAL STATEMENTS J UNE 30, 2008 NOTE 3- CASH AND INVESTMENT S A.R.S. authorize the Town to invest public monies in the State Treasurer's local government investment pools, obligations of the U.S. Government and its agencies, obligations of the State and certain local government subdivisions, interest-bearing savings accounts and certificates of deposit, collateralized repurchase agreements, certain obligations of U.S. corporations, and certain other securities. The statutes do not include any requirements for credit risk, custodial credit risk, concentration of credit risk, interest rate risk, or foreign currency risk for the Town's investments. The State Treasurer's pools are external investment pools, the Local Government Investment Pool (Pool 5) and Local Government Investment Pool-Government (Pool 7), with no regulatory oversight. The pools are not required to register (and are not registered) with the Securities and Exchange Commission. The fair value of each participant's position in the State Treasurer investment pools approximates the value of the participant's shares in the pool. Custodial Credit Risk- DeposiTs. Custodial Credit risk is the risk that in the event of bank failure the Town's deposits may not be returned to the Town. The Town does not have a deposit policy for custodial credit risk. At June 30, 2008, the carrying amount of the Town's deposits was $364,224 and the bank balance was $419,445. At June 30,2008, the Town's deposits were entirely covered by Federal depository insurance. At June 30,2008, the Town's investments consisted of the following. Investment Type Town of Fountain Hills bonds State Treasurer's investment pool 5 Total Maturities 01101/2009 45 days average $ Fair Value 2,752 22,426,682 s 22.429,434 Interest Rate Risk. The Town does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk. The Town has no investment policy that would further limit its investment choices. As of June 30, 2008, for investments in the State Treasurer' s investment pool 5, 77% of t.he securities were rated AAA, A+, or A I; all of the remaining securities were rated A- or better by Standard and Poor's. CIIStodia/ Credit Risk-Investments. The Town's investment in the State Treasurer's investment pool represents a proportionate interest in the pool's portfolio; however the Town·s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration ofCredit Risk. The Town places no limit on the amount the Town may invest in any one issuer. Page 38 TOWN OF FOUNT AIN HILLS, ARIZ ONA NOTES T O FINANCIAL ST ATEMENT S JUNE 30, 2008 NOTE 3- CASH AND INVESTMENT S (Concl'd) Cash and investments at June 30, 2008 consisted of the following: Can·ying amount ofTown's deposits State Treasurer' s lnvestment Pool Town ofFow1tain Hills bonds Petty cash on hand Cash wi th paying agent Total cash and investments $ 364,224 22,426,682 2,752 1,45 1 2,679,566 $ 25,474,675 NOTE 4 - RECEI VABLES Receivable balances, net of allowance for uncollectibles, have been disaggregated by type and presented separately in the financial statements with the exception of due JJ-om governmental entities. Due fTom govemmen tal entities, net of allowance for uncollectibles, as of yearend for the Town's individual major funds and non-major governmental funds in the aggregate, were as fol lows. General fund Due from governmental entities: Due from State govenm1ent Net due fi-om governmental entities General Municipal Obligation Property Development Debt Corporation Non-Major Fees Service Debt Service Governmental Fund Fund Fund Funds $ 956,617 $ 252,000 $ 32,656 $ 95,992 $ 274,329 $ 956,6 I7 $ 252,000 $ 32,656 $ 95,992 $ 274,329 Governmental funds report deferred revenue in connection wi th receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental fi.mds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the govenm1ental funds were as follows. Miscellaneous (General Fund) Miscellaneous (Development Fees Fund) Property taxes (General Obligation Debt Service Fund) Special assessments (Non-Major Govemmental Funds) Total deferred revenue for governmental funds Page 39 Unavailable $ $ 5,888 4,482 10,370 Unearned $ 22,000 929,573 $951 ,573 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 5 - CAPITAL ASSETS A summary of capital asset activity for the fiscal year ended June 30, 2008 follows. Governmental Activ ities Capital assets, not being depreciated: Land Artwork Constmction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Infrastructure Buildings Improvements other than buildings Vehicles, machinery and equipment Total capital assets being depreciated Less accumulated depreciation for: Infrastructure Buildings Improvements other than buildings Vehicles, machinery and equipment Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Beginning Balance $ $ Increase Decrease Ending Balance 387,400 3,38 I1632 3,769,032 $ 23,57 1,668 1,376,500 1,42 1,620 2,022,979 I ,42 1,620 26,971,147 125,495,515 17,754,746 10,169,670 3,696, 144 157, 11 6,075 13,221 I4 I,849 1,636,199 1,032,830 2,824,099 77,449 77,449 125,508,736 17,896,595 11.805,869 4,65 1,525 159,862,725 (54,253,061) ( I ,662,006) (3,503, 490) {2,902, 149} (62,320, 706} (3,536,693) (357, I65) (584,066) {240,568} (4,7 I 8,492} {77,449} (77,449} (57,789.754) (2,0 19,171) (4,087,556) {3,065,268) (66,961 '749) 23,571.668 $ 989,100 62,967 24,623,735 $ 94,795,369 {1,894,393} 92,900,976 119,4 19,104 $ 1,874,639 $ 1.42 1,620 $ 119,872,123 Depreciation expense was charged to functions/programs as foUows: Governmental activities: General government Public safety Highways and streets Cul ture and recreation Total depreciation expense 231, 125 38,9 I7 3,693,2 I9 755,23 I $ 4,718,492 $ Consh·uction Commitments - As of June 30,2008, the Town was involved in several construction projects. The estimated cost to complete the constmction projects is $198,628. Pagc40 TOWN OF FOUNT AJN HILLS, ARIZONA NOTES TO FINANC IAL STATEMENTS J UNE 30, 2008 NOTE 6- BONDS PAYABLE Bonds payable at June 30, 2008, consisted of the following general obligation, municipal property corporation, special assessment, and community facilities district bonds. The bonds are both callable and noncallable with the interest payable semiannually. Property taxes from the General Obligation Bond Debt Service Fund and Eagle Mountain Debt Service Fund are used to pay general obligation and community facilities district bonds. State shared revenues from the HURF Fund are used to pay street and highway user bonds. Tax revenues from the General Fund and Excise Tax Fund are used to pay municipal faci li ties bonds. Special assessments imposed on certain parcels ofland within the Cottonwoods Improvement District are used to pay the Special Assessment District bonds. Original Amount Issued Interest Rates Description Governmental activities: General Obligation Bonds, Series 1999 $ 1,400,000 4.7-4.9% General Obligation Bonds, Project of 3,700,000 5.25% 1999, Series B (2000) General Obligation Bonds, Project of 6,000,000 4.125-4.4% 1997, Series 200 I General Obligation Refunding Bonds, Series 2005 7,225,000 3.25-4.0% Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2005 4.555,000 3.5-4.125% Street and Highway User Revenue Refunding Bonds, Series 1998 I ,075,000 4.5-4.625% Municipal Facilities Revenue Bonds. Series 2000 4,680,000 5.0-5.25% Municipal Facilities Revenue Bonds, Series 2001 7,750,000 4.0-4.5% Municipal Facilities Revenue Bonds, Series 2004 3,645,000 3.0-4.5% Unamortized premium on Municipal Facilities Revenue Bonds, Series 2004 Municipal Facilities Revenue Refunding Bonds, Series 2005 Cottonwoods Improvement District Improvemcnt Bond Total Page 41 Maturity Outstanding Principal June 30, 2008 711/08-10 $ Due Within One Year 300,000 $ I 00,000 7/1/08-09 550,000 275,000 7/1108-11 1, 150,000 275,000 7/1108-19 6,620,000 400,000 7/1108-21 4,255,000 185,000 7/1/08-10 345,000 110.000 711/08-12 1,080,000 200,000 7/1108-13 2,125,000 325,000 7/ 1/08-19 3.205,000 165,000 143,856 3.0-4.5% 711/08-19 11 4,093 9,921 5,330,000 3.25-4.5% 7/1108-20 5, 185,000 II 5,000 5.25% 1/ 1/08-09 3,225 3,225 32,276 -=s-2=-4:-:,9~3='2,-='31~8 s 2,163,146 TOWN OF FOUNTAIN HlLLS, ARIZONA NOTES TO FINANCIAL STAT EMENTS JUNE 30, 2008 NOTE 6- BONDS PAYABLE (Cone!' d) Annual debt service requirements to maturity on general obligation and other bonds at June 30, 2008, are summarized as follows. Year ending June 30: 2009 2010 201 1 2012 2013 2014-1 8 2019-22 Total PrinciEal 2, 153,225 2,240,000 2,460,000 2, 115,000 2,205,000 9,650,000 3,995,000 $ 24,818,225 $ Interest Premium Total 961,671 $ 9,921 $ 3,124,8 17 872,022 9,921 3,121,943 777,276 9,92 1 3,247, 197 686,367 9,92 1 2,8 11,288 599,449 9,92 1 2,8 14,370 I ,694, 173 49,605 11,393,778 245,301 14,883 4,255,184 $ 5,836,259 $ 114,093 $ 30,768,577 $ In prior years, the Town defeased certai n general obligation and other bonds by placing lhe proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the defeased bonds . Accord ingly, the trust account assets and the liabi li ty for thedefeased bonds are not included in tbe Tovvn' s financial statements. A!June 30, 2008, $1 1,958,000 of defeased bonds are still outstanding. NOTE 7 - CH ANGES IN LONG-TERM LIABILITIES Long-term liabil ity activity for the year ended Jw1e 30, 2008 was as follows. Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Compensated absences $ 189,047 $361 ,4 13 $ 238,690 $ 311 ,770 $ 35,000 General obligation bonds payable 22,489,0 14 1,8 14,921 20,674,093 I ,974,921 Special assessment bonds payable 6,453 3,228 3,225 3,225 C01rununity facilities district bonds payable _4.11~,()()() 185,000 - 1§0,000 4,255,000 Governmental activities long-term I iabi I ities $27,099,514 $361,413 $2,216,839 $25,244,088 $ 2,198, 146 Page 42 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 8- INTERFUND RECEIVABLES, PAY ABLES, AND TRANSFERS At Jtme 30, 2008, interfund balances were as follows. Due to/from other funds: Due from General Fund 37,860 $ $ 104,057 $ 141,917 $ Due to General Obligation Debt Service Fund Non-Major Governmental Funds Total Total 37,860 104,057 141 ,917 At June 30, 2008, several funds had negative cash balances. Negative cash was reduced by interfund borrowing with lhe General Ftmd. All interfund balances are expected to be paid within one year. Intcrfund transfers: General Fund ~ ;;;) 0 General Fund . Non-MaJor Governmental ~ Funds f-< Total ..."' <.':l . $ $ Transfers in Municipal Property Corporation Non-Major Debt Capital Govenunental Service Fund Projects Fund Funds Total $ 387,000 $ 1,000,000 $ 53,050 $ 1,440,050 426 426 $ 1, 177,973 1,564,973 $ 1,000,000 $ 138,539 1,316,938 19 1,589 $2,756,988 Per local policy, residual General Fund revenues are transferred at year end to lhe Capital Projects Fund ($1.0 million for fiscal year 2007-08). Transfers between other funds were made by the Town during the fiscal year to ensure that sufficient resources were available to cover expenditures in the applicable funds. NOTE 9- CONTINGE NT LIABILITIES Lawsuits-The Town is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently detemlinable, in the opinion of the Town' s legal counsel, the reso lution of these matters will not have a material adverse effect on the financial condition of the Town. Page43 TOWN O F FOUNTAIN HILLS, ARIZONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 10 - RISK MANAGEMENT The Town is exposed to various risks ofloss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Town's insurance protection is provided by the Arizona Municipal Risk Retention Pool, of which the Town is a participating member. The limit for basic coverage is for $2,000,000 per occurrence on a claims made basis. Excess coverage is for an additional $13,000,000 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 Town was unable to obtain worker's compensation insurance at a cost considered to be economically justifiable. Therefore the Town joined the Arizona Municipal Workers' Compensation Pool (AMWCP). AMWCP is a public entity risk pool currenlly operating as a common worker's compensation insurance program for 67 member cities and towns. The Town is responsible for paying a premium, based on an experience rating formula, that allocates pool expenditures and liabilities among members. NOTE !!-RETIREMENT PLANS Defined Contribution Pension Plan - All full-time employees of the Town participate in a deftned contribution pension plan administered by the ICMA Retirement Corporation as a 40 I(a) plan. The payroll for tl1e Town employees covered by this plan for the year ended June 30, 2008 was $3,694,466. The Town's total payroll was $4,152,103. A defined contribution pension plan provides benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual's account are to be determined, instead of specifying the amount of benefit the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant' s account, the returns earned on investment of those contributions, and forfeitures of other participants' benefits that may be allocated to such participant's accow1t. All non-peace officer full-time Town employees must participate in the pension plan from the date they are hired. Contributions made by an employee vest immediately and contributions made by lhe Tovm vest after three years of service. An employee that leaves the employment of the Town is enti tled to his or her contributions and the vested portion of the Town' s contributions, plus interest earned. Each employee must contribute I I percent of his or her gross earnings. The Town must contribute I I percent of covered earnings. During fiscal year 2007-08, the Town's required and actual contributions an10unted to $406,227. The employees' contributions totaled $542,958. Employees may also contribute to the JCMA Retirement Corporation 457 plan on a vo luntary basis; there is no employee match for those contributions. During fiscal year 2007-08, employees contributed $136,731 to that plan. No pension provision changes occurred during the year that affected the required contributions to be made by tl1e Town or its employee-s. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2007-08 or as of the close of the fiscal year. Page44 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (Required Supplementary Information) Page 45 TOWN OF FOUNTAIN lULLS. ARJZONA SCttEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES· BUDGET AND ACI'UAL ·GENERAL FUND YEAR ENDED J UNE30, 2008 Budgct«< Amounts Variance with Final Budget l'OSIIive Ori~tinal & flt-,'tnues: Ta."ntrltl =ovtrnmtnt Publit saftl:)' Building safety Law enforcemem Fire dep3mnem TOt Ill publit Slftty Cullun: and rtC'rCR1iOII Parks and rct.teation Civ1c center Senior services To1111culture tnd rttrt111ion Cummunity development Publte: wor'ks Plnnnmg and ~nmg 1'otal tommunhy drvelopment CnJ)htl outl~y Capitnl oullay Tot11l t.apilal oullay Total upcndiluru f.;.xct'.U (dt'Ocicncy) of rtvt.nues ovcr upc.odhurts Othcrlin:.ncing sourers (us~): Transfer'$ in Transfmoul Total otbtr financing. Jourc·es (un.'l) Chnnge in fond bJIIAnttt l~und 6.600.149 balancu. July 1. 2007 Fund bab1nctt (dtl'itlts), June 30, 2008 Page 46 s ( 101) s Stc accompanying notes to chi.s .llthcdule. 6.S79,808 6,600.149 s 6,579,909 TOWN OF FOUNTAIN K ILLS, AIUZONA SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL- DEVELOPMENT FEES YEAR ENDED JUNE 30, 2008 Budgeted Amounts Original & Final Revenues: lntergovcmmcntal Charges for services Investment income Total revenues s 774 ,920 586,490 15,285 1,376,695 Actual s Variance with Final Budget Positive (Negative) 257,347 $ 359,735 99 139 716.221 (517,573) (226,755) 83 854 (660,474) E~pcnditurcs: CurrentHighways and streets Capital outlay Tot~tl expenditures Change ir.r fund balances 2,412,5 14 2,412,5 14 2,606 2,0 18,824 2,02 1,430 (2,606) 393 690 391 084 0,035~12) (I ,305,209) (269,390) Fund balances, July I, 2007 Fund balances (dclicits), June 30, 2008 s O~~ --~.m.Q7Jt Other financing sources (uses): Transfers in T ota l other financing sources (uses) Fund balances (deficits), June 30, 2008 s $ 845,290 27,2 17 37 324 909 83 1 84998 1 ___ 849,98 1 1_5!,81)) _ _IJ75~8 1 2 1.000,000 1,000,000 1,000,000 1,000,000 848,187 2 759,812 9,916,670 9,916,670 {1 1911,625) J_IQ,7_~4,857_ .$_ ) 2J()'76,482 TOWN O F FOUNTAJN HILLS, ARIZONA COMBlNING BALANCE S HEET- ALL NON-MAJOR GOVERNMENT AL FUNDS- BY FUND TYPE JUNE 30, 2008 S~cial ASSF.TS Cash and investments Taxes receivable Special assessments receivable Accounts receivable Due from governmental entities Total assets L IABILITI ES AND FUND BALANCES Liabilities: Accounts payable Due to other funds Accrued payrolI and employee benefits Bond interest payable Deferred revenue Bonds pa)•able T otal liabilities Page 56 Debt Service s I,644,748 $ s 6, 146 266,83 1 I ,917,725 s s Fund balances: Unreserved: Undesignated Total fund balances Total liabilities and fund balances Revenue $ 201, 163 95,992 1,868 391,527 480 4,710 7 498 404,215 s Total Non-Major Governmental Funds $ $ s 2,036,275 480 4,710 6,146 '74 329 2,32 1,940 299,023 90,514 4,482 295,000 398 061 201,163 104,057 1,868 90,514 4,482 295,000 697 084 1,6 18,702 1,6 18,702 6 154 6 154 1,624 ,856 1,624,856 1,911,7_~~ 8,065 $ _ _101~15 s 2,321,940 TOWN OF FOUNTAIN H1 LLS, ARJZONA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL NON-MAJOR GOVERNMENTAL FUNDS- BY FUND TYPE YEAR ENDED J UNE 30, 2008 ~ial Revenue Rc''cnucs: Taxes lntergovemmental Fines and forfeitures Licenses and pennits Charges for services Special assessments $ 1,570,631 2,236,892 27,076 1,552 50,005 Debt Service s 328,48 1 Miscellaneous Tohtl revenues Expenditures: CurrentGeneral government Public safety Highways and streets Culture and recreation Community development Capital outlay Debt service Principal retirement Interest and fiscal charges Total expenditures 332,8 18 245,094 1,639 2,211,951 56,523 10.000 312,026 Excess (deficiency) of revenues over expenditures Other financing sources ( uses): Transfers in Tnmsfers out Total other financing sources (uses) 2,83 7,233 298,228 182 598 480 826 298,228 182 598 3,318,059 I ,128,000 (148,008) 979,992 65,642 (1 ,316,938) (1 ,251,296) 125,947 122,061) Fund balances, beginning or year 1,741.998 28,215 1,618,702 191,589 ( 1,3 16,938) (1, 125,349) 125 947 {123,296) $ 1,899,112 2,236,892 27,o76 1,552 50,005 4,337 77,353 l 724 4,298,051 245,094 1,639 2,2 11 ,951 56,523 10,000 3 12,026 C hange in fund balances Page 57 s 4,337 77,353 I 724 3,965,233 Investment income Fund balances, end of year Total Non-Major Governmental Funds $ 6, 154 145,357) 1,770,213 $ I ,624,856 NON-MA.IOR SPECIAL REVENUE FUNDS Special Revenue funds are used to account for proceeds of specific revenues sources that are lega lly restricted to expenditures for specific purposes (other than major capital projects). The funds are usual ly requ ired by statute, ord inance, or federal grant regulation to finance specified activities of the Town. l11c Town maintains the fo llowing non-major Special Revenue funds. HURF Fund- accounts for the Town's snare of motor fuel tax revenues and lottery proceeds. Local Co urt Enhancement Fund - accounts for activities of grants from the Arizona Supreme Court. Grants Fund - accounts for the activities of various grants and contributions received by the Town. Excise Tax Fund - accounts for the portion of Town sales tax reserved by the Town Council for special projects including Town beautification and economic development. Public Art Fund - accounts for the one percent surcharge on commercial and multi-family development dedicated to purchasing art. Page 59 TOWN Of fOUNTAI N HI L LS, ARIZONA C OMBTNING BALANCE SHEET- NON-MAJOR S P ECLAL REVENUE f UNDS JUNE 30, 2008 Local Court Enhancement HURF ASSET S Cash and investments Accounts receivable Due from governmental entities Total assets L IABILITI ES AND f UND BALANCES Liabilities: Accounts payable Due to other funds Accrued payroll and employee benefits Toralliabilities Page 60 and fund balances Excise Tax $ 193,148 s 36,674 s 930,064 s 458,557 6,146 138,842 603 545 s 193 148 $ 36,674 s 127 989 1,058.053 s 164,233 s s 36,674 s $ 777 165 010 Fund balances: Unreserved: Undesignated T otal fund balan ces Tot:~ I liabilities Grants 438,535 438, 535 $ 36674 193 148 193, 148 603,5lj1_ S_ _J23. 148_ S 256 95,992 I 091 97,339 9607 14 960,7 14 36.674 $_ _1~058,053 Public An Totals s 26,305 s s - 26,305 $ s s 1,644,748 6,146 266,831 1,9 17,725 201,163 95,992 I 868 - - - - - -----:2=9::'9,0 . 23 26,305 _ __, 26"",3'""0"5 s Page61 26,305 1.618,702 1.618.702 s 1,917,725 T OWN O F FOUNT AIN HTLLS, ARIZONA COMB INING ST AT EMENT OF REVENUES, EXPEN DITURES AND CHANGES I N FUND BALANCES NON- MAJOR SP ECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2008 Local Court Enhancement HURF Grams R evenues: Taxes Intergovernmental Fines and forfeitures Licenses and permits Charges for services $ 27,076 Miscellaneous Tota l revenues Expenditures: CurrentGeneral government Public Sllfety Highways and streets Culture and recreation Community development Capital outlay T otal expenditures 58 136 2, 187,525 _ _ 020"178} - ( 138,539) (138,532) C hange in fund balances (458,717) F und ba la nces, begin ning ofycur Page 62 3,552 30628 435 527 2,274 2 1 875 24 149 174,574 1,639 82,562 56,523 10,000 232,0 I S 557,3 13 . - _6.479 {121,786) 2, 129,389 O ther financing sources (uses): Transfers in Transfers out T otal other financing sources (uses) Fund balances, end of year 435,527 1,552 23,700 39,006 I 724 I 867 347 lnvestment income Excess (deficiency) of revenues over expenditures $ $ 1,801,365 65,642 (426) 65,2 16 897,252 $ 438,535 $ 6 479 56,570) 186,669 56,570 193,148 =$==== Excise Ta.~ s 1,570.63 1 Totals Public An s $ 26,305 34.795 - 1,605,426 _______2(i>~05_ __ 3,~6~,233 245.094 1,639 2.211.951 56,523 10.000 312.026 2,837,233 68.246 6!!.,246 I ,537,180 26 305 1, 128,000 65,642 {I ,3 16,938) (1.25 1.2.2§} .u_._m,973) (1,177,973) 359.207 (123.296) 26.305 1,741,998 601,507 ~ ===-= 9.;. 69,714 Page63 1,570,631 2.236.892 27.076 1,552 50,005 77,353 I 724 -~ 26,305 $ I ,6 18,702 TOWN Of fOUNTAIN HILLS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN fUND BALANCES· BUDGET AND ACTUAL- NON-MAJOR SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2008 HURF Budget Variance· Positive (Negative) Actual Revenues: Taxes Intergovernmental Fines and forfeitures Licenses and permits Charges for services Investment income Miscellaneous Total revenues $ $ $ 1,851 ,633 1,801 ,365 (50,268) 8,000 40,000 I 000 1,900,633 1,552 23,700 39,006 I 724 I 867 347 1,552 15,700 (994) 724 (33,286) Expenditures: CurrentGeneral government Public safety Highways and streets Culture and recreation Community developmenl Capital outlay Total expenditures 2,289,485 2,129,389 160,096 74 000 _ _2,~~3A!t5 58 136 2,187,525 IS 864 175,960 Excess (deficiency) of revenues over expenditures _ _ (46~&m _ _ (320,178) 142,674 Other financing sources ( uses): Transfers in Transfers out Total other financing sou rces (uses) ( 126,300} ( 126,300) {138,539} {138,539) ( 12,239} ( 12,239) Change in fund b:ahtnces (589,152) {458,717) 130,435 897,252 897,252 Fund balonCI.'S, July I, 2007 Fund balances (deficits), June 30, 2008 Page 64 s ~89,152) $ 438 535 $_ _1)2f7,687 Local Court Enhancement Budget s 23,300 Budget s $ VariancePositive (Negative) Actual s $ 1,807,500 435,527 (I ,37 1,973) 27,076 3,776 3,552 3,552 30,628 7,328 1,807,500 435,527 (1,37 1,973) 2,274 (2,274) 90.000 28,000 28,000 21.875 24.149 6 125 3 851 1,835,000 1,925.000 174,574 1,639 82,562 56,523 10,000 232 015 557 313 (84,574) ( 1.639) (82,562) (56,523) (10,000) 1,602,985 I 367 687 (4,700) 6,479 II ,179 (117,500) (121 ,786) (4,286) 42.500 42,500 65,642 (426} 65,2 16 23,142 (426) 22 716 (75,000) (56,570) 18,430 56,570 56,570 -23,300 !1,IQQ) - - s Variance· Positive (Negative) Actual $ Grants (4, 700) $ 6479 I I 179 186,669 186,669 193.148 s 197,848 $ (75.000) s s 75,000 (Continued) Page65 TOWN OF FOUNTAIN FUL LS, ARIZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES· BUDGET AND ACTUAL- NON-MAJOR SPECIAL REVENUE FUNDS YEAR EN DED JUNE 30, 2008 (Concluded) Excise Tax Budget Revenues: Taxes Intergovernmental Fines and forfeitures Licenses and permits Charges for ser vices s 1,297,124 Actual s Investment income Miscellaneous Totul revenues Expenditures: CurrentGeneral government Public safety Highways and streets Culture and recreation Community development Capital outlay Total expenditures VariancePositive (Negative) 1,570,631 $ 273,507 34,795 34,795 I 297 124 1,605,426 308 302 183,120 68,246 114,874 183,120 68~4_6_ 114,874 I 114,()j)4_ _ _ l~snJSO_ 423,176 Excess (deficiency) of revenues over expenditur-es Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) (924,350} (924,350) Chnngc in fund balonees 189 654 Fund balances, July I, 2007 Fund balances (deficits), June 30, 2008 -$ 189,654 $ ( 1,177,973} ( 1,177,973) (253,623) (253,623) 359 207 169,553 601,507 601,507 960,714 •n1e Public Art Fund was included in the Town's budget, however, the budget was -0-. Page66 s 771.060 Public An Totals Variance Positive (Negative) Variance · 4 Budget• s Actual s $ Budget s 26,305 26,305 26,305 26,305 1,297,124 3,659,133 23,300 Actual s 8,000 40,000 I 000 5,028,557 273,120 26,305 26,305 26,305 s Page67 $ 26,305 s 26,305 $ 273,507 ( 1,422,241) 3,776 1,552 42,005 37,353 724 (1,063 ,324) 1,937,000 4,499,605 245,094 1,639 2,2 11,951 56,523 10,000 312 026 2,837,233 28,026 (1,639) 77,534 (56,523) (10,000) 1,624,974 1 662,372 528,952 1, 128,000 599,048 42,500 ( 1,050,650) ( 1,008, 150) 65,642 ( 1,316,938} (1 ,25 1,296) (266~88} (479, 198) (123,296) 2,289,485 26,305 1,570,63 1 $ 2,236,892 27,076 1,552 50,005 77,353 I 724 3,965.233 l'osilive (Negative) (479.198) $ 23 ,142 (243, 146) 355 902 1,74 1,998 1.741,998 1,618,702 $ 2.097,900 NON-MA JOR DEBT SERVICE F UNDS II URF Debt Ser-vice Fun d - accounts for operating transfers received from the HURF special revenue fund 10 pay !he debt service of the Street and Highway User Revenue Bonds. Eagle Mountain Debt Service Fund - accounls for the property tax revenues received to pay the debt service of the Eagle Molllltain Community Faciliries District component unit. Cott onwoods Special Assessment Fund - accounts for all special assessments received to pay the debt service of the Cononwoods Special Assessment District. Page 69 T OWN OF FOUNTA IN HI LLS, AR IZONA COMBINING BA LANCE SHEET- NON-MAJ OR OEBT SERVICE FUNDS JUNE 30, 2008 HURFDebt Service ASSETS Cash and investments Taxes receivable Special assessments receivable Due from governmental entities T otal assets LIABILITI ES AND FUN O BALANCES Liabilities: Due to otl1er funds Bond interest payable Deferred revenue Bonds payable Tota l liabilities $ tl 7.896 Cottonwoods Special Assessment Eagle Mountain Debt Service s 267,138 480 $ Page 71 $ 4,710 $ 117 896 s s $ 7,896 7498 275 116 7,498 82,618 s 11.203 s s 567 $ 185,000 275 116 s 117,896 s 275, 116 s 391,527 480 4,710 7498 404 215 5 049 8,065 90,5 14 4,482 295 000 398 061 6 154 6 154 6.154 6,154 4,482 110.000 117,896 Fund balances: Unreserved: Undesignated Total fund balances Tota l liabilities and fund balances 6,493 Totals 11,203 $ 404,215 TOWN OF FOUNTAIN HILLS, ARJZONA COMBIN ING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESNON-MAJOR DEBT SERVI CE FUNDS YEAR ENDED JUNE 30, 2008 HURFDebt Service Cottonwoods Special Assessment Eagle Mountain Debt Serviee Revenues: Taxes Special assessments Total reven ues Expenditures: Debt service Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources {uses): Transfers in Total other financing sources (uses) C hange in fund balances Fund balances, beginning of yea r Fund bal.a nces, end of year Page 72 s s s 328,481 $ 328 481 4 337 4 337 110,000 16 192 126, 192 185,000 166 054 351,054 3,228 352 3,580 01§, 1~2} m ,5m 757 122 281 122,281 3.666 3,666 (3,911) (18,907) 757 3,911 18,907 5,397 $ s 6, 154 .. . "8"" ........ .. ..., 0> "'... iv u. "'f~ ..,. "' 'f'f? ..... ..... ~ :.;: :co ~ coco ... ~A-N co 0"' OOV'I'l-.J N . ". ' .N. 0> ... ~~ .....A N 00 ... -:.. ..... c} ;; ;;; TOWN OF FOUNTAIN HILLS, ARIZONA COMBINI NG SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL- NON-MAJOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2008 HURF Debt Service Budget Revenues: Taxes Special assessments Total r1_65) ________3,UQ_ 757 5,397 s 3 570 $ 6)54 $ - _ (f.._811) 5,397 - -- 2,584 (Continued) Page 75 TOWN OF FOUNTAIN HILLS, ARJZONA COMBINING SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES· BUDGET AND ACTUAL- NON-MA.JOR DEBT SERVICE FUNDS YEAR ENDED JUNE 30, 2008 (Concluded) Totals Budget Revenues : Taxes Special assessments Total revenut,s Ex penditures: Debt service Principal retirement Interest and fiscal charges Total expenditures $ 328,48 1 $ 4 337 33UJ1_ 298,228 298,228 -----:-1=89':':4:.::87 7 487,715 48(),826 6 889 6.889 (12Q,~65) •• 008) 1" 1 ~0 (27,443) 126,300 125,947 !M947 , ~, . (353) (353) (22,Q61) (27,796) 28,215 28,215 ----~ 12~6~ .3~0~ 0 C hange in fund balances 5,735 Fund balances, July I, 2007 Fund b:1lnnces, June 30, 2008 Page 76 Actual 360,000 $ 7,150 367, 150 Excess (deficiency) or revenues o••er expenditures Other financing sources (uses}: Transfers in Total other financing sources (uses) Variance· Positive (Negative) $ I 0'"1 >Ok 59..!. -5, 735 $ , 0 • C:A (31 ,519) (2,8 13) (~1,JJ2) 419 IJ~ ~~~======~~ ~ STATISTICAL SECTION The statistical section presents financial statement trends as well as detailed fmancial and operational information not available elsewhere in the report. The statistical section is intended to enhance the reader's understanding of the information presented in the financial statements, notes to the financial statements, and other supplementary information presented in this report. The statistical section is comprised of the five categories of statistical information presented below. Fina ncia l Trends These schedules contain information on financial trends to help the reader understand how the Town' s financial position and financial activities have changed over time. Reven ue Capacity These schedules contain information to help the reader assess the factors affecting the Town' s ability to generate revenue. Debt Capacity These schedules present information to help the reader evaluate the Town's current levels of outstanding debt as well as assess the Town' s abi lity to make debt payments and/or issue additional debt in the fi.tture. Demographic and Econ omic Information These schedules present various demographic and economic indicators to help the reader understand the environment in which the Town 's financial activities take place and to help make comparisons wi th other cities. Operating Information These schedules contain information about the Tovm 's operations and various resources to help the reader draw conclusions as to how the Town' s financial information relates to the services provided by the Town. Due to cost considerations for the accumulation of data, the Town has elected to present less than ten years of data, or data from less than nine years prior, for certain statistical schedules. This information will be accumulated and reported each year until the complete ten years of data is presented. Page 77 TOWN OF FOUNTA IN HILLS, AR IZONA NET ASSETS BY COMPONENT LAST SIX FISCAL YEARS (Accrual basis of accounting) 2008 GoYernmrntal actMiies: Invest~ in capital assets, net of rclat~ deb1 s Reslric1~ Unrestricted Total governmental ae1ivi1ies net assetS s 94,939,805 12,799,502 13,230.126 120,970.033 1007 s s Fiscal Ytar End~ June 30 .wJ§ 92,508,637 12,210,966 14,276,126 118,995,729 s s 20,806,507 12,446,147 9,053.611 42,306.265 s s 17,495,539 5,144.127 10,821.304 33,460.970 2003 GoYernmental oelivities: Invested in capital assets, ncr of rclnt~ debl Restricled Unrestricled Total governmental nctivilies net asse1s s $ 11,843,575 6,681,170 2,638,149 21, 162.894 Source: The source of lhis infonna1ion is lhe Town's financial records. No1c: The provisions of1he Governmenlal Accounting Standards Board (GASB) Statement No. 34 were ndop1cd in fiscal year 2002·03 1hcrefore only six yea.·s are shown. Page 79 ~ 2005 s s 11,261.256 6,471.863 7,976,113 25,709.232 TOWN OF FOUNTAIN HILLS, ARIZONA EXPENSES, PROGRAM REVENUES, AND NET (EXPENSE)fREVENUE LAST SIX FISCAL YEARS (Accrual basis of accounting) 2008 2007 Fiscal Year Ended June 30 2006 2005 2004 2003 $ 3,92 1,588 6,532,292 5,98 1,347 3,092,661 2,861,653 1,132,947 23,522,488 23,522,488 4,292,515 5,935,742 5,225,835 3,282, 160 2,512,170 1, 163 370 22,411.792 22,411,792 3,875,014 5,403,620 I,581 ,068 2,576,406 1,812,469 1297,119 16,545,696 16,545.696 3,686,452 4,918,280 1,419,509 2,068,6 13 1,144,964 1.499,575 14.737,393 14,737,393 3,479,333 5,494,708 1,3 10,683 2,363,897 1,235,985 1,576 842 15,461,448 15,461,448 Program Revenues Governmental activities: Charges for services General government Public safety 0Lher acrivities Operating grants and contributions Capital grants and cQntributions Total governmental activities Total program revenues s 830,963 746,227 752,621 56,802 835,659 3,2??,27? 3,222,272 Net (E~ pen se)/Re.veoue s (20,300,2 I6) Expenses Governmental activities: General governmelll Public safety Highways and streets Culture and recreation Conununity development Interest on long-term debt Total governmental activities Total expenses $ s 910,978 982,659 626,43 1 s 989,100 3,509. 168 3,509. 168 $ (18,902,624) s 3,766,500 5,024,686 1,28 1,061 2,362,661 1,460,181 1, 162,796 15,057,885 15,057,885 s 4,029,437 4,431,154 3,388,923 2,738,898 103,826 2.022.675 32,209 1,590,787 43,487 1,697.900 s 5,01 1.919 5,011 ,919 s 4,480,285 4,480,285 s (9.725,474) s (10,981 ,163) s 6,155,938 6,155,938 s 59,550 1,692.712 237,307 6,420,723 6,420.723 $ (10,389,758) s (8,637,162) Source: The source of this information is the Town's financial recilnllzed assets s 5,171,511 s 2,684,134 Debt service as n percentage of noncnpitnl expenditures s 3.548,295 6.321.669 2.214.557 2,257.007 2.751,740 5,239,169 s 2.153,228 1,025,320 16% 4,024,551 5,689,020 2,028,397 2,131,374 2,462,643 2,002,887 s s 9,547.409 4,754,523 1,682.563 3.004,216 1.460.181 s 3.614,458 4,616.161 1,402,502 1.597,150 1.144.964 101,951 1,968,228 1.058,665 16% 4,459,183 5,208,770 2,121.986 3,607.750 1.812.469 200~ ~ s 1,968.228 1,192,414 232.762 300,000 20.903.562 s 23.151,671 s 15,399.989 s 3,122,912 s 7,450,885 s 391.949 2 1% 1.308,228 1,164.561 229,990 17% 1,423,228 1,499,575 19% (Continued) Page 84 TOWN OF FOUNTAIN HILLS, ARIWNA GOVERNMENTAL FUNDS EXPENDITURES AND DEBT SERVICE RATIO LAST 10 FISCAL YEARS (Modified accrual basis of accounting) 2003 £2Q! ~ l.QQ! 1999 Exp<'ndilurt$: c~nt• s General go•ernment Public safely Highways and streets Culture and rcc:=tion Communoty development Capital outlay Debt service Principal rctiremtnt Interest on long-tenn debt Issuance costs Advance refunding eserow Tow I expenditures s 15.771.446 Expenditures for capitalized assets s 3 1.857 Debt service as u percentage of noncnpi1ol expenditures 3.31 8.574 5,174,492 I, 198,080 1,815,416 1,215,387 79.427 s 1,393,228 1,576,842 19% 3,859,633 5,084,532 1,877,790 3.069,695 1,064,913 14.770,507 s 1.229,215 1,673,901 s 32.630,186 s 3.646.500 $ 3.354.037 2.212,432 3.866.245 1.175,649 5,261,585 2.528.953 3.059,020 2.468.498 3,359.509 1,276,951 1,787,469 620,408 1.23 1.194 339,013 585,00 1 2 1.368.050 NIA NIA 16% 12% $ l 5.404.4 14 NIA 7% s 2.631,245 2.205,600 1.984.879 2,334,901 955,451 557,374 223.024 572,064 $ 11,464,538 NIA 7% Source: 1l1e source of this information is ll1e Town's financial reoords. (Concluded) Page 85 TOWN OF FOUNTA IN UI LLS, ARIZONA OTII ER FINANCING SOURCES AND USES AND NET CHANCES IN FUN D BALANCES- GOVERNM ENTAL FUNDS LAST 10 FISCAL YEARS (Modified acuual basis of accounting) fiscal Year Ended June 30 2008 Ex«Ss (deO• June 30 Fountain Hills County State 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 2.60 2.60 2.60 2.60 2.60 1.60 1.60 1.60 1.20 1.20 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.00 5.00 Source: The source of this information is the Arizona Department of Revenue. Page 88 TOWN OF FOUNTAIN liiLLS, ARIZONA OUTSTANDING DEBT BY TYPE L;\ST 10 FISCAL YEARS Govemmtntal Activities Less: General Amounts Fiscal Year ended June 30 2008 2007 2006 2005 2ooq 2003 2002 200 1 2000 1999 Obllgalioo and Other Bonds Restricted for Prlncipa_l s $ 24,932,3 18 26.9 10,467 22,365,000 24.190,000 25.335.000 24,0 15.000 25,265,000 26,465,000 13,160,000 8.775.000 2, 163, 146 1,978, 149 1,968,228 1.308.228 1.423.228 1.393.228 1.229.2 15 620,408 339,013 223.024 Total Outstanding Debt Perctntage of Estimated Total $22,769, 172 24,932,318 20,396,772 22.88 1.772 23.91 1.772 22.62 1,772 24.035.785 25,844,592 12,820,987 8,55 I ,976 Source: The source of this information is the Town's financial records. l'age 89 Per Capita Actual Value - - - - - - - - - - - · ---- 0.39 % 0.43 0.60 0.72 0.8 1 0.94 1.12 1.37 0.8 1 0.65 $ 892 1,018 833 986 1,061 1.017 1,095 1.209 634 460 TOWN OF FOUNTAIN fULLS., ARIZONA DIRECT AND OVERLAPPING GOVE RN MENTAL ACIWITI ES DEBT J UNE 30. 2008 Estimated Estimated Drbt Govcrnmcnud Unil Maricopa CoUJU)' Maricopa Count')' Communhy College Disulct Fountain Hills Unified School District E.aglc Mountain Community Fac-ilities District Outs tandinJ!, s 185.960.043 609.320,000 16.085,000 4.255,000 Amount Ovtrl:.ipping Perccnlltg·e A1,plicoblc 0.001% 0.001% 97.03% 100.00% Debt S 38.384,40 I Source: The source of this infomtalion is the Town's records and the State nnd County AbSlract o( ahe Asses.4lmt nl Arizona Department of Revenue ~tnd the applicable governmental unit !'age 90 TOWN OF FOUNTA IN HILLS, ARIZONA LEGAL DEBT MARCIN INFORMATION LAST 10 FISCAL YEARS Legal Debt Margin Calculation for Fiscal Year 2008: Secondary assessed valuation S 684,742,347 Debt limit (200/o and 6'~ of assessed value) 178,033.010 Debt applicable to limit 8,620,000 Legal debt margin S 169,413.010 Debt limit equal to 26% of nssessed valuation 2001 S 178,033,0 I0 s 158,791,912 8.620.000 9,600.000 s 169,413,010 s 149, 19 1,912 Total net debt applicable to limit Legal debt margin Total net debt applicable to the I irnit as a percentage of debt limit s Legal debt margin Total net debt applicable to the limit as a pereentl1ge of debt limit 70,356,745 s 57,771,745 18~'. Source: The source of this mformation is the To,.n's financial records. Page91 97,547,627 s $ 87,947,627 s 56,060,780 10% $ 84,080,160 10,225,000 11,740,000 80,618,567 $ 72,340.160 II% 2001 62,065,780 s 14% 1999 WJl 55,228,024 s 6,155,000 s 2004 90,843,567 10% 6.005,000 s s 9.600.000 2002 12,585.000 Total net debt applicable to limit $ 6% 5% 2003 Debt limit Fiscal Year Endtd June 30 2006 2005 2008 49,073,024 I"· 45.437,792 s 6,330,000 s 39,107,792 14°,. 38.205,370 2,780,000 s 35,425,370 7"/o TOWN OF FOUNTAIN AlLLS, ARIZONA DEMOGRAPHIC AND ECONOMlC STATISTICS LAST 10 CALENDAR YEARS Yenr 2007 2006 2005 2004 2003 2002 2001 2000 1999 Personal Income ~ulntion 25.540 24.<192 23,2 17 22.54 1 22.243 21.954 21,383 20,235 18.595 s N/A 132,423,154 125.718.070 115.604, 165 106.385.325 I00,805,099 97.138.599 92.975,771 83,860,233 Per Copi!JI Income s N/A 35,046 32,414 31, 133 26,609 28.900 28.717 28,363 26.385 Unemployment Rllte 1.6 % 1.8 2.0 2. 1 2.6 2.7 2.0 1.6 1.6 Sources: 11te source of the "Person• llncomc" and "PcrCapiUt" information is the Bureau of Economic Analysis. 11u: source or the "Population'' nnd ·•unemployment Rate" information is State of Ari1..on~ Department of Economic Security. Note: N/A indientcs lhnl lhe information is not available. Pagc92 TOWN OF FOUNTAIN HILLS, ARIZONA PRI NCI PAL EMPLOYERS CURRENT FISCAL YEAR AND SEVEN YEARS AGO 2008 Employer Fountain Hills Unified School Districi No. 98 Monk Construction Target MCO Properties, Inc. Safcway Food Stores Town of Fountain Hills Fry's Basha's Sun Ridge Canyon Golf Course Eagle Mountain Golf Course Golf International Totlll Totlll employment Employees 2002* Percentage of Total Employment 28S 190 130 12S 11 0 87 80 70 70 70 6S 1,282 1,282 Source: The source ofthis infom1ation is the Town's records. • lnfonnation prior to 2002 is not available. Page 93 22.2 % 14.8 10.1 9.8 8.6 6.8 6.2 5.5 5.5 S.5 5. 1 100.00 % Employees 250 ISO ss l'erccntage ofToial Employment 27.0% 16.2 9S l iS 9.2 10.3 12.4 70 70 40 50 925 7.6 7.6 4.3 5.4 100.00 % 92S TOWN OF FOUNTAIN HILLS, ARIZONA FULL-TIME-EQUIVALENT TOWN GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST SEVEN FISCAL YEARS" Full-rime Eguivalen! EmJ!IOl'ees as or June 30 2001 2006 2005 2008 General Gov