COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year 2011-2012 Town of Fountain Hills, Arizona 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Phone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov TOWN OF FOUNTAIN HILLS, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Issued By: Administration Department Finance Division THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS FISCAL YEAR ENDED JUNE 30, 2012 INTRODUCTORY SECTION LETTER OF TRANSMITTAL 1 LIST OF PRINCIPAL OFFICIALS 9 ORGANIZATIONAL CHART 10 GFOA CERTIFICATE OF ACHIEVEMENT 11 FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT 12 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT’S DISCUSSION AND ANALYSIS 14 BASIC FINANCIAL STATEMENTS STATEMENT OF NET ASSETS 26 STATEMENT OF ACTIVITIES 27 BALANCE SHEET – GOVERNMENTAL FUNDS 28 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS 30 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES – GOVERNMENTAL FUNDS 31 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 33 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND 34 NOTES TO BASIC FINANCIAL STATEMENTS 35 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET COMBINING STATEMENT OF CHANGE IN FUND BALANCES 54 REVENUES, EXPENDITURES, AND 56 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – CAPITAL PROJECTS FUND 58 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL OBLIGATION DEBT SERVICE FUND 59 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2012 FINANCIAL SECTION (CONTINUED) COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – MUNICIPAL PROPERTY CORPORATION DEBT SERVICE 60 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – EAGLE MOUNTAIN DEBT SERVICE FUND 61 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – HURF FUND 62 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – DEVELOPMENT FEES FUND 63 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – LOCAL COURT ENHANCEMENT FUND 64 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – GRANTS FUND 65 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – EXCISE TAX FUND 66 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE – BUDGET AND ACTUAL – COTTONWOODS SPECIAL ASSESSMENT FUND 67 STATISTICAL SECTION (UNAUDITED) FINANCIAL TRENDS NET ASSETS BY COMPONENT 68 CHANGES IN NET ASSETS 70 FUND BALANCES OF GOVERNMENTAL FUNDS 74 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS 76 REVENUE CAPACITY GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE 78 TAXABLE SALES BY CATEGORY 79 DIRECT AND OVERLAPPING SALES TAX RATES 81 ASSESSED VALUE AND ESTIMATED TOTAL VALUE OF TAXABLE PROPERTY 82 PRINCIPAL PROPERTY TAXPAYERS 83 PROPERTY TAX LEVIES AND COLLECTIONS 84 TOWN OF FOUNTAIN HILLS, ARIZONA TABLE OF CONTENTS (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2012 STATISTICAL SECTION (UNAUDITED) (CONTINUED) DEBT CAPACITY RATIOS OF OUTSTANDING DEBT BY TYPE 85 RATIOS OF GENERAL BONDED DEBT OUTSTANDING 86 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 87 LEGAL DEBT MARGIN INFORMATION 88 CALCULATION OF LEGAL DEBT MARGIN 90 REVENUE BOND COVERAGE 91 DEMOGRAPHIC AND ECONOMIC INFORMATION DEMOGRAPHIC AND ECONOMIC STATISTICS 92 PRINCIPAL EMPLOYERS 94 OPERATING INFORMATION FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION 95 OPERATING INDICATORS BY FUNCTION 96 CAPITAL ASSETS STATISTICS BY FUNCTION 98 THIS PAGE BLANK INTRODUCTORY SECTION THIS PAGE BLANK October 18, 2012 To the Honorable Mayor, Members of the Town Council, 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 financial statements presented in conformity with generally accepted accounting principles (GAAP) in the United States of America and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Town of Fountain Hills for the fiscal year ended June 30, 2012. This report consists of management’s representations concerning the finances of the Town of Fountain Hills. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town of Fountain Hills has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of Fountain Hills’ financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of Fountain Hills’ comprehensive framework 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 Town of Fountain Hills’ financial statements have been audited by CliftonLarsonAllen LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of Fountain Hills for the fiscal year ended June 30, 2012, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement; 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’ financial statements for the fiscal year ended June 30, 2012, are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the financial section of this report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The Town of Fountain Hills’ MD&A can be found immediately following the report of the independent auditors. (1) Town of Fountain Hills Profile The Town of Fountain Hills is a planned, family-oriented community established in 1970 by McCulloch Properties (now MCO Properties, Inc.). Prior to 1970, the area was a cattle ranch and was part of one of the largest land and cattle holdings in Arizona. The land was purchased by Robert McCulloch in the 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 tallest man-made fountains, a focal point that attracts thousands of visitors each year. Located on 13,006 acres of land, and bordering northeast Scottsdale, Fountain Hills is surrounded by the 3,500-foot McDowell Mountains on the west, the Fort McDowell Indian Reservation on the east, the Salt River Pima Maricopa Indian Community 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 twenty-two years Fountain Hills has grown from 10,190 residents to a town of approximately 22,500 based on the 2010 census. On June 5, 2006 the Town of Fountain Hills became twenty square miles and about ten percent larger by annexing 1,300 acres of State Trust Land. The process to annex the State Trust 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 Town standards such 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 number of large custom homes. Fountain Hills also offers recreational, cultural and retirement programs 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 2.2% of the total is zoned commercial and/or industrial, 23.0% is reserved as open space and 51.3% 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. (2) Fountain Hills Town Hall The 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 Council-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 three department directors and approximately 57 FTE employees. The Judge, Town Attorney and Town Prosecutor 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); development services (code enforcement, planning, zoning and public works); the construction and maintenance of streets and infrastructure, municipal court, recreational 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 of the primary government (i.e., the Town of Fountain Hills as legally defined) as well as all of its component units. The component units consist of legally separate entities for which the primary 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 foundation for the Town of Fountain Hills’ financial planning and control. The Town Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Fund. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second meeting in April, 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 Constitution, Article 9, Section 20. (3) Factors Affecting Financial Condition The information 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. Local Economy. The great recession continues to have an impact on the local businesses in Fountain Hills, particularly in the construction of residential properties, local business retention and commercial leasing. Construction activity provides revenue to the Town through local sales tax, the proceeds of which are utilized for capital expenditures. Without the resources to fund capital projects the Town must find additional funds to pay for necessary infrastructure projects. For operating costs the Town is dependent upon state shared revenues and local sales tax as a major source of operating revenue, accounting for 91% of total General Fund revenue for fiscal year 2011-12. State shared revenues are derived as a proportionate share of state sales, income and vehicle license taxes which are distributed based on the Town’s population compared to all other incorporated cities and towns in Arizona (currently 0.045%). State shared income tax revenues decreased 12% during fiscal year 2009-10 and another 25% in fiscal year 2010-11; this revenue category is based on two years prior personal and corporate earnings, therefore, it is anticipated that the Town will experience flat revenues for the next few years reflecting the economic recession. The Town of Fountain Hills’ local tax revenue base consists of two major tax categories, the most significant being retail sales and transportation/communication/utilities (construction was a third significant category in prior years). The chart below is a look at the past five years’ local sales tax activity by sector including a projection for the upcoming fiscal year: As can be seen in the chart on the left sales tax collections continue to show signs of moderate growth. Retail sales experienced a 1% increase over the prior year; restaurant/bar activity increased by just less than 3%. Construction sales tax, a one-time revenue source, is driven entirely by development activity in the community and increased 6% over the prior year but still significantly less than fiscal years 2008 and 2009. Transportation/communication tax revenues increased slightly more than 1%. Other local activity has remained fairly level during the recessionary period due to the lack of major retailers (the Town has three grocery stores and one major retailer). Fountain Hills is past the historic period of rapid growth and the long-term economic outlook for the Town must recognize this fact. The opportunity to further expand the retail tax base in Fountain Hills is limited by the lack of available commercial land – 72% of the developable lots are already developed. Development Activity over the past year: Development Services has been involved with the following development activities during fiscal year 2011-12 (7/1/2011 – 6/30/2012): Four Concept Plans were approved by the Planning & Zoning Commission during the period: Sunridge Canyon Golf School “The Avenue” Theatre project Dunkin Donuts Avenue of the Fountains Landscape Plan (4) Three Special Use Permits were granted: “The Avenue” Theatre project Verizon - Eagle Mountain Cellular Antenna Demaret Drive Golf Net Nine Temporary Use Permits were issued during the period: (2x) Arts & Crafts Fair Farmers' Market Art in the Park (2x) Art on the Avenue Eagles Nest Sales Office Tour D’Artistes Halloween Carnival Two new Commercial Building Permits were issued: 13100 Sunridge Canyon Drive - Golf School 13226 La Montana Drive – Sun Devil Auto There were sixteen commercial tenant improvement permits issued during the last fiscal year that indicate that Fountain Hills is still a desirable place to locate a business. 13371 Fountain Hills Blvd #114 – UPS 13771 Fountain Hills Blvd #114 – UPS 13404 La Montana Blvd – Meridian Bank 13733 Fountain Hills Blvd – Safeway 13525 Fountain Hills Blvd #106 – Sherwin Williams 16838 Palisades Blvd #111 – Loving Dental 16455 Ave of Fountains - Fountain View Village 13771 Fountain Hills Blvd #103 – Subway 16225 Fountain Hills Blvd #122 – Dunkin Donuts 9800 Summer Hill Blvd - Inn At Eagle Mountain 16730 Palisades Blvd #100 – Goodwill 17210 Amhurst Dr. – North Chapel Church 11010 Saguaro Blvd #204 – Edifice Office 11010 Saguaro Blvd #101 – Edifice Office 16605 Palisades Blvd #140 – Ace Hardware 13100 Sunridge Canyon – Sunridge Canyon patio One 2-Family Residential Building Permit was issued during this period. Three new Single-Family Residential Building Permits were issued. Long-term Financial Planning Fountain Hills’ financial policies are balanced on sound financial reserves and conservative revenue growth forecasts for the foreseeable future. Potential for State legislative impacts to revenue-sharing or local revenues and additional demands for essential Town services remain. The Town’s financial policies set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. In early 2009, the Strategic Planning Advisory Commission began the process of gathering public input to update the Strategic Plan’s vision, confirm residents’ values, and create a fresh structure for the Strategic Plan revision. Subsequently, Strategic Plan 2010 is built upon the foundation of a clearly defined vision statement and eight key values, with specific indicators to evaluate Council and staff priorities. Based on citizen input, the Strategic Plan is designed to guide our future decisions grounded on these common values: (5) 1. Civility 2. Civic Responsibility 3. Environmental Stewardship 4. Economic Vitality 5. Education, Learning and Culture 6. Maintain and Improve Community Infrastructure 7. Public Safety, Health and Welfare 8. Recreational Opportunities and Amenities These values guide the Town’s annual budget process. The Fountain Hills Town Council maintains a fund balance policy that ensures adequate reserves that will provide financial stability in the event of an unanticipated economic downturn. The policy was amended in FY08-09 to include the establishment of a Rainy Day Fund beginning in FY09-10. In FY1011 the Town adopted Governmental Accounting Standards Board (GASB) Statement No. 54 which changed how governments report fund balance. The overall principal and goal of GASB No. 54 is to report governmental fund balances based on a hierarchy that shows, from the highest to the lowest, the level or form of constraints on fund balance, and accordingly, the extent to which governments are bound to honor them: 1. Nonspendable – The initial distinction that is made in reporting fund balance information is identifying amounts that are considered nonspendable, such as fund balance associated with inventories or prepaid assets. In Fountain Hills this classification would apply to our inventory and prepaid items. 2. Restricted – The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external reporting providers, or through enabling legislation. In Fountain Hills this classification would apply to Highway User Revenue Fund (HURF), Development Fees, the Grant/Special Revenue Fund and the Debt Service Fund. 3. Committed – The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decisionmaking authority. In Fountain Hills this classification would apply to the Rainy Day Fund, Excise/Downtown Development Fund, and any General Fund surplus. 4. Assigned – Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. In Fountain Hills this classification would apply to the current Public Art, Designated, Unreserved Fund. 5. Unassigned – The unassigned fund balance is the residual classification for the government’s general fund and includes all spendable amounts not contained in the other classifications. In other funds, the unassigned classification should be used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted or committed. In Fountain Hills this classification would be any residual balance of monies not contained in any of the other classifications. (6) The fund balance amounts will not be programmed for expenditure and are only available for use within the 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 unexpended appropriations not needed to meet fund balance requirements or re-appropriation. For the fiscal year ending June 30, 2012 the General Fund balance was reduced by $1.1M as a result of the Town’s decision to pay off the balance on Municipal Property Corporation bonds issued in 2005 for Town Hall. The remaining fund balance meets the requirements of the fund balance policy. The Council also adopted financial policies that include guidelines for the issuance of debt for capital expenditures, Community Facility Districts, financing alternatives, expenditure controls and financial planning. The policy was amended during fiscal year 2009-10 to reduce the allocation of the local construction sales tax to the Capital Projects Fund from 85% to 50%, reflecting the transition from onetime building activity to ongoing redevelopment activity. The debt policy was prepared with a preference for “pay-as-you-go” financing for capital spending, however, the policy did not anticipate the lack of funding for capital projects and bond funding may be reconsidered. Major Initiatives The Town of Fountain Hills’ adopted FY2011-12 budget reflects the continued recession in the local economy as well as an 8% decline in population resulting from the 2010 census, which is also mirrored at the national and state levels. Due to the challenging current economic conditions, the Town has made significant reductions in staff and service levels. This was accomplished by a thorough assessment of all existing and proposed programs and workload; as a result Town staffing was reduced from 81 to 57 FTE’s (full time equivalents) over the last two years. AWARDS AND ACKNOWLEDGEMENT Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Fountain Hills for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2011. This was the fifteenth consecutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year ending June 30, 2011. In order to qualify for the Distinguished Budget Presentation Award, the government’s budget document was judged to be proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. This is the tenth consecutive year that the Town has received the award. An investment policy was adopted and was awarded the Investment Policy Certification from the Association of Public Treasurers of United States and Canada. (7) Acknowledgements. The preparation of this report would not have been possible without the efficient and dedicated services of the entire team of the Finance and Administration Department. I would also like to extend my appreciation to the Mayor and Council for their leadership and support. Each member of the department has my sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, Ken Buchanan Town Manager (8) TOWN OF FOUNTAIN HILLS, ARIZONA LIST OF PRINCIPAL OFFICIALS JUNE 30, 2012 ELECTED OFFICIALS Mayor Ms. Linda Kavanagh Vice-Mayor Mr. Henry Leger Councilmember Mr. Dennis Brown Councilmember Mr. Cecil Yates Councilmember Mr. Tait Elkie Councilmember Ms. Cassie Hansen Councilmember Ms. Ginny Dickey DEPARTMENT DIRECTORS Town Manager Ken Buchanan Deputy Town Manager/ Finance Director Julie A. Ghetti, MPA, CPA, CGFM Presiding Judge Mitchell S. Eisenberg Community Services Director Mark Mayer Development Services Director Paul Mood Fire Chief Scott LaGreca Rural Metro Corporation District Commander Captain Joe Rodriquez Maricopa County Sheriff’s Office Town Prosecutor Iacovino & Kayler Town Attorney Andrew McGuire, Gust Rosenfeld, P.L.C. (9) TOWN OF FOUNTAIN HILLS, ARIZONA ORGANIZATIONAL CHART JUNE 30, 2012 (10) (11) THIS PAGE BLANK FINANCIAL SECTION THIS PAGE BLANK INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Fountain Hills, Arizona We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona (the Town), as of and for the year ended June 30, 2012, which collectively comprise the Town’s basic financial statements as listed in the 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 United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 activities, each major fund, and the aggregate remaining fund information of the Town of Fountain Hills, Arizona as of June 30, 2012, and the respective changes in financial position and the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management’s discussion on pages 14 through 25 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. An independent member of Nexia International (12) The Honorable Mayor and Members of the Town Council Town of Fountain Hills, Arizona Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Fountain Hills, Arizona’s financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements and schedules, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. CliftonLarsonAllen LLP Mesa, Arizona October 18, 2012 (13) REQUIRED SUPPLEMENTARY INFORMATION THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 As management of the Town of Fountain Hills, 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, 2012. This discussion and analysis is intended to be an easily readable breakdown of the Town of Fountain Hills’ financial activities based on currently known facts, decisions and conditions. This analysis focuses on current year activities and operations and should be read in combination with the transmittal letter and the financial statements that follow. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS  The assets of the Town exceeded its liabilities at the close of fiscal year 2011-12 and fiscal year 2010-11 by $119.0 million and $119.6 million, respectively. Of these amounts, $21.1 million and $22.6 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors.  Governmental activities program revenues decreased overall by $1,315,844 (26%) over the previous year. The completion of a major street project funded by grants/contributions contributed to the decline of both operating and capital grants. Charges for services decreased by 9% as a result of the continued recession and lack of development permits.  At June 30, 2012, total fund balance of the governmental funds was $24.5 million, an increase of $0.3 million (1.4%) from the previous year which can be attributed to the town’s fiscal policy to spend within budget limits. Of this, $3.7 million is unassigned in the General Fund, while the remainder is classified as committed, assigned and nonspendable.  The major governmental funds which includes the General Fund, total $15.2 million in revenues, consisting primarily of local taxes, intergovernmental taxes, charges for services and licenses and permits. The total expenditures of the General Fund were $11.7 million and the fund balance decreased from $8.3 million to $7.2 million including the Rainy Day, Public Art, and Vehicle Replacement Funds. The nonmajor governmental funds revenues were $1.7 million with the majority from Intergovernmental - Highway User Revenue Funds (HURF). Expenditures for the non-major funds were $1.3 million with $1.0 million from the HURF Fund.  The Town’s total net assets of governmental activities decreased $541,961 (0.5%) from the prior fiscal year; revenues decreased 9.8% with the expiration of grant funding and a reduction in expenditures was also made (5.3%) in streets related to the major street project.  General revenues accounted for $14.4 million in revenue, or 79% of all current fiscal year revenues. Program specific revenues in the form of charges for services and grants and contributions accounted for $3.7 million or 21% of total current fiscal year revenues.  The Town had approximately $18.6 million in expenses related to governmental activities, a decrease of 5.3% from the prior fiscal year. The decline caused by a protracted economic recession resulted in significant expenditure reductions in all activities with the exception of General Government which included payoff of bonds.  Per local policy, residual unassigned General Fund revenues may be transferred to the Rainy Day fund, supplement pay-as-you-go capital outlay expenditures or prepay existing town debt. The Council authorized the use of general fund surplus revenues in FY11-12 to transfer funds to the Municipal Property Corporation Debt Service Fund to provide funds that were placed in an irrevocable trust to provide for future principal and interest payments on bonds that were issued in 2005 for the Town Hall. The general fund balance will include the surplus, the Rainy Day and vehicle replacement funds in the amount of $7.2 million. (14) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 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 financial statements comprise three components: 1) 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. Government-Wide Financial 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 private sector business. The accrual basis of accounting is used for the government-wide financial statements. The Statement of Net Assets presents information 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. The Statement of Activities presents information showing how the Town’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused 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, development services, and interest on long-term debt. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. 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. Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and 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 financing requirements. (15) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Town’s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 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, General Obligation Debt Service Fund, Municipal Property Corporation Debt Service Fund, Eagle Mountain 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 Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to basic financial statements can be found immediately following the basic financial statements. Other Information Governments have the option of including the budgetary comparison statements for the General Fund and major special revenue funds as either part of the fund financial statements within the basic financial statements, or as required supplementary information following the notes to the basic financial statements. The Town has chosen to present these budgetary statements as part of the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the Town to provide services to our citizens, the Statement of Net Assets and the Statement of Activities serve to provide an answer to the question of how the Town, as a whole, did financially throughout the year. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by the private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the Town’s assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the Town as a whole has improved or diminished. However, in evaluating the overall position of the Town, non-financial information such as changes in the Town’s tax base and the condition of the Town’s capital assets will also need to be evaluated. (16) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 Analysis of Net Assets 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 $119.0 million at the current fiscal year end. The following table presents a summary of the Town’s net assets for the fiscal years ended June 30, 2012 and June 30, 2011. Town of Fountain Hills, Arizona Statement of Net Assets ASSETS Current and Other Assets Capital Assets: Non-depreciable Depreciable (net) Total Assets Percent Change 2012 2011 $ 28,669,946 $ 28,545,371 0.4% 25,934,778 81,921,325 136,526,049 28,304,198 82,314,694 139,164,263 -8.4% -0.5% -1.9% LIABILITIES Other Liabilities Long-Term Liabilities: Due Within One Year Due in More Than One Year Total Liabilities 3,256,053 3,334,185 -2.3% 2,319,551 11,928,659 17,504,263 2,249,113 14,017,218 19,600,516 3.1% -14.9% -10.7% NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets 92,006,103 5,951,416 21,064,267 $ 119,021,786 92,579,483 4,385,595 22,598,669 $ 119,563,747 -0.6% 35.7% -6.8% -0.5% The largest portion of the Town’s net assets (77%) reflects its investment in capital assets (e.g., land, infrastructure, buildings, improvements other than buildings, vehicles, machinery and equipment, and artwork) less 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 available 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 (5%) are for the specified purposes of debt service repayment, capital outlay investment, and highways and streets. At the end of the current fiscal year, the Town reported positive balances in all three categories of net assets. The same situation held true for the prior fiscal year. 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. (17) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 Analysis of Changes in Net Assets The Town’s total net assets decreased by $541,961 during the FY11-12. Factors contributing to this decrease are presented on the following pages. Total governmental revenues decreased over the prior year with a net decrease of $1,958,978 (10%). The most significant decrease was the exhaustion of operating and capital grants of $1,209,514 (31%) in capital grants as well as a decrease in revenues for programs. The Town also saw a decrease in local sales taxes of $225,991 (3%) as well as revenues shared with cities/towns by the State (income tax, state sales tax and vehicle license taxes – down 7%). The Town’s total revenues for the current fiscal year were $18.1 million. The total cost of all programs and services was $18.6 million. The following table presents a summary of the changes in net assets for the fiscal years ended June 30, 2012 and June 30, 2011. Town of Fountain Hills, Arizona Changes in Net Assets 2011 2012 REVENUES Program Revenues: Fees, Fines and Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues: Sales Taxes Property Taxes Franchise Taxes State Shared Revenues Auto Lieu Taxes Investment Earnings Miscellaneous Total Revenues $ EXPENSES General Government Public Safety Highways and Streets Culture and Recreation Development Services Interest on Long-Term Debt Total Expenses CHANGE IN NET ASSETS Net Assets - Beginning of Year NET ASSETS - END OF YEAR 1,058,088 1,285,656 1,392,706 1,164,418 1,614,462 2,273,414 -9.1% -20.4% -38.7% 7,787,489 1,453,405 332,130 3,793,385 722,126 88,877 178,393 18,092,255 8,013,480 1,349,079 322,659 4,417,589 799,551 28,456 68,125 20,051,233 -2.8% 7.7% 2.9% -14.1% -9.7% 212.3% 161.9% -9.8% 3,119,113 5,820,136 4,718,047 2,754,731 1,442,613 779,576 18,634,216 2,876,848 5,963,067 5,567,973 2,840,154 1,572,202 851,957 19,672,201 8.4% -2.4% -15.3% -3.0% -8.2% -8.5% -5.3% (541,961) 379,032 243.0% 119,184,715 $ 119,563,747 0.3% -0.5% 119,563,747 $ 119,021,786 (18) $ Percent Change TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 General revenues such as property, business, and privilege taxes are not shown by program, but are effectively used to support program activities town-wide. For governmental activities overall, without regard to program, business taxes which includes Sales and Use Taxes and Franchise Taxes, are the largest single source of funds (43%), followed by state shared revenues and auto lieu (21%), property taxes (8%), charges for services (6%) and grants (15%). The charts below compare the governmental expenses from fiscal year 2011-12 and fiscal year 201011. Fiscal Year 2010‐11 Expenses Fiscal Year 2011‐12 Expenses 8% 5% 8% 16% 15% 15% 15% 30% 31% 25% General Government Highways and Streets Development Services 4% 28% General Government Highways and Streets Development Services Public Safety Culture and Recreation Interest on Long‐Term Debt Public Safety Culture and Recreation Interest on Long‐Term Debt General Government Public Safety Highways and Streets Culture and Recreation Community Development Interest on long-term debt (19) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 The following are significant current year transactions that had an impact on the Statement of Net Assets and Statement of Activities:  Overall revenues decreased by 9.8% compared to last year primarily the consequence of expiring grant funds. Additionally, state shared revenues declined 14.1% which reflected the decreased share related to declining population. The town does not have a primary property tax that is used for operations; the town property tax levy is dependent upon the annual debt payment for voter approved bonds. The increased property tax is a result of an increase in the annual debt payment.  Depreciable assets declined 0.5% ($393,369) with the Town’s deferred investment in capital infrastructure and improvements, specifically roads. A major road project, Shea Boulevard climbing lane, was funded through the American Recovery and Reinvestment Act (ARRA) through Arizona Department of Transportation ($1.8 million). This project was a federal grant that was awarded to the Arizona Department of Transportation for a project within the town infrastructure. The town was not considered a sub recipient of the grant; however, the improvements were donated from the Arizona Department of Transportation.  The increase in miscellaneous revenues is primarily attributable to refunds from the town liability insurance carrier ($77,839) a non-profit agency for funding related to background checks ($13,324) and a state agency for prisoner fees ($16,456).  State shared revenues are determined by the prior two years of income tax returns in Arizona and is shared with cities and towns based on population; the two year lag affected the current fiscal year revenues and will for at least the next year as the economy lags. Additionally, as surrounding communities grow in population the town will lose a proportionate share due to fixed borders and lack of available developable land.  Sales tax revenues in Fountain Hills are derived primarily from retail, telecommunications, restaurant/bars and construction activity. Construction activity saw the steepest declines from $2.4 million in FY08 to less than $600 thousand in FY12; retail and telecommunications activity, however, have leveled off with a very slight increase, less than 1%. Restaurants and bars increased more than 2%.  Overall expenses decreased 5.3% as the Town manages through the great recession by matching expenses with available resources.  General Government expenditures increased over the prior year as a result of the costs for the bi-annual election for Mayor and Town Council as well as expenditures for upgraded equipment for the Town’s television public access channel.  Development Services includes Public Works, Streets, Building Safety, Planning, Code Enforcement and Facilities. Deferred maintenance on public infrastructure resulted in a decrease in Development Services expenses.  Public Safety costs include contracts for police and fire; those contracts are multi-year with automatic increases.  Other significant expense reductions were deferral of replacement equipment and vehicles until the economy shows signs of recovery. FINANCIAL ANALYSIS OF THE TOWN’S FUNDS As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. (20) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 Governmental funds. The focus of the Town’s governmental funds is to provide information on nearterm inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the Town’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of Major Governmental Funds reported by the Town include the General Fund, Capital Projects Fund, General Obligation Debt Service Fund, Eagle Mountain Debt Service Fund and the Municipal Property Corporation Debt Service Fund. The financial performance of the Town as a whole is reflected in its governmental funds. As the Town completed the year, its governmental funds reported a combined fund balance of $24.5 million, an increase of $0.3 million due primarily maintain a strong fiscal policy of spending within budget limits and not exceeding available funding. Fund General Fund Capital Projects Fund General Obligation Debt Service Fund Municipal Property Corporation Debt Service Fund Eagle Mountain Debt Service Fund Nonmajor Governmental Funds $ $ Balance 7,229,860 9,312,168 63,317 2,739,511 8,944 5,157,583 24,511,383 Increase (Decrease) From FY 2010-11 $ (1,076,106) (321,620) 11,984 1,848,205 3,612 (127,731) $ 338,344 The General Fund is the chief operating fund of the Town of Fountain Hills, Arizona. At the end of the current fiscal year, the fund balance of the General Fund was $7,229,860, while total fund balance of the funds reached $24.5 million. As a measure of the General Fund’s liquidity, it may be useful to compare both General Fund balance and total fund balance to total fund expenditures. General Fund balance represents 62 percent of total General Fund expenditures, while total fund balance represents 148 percent of total expenditures. The fund balance of the Town of Fountain Hills, Arizona’s General Fund decreased by $1.1M which includes a transfer of $1.9 to the Municipal Property Corporation Debt Service Fund to place funds in an irrevocable trust with an escrow agent to provide for future principal and interest payments on a bond issued in 2005. Expenditures within the General Fund increased 1.9% over the prior year – the primary reason for the increase is the contractual obligations for public safety contracts. The General Fund comprises 29 percent of the total fund balance. Approximately $3.7 million, or 51 percent of the General Fund’s fund balance constitutes unassigned fund balance. The remaining fund balance is committed, assigned and nonspendable for inventory and prepaid items. The General Fund is the principal operating fund of the Town; overall the General Fund’s performance resulted in revenues over expenditures for FY12 in an amount of $0.9 million. The fund balance of $7.2 million in the General Fund as of June 30, 2012 decreased in the current year substantially due to a transfer recorded in the General Fund to the Municipal Property Corporation (MPC) Debt Service Fund to provide for future principal and interest requirements on an MPC Revenue Bond issued in 2005 to construct Town Hall. (21) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 The fund balance of the Capital Project’s Fund decreased $321,620 during the current fiscal year. The decrease was primarily due to the planned use of capital project fund balance to fund pay as you go projects that were committed through matching funds for grants. The fund balance of the General Obligation Debt Service Fund increased $11,984 during the current fiscal year. The increase was largely due to the increase in property tax collections for debt service. The fund balance of the Municipal Property Corporation (MPC) Debt Service Fund increased $1,848,205 during the current fiscal year. Revenues for the MPC are derived from local sales tax collections which were consistent with the prior year. The annual debt payment committed for the MPC is fixed but there are sufficient reserves to pay annual debt service. The increase in fund balance was largely due to a transfer from the General Fund to the MPC Debt Service Fund to provide for future principal and interest requirements on an MPC Revenue Bond issued in 2005 to construct Town Hall. The fund balance of the Eagle Mountain Debt Service Fund increased by $3,612 during the current fiscal year due to property tax revenues collected. All nonmajor governmental funds of the Town are combined into one column on the governmental fund statements. The nonmajor governmental funds reported a $127,731 decrease in fund balance mainly due to the transfer of funds from General Government development fees to the defeasance of Town Hall bonds. BUDGETARY HIGHLIGHTS A schedule showing the original and final budget amounts compared to the town’s actual financial activity for the general fund is provided in this report as part of the basic financial statements. The significant variances are summarized as follows: The unfavorable revenue variance of $18,090 (less than 1%) in taxes is due to timing of projected revenues versus actual receipt. The favorable variance in intergovernmental revenues was a result of the state’s projection of state sales and vehicle license taxes being less than actual collections which affects the distribution to cities and towns. The unfavorable revenue variance of $19,254 in licenses and permits reflects the continued economic recession, particularly in construction related activities but an increase over the prior year. Building permit revenues continue to decline as well as business license renewals and applications. The unfavorable revenue variance of $56,810 in fines and forfeiture reflects decreased court activity related to decreased traffic citations within town borders. The favorable expenditure variance of $866,158 includes all departments. The staff has managed expenditures and looked for efficiencies wherever possible. The general government variance is due primarily to the appropriation of approximately $300,000 in the event the economy worsened during the fiscal year; this contingency was not required. (22) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of June 30, 2012, the Town had invested $192.8 million in capital assets (not including accumulated depreciation), including buildings, vehicles, computers, equipment, infrastructure and artwork. This amount represents a net increase prior to depreciation of $1.3 million from the prior fiscal year, primarily due to a major road improvement project on Shea Boulevard that has completed construction. Total depreciation expense for the current fiscal year was $4.9 million. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2012 and June 30, 2011. Town of Fountain Hills, Arizona Capital Assets (Net of Accumulated Depreciation) Land Artwork Construction in Progress Infrastructure Buildings Improvements other than Buildings Vehicles, Machinery and Equipment Total Capital Assets 2012 $ 23,571,668 1,829,500 533,610 58,772,006 14,550,487 8,366,079 232,753 $ 107,856,103 2011 $ 23,571,668 1,688,500 3,044,030 57,986,232 14,911,290 9,214,491 202,681 $ 110,618,892 Percent Change 0.0% 8.4% -82.5% 1.4% -2.4% -9.2% 14.8% -2.5% Additional information on the Town’s capital assets can be found in Note 3.A.3. Long-Term Debt At year-end, the Town had $13.9 million in bonds outstanding, $2.3 million due within one year; this represents a net decrease of $2.0 million. The chart below is a summary of the Town’s outstanding debt as of year-end: Town of Fountain Hills, Arizona Outstanding Long-term Bonds 2012 $ 6,845,000 7,040,000 $ 13,885,000 General Obligation Bonds Revenue Bonds Premium on Bonds Total Outstanding Debt 2011 $ 7,965,000 7,885,000 74,409 $ 15,924,409 The Town’s general obligation bonds are subject to two limits; the Constitutional debt limit (total debt limit) on all general obligation bonds (up to 20% of the total secondary assessed valuation) and the statutory debt limit on general municipal purpose bonds (up to 6% of the total secondary assessed valuation). The current total debt limitation for the Town is $94.4 million, which is more than the Town’s outstanding general obligation debt. Additional information on the Town’s long-term debt can be found in Note 3.C. (23) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 ECONOMIC FACTORS The town continues to maintain strong reserves for unforeseen circumstances, whether of a financial nature or a natural (or other) disaster. The town’s reserves, in combination with our consistent adherence to adopted financial policies and management practices, proved big factors in the Aa3 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 continue to 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 four fiscal years. With a limited inventory of available lots the town will have to adjust to the new economy, one that is less dependent upon building activity as a source of reliable revenue. There is an area of almost 1,300 acres that was annexed in 2006 that is planned to be developed but the first building permit is not scheduled to be issued until 2015. The town’s local sales tax collections, which represent the largest town revenue source is made up of primarily retail, telecommunications and restaurant bar activity. Construction related sales tax are projected to continue declining for the foreseeable future; retail collections, however, are projected to remain steady due to the fact that the existing retail base is not significantly affected by the recession (major retail activity consists of three grocery stores and one shopping center with a major retailer). The town is heavily dependent upon state shared revenues for general fund operations (36%); stateshared income tax revenues are anticipated to increase slightly during fiscal year 2012-13 with increased individual and business revenues and state collections. The town is aggressively pursuing economic vitality and redevelopment opportunities, specifically a proposed development in the downtown center. The town partnered with the Fountain Hills Chamber of Commerce to commission a vision for the downtown core including the world renowned Fountain Lake area. The plan was presented to the public late summer of 2009 and serves as a useful tool to attract developers. As of June 30, 2012 the town had set aside $9.3 million in the capital improvement funds but the majority of capital projects will be deferred until the economy improves. The town has been successful in obtaining stimulus funding for a major road improvement along Shea Boulevard that was completed in FY11. The town completed a second construction project for another major road improvement on Shea Boulevard with further stimulus funding in FY12. NEXT YEAR’S BUDGETS AND RATES The protracted economic recession has forced the town to evaluate core services and, in some cases, to reduce existing service levels. Prudent long-term fiscal planning dictates that we remain conservative, focus on the highest Council and citizen priorities, and fund only those enhancements we can sustain financially. The FY13 general fund operating budget is $14.8 million representing a 6% increase from fiscal year 2011-12. 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 is set at $11.6 million, a 27% decrease over fiscal year 2011-12. There are some projects in the five-year plan that are considered affordable within current revenue sources, others will require other sources of revenue for funding such as bonds, grants, etc. Capital budgets tend to rise and fall each year depending on the timing of projects – especially if a town, such as Fountain Hills, strives to achieve a “pay-as-you-go” program. (24) TOWN OF FOUNTAIN HILLS, ARIZONA MANAGEMENT’S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED JUNE 30, 2012 The capital improvement program (CIP) is the town’s financial plan for supporting large capital projects. The five-year CIP addresses the growing needs of the community and enhances the quality of life 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 CIP totals $60.9 million; with the capital budget for fiscal year 2012-13 totaling $4.3 million (which includes carryover funds for some large projects currently underway). In fiscal year 2012-13, the CIP places major emphasis on major road improvements and maintenance. Due to the economy there are no recreational or non essential projects proposed. CONTACTING 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 resources it receives. If you have questions about this report or need additional information, contact the Finance Division, Town of Fountain Hills, 16705 East Avenue of the Fountains, Fountain Hills, Arizona 85268. Our website can be found at www.fh.az.gov. (25) BASIC FINANCIAL STATEMENTS TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF NET ASSETS JUNE 30, 2012 Governmental Activities ASSETS Cash and Investments Cash with Paying Agent Receivables, Net: Accounts Receivable Intergovernmental Receivables Property Taxes Receivable Inventory, At Cost Prepaid Items Deferred Charges Restricted Assets Capital Assets: Non-Depreciable Depreciable (Net) Total Assets $ 21,613,515 2,234,774 244,868 827,063 49,450 9,332 33,719 852,633 2,804,592 25,934,778 81,921,325 136,526,049 LIABILITIES Accounts Payable Accrued Wages and Benefits Interest Payable Unearned Revenue Matured Debt Principal Payable Noncurrent Liabilities: Due Within One Year Due in More Than One Year Total Liabilities 524,650 123,542 374,987 267,874 1,965,000 2,319,551 11,928,659 17,504,263 NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted For: Highways and Streets Public Safety Capital Outlay Debt Service Cottonwoods Maintenance District Unrestricted Total Net Assets 92,006,103 867,219 240,525 1,993,771 2,833,891 16,010 21,064,267 $ 119,021,786 See accompanying Notes to Basic Financial Statements. (26) TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2012 PROGRAM REVENUES FUNCTIONS/PROGRAMS Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Development Services Interest on Long-Term Debt Total Governmental Activities EXPENSES Fees, Fines and Operating Charges for Grants and Services Contributions $ 3,119,113 5,820,136 4,718,047 2,754,731 1,442,613 779,576 $ 18,634,216 $ 1,025,940 20,323 11,825 $ 1,058,088 $ 119,141 1,166,515 $ 1,285,656 GENERAL REVENUES Taxes: Sales Taxes Property Taxes Franchise Taxes State Sales Tax Revenue Sharing - Unrestricted Auto Lieu Tax Revenue Sharing - Unrestricted Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning Net Assets - Ending Capital Grants and Contributions $ 234,281 1,158,425 $ 1,392,706 NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS Governmental Activities $ (1,858,892) (5,680,672) (2,381,282) (2,754,731) (1,442,613) (779,576) (14,897,766) 7,787,489 1,453,405 332,130 3,793,385 722,126 88,877 178,393 14,355,805 (541,961) 119,563,747 $ 119,021,786 See accompanying Notes to Basic Financial Statements. (27) TOWN OF FOUNTAIN HILLS, ARIZONA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012 General Obligation Debt Service General Capital Projects $ 6,711,553 222,567 553,065 9,332 28,245 75,484 $ 7,600,246 $ 9,596,239 12,951 115,380 $ 9,724,570 $ $ $ $ Municipal Property Corporation Debt Service ASSETS Cash and Investments Cash with Paying Agent Accounts Receivable Intergovernmental Receivable Taxes Receivable Inventory, at cost Prepaid Items Restricted Assets Total Assets $ 42,289 928,656 40,997 1,011,942 $ 83,351 958,625 32,765 2,729,108 $ 3,803,849 LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Accrued Wages and Benefits Interest Payable Deferred Revenue Matured Debt Principal Payable Total Liabilities Fund Balances: Nonspendable Cash with Escrow Agent Inventory Prepaid Items Restricted Committed Assigned Unassigned Total Fund Balance Total Liabilities and Fund Balance $ 231,569 109,171 29,646 370,386 212,402 200,000 412,402 9,332 28,245 1,345,200 2,190,910 3,656,173 7,229,860 9,312,168 9,312,168 7,600,246 $ 9,724,570 See accompanying Notes to Basic Financial Statements. (28) $ 88,656 19,969 840,000 948,625 $ 500 218,838 845,000 1,064,338 63,317 63,317 2,623,895 115,616 2,739,511 1,011,942 $ 3,803,849 Eagle Mountain Debt Service Nonmajor Governmental Funds Total Governmental Funds $ 2,641 347,493 8,453 358,587 $ 5,177,442 9,350 125,853 5,474 $ 5,318,119 $ 21,613,515 2,234,774 244,868 827,063 49,450 9,332 33,719 2,804,592 $ 27,817,313 67,493 2,150 280,000 349,643 $ $ $ $ $ 80,179 14,371 65,986 160,536 524,650 123,542 374,987 317,751 1,965,000 3,305,930 8,944 8,944 5,474 3,112,549 2,039,560 5,157,583 2,623,895 9,332 33,719 3,300,426 3,384,760 11,503,078 3,656,173 24,511,383 358,587 $ 5,318,119 $ 27,817,313 (29) THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 Total Fund Balances for Governmental Funds $ 24,511,383 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. 192,779,992 (84,923,889) 107,856,103 Governmental Capital Assets Less Accumulated Depreciation Capital Assets Used in Governmental Activities Some revenues are not available to pay for current period expenditures and, therefore, are deferred in the funds. Property Taxes 49,877 Bond issuance costs are reported as expenditures in the governmental funds and shown net of accumulated amortization in the Statement of Net Assets as deferred charges. 852,633 Long-term liabilities, including bonds payable and compensated absences, are not due and payable in the current period and therefore are not reported in the governmental funds. (6,845,000) (7,040,000) (363,210) General Obligation Bonds Revenue Bonds Payable Compensated Absences Total Net Assets of Governmental Activities $ 119,021,786 See accompanying Notes to Basic Financial Statements. (30) TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2012 Capital Projects General REVENUES Taxes: Sales Taxes Property Taxes Franchise Taxes Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Investment Earnings Other Total Revenues $ 6,579,468 332,130 4,496,652 203,350 194,976 353,718 206,018 38,493 173,839 12,578,644 EXPENDITURES Current: General Government Public Safety Highways and Streets Culture and Recreation Development Services Debt Service: Principal Retirement Interest on Long-Term Debt Fiscal Charges Capital Outlay Total Expenditures 300,202 204,262 30,713 535,177 $ 1,029,242 305 1,029,547 $ 605,213 588 605,801 2,631,726 5,869,445 1,794,332 1,421,787 - - - 11,717,290 863,420 863,420 840,000 177,563 1,017,563 845,000 327,312 48,402 1,220,714 Excess (Deficiency) of Revenues Over Expenditures 861,354 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) (1,937,460) (1,937,460) Net Change in Fund Balance (1,076,106) FUND BALANCE Beginning of Year End of Year $ Municipal Property Corporation Debt Service General Obligation Debt Service $ 8,305,966 7,229,860 See accompanying Notes to Basic Financial Statements. (31) (328,243) 11,984 6,623 6,623 (321,620) 9,633,788 $ 9,312,168 $ (614,913) - 2,463,118 2,463,118 11,984 1,848,205 51,333 63,317 $ 891,306 2,739,511 Eagle Mountain Debt Service Nonmajor Governmental Funds Total Governmental Funds $ $ 302,606 3,335 1,334,534 20,323 51,945 18,681 4,554 1,735,978 $ 7,787,489 1,457,702 332,130 6,035,448 223,673 194,976 405,663 206,018 88,877 178,393 16,910,369 - 255,595 1,054,930 - 2,887,321 5,869,445 1,054,930 1,794,332 1,421,787 280,000 134,260 7,350 421,610 20,903 1,331,428 1,965,000 639,135 55,752 884,323 16,572,025 3,612 404,550 338,344 $ 425,125 97 425,222 - 286 (532,567) (532,281) 3,612 (127,731) 5,332 8,944 5,285,314 $ 5,157,583 2,470,027 (2,470,027) 338,344 24,173,039 $ 24,511,383 (32) TOWN OF FOUNTAIN HILLS, ARIZONA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2012 Net Change in Fund Balances of Governmental Funds $ 338,344 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. 1,333,785 (4,865,600) (3,531,815) Expenditures for Capital Assets Less Current Year Depreciation Excess Depreciation Over Capital Expenditures The Statement of Activities reports losses arising from the disposal of existing capital assets as well as capital contributions received from other governments. Conversely, governmental funds do not report any gain or loss on disposals of capital assets or capital contributions. Loss on Disposal of Capital Assets Capital Contributions (389,399) 1,158,425 Some revenues reported in the Statement of Activities do not provide current financial resources and therefore are not reported as revenues in governmental funds. Property Taxes 23,461 The issuance of long-term debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. The issuance of long-term debt increases long-term liabilities on the Statement of Net Assets and the repayment of principal on long-term debt reduces longterm debt on the Statement of Net Assets. Also, governmental funds report the effect of issuance costs, premiums, and similar items when the debt is first issued, whereas these items are deferred and amortized over the term of the long term debt in the Statement of Activities. 1,120,000 845,000 74,409 (159,098) Principal Payments on General Obligation Bonds Principal Payments on Revenue Bonds Amortization of Deferred Amount on Bond Premium Amortization of Deferred Charges Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental Net Increase in Compensated Absences (21,288) Change in Net Assets of Governmental Activities $ See accompanying Notes to Basic Financial Statements. (33) (541,961) TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FISCAL YEAR ENDED JUNE 30, 2012 Original Budget REVENUES Taxes: Sales Taxes Franchise Taxes Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Investment Earnings Other Total Revenues $ 6,626,688 303,000 4,482,270 260,160 214,230 443,407 233,028 60,000 22,696 12,645,479 Final Budget $ 6,626,688 303,000 4,482,270 260,160 214,230 443,407 233,028 60,000 22,696 12,645,479 Actual $ 6,579,468 332,130 4,496,652 203,350 194,976 353,718 206,018 38,493 173,839 12,578,644 Variance with Final Budget $ (47,220) 29,130 14,382 (56,810) (19,254) (89,689) (27,010) (21,507) 151,143 (66,835) EXPENDITURES Current: General Government: Mayor and Council Administration Municipal Court Total General Government 75,745 2,309,411 432,844 2,818,000 75,745 2,395,911 432,844 2,904,500 68,445 2,177,349 385,932 2,631,726 7,300 218,562 46,912 272,774 Public Safety: Law Enforcement Fire and Emergency Medical Total Public Safety 2,899,522 3,156,212 6,055,734 2,899,522 3,156,212 6,055,734 2,828,127 3,041,318 5,869,445 71,395 114,894 186,289 Community Services: Recreation Parks Senior Services Community Center Total Community Services 475,372 1,053,893 239,322 231,685 2,000,272 485,372 1,053,594 252,822 231,685 2,023,473 440,850 920,582 222,328 210,572 1,794,332 44,522 133,012 30,494 21,113 229,141 501,191 491,627 172,029 234,687 125,852 74,355 1,599,741 12,473,747 489,051 498,127 172,029 234,687 125,852 79,995 1,599,741 12,583,448 455,309 459,874 183,874 127,265 123,597 71,868 1,421,787 11,717,290 33,742 38,253 (11,845) 107,422 2,255 8,127 177,954 866,158 171,732 62,031 861,354 (194,250) (184,550) (1,937,460) (1,752,910) (22,518) (122,519) (1,076,106) (953,587) Development Services: Engineering Facilities Maintenance Planning Building Safety Code Compliance Mapping and Graphics Total Development Services Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year $ (22,518) See accompanying Notes to Basic Financial Statements. (34) $ (122,519) $ 8,305,966 7,229,860 799,323 $ 8,305,966 7,352,379 THIS PAGE BLANK NOTES TO BASIC FINANCIAL STATEMENTS THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Town of Fountain Hills, Arizona (Town) have been prepared in conformity 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 accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. A. Reporting Entity 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 entity 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 conformity with generally accepted accounting principles. The Town is a primary government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, component units combined with the Town for financial statement presentation purposes and the Town is 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. Eagle Mountain Community Facilities District and the Cottonwoods Improvement District. 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 District has no liability for the districts’ debt, the Town is responsible for the debt; the debt is therefore, not subject to the Town’s debt limit; therefore, providing a financial benefit to the Town. For financial reporting purposes, transactions of the Districts are combined together and included as if they were part of the Town’s operations. (35) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Reporting Entity (Continued) Town of Fountain 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 formed 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 of the Town’s operations. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) present financial information about the Town as a whole. For the most part, the effect 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 are supported by taxes and intergovernmental revenues. The Town does not have any business-type 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 are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, state shared revenues, investment earnings 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. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of internal activity has been eliminated from the government-wide 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. (36) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the 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 liability is incurred, as under accrual accounting. However, debt service resources are provided during the current year for payment of long-term debt principal and interest due early in the following year (not to exceed one month) and therefore the expenditures and related liabilities have been recognized. Compensated absences are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, licenses and permits, charges for services, special assessments and investment earnings 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. Miscellaneous revenue is not susceptible to accrual because generally they are not measurable until received in cash. Grants and similar awards are 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. 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 column. The Town reports the following major governmental funds. Major Governmental Funds General Fund This fund is the Town’s primary operating fund. The Fund accounts for all financial resources of the Town, except those required to be accounted for in other funds. (37) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Capital Projects Fund This fund accounts for the capital improvements to various projects and equipment purchases of the Town. 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. Municipal Property Corporation Debt Service Fund This fund accounts for the revenues received to pay the debt service on MPC revenue bonds. Eagle Mountain Debt Service Fund This fund accounts for the property tax revenues received to pay the debt service of the Eagle Mountain Community Facilities District component unit. D. Assets, Liabilities, and Net Assets or Fund Balance 1. Deposits and Investments The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the State Treasurer, and highly liquid investments with maturities of three months or less from the date of acquisition. Cash and investments are pooled except for funds required to be held by fiscal agents or restricted under provisions of bond indentures. Interest earned from investments purchased with such pooled monies is allocated to each of the funds based on the average daily cash balances. State statutes authorize the Town to invest in obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state and the State Treasurer’s Local Government Investment Pool. Investments are stated at fair value. 2. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” (38) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Assets or Fund Balance (Continued) 2. Receivables and Payables (Continued) All trade and property tax receivables are shown net of an allowance 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 1 of the current year and March 1 of the subsequent year. Taxes become delinquent after the first business day of November and May, respectively. Interest attaches on installments after the delinquency date. Pursuant to Arizona Revised Statutes (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 limitation 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 of 2 percent over the previous year’s maximum 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 1 percent of the market value of their homes. If the combined primary property tax (for the Town, County, School District, etc.) exceeds 1 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 1 percent. The State will then subsidize the school districts for the reduced revenue. This 1 percent limitation applies to primary property taxes only and does not affect the secondary property tax levy. There is also a control on the assessed value of property for primary tax purposes. The 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 10 percent a year. The dollar amount of the secondary property tax levy is “unlimited” and the actual full cash value of property is used in determining the tax rate. Intergovernmental receivables include amounts due from other government agencies and include Town sales tax ($425,945), Highway User Revenue fuel tax ($109,471), state sales tax ($149,234), auto lieu ($27,033) and grants receivable ($115,380) in the governmental funds and governmental activities column of the government-wide financial statements. (39) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Assets or Fund Balance (Continued) 3. Inventory Inventories are stated at average cost using the first-in/first-out (FIFO) method. Inventories consist of expendable supplies held for consumption. Inventories are recorded as expenses when consumed in the government-wide financial statements, and as expenditures when consumed on the fund financial statements. 4. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. In the government-wide and fund financial statements prepaids are recognized as expenses/expenditures when goods and/or services are received rather than when purchased. 5. Restricted Assets The Town reported restricted assets in the amount of $75,484 for funds held in an escrow account. The agreement provides that if, prior to July 1, 2014, any future Council fails to ratify this agreement or fails to provide severance when required as set forth in the agreement between the Town Council and Town Manager, the Town Manager shall be permitted to withdraw all funds from the escrow, minus any interest earned, which interest shall be payable to the Town upon the Town Manager’s withdrawal of the amounts in escrow. The Town also has $2,729,108 deposited in an irrevocable trust with an escrow agent to make future principal and interest payments on the 2004 Municipal Property Corporation Revenue Bond. 6. Capital Assets Capital assets, which include land, artwork, buildings, improvements other than buildings, vehicles, machinery, and equipment, construction in progress, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the governmental activities column in the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of $10,000 or more and an estimated useful life of more than one year. The capital assets include all infrastructure assets acquired by the Town since incorporation. 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. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. (40) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Assets or Fund Balance (Continued) 6. Capital Assets (Continued) Capital assets of the Town are depreciated using the straight-line method over the following estimated useful lives: Assets Infrastructure Buildings Improvements other than buildings Vehicles, machinery and equipment Years 15-50 50 20 5-20 7. 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 then current rate of pay. Effective October 7, 2004, all eligible full-time and part-time employees can accrue vacation leave. Full-time employees can accrue up to a maximum of 224 hours of vacation, while part-time employees can accrue up to 112 ours, depending upon their length of service. In the event of termination, employees will be paid for any accrued, but unused, vacation hours. Also effective October 7, 2004, full-time employees started to accrue sick leave, based on their length of service, up to a maximum of 720 hours. A portion of this balance will be paid upon a satisfactory separation of service. The current and long-term liabilities, including related benefits, for accumulated 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. 8. Long-term Obligations In the government-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 carrying 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. (41) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Assets or Fund Balance (Continued) 8. Long-term Obligations (Continued) In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts of debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 9. Net Assets In the government-wide financial statements, net assets are reported in three categories: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. Net assets invested in capital assets, net of related debt is separately reported because capital assets make up a significant portion of total net assets. Restricted net assets account for the portion of net assets restricted by parties outside the Town. Unrestricted net assets are the remaining net assets not included in the previous two categories. 10. Fund Balance Classifications Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, committed, assigned, and unassigned fund balance classifications. The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form such as inventories and prepaid items, or are legally or contractually required to be maintained intact. Restricted fund balances are those that have externally imposed restrictions on their usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations. Committed fund balances are self-imposed limitations approved by the Town’s Council, which is the highest level of decision-making authority within the Town. Only the Town Council can remove or change the constraints placed on committed fund balances. Assigned fund balances are resources constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. The Town Council has authorized the Deputy Town Manager/Finance Director to assign fund balances. The unassigned fund balance is the residual classification for the General Fund and includes all amounts not reported in the other classifications. (42) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, and Net Assets or Fund Balance (Continued) 10. Fund Balance Classifications (Continued) Also, deficits in fund balances of the other governmental funds are reported as unassigned. It is the Town’s policy to use restricted fund balance first, then committed, assigned, and lastly unassigned amounts. 11. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers in the fund statements are reported as other financing sources/uses in governmental funds. 12. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information The Town Council follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In accordance with Arizona Revised Statutes, the Town Manager submits a proposed budget for the fiscal year commencing the following July 1 to the Town Council. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. 2. Public hearings are conducted to obtain taxpayer comment. 3. Prior to the third Monday in August, the expenditure limitation for the Town is legally enacted through passage of an ordinance. To ensure compliance with the expenditure limitation, a uniform expenditure report must be filed with the State each year. This report, issued under a separate cover, reconciles total Town expenditures from the audited basic financial statements to total expenditures for reporting in accordance with the State’s uniform expenditure reporting system (A.R.S. §41-1279.07). (43) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) A. Budgetary information (Continued) 4. Expenditures may not legally exceed the expenditure limitation described below for all fund types as a whole. For management purposes, the Town adopts a budget by department for the General Fund and in total by fund for other funds. The Town Manager, subject to Town Council approval, may at any time transfer any unencumbered appropriation balance or portion thereof between a department or activity. The adopted budget cannot be amended in any way without Town Council approval. 5. Formal budgetary integration is employed as a management control device during the year for the General, Special Revenue, Debt Service, and Capital Projects Funds (except for the HURF Debt Service and Cottonwoods Special Assessment Funds, in which the Town did not adopt a budget) on essentially the same modified accrual basis of accounting used to record actual revenues and expenditures. The Town is subject to the State of Arizona’s Spending Limitation Law for Towns and Cities. This law does not permit the Town to spend more than budgeted revenues plus the carryover unrestricted cash balance from the prior fiscal year. The limitation is applied to the total of the combined funds. The Town complied with this law during the year. No supplementary budgetary appropriations were necessary during the year. B. Excess of Expenditures Over Appropriations Expenditures exceeded appropriations in the following funds: Amount of Overexpenditure Major Funds: Municipal Property Corporation Debt Service Fund $ 141,464 Cash was available to cover the over expenditures listed above. (44) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS A. Assets 1. Deposits and Investments Deposits and investments at June 30, 2012, consist of the following: Deposits: Cash on Hand Cash in Bank Cash on Deposit with Paying Agent Investments State Treasurer's Investment Pool Wells Fargo Money Market U.S. Agency Securities U.S. Treasury Notes Total Less Cash with Paying Agent Total Cash and Investments $ 1,050 493,672 2,234,774 6,079,307 59,906 8,157,709 6,821,871 23,848,289 (2,234,774) $ 21,613,515 Deposits The Town’s deposits at June 30, 2012, had a carrying value of $493,672 and a bank balance of $560,720. The entire bank balance of the Town was deposited in noninterest bearing accounts or low-interest bearing accounts that were fully insured by federal depository insurance. Investments The Town’s investments at June 30, 2012 were as follows: Investment Type Local Government Investment Pool Wells Fargo Money Market U.S. Agency Securities U.S. Treasury Notes Amount $ 6,079,307 59,906 8,157,709 6,821,871 $ 21,118,793 Credit Risk – Credit risk is the risk that an issuer or counterparty to an investment will not fulfill its obligations. The Town will limit credit risk by limiting investments in the Town’s portfolio to the asset classes designated as acceptable in A.R.S 835323. When possible, analysis of the credit worthiness of all individual debt issuers held in the portfolio should be conducted on an annual basis in an effort to guard against investing in weak or deteriorating credit situation. Additionally, the Town will pre-qualify financial institutions, brokers/dealers, and investment advisors with which the Town will do business. (45) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 4 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 1. Deposits and Investments (Continued) At June 30, 2012, credit risk for the Town’s investments was as follows: Investment Type Local Government Investment Pool Wells Fargo Money Market U.S. Agency Securities U.S. Treasury Notes Rating N/A N/A AA+ N/A Agency N/A N/A S&P N/A Amount 6,079,307 59,906 8,157,709 6,821,871 $ 21,118,793 $ Custodial credit risk – Concentration credit risk is the risk of loss associated with the significant of investments in a single issuer. The Town of Fountain Hills will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and authorized pools, no more than 25% of the Town’s total investment portfolio will be invested in a single security type or with a single financial institution. At June 30, 2012, the Town had the following diversification of Town investments: Investment Type Local Government Investment Pool Wells Fargo Money Market U.S. Agency Securities U.S. Treasury Notes Amount $ 6,079,307 59,906 8,157,709 6,821,871 $ 21,118,793 Percent of Town Investments 28.79% 0.28% 38.63% 32.30% Interest rate risk – Interest rate risk is the risk that changes in interest rates will adversely affect an investment’s fair value. The Town will look to mitigate interest rate risk by performing the following:  Structuring the investment portfolio so that securities mature concurrent with the anticipated cash requirements for ongoing operations, thereby avoiding, as much as possible, the need to sell securities into an adverse market environment prior to maturity.  Investing funds primarily in shorter-term securities or similar investment pools and limiting the average maturity of the portfolio in accordance with the needs of the Town.  With respect to any firm or individual given responsibility for investments utilizing external research and advice regarding the current interest rate outlook and global economic condition to optimize portfolio duration strategy. (46) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 1. Deposits and Investments (Continued) The following is a table of the Town’s investment maturities: Investment Local Government Investment Pool Wells Fargo Advantage Money Market Federal Farm Credit Bank Notes Federal Home Loan Bank Global Notes Federal Home Loan Mortgage Corp. Notes Federal National Mortgage Association Notes U.S. Treasury Notes Total 0-6 Months $ 6,079,307 59,906 $ 6,139,213 Maturity 6-12 Months $ 655,661 $ 655,661 12+ Months $ 1,772,022 2,723,139 3,006,887 6,821,871 14,323,919 $ $ $ Total 6,079,307 59,906 655,661 1,772,022 2,723,139 3,006,887 6,821,871 21,118,793 2. Receivables Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds 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 governmental funds were as follows: Unavailable General Fund Miscellaneous $ Capital Projects Fund Miscellaneous General Obligation Debt Service Fund Property Taxes Eagle Mountain Debt Service Fund Property Taxes Nonmajor Governmental Funds Grants Total Deferred Revenue for Governmental Funds $ (47) Unearned 27,758 $ 1,888 - 200,000 19,969 - 2,150 - 49,877 $ 65,986 267,874 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) A. Assets (Continued) 3. Capital Assets Capital assets for the year ended June 30, 2012, were as follows: Beginning Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land Artwork Construction in Progress $ 23,571,668 1,688,500 3,044,030 Increases $ 141,000 1,943,110 Ending Balance Decreases $ (4,453,530) $ 23,571,668 1,829,500 533,610 Total Capital Assets, Not Being Depreciated 28,304,198 2,084,110 (4,453,530) 25,934,778 Capital Assets, Being Depreciated: Infrastructure Buildings Improvements Other Than Buildings Vehicles, Machinery and Equipment 126,447,432 18,008,744 15,022,357 3,666,890 4,341,081 264,128 256,421 (647,221) (514,618) 130,788,513 18,008,744 14,639,264 3,408,693 163,145,423 4,861,630 (1,161,839) 166,845,214 (68,461,200) (3,097,454) (5,807,866) (3,464,209) (3,555,307) (360,803) (731,963) (217,527) 266,644 505,796 (72,016,507) (3,458,257) (6,273,185) (3,175,940) (80,830,729) (4,865,600) 772,440 (84,923,889) (389,399) 81,921,325 $ (4,842,929) $ 107,856,103 Total Capital Assets, Being Depreciated 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 82,314,694 $ 110,618,892 (3,970) $ 2,080,140 Depreciation expense was charged to functions/programs as follows: Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Total Depreciation Expense (48) $ $ 211,426 74,873 3,676,530 902,771 4,865,600 TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) B. Interfund Transfers Interfund transfers for the year ended June 30, 2012, consisted of the following: Transfers In Capital Projects Fund Transfers Out General Fund Nonmajor Governmental Funds Total $ 6,623 6,623 $ Municipal Property Corporation Debt Service Fund Nonmajor Governmental Fund $ $ $ 1,937,174 525,944 2,463,118 $ 286 286 Total $ $ 1,937,460 532,567 2,470,027 The General Fund transferred $1,937,174 to pay for debt service costs on the Municipal Property Corporation’s outstanding bonds. The General Fund transferred $286 to the Nonmajor Governmental Fund to provide the matching portion of a transportation grant the Town received. The Nonmajor Governmental Funds transferred $6,623 to the Capital Projects Fund to pay for a portion of a capital acquisition. The Nonmajor Governmental Funds also transferred $525,944 to the Municipal Property Corporation Debt Service Fund to pay for debt service costs on the outstanding bonds. C. Long-Term Obligations Bonds payable at year end consisted of the following general obligation, municipal property corporation 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 facilities bonds. (49) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Long-Term Obligations (Continued) Bonds outstanding at June 30, 2012 were as follows: Interest Rates Maturity Date 3.75-4.00 07/01/12-19 $ 7,225,000 $ 3,755,000 3.75-4.125 7/1/2012-21 4,555,000 $ 11,780,000 $ 3,090,000 6,845,000 Purpose Original Amount Outstanding Amount Governmental Activities: General Obligation Bonds: General Obligation Refunding Bonds, Series 2005 Eagle Mountain Community Facilities District, General Obligation Refunding Bonds, Series 2005 Total General Obligation Bonds Revenue Bonds: Municipal Facilities Revenue Bonds, Series 2001 4.40-4.50 7/01/12-13 7,750,000 400,000 Municipal Facilities Revenue Bonds, Series 2004 4.00-4.50 7/01/12-15 3,645,000 2,410,000 3.75-4.50 7/01/12-20 5,330,000 $ 21,405,000 Municipal Facilities Revenue Refunding Bonds, Series 2005 Total Revenue Bonds $ 4,230,000 7,040,000 The Town has pledged future excise taxes to repay a total of $7,040,000 in outstanding municipal facilities revenue and refunding bonds. For fiscal year ended June 30, 2012, the net revenues available to service this debt were $13.1 million. The debt principal and interest paid on this debt in fiscal year 2011-12 was $845,000 and $332,463, respectively (11 percent of available pledged revenues). (50) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) C. Long-Term Obligations (Continued) Changes in long-term obligations for the year ended June 30, 2012, are as follows: July 1, 2011 Governmental Activities Bonds General Obligation Bonds Revenue Bonds Deferred Amounts: Premium Total Bonds Other Liabilities: Compensated Absences Governmental Activities Long-Term Liabilities $ 7,965,000 7,885,000 15,850,000 Increases $ Decreases June 29, 2012 - $ (1,120,000) (845,000) (1,965,000) 74,409 - 15,924,409 $ Due Within One Year 6,845,000 7,040,000 13,885,000 $ 1,350,000 930,000 2,280,000 (74,409) - - - (2,039,409) 13,885,000 2,280,000 341,922 284,065 (262,777) 363,210 39,551 $ 16,266,331 $ 284,065 $ (2,302,186) $ 14,248,210 $ 2,319,551 Debt service requirements on long-term debt at June 30, 2012, are as follows: Governmental Activities Principal Year Ending June 30, 2013 2014 2015 2016 2017 2018 - 2021 $ 2,280,000 2,415,000 1,970,000 2,830,000 1,120,000 3,270,000 $ 13,885,000 Interest $ 565,506 470,431 375,106 233,806 186,406 302,758 $ 2,150,513 In prior years, the Town defeased certain general obligation and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the defeased bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Town’s financial statements. At year end, $6,385,000 of defeased bonds are still outstanding. (51) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 3 DETAILED NOTES ON ALL FUNDS (CONTINUED) D. Fund Balances Fund Balances at June 30, 2012 were as follows: Capital Projects General Nonspendable: Cash with Escrow Agent Inventory Prepaids Restricted: Debt Service Highways and Streets Local Court Enhancement New Development Cottonwoods Maintenance District Committed Rainy Day Funds Excise Tax Assigned Public Art Vehicle Replacement Capital Projects Equipment Replacement Unassigned Total Fund Balance NOTE 4 $ $ 9,332 28,245 $ - General Obligation Debt Service Municipal Property Corporation Debt Service Eagle Mountain Debt Service Nonmajor Governmental Funds $ $ $ $ - 2,623,895 - - 5,474 Total $ 2,623,895 9,332 33,719 - - 63,317 - 115,616 - 8,944 - 862,243 240,525 1,993,771 187,877 862,243 240,525 1,993,771 - - - - - 16,010 16,010 1,345,200 - - - - - 2,039,560 1,345,200 2,039,560 1,051 689,199 600,264 900,396 3,656,173 7,229,860 9,312,168 9,312,168 63,317 2,739,511 8,944 5,157,583 1,051 689,199 9,912,432 900,396 3,656,173 24,511,383 $ $ $ $ $ $ OTHER INFORMATION A. Contingent Liabilities Lawsuits The Town is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the Town’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the Town. B. Risk Management The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The 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 $8,000,000 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. (52) TOWN OF FOUNTAIN HILLS, ARIZONA NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2012 NOTE 4 OTHER INFORMATION (COTINUED) B. Risk Management (Continued) The Town was unable to obtain workers’ 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 currently operating as a common workers’ 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. C. Retirement Plans Defined Contribution Pension Plan All full-time employees of the Town participate in a defined contribution pension plan administered by the ICMA Retirement Corporation as a 401(a) plan. The payroll for the Town employees covered by this plan for the year ended June 30, 2012, was $2,549,322. The Town’s total payroll was $2,871,172. 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 account. 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 the Town vest after three years of service. An employee that leaves the employment of the Town is entitled to his or her contributions and the vested portion of the Town’s contributions, plus interest earned. Each employee must contribute 11% of his or her gross earnings. The Town must match the employee contribution of 11%. During fiscal year 2011-12, the Town’s required and actual contributions amounted to $280,425. The employees’ contributions totaled $280,425. Employees may also contribute to the lCMA Retirement Corporation 457 plan on a voluntary basis; there is no employer match for those contributions. During fiscal year 2011-12, employees contributed $158,829 to that plan. No pension provision changes occurred during the year that affected the required contributions to be made by the Town or its employees. The ICMA Retirement Corporation held no securities of the Town or other related parties during the fiscal year 2011-12 or as of the close of the fiscal year. (53) THIS PAGE BLANK COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES THIS PAGE BLANK NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS HURF Fund - accounts for the Town’s share of motor fuel tax revenues and lottery proceeds. Development Fees Fund - accounts for development fees collected from developers restricted for projects approved by the Town Council. Local Court Enhancement Fund - accounts for a local court surcharge. 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. Cottonwoods Special Assessment Fund - accounts for all special assessments received to pay for maintenance of the Cottonwoods Special Assessment District. TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 Special Revenue Funds HURF Development Local Court Fees Enhancement Grants Excise Tax ASSETS Cash and Investments Accounts Receivable Intergovernmental Receivable Prepaid Items Total Assets $ $ 831,245 1,062 109,471 4,976 946,754 $ 1,994,359 4,144 $ 1,998,503 $ $ $ $ 240,525 240,525 $ $ 65,986 65,986 $ 2,029,317 4,144 16,382 498 $ 2,050,341 65,986 65,986 $ LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Accrued Wages and Benefits Deferred Revenue Total Liabilities $ Fund Balances: Nonspendable Restricted Committed Total Fund Balances Total Liabilities and Balance $ 66,801 12,734 79,535 4,732 4,732 4,976 862,243 867,219 1,993,771 1,993,771 946,754 $ 1,998,503 (54) - $ 240,525 240,525 $ 240,525 $ 8,646 1,637 10,283 - 498 2,039,560 2,040,058 65,986 $ 2,050,341 Special Revenue Funds Total Cottonwoods Nonmajor Special Governmental Assessment Funds $ $ $ $ 16,010 16,010 - $ 5,177,442 9,350 125,853 5,474 $ 5,318,119 $ 80,179 14,371 65,986 160,536 16,010 16,010 5,474 3,112,549 2,039,560 5,157,583 16,010 $ 5,318,119 (55) TOWN OF FOUNTAIN HILLS, ARIZONA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2012 Special Revenue Funds HURF REVENUES Taxes: Sales Taxes Property Taxes Intergovernmental Fines and Forfeitures Charges for Services Investment Earnings Other Total Revenues $ EXPENDITURES Current: General Government Highways and Streets Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES Beginning of Year End of Year $ 1,166,515 11,825 450 4,554 1,183,344 Development Fees Local Court Enhancement $ $ 40,120 9,038 49,158 20,323 300 20,623 Grants $ Excise Tax 168,019 168,019 $ 302,606 8,882 311,488 1,022,104 1,022,104 23,424 23,424 5,098 5,098 138,000 9,402 20,903 168,305 112,497 112,497 161,240 25,734 15,525 (286) 198,991 - (525,944) - 286 - (6,623) - (525,944) - 286 (6,623) 161,240 (500,210) 15,525 - 192,368 705,979 867,219 2,493,981 $ 1,993,771 - 1,847,690 $ 2,040,058 (56) $ 225,000 240,525 $ Special Revenue Funds Cottonwoods Special Assessment $ $ 3,335 11 3,346 Total Nonmajor Governmental Funds $ 302,606 3,335 1,334,534 20,323 51,945 18,681 4,554 1,735,978 - 255,595 1,054,930 20,903 1,331,428 3,346 404,550 - 286 (532,567) - (532,281) 3,346 (127,731) 12,664 16,010 5,285,314 $ 5,157,583 (57) TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL CAPITAL PROJECTS FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Sales Taxes Intergovernmental Investment Earnings Total Revenues $ EXPENDITURES Capital Outlay Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) $ (58) $ 195,622 (4,147,338) 30,713 (3,921,003) 863,420 16,176,619 (12,583,859) (328,243) 12,255,616 6,623 6,623 (2,977,948) $ 300,202 204,262 30,713 535,177 Variance with Final Budget 17,040,039 9,615,911 (10,000) 9,605,911 Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year 104,580 4,351,600 4,456,180 Actual (2,977,948) (321,620) $ 9,633,788 9,312,168 (9,609,288) 10,000 (9,599,288) 2,656,328 9,633,788 $ 12,290,116 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL OBLIGATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Property Taxes Investment Earnings Total Revenues $ EXPENDITURES Debt Service: Principal Retirement Interest on Long-Term Debt Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year $ (59) 1,020,000 100 1,020,100 Actual $ 1,029,242 305 1,029,547 840,000 177,313 2,100 1,019,413 840,000 177,563 1,017,563 687 11,984 687 $ 51,333 63,317 Variance with Final Budget $ 9,242 205 9,447 (250) 2,100 1,850 11,297 $ 51,333 62,630 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL MUNICIPAL PROPERTY CORPORATION DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Sales Taxes Investment Earnings Total Revenues $ EXPENDITURES Debt Service: Principal Retirement Interest on Long-Term Debt Fiscal Charges Total Expenditures 631,200 500 631,700 Actual $ 958,625 113,625 7,000 1,079,250 Excess (Deficiency) of Revenues Over Expenditures 605,213 588 605,801 Variance with Final Budget $ 845,000 327,312 48,402 1,220,714 (447,550) (25,987) 88 (25,899) 113,625 (213,687) (41,402) (141,464) (614,913) (167,363) OTHER FINANCING SOURCES (USES) Transfers In Payment to Refunded Escrow Agent Total Other Finance Sources (Uses) 193,500 (2,932,697) (2,739,197) 2,463,118 2,463,118 2,269,618 2,932,697 5,202,315 Net Change in Fund Balance (3,186,747) 1,848,205 5,034,952 FUND BALANCE Beginning of Year End of Year $ (60) (3,186,747) $ 891,306 2,739,511 $ 891,306 5,926,258 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL EAGLE MOUNTAIN DEBT SERVICE FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Property Taxes Investment Earnings Total Revenues $ EXPENDITURES Debt Service: Principal Retirement Interest on Long-Term Debt Fiscal Charges Total Expenditures $ 280,000 134,260 7,350 421,610 Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year 420,000 84 420,084 Actual (1,526) $ (61) (1,526) $ 425,125 97 425,222 Variance with Final Budget $ 5,125 13 5,138 280,000 134,260 7,350 421,610 - 3,612 5,138 5,332 8,944 $ 5,332 10,470 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL HURF FUND FISCAL YEAR ENDED JUNE 30, 2012 REVENUES Intergovernmental Charges for Services Investment Earnings Other Total Revenues Original and Final Budget Actual $ 1,132,332 25,200 120 4,800 1,162,452 $ 1,166,515 11,825 450 4,554 1,183,344 1,278,299 1,022,104 256,195 161,240 277,087 EXPENDITURES Current: Highways and Streets Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year (115,847) $ (62) (115,847) $ 705,979 867,219 Variance with Final Budget $ $ 34,183 (13,375) 330 (246) 20,892 705,979 983,066 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL DEVELOPMENT FEES FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Charges for Services Investment Earnings Total Revenues $ EXPENDITURES Current Highways and Streets Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year $ (63) 92,268 420 92,688 Actual $ 40,120 9,038 49,158 Variance with Final Budget $ (52,148) 8,618 (43,530) 70,000 23,424 46,576 22,688 25,734 3,046 - (525,944) (525,944) 22,688 (500,210) (522,898) 22,688 $ 2,493,981 1,993,771 $ 2,493,981 1,971,083 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL LOCAL COURT ENHANCEMENT FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Fines and Forfeitures Investment Earnings Total Revenues $ EXPENDITURES Current: General Government Excess (Deficiency) of Revenues Over Expenditures FUND BALANCE Beginning of Year End of Year $ (64) 14,520 300 14,820 Actual $ 20,323 300 20,623 Variance with Final Budget $ 5,803 5,803 33,250 5,098 28,152 (18,430) 15,525 33,955 (18,430) $ 225,000 240,525 $ 225,000 258,955 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GRANTS FUND FISCAL YEAR ENDED JUNE 30, 2012 Budget Original REVENUES Intergovernmental Final $ 1,500,000 EXPENDITURES Current: General Government Highways and Streets Capital Outlay Total Expenditures $ Variance with Final Budget Actual 1,500,000 $ 168,019 $ (1,331,981) 1,500,000 1,500,000 1,438,435 1,438,435 138,000 9,402 20,903 168,305 1,300,435 (9,402) (20,903) 1,270,130 Excess (Deficiency) of Revenues Over Expenditures - 61,565 (286) (61,851) OTHER FINANCING SOURCES (USES) Transfers In - - 286 286 Net Change in Fund Balance - 61,565 - (61,565) FUND BALANCE Beginning of Year End of Year - $ (65) $ 61,565 $ - $ (61,565) TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL EXCISE TAX FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Sales Taxes Investment Earnings Total Revenues $ EXPENDITURES Current: General Government Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out 272,136 272,136 $ (66) $ 30,470 8,882 39,352 112,497 98,867 60,772 198,991 138,219 (6,623) 60,772 $ 302,606 8,882 311,488 Variance with Final Budget 211,364 - Net Change in Fund Balance FUND BALANCE Beginning of Year End of Year Actual 60,772 (6,623) 192,368 $ 1,847,690 2,040,058 131,596 $ 1,847,690 1,979,286 TOWN OF FOUNTAIN HILLS, ARIZONA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL COTTONWOODS SPECIAL ASSESSMENT FUND FISCAL YEAR ENDED JUNE 30, 2012 Original and Final Budget REVENUES Taxes: Property Taxes Investment Earnings Total Revenue $ EXPENDITURES Current: General Government $ 3,315 Excess (Deficiency) of Revenue Over Expenditures FUND BALANCE Beginning of Year End of Year 3,315 3,315 (3,315) $ (67) (3,315) Variance with Final Budget Actual $ 3,335 11 3,346 $ 20 11 31 - 3,315 3,346 6,661 12,664 16,010 $ 12,664 19,325 THIS PAGE BLANK STATISTICAL SECTION (UNAUDITED) The statistical section presents financial statement trends as well as detailed financial 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. Financial 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. Revenue 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 ability to make debt payments and/or issue additional debt in the future. Demographic and Economic 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 with other cities. Operating Information These schedules contain information about the Town’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. See the table of contents for page numbers of the schedules that encompass the above sections. TOWN OF FOUNTAIN HILLS, ARIZONA NET ASSETS BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 2004 2005 2006 Governmental Activities: Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Governmental Activities Net Assets $ $ 11,843,575 6,681,170 2,638,149 21,162,894 $ $ 11,261,256 6,471,863 7,976,113 25,709,232 Source: The source of this information is the Town’s financial records. (68) $ $ 17,495,539 5,144,127 10,821,304 33,460,970 $ $ 20,806,507 12,446,147 9,053,611 42,306,265 Fiscal Year 2007 $ 92,508,637 12,210,966 14,276,126 $ 118,995,729 2008 $ 94,939,805 12,799,502 13,230,726 $ 120,970,033 2009 $ 94,611,110 11,828,137 13,765,293 $ 120,204,540 2010 $ 95,467,509 11,396,116 12,321,090 $ 119,184,715 (69) 2011 $ 92,579,483 4,385,595 22,598,669 $ 119,563,747 2012 $ 92,006,103 5,951,416 21,064,267 $ 119,021,786 TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 EXPENSES Governmental Activities: General Government Public Safety Highways and Streets Culture and Recreation Development Services Interest on Long-Term Debt Total Government Activities Expenses PROGRAM REVENUES Governmental activities: Fees, Fines, and Charges for Services General Government Public Safety Highways and Streets Other Activities Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues Net (Expenses)/Revenues $ 3,479,333 5,494,708 1,310,683 2,363,897 1,235,985 1,576,842 15,461,448 2004 $ 3,686,452 4,918,280 1,419,509 2,068,613 1,144,964 1,499,575 14,737,393 2005 $ 3,766,500 5,024,686 1,281,061 2,362,661 1,460,181 1,162,796 15,057,885 2006 $ 3,875,014 5,403,620 1,581,068 2,576,406 1,812,469 1,297,119 16,545,696 2,738,898 43,487 1,697,900 3,388,923 32,209 1,590,787 4,431,154 59,550 1,692,712 237,307 4,029,437 103,826 2,022,675 4,480,285 5,011,919 6,420,723 6,155,938 $ (10,981,163) $ (9,725,474) Source: The source of this information is the Town’s financial records. (70) $ (8,637,162) $ (10,389,758) Fiscal Year 2007 $ 4,292,515 5,935,742 5,225,835 3,282,160 2,512,170 1,163,370 22,411,792 2008 $ 3,921,588 6,532,292 5,981,347 3,092,661 2,861,653 1,132,947 23,522,488 2009 $ 4,231,529 7,312,415 5,051,294 3,336,616 2,218,994 1,033,536 23,184,384 2010 $ 3,720,236 6,293,323 5,202,285 2,927,848 1,612,287 950,484 20,706,463 2011 $ 2,876,848 5,963,067 5,567,973 2,840,154 1,572,202 851,957 19,672,201 2012 $ 3,119,113 5,820,136 4,718,047 2,754,731 1,442,613 779,576 18,634,216 910,978 982,659 626,431 989,100 830,963 746,227 752,621 56,802 835,659 544,753 55,042 888,249 1,353,409 1,340,457 32,667 2,556 1,666,498 632,617 1,126,926 21,222 16,270 1,614,462 2,273,414 1,025,940 20,323 11,825 1,285,656 1,392,706 3,509,168 3,222,272 2,841,453 3,674,795 5,052,294 3,736,450 $ (18,902,624) $ (20,300,216) $ (20,342,931) $ (17,031,668) $ (14,619,907) $ (14,897,766) (Continued) (71) TOWN OF FOUNTAIN HILLS, ARIZONA CHANGES IN NET ASSETS (CONTINUED) LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 2004 2005 2006 (Concluded) GENERAL REVENUES AND OTHER NET ASSETS Governmental Activities: Taxes: Sales Taxes Property Taxes Franchise Taxes State Shared Revenues Investment Earnings Miscellaneous Total Governmental Activities CHANGE IN NET ASSETS Governmental Activities $ 5,051,872 1,905,770 152,542 4,740,758 1,976,809 79,706 13,907,457 $ 7,733,643 2,195,856 126,362 4,489,844 122,082 195,978 14,863,765 $ 8,879,798 2,020,800 216,031 4,756,481 395,124 120,666 16,388,900 $ 11,007,924 1,648,947 314,359 5,389,551 673,351 200,921 19,235,053 $ 2,926,294 $ 5,138,291 $ 7,751,738 $ 8,845,295 Source: The source of this information is the Town’s financial records. (72) Fiscal Year 2007 2008 2009 $ 11,407,714 1,385,953 324,318 8,444,731 1,094,994 85,418 22,743,128 $ 10,489,591 1,635,542 336,290 8,848,199 780,935 183,963 22,274,520 $ $ 3,840,504 $ 1,974,304 $ 8,932,374 1,531,770 321,964 8,456,552 258,478 76,300 19,577,438 (765,493) 2010 2011 2012 $ 7,644,440 1,928,028 285,881 6,000,923 22,831 129,740 16,011,843 $ 8,013,480 1,349,079 322,659 5,217,140 28,456 68,125 14,998,939 $ $ (1,019,825) $ 379,032 $ (73) 7,787,489 1,453,405 332,130 4,515,511 88,877 178,393 14,355,805 (541,961) TOWN OF FOUNTAIN HILLS, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 General Fund: Reserved Unreserved, Designated for: Vehicle Replacement Unreserved, Undesignated Total General Fund All Other Governmental Funds: Unreserved, Designated for Vehicle Replacement Unreserved, Undesignated Reported in: Special Revenue Funds Capital Projects Funds Debt Service Funds Total All Other Governmental Funds 2004 $ - 2005 $ 77,485 $ 4,037,863 4,037,863 $ - $ 3,411,738 1,705,230 5,116,968 2006 $ 40,664 $ 14,393 $ 6,293,941 6,371,426 $ 9,041,779 9,082,443 $ 6,515,855 6,530,248 $ - $ - $ - $ 5,969,830 530,372 6,500,202 $ 2,176,086 2,429,225 644,089 5,249,400 $ 1,951,434 9,496,266 159,530 11,607,230 Fiscal Year 2011 General Fund: Nonspendable Inventory Prepaid Items Restricted Committed Assigned Unassigned Total General Fund All Other Governmental Funds: Nonspendable Cash with Escrow Agent Prepaid Items Restricted Committed Assigned Total All Other Governmental Funds $ $ $ $ 2012 13,183 29,234 8,263,549 8,305,966 $ 6,217 4,379,987 11,480,869 15,867,073 $ $ $ 9,332 28,245 1,345,200 2,190,910 3,656,173 7,229,860 2,623,895 5,474 3,300,426 2,039,560 9,312,168 17,281,523 Source: The source of this information is the Town’s financial records. Note: During fiscal year 2011, the Town implemented GASB Statement No. 54. Therefore, starting in the fiscal year ended June 30, 2011, governmental fund balances will be presented based on the GASB Statement No. 54 hierarchy. (74) Fiscal Year 2007 2008 $ 2,934,144 2009 $ 3,053,070 $ 3,234,860 $ 3,666,005 6,600,149 $ 3,526,738 6,579,808 $ - $ - $ 5,305,432 9,916,670 1,386,674 16,608,776 $ 3,876,927 10,764,857 1,585,740 16,227,524 2010 $ 3,235,811 $ 127,916 3,302,373 6,665,149 $ 333,796 3,418,799 6,988,406 $ 95,620 $ 159,484 $ 4,198,782 10,246,395 1,218,971 15,759,768 $ 4,498,523 10,020,336 1,182,834 15,861,177 (75) TOWN OF FOUNTAIN HILLS, ARIZONA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year REVENUES Taxes Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Rents and Royalties Special Assessments Investment Income (Loss) Other Total Revenues 2003 2004 2005 2006 2007 $ 7,114,486 6,311,458 195,091 1,308,747 810,412 188,745 4,302 1,976,809 275,343 18,185,393 $ 9,997,706 6,080,631 361,339 1,600,934 1,038,170 242,704 3,612 122,082 261,561 19,708,739 $ 11,151,893 6,686,500 249,564 2,230,046 1,834,205 222,327 1,512 395,124 179,657 22,950,828 $ 12,993,876 7,412,226 235,050 1,918,107 1,689,046 255,527 21,147 673,351 233,565 25,431,895 $ 13,159,087 8,444,731 304,214 1,239,318 898,955 267,350 4,228 1,094,994 85,418 25,498,295 EXPENDITURES General Government Public Safety Highways and Streets Culture and Recreation Development Services Capital Outlay Debt Service Principal Retirement Interest on Long-Term Debt Other Debt Service Total Expenditures 3,318,574 5,174,492 1,198,080 1,815,416 1,215,387 79,427 3,614,458 4,616,161 1,402,502 1,597,150 1,144,964 101,951 9,547,409 4,754,523 1,682,563 3,004,216 1,460,181 - 4,459,183 5,208,770 2,121,986 3,607,750 1,812,469 - 4,024,551 5,689,020 2,028,397 2,131,374 2,462,643 2,002,887 1,393,228 1,576,842 15,771,446 1,423,228 1,499,575 15,399,989 1,308,228 1,164,561 229,990 23,151,671 1,968,228 1,192,414 532,762 20,903,562 1,968,228 1,058,665 21,365,765 Excess of Revenues Over (Under) Expenditures 2,413,947 4,308,750 4,528,333 4,132,530 5,981,544 (5,981,544) - 1,630,907 (1,630,907) - 4,805,635 (4,805,635) 12,555,000 3,783,896 10,146,663 (10,146,663) 4,555,000 - 4,383,069 (4,383,069) - (4,338,781) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Refunding Debt Issuance of Long-Term Debt Payment to Refunded Debt Escrow Agent Total Other Financing Sources (Uses) Net Change in Fund Balance Debt Service as a Percentage of Noncapital Expenditures (200,843) - - (14,677,838) - - 1,661,058 $ 2,413,947 $ 4,308,750 23.35% $ 1,460,215 23.62% Source: The source of this information is the Town’s financial records. (76) 13.22% - 216,219 $ 4,744,552 21.46% $ 4,132,530 18.53% Fiscal Year 2008 2009 $ 12,457,086 9,353,260 287,120 1,125,957 620,300 296,434 4,337 780,935 183,963 25,109,392 $ 10,960,001 9,607,961 339,658 541,627 316,676 290,083 4,037 258,478 43,683 22,362,204 3,548,295 6,321,669 2,214,557 2,257,007 2,751,740 5,239,169 3,514,249 6,624,141 1,199,850 2,215,065 2,036,295 3,708,277 2,153,228 1,025,320 25,510,985 2,240,000 929,134 22,467,011 (401,593) (104,807) 2,756,988 (2,756,988) - 3,759,735 (3,950,654) - - (401,593) 18.60% $ (190,919) $ (295,726) 20.33% 2011 9,818,985 7,672,037 297,030 399,094 464,036 215,520 22,831 129,740 19,019,273 $ $ 2012 9,704,054 7,165,103 236,221 312,367 388,635 227,195 28,456 72,125 18,134,156 $ 9,577,321 6,035,448 223,673 194,976 405,663 206,018 88,877 178,393 16,910,369 3,186,368 6,200,227 973,746 2,007,737 1,669,449 1,254,223 2,575,975 5,772,800 1,123,230 1,871,446 1,564,615 1,043,304 2,887,321 5,869,445 1,054,930 1,794,332 1,421,787 884,323 2,460,000 842,857 18,594,607 2,115,000 744,330 16,810,700 1,965,000 639,135 55,752 16,572,025 424,666 1,323,456 338,344 1,127,776 (1,127,776) - - $ 2010 431,880 (431,880) - 2,470,027 (2,470,027) - - - - - - - 424,666 18.29% $ 1,323,456 17.41% (77) $ 338,344 17.09% THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sales Taxes $ 5,051,872 7,733,643 8,879,798 11,007,924 11,407,714 10,489,591 8,932,374 7,644,440 8,013,480 7,787,489 Property Taxes $ 1,905,770 2,195,856 2,020,800 1,648,947 1,385,953 1,635,542 1,531,770 1,928,028 1,349,079 1,453,405 Franchise Taxes $ 152,542 126,362 216,031 314,359 324,318 336,290 321,964 285,881 322,659 332,130 Source: The source of this information is the Town’s financial records. (78) Total $ 7,110,184 10,055,861 11,116,629 12,971,230 13,117,985 12,461,423 10,786,108 9,858,349 9,685,218 9,573,024 TOWN OF FOUNTAIN HILLS, ARIZONA TAXABLE SALES BY CATEGORY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2003 Sales Category: Construction Restaurants and Bars Transportation and Utilities Services Real estate, Rental and Leasing Wholesale/Retail Other Total $ $ 1,203,706 276,664 590,446 455,324 205,849 1,930,175 188,654 4,850,818 2004 $ $ 1,482,981 419,107 916,498 423,433 341,951 3,212,062 706,816 7,502,848 2005 $ $ 1,837,317 524,368 1,124,677 185,868 604,356 3,536,045 933,366 8,745,997 Source: The source of this information is the Town’s financial records. (79) 2006 $ 3,362,079 547,276 1,240,120 263,239 626,364 3,796,192 1,030,966 $ 10,866,236 2007 $ 2,694,700 537,596 1,330,052 280,290 792,358 4,144,263 1,296,171 $ 11,075,430 Fiscal Year 2008 $ 2,062,028 582,226 1,422,158 327,411 982,198 3,912,512 1,182,349 $ 10,470,882 2009 $ $ 1,414,240 493,242 1,311,735 258,138 664,999 3,687,409 910,561 8,740,324 2010 $ $ 538,551 509,624 1,424,827 241,686 650,071 3,555,974 691,972 7,612,705 2011 $ $ 567,136 559,930 1,388,074 276,566 731,615 3,567,615 733,454 7,824,390 (80) 2012 $ $ 600,402 575,705 1,407,331 274,481 678,267 3,600,619 730,956 7,867,761 THIS PAGE BLANK TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Town Rate 1.60 % 2.60 2.60 2.60 2.60 2.60 2.60 2.60 2.60 2.60 Maricopa County 0.70 % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 State Rate 5.60 % 5.60 5.60 5.60 5.60 5.60 5.60 6.60 6.60 6.60 Source: The source of this information is the Arizona Department of Revenue. (81) Total Tax Rate 7.90 % 8.90 8.90 8.90 8.90 8.90 8.90 9.90 9.90 9.90 TOWN OF FOUNTAIN HILLS, ARIZONA ASSESSED VALUE AND ESTIMATED TOTAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net Assessed Value (in thousands) $ 270,603 323,384 349,399 375,183 610,738 684,742 651,218 576,535 451,860 377,522 Total Direct Tax Rate $ 0.51 0.48 0.42 0.35 0.30 0.22 0.20 0.22 0.18 0.22 Total Value (in thousands) $ 2,418,236 2,942,849 3,162,855 3,411,461 5,840,185 6,847,423 6,648,954 6,255,310 4,370,950 3,668,374 Assessed Value as a Percentage of Total Value 11.19 % 10.99 11.05 11.00 10.46 10.00 9.79 9.22 10.34 10.29 Source: The source of this information is the Arizona Department of Revenue’s Abstract of the Assessment Roll and the Town’s financial records. (82) TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL PROPERTY TAXPAYERS JUNE 30, 2012 AND 2003 (UNAUDITED) 2012 Taxpayer Inland Western Fountain Hills Four Peaks, LLC Chaparral City Water Company EN II, LLC WSL Fountain View Investors V, LLC Pacific FH Resort, LLC J & R Holdings XX, LLC Target Corporation Qwest Corporation Firerock, LLC Fountain Hills AZ Development LLLP MCO Properties, LP Fountain Hills Village LLC Four Peaks Limited Partnership MCO Properties, Inc. Fountain Hills-Old Vine Limited Partnership Summit Estates, LLC Safeway, Inc. 562502 Ontario Inc. Sun Tech Development, LLC Net Secondary Assessed Value $ 3,497,492 3,025,000 2,299,280 2,209,139 13,756,875 2,089,587 2,058,652 1,649,928 1,608,357 1,504,850 Rank 1 2 3 4 5 6 7 8 9 10 $ 33,699,160 2003 Percentage of Total Net Secondary Assessed Value 0.93 % 0.80 0.61 0.59 3.64 0.55 0.55 0.44 0.43 0.40 8.94 Net Secondary Assessed Value Rank $ 3,645,656 6,654,687 2,132,248 1,570,000 1,136,626 1,027,240 890,522 862,111 841,884 838,648 809,435 $ 20,409,057 Source: The source of this information is the Maricopa County Assessor’s Office. (83) N/A N/A N/A N/A N/A N/A N/A 1 N/A 2 3 4 5 6 7 8 9 10 Percentage of Total Net Secondary Assessed Value N/A % 1.35 N/A N/A N/A N/A N/A N/A 2.46 N/A 0.79 0.42 0.38 0.33 0.32 0.31 0.31 0.3 6.97 TOWN OF FOUNTAIN HILLS, ARIZONA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Tax Levy $ 1,842,009 2,125,505 2,041,230 1,673,519 1,391,521 1,630,534 1,719,105 1,895,552 1,340,544 1,446,076 Current Tax Collections $ 1,777,619 2,053,055 1,992,532 1,618,877 1,359,035 1,578,583 1,660,820 1,838,909 1,307,092 1,414,482 Percent of Current Taxes Collected 96.5% 96.6% 97.6% 96.7% 97.7% 96.8% 96.6% 97.0% 97.5% 97.8% Delinquent Tax Collections $ 51,558 57,506 22,283 34,011 27,203 48,013 53,548 52,478 27,530 - Total Tax Collections $ 1,829,177 2,110,561 2,014,815 1,652,888 1,386,238 1,626,596 1,714,368 1,891,387 1,334,622 1,414,482 Source: The source of this information is the Maricopa County Treasurer’s Office. (84) Ratio of Total Tax Collections to Total Tax Levy 99.3% 99.3% 98.7% 98.8% 99.6% 99.8% 99.7% 99.8% 99.6% 97.8% TOWN OF FOUNTAIN HILLS, ARIZONA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Governmental Activities Fiscal Year General Obligation Bonds and Other Bonds Less: Amounts Restricted for Principal Total 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 $ 24,015,000 25,335,000 24,190,000 22,365,000 26,910,467 24,932,318 22,769,172 17,965,000 15,850,000 13,885,000 $ 1,393,228 1,423,228 1,308,228 1,968,228 1,978,149 2,163,146 2,249,921 2,115,000 2,205,000 2,280,000 $ 22,621,772 23,911,772 22,881,772 20,396,772 24,932,318 22,769,172 20,519,251 15,850,000 13,645,000 11,605,000 Percentage of Personal Income 21.26 % 20.68 18.20 15.40 17.85 N/A N/A N/A N/A N/A Per Capita $ 1,017 1,061 986 833 976 855 808 705 608 515 Source: The source of this information is the Town’s financial records and the Bureau of Economic Analysis. Note: N/A indicates that the information is not available. (85) TOWN OF FOUNTAIN HILLS, ARIZONA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year General Obligation Bonds 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 $ 11,865,000 11,110,000 10,675,000 9,600,000 8,620,000 7,570,000 6,530,000 9,045,000 7,965,000 6,845,000 Taxable Assessed Value of Property $ 270,603,000 323,385,000 349,398,000 375,183,000 576,535,714 684,742,347 651,218,464 576,535,714 451,860,136 377,521,718 Percentage of Taxable Assessed Value of Property Population 4.38% 3.44% 3.06% 2.56% 1.50% 1.11% 1.00% 1.57% 1.76% 1.81% 22,243 22,541 23,217 24,492 25,540 26,633 25,388 22,489 22,444 22,554 Net General Obligation Bonded Debt Per Capita $ 533 493 460 392 338 284 257 402 355 303 Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. (86) TOWN OF FOUNTAIN HILLS, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2012 (UNAUDITED) Governmental Unit Overlapping: Maricopa County Maricopa County Community College District Fountain Hills Unified School District Eagle Mountain Community Facilities District Subtotal, Overlapping Debt Outstanding Debt $ Direct: Town of Fountain Hills, Arizona 133,930,000 683,835,000 12,595,000 3,090,000 Estimated Share of Overlapping Debt Estimated Percentage Applicable 1.10% 1.10% 96.30% 100.00% $ 1,473,230 7,522,185 12,128,985 3,090,000 24,214,400 10,795,000 Total Direct and Overlapping Debt $ 35,009,400 Source: The source of this information is the Town’s records and the State and County Abstract of the Assessment the Arizona Department of Revenue Report of Indebtedness and the applicable governmental unit. Note: The estimated percentage of debt outstanding applicable to the Town is calculated based on the Town’s secondary assessed valuation (full cash value) as a percentage of the secondary assessed valuation of the overlapping jurisdiction. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the Town of Fountain Hills. This schedule further estimates the portion of outstanding debt of those overlapping governments that is borne by residents and businesses of the Town. This process recognizes that, when considering a town’s ability to issue and repay long-term debt, the entire debt burden borne by residents should be taken into account. However, this fact does not imply that every taxpayer is a resident, and therefore, responsible for repaying the debt of each overlapping government. (87) TOWN OF FOUNTAIN HILLS, ARIZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year 2003 Debt Limit $ Total Applicable to Limit Legal Debt Margin 16,236,172 2004 $ 5,625,000 $ Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit 10,611,172 2005 19,403,114 $ 5,190,000 $ 35% 14,213,114 20,963,900 2006 $ 3,595,000 $ 27% 17,368,900 22,510,991 3,410,000 $ 19,100,991 17% 15% 2005 2006 20% Debt Limit Fiscal Year 2003 Debt Limit $ Total Applicable to Limit Legal Debt Margin Total Net Debt Applicable to the Limit as a Percentage of the Debt Limit 54,120,573 2004 $ 6,975,000 $ 47,145,573 13% 64,677,046 $ 6,675,000 $ 58,002,046 10% 69,879,667 $ 7,515,000 $ 62,364,667 11% 75,036,636 7,265,000 $ 67,771,636 10% Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. (88) Fiscal Year 2007 $ 34,592,143 2008 $ 41,084,541 1,660,000 $ 32,932,143 5% 2009 $ $ 41,084,541 0% 2010 39,073,108 $ 34,592,143 320,000 $ 38,753,108 2011 $ 27,111,608 $ 1% 34,592,143 2012 $ 22,651,303 $ 27,111,608 $ 22,651,303 0% 0% 0% 2011 2011 Fiscal Year 2007 2008 2009 2010 $ 115,307,143 $ 136,948,469 $ 130,243,693 $ 115,307,143 5,415,000 6,510,000 6,210,000 5,415,000 $ 109,892,143 $ 130,438,469 $ 124,033,693 $ 109,892,143 5% 5% 5% 5% (89) $ 90,372,027 $ 4,595,000 $ 85,777,027 5% 75,504,344 3,755,000 $ 71,749,344 5% TOWN OF FOUNTAIN HILLS, ARIZONA CALCULATION OF LEGAL DEBT MARGIN AS OF JUNE 30, 2012 (UNAUDITED) Net Secondary Assessed Valuation $ 377,521,718 Water, Sewer, Light, Parks, Open Space and Recreational Facility Bonds Debt Limit - 20% of Net Secondary Assessed Valuation $ Net Debt Applicable to Limit 75,504,344 3,755,000 20% Legal Debt Margin 71,749,344 All other general obligation bonds Debt Limit - 6% of Net Secondary Assessed Valuation 22,651,303 Net Debt Applicable to Limit - 6% Legal Debt Margin 22,651,303 Total legal debt margin $ 94,400,647 Source: The source of this information is the Maricopa County Assessor’s Office and the Town’s financial records. (90) TOWN OF FOUNTAIN HILLS, ARIZONA REVENUE BOND COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Principal 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 $ 425,000 425,000 620,000 665,000 715,000 805,000 885,000 985,000 1,035,000 845,000 Municipal Facilities Revenue Bonds Pledged Interest Total Revenues $ 566,433 550,983 456,892 546,576 473,349 498,878 460,379 424,538 373,768 332,463 $ 991,433 975,983 1,076,892 1,211,576 1,188,349 1,303,878 1,345,379 1,409,538 1,408,768 1,177,463 $ 11,270,153 14,044,597 16,171,235 18,746,928 19,379,717 18,890,944 16,440,872 14,380,648 14,001,045 13,075,001 Source: The source of this information is the Town’s financial records. (91) Coverage 11.4 14.4 15.0 15.5 16.3 14.5 12.2 10.2 9.9 11.1 TOWN OF FOUNTAIN HILLS, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALENDAR YEARS (UNAUDITED) Calendar Year 2002 Population 2003 2004 2005 21,954 22,243 22,541 23,217 Personal income $ 100,805,099 $ 106,385,325 $ 115,604,165 $ 125,718,070 Per capital personal income $ $ $ $ Median age 28,900 29,607 N/A School enrollment N/A 2,447 31,133 N/A 2,450 32,414 N/A 2,453 2,373 Town of Fountain Hills unemployment rate 2.7% 2.6% 2.1% 2.0% Land use Total acres Total square miles Vacant lots N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Number of units Housing Lodging Restaurants Shopping centers N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Schools Public Preschool Charter N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Source: The source of the “Personal Income” and “Per Capita” information is the Bureau of Economic Analysis. The source of the “Population” and “Unemployment Rate” information is State of Arizona, Department of Administration, Office of Employment and Population Statistics. The source of School Enrollment is the Fountain Hills Unified School District No. 98. Other information is from the Town’s records. Note: N/A indicates that the information is not available. * Information obtained is based on calendar years; therefore, the latest information obtained was from 2011. (92) Calendar Year 2006 2007 2008 24,452 25,540 $ 132,423,154 $ 139,665,253 $ $ 35,046 36,135 N/A 26,633 $ 1.8% 2,307 1.6% 2010 25,388 N/A 32,230 $ N/A 38,439 46.4 2,233 2.5% 2011 22,489 N/A 46.4 2,425 2009 $ N/A 38,918 49.7 2,203 4.4% 22,554 49.7 2,103 4.5% N/A N/A 1,981 6.8% 12,296.0 20.31 N/A 13,005.7 20.32 3,355 13,005.7 20.32 1,295 13,005.7 20.32 1,253 13,005.7 20.32 1,226 13,005.7 20.32 1,218 12,681 4 50 14 12,850 4 53 14 12,832 4 47 19 12,927 4 52 19 13,167 4 53 20 13,167 4 56 20 4 5 2 4 4 1 4 4 1 4 4 1 4 4 1 4 4 1 (93) TOWN OF FOUNTAIN HILLS, ARIZONA PRINCIPAL EMPLOYERS PRIOR FISCAL YEAR AND NINE YEARS AGO* (UNAUDITED) 2011 Employer Employees Fountain Hills Unified School District No. 98 Fountain View Village Target Firerock County Club Fry's Safeway Food Stores Eagle Mountain Golf Course Town of Fountain Hills Basha's TT Construction, Inc. Sunridge Canyon Golf Course Desert Canyon Golf Club MCO Properties, Inc. Monks Construction Total 336 136 102 100 91 90 70 66 62 60 59 58 1,230 Total Town employment 3,675 Source: Rank 1 2 3 4 5 6 7 9 8 10 11 12 2002 Percentage of Total Town Employment Employees 9.1% 3.7% 2.8% 2.7% 2.5% 2.4% 1.9% 1.8% 1.7% 1.6% 1.6% 1.6% 0.0% 0.0% 33.5% The source of this information is the Town’s financial records. * Data for 2012 and 2003 are not available. (94) 250 95 40 115 70 70 50 85 150 925 Rank 1 4 9 3 6 7 8 5 2 TOWN OF FOUNTAIN HILLS, ARIZONA FULL-TIME EQUIVALENT GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Municipal Court 6.00 5.00 5.00 5.50 5.00 5.00 5.00 5.00 5.00 5.00 Administration 14.50 10.00 11.00 12.50 13.00 13.50 13.50 13.25 11.25 11.58 Public Safety 20.00 1.00 - - - - - - - - Development Services 43.00 40.00 39.50 41.00 41.00 40.50 40.00 35.75 23.25 20.25 Community Services 22.50 20.00 21.50 23.50 28.00 29.25 29.75 27.10 21.63 21.53 106.00 76.00 77.00 82.50 87.00 88.25 88.25 81.10 61.13 58.36 Total Source: The source of this information is the Town’s financial records. (95) TOWN OF FOUNTAIN HILLS, ARIZONA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) 2003 2004 Fiscal Year 2005 2006 2007 Municipal Court: Cases filed Hearings/Trials held N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Administration: FTEs per 1,000 residents Registered voters - general election Voter turnout - general election 4.8 12,594 43% 3.4 13,349 23% 3.4 none none 3.6 13,669 21% 3.6 none none Development Services: Building permits issued Building inspections conducted Number of code violation cases Number of zoning cases 168 6,389 N/A N/A 228 6,985 N/A N/A 430 8,446 N/A N/A 468 9,377 N/A N/A 759 7,975 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Function/Program Community Services: Number of Community Center bookings Number of participants in recreational programs Number of Senior Services members Number of home delivered meals Law Enforcement (contracted): Physical arrests Traffic violations Fire & Emergency Medical (contracted): Total incident responses Average response time (in minutes) 601 3,186 601 3,186 N/A N/A N/A N/A 644 2,432 N/A N/A Source: The source of this information is the Town’s financial records. Note: N/A indicates that the information is not available. * Includes permits issued for all types of activities requiring permits. (96) N/A N/A 993 2,315 3,056 3:47 3,069 3:49 2008 2009 N/A N/A N/A N/A Fiscal Year 2010 3,520 1,089 2011 2,584 738 2.7 none none 2012 2,173 731 3.5 14,335 39% 3.3 none none 3.2 15,511 50% 2.6 16,074 34% 716 5,692 N/A N/A 391 3,189 N/A N/A 409 1,936 1,024 7 354 1,546 843 14 352 1,257 804 7 N/A N/A 3,396 3,315 3,236 N/A N/A N/A N/A N/A N/A 1,960 1,105 10,169 1,759 1,205 9,742 1596* 1208* 8000* 524 2,504 825 4,900 679 2,959 645 1,909 522 1,366 2,694 3:37 2,787 3:44 2,875 4:32 3,179 3:46 3,082 3:50 (97) TOWN OF FOUNTAIN HILLS, ARIZONA CAPITAL ASSETS STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function/Program Public Safety: Number of Fire stations Other Public Works: Streets (Miles) Streets (Lane Miles) Streetlights Traffic Signals Parks and Recreation: Acreage Playgrounds Baseball/Softball Diamonds Soccer/Football Fields Community Centers Preserve Acreage Miles of Trails 2003 2004 2005 2006 2007 2 2 2 2 2 178.5 395 N/A 10 178.5 395 N/A 11 178.5 395 N/A 11 178.5 395 34 12 178.5 395 34 13 116 3 6 4 1 N/A N/A 116 3 6 4 1 N/A N/A 116 3 6 4 1 N/A N/A 116 3 6 3 1 N/A N/A 116 3 6 3 1 N/A N/A Source: The source of this information is the Town’s facilities records. (98) Fiscal Year 2008 2009 2010 2011 2012 2 2 2 2 2 178.5 395 34 12 178.5 395 34 12 178.5 395 34 12 178.5 395 34 13 178.5 395 34 13 116 3 6 3 1 N/A N/A 116 3 6 3 1 N/A N/A 116 3 6 3 1 N/A N/A 116 4 6 5 1 N/A N/A 116 4 6 5 1 740 4.3 (99) THIS PAGE BLANK