Town of Fountain Hills, Arizona Popular Annual Financial Report for fiscal year 2014-2015 ending June 30, 2015 Page 3 Page 5 Page 8 Page 10 Page 12 Community Profile 2014-2015 Financial Overview Net Position Property Taxes Awards Page 2 2014-2015 Popular Annual Financial Report The height of desert living. Welcome Members of the Administration Department, Finance Division, are pleased to present the Town of Fountain Hills Popular Annual Financial Report for the fiscal year ended June 30, 2015. This report is intended to present an accessible overview of the Town’s financial position and policies, and its commitment to providing responsive services and programs in a fiscally responsible manner. We share with you details of how the Town’s revenue is generated, where the dollars are spent, and how the local economy impacts Fountain Hills’ overall financial status. Above the Town’s 2014-2015 CAFR, which is availall, our goal is to provide you with an opportu- able online at www.fh.az.gov/170/Financialnity to better understand the many financial Reports-Budgets. aspects that affect your local government. Members of the Finance Division and staff The financial information provided here is across the organization are proud to serve this drawn from detailed information found within fine community. We hope that the 2014-2015 the fiscal year 2014-2015 Comprehensive An- Popular Annual Financial Report serves its nual Financial Report (CAFR). The financial purpose and helps assure you that every effort statements were prepared in conformance with is made to manage the community’s resources accounting principles generally accepted in the wisely for the benefit of all. United States of America (GAAP) and audited by an independent accounting firm, receiving an unmodified (or clean) opinion. The numbers contained within the CAFR were obtained by employing the basis of accounting as prescribed by the Governmental Accounting Stan- Craig Rudolphy CPA, CPFO, CGFM dards Board (GASB). Finance Director While the numbers in this Popular Report come from an audited source, they are presented in an abridged, unaudited non-GAAP format. Citizens who wish to review audited GAAP-basis financial statements can refer to The height of desert living. 2014-2015 Popular Annual Financial Report Page 3 Profile of Fountain Hills, Arizona 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. 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 wide range of living accommodations, from small community condominiums to large custom homes. Fountain Hills also offers recreational, cultural and retirement programs that address the needs and lifestyles of active families as well as older adults. The community consists of primarily residential property; of the total 20.32 square miles of land, only 2.6% of the total is zoned commercial and/ Located on 13,006 acres of land, and bordering or industrial, 22.9% is preserved as open space northeast Scottsdale, Fountain Hills is sur- and 51.3% is residential. rounded by the 3,500-foot McDowell Mountains and Scottsdale on the west, the Fort The Town of Fountain Hills is an Arizona MuMcDowell Yavapai Nation on the east, the Salt nicipal Corporation, acting as a general law River Pima-Maricopa Indian Community on the town as prescribed in the Arizona Revised Statsouth and by the McDowell Mountain Regional utes. The Town was incorporated on December Park on the north. The elevation is 1,575 feet at 5, 1989, with the governmental and administrathe fountain, 2,130 feet on Golden Eagle Boule- tive affairs of the Town operating under the vard, and is approximately 500 feet above Council-Manager form of government. The Phoenix. Town Council is responsible for the adoption of local ordinances, budget adoption, development Over the past twenty plus years, Fountain Hills of citizen advisory committees and hiring the has grown from 10,190 residents to a town of Town Manager. The Town Manager is respon22,489 based on the 2010 census. On June 5, sible for implementation of the policies of the 2006, the Town of Fountain Hills became Town Council and administering the Town’s twenty square miles and about 10% larger by operations through three department directors annexing 1,300 acres of State Trust Land. The and approximately 52 full-time-equivalent process to annex the State Trust Land occurred (FTE) employees. The Presiding Judge, Town over a two and one-half year period and devel- Attorney and Town Prosecutor are under the opment of the land will occur over the next dec- direction of the Town Council. ade. Annexing this property into the Town ensures that its future development will be of the This Popular Annual Financial Report may be highest quality under such Town’s standards as accessed on the Town’s website, at the cut-and-fill ordinance and strict zoning www.fh.az.gov/pafr. Page 4 2014-2015 Popular Annual Financial Report The height of desert living. The Government of Fountain Hills, Arizona The Town provides or administers a full range of services including public safety (law enforcement, fire, animal control); development services (code enforcement, planning, and public works); construction and maintenance of streets and infrastructure, municipal court, recreational activities, community center, senior services and cultural events. The Town does not maintain utility or other operations. 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. 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 a resolution and is prepared by fund and department. The resolution sets the limit for total 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. Principal Employers Fountain Hills Unified School District No. 98 Fountain View Village Rural Metro Corporation Firerock Country Club Safeway Stores 2014 193 140 111 100 86 The height of desert living. 2014-2015 Popular Annual Financial Report Page 5 2014-2015 Financial Overview In this section, we present an overview of monies in and monies out for the Town of Fountain Hills for the fiscal year ended June 30, 2015. MONIES IN As a governmental entity, the Town uses fund accounting, or self-balancing sets of accounts segregated for specific activities. Governmental funds are used to account for tax supported activities and the Town receives the funding it needs to provide services to the community from a variety of sources. The table below presents a sum- REVENUE TYPE DEFINITIONS mary of governmental revenues by primary type for Taxes - Sales - the Town charges a local sales fiscal years 2014-2015, 2013-2014 and 2012-2013, in tax of 2.6% on most goods purchased in the order to present a picture of typical revenues from year Town. This tax is in addition to the State of to year. The improving national and local economy Arizona rate of 5.6% and the Maricopa County rate of .7%, for a total sales tax rate of 8.9%. contributed to an increase in revenues of $3,341,754 Taxes - Property - the Town does not charge or 17.9% compared to 2014. Intergovernmental reve- a primary property tax, only a secondary propnue includes income and sales tax shared from the erty tax. The secondary tax is for debt repayState and distributed based on population, as well as ment on voter approved bonds (specifically the grants—these revenues saw increases consistent with a Community Center and open space). Taxes - Franchise - revenue received from recovering economy. Building activity increased re- utility (telecommunications) companies for the sulting in an increase in Licenses and Permits. right to operate within the Town. Governmental Funds Three Year Revenues Summary by Type 2015 2014 Revenues Taxes: Sales Property Franchise Intergovernmental Fines and Forfeitures Licenses and Permits Charges for Services Leases and Rents Investment Revenue Other Total Revenues $ Intergovernmental - these are revenues re- 2013 8,983,049 $ 8,459,267 $ 7,957,163 904,660 1,463,056 1,421,614 352,673 349,414 334,668 9,770,048 6,677,518 6,323,047 186,456 170,995 187,251 1,043,382 891,782 570,904 176,541 161,376 162,086 269,753 252,584 213,871 150,358 123,311 69,998 188,251 134,114 300,899 $ 22,025,171 $ 18,683,417 $ 17,541,501 ceived from other governments or entities, including state shared sales tax, state shared income tax, fire insurance premium tax, vehicle license tax, and grants. Fines and Forfeitures - these are revenues received from court fines. Licenses and Permits - includes building permit fees, business and animal license fees, fire inspections, etc. Charges for Services - these are revenues received from services and/or programs provided by the Town such as recreation programs. Leases and Rents - rental fees for use of the Community Center as well as fees from leases for cellular telephone towers. Investment Revenue - revenue received from interest on invested monies. Other - these are revenues that do not fit under another classification. Page 6 The height of desert living. 2014-2015 Popular Annual Financial Report 2014-2015 Financial Overview - continued MONIES OUT The three-year comparison for Town Governmental Funds expenditures shows an increase in the Three Year Expenditures Summary by Type overall cost of operations. Overall, 2015 2014 2013 2015 total Governmental Fund expen- Expenditures General Government $ 2,275,124 $ 2,194,845 $ 2,699,109 ditures were $5,104,402, or 24.9% Public Safety 6,675,874 6,890,770 6,022,269 more than in 2014. The Town con- Highways and Streets 1,275,779 3,085,559 2,058,990 tracts for law enforcement and fire Culture and Recreation 1,962,585 1,921,939 1,791,018 and emergency medical services— Development Services 2,073,990 1,774,983 1,643,757 these contracts include automatic ne- Debt Service 2,548,542 2,887,999 2,847,043 gotiated increases which are reflected Capital Outlay 8,799,068 1,750,465 453,002 in the Public Safety category. HighTotal Expenditures $ 25,610,962 $ 20,506,560 $ 17,515,188 ways and Streets expenditures decreased due to the postponement of pavement maintenance to allow for an accumulation of additional funding needed for the next fiscal year. Capital Outlay increased due to the continuation of the Shea Boulevard Widening project and the start of the Saguaro Boulevard Reconstruction projects paid for with voter-approved bonds. Debt service includes the annual principal and interest payment for outstanding bonds. FY 2015 Expenditures Capital Outlay 34% Debt Service 10% General Government 9% Development Services 8% Culture and Recreation 8% Highways and Streets 5% Public Safety 26% The height of desert living. 2014-2015 Popular Annual Financial Report Page 7 2014-2015 Financial Overview - continued EXPENDITURE TYPE DEFINITIONS  General Government - functions serving Town operations as a whole, including: Town Council, Town Manager, Town Clerk, Finance, Human Resources, Information Technology, Town Attorney, and Town Prosecutor.  Public Safety - encompasses the contracted services for Law Enforcement and Fire and Emergency Medical departments.  Highways and Streets - represents the Street division.  Culture and Recreation - encompasses the services, programs and facilities provided by Parks & Recreation, Community Center and Senior Services.  Development Services - encompasses Engineering, Facilities, Planning, Building Safety, Code Compliance and Mapping and Graphics divisions.  Capital Outlay - expenditures on the Town’s Capital Improvement Program projects.  Debt Service - interest and other related costs affiliated with the Town’s issuance of debt to support various capital improvement activities. Operating Funds Expenditures Budget and Actual Last Five Fiscal Years (In Millions) Millions $15 $14 $13 $12 Budget $11 Actual $10 2015 2014 2013 Years 2012 2011 Page 8 The height of desert living. 2014-2015 Popular Annual Financial Report The Town’s Net Position Statement of Net Position 2015 ASSETS Current and Other Assets Capital Assets Non-Depreciable Depreciable (net) Total Assets LIABILITIES Current and Other Liabilities Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Unrestricted Total Net Position 2014 2013 $ 30,103,343 $ 26,489,337 $ 28,460,597 29,930,540 75,321,571 27,334,347 73,728,913 26,223,288 77,222,272 135,355,454 127,552,597 131,906,157 2,897,349 3,717,336 3,820,104 4,545,644 11,095,245 2,164,879 7,289,432 2,449,599 9,501,392 18,538,238 13,171,647 15,771,095 95,325,824 89,713,260 89,800,560 6,310,810 5,480,867 5,721,744 15,180,582 19,186,823 20,612,758 $ 116,817,216 $ 114,380,950 $ 116,135,062 The Statement of Net Position presents information on all the Town’s assets and liabilities, with the difference between the two reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Net position is categorized by activity type. Governmental activities include services largely funded through revenues such as sales tax and charges for services. ASSETS represent what the Town owns. Current and other assets include cash, investments, and receivables (money due to the Town). Capital assets are land, buildings, infrastructure, vehicles, machinery, and equipment. They are broken down as non-depreciable (land, art, and construction in progress) and depreciable (all other capital assets). LIABILITIES represent what the Town owes. Current and other liabilities consist of payables (money due from the Town to pay what it owes). Non-current liabilities represent compensated absences and debt that the Town must pay back and is broken out into the current year and future years. NET POSITION may serve, over time, as useful indicators of a government’s financial position and consists of three components. The largest portion (82%) reflects the Town’s investment in capital assets (land, buildings, infrastructure, vehicles, machinery and equipment), less any outstanding related debt used to acquire those assets. An additional portion of the Town’s net position (5%) represents resources subject to restrictions on how they may be used. These legal restrictions are imposed by outside entities such as federal or state governments. An example of such a restriction is the gasoline tax. The State of Arizona charges the gasoline tax and shares some of it with communities. These revenues are legally restricted by the State to be used only for expenditure on street projects. Portions of net assets are also restricted to pay debt service and fund capital projects. The remainder (13%) of net position is unrestricted as to pur- The height of desert living. 2014-2015 Popular Annual Financial Report Page 9 Fund Accounting Millions Revenues by Category Fund Accounting Last Five Fiscal Years State and local governments, such the Town, employ fund account$25 ing whereby assets and liabilities are grouped $20 Other according to the purInvestment Revenue pose for which they are $15 Charges for Services to be used. Each groupLeases and Rents ing, or fund, operates as $10 Licenses and Permits a s ep a ra t e se l f balancing set of acFines and Forfeitures $5 counts. The General Intergovernmental Fund is the chief operTaxes ating fund of the Town $2015 2014 2013 2012 2011 and General Fund exYears penditures account for 49% of governmental expenditures. Special revenue funds group revenues raised for a specific purpose. Capital project funds account for the acquisition or construction of Fund Balances major capital facilities. These inas of June 30, 2015 Non-Major tended uses can be demonstrated Government by viewing the components of al Funds governmental fund balances. The 13% General fund balance is an important comFund Municipal ponent of fiscal planning and fac33% Property tors into the Town’s debt rating, Corporation HURF and has been maintained during Debt Service 6% the recession due to the Town Fund Capital Council’s commitment to fund on 7% Projects -going services with on-going General Fund revenues. Obligation 40% Debt Service Fund 1% Page 10 2014-2015 Popular Annual Financial Report The height of desert living. Property Taxes Property Tax Levy - Fiscal Year 2014-2015 One of the biggest bills resiEntity Primary Rate Secondary Rate dents face each year is tied to Maricopa County $ 1.3609 $ the property they own. Prop0.5054 erty tax in Fountain Hills is State Equalization Tax Maricopa County Community College 1.2628 0.2312 administered by Maricopa Maricopa County Flood Control District 0.1592 County, and is based on propMaricopa County Library District 0.0556 erty value (ad valorem) and Fire Assistance District 0.0116 typically included with the resi- Central Arizona Water Conservation 0.1400 dent’s monthly mortgage pay- Maricopa Special Health Care District 0.3021 ment. As the table indicates, Fountain Hills Sanitary District 0.8771 only a small portion (6.2%) of East Valley Institute of Technology 0.0500 your property taxes go to the Fountain Hills Unified Schools #98 1.9688 0.9567 Town of Fountain Hills—this Town of Fountain Hills 0.5246 portion pays for the annual Total $ 5.0979 $ 3.3081 payment on the bonds approved by voters for open space and the Community Center building. The majority supports Fountain Hills schools, Fountain Hills Sanitary District, and various Maricopa County districts. Currently, property taxes represent one of the smallest and most stable sources of revenue for the Town at 4.1% of total revenues. The primary property tax revenue pays for the basic operating costs of government and schools. The Town does not have a primary property tax for operations. Revenue from the secondary property tax pays for the annual debt service payment on bonds that have been approved by voters and special taxing districts such as the Sanitary District; the rate is set by the County. The rate is calculated using 10% of the assessed valuation of property (assigned by the County), dividing by 100 Town of Fountain Hills and multiplying Fountain Hills Unified Schools #98 East Valley Institute of Technology by the tax rate. Fountain Hills Sanitary District For example, a Maricopa Special Health Care District residential Central Arizona Water Conservation property with Fire Assistance District an assessed Maricopa County Library District value of Maricopa County Flood Control District $350,000 would Maricopa County Community College State Equalization Tax pay approxiMaricopa County mately $2,942 ($350,000 x $$0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 10% divided by Composition of Property Tax 100 x 8.4060). The height of desert living. 2014-2015 Popular Annual Financial Report Page 11 Capital Investments How Capital Investments are Funded The Town’s capital outlay consists of investments in our roads, equipment, public facilities, and parks. Every year, the Town prepares and adopts an on-going, Five-Year Capital Improvement Plan that provides for a comparable annual value of infrastructure improvement projects. Town Council and staff review and update the plan each year as part of the budget process. The projects are funded using a combination of grants and existing funds. Construction projects, also known as construction -in-progress, include items such as the Shea Boulevard Widening and Saguaro Boulevard Reconstruction projects. The Town’s Debt Policy provides a set of criteria to help determine when it’s best to fund capital projects using existing revenues, issuing bonds or seeking loans. The Town has an Aa2 bond rating from Moody’s Investors Service for the general obligation bonds and an Aa3 rating for the revenue bonds. These ratings allow the Town to receive very competitive interest rates when issuing debt. Two Year Debt Summary All Funds Debt Type 2015 2014 General Obligation Bonds $ 11,475,000 $ 4,495,000 Revenue Bonds 3,525,000 4,695,000 Total Debt $ 15,000,000 $ 9,190,000 Repayment of Outstanding Debt Year ending June 30 Principal Interest 2016 $ 4,328,417 $ 308,106 2017 2,743,417 244,986 2018 2,788,417 185,092 2019 2,703,417 123,872 2020 2,378,418 67,302 2021 400,000 7,040 $ 15,342,086 $ 936,398 DEBT TYPE DEFINITIONS General Obligation Bonds - long-term debt that is repaid from the Town’s available resources. Revenue Bonds - long-term debt with repayment to come from a pledged Town revenue stream. Debt Margin The State imposes certain debt limitations of 20% and 6% of the net secondary assessed valuation of the Town. For projects involving water, sewer, artificial lighting, parks, open space, public safety, law enforcement, fire and emergency facilities, street and transportation facilities and recreation facilities improvements, the Town can issue GO bonds up to 20%. For any other general purpose improvements, the Town may issue bonds up to the 6% limit. The Town’s available debt margin is $71.1 milThe repayment of debt is funded using secondary lion in the 20% capacity and $24.2 million in the property tax and general fund revenues. 6% capacity. The Town is currently using only 11% of the 20% capacity and nothing of the 6% capacity. Page 12 2014-2015 Popular Annual Financial Report The height of desert living. Fountain Hills, Arizona Awards Awards Fountain Hills has had its share of accolades. NerdWallet ranked Fountain Hills 15th among the best places to start a business in Arizona. Movoto ranked the Town as 3rd of the best Phoenix suburbs. The Arizona Parks and Recreation Association bestowed the “Best of Special Event” award, recognizing the “Slide the City” event, hosted in Fountain Hills on April 25, 2015. This event brought more than 4,000 people into Fountain Hills to slide down a giant Slip-and-Slide style waterslide. These honors make the Town proud, and we continually strive to make our community an even better place to live. 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 13th consecutive year that the Town has received the award. 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, 2014. This was the 19th 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 Generally Accepted Accounting Principles (GAAP) and applicable legal requirements. Two hundred forty-one cities and towns, including Fountain Hills, earned recognition from national non-profit KaBOOM! and the Humana Foundation as 2015 Playful City USA communities for making play a priority in their communities. From 42 states and the District of Columbia, the Playful City USA honorees range from ninetime honorees to first-time recipients. Playful City USA communities utilize play as an innovative solution to address a number of challenges facing kids, families, and communities. In turn, these communities retain a competitive advantage by creating healthier, more vibrant communities where families want to live and companies want to do business. In addition, the government also received the GFOA’s Distinguished Budget Presentation Award for its annual budget for the fiscal year beginning July 1, 2014. In order to qualify for Also, the GFOA recognized the Town for its June 30, 2014, submission of its Popular Annual Financial Report (PAFR). The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. The requirements are based on an evaluation of creativity, presentation, understandability, and reader appeal. This award is for the Town’s third submission of its PAFR. The height of desert living. 2014-2015 Popular Annual Financial Report Page 13 Fountain Hills, Arizona Awards - continued The Government Finance Officers Association of the United States and Canada has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Town of Fountain Hills, Arizona for its Popular Annual Financial Report for the fiscal year ending June 30, 2014. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. Page 14 2014-2015 Popular Annual Financial Report The height of desert living. Town of Fountain Hills, Arizona Town Officials TOWN COUNCIL Mayor Ms. Linda M. Kavanagh Vice Mayor Mr. Dennis Brown Councilmember Mr. Nick DePorter Councilmember Ms. Cassie Hansen Councilmember Mr. Henry Leger Councilmember Mr. Alan Magazine Councilmember Mr. Cecil A. Yates TOWN MANAGER This Popular Annual Financial Report is intended to summarize the financial information appearing in the fiscal year 2014-2015 Comprehensive Annual Financial Report (CAFR). Copies of the CAFR can be viewed on the Town’s website at www.fh.az.gov/170/Financial-Reports -Budgets. The data included in this review is not prepared in accordance with GAAP as only a portion of the Town’s financial statements are presented. Grady Miller DEPARTMENT DIRECTORS Finance Director Craig Rudolphy Community Services Director Mark Mayer Development Services Director Paul Mood Presiding Judge Robert Melton Fire Chief Captain Randy Roberts, Rural Metro Corporation District Commander Captain David Letourneau, Maricopa County Sheriff’s Office Town Prosecutor The Law Offices of Mark Iacovino Town Attorney Andrew McGuire Gust Rosenfeld, P.L.C. TOWN HALL 16705 E. Avenue of the Fountains Fountain Hills, Arizona 85268 Arizona Legislature—District 23 U.S. Congress—District 6 Telephone: 480-816-5100 Fax: 480-837-3145 Website: www.fh.az.gov