City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2006 Prepared by: Financial Services Department Craig Clifford, CPA Chief Financial Officer Lisa Murphy, CPA Accounting Director City of Scottsdale, Arizona City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2006 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal – Chief Financial Officer, Financial Services .............................................................................. 1 Certificate of Achievement - Government Finance Officers Association ..................................................................... 6 Organizational Chart/List of Principal Officials..................................................................................................................7 FINANCIAL SECTION Independent Auditors’ Report ............................................................................................................................................... 9 Management’s Discussion and Analysis .............................................................................................................................. 11 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets ............................................................................................................................................. 28 Statement of Activities ...................................................................................................................................................... 29 Fund Financial Statements Balance Sheet - Governmental Funds ...................................................................................................................... 30 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ............................................................................................................................................................ 32 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds ............................................................................................................................................... 33 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ......................................................... 35 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - General Fund........................................................................................................................ 36 Statement of Net Assets - Proprietary Funds ......................................................................................................... 38 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds..................................................................................................................................................... 40 Statement of Cash Flows - Proprietary Funds ....................................................................................................... 41 Statement of Fiduciary Net Assets - Fiduciary Funds........................................................................................... 43 Statement of Changes in Fiduciary Net Assets - Fiduciary Funds ...................................................................... 44 Notes to the Financial Statements........................................................................................................................................ 45 I Summary of Significant Accounting Policies .......................................................................................................... 45 II Reconciliation of Government-wide and Fund Financial Statements ................................................................ 52 III Stewardship, Compliance and Accountability ......................................................................................................... 58 IV Detailed Notes on All Funds ..................................................................................................................................... 60 A. Prior Period Adjustment .............................................................................................................................. 60 B. Cash and Investments .................................................................................................................................. 60 C. Receivables ..................................................................................................................................................... 63 D. Capital Assets................................................................................................................................................. 64 E. Interfund Balances and Interfund Transfers. ........................................................................................... 67 F. Leases. ............................................................................................................................................................. 69 G. Bonds, Loans, and Other Payables ............................................................................................................ 69 City of Scottsdale, Arizona Page V Other Information....................................................................................................................................................... 82 A. Risk Management .......................................................................................................................................... 82 B. Contingent Liabilities .................................................................................................................................... 82 C. Commitments and Subsequent Events ...................................................................................................... 82 D. Joint Venture .................................................................................................................................................. 84 E. Related Organization ..................................................................................................................................... 84 F. Retirement and Pension Plans...................................................................................................................... 84 G. Other Post-Employment Benefits ............................................................................................................... 87 Required Supplementary Information: Schedule of Funding Progress – Public Safety Personnel Retirement System.......................................................... 89 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds .................................................................................... 92 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds ................................................................................................. 93 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds ....................................................... 95 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Special Revenue Governmental Funds.................................................................... 96 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: Highway User Fuel Tax – Special Revenue Fund ................................................................................................... 97 Preserve Privilege Tax – Special Revenue Fund ..................................................................................................... 98 Combining Balance Sheet - Nonmajor Debt Service Governmental Funds ............................................................. 99 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Debt Service Governmental Funds............................................................... 100 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: General Obligation Bond – Debt Service Fund ................................................................................................... 101 Municipal Property Corporation Bond – Debt Service Fund ............................................................................ 102 Special Assessments Bond – Debt Service Fund ................................................................................................. 103 Scottsdale Preserve Authority Bond – Debt Service Fund ................................................................................. 104 Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds ...................................................... 105 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Capital Projects Governmental Funds .................................................................. 106 Combining Statement of Net Assets - Internal Service Funds ................................................................................. 108 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets – Internal Service Funds. ........................................................................................................... 109 Combining Statement of Cash Flows - Internal Service Funds ................................................................................ 110 Combining Statement of Fiduciary Net Assets ........................................................................................................... 112 Combining Statement of Changes in Fiduciary Net Assets ....................................................................................... 113 Combining Statement of Changes in Assets and Liabilities – Fiduciary Funds ..................................................... 114 Other Supplementary Information: Schedule of Changes in Long-Term Debt........................................................................................................................ 116 City of Scottsdale, Arizona STATISTICAL SECTION Page Financial Trends Net Assets by Component – Last Five Fiscal Years (accrual basis of accounting) ............................................... 120 Changes in Net Assets – Last Five Fiscal Years (accrual basis of accounting) ...................................................... 121 Governmental Activities Tax Revenue by Source – Last Five Fiscal Years (accrual basis of accounting)...................................................................................................................................... 124 Fund Balances of Governmental Funds – Last Five Fiscal Years (modified accrual basis of accounting)..................................................................................................................... 125 Changes in Fund Balances of Governmental Funds – Last Five Fiscal Years (modified accrual basis of accounting)..................................................................................................................... 126 Governmental Activities Tax Revenue by Source – Last Five Fiscal Years (modified accrual basis of accounting)..................................................................................................................... 129 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category - Last Five Fiscal Years ............................................ 130 Direct and Overlapping Sales Tax Rates - Last Five Fiscal Years............................................................................ 131 Sales Tax Revenue Payers by Industry - Current Year and Nine Years Ago .......................................................... 132 Property Tax Rates – Direct and Overlapping Governments – Last Five Fiscal Years ....................................... 133 Principal Property Tax Payers – June 30, 2006 ............................................................................................................ 134 Assessed Value and Estimated Actual Value of Taxable Property – Last Five Fiscal Years. ................................................................................................................................................. 135 Property Tax Levies and Collections – Last Five Fiscal Years .................................................................................. 136 Debt Capacity Ratios of Outstanding Debt by Type – Last Five Fiscal Years ................................................................................. 137 Ratios of General Bonded Debt Outstanding – Last Five Fiscal Years .................................................................. 138 Direct and Overlapping Governmental Activities Debt as of June 30, 2006 ......................................................... 139 Legal Debt Margin Information – Last Five Fiscal Years .......................................................................................... 140 Pledged-Revenue Coverage – Last Five Fiscal Years .................................................................................................. 142 Economic and Demographic Information Demographic and Economic Statistics – Last Five Fiscal Years .............................................................................. 143 Principal Employers – Current Year and Nine Years Ago ........................................................................................ 144 Operating Information Full-time Equivalent City Government Employees by Function – Last Five Fiscal Years .................................. 145 Operating Indicators by Function – Last Five Fiscal Years ....................................................................................... 146 Capital Asset Statistics by Function – Last Five Fiscal Years .................................................................................... 149 City of Scottsdale, Arizona City of Scottsdale, Arizona Table of Contents September 15, 2006 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: Transmittal Letter The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2006, is submitted in accordance with Article 6, Section 14, of the City Charter. Management assumes full responsibility for the completeness and reliability of all information presented in this report, based upon a comprehensive framework of internal control that it established for this purpose. Because the cost of internal controls should not outweigh their anticipated benefits, the objective is to provide reasonable rather than absolute assurance that the financial statements are free of any material misstatements. For the Fiscal Year Ended June 30, 2006 Cronstrom, Osuch & Company, PC, have issued an unqualified (“clean”) opinion on the City of Scottsdale Scottsdale, Arizona City of Scottsdale, Arizona’s financial statements for the year ended June 30, 2006. The independent auditor’s report is located at the front of the financial section of this report. Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. City of Scottsdale Profile Scottsdale is centrally located in Maricopa County, Arizona, with its boundaries encompassing an area approximately 184.2 square miles, stretching 31 miles from north to south. Lying at an elevation of 1,260 feet above sea level, the City averages 314 days of sunshine and 7.74 inches of rainfall per year, with the average minimum and maximum temperatures ranging from 56.2 degrees to 86.3 degrees, respectively. The City is bordered to the west by Phoenix, the state capital, by Tempe to the south, and by the Salt River/ Pima Maricopa Indian Community to the east. Scottsdale, together with its neighboring cities, forms the greater metropolitan Phoenix area, which is the economic, political, and population center of the state. Scottsdale was founded in the 1800’s when retired Army Chaplain Major Winfield Scott homesteaded what is now the center of the City. The City incorporated in 1951 and the City Charter, under which it is presently governed, was adopted in 1961. The City has experienced significant increases in population, with the 1950 census reporting 2,032 residents, the 1990 census reporting 130,069, and the 2000 census reporting 202,705. The City’s population for 2006 was estimated at 226,390. City of Scottsdale, Arizona 1 Table of Contents Scottsdale operates under a council-manager form of government as provided by its Charter. The Mayor and six City Council members are elected at large on a non-partisan ballot for a four-year term. The City Council appoints the City Manager, who has full responsibility for carrying out Council policies and administering City operations. The City Manager, in turn, appoints City employees and department General Managers under service procedures specified by Charter. City service departments provide a full range of services including police and fire protection, sanitation/solid waste service, water and sewer services, construction and maintenance of streets, recreational activities, and cultural events. The annual budget serves as the foundation for Scottsdale’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the City’s various funds. Therefore, these funds have appropriated budgets, and budget to actual information is presented. On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Two public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. In June, the budget is legally enacted through passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. 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. During fiscal year (FY) 2005/06, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by department. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Departmental appropriations may be amended during the year. Upon the recommendation of the City Manager, and with the approval of the City Council: (1) transfers may be made from the appropriations for contingencies to departments; and (2) unexpended appropriations may be transferred from one department to another. Management control of budgets is further maintained at a line item level within the department. Local Economy The City of Scottsdale’s tax revenue base consists of a variety of tax categories, the most significant being revenue collections from retail sales, tourism, and construction activities. The City also benefits from other favorable conditions associated with Scottsdale, including a stable, diversified economic base and a desirable location for work, destination, and living. Low commercial vacancy rates and the attractive developments within Scottsdale continue to bring high-end residential growth and commercial development. Revitalization efforts have resulted in a rebirth of the City’s downtown area, as well as renewed interest in redevelopment of the more mature, southern parts of the City. Scottsdale is past its historic period of peak expansion and the long-term economic outlook for the City must recognize this fact. Commercial successes are due, in part, to Scottsdale’s commitment to targeted recruitment efforts that focus on industry segments that complement the existing business mix, including: corporate headquarter and regional offices; high-tech, research and development; bio-med; high-end resorts and hotels, and business and professional services. The following categories represent key factors affecting Scottsdale’s economic and financial success: Retail Sales Scottsdale’s largest revenue source is sales tax generated from a well-balanced variety of business categories including automotive, construction, food stores, hotels/motels, department stores, retail stores, restaurants, utilities and rentals. The City saw a second consecutive year of double-digit growth in sales tax revenues in FY 2005/06 with an 11.1 percent increase over the prior year’s 10.5 percent gain – both positive indicators that the local economy is expanding. 2 City of Scottsdale, Arizona Table of Contents Employment and Job Growth Scottsdale is creating jobs faster than it is adding to its labor force and thus remains a net importer of labor. This creates employment opportunities for Scottsdale residents and creates a significant business component to the local tax base. Scottsdale’s unemployment rate was lower than state and metropolitan levels and was approximately 2.9 percent as of June 2006. Scottsdale recruited nine new, targeted firms and secured one expansion resulting in over 1,275 new jobs in FY 2005/06 with an average annual salary of $56,000. The City benefited from population growth as well as higher income levels due to the addition of higher wage jobs. Major new employers to announce moves to Scottsdale in FY 2005/06 included InNexus, Sankyo Pharmaceutical, Efunds, and Sanofi/Aventis. The City also benefited from the expansions of DHL. Vacancy Rates Scottsdale’s citywide office vacancy rate was 13.5 percent at the end of FY 2005/06, well below the Valley-wide average. Scottsdale’s weighted average rent was 10.1 percent higher than the Valley-wide average, evidence that Scottsdale remains an attractive city to conduct business. Tourism Tourism is one of Scottsdale’s largest industries and is a significant contributor to the City’s economy. Numerous resort and convention facilities, along with many hotels and motels, provide nearly 10,000 guest rooms, along with many public and private golf courses and tennis courts, and several country clubs. The number of rooms is expected to remain stable through 2006, with additional rooms coming into the market in 2007 and 2008. More than 17,000 retail shops, boutiques, and galleries are located throughout the City and a selection of almost 600 restaurants is available. These services and facilities, complemented by the mild winter, have made Scottsdale a popular vacation spot for tourists and winter visitors. Hotel/motel transient occupancy tax receipts increased approximately 12.6 percent in FY 2005/06 over the previous year – the third straight year of revenue growth after post 9/11 levels. Room rates and room occupancy are nearing the levels experienced by the industry in the late 1990s and the early 2000s. The current assessment for tourism in FY 2006/07 is that these positive trends will continue, although factors such as high energy costs, inflationary pressures, a slowing housing market, and geopolitical instability in the Middle East could all impact future industry performance. Long-term Financial Planning The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Scottsdale’s fiscal health. Fiscal conservatism, a streamlined budget, and operating efficiencies have resulted in a solid financial position for the City at the close of FY 2005/06. The Mayor and City Council cocreated a mission statement as well as seven broad goal categories, which represent key interests and priorities of the Mayor, City Council, and reflect their constituency’s suggestions and expectations for the future. Approval by Council of these mission and goal statements allows staff to create strategic plans and a programmatic budget that directly responds to the Council’s and community’s goals and expectations. Plans articulated in the FY 2005/06 budget and five-year financial plan continued to support basic government services (roads, water, sewer, solid waste management, public transit, parks and recreation, police, fire, etc.), while also addressing the City Council’s broad goals and citizen expectations for the community. Scottsdale’s financial plan requires many elements working in concert with one another. Some of these financial plan elements are financial resource planning, multi-year budget planning, strategic capital improvement project planning and debt management, all of which are further identified below. Scottsdale’s financial forecast includes conservative revenue projections, potential for State reductions of revenue sharing due to population shifts, and continued increases in demand for City services such as police, fire, transportation and social services. Financial Services management role has and will continue to be to maintain and enhance financial plan elements and ensure the continued financial stability for the City of Scottsdale. City of Scottsdale, Arizona 3 Table of Contents Financial Resource Planning Strategic financial planning begins with determining the City’s fiscal capacity based upon long-term financial forecasts of recurring available revenues. Financial forecasts coupled with financial trend analysis techniques and careful reserve analysis help preserve the fiscal wellbeing of Scottsdale. Strategic financial capacity planning is a critical element to reach long-term financial stability goals and to determine special financial needs for critical objectives of the City Council. Multi-Year Budget Planning Multi-year budget planning encompasses long-range operating expenditure plans (including the operating impacts of planned capital projects), which are linked to community expectations and broad goals of the City Council. The multi-year approach provides a better opportunity for staff to change its financial paradigm from what do we need this year to how do we accomplish our service objectives over time, given our financial capacity. While the City is required to adopt an annual budget to meet State statutory requirements, Scottsdale builds a five-year financial plan to help anticipate future impacts and ensure achievement of City objectives. Strategic Capital Improvement Project Planning Scottsdale Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budget plans. Projects with significant operating impacts are carefully timed to avoid contingent liabilities, which future operating resources cannot meet. Pay-as-you-go funding sources are also conservatively estimated to avoid overcommitting to capital construction using revenues that are not certain. To the extent debt financing is used and/or required capital project plans are sized to conform to existing debt management policies. Debt Management Scottsdale has a financial policy, which prohibits the issuance of debt for operating expenses. With that as a governing framework, all debt issuances are for the purposes of financing capital infrastructure (or long-lived costly assets). Each debt issuance is evaluated against multiple additional policies addressing: debt service as a percent of operating expenditures, tax and revenue bases for the repayment of debt, the overall debt burden on the community, statutory limitations and market factors affecting tax-exempt interest costs. In all cases a long-term analysis is made considering the financial (debt) capacity that fits the wherewithal (and willingness) of our community to pay for the capital projects. The annual debt service operating cost for each additional $1 million dollars in new debt ranges from $75,000 to $80,000, based on a current interest rate of 4.75 percent when amortized over 20 years. Sizing of the City’s Capital Improvement Project Plan based on debt capacity in conjunction with conservatively estimated pay-as-you-go revenues will help stabilize per capita debt and lower annual debt service costs to the City over the long-term. Major Initiatives The City of Scottsdale’s FY 2006/07 budget reflects an expanding economy at the local level, reinforced by positive overall indicators at the state and national levels. Current economic conditions allow the City to maintain its core services and to provide some enhancements to existing service levels. However, prudent long-term fiscal planning dictates a conservative approach to budgeting by funding only those enhancements that are financially sustainable. The FY 2006/07 budget funds City Council and citizen priorities, including additional police officers, operations for new community facilities, park expansions, and service level demands pertaining to social services, youth programs, revitalization efforts, and environmental preservation. 4 City of Scottsdale, Arizona Table of Contents Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Scottsdale for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2005. This was the 33rd consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current 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. The City of Scottsdale received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2005 from the GFOA for our conformity in budget presentation. We believe that our current budget continues to conform to the program requirements and expect to receive this award for the fiscal year beginning July 1, 2006. In addition, credit ratings of “AAA”, “Aaa”, and “AAA” from the three major credit rating agencies, Fitch Ratings, Moody’s Investors Service, and Standard and Poor’s Ratings Services, respectively, were re-affirmed in Fall 2005 on the City’s outstanding general obligation bonds. These are the highest ratings possible and this distinction, originally earned by the City in 2001, is held by only a handful of local governments across the nation. The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Accounting and Budget divisions, the assistance of administrative personnel in the various departments, and through the competent service of our independent auditors. I also wish to express my sincere appreciation to the City Council, the City Manager, and the Assistant City Managers for their interest and support in planning and conducting the financial affairs of the City of Scottsdale in a responsible and progressive manner. Respectfully submitted, Craig Clifford, CPA, CGFM Chief Financial Officer City of Scottsdale, Arizona 5 Table of Contents 6 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona List of Elected and Appointed Officials City Council Mary Manross, Mayor Robert W. Littlefield, Vice Mayor Betty Drake Wayne Ecton W.J. “Jim” Lane Ron McCullagh Tony Nelssen Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 City of Scottsdale Scottsdale, Arizona City of Scottsdale, Arizona Charter Offices Deborah Robberson, City Attorney Cheryl Dreska, City Auditor Carolyn Jagger, City Clerk B. Monte Morgan, City Judge Janet M. Dolan, City Treasurer Administrative Staff Janet M. Dolan, City Manager Ed Gawf, Assistant City Manager Roger Klingler, Assistant City Manager Neal Shearer, Assistant City Manager 7 Table of Contents 8 Citizens of Scottsdale Mayor and City Council City Manager Citizens’ Advisory Boards Citizens’ Advisory Commissions Charter Offices City Attorney - Deborah Robberson 480-312-7994 City Auditor - Cheryl Dreska 480-312-7867 City Clerk - Carolyn Jagger 480-312-2411 City Judge - B. Monte Morgan 480-312-2442 City Treasurer - Janet M. Dolan 480-312-2800 Janet M. Dolan 480-312-2800 Administrative Support Assistant City Manager Assistant City Manager Assistant City Manager Ed Gawf 480-312-4510 Roger Klingler 480-312-5830 Neal Shearer 480-312-2604 Executive Assistant Kroy Ekblaw 480-312-7064 Citizen & Preservation Transportation The Downtown Planning & Group Development Neighborhood Services Resources Frank Gray Judy Register Bob Cafarella Mary O’Connor John C. Little 480-312-2334 480-312-2539 480-312-2890 480-312-2454 480-312-2577 Administration City of Scottsdale, Arizona Aviation * Transportation Planning * Transit * Traffic Engineering -Intelligent Transportation Systems Administration McDowell Downtown Customer * Marketing & Services & Sonoran Customer Promotion Administration Preserve Service & * * * Communication Planning & Downtown Historic * Project Design Services Preservation Neighborhood Planning & * * Services Coordination Current Planning Environmental * Services Planning Downtown * Services Parking Plan Review & Program Permit Services/ One Stop Shop * * Cultural Inspection & Council Contract Land Survey Services Administration Police Fire Alan Rodbell 480-312-1900 William L. McDonald 480-312-1880 Office of the Chief * Uniformed Services * Special Programs * Investigative Services * Administrative Services * Personnel Development Fire Administration * Fire Emergency Services * Fire Support Services * Emergency Management Economic Vitality Dave Roderique 480-312-7601 Economic Development * Tourism * Revitalization * Business Services Water Resources Municipal Services WestWorld David Mansfield VACANT VACANT 480-312-5681 480-312-5555 480-312-6825 Community Services Financial Services Human Constituent & Communications Resources Intergovernmental and Public Relations Affairs Debra Baird Craig Clifford Brad Hartig Teri Traaen Bridget Schwartz-Manock Pat Dodds 480-312-2480 480-312-2364 480-312-7615 480-312-2615 480-312-2423 480-312-2336 Administration Operations & Administration Administration Water * Resources * * Facilities Capital Administration Parks & Accounting Management Project * e r e a t o n R c i * * Management Water * Budget Events * Operations Human * Management Solid * Services Risk Waste Water * Management Management Quality Library * * * Systems Purchasing e d F i l Water * * Services Treatment Parks & Ground Customer * Management Service Fleet * Management Facilities * Management Stormwater Management Information Systems IS Support * Application Dev. Integration, Mgt. & Support * Technology Infrastructure Implem. & Support * GIS Data Services * Project Office * Departmental Support Administration * Human Resources * Learning & Organization Development * Diversity & Dialogue Federal Relations * Stat e Relations * Regional Relations Public Relations * Media Relations * CityCable 11 September 2006 Table of Contents Table of Contents Table of Contents M ANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Scottsdale’s (the City) Comprehensive Annual Financial Report presents a narrative overview and comparative analysis of the financial activities of the City for the fiscal years ended June 30, 2006 and 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal and the basic financial statements. FINANCIAL HIGHLIGHTS Key Financial highlights for fiscal year 2006 are as follows: • The assets of the City exceeded its liabilities at the close of the fiscal years 2006 and 2005 by $3.4 billion and $3.1 billion (net assets), respectively. Of these amounts, $316.7 million and $430.8 million (unrestricted net assets), respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net assets increased by $232.0 million and $119.3 million during fiscal years 2006 and 2005, respectively. • As of June 30, 2006 and 2005, the City’s governmental funds reported combined ending fund balances of $348.0 million and $264.8 million, respectively. The increase is primarily due to bond issuances during fiscal year 2006. Approximately 93.1 percent of the fund balance at June 30, 2006, $324.1 million, is unreserved fund balance available for spending at the government’s discretion, compared to $253.3 million at June 30, 2005. • At the close of the current fiscal year, unreserved fund balance for the General Fund was $93.2 million or 45.3 percent of total General Fund expenditures of $205.7 million. At the close of fiscal year 2005, unreserved fund balance for the General Fund was $72.8 million or 38.6 percent of total General Fund expenditures of $188.4 million. • During fiscal years 2006 and 2005, the City’s total bonded debt increased by approximately $247.2 million and $27.0 million, respectively. Although the City reduced several bond payable balances, the key contributors to the increase were the issuance of new General Obligation bonds in the amount of $145.0 million, Municipal Property Corporation bonds in the amount of $134.8 ($46.5 in Governmental activities and $88.3 in Business-type activities) during fiscal year 2006. City of Scottsdale, Arizona 11 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements 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. Relationship Between Comprehensive Annual Financial Report (CAFR) and Basic Financial Statements and Required Supplementary Information (RSI) General Information on the government structure, Introductory services and environment Section + Management's Discussion and Analysis CAFR Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Financial Section Notes to the Financial Statements Additional Required Supplementary Information Information on individual funds and discretely presented component units and other supplementtary information not required by GAAP + Trend data and nonfinancial data Statistical Section Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets and the statement of activities provide information about the whole City, presenting both an aggregate view of the City’s finances and a longer-term view of those assets. Major fund financial statements provide the next level of detail. For governmental funds, these statements reflect how services were financed in the short term as well as what dollars remain for future spending. The fund financial statement also displays the City’s most significant funds with all other major funds presented in total in one column. The statement of net assets presents information on all of the City’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 or not the financial position of the City is improving or deteriorating. 12 City of Scottsdale, Arizona Table of Contents The government-wide financial statements are for the City itself. However, included within the governmental activities of the government-wide financial statements are the operations of the City of Scottsdale Municipal Property Corporation (MPC), the Scottsdale Preserve Authority (SPA), and the Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, Via Linda Road, and Waterfront Commercial Community Facilities Districts. Although legally separate from the City, these component units are blended with the primary government because of their governance or financial relationships to the City. Separate financial statements of the MPC, SPA and the Scottsdale Mountain, McDowell Mountain Ranch, DC Ranch, Via Linda Road and Waterfront Commercial Community Facilities Districts may be obtained at the City’s Financial Services Department, Accounting Division, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251. Management’s Discussion and Analysis Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, police, financial services, transportation, community services, information systems, planning and development, fire, municipal services, citizen and neighborhood resources, human resources and economic vitality. The business-type activities of the City include water, sewer, solid waste, and airport operations. For the Fiscal Year Ended June 30, 2006 The statement of activities presents information showing how the City’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, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. The government-wide financial statements can be found on pages 28 and 29 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into the following three categories: Governmental Funds, Proprietary Funds, and Fiduciary Funds. Gover nmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental 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. The City maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). 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 Bond Debt Service Fund, General Capital Improvement Plan (CIP) Capital Projects Fund, and General Obligation Bond Capital Projects Fund which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements in a separate section of this report. City of Scottsdale, Arizona 13 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents The basic governmental fund financial statements begin on page 30 of this report. Proprietar y Funds Proprietary Funds are generally used to account for services for which the City charges customers–either outside customers, internal units or departments of the City. Proprietary Funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The City maintains the following two types of Proprietary Funds: Enterprise Funds are used to report the same functions presented as business-type activities in the governmentwide financial statements. The City uses Enterprise Funds to account for the operations of the Water, Sewer, Solid Waste and Airport operations of the City. All Enterprise Funds are considered to be major funds of the City. Internal Service Funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses Internal Service Funds to account for its fleet of vehicles and selfinsurance. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The Internal Service Funds are combined into a single, aggregated presentation in the Propriety Fund financial statements. Individual fund data for the Internal Service Funds is provided in the form of combining statements in a separate section of this report. The basic Proprietary Fund financial statements begin on page 38 of this report. Fiduciar y Funds Fiduciary Funds are used to account for resources held for the benefit of parties outside the City. The City has two private-purpose trust funds and two agency funds, which are reported under the Fiduciary Funds. Fiduciary Funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for Fiduciary Funds is much like that used for Proprietary Funds. The basic Fiduciary Fund financial statements begin on page 43 of this report. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found beginning on page 45 of this report. Required Supplementar y Infor mation In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension benefits to its employees. This information can be found on page 89 of this report. Combining Statements The combining statements referred to earlier in connection with non-major Governmental Funds, Internal Service Funds, and Fiduciary Funds are presented immediately following the required supplementary information on pensions. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the City 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 City, 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. 14 City of Scottsdale, Arizona Table of Contents Net Assets For the Years Ended June 30, 2006 and 2005 (in thousands of dollars) Governmental Business-Type Activities 2006 Assets Current and Other Assets Capital Assets* Total Assets Liabilities Long-term Liabilities Outstanding Other Liabilities Total Liabilities $ 497,118 2,685,292 3,182,410 740,077 138,135 878,212 Activities 2005 $ 415,801 2,442,117 2,857,918 608,392 96,890 705,282 2006 $ 307,886 1,039,230 1,347,116 231,584 42,248 273,832 Total 2005 $ 282,528 912,642 1,195,170 163,570 38,738 202,308 2006 $ 805,004 3,724,522 4,529,526 971,661 180,383 1,152,044 2005 $ 698,329 3,354,759 4,053,088 771,962 135,628 907,590 Management’s Discussion and Analysis Analysis of Net Assets As noted earlier, net assets may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $3.4 billion and $3.1 billion at the close of the fiscal years 2006 and 2005, respectively. For the Fiscal Year Ended June 30, 2006 These two statements report the City’s net assets and the changes in those assets. The change in assets is important because it tells the reader whether the financial position of the City as a whole has improved or diminished. However, in evaluating the overall position of the City, non-financial information such as changes in the City’s tax base and the condition of the City’s capital assets will also need to be evaluated. Net Assets Invested in Capital Assets, Net of Related Debt* 2,029,375 1,877,955 806,749 756,433 2,836,124 2,634,388 Restricted* 197,691 78,794 27,000 23,472 224,691 102,266 Unrestricted 77,132 195,887 239,535 212,957 316,667 408,844 Total Net Assets $ 2,304,198 $ 2,152,636 $ 1,073,284 $ 992,862 $ 3,377,482 $ 3,145,498 * The 2005 capital asset balance and restricted fund balance amounts were adjusted, see Prior Period Adjustment note page 60. The largest portion of the City’s net assets reflects its investment in capital assets (e.g. land, buildings, and equipment) of $2.8 billion (84.0 percent) and $2.6 billion (83.8 percent), less any related outstanding debt used to acquire those assets, for the fiscal years 2006 and 2005, respectively. Although the City’s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources because the City uses these assets to provide services to citizens and; therefore, cannot liquidate them. An additional portion of the City’s net assets, $224.7 million (6.7 percent) for fiscal year 2006 and $102.3 million (3.3 percent) for fiscal year 2005 represent resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets for fiscal years 2006 and 2005, $316.7 million (9.4 percent) and $408.8 million (13.0 percent), respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of both the current and previous fiscal years, the City was able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for the business-type activities. City of Scottsdale, Arizona 15 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents Analysis of Changes in Net Assets The City’s total net assets increased by $232.0 million and $119.3 million during the fiscal years 2006 and 2005, respectively. These increases are explained in the government and business-type activities discussion herein, and are primarily a result of contributions from developers of infrastructure assets. Changes in Net Assets For the Years Ended June 30, 2006 and 2005 (in thousands of dollars) Governmental Activities 2006 2005 Revenues Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Property Taxes Business Taxes Intergovernmental Taxes Interest and Investment Income Other Total Revenues Expenses General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Interest on Long-term Debt Water Utility Sewer Utility Airport Solid Waste Total Expenses Increase in Net Assets Before Special Items and Transfers Gain/(Loss) on Sale of Capital Asset Transfers Increase in Net Assets Net Assets at Beginning of Year * Net Assets at End of Year $ 50,225 $ 26,355 136,745 Business-Type Activities 2006 2005 46,720 $ 26,865 73,092 Total 2006 2005 129,141 $ 55,580 120,261 $ 38,313 179,366 $ 26,355 192,325 50,610 190,121 54,481 13,714 5,786 528,037 48,416 168,909 48,346 6,765 4,941 424,054 119 6,581 686 192,107 4,288 821 163,683 50,610 190,240 54,481 20,295 6,472 720,144 166,981 26,865 111,405 48,416 168,909 48,346 11,053 5,762 587,737 42,729 74,408 8,343 82,047 57,931 14,589 26,943 14,746 3,419 3,615 7,549 12,883 617 37,192 387,011 30,943 63,076 8,315 85,835 57,519 7,941 28,620 16,520 3,496 3,333 8,026 12,522 1,094 32,466 359,706 53,961 27,854 2,922 16,412 101,149 59,723 28,324 3,346 15,508 106,901 42,729 74,408 8,343 82,047 57,931 14,589 26,943 14,746 3,419 3,615 7,549 12,883 617 37,192 53,961 27,854 2,922 16,412 488,160 30,943 63,076 8,315 85,835 57,519 7,941 28,620 16,520 3,496 3,333 8,026 12,522 1,094 32,466 59,723 28,324 3,346 15,508 466,607 141,026 64,348 90,958 (841) 10,536 9,567 (10,536) 151,562 73,074 80,422 2,152,636 2,079,562 992,862 $ 2,304,198 $ 2,152,636 $ 1,073,284 $ 56,782 231,984 121,130 (977) (1,818) (9,567) 46,238 231,984 119,312 946,624 3,145,498 3,026,186 992,862 $ 3,377,482 $ 3,145,498 * The beginning net asset balance was adjusted, see Prior Period Adjustment note page 60. Governmental activities Governmental activities increased the City’s net assets by $151.6 million in fiscal year 2006 and $73.1 million in fiscal year 2005, thereby accounting for 65.3 percent and 61.3 percent, respectively, of the total growth in the net assets of the City. The key factor of this increase is as follows: City sales tax posted a year-over-year growth in the 2006 fiscal year resulting in an increase of 12.6 percent. Although the property tax rates decreased in both fiscal years 2006 and 2005 property tax revenues rose 4.5 percent and 4.4 percent, respectively, over the previous years due to increases in assessed valuation. 16 City of Scottsdale, Arizona Table of Contents (in thousands) 80,000 70,000 60,000 50,000 Revenues Expenses 40,000 30,000 20,000 10,000 Interest on Long-term Debt Streetlight and Services Districts Planning and Development Economic Vitality Human Resources Citizen & Neighborhood Resources Municipal Services Fire Information Systems Community Services Transportation Financial Services Police General Government - Management’s Discussion and Analysis Fiscal Year 2005-06 For the Fiscal Year Ended June 30, 2006 Program Revenues and Expenses for Governmental Activities Revenues by Source - Governmental Activities Fiscal Year 2005/06 Interest and investment income 2.60% Other 1.09% Charges for services 9.51% Operating grants and contributions 4.99% Other taxes 10.32% Capital grants and contributions 25.90% Business taxes 36.01% Property taxes 9.58% City of Scottsdale, Arizona 17 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents As shown in the “Program Revenues and Expenses for Governmental Activities” chart and the “Revenues by Source for Governmental Activities” chart, transportation is the largest function in expense (21.2 percent), followed by police (19.2 percent), and community services (15.0 percent). General revenues such as property, business, and privilege taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, business taxes, including Sales and Use Taxes and Franchise Taxes, are the largest single source of funds (36.0 percent), followed by capital grants and contributions (25.9 percent), Intergovernmental taxes (10.3 percent) and property taxes (9.6 percent). The Transportation department ensures that Scottsdale neighborhoods, businesses and visitors are provided an accessible, environmentally sensitive, safe and efficient transportation system. Projects and operations for street, transit and non-motorized travel are developed in cooperation with the public and promote economic sustainability for the community, preserves and enhances neighborhood quality of life and ensures seamless connections to the regional network. The Scottsdale Police Department, in partnership with the citizens of Scottsdale, recognizes the changing needs of our community and law enforcement’s role in addressing those needs. Furthermore, they pledge excellence, initiative and integrity to enhance the quality of life throughout our City knowing those they serve deserve no less. The City’s Community Services Department improves and preserves Scottsdale’s quality of life through development of safe and highly maintained facilities and imaginative services that provide opportunities for family interaction, cultural enrichment, and development of lifetime skills which build self-esteem, promote healthy lifestyles and are a catalyst for community involvement. They provide assistance and guidance to those in need and link our citizens with information and resources throughout the world. Business-Type activities Business-type activities increased the City’s net assets in fiscal years 2006 and 2005 by $80.4 million and $46.2 million, respectively, accounting for 34.7 percent and 38.7 percent, respectively, of the total growth in the City’s net assets. The key factor of this increase is as follows: The Water and Sewer Utility Fund had capital contributions from developers and grantors resulting in $54.9 million and $35.9 million in revenue for fiscal years 2006 and 2005, respectively. The majority of this amount is from infrastructure donated from developers and development fees received as development continues throughout the City. Program Revenues and Expenses - Business-Type Activities Fiscal Year 2005/06 (In Millions) 100,000 Program Revenues Expenses 50,000 - 18 Water Utility Sewer Utility Airport Solid Waste City of Scottsdale, Arizona Table of Contents Business Taxes 0.06% Capital grants and contributions 28.93% Interest and investment income 3.43% Charges for services 67.22% As shown in “Program Revenues and Expenses for Business Type Activities” and the “Revenues by Source for Business Type Activities” charts, the largest of Scottsdale’s business-type activities, Water and Sewer utilities, each had expenses of $54.0 million and $27.9 million, respectively, in fiscal year 2006, followed by Solid Waste with operating expenses of $16.4 million. For the fiscal year, revenues exceeded expenses in all four areas of business activity. Revenues exceed expenditures due to multi-year financial planning and pay-as-you-go contributions to capital projects. Charges for services provided the largest share of revenues (67.3 percent) followed by capital grants and contributions (28.9 percent), which are largely developer contributions and development fees, for all of the business-type activities. Management’s Discussion and Analysis Other Income 0.36% For the Fiscal Year Ended June 30, 2006 Revenues by Source - Business-Type Activities Fiscal Year 2005/06 The City’s Water Resources Department plans, manages and operates a safe, reliable water supply and wastewater reclamation system and provides efficient, high quality customer service to Scottsdale citizens. The Solid Waste Department provides effective and responsive leadership that ensures the delivery of safe, efficient and environmentally sound solid waste services to approximately 76,144 residential customers and 1,439 commercial and roll-off customers. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds Funds are created and segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. An activity not required to be reported in a separate fund is included in the general fund. Governmental funds are used to account for tax-supported activities. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. These funds are accounted for by using the modified accrual basis of accounting. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Project Funds. City of Scottsdale, Arizona 19 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $348.0 million, an increase of $83.3 million in comparison to the combined ending fund balances for fiscal year 2005 of $264.8 million. The increase in the current year’s fund balance is primarily due to the sale of general obligation bonds during fiscal year 2006. Approximately $324.1 million of the total for fiscal year 2006 and $253.3 million of the total for fiscal year 2005 constitutes unreserved fund balance, which is available for spending at the City’s discretion. Within the 324.1 million, $189.9 million is reported in Capital Projects funds, $91 million in Special Revenue funds and $30 million is designated in the General Fund. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed, (1) to pay debt service ($23.1 million and $10.6 million for fiscal years 2006 and 2005, respectively) or; (2) to pay for the ongoing cost of the streetlight and services districts ($805,000 and $872,000 for fiscal years 2006 and 2005, respectively). Revenues for governmental functions overall totaled approximately $392.2 million in fiscal year 2006, an increase of 8.0 percent ($29.2 million) over the previous year total of $363.0 million. In fiscal year 2006 expenditures for governmental functions, totaled $513.0 million, an increase of 3.8 percent ($18.8 million) over the fiscal year 2005 total of $494.2 million. In the fiscal years ended June 30, 2006 and 2005 expenditures for governmental functions exceeded revenues by approximately $120.8 million (30.8 percent) and $131.2 million (31.1 percent), respectively. The excess in both years was due to the City financing some capital projects with debt proceeds received in prior years and reflected in beginning fund balance. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unreserved fund balance of the General Fund was $93.2 million, while total fund balance was $94.0 million. The unreserved and total balances for the General Fund at the end of fiscal year 2005 were $72.8 million and $73.6 million, respectively. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 45.3 percent of the total General Fund expenditures of $205.7 million in fiscal year 2005 and 38.6 percent of the total General Fund expenditures of $188.4 million in fiscal year 2005. The total fund balance represents 45.7 percent and 39.1 percent of total fund expenditures for fiscal years 2006 and 2005, respectively. In fiscal year 2006 management has designated $30.1 million of the General Fund unreserved fund balance for various uses. See note section III.D in the Notes to the Financial Statements for further information regarding reservations and designations. The General Fund Balance increase in fiscal year 2006 by $20.4 million is mainly due to a brighter economic outlook and rising consumer confidence that resulted in increased sales tax revenues for the City. Overall, the General Fund’s performance resulted in revenues over expenditures in the fiscal year ended June 30, 2006, of $56.6 million, an increase of 15.2 percent over the comparable figure from the prior year of $49.1 million. The General Obligation Bond Debt Service fund is used to account for the accumulation of resources for, and the payment of, general obligation long-term debt principal, interest and related costs. At the end of the current fiscal year, the fund balance of the General Obligation Bond Debt Service Fund was $12.4 million, an increase of $6.8 million from the $5.6 million at the end of fiscal year 2005. The General CIP Construction Capital Projects fund accounts for the resources used to acquire, construct and improve major capital facilities, other than those financed by Proprietary Funds. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Project Fund was $57.1 million, compared to a fund balance of $113.6 million at the end of fiscal year 2005. The decrease in fund balance is primarily due increased capital expenditures as compared to prior years using carryover balances. Capital improvement expenditures in 2006 and 2005 were $176.0 million and $115.6 million, respectively, an increase of $60.4 million, which is explained in greater detail in the Capital Assets section of this report. The General Obligation Bond Capital Project Fund accounts for proceeds of the sale of 1989, 1992 and 2000 voter-approved general obligation bonds that are used for authorized capital improvements. At the end of the current fiscal year, the fund balance was $95.0 million, an increase of $79.6 million from the $15.4 million at the end of fiscal year 2005, which is explained in detail in the Capital Assets section of this report. 20 City of Scottsdale, Arizona Table of Contents The total growth in net assets for the Enterprise Funds was $80.4 million and $46.2 million for fiscal years 2006 and 2005, respectively. Factors concerning the finances of these funds have been addressed previously in the discussion of the City’s business-type activities. In particular, the Scottsdale Water and Sewer net assets increased by $78.4 million due to capital contributions of $54.9 million as well as increased revenues. Fiduciar y Funds The City maintains Fiduciary Funds for the assets of the Family Self-Sufficiency Agency Fund, the Retainage Escrow Agency Fund, the Handicap Scholarship Private Purpose Trust Fund, and the Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund. The Hospital Trust Fund manages the investment of monies held in trust for the redevelopment of the Scottsdale Memorial Hospital. As of the end of fiscal year 2006, the net assets of the Handicap Scholarship Private Purpose Trust Fund totaled $4,000. All other Fiduciary Funds have a zero balance due to completion of projects directly related to the redevelopment area. Management’s Discussion and Analysis At the end of the fiscal years 2006 and 2005, the unrestricted net assets for the Water and Sewer Utility were $230.5 million and $204.3 million, respectively; Scottsdale Airport were $3.5 million and $2.1 million, respectively; and the Solid Waste Utility Fund were $5.5 million and $6.6 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, also had unrestricted net assets of $15.8 million and $16.6 million, respectively. For the Fiscal Year Ended June 30, 2006 Proprietar y Funds The City’s Proprietary Funds provide the same type of information found in the government-wide financial statements, but in more detail. General Fund Budgetar y Highlights The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The City’s final budget differs from the original budget due to adjustments that were made during the fiscal year. In fiscal year 2006, there was an increase in expenditure budgets; however, the City maintained an excess of revenues over expenditures and did not exceed the total appropriations for the year. The majority of these changes were Photo Enforcement Loop 101 contingency transactions approved by the City Council and budgetary transfers to the Fleet Management Fund for vehicle adjustments. Net budget increases for expenditures by department totaled $5.1 million and $190,000 for fiscal years 2006 and 2005, respectively. The net increase/decrease is defined as follows: $ 904,000 4,767,000 (17,000) (595,000) (16,000) 109,000 (98,000) General Government Police Finanical Services Community Services Information Systems Fire Citizen & Neighborhood Resources Actual revenues and other resources exceeded budgetary estimates by $11.5 million in fiscal year 2006 and $26.7 million in fiscal year 2005. City of Scottsdale, Arizona 21 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents Capital Assets and Debt Administration Capital Assets The City’s capital assets for its governmental and business-type activities as of June 30, 2006 and 2005, amount to $3.7 billion and $3.4 billion, respectively (net of accumulated depreciation). Capital assets include land, buildings and improvements, water and sewer systems, water rights, vehicles, machinery and equipment, furniture and fixtures, and construction in progress. The total increase in the City’s capital assets (net of accumulated depreciation) for the fiscal years 2006 and 2005 was 11.0 percent as shown in the table below. Capital Assets, Net of Depreciation June 30, 2006 (in thousands of dollars) Governmental Business-type Activities Activities Total 2006 2005 2006 2005 2006 2005 Land* $ 898,941 $ 718,880 $ 24,822 $ 24,065 $ 923,763 $ 742,945 Buildings and Land Improvements 150,789 136,185 11,778 10,146 162,567 146,331 Streets and Storm Drains 1,427,769 1,417,799 1,427,769 1,417,799 Machinery and Equipment 25,579 20,173 4,332 3,972 29,911 24,145 Water Rights 64,688 64,688 64,688 64,688 Water System 415,199 401,207 415,199 401,207 Sewer System 266,624 257,445 266,624 257,445 Motor Vehicles and Maintenance by Fleet 24,486 22,629 24,486 22,629 Furniture, Fixtures and Office Equipment 71 117 71 117 Construction in Progress 157,728 126,451 251,716 151,002 409,444 277,453 Total $ 2,685,292 $ 2,442,117 $ 1,039,230 $ 912,642 $ 3,724,522 $ 3,354,759 *Adjustment made to 2005 ending balance related to capital asset additions, see Prior Period Adjustment note. Major capital asset events during the current fiscal year included the following: 22 • Construction in progress on the Chaparral Water Treatment Plant – A multiple construction contract project accounting for total budgeted funds of approximately $83.5 million with total expenditures for the current fiscal year of $46.8 million. The project includes designing and constructing a 30.0 million gallon per day water treatment plant to treat the city’s allocation of Salt River Project water. Currently the City of Phoenix provides treatment of this water. • The City’s water and sewer 5-year capital improvement plan includes significant cost impacts from “unfunded” federal water quality mandates for treatment of arsenic and disinfection by-product requirements, in addition to plant and infrastructure expansion to accommodate growth. The most significant CIP cash expenditures, in addition to the Chaparral Water Treatment Plant noted above, forecasted in the 5-year plan include: Arsenic Mitigation Treatment ($44.0 million), the 91st Avenue Wastewater Treatment Plant expansion and improvements ($7.9 million), and the Water Reclamation Plant Phase 3 Expansion ($5.6 million). • Construction continued on Hayden Road, Cactus to Redfield totaling $4.8 million in expenditures this year. The construction will add turn lanes at two major intersections, bike lanes, sidewalks, landscaping, convert a drainage channel to a culvert system and add intelligent transportation system improvements. • The City purchased approximately 149 acres of West World property at a cost of $80.3 million as part of a long-term strategy to meet parking and other needs at the Tournament Players Club and West World. • Construction continued on the McDowell Mountain Ranch Park and Aquatic Center with expenditures totaling $9.3 million this year. City of Scottsdale, Arizona Table of Contents Outstanding Debt For the Years Ended June 30, 2006 and 2005 (in thousands of dollars) General Obligation Bonds Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable Capital Lease Compensated Absences Total Long-Term Liabilities $ $ Governmental Activities 2006 2005 499,365 $ 372,070 $ 2,990 5,815 108,225 61,253 80,570 83,385 5,505 6,340 7,090 7,650 Business-Type Activities 2006 2005 - $ 6,515 $ 62,405 65,735 161,965 79,430 - 41,945 15,859 (10,234) 751,315 13,136 18,889 783,340 $ 9,177 (1,245) 232,302 179 2,181 234,662 $ 43,480 11,868 (11,693) 580,168 14,324 13,900 608,392 $ Total 2006 2005 499,365 $ 378,585 65,395 71,550 270,190 140,683 80,570 83,385 5,505 6,340 7,090 7,650 41,945 6,059 25,036 (1,530) (11,479) 156,209 983,617 13,136 179 1,971 21,070 158,180 $ 1,018,002 $ Management’s Discussion and Analysis Debt Administration At the end of the fiscal years 2006 and 2005, the City had total long-term obligations outstanding of $1,018.0 million and $766.6 million, respectively. Of these amounts, $499.4 million and $378.6 million, respectively, are General Obligation Bonds backed by the full faith and credit of the City. The remainder includes revenue bonds, certificates of participation, and other obligations of $518.6 million and $388.0 million, respectively. For the Fiscal Year Ended June 30, 2006 For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. See Section IV in the Notes to the Financial Statements for further information regarding capital assets. 43,480 17,927 (13,223) 736,377 14,324 15,871 766,572 During fiscal years 2006 and 2005, the City’s total bonded debt increased by approximately $247.2 million and $27.0 million, respectively. Although the City reduced several bond payable balances, the key contributors to the increase were the issuance of general obligation bonds, $145 million, and Municipal Property Corporation bonds, $135 million, during fiscal year 2006. The State constitution imposes certain debt limitations on the City of six percent (6%) and twenty percent (20%) of the outstanding assessed valuation of the City. The City’s available debt margin at June 30, 2006 and 2005 is $157.3 million and $195.8 million, respectively, in the 6% capacity and $574.6 million and $554.9 million, respectively, in the 20% capacity. Additional information on the debt limitations and capacities may be found in Section IV of the Notes to the financial statements and also in Table XVIIa in the statistical section of this report. The City’s ratings on uninsured General Obligation Bonds as provided above were affirmed by the Rating Agencies in December 2005 in conjunction with the issuance of General Obligation Bonds. Rating Agencies also reviewed and confirmed several of the revenue based bond ratings at various times throughout the year with the latest ratings shown in the schedule below. Additional information in the City’s long-term debt can be found in Section IV of the Notes to the Financial Statements. City of Scottsdale, Arizona 23 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2006 Table of Contents City of Scottsdale Bonded Debt Ratings As of June 30, 2006 General Obligation (GO) Municipal Property Corp (MPC) Water and Sewer Revenue (W&S) Highway User Revenue Fund (HURF) Scottsdale Preserve Authority (SPA) Moody's Investors Service Aaa Aa1 Aa1 Aa3 Aa3 Standard and Poor's Rating Group AAA AA+ AA+ AA AA- Fitch Investors Service, Inc. AAA AA+ AA+ Not Rated AA- Economic Factors and Next Year’s Budget and Rates The City of Scottsdale’s fiscal year 2007 budget reflects continuing strength in the City’s economy, reinforced by positive trends at the state and national levels. Modest improvements projected in the City’s revenues, combined with savings carried over from fiscal year 2006, will allow Scottsdale to balance its budget and meet its most pressing needs. These needs include additional police officers, added operating costs related to the opening of new City facilities, continued emphasis on economic vitality and revitalization, and increased health care and retirement costs. Current economic conditions allow the City to maintain core services and, in some cases, to provide enhancements to existing service levels. However, 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 revenue forecasts used in the budget are cautiously optimistic. There is no assumption that the City has returned to the extraordinary economic conditions of the 1990s. The City is past its historic period of peak expansion and the long-term budget plans must recognize that fact. In addition to the factors mentioned above, all of the following factors were considered in preparing the City’s budget for fiscal year 2007: The City continued to use a zero based, “program budget” approach, which focuses on the quality of each service citizens receive from the City, whether the service is provided by one department or several. The staff also continued to develop a more realistic and precise plan for continued investment in the City’s basic infrastructure and public facilities, combined with a more comprehensive analysis of maintenance and operating costs. Under the adopted budget, General Fund expenditures, debt payments and transfers-out to other funds increase from $256.5 million in fiscal year 2006 to $291.9 million in fiscal year 2007. A major component of the increase is $4.5 million in transfer out to the capital project fund for pay-as-you go capital projects. All of the above factors were considered in preparing the City’s budget for fiscal year 2007. The budget for fiscal year 2006/07 includes: • • • • • 24 Community facilities – staffing for the new McDowell Mountain Park and Aquatic Center, expansions at Chaparral park and Scottsdale Ranch park, and maintenance staff to handle the added facilities and the downtown Parking Program. Public safety – staff additions in this category are Police Department positions; they include a combination of patrol services, mounted patrol officers and other personnel to improve police services. Citizen Services and Community Growth – increased staff primarily to support planning and development workloads, the Victim’s Advocate Program, youth activities and after school programs. Internal service demands – additional staffing to support the day-to-day needs of other operating departments such as Human Resources, Information Systems and Financial Services. Health care costs – the General Fund budget assumes increased health care costs of approximately $2.5 million. City of Scottsdale, Arizona Table of Contents A separate, key component of the annual financial plan is the City’s five-year Capital Improvement Plan (CIP) for infrastructure and public facilities including roads, water and sewer improvements, parks, buildings and information technology. The adopted CIP appropriation for fiscal year 2007 is $863.8 million, which includes $498.6 million (or 57.7 percent of the total) re-budgeted from the prior year. Under Arizona law, the City must re-budget for a capital project until it is completed. Some examples of major projects included in the CIP budget are: • • • • • • • Community Facilities – Acquire, preserve and restore desert lands along Scottsdale Road to promote its designation as a Scenic Corridor, infrastructure to support site development of the Sky Song facility, design and construction of the Arabian library (phase II). Preservation – Construction of trails supporting the gateway to the preserve and expansion of preserve lands. Drainage and Flood Control – Drainage improvement to several areas within Scottsdale including North of the Loop 101, Granite Reef, Indian School Road, McDonald Drive corridor and North Scottsdale Road. Public Safety – Construction of the District 1 Police Facilities at the McKellips Service Center as well as construction of the Downtown Fire Station #602. Service Facilities – Major renovation of the existing TPC (Tournament Players Club) Desert Golf Course, access improvements of the common central pedestrian area of the TPC and maintenance to community service facilities. Transportation – Improvements to several main Scottsdale thorough ways including Bell Road, Frank Lloyd Wright Boulevard, McDonald Drive, Cactus and Hayden Road. Additionally, improvements will be made to various bus stops to construct shelters to provide weather protection, seating, bike racks and other amenities. Water Services – Expansion of the existing CAP Water Treatment Plant, modification and improvements to sewer lines to meet future demands. Management’s Discussion and Analysis Retirement costs – mandatory Arizona state retirement funding for civilian and public safety employees are expected to increase by $1.9 million. For the Fiscal Year Ended June 30, 2006 • The adopted budget continues the practice of setting aside a reserve equal to 10 percent of the General Fund and Highway User Fund program budgets to ensure the City can provide basic services in the event of major emergencies. Requests For Infor mation This financial report is designed to provide a general overview of the City’s finances for all of those with an interest in the government’s finances. If you have questions about this report or need additional financial information, contact: City of Scottsdale Financial Services Department Accounting Division 7447 E. Indian School Road, Suite 210 Scottsdale, AZ 85251 (480) 312-2437 Or visit our website at: http://www.scottsdaleaz.gov/finance/ City of Scottsdale, Arizona 25 Table of Contents 26 City of Scottsdale, Arizona Table of Contents Basic Financial Statements City of Scottsdale, Arizona 27 Table of Contents Statement of Net Assets June 30, 2006 (in thousands of dollars) Governmental Activities Business-type Activities $ $ Total ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivable (net of uncollectible amounts of $13,828) Property Taxes and Penalties Other Local Taxes Intergovernmental Charges for Services Interest and Other Supplies Inventory Restricted Cash, Cash Equivalents, and Investments: Customer Advances and Deposits 373,955 53,322 111,802 47,430 $ 485,757 100,752 8,135 20,791 20,789 16,933 746 2 12,973 2,310 - 8,135 20,791 20,791 12,973 19,243 746 - 1,408 1,408 494,671 175,925 670,596 2,447 98,044 945 98,044 3,392 - 5,972 18,562 8,438 5,972 18,562 8,438 1,056,669 1,628,623 2,685,292 341,226 698,004 1,039,230 1,397,895 2,326,627 3,724,522 Total Noncurrent Assets 2,687,739 1,171,191 3,858,930 Total Assets 3,182,410 1,347,116 4,529,526 Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences-Current Accrued Compensated Absences-Due within One Year Claims Payable Due to Other Governments Customer Advances and Deposits Matured Bonds, Loans, Other Payables Matured Bonds, Loans, Other Interest Payable Bonds, Loans, and Other Payables-Due within One Year Unearned Revenue Other Liabilities Total Current Liabilities 22,244 4,982 58 9,416 14,734 110 5,031 25,386 18,360 33,847 1,693 2,274 138,135 10,944 377 1,000 1,408 14,185 6,284 8,050 42,248 33,188 5,359 58 10,416 14,734 110 6,439 39,571 24,644 41,897 1,693 2,274 180,383 Noncurrent Liabilities Accrued Compensated Absences-Due in More Than One Year Deferred Revenue Bonds, Loans, and Other Payables-Due in More Than One Year Total Noncurrent Liabilities 9,473 730,604 740,077 1,181 5,972 224,431 231,584 10,654 5,972 955,035 971,661 878,212 273,832 1,152,044 2,029,375 806,749 2,836,124 23,142 71,810 95,398 100 6,436 805 77,132 2,304,198 18,562 8,438 239,535 1,073,284 23,142 71,810 95,398 100 6,436 805 18,562 8,438 316,667 $ 3,377,482 Total Current Assets Noncurrent Assets Equity in Joint Venture Deferred Charges Restricted Cash, Cash Equivalents, and Investments: Deferred Revenue Water and Sewer System Replacement Acquisition and Construction Reserve Development Fees Capital Assets Land, Water Rights, and Construction in Progress Facilities, Infrastructure, and Equipment (net of depreciation) Total Capital Assets (net of accumulated depreciation) LIABILITIES Total Liabilities - NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted Debt Service Transportation and Preserve Privilege Tax Activities Capital Projects Grants Special Programs Streetlight and Service District Water and Sewer System Replacement Acquisition and Construction Unrestricted Total Net Assets $ $ The notes to the financial statements are an integral part of this statement. 28 City of Scottsdale, Arizona Table of Contents Statement of Activities For the Year Ended June 30, 2006 (in thousands of dollars) Function/Programs Governmental Activities General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Interest on Long-term Debt Total Governmental Activities Business-Type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 42,729 $ 74,408 8,343 82,047 57,931 14,589 26,943 14,746 3,419 3,615 7,549 12,883 617 37,192 387,011 53,961 27,854 2,922 16,412 101,149 $ 488,160 $ 13,783 $ 9,938 277 4,028 1,010 163 20,515 511 50,225 81,517 27,119 3,342 17,163 129,141 179,366 $ 859 $ 1,823 15,708 7,893 3 6 10 53 26,355 26,355 $ General Revenues Taxes Property Taxes Sales and Use Taxes Franchise Taxes Intergovernmental State Shared Sales State Revenue Sharing Other Interest and Investment Income Other Revenue Transfers Total General Revenues and Transfers Change in Net Assets Net Assets - Beginning Net Assets - Ending 4,086 73 130,745 388 1,453 136,745 Governmental Activities $ Business-type Activities (24,001) $ (62,574) (8,343) 64,683 (45,622) (14,589) (25,930) (13,287) (3,246) (3,615) (7,549) 7,685 (106) (37,192) (173,686) Total - $ - (24,001) (62,574) (8,343) 64,683 (45,622) (14,589) (25,930) (13,287) (3,246) (3,615) (7,549) 7,685 (106) (37,192) (173,686) 26,208 28,690 682 55,580 - 53,764 27,955 1,102 751 83,572 53,764 27,955 1,102 751 83,572 192,325 (173,686) 83,572 (90,114) 50,610 180,470 9,651 119 - 50,610 180,589 9,651 $ 21,664 21,223 11,594 13,714 5,786 10,536 325,248 151,562 2,152,636 2,304,198 $ 21,664 21,223 11,594 6,581 20,295 686 6,472 (10,536) (3,150) 322,098 80,422 231,984 992,862 3,145,498 1,073,284 $ 3,377,482 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 29 Table of Contents 30 Balance Sheet Governmental Funds June 30, 2006 (in thousands of dollars) General Obligation Bond Debt Service General Fund ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Hotel/Motel Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Special Assessments Miscellaneous Due from Other Funds Supplies Inventory Total Assets City of Scottsdale, Arizona (continued) $ $ 84,905 458 764 9,076 472 539 1,859 2,481 6,646 1,019 8,550 78 320 117,167 $ $ 11,957 30,197 786 4 42,944 General CIP Construction Capital Projects $ $ 60,125 5,675 532 14 66,346 Total Nonmajor Governmental Funds General Obligation Bond Capital Projects $ $ 94,502 - 523 95,025 $ $ 91,073 16,992 497 4,443 164 1,441 1,327 96 5,436 278 121,747 Total Governmental Funds $ $ 342,562 53,322 2,316 13,519 472 1,489 1,859 2,481 6,646 1,441 1,019 1,327 96 5,436 8,846 78 320 443,229 Table of Contents City of Scottsdale, Arizona Balance Sheet Governmental Funds June 30, 2006 (in thousands of dollars) General Obligation Bond Debt Service General Fund LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Court Tax Audit Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities $ 3,010 $ 4,816 122 336 General CIP Construction Capital Projects Total Nonmajor Governmental Funds General Obligation Bond Capital Projects 8,947 143 78 5,746 7,345 Total Governmental Funds - $ 12,492 17,705 9,193 $ 12 - - $ - $ 21,150 4,971 78 18,360 25,386 223 6,646 3,403 339 82 1,899 2,243 23,119 311 30,508 28 9,233 - 110 5,436 1,354 3,132 31 32,322 644 5,436 6,646 3,403 1,354 339 110 5,031 2,274 95,182 805 - 12,436 - - 10,706 805 23,142 37,767 40,952 89,425 121,747 30,073 63,170 189,905 40,952 348,047 443,229 Fund Balances Reserved for Streetlight and Services Districts Debt Service Unreserved, Reported in General Fund - Designated General Fund - Undesignated Capital Projects Funds Special Revenue Funds Total Fund Balances Total Liabilities and Fund Balances $ 30,073 63,170 94,048 117,167 $ The notes to the financial statements are an integral part of this statement. 12,436 42,944 $ 57,113 57,113 66,346 $ 95,025 95,025 95,025 $ $ 31 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2006 (in thousands of dollars) Fund Balances -Total Governmental Funds $ 348,047 Amounts reported for governmental activities in the statement of net assets are different because (see Section II A): Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Bond issuance costs are not financial resources and, therefore, are not reported in the funds. Long-term receivables are not due and receivable in the current period and, therefore, are not reported in the funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. 2,659,918 2,447 19,366 (782,876) Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by deferred revenue in the funds. 16,129 Internal Service Funds are used by management to charge the costs of certain activities, such as, insurance and vehicles to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the statement of net assets. 41,167 Net Assets of Governmental Activities $ 2,304,198 The notes to the financial statements are an integral part of this statement. 32 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) General Obligation Bond Debt Service General Fund REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State-Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Building and Related Permits Fire Fees Recreation Fees Westworld Equestrian Facility Fees Fines, Fees and Forfeitures Code Enforcement Court Fines Parking Photo Radar Court Enhancement Library Special Assessments Property Rental Interest Earnings (Loss) Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) $ 18,362 114,927 8,970 6,308 3,157 186 776 $ General CIP Construction Capital Projects 27,928 - $ Total Nonmajor Governmental Funds General Obligation Bond Capital Projects - $ - $ 3,361 55,503 - Total Governmental Funds $ 49,651 170,430 8,970 6,308 3,157 186 776 21,664 21,223 9,720 1,572 - - - 15,708 1,098 - 21,664 21,223 9,720 15,708 1,098 1,572 20,477 1,010 2,491 2,313 - - - 38 931 - 20,515 1,010 3,422 2,313 5,216 355 2,947 606 3,463 4,010 - 2,944 2,832 163 48 925 1,106 710 2,732 163 5,264 355 2,947 925 606 1,106 4,173 12,518 699 53 511 11 773 9,898 548 262,246 4 27,932 77 307 100 93 3,521 2,832 8,378 322 3,653 32 724 99 96 95,627 8,378 399 4,352 392 511 835 969 9,898 644 392,158 33 Table of Contents 34 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) General Obligation Bond Debt Service General Fund EXPENDITURES Current General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures General CIP Construction Capital Projects General Obligation Bond Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds City of Scottsdale, Arizona 22,083 65,304 7,769 44,384 8,253 24,296 582 3,062 3,498 7,510 12,415 617 - - - 1,433 974 10,099 9,151 8,268 8 9 21 - 23,516 66,278 7,769 10,099 53,535 8,253 24,296 8,850 3,070 3,507 7,510 12,436 617 1,076 4,618 210 205,677 17,705 21,198 296 39,199 29 175,928 175,957 - 8,851 10,566 26 42,759 92,165 27,632 36,382 351 218,897 512,998 Excess (Deficiency) of Revenues Over Expenditures 56,569 (11,267) (172,436) 2,832 3,462 (120,840) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Long-term Capital-Related Debt Issued Premium on Bonds Issued Total Other Financing Sources and (Uses) 8,147 (44,312) (36,165) 15,267 2,834 18,101 70,071 (2,333) 46,500 1,690 115,928 1,003 (49,235) 125,000 76,768 53,155 (44,633) 20,000 977 29,499 147,643 (140,513) 191,500 5,501 204,131 20,404 6,834 (56,508) 79,600 32,961 83,291 73,644 5,602 113,621 15,425 56,464 264,756 95,025 89,425 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 94,048 $ The notes to the financial statements are an integral part of this statement. 12,436 $ 57,113 $ $ 348,047 Table of Contents Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2006 (in thousands of dollars) Net Change in Fund Balances - Total Governmental Funds $ 83,291 Amounts reported for governmental activities in the statement of activities are different because (see Section II B): 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. This is the amount by which capital outlay exceeded depreciation in the current period. 109,183 Donations of capital assets are not reflected on the governmental fund statements but are shown in the statement of activities. 133,262 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 governmental funds. (4,921) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 647 Bond issuance costs are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net assets. This is the amount by which current year bond issuance costs exceed amortization expense in the current period. 132 The issuance of long-term debt 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. This is the amount by which bond proceeds exceeded principal retirement in the current period. (169,369) Additional accrued interest calculated on bonds and notes payable. (591) The net revenues of certain activities of internal service funds is reported with governmental activities. Changes in Net Assets of Governmental Activities (72) $ 151,562 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 35 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State-Shared Sales State Revenue Sharing Auto Lieu Tax Business and Liquor Licenses Charges for Current Services Building and Related Permits Fire Fees Recreation Fees Westworld Equestrian Facility Fees Fines, Fees and Forfeitures Court Fines Parking Photo Radar Library Property Rental Interest Earnings Intergovernmental Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues $ 18,699 106,345 8,177 5,649 2,754 203 630 Final $ 18,699 106,345 8,177 5,649 2,754 203 630 Actual Amounts Budgetary Basis $ Budget to GAAP Differences 18,362 114,927 8,970 6,308 3,157 186 776 $ Actual Amounts GAAP Basis - $ 18,362 114,927 8,970 6,308 3,157 186 776 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (337) 8,582 793 659 403 (17) 146 19,026 20,512 8,925 2,008 19,026 20,512 8,925 2,008 21,664 21,223 9,720 1,572 - 21,664 21,223 9,720 1,572 2,638 711 795 (436) 15,500 2,341 1,824 15,500 2,341 1,824 20,477 2,491 2,313 1,010 - 20,477 1,010 2,491 2,313 4,977 150 489 5,096 213 12,512 613 3,018 1,850 5,096 213 12,512 613 3,018 1,850 5,216 355 2,947 606 3,463 3,202 808 5,216 355 2,947 606 3,463 4,010 120 142 (9,565) (7) 445 1,352 550 9,898 1,020 247,363 550 9,898 1,020 247,363 511 9,898 548 258,892 699 53 11 773 3,354 699 53 511 11 773 9,898 548 262,246 (39) (472) 11,529 23,689 66,223 8,396 47,039 9,078 26,169 490 3,430 3,703 8,038 13,590 590 24,593 70,989 8,379 46,444 9,062 26,278 490 3,331 3,703 8,038 13,590 590 22,306 65,731 7,814 44,623 8,342 24,307 532 3,098 3,549 7,525 12,531 617 (223) (427) (45) (239) (89) (11) 50 (36) (51) (15) (116) - 22,083 65,304 7,769 44,384 8,253 24,296 582 3,062 3,498 7,510 12,415 617 2,287 5,258 565 1,821 720 1,971 (42) 233 154 513 1,059 (27) 2,355 3,189 215,979 2,355 3,189 221,031 1,076 4,618 206,669 210 (992) 1,076 4,618 210 205,677 1,279 (1,429) 14,362 Excess (Deficiency) of Revenues Over Expenditures 31,384 26,332 52,223 56,569 25,891 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) 7,909 (41,067) (33,158) 7,909 (41,067) (33,158) 8,147 (44,312) (36,165) 8,147 (44,312) (36,165) 238 (3,245) (3,007) (1,774) (6,826) 16,058 4,346 20,404 22,884 59,249 59,249 73,644 - 73,644 14,395 EXPENDITURES Current General Government Police Financial Services Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 57,475 $ 52,423 $ 89,702 4,346 - $ 4,346 $ 94,048 $ 37,279 The notes to the financial statements are an integral part of this statement. 36 City of Scottsdale, Arizona Table of Contents General Fund Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Change in Fair Value of Investments Miscellaneous Items $ Total Revenue Reconciling Items: 3,354 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Claims and Compensated Absences Bad Debt Expense Capital Improvement Total Expenditure Reconciling Items: Net Increase in Fund Balance - Budget to GAAP 808 2,546 (1,203) 1 210 (992) $ 4,346 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 37 Table of Contents Statement of Net Assets Proprietary Funds June 30, 2006 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Total Governmental Activities Internal Service Funds ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivable (net of allowance for uncollectibles) Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Restricted Cash, Cash Equivalents, and Investments: Customer Advances and Deposits Total Current Assets Noncurrent Assets Equity in Joint Venture Deferred Charges Restricted Cash, Cash Equivalents, and Investments: Deferred Revenue Water and Sewer System Replacement Acquisition and Construction Reserve Capital Assets Land Water Rights Water System Sewer System Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Less Accumulated Depreciation $ 103,405 47,430 $ 3,402 - $ 4,995 - $ 111,802 47,430 $ 31,393 - 11,480 2 1,015 974 - 12 212 - 1,493 38 59 - 12,973 2 1,065 1,245 - 242 93 426 1,343 65 - 1,408 - 165,649 3,691 6,585 175,925 32,154 98,044 945 - - 98,044 945 - 5,972 18,562 8,438 - - 5,972 18,562 8,438 - 14,147 64,688 582,245 345,834 4,569 621 251,343 (248,933) 9,564 15,054 838 373 (5,064) 1,111 2,997 1,905 (2,062) 24,822 64,688 582,245 345,834 18,051 7,312 621 251,716 (256,059) 1,846 58,705 426 (35,603) Total Capital Assets (net of accumulated depreciation) 1,014,514 20,765 3,951 1,039,230 25,374 Total Noncurrent Assets 1,146,475 20,765 3,951 1,171,191 25,374 10,536 $ 1,347,116 Total Assets $ 1,312,124 $ 24,456 $ $ 57,528 The notes to the financial statements are an integral part of this statement. (continued on next page) 38 City of Scottsdale, Arizona Table of Contents Statement of Net Assets Proprietary Funds June 30, 2006 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Total Governmental Activities Internal Service Funds LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Current Accrued Compensated Absences - Due Within One Year Due to Other Funds Claims Payable Customer Advances and Deposits Matured Bonds Payable Matured Bond Interest Payable Bonds Payable - Due within One Year $ Total Current Liabilities 10,530 273 703 1,343 14,185 6,284 8,050 $ 65 15 44 65 - $ 349 89 253 - $ 10,944 377 1,000 1,408 14,185 6,284 8,050 $ 1,094 67 2 232 14,734 - 41,368 189 691 42,248 16,129 783 5,972 224,431 38 - 360 - 1,181 5,972 224,431 232 - 231,186 38 360 231,584 232 272,554 227 1,051 273,832 16,361 782,033 20,765 3,951 806,749 25,374 18,562 8,438 230,537 $ 1,039,570 3,464 24,229 5,534 9,485 18,562 8,438 239,535 $ 1,073,284 15,793 41,167 Noncurrent Liabilities Accrued Compensated Absences -Due in More Than One Year Deferred Revenue Bonds Payable - Due in More Than One Year Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Water and Sewer System Replacement Restricted for Acquisition and Construction Unrestricted Total Net Assets $ $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 39 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2006 (in thousands of dollars) Water and Sewer Utility Operating Revenues Charges for Sales and Services Water Service Fees Sewer Service Fees Proprietary - Non-Potable Water Fees Groundwater Treatment Plant Solid Waste Fees Airport Fees Other Services Other $ Total Operating Revenues 74,756 27,119 5,956 805 681 Airport $ 3,342 - Solid Waste $ 17,163 5 Total $ 74,756 27,119 5,956 805 17,163 3,342 686 Governmental Activities Internal Service Funds $ 32,422 989 109,317 3,342 17,168 129,827 33,411 34,325 14,806 7,198 25,486 1,480 635 807 14,147 2,065 197 34,325 14,806 14,147 1,480 9,898 26,490 34,859 5,190 Total Operating Expenses 81,815 2,922 16,409 101,146 40,049 Operating Income (Loss) 27,502 420 759 28,681 (6,638) 6,331 - 119 64 - 186 (3) - 119 6,581 (3) - 701 1,196 94 6,331 183 183 6,697 1,991 33,833 603 942 35,378 (4,647) 54,898 (10,306) 682 597 (84) (743) 55,580 597 (11,133) 1,169 3,696 (290) Operating Expenses Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Non-Operating Revenues (Expenses) Property Tax Transaction Privilege Tax Investment Income Interest Expense Gain on Sale of Capital Assets Net Non-Operating Revenues (Expenses) Income (Loss) Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending 78,425 1,798 199 80,422 961,145 22,431 9,286 992,862 9,485 $ 1,073,284 $ 1,039,570 $ 24,229 $ (72) 41,239 $ 41,167 The notes to the financial statements are an integral part of this statement. 40 City of Scottsdale, Arizona Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2006 (in thousands of dollars) Water and Sewer Utility Cash Flows from Operating Activities Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Other Operating $ Net Cash Provided by (Used for) Operating Activities Cash Flows from Non-Capital Financing Activities Property Tax Transaction Privilege Tax Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Bonds Proceeds Capital Contributions from Other Water and Sewer Development Fees Capital Grants Acquisition and Construction of Property and Equipment Principal Payments on Capital Debt Interest Paid on Capital Debt Sale of Capital Assets $ Net Cash Provided by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year $ 3,364 (1,736) (901) 727 (10,306) 119 597 (84) (10,306) 632 91,512 Cash Flows from Investing Activities Proceeds from the Sale of Investments Income Received on Investments Solid Waste 43,332 $ Total 18,044 (11,423) (5,011) 5 $ 1,615 $ 32,581 (32,232) (3,452) 1,541 (1,562) (743) 119 597 (11,133) 701 3,696 (290) (743) (10,417) 4,107 - 1,436 (1,195) - 130,451 (66,414) (19,048) 685 45,674 - - 24,072 62 (121,935) (10,706) (7,855) - Net Cash Provided by (Used for) Capital and Related Financing Activities Cash and Cash Equivalents at End of Year 109,043 (53,255) (13,136) 680 Airport Governmental Activities Internal Service Funds 91,512 - (1,740) (45) - 24,072 1,498 (123,130) (12,446) (7,900) - (4,826) 168 (1,785) (26,394) (4,658) (24,850) 241 5,960 56 126 173 126 6,189 1,087 5,960 56 299 6,315 1,087 14,136 1,656 (614) 15,178 (1,026) 171,014 1,811 178,434 32,419 185,150 $ 3,467 5,609 $ 4,995 $ 193,612 $ 31,393 The notes to the financial statements are an integral part of this statement. (continued on next page) City of Scottsdale, Arizona 41 Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2006 (in thousands of dollars) (Concluded) Water and Sewer Utility Airport Solid Waste Governmental Activities Internal Service Funds Total Cash and Cash Equivalents at End of Year Includes Cash and Investments Cash with Fiscal Agent Restricted Cash and Investments $ 103,405 47,430 34,315 $ 3,402 65 $ 4,995 - $ 111,802 47,430 34,380 $ 31,393 - Total Cash and Cash Equivalents $ 185,150 $ 3,467 $ 4,995 $ 193,612 $ 31,393 $ 27,502 $ 420 $ 759 $ 28,681 $ (6,638) Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used for) Operating Activities Depreciation and Amortization Changes In Assets and Liabilities Sources (Uses) of Cash Accounts Receivable Miscellaneous Receivables Supplies Inventory Accounts Payable Accrued Payroll and Benefits Claims Payable Deferred Revenue Other Liabilities 25,486 Supplemental Disclosure of Non-Cash Financing Activities Additions to Property, Plant, and Equipment Contributions from Developers Contributions from Other Government Units Amortization of Deferred Charges Total Non-Cash Financing Activities 197 26,490 18 893 (12) (9,662) (400) 582 38 (490) (32) 4 (42) (180) - 1,023 (338) (10,194) (612) 582 42 15,830 307 856 16,993 130 (344) Total Adjustments Net Cash Provided by (Used for) Operating Activities 807 5,190 711 (157) 265 (102) (831) 5,076 $ 43,332 $ 727 $ 1,615 $ 45,674 $ (1,562) $ 30,806 (286) $ - $ - $ 30,806 (286) $ 1,169 - $ 30,520 $ - $ - $ 30,520 $ 1,169 The notes to the financial statements are an integral part of this statement. 42 City of Scottsdale, Arizona Table of Contents Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2006 (in thousands of dollars) Private Purpose Trust Funds ASSETS Cash and Cash Equivalents $ Total Assets LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities NET ASSETS Held in Trust for Other Purposes $ Agency Funds 4 $ 5,281 4 5,281 - 86 5,195 - 5,281 4 $ - The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 43 Table of Contents Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2006 (in thousands of dollars) Private Purpose Trust Funds ADDITIONS Contributions: Private Donations $ Total Additions 5 5 DEDUCTIONS Scholarships Redevelopment Expenses 5 19 Total Deductions 24 Change in Net Assets (19) Net Assets - Beginning Net Assets - Ending 23 $ 4 The notes to the financial statements are an integral part of this statement. 44 City of Scottsdale, Arizona Table of Contents The City of Scottsdale, Arizona (City) was incorporated in 1951. The current City Charter was adopted in 1961, which established the Council/Manager form of government. The City provides basic government services to its citizens including roads, water, sewer, solid waste management, public transit, parks and recreation facilities, police and fire. The accounting policies of the City conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the more significant policies. The financial reporting entity presented in these financial statements consists of the City of Scottsdale, Arizona (the primary government) and its component units. The component units discussed below are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City. Component Unit City of Scottsdale Municipal Property Corporation (MPC) Scottsdale Preserve Authority (SPA) Scottsdale Mountain Community Facilities District (CFD) Description and Criteria for Inclusion • Non-profit corporation created in 1967. • Sole purpose is to construct, acquire, and equip buildings, structures or land improvements for the City. • Governed by Board of Directors appointed by the City Council. • For financial reporting purposes, transactions are included as a governmental and proprietary fund type, as if part of the City’s operation. • Non-profit corporation created in 1997. • Sole purpose is to finance land acquisitions for McDowell Sonoran Preserve. • Governed by a Board of Directors appointed by the City Council. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. • Formed by 1992 petition to City Council. • Created to acquire and improve public infrastructure in specified land area. • Able to levy taxes and issue bonds independent of the City. • Property owners within the designated area are assessed for District taxes and costs of operation. • City Council serves as the Board of Directors. • The City has no liability for the District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. City of Scottsdale, Arizona Reporting Method For Separate Financial Statements Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Notes to Financial Statements A. Financial Reporting Entity For the Fiscal Year Ended June 30, 2006 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 45 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents McDowell Mountain Ranch Community Facilities District (CFD) DC Ranch Community Facilities District (CFD) Via Linda Road Community Facilities District (CFD) Waterfront Commercial Community Facilities District (CFD) 46 • Formed by 1994 petition to City Council. • Created to acquire and improve public infrastructure in specified land area. • Able to levy taxes and issue bonds independent of the City. • Property owners within the designated area are assessed for District taxes and costs of operation. • City Council serves as the Board of Directors. • The City has no liability for the District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. • Formed by 1997 petition to City Council. • Created to acquire and improve public infrastructure in specified land area. • Able to levy taxes and issue bonds independent of the City. • Property owners within the designated area are assessed for District taxes and costs of operation. • City Council serves as the Board of Directors. • The City has no liability for the District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. • Formed by 1998 petition to City Council. • Created to acquire and improve public infrastructure in specified land area. • Able to levy taxes and issue bonds independent of the City. • Property owners within the designated area are assessed for District taxes and costs of operation. • City Council serves as the Board of Directors. • The City has no liability for the District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. • Formed by 2005 petition to City Council. • Created to acquire and improve public infrastructure in specified land area. • Able to levy taxes and issue bonds independent of the City. • Property owners within the designated area are assessed for District taxes and costs of operation. • City Council serves as the Board of Directors. • The City has no liability for the District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance Department Accounting Division 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 City of Scottsdale, Arizona Table of Contents The statement of activities demonstrates the degree to which the direct expenses for a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and trust fund financial statements. Agency funds do not have a measurement focus. 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 have been met. Notes to Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. For the Fiscal Year Ended June 30, 2006 B. Gover nment-wide and 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. The City considers revenues to be available if they are collected within 30 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Except expenditures related to vacation, sick leave, claims, and judgments, are recorded only when payment is due. Property taxes, other local taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when the City receives cash. The government reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Obligation Bond Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term obligation debt principal, interest, and related costs. The General CIP Construction Capital Projects Fund accounts for the resources used to acquire, construct and improve major capital facilities, other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. The General Obligation Bond Capital Projects Fund accounts for proceeds of the sale of 1989, 1992 and 2000 voterapproved general obligation bonds that are used for authorized capital improvements. City of Scottsdale, Arizona 47 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents The government reports the following major proprietary funds: The Water and Sewer Utility, Airport and Solid Waste Funds account for the operating revenues and expenses of the City’s water and sewer utility systems, airport and sanitation services (solid waste, brush removal, container maintenance, etc.), respectively. Additionally, the government reports the following fund types: The Internal Service Funds account for fleet management and self-insurance services provided to other departments or units of the City, on a cost-reimbursement basis. The Agency Funds are purely custodial (assets equal liabilities) and do not involve measurement of results of operations. The City’s agency funds are used to record the Family Self-Sufficiency activity and Retainage Escrow activity. The Private-Purpose Trust Funds are used to account for assets held in a trustee capacity for scholarships and other purposes as designated by the donors or by legal restrictions. Both the principal and earnings of these expendable trust funds can be expended for the trusts’ intended purposes. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are payments-in-lieu of taxes, indirect costs and franchise fees and other charges between the City’s Water and Sewer Utility Fund, Airport Fund, and Solid Waste Fund, because elimination of these charges would distort the direct costs and program revenues reported in the Statement of Activities. Amounts reported as program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise and internal service funds are charges for customer services including: water, sewer, airport, and solid waste fees, vehicle purchase amounts and risk management charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first; then unrestricted resources as they are needed. 48 City of Scottsdale, Arizona Table of Contents GASB Statement No. 31 provides that governmental entities may report all investments at fair value or they may elect to report certain money market investments and participating interest-earning investment contracts at amortized cost. The City has elected to report all investments at fair value. The City’s policy is to invest in certificates of deposit, repurchase agreements, commercial paper, direct U.S. Treasury debt, securities guaranteed by the United States Government or any of its agencies, and the State of Arizona Local Government Investment Pool (LGIP). The LGIP is overseen by the State of Arizona. The fair value of each share in the LGIP is $1. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are classified as “due to/from other funds” (i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” All accounts, property tax and court receivables are shown net of an allowance for uncollectibles. All receivables in excess of one year comprise the allowance for uncollectibles at June 30, 2006. The City’s property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments, on October 1 and March 1, and become delinquent on November 1 and May 1, respectively. A lien attaches to the property on the first day of January preceding the assessment and levy of taxes. Delinquent amounts bear interest at the rate of 16 percent. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February following the May 1 date upon which the second half taxes become delinquent. Notes to Financial Statements 1. Deposits and Investments Cash equivalents for purposes of the statements of cash flows are investments (including restricted assets) in mutual funds, demand deposits, repurchase agreements, and U.S. Treasury bills and notes with maturities of three months or less at acquisition date. For the Fiscal Year Ended June 30, 2006 D. Assets, Liabilities, and Net Assets or Equity Property taxes levied for current operation and maintenance expenses on residential property are limited to 1.0 percent of the primary full cash value of such property. In addition, taxes levied for current operation and maintenance expenses on all types of property are limited to a maximum increase of 2.0 percent over the prior year’s levy, adjusted for new construction and annexations. Property taxes levied to pay principal and interest on bonded indebtedness are not limited. 3. Inventories Inventories of the governmental funds are recorded under the consumption method. Inventories are recorded as expenditures when consumed rather than when purchased. Inventories are valued at year-end based on cost, with cost determined using an average cost method. 4. Restricted Assets Certain proceeds of the City’s enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheets because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. The revenue bond renewal and replacement account is used to report resources set aside to meet unexpected contingencies or to fund asset renewals and replacements. Customer advances, customer deposits and deferred revenue are also restricted. 5. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets, as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Assets contributed (donated) to those funds are recorded by reference to historical costs of the donor if recently purchased or constructed, or if such records are not available, at estimated fair market value on the date of receipt. City of Scottsdale, Arizona 49 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Water System ........................... 10 to 75 Years Sewer System ........................... 25 to 50 Years Buildings and Improvements ... 25 to 50 Years Land Improvements ......................... 25 Years Machinery and Equipment ...... 5 to 20 Years Motor Vehicles ........................ 3 to 15 Years Furniture, Fixtures, and Office Equipment ....................5 to 10 Years The excess purchase price over fair market value of assets acquired in the Water and Sewer Utility Enterprise Fund is amortized on the straight-line method over 20 to 60 years. When capital assets are disposed of, the cost and accumulated depreciation or amortization is removed from the accounts, and any resultant gain or loss is recognized in the government-wide and proprietary fund financial statements. 6. Compensated Absences Compensated absences consist of vacation leave and a calculated amount of sick leave earned by employees based on services already rendered. Employees may accumulate up to a maximum number of hours of vacation depending on years of service, but any vacation hours in excess of the maximum amount unused at year-end are forfeited. The City’s policy is to pay employees for unused accumulated vacation hours at termination or retirement. Sick leave time can be accumulated without limit. The City’s policy, however, is that only those employees hired full-time before July 1, 1982 are paid for unused sick leave at death or retirement. Employees who retire on or after July 1, 1996, and who have accumulated 300 or more hours of sick leave, may elect to apply the value of the sick leave toward their City medical plan premiums. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for the current amount of compensated absences is recorded as a current liability at June 30 in the governmental and proprietary funds. The current compensated absences amount in the governmental funds is combined with accrued payroll and other payroll related amounts in the accrued payroll and benefits line item. The City calculates this current amount based on vacation taken and an actuarial valuation dated January 1, 2006, for medical leave conversion. There is no long-term liability for compensated absences in the governmental funds. 7. Long-term Obligations In the government-wide financial statements and the proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount and deferred amounts on refundings. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received are reported as debt service expenditures. 50 City of Scottsdale, Arizona Table of Contents Invested in Capital Assets, Net of Related Debt – This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce the balance in this category. Restricted Net Assets – This category represents net assets that have external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Assets – The category represents net assets of the City, not restricted for any project or other purpose. City of Scottsdale, Arizona Notes to Financial Statements 9. Net Assets The government-wide and proprietary fund financial statements utilize a net assets presentation. Net assets are categorized as invested in capital assets (net of related debt), restricted, and unrestricted. For the Fiscal Year Ended June 30, 2006 8. Fund Equity In the fund financial statements, governmental funds report reservation of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 51 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents II. Reconciliation of Gover nment-wide and Fund Financial Statements A. Explanation of certain difference between the governmental fund balance sheet and the governmentwide statement of nets assets. The City’s total governmental fund balances, $348,047, differs from net assets of governmental activities, $2,304,198, reported in the statement of net assets. The difference primarily results from the long-term economic focus in the statement of net assets versus the current financial resources focus in the governmental fund balance sheets. Reconciliation of Governmental Funds Balance Sheet and the Government-wide Statement of Net Assets (in thousands of dollars) Total Governmental Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Hotel/Motel Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Special Assessments Miscellaneous Due from Other Funds/Internal Balances Supplies Inventory Capital Assets (net of accumulated depreciation) Deferred charges and other assets Total Assets LIABILITIES Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Current Accrued Compensated Absences - Due Within One Year Accrued Compensated Absences - Due in More Than One Year Claims Payable Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Court Tax Audit Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Fund Balances/Net Assets Total Fund Balances/Net Assets Total Liabilities and Fund Balances/Net Assets 52 $ $ $ Internal Service Funds (2) Reclassifications and Eliminations Statement of Net Assets Totals 342,562 $ 53,322 - $ - 31,393 $ - - $ - 373,955 53,322 2,316 13,519 472 1,489 1,859 2,481 6,646 1,441 1,019 1,327 96 5,436 8,846 78 320 443,229 $ 19,366 2,659,918 2,447 2,681,731 $ 242 93 426 25,374 57,528 $ (78) (78) $ 2,558 13,519 472 1,489 1,859 2,481 6,646 1,441 1,019 20,693 96 5,436 8,939 746 2,685,292 2,447 3,182,410 21,150 $ 4,971 78 18,360 25,386 - $ (56) 56 9,184 9,241 - 1,094 $ 67 2 232 232 14,734 - - $ (78) - 22,244 4,982 58 9,416 9,473 14,734 18,360 25,386 16,361 (78) 41,167 57,528 $ (78) $ 644 5,436 6,646 3,403 1,354 339 110 5,031 2,274 95,182 $ Long-Term Assets/ Liabilities (1) 348,047 443,229 $ (644) (5,436) (6,646) (3,403) 764,451 766,747 1,914,984 2,681,731 $ 1,354 339 110 5,031 2,274 764,451 878,212 2,304,198 3,182,410 City of Scottsdale, Arizona Table of Contents Cost of capital assets Accumulated depreciation $ $ 3,699,832 (1,039,914) 2,659,918 Bond issuance costs are expended in governmental funds when paid, and are capitalized and amortized over the life of the corresponding bonds for purpose of the statement of net assets. Bond issuance costs @ 7/1/05 Bond issuance cost for fiscal year 2006 Amortization of bond issuance costs $ $ 2,315 351 (219) 2,447 $ 19,366 $ (13,136) (745,690) 10,234 (15,859) (18,425) (782,876) Long-term receivables applicable to the City's governmental activities are not due and receivable in the current period and accordingly are not reported as fund receivables in the governmental funds. All receivables, both current and long-term, are reported in the statement of net assets. Long-term liablilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities in the governmental funds. All liabilities, both current and long-term, are reported in the statement of net assets. Balances at June 30, 2006 were: Contract payables Bonds payable Deferred amount on refunding Deferred issuance premium Accrued vacation and sick leave pay $ Notes to Financial Statements assets are reported as expenditures in governmental funds. However, the statement of net assets includes those capital assets among the assets of the City as a whole. For the Fiscal Year Ended June 30, 2006 (1) When capital assets (land, buildings, equipment, etc) that are to be used in governmental activities are purchased or constructed, the costs of those Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets (for example, receivables) are offset by deferred revenues in the governmental funds and thus are not included in fund balance. Deferred revenue for the long-term special assessment receivables shown on the governmental fund statements is not deferred on the statement of net assets. Certain tax and other revenues deferred under modified accrual for governmental fund statements, is recognized as revenue under accrual accounting for the government-wide statements. Deferred special assessment revenue Deferred court revenue Deferred tax revenue $ $ 5,436 6,646 4,047 16,129 $ 41,167 (2) Internal Service Funds are used by management to charge the costs of certain activities, such as fleet management and self insurance, to individual funds. The assets and liabilities of certain Internal Service Funds are included in governmental activities in the statement of net assets. City of Scottsdale, Arizona 53 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents B. Explanation of certain differences between the gover nmental fund statement of revenues, expenditures, and changes in fund balances and the gover nment-wide statement of activities. The net change in fund balances for governmental funds, $83,291, differs from the change in net assets for the governmental activities, $151,562, reported in the statement of activities. The differences arise primarily from the long-term economic focus in the statement of activities versus the current financial resources focus in the governmental funds. The effect of the differences is illustrated below. Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) Total Governmental Funds REVENUES: Taxes - Local: Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental: State-Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services: Building and Related Permits Fire Fees Recreation Fees Westworld Equestrian Facility Fees Fines and Forfeitures: Code Enforcement Court Fines Parking Photo Radar Court Enhancement Library Special Assessments Property Rental Interest Earnings Intergovernmental: Federal Grants State Grants Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total $ 49,651 $ 170,430 8,970 6,308 3,157 186 776 Long-Term Revenue/ Expenses (3) Capital Related Items (4) 258 $ 1,070 - Internal Service Funds (5) - $ - Long-Term Debt Transactions (6) 701 $ - Statement of of Activities - $ - 50,610 171,500 8,970 6,308 3,157 186 776 21,664 21,223 9,720 15,708 1,098 1,572 - - - - 21,664 21,223 9,720 15,708 1,098 1,572 20,515 1,010 3,422 2,313 - - - - 20,515 1,010 3,422 2,313 163 5,264 355 2,947 925 606 1,106 4,173 12,518 271 7 169 (829) - - 1,196 - 163 5,535 362 3,116 925 606 277 4,173 13,714 8,378 399 4,352 392 511 835 969 9,898 644 392,158 (299) 647 - - - 8,378 399 4,053 392 511 835 969 9,898 644 394,702 - 1,897 (continued) 54 City of Scottsdale, Arizona Table of Contents EXPENDITURES/EXPENSES Current: General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures/Expenses OTHER FINANCING USES/CHANGES IN NET ASSETS Net Transfers (to) From Other Funds Capital Contibutions Sales of Capital Assets Long-term Capital-Related Debt Issued Premium on Bonds Issued Total Net Change for the Year City of Scottsdale, Arizona $ $ 23,516 $ 66,278 7,769 10,099 53,535 8,253 24,296 8,850 3,070 3,507 7,510 12,436 617 Long-Term Revenue/ Expenses (3) Capital Related Items (4) 297 $ 3,067 50 89 460 86 618 94 4 35 29 92 - 18,106 $ 2,777 341 71,510 3,271 6,181 1,686 4,314 306 34 3 89 - Internal Service Funds (5) 904 $ 2,286 183 349 665 69 343 1,488 39 39 7 266 - Long-Term Debt Transactions (6) Statement of of Activities - $ - 42,823 74,408 8,343 82,047 57,931 14,589 26,943 14,746 3,419 3,615 7,549 12,883 617 27,632 36,382 351 218,897 512,998 4,921 (218,897) (110,279) 6,638 (27,632) 810 (351) (27,173) 37,192 387,105 7,130 191,500 5,501 204,131 - (1,096) 133,262 132,166 4,502 73 94 4,669 (191,500) (5,501) (197,001) 10,536 133,335 94 143,965 (169,828) $ 151,562 83,291 $ (4,274) $ 242,445 $ (72) $ Notes to Financial Statements Total Governmental Funds For the Fiscal Year Ended June 30, 2006 Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) 55 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) (3) Reconciling Items Description: Because some property taxes will not be collected for several months after the City's fiscal year ends, they are not considered as "available" revenues in the governmental funds. Similarly, other revenues are not currently available at year-end and are not reported as revenue in the governmental funds. Property taxes Court revenue Tax audit revenue Special Assessment revenue Intergovernmental revenue $ $ 258 447 1,070 (829) (299) 647 $ (4,921) $ $ 203,137 (87,321) (6,633) 109,183 $ 133,262 $ (72) 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 governmental funds. Accrual for long-term compensated absences (4) When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year, and the loss on disposal of capital assets. Capital expenditures Depreciation Expenses Loss on disposal of capital assets Difference Donations of capital assets are not shown on the governmental fund statements, but are included in the assets of the City. On the statement of activities, these donations are shown as capital contributions. Capital Contributions (5) Internal Service funds are used by management to charge the costs of certain activities, such as insurance and motor pool, to the individual funds. The adjustments for internal service funds close those funds by charging additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. Capital assets contributed by the governmental funds ($1,096) are treated as capital contribution revenue in the Internal Service fund statements and capital outlay expenditures in the governmental funds statements. For government-wide purposes, the capital contribution is reclassified as a transfer in in the Internal Service Fund column and a transfer out in the Capital Related Items column. Change in Net Assets 56 City of Scottsdale, Arizona Table of Contents Bond issuance costs are reported as an expenditure in governmental funds in the year of bond issuance and thus, have the effect of reducing fund balance because current financial resources have been used. For the government-wide statements; however, the bond issuance costs are deferred and amortized (expensed) over the life of the bonds. Bond issuance costs for fiscal year 2006 Amortization of bond issuance costs Difference $ $ 351 (219) 132 $ $ 27,632 27,632 $ (1,459) (642) 1,510 (591) Repayment of bond principal is reported as an expenditure in governmental funds and, thus, has the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the liabilities in the statement of net assets and do not result in an expense in the statement of activities. Principal payments made Interest expense in the statement of activities differs from the amount reported in governmental funds because additional accrued and accreted interest was calculated for bonds and notes payable, and additional interest expense was recognized on the amortization of bond discount and premiums which are expended within the fund statements. Amortization of deferred charges on refundings Interest accretion and amortization Amortization of bond premium and discounts $ Notes to Financial Statements (6) For the Fiscal Year Ended June 30, 2006 Reconciliation of Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-wide Statement of Activities (in thousands of dollars) Bond proceeds are reported as financing sources in governmental funds and thus contribute to the change in fund balance. In the governmentwide statements, however, issuing debt increases long-term liabilities in the statement of net assets and does not affect the statement of activities. Proceeds were received from: General Obligation Bonds Revenue Bonds Premium on Bonds $ $ City of Scottsdale, Arizona (145,000) (46,500) (5,501) (197,001) 57 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents III. Stewardship, Compliance, and Accountability A. Budget And Budgetar y Accounting The City prepared an annual budget that covered fiscal year 2005/06. The 2005/06 budget appropriation is established and reflected in the financial statements as follows: The City Council formally adopts the budget and legally allocates, or appropriates, available monies for the General Fund, Special Revenue Funds (Highway User Fuel Tax and Preserve Privilege Tax), and Debt Service Funds (except for the Community Facilities Districts Debt Service Funds). Therefore, these funds have appropriated budgets, and budget to actual information is presented. The Community Development Block Grant, Home, Grants, Section 8, and Special Programs Special Revenue Funds, Community Facilities Districts Funds, Capital Projects Funds, Enterprise Funds, Internal Service Funds, and Trust and Agency Funds have non-appropriated budgets. Accordingly, no comparison of budget to actual is presented in the financial statements for these funds. Budgets for the Community Development Block Grant, Grants, and Section 8 Funds are established pursuant to the terms of the related grant awards. Budgets for the Community Facilities Districts are established in accordance with Arizona Revised Statutes, which do not require their inclusion in the City budget or adoption by the City Council. Budgets for Capital Projects Funds are established for individual projects and unexpended funds are re-appropriated each year until the project is completed and capitalized. Budgets for Enterprise Funds are established in order to help departments control operational costs. Budgets for Internal Service Funds are established in order to help departments control operational costs. Budgets for Trust and Agency Funds are established in accordance with the trust/agency agreements. On or before the second regular Council meeting in May, the City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Two public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. In June, the budget is legally enacted through passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. 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. During 2005/06, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by department. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Departmental appropriations may be amended during the year. Upon the recommendation of the City Manager, and with the approval of the City Council: (1) transfers may be made from the appropriations for contingencies to departments; and (2) unexpended appropriations may be transferred from one department to another. Management control of budgets is further maintained at a line item level within the department. All expenditure appropriations that have not been expended lapse at year-end. Beginning July 1, 1998, the City discontinued the use of encumbrance accounting. As such, fund balance amounts are not reserved for purchase orders, contract or other commitments. B. Excess of Expenditures over Appropriations The Special Assessments Debt Service Fund exceeded its Debt Service Expenditures appropriation by $3,000. This over expenditure was funded by available fund balance. 58 City of Scottsdale, Arizona Table of Contents Fund Balance Reservations and Designations (in thousands of dollars) General Fund Reserved\Restricted for Streetlight and Service Districts $ Designated for Tourism Designated for Economic Stabilization Reserve Total $ Debt Service Reserved for Debt Service Restricted Net Asset and Unrestricted Net Asset Designations Water and Sewer Restricted for Repair and Replacement Restricted for Acquisition and Construction Total Restricted Major Nonmajor 805 1,876 28,197 30,878 $ 12,436 $ 18,562 8,438 27,000 $ $ Notes to Financial Statements D. Fund Balance/Net Assets Reser vations and Designations Only restrictions imposed by external sources are shown as restricted net assets on the government-wide financial statements. Reservations or designations of fund balances are shown in aggregate on the governmental fund financial statements, but not on the proprietary fund financial statements. The City does, however, reserve or designate portions of net assets in other funds to demonstrate the government’s intended use of those net assets. Designations are created by administrative policy. The following are the reservations and designations of fund balance/net assets included in the unreserved fund balance/net assets at June 30, 2006: For the Fiscal Year Ended June 30, 2006 C. Deficit Fund Equity The Home and Grant Funds had deficit fund balances of $100,000 and $109,000, respectively, caused by certain grant reimbursements due which may not be available in the upcoming period. Since these reimbursements are not assured, no revenue was accrued in the current fiscal year. These reimbursements due will be recognized as revenue when actually received. 10,706 The amounts presented below detail the City's planned use of the following Unrestricted Net Asset amounts: Water and Sewer Designated for Operating Reserve $ 14,868 Solid Waste Designated for Operating Reserve $ 4,028 $ 2,252 565 2,817 Airport Repair and Replacement Designated for Operating Reserve $ Self-Insurance Designated for General Liability Claims Designated for Benefits $ $ 2,501 2,057 4,558 Fleet Management City of Scottsdale, Arizona 59 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents IV. Detailed Notes on All Funds A. Prior Period Adjustment In 1994 and 1996, private owners dedicated 2,759 and 200 acres, respectively, of land to the City for the McDowell Mountain Sonoran Preserve. These land values were not previously recorded in the City’s capital assets balance. Therefore, Beginning Net Assets have been restated to reflect these additions. Restatement of beginning net assets for governmental activities (in thousands of dollars) Governmental Activities Net Assets: Beginning Net Assets at June 30, 2005, as previously reported $ Prior Period Adjustment Beginning Net Assets at July 1, 2005, as adjusted 1,948,344 204,292 $ 2,152,636 B. Cash and Investments The City maintains a cash and investment pool for use by all funds except the Community Facilities Districts Funds, which have investments held separately by a trustee. City Charter, Ordinance, and Trust Agreements authorize the City to invest in obligations of the U.S. Treasury, U.S. Government agencies, Certificates of Deposit, bankers’ acceptances, commercial paper (A-1, P-1), repurchase agreements, mutual funds consisting of the foregoing, and the State of Arizona Local Government Investment Pool (LGIP). Deposits At June 30, 2006, the carrying amount of the City’s deposits was $135,633,289, and the bank balance was $134,519,615. The $1,113,674 difference represents outstanding checks and other reconciling items. Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. As of June 30, 2006, in accordance with the City’s policy, the City’s deposits were covered by federal depository insurance or by collateral held by the City’s agent or pledging financial institution’s trust department or agent in the name of the City, and thus had no deposits that were exposed to custodial credit risk. The custodial credit for investments is the risk that, in the event of the failures of the counterparty (e.g. brokerdealer) to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City be conducted on a delivery-versus-payment basis. Securities are to be held by a third party custodian. 60 City of Scottsdale, Arizona Table of Contents (in thousands of dollars) Investment Type U.S. Government Securities Federal Agency Securities Commercial Paper Guaranteed Investment Contracts Money Market Funds Cash in Banks Fair Value $ 108,621 356,536 24,909 Total Investments $ Investment Maturities (in Years) Less Than 1 1-2 2-3 3+ $ 98,892 $ 9,729 $ $ 316,916 * 29,702 ** 9,902 *** 16 24,909 - 475 76 135,557 475 76 135,557 - - 626,174 $ 576,825 $ 39,431 $ 9,902 $ 16 *$54,079 of these bonds are callable July 4, 2006 to September 29, 2006 **$19,782 of these bonds are callable July 19, 2006 to May 23, 2007 ***These bonds are callable December 8, 2006 Notes to Financial Statements Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits the City’s investment portfolio to maturities of less than three years unless matched to a specific cash flow. The following table summarizes the City’s interest rate risk, based on maturity dates of various investments: For the Fiscal Year Ended June 30, 2006 Interest Rate Risk Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by nationally recognized statistical rating organizations (NRSROs). It is the City’s policy to invest in securities with the highest rating issued by NRSROs. Presented below is the rating as of June 30, 2006 for each investment type: (in thousands of dollars) Investment Type U.S. Government Securities Federal Agency Securities Commercial Paper Guaranteed Investment Contracts Money Market Funds Cash in Banks Total Investments City of Scottsdale, Arizona $ Total 108,621 356,536 24,909 626,174 Not Rated $ - - 76 - 135,557 475 - 80,114 $ 301,407 $ 244,178 A-1+ $ 475 76 135,557 $ 301,331 - Exempt from Disclosure $ 108,621 - $ AAA 55,205 24,909 $ $ 475 61 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Concentration of Credit Risk The City’s investment policy contains no limitations on the amount that can be invested in any one issuer. The following is a listing by issuer of the City’s investments at June 30, 2006: (in thousands of dollars) Issuer U.S. Government Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corp. (FHLMC) Federal National Mortgage Assocation (FNMA) Federal Farm Credit Bank (FFCB) Government National Mortgage Association (GNMA) Barclays U.S. Funding LLC General Electric Capital Corp. Prudential Funding LLC UBS Finance Delaware LLC Pacific Life Insurance Company Wells Fargo and Company Wells Fargo and Company Investment Type U.S. Government Securities Federal Agency Securities Federal Agency Securities Federal Agency Securities Federal Agency Securities Federal Agency Securities Commercial Paper Commercial Paper Commercial Paper Commercial Paper Guaranteed Investment Contract Money Market Funds Cash in Banks Market Value $ 108,621 149,985 100,500 96,129 9,906 16 4,974 4,997 7,469 7,469 475 76 135,557 $ Total Investments Percent of Holdings 17.35% 23.95% 16.05% 15.35% 1.58% 0.00% 0.79% 0.80% 1.19% 1.19% 0.08% 0.01% 21.66% 626,174 100.00% Investments Total City cash and investments at fair value are as follows (in thousands of dollars): Carrying Amount of City Deposits Investments $ 135,633 490,541 Total Cash and Investments $ 626,174 Total City cash and investments are reported as follows (in thousands of dollars): Primary Government Cash and Investments Cash with Fiscal Agent Restricted Cash Handicap Scholarship Private Purpose Trust Fund Family Self-Sufficiency Agency Fund Retainage Escrow Agency Fund Total Cash and Investments $ 485,757 100,752 34,380 4 86 5,195 $ 626,174 Investment income comprises the following for the year ended June 30, 2006 (in thousands of dollars): 62 Net Interest and Dividends Net Increase in the Fair Value of Investments $ 17,244 3,051 Total Net Investment Income $ 20,295 City of Scottsdale, Arizona Table of Contents C. Receivables Receivables as of year end for the government’s individual major governmental funds and nonmajor governmental and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts are as follows: (in thousands of dollars) Governmental and Governmental Activities Internal Service Funds: Receivables Property Taxes and Penalties: Property Court Subtotal Property Taxes and Penalties $ General General CIP General Nonmajor Total General Obligation Bond Construction Obligation Bond and Other Governmental Fund Debt Service Capital Projects Capital Projects Funds Funds 539 $ 20,474 21,013 786 $ 786 - $ - - $ - 164 $ 164 1,489 20,474 21,963 Other local taxes: Privilege Hotel/Motel State Shared Sales Tax Franchise Fee Auto Lieu Highway User Subtotal Other Local Taxes 9,076 472 1,859 2,481 1,019 14,907 - - - 4,443 1,441 5,884 13,519 472 1,859 2,481 1,019 1,441 20,791 Intergovernmental/Grants - - - - 1,423 1,423 Interest and Other: Interest Special Assessments Miscellaneous Subtotal Interest and Other 764 8,550 9,314 4 4 532 14 546 523 523 739 5,436 371 6,546 2,558 5,436 8,939 16,933 45,234 (13,828) 790 - 546 - 523 - 14,017 - 61,110 (13,828) 31,406 $ 790 $ 546 $ 523 $ 14,017 $ 47,282 Gross Receivable Less: Allowance for Uncollectibles Net Total Receivables $ Notes to Financial Statements In the previous year, the City reported a decrease in fair value of $7,864,309 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool. The State and numerous other bondholders filed suit against the principals, underwriters, trustees, accountants and others in May 2003. The case is presently pending in federal court in Ohio. No reliable assessment of the litigation outcome is available; however, the City has received $3,060,771 plus interest of $12,125 as a partial recovery. For the Fiscal Year Ended June 30, 2006 The net increase in the fair value of investments during fiscal year 2005-2006 was $3,050,860. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. The unrealized loss on investments held at June 30, 2006, was $2,886,532. Enterprise Funds: Water and Sewer Utility Receivables Charges for services Intergovernmental Interest Miscellaneous Gross Receivable Net Total Receivables City of Scottsdale, Arizona Airport Solid Waste Total Enterprise Fund $ 11,480 $ 2 1,015 974 13,471 - $ 12 212 224 1,493 $ 38 59 1,590 12,973 2 1,065 1,245 15,285 $ 13,471 $ 224 $ 1,590 $ 15,285 63 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents 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 fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: (in thousands of dollars) Property Tax Special Assessments Court Tax Audit Intergovernmental Other Community Services Total Unavailable $ 644 5,436 6,646 3,403 - Unearned $ 1,354 - 339 $ 16,129 $ 1,693 D. Capital Assets Capital asset activity for the year ended June 30, 2006, was as follows (in thousands of dollars): Beginning Governmental Activities Balance Ending Increases Decreases Balance Capital Assets, not being depreciated: Land 718,880 $ 186,572 $ Construction In Progress $ 126,451 192,797 (161,520) (6,511) $ 157,728 898,941 Total Capital Assets, not being depreciated: 845,331 379,369 (168,031) 1,056,669 Capital Assets, being depreciated: Buildings and Land Improvements 270,572 25,186 (28) 295,730 2,203,477 81,084 - 2,284,561 49,957 7,017 (1,901) 55,073 3,651 - (20) 3,631 56,422 11,255 (2,532) 65,145 2,584,079 124,542 (4,481) 2,704,140 Buildings and Land Improvements 134,387 10,577 (23) 144,941 Streets and Storm Drains 785,678 71,114 - 856,792 28,511 4,777 (1,836) 31,452 2,468 309 (11) 2,766 36,249 5,734 (2,417) 39,566 987,293 92,511 (4,287) 1,075,517 1,596,786 32,031 (194) 1,628,623 (168,225) $ 2,685,292 Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Capital Assets, being depreciated: Less Accumulated depreciation for: Vehicles Maintenance by Fleet Machinery and Equipment Total Accumulated depreciation: Total Capital Assets, being depreciated, net: Governmental activities Capital Assets, net: 64 $ 2,442,117 $ 411,400 $ City of Scottsdale, Arizona Table of Contents Ending Balance Decreases Capital Assets, not being depreciated: Land $ Water Rights 24,065 $ 64,688 757 $ - $ 24,822 - - 64,688 Construction In Progress 151,002 121,654 (20,940) 251,716 Total Capital Assets, not being depreciated: 239,755 122,411 (20,940) 341,226 Capital Assets, being depreciated: Water System 551,796 30,449 - 582,245 Sewer System 327,792 18,042 - 345,834 15,574 2,477 - 18,051 6,673 639 - 7,312 621 - - 621 902,456 51,607 - 954,063 Water System 150,589 16,457 - 167,046 Sewer System 70,347 8,863 - 79,210 Buildings and Land Improvements 5,428 845 - 6,273 Machinery and Equipment 2,701 279 - 2,980 504 46 - 550 Total Accumulated depreciation: 229,569 26,490 - 256,059 Total Capital Assets, being depreciated, net: 672,887 25,117 - 698,004 Buildings and Land Improvements Machinery and Equipment Furniture, Fixtures and Office Equipment Total Capital Assets, being depreciated: Less Accumulated depreciation for: Furniture, Fixtures and Office Equipment Business-type activities capital assets, net $ 912,642 $ 147,528 $ (20,940) $ Notes to Financial Statements Increases For the Fiscal Year Ended June 30, 2006 Beginning Balance Business-type Activities 1,039,230 During fiscal year 2005/06, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $10,000,049. Total interest expense in this fund before capitalization was $10,000,049. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands of dollars): Governmental Activities General Government Police Financial Services Transportation Community Services Information Services Fire Municipal Services Citizen and Neighborhoods Resources Human Resources Economic Vitality Planning and Development Capital Assets Held by the Government's Internal Service Funds are Charged to the Various Functions Based on their Usage of the Assets Total Depreciation Expense - Government Activities City of Scottsdale, Arizona 5,408 1,643 211 68,488 4,223 3,770 542 2,961 7 34 3 31 5,190 $92,511 65 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Business-type Activities Water and Sewer System $ 25,486 Airport 807 Solid Waste 197 Total Depreciation Expense - Business-type Activities $ 26,490 Construction Commitments The City has active construction projects as of June 30, 2006. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands of dollars): Construction Commitments Streets Remaining Commitment Spent to Date $ 95,331 $ 13,098 Traffic 28,421 3,382 Fire 22,038 691 Police 5,080 1,560 Drain/Flood Control 13,750 864 Community/Preserve 177,089 9,268 Parks/Recreation 61,854 7,925 Municipal Facilities 11,344 891 Technology 25,749 1,569 Libraries 2,447 358 Airport 3,614 178 Transit 10,437 4,509 Water System 307,469 54,006 Sewer System 132,047 1,492 Total Construction Commitments $ 896,670 $ 99,791 The traffic commitments are being financed by the .2% transportation sales tax, which is reported in the special revenue fund financial statements. All water and sewer system improvement projects are being financed through the use of water or sewer development fees and water or sewer rates. 66 City of Scottsdale, Arizona Table of Contents “Due to” and “due from” balances have primarily been recorded when funds overdraw their share of pooled cash. The composition of interfund balances as of June 30, 2006, is as follows: Receivable Fund (in thousands of dollars) General Total Amount $ 78 Payable Fund (in thousands of dollars) Nonmajor Governmental Funds Amount $ 78 $ Total $ 78 78 The Home Fund had a deficit cash balance of $78,000 due to the grant being received on a reimbursement basis. Interfund Transfers Transfers are used to fund capital projects and debt service, reallocate special revenue funds to operating centers or other operations and for indirect administrative cost allocations (including in-lieu property tax and franchise fees) charges to Enterprise Funds. Notes to Financial Statements Due To and Due From Other Funds For the Fiscal Year Ended June 30, 2006 E. Interfund Balances and Interfund Transfers Net transfers (in thousands of dollar): Transfers Out From: Major Governmental Funds General Capital Projects General CIP Construction General Obligation Bond Total Major Governmental Funds Transfers In To: $ 44,312 2,333 49,235 95,880 Major Governmental Funds Capital Projects General CIP Construction $ 33,804 Nonmajor Governmental Funds 7,672 Internal Service Funds 2,836 Nonmajor Governmental funds 2,333 Major Governmental Funds Capital Projects General CIP Construction 33,864 Nonmajor Governmental funds 15,371 Total Major Governmental Funds 95,880 (continued) City of Scottsdale, Arizona 67 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Transfers Out From: Major Enterprise Funds Water and Sewer Transfers In To: $ 10,306 Major Governmental Funds General Fund $ Capital Projects General CIP Construction Airport 84 Solid Waste 743 1,387 Major Enterprise Funds Airport 597 Internal Service 266 Major Governmental Funds General Fund 63 Capital Projects General CIP Construction 10 Internal Service 11 Major Governmental Funds General Fund 16 Capital Projects General CIP Construction 81 Nonmajor Governmental Funds 271 Internal Service 375 Total Major Enterprise Funds 11,133 Total Major Enterprise Funds 11,133 Nonmajor Governmental Funds 44,633 Major Governmental Funds General Fund 12 Debt Service General Obligation Bond 15,267 Capital Projects General CIP Construction General Obligation Bond 689 1,003 Nonmajor Governmental funds 27,508 Internal Service Total Nonmajor Governmental Funds 44,633 Internal Service 290 154 Total Nonmajor Governmental Funds 44,633 Major Governmental Funds Capital Projects General CIP Construction 236 Internal Service Total Internal Service Funds Total 68 8,056 290 $ 151,936 54 Total Internal Service Funds Total 290 $ 151,936 City of Scottsdale, Arizona Table of Contents The City has entered into rental agreements of retail and parking facilities. Rental payments on these facilities during fiscal year 2005-2006 were $4,033,959. Payments are contingent upon sales tax revenues received on the properties; thus, future payments cannot be determined. Capital Leases The City has entered into a lease agreement as lessee for financing the acquisition of a modular office building for its water operations. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded in the Water and Sewer Fund at the present value of the future minimum lease payments as of the inception date. The building acquired by this lease agreement is recorded in the Water System at a value of $212,654, less accumulated depreciation of $354. G. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2006. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2006. There are a number of limitations and restrictions contained in the various bond indentures. The City is in compliance with all significant limitations and restrictions. Notes to Financial Statements Operating Leases For the Fiscal Year Ended June 30, 2006 F. Leases General Obligation Bonds General obligation (GO) bonds are issued, after approval by City of Scottsdale voters at an authorized bond election, to finance the construction of water and sewer systems, artificial lighting, parks and open spaces, recreational facilities, and general purpose improvements. At June 30, 2006, the City had $157,200,000 of unissued various purpose GO bonds, which were authorized in September 2000. The City had no unissued Preservation GO bonds from the September 1999 authorization. In May 2004, voters authorized $500,000,000 of additional Preservation GO bonds, as well as an additional .15% sales tax increase to be used to finance Preserve land acquisitions. At June 30, 2006, the City had $480,000,000 of unissued Preservation GO bonds from the May 2004 authorization. GO bonds are backed by the full faith and credit of the City, and are repaid through the City’s levying of property (ad valorem) taxes. However, the Preservation GO bonds are repaid through the two-tenths of one percent City sales tax approved by voters in September 1996 to be used specifically to finance land acquisitions for the McDowell Sonoran Preserve. Additionally, a portion of the City’s GO bonds are recorded in the Water and Sewer Enterprise Fund as described below, and are repaid through revenues of that fund unless such revenues are insufficient. HURF Revenue Bonds Highway User Revenue Fee (HURF) bonds are issued specifically for the purpose of constructing street and highway projects. These bonds are repaid out of the Special Revenue Fund by gas tax revenues collected by the State of Arizona and distributed to cities and towns based on a formula of population and gas sales within each county. Municipal Property Corporation Bonds The City of Scottsdale Municipal Property Corporation (MPC) is a nonprofit corporation created by the City in 1967 to finance the construction or acquisition of certain capital improvement projects. The MPC issues its own bonds, which are repaid through the City’s excise tax collections and other unrestricted revenues. The use of property taxes to repay these bonds is specifically prohibited by law. Most of these bonds are recorded as governmental activities long-term debt. The 1995 MPC Transfer Station bonds, however, are recorded in and paid out of revenues of the Solid Waste Enterprise Fund. The 2001 MPC Scottswater bonds, the 2004 MPC bonds and the 2005E MPC bonds are recorded in and paid out of the revenues of the Water and Sewer Enterprise Fund. City of Scottsdale, Arizona 69 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Scottsdale Preser ve Authority Bonds The Scottsdale Preserve Authority (SPA) is a nonprofit corporation created by the City in 1997 to finance land acquisitions for the McDowell Sonoran Preserve. The SPA issues its own bonds, which are repaid through the two tenths of one percent City sales tax approved by voters in September 1996 to be used specifically for this purpose. In May 2004, voters approved an additional .15% sales tax increase. SPA bonds are recorded as governmental activities long-term debt and are paid out of the SPA Debt Service Fund. Water and Sewer Revenue Bonds Water and sewer revenue bonds are issued as authorized by the voters for the construction, acquisition, furnishing and equipping of water and sewer facilities and related systems. The water and sewer revenue bonds are collateralized by revenue in excess of operating and maintenance expenses of the City’s water and sewer utility system, and are repaid via user charges or fees for service. Property taxes cannot be used to pay the debt service on these bonds. Water and sewer revenue bond covenants require that the City accumulate sufficient reserves to cover the eventual replacement of the water and sewer system. The City has continued to meet this reserve requirement. At June 30, 2006, the funds reserved for this purpose were $18,561,591. Special Assessment Bonds Special assessment bonds are issued by the City on behalf of improvement districts created by property owners for a specific purpose, such as to finance local street, water or sewer improvements, or to acquire an existing water or sewer operation. Property owners in the designated districts agree to be assessed for the principal and interest costs of repaying the bonds. As trustee for improvement districts, the City is responsible for collecting the assessments levied against the owners of property within the improvement districts and for disbursing these amounts to retire the bonds issued to finance the improvements. The receivables, revenues, and debt service expenses related to these bonds are recorded in the Special Assessments Debt Service Fund. At June 30, 2006, special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were adequate for the scheduled maturities of the bonds payable and the related interest. These bonds are secured by a lien on the property and improvements of all parcels within each district. In the event of default by the property owner, the City may enforce auction sale to satisfy the debt service requirements of the improvement bonds. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. The City Council’s adopted policy is that special assessment improvement debt is permitted only when the ratio of the full cash value of the property (prior to improvements being installed) when compared to debt is a minimum of 3 to 1 prior to issuance of debt, and 5 to 1 or higher after construction of improvements. In addition, cumulative improvement district debt is not permitted to exceed 5 percent of the City’s secondary assessed valuation. At June 30, 2006, there were 2 separate series of special assessment improvement bonds outstanding, each series issued as serial bonds to be repaid over 10 years. Certificates of Participation Certificates of Participation are issued to finance acquisition and improvements of real property that is leased to the City. The City’s obligation to make lease payments are subject to, and dependent upon, annual appropriations made by the City Council. In the event any such appropriation is not made, the lease will terminate and the lessor will have legal right to take possession of the property. The City’s obligation to make lease payments does not constitute a debt or liability of the City within the meaning of any constitutional or statutory limitation. Neither the full faith and credit nor the general taxing power of the City is pledged to make payments of principal or interest due with respect to the Certificates of Participation. Such payments will be made solely from amounts derived under the terms of the lease, including lease payments, and amounts from time to time on deposit under the terms of the declaration of trust. 70 City of Scottsdale, Arizona Table of Contents CFDs are created only by petition to the City Council by property owners within the district areas. As board of directors for the CFDs, the City Council has adopted a formal policy that CFD debt will be permitted only when the ratio of the full cash value of the unimproved district property to the proposed district debt, is a minimum of 3 to 1, and 5 to 1 or higher after construction of improvements. These ratios are verified by an appraisal paid for by the CFD and administered by the City. In addition, cumulative debt of all CFDs cannot exceed 5 percent of the City’s secondary assessed valuation. CFD Advance Refundings There were no refundings during fiscal year 2005/06. In prior years, the McDowell Mountain Ranch CFD and the Scottsdale Mountain CFD refinanced other bond issues through the issuance of refunding bonds. The proceeds from the refunding bonds have been deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future redemption or payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of all of these trust accounts and the liability for refunded (defeased) bonds are not reflected in the financial statements of the City. Notes to Financial Statements Community Facilities District General Obligation Bonds are issued by community facilities districts (CFDs), which are special purpose districts created specifically to acquire and improve public infrastructure in specified land areas. CFD bonds are repaid by ad valorem taxes levied directly by the districts and collected by the county. Property owners in the districts are assessed for district taxes and thus for all costs associated with the districts. The City has no liability for community facilities district bonds. For the Fiscal Year Ended June 30, 2006 Community Facilities Districts General Obligation Bonds The table reflects CFD refunded debt outstanding at June 30, 2006, and net of any amounts to be paid or retired by the trustee on July 1, 2006 (in thousands of dollars). Refunded Debt Outstanding (in thousands of dollars) McDowell Mountain Ranch CFD: General Obligation Series 1997 $ Scottsdale Mountain CFD: General Obligation Series Series 1993B Total CFD Bonds Refunded in Prior Years City of Scottsdale, Arizona 6,910 25 $ 6,935 71 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents 72 Bonds payable at June 30, 2006, are comprised of the following: Classified in Governmental Activities on the Government-wide Financial Statements: General Obligation Bonds 1993 Refunding Bonds due in annual installments of $1,010,000 to $8,150,000 through July 1, 2009; interest at 4.0 percent to 5.5 percent. $28,399,993 of these bonds are recorded in and paid out of the Water and Sewer Fund. On June 15, 2004, $2,505,000 due 2007 through 2009 were defeased. The original issue amount for the 1993 Refunding Bonds was $45,015,000. Bonds Outstanding (in thousands of dollars) $ 7,590 1993A Refunding Bonds due in annual installments of $475,000 to $5,560,000 through July 1, 2011; interest at 3.65 percent to 5.1 percent. $1,315,000 of these bonds are recorded in and paid out of the Water and Sewer Fund. On September 26, 2003, $13,355,000 due 2004 and 2007 through 2011 were refunded. The original issue amount for the 1993A Refunding Bonds was $24,265,000. - 1997 Refunding Bonds (issued September 3, 1997) due in annual installments of $50,000 to $3,510,000 through July 1, 2014, interest at 4.45 percent to 5.5 percent. Original issue amount $19,900,000. 18,780 1989 Capital Improvement Project Serial Bonds (issued April 6, 1998) due in annual installments of $445,000 to $1,340,000 through July 1, 2018, interest at 4.3 percent to 6.5 percent. On September 26, 2002, $8,180,000 due 2009 through 2015 were refunded. Original issue amount $20,500,000. 6,345 1999A Transportation, Storm Sewer, Flood Protection and Pima Road Improvements Serial Bonds (issued June 29, 1999) due in annual installments of $675,000 to $1,900,000 through July 1, 2019; interest at 4.6 percent to 6.5 percent. On September 26, 2002, $15,525,000 due 2010 through 2019 were refunded. Original issue amount $25,200,000. 3,450 1999 Preservation Bonds (issued November 16, 1999) due in annual installments of $800,000 to $4,225,000 through July 1, 2024; interest at 7.5 percent to 5.0 percent. On July 18, 2001, $32,375,000 due 2012 through 2022 were refunded, on September 26, 2002, an additional $4,125,000 due 2010 and 2011 were refunded, and on March 29, 2005 an additional $8,225,000 due 2023 and 2024 were refunded. Original issue amount $59,600,000. 5,500 2001 Preservation Bonds (issued March 29, 2001) due in annual installments of $920,000 to $2,455,000 through July 1, 2024; interest at 4.0 percent to 6.0 percent. On September 26, 2002, $3,920,000 due 2010 through 2012 were refunded, and on March 29,2005 an additional $22,680,000 due 2013 through 2024 were refunded. Original issue amount $35,000,000. 3,455 City of Scottsdale, Arizona Table of Contents 36,620 2002 Various Purpose Bonds (issued May 16, 2002) due in annual installments of $1,740,000 to $5,000,000 through July 1, 2024; interest at 4 percent to 5 percent. On June 15, 2004, $3,000,000 due 2010 through 2011 were defeased, and on March 29, 2005 an additional $42,665,000 due 2012 through 2019 and 2021 through 2024 were refunded. Original issue amount $68,000,000. 14,525 2002 Refunding Bonds (issued September 26, 2002) due in annual installments of $1,625,000 to $8,795,000 through July 1, 2019; interest at 2 percent to 5 percent. On April 15, 2004, $1,510,000 due 2010 were defeased. Original issue amount $72,000,000. 58,445 2003 Refunding Bonds (issued September 24, 2003) due in annual installments of $45,000 to $5,515,000 through July 1, 2013; interest at 2 percent to 4.5 percent. Original issue amount $16,265,000. 14,925 2004 Various Purpose Bonds (issued May 13, 2004) due in annual installments of $1,600,000 to $30,300,000 through July 1, 2025; interest at 3 percent to 5 percent. Original issue amount $113,400,000. 110,100 2005 Refunding Bonds (issued March 29, 2005) due in annual installments of $2,715,000 to $11,075,000 through July 1, 2024; interest at 3.85 percent to 5 percent. Original issue amount $74,630,000. 74,630 2005A Various Purpose Bonds (issued December 1, 2005) due in annual installments of $2,500,000 to $10,750,000 through July 1, 2024; interest at 3.5 percent to 5 percent. Original issue amount $125,000,000. 125,000 2005B Preservation Bonds (issued December 1, 2005) due in annual installments of $775,000 to $1,575,000 through July 1, 2024; interest at 3.5 percent to 5 percent. Original issue amount $20,000,000. 20,000 Total General Obligation Bonds Outstanding $ 499,365 $ 2,990 Notes to Financial Statements 2001 Refunding Bonds (issued July 18, 2001) due in annual installments of $70,000 to $5,030,000 through July 1, 2022; interest at 3.875 percent to 5.375 percent. On April 15, 2004, $5,490,000 due 2010 and 2014 through 2018 were defeased. Original issue amount $51,155,000. For the Fiscal Year Ended June 30, 2006 Bonds Outstanding (in thousands of dollars) The 1999 and 2001 Preservation Bonds of $18,400,000 and $29,210,000, respectively, and portions of the 2001 Refunding Bonds, 2002 Various Purpose Bonds, 2002 Refunding Bonds, 2004 Various Purpose Bonds and 2005 Refunding Bonds of $33,235,000, $40,000,000, $8,100,000, $65,400,000 and $66,090,000, respectively, are paid from the .2% Preservation Sales Tax. The 2005B Preservation Bonds of $20,000,000 are paid from the .15% Preservation Sales Tax. HURF Revenue Bonds 1993 Highway User Revenue Refunding Serial Bonds due in annual installments of $405,000 to $2,990,000 through July 1, 2007; interest at 4.25 percent to 5.5 percent. Original issue amount, $26,690,000. City of Scottsdale, Arizona 73 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Bonds Outstanding (in thousands of dollars) Municipal Property Corporation Bonds 1998 Municipal Property Corporation Excise Tax Revenue Bonds (issued December 2, 1998) due in annual installments of $3,500,000 to $180,000 through July 1, 2008; interest at 4.0 percent. Original issue amount, $9,150,000. $ 350 2004A Municipal Property Corporation Excise Tax Revenue Bonds (issued September 15, 2004) due in annual installments of $920,000 to $2,715,000 through July 1, 2034; interest at 3.25 percent to 5.25 percent. Original issue amount, $40,760,000. 40,760 2005 Municipal Property Corporation Excise Tax Revenue Bonds (issued June 15, 2005) due in annual installments of $35,026 to $4,925,019 through July 1, 2021; interest at 3.22 percent to 5 percent. Original issue amount, $19,945,322. 20,615 2005D Municipal Property Corporation Excise Tax Revenue Bonds (issued December 1, 2005) due in annual installments of $200,000 to $3,625,000 through July 1, 2035; interest at 3.25 percent to 5 percent. Original issue amount, $46,500,000. 46,500 Total MPC Bonds Outstanding $ 108,225 $ 41,175 Scottsdale Preserve Authority Bonds 1998 Scottsdale Preserve Authority Excise Tax Revenue Bonds due in annual installments of $1,015,000 to $6,585,000 beginning July 1, 1999, through July 1, 2024; interest at 6.0 percent to 4.75 percent. On March 30, 2004, $22,770,000 due 2009 through 2016 were refunded. Original issue amount $77,000,000. 2001 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued July 18, 2001, due in annual installments of $60,000 to $1,465,000 beginning July 1, 2002, through July 1, 2022; interest at 4.375 percent to 5.25 percent. Original issue amount $17,495,000. 16,545 2004 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued March 30, 2004, due in annual installments of $75,000 to $3,315,000 through July 1, 2016; interest at 2 percent to 5 percent. Original issue amount $22,925,000. 22,850 Total Scottsdale Preserve Authority Bonds $ 80,570 $ 5,505 2005 Certificates of Participation issued January 26, 2005, due in annual installments of $223,832 to $450,965 beginning January 1, 2006, through July 1, 2015. Original issue amount $7,650,000. $ 7,090 Community Facilities Districts General Obligation Bonds 1998 DC Ranch Community Facilities District General Obligation Bonds due in annual installments of $155,000 to $385,000 beginning July 15, 2005 through July 15, 2023; interest at 4.75% to 5.5%. Original issue amount $4,750,000. $ 4,435 Special Assessment Bonds Special Assessment Bonds issued September 28, 1998, through December 20, 2001, maturing January 1, 2009, through January 1, 2013; due in annual installments of $85,000 to $750,000; interest at 4.5 percent to 4.625 percent. Total original issue amount, $8,350,000. Certificates of Participation 74 City of Scottsdale, Arizona Table of Contents 16,170 1999 DC Ranch Community Facilities District General Obligation Bonds (issued November 1, 1999) due in annual installments of $85,000 to $260,000 beginning July 15, 2005 through July 15, 2011. Interest at 5.45% to 6.50%. Original issue amount $3,085,000. 2,910 2002 Scottsdale Mountain Community Facilities District General Obligation Refunding Bonds (issued May 15, 2002) due in annual installments of $160,000 to $455,000 beginning July 15, 2003 through July 15, 2018; interest at 3.0 percent to 4.7 percent. Original issue amount $5,375,000. 4,310 2002 DC Ranch Community Facilities District General Obligation Bonds (issued December 17, 2002) due in annual installments of $245,000 to $1,395,000 beginning July 15, 2004 through July 15, 2027. Interest at 3% to 5%. Original issue amount $12,165,000. 11,195 Total Bonds Payable Recorded in Governmental Activities Notes to Financial Statements 2,925 1999 McDowell Mountain Ranch Community Facilities District General Obligation Refunding Bonds due in annual installments of $320,000 to $1,455,000 beginning July 15, 1999 through July 15, 2022; interest at 4.0% to 6.0%. Original issue amount $20,245,000. Total Community Facilities Districts General Obligation Bonds Outstanding For the Fiscal Year Ended June 30, 2006 1999 Via Linda Road Community Facilities District General Obligation Bonds due in annual installments of $95,000 to $255,000 beginning July 15, 2004 through July 15, 2023; interest at 5.0% to 5.75%. Original issue amount $3,225,000. Bonds Outstanding (in thousands of dollars) $ 41,945 $ 745,690 Classified in Business-type Activities on the Government-wide Financial Statements: Bonds Outstanding (in thousands of dollars) General Obligation Bonds 1993 Refunding Bonds due in annual installments of $1,010,000 to $8,150,000 through July 1, 2009; interest at 4.0 percent to 5.5 percent. $28,399,993 of these bonds are recorded in and paid out of the Water and Sewer Fund. The original issue amount for the 1993 Refunding Bonds was $45,015,000. $ 1993A Refunding Bonds due in annual installments of $475,000 to $5,560,000 through July 1, 2011; interest at 3.65 percent to 5.1 percent. $1,315,000 of these bonds are recorded in and paid out of the Water and Sewer Fund. The original issue amount for the 1993A Refunding Bonds was $24,265,000. Total General Obligation Bonds Outstanding City of Scottsdale, Arizona - $ - 75 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Bonds Outstanding (in thousands of dollars) Water and Sewer Revenue Bonds 1996 Water and Sewer Revenue Refunding Serial Bonds (issued March 1, 1996) due in annual installments of $325,000 to $1,000,000 beginning July 1, 1997 through July 1, 2014; interest at 3.5 percent to 5.625 percent. Original issue amount, $9,815,000. $ 4,750 1989 Water and Sewer Revenue Bonds (Series D issued November 1, 1997) due in annual installments of $425,000 to $1,375,000 through July 1, 2022; interest at 4.75 percent to 7.25 percent. On March 30, 2004, $6,775,000 due 2009 through 2016 were refunded. Original issue amount $20,000,000. 8,575 1989 Water and Sewer Revenue Bonds (Series E issued December 2, 1998) due in annual installments of $1,015,000 to $4,615,000 through July 1, 2023; interest at 4.5 percent to 7.0 percent. On March 30, 2004, $9,210,000 due 2009 through 2013 were refunded. Original issue amount $50,000,000. 30,645 2004 Water and Sewer Revenue Refunding Bonds (Series 2004 issued March 30, 2004) due in annual installments of $80,000 to $3,175,000 through July 1, 2016 ; interest at 2 percent to 5 percent. Original issue amount $18,880,000. 18,435 Total Water and Sewer Revenue Bonds Outstanding $ 62,405 $ - Municipal Property Corporation Bonds 1995 Municipal Property Corporation Transfer Station Excise Tax Revenue Serial Bonds (issued November 1, 1995) due in annual installments of $160,000 to $330,000 through July 1, 2010; interest at 4.75 percent to 7.25 percent. These bonds are recorded in and paid out of the Solid Waste Enterprise Fund. These bonds were defeased July 5, 2005. Original issue amount, $3,500,000. 2001 Municipal Property Corporation Scottswater Excise Tax Revenue Serial Bonds (issued October 10, 2001) due in annual installments of $1,160,000 to $1,835,000 through July 1, 2008; interest at 3.5 percent to 5 percent. These bonds are recorded in and paid out of the Water and Sewer Enterprise Fund. Original issue amount, $10,500,000. 3,545 2004 Municipal Property Corporation Excise Tax Revenue Bonds (Series 2004 issued May 13, 2004) due in annual installments of $2,190,000 to $5,435,000 through July 1, 2024; interest at 3.25 percent to 5.25 percent. Original issue amount $75,000,000. 70,060 2005E Municipal Property Corporation Excise Tax Revenue Bonds (issued December 1, 2005) due in annual installments of $2,275,000 to $6,305,000 through July 1, 2030; interest at 5 percent. These bonds are recorded in and paid out of the Water and Sewer Enterprise Fund. Original issue amount $88,360,000. 88,360 Total Municipal Property Corporation Bonds Outstanding Total Bonds Payable Recorded in Business-type Activities Total Long-term Bonds Payable 76 $ 161,965 $ 224,370 $ 970,060 City of Scottsdale, Arizona Table of Contents General Obligation Bonds Issued to Provide Water, Sewer, Light, $ 947,151 20% Constitutional Limit General Obligation Bonds Issued for All Other Purposes 6% Constitutional Limit $ 284,145 Less General Obligation 20% Bonds Outstanding (372,545) Less General Obligation 6% Bonds Outstanding 574,606 Available 6% Limitation Borrowing Capacity Available 20% Limitation Borrowing Capacity $ (126,820) $ 157,325 Arbitrage Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the earnings from the investment of tax-exempt bond proceeds, which exceed related interest expenditures on the bonds, must be remitted to the Federal government on every fifth anniversary of each bond issue. The City used an independent consultant to evaluate the City’s outstanding tax-exempt debt for arbitrage liability and determined that there is no arbitrage liability due as of June 30, 2006. Notes to Financial Statements Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt issued for water, sewer, light, parks, and open space purposes may not exceed 20 percent of a city’s net secondary assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of a city’s net secondary assessed valuation. Accretion on capital appreciation bonds, which is included for GAAP purposes as outstanding debt, is excluded for this calculation. General obligation bonds of community facilities districts also are not subject to or included in this calculation. The following summarizes the City of Scottsdale, Arizona’s legal general obligation bonded debt borrowing capacity at June 30, 2006 (in thousands of dollars): For the Fiscal Year Ended June 30, 2006 Statutor y Debt Limitation Advance Refundings and Defeasances There were no refundings during the year ended June 30, 2006. In prior years, the City refinanced other bond issues through the issuance of refunding bonds. The proceeds from the refunding bonds have been deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, will provide amounts sufficient for future redemption or payment of principal and interest of the issues refunded. The assets, liabilities, and financial transactions of all of these trust accounts and the liability for refunded (defeased) bonds are not reflected in the financial statements of the City. The following tables reflect refunded debt outstanding at June 30, 2006, and net of any amounts to be paid or retired by the trustee on July 1, 2006 (in thousands of dollars). Refunded Debt Outstanding (in thousands of dollars) 1998 General Obligation Bonds 1999A General Obligation Bonds 1999 Preservation General Obligation Bonds 2001 Preservation General Obligation Bonds 2002 General Obligation Bonds 1998 Scottsdale Preserve Authority Excise Tax Revenue Bonds 1997 Water and Sewer Revenue Bonds 1998 Water and Sewer Revenue Bonds City of Scottsdale, Arizona $ 8,180 15,525 44,725 26,600 42,665 22,770 6,775 9,210 $ 176,450 77 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Contracts Payable The City has entered into various purchase contracts related to economic development, acquisition of water system facilities, acquisition of recreational facilities and patents. The contract for the acquisition of water system facilities is payable only from the operating revenue of the water and sewer utility system. The following is a summary of debt service to maturity for all long-term contracts payable at June 30, 2006. Classified in Governmental Activities on the Government-wide Financial Statements: Contracts Payable (in thousands of dollars) Contract payable to the U.S. Army Corps of Engineers for the construction of flood control and recreation facilities; due in annual installments through 2032; interest at 5.1 percent. 3,107 Contract payable for the construction of public infrastructure relating to completion of the Dial Corporation new corporate headquarters; due in annual installments beginning September 1998 through September 2007; non-interest bearing. 155 Contract payable for the maintenance of a federal patent; due in three year installments beginning January 1, 2001 through January 1, 2009; non-interest bearing. 3 Contract payable for the oversight and management of the Tournament Players Club Recreational Land Use Agreement; due in annual installments beginning March 1999 through June 2035; non-interest bearing. 1,595 Contract payable for the oversight and management of the Westworld Cost-share and Land Use Agreement; due in annual installments beginning December 2000 through December 2032; non-interest bearing. 1,485 Contract payable for the undergrounding of 69kv power lines; due in annual installments beginning January 1999 through January 2010; interest at 10.0 percent. 51 Contract payable for the purchase of a portion of 2,685 acres of land for the McDowell Sonoran Preserve; due in fifteen annual installments beginning July 1, 1999 through July 1, 2013; interest from 3.75 percent to 6.0 percent. 5,540 Contract payable for marketing of car dealerships located in southern Scottsdale; due in annual installments beginning January 2006; non-interest bearing. 1,200 Total Contracts Payable Recorded in Governmental Activities 78 $ $ 13,136 City of Scottsdale, Arizona Table of Contents Beginning Balance Governmental Activities: Bonds payable: General Obligation Bonds HURF Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable Compensated Absences Governmental Activity Long-term Liabilities $ $ 372,070 5,815 61,253 83,385 6,340 7,650 43,480 11,868 (11,693) 580,168 14,324 13,900 608,392 Additional Obligations, Interest Accretion and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ 145,000 47,142 5,501 197,643 13,053 210,696 $ (17,705) (2,825) (170) (2,815) (835) (560) (1,535) (1,510) 1,459 (26,496) (1,188) (8,064) (35,748) Ending Balance $ $ 499,365 2,990 108,225 80,570 5,505 7,090 41,945 15,859 (10,234) 751,315 13,136 18,889 783,340 Amounts Due Within One Year $ $ 23,165 2,990 370 2,965 835 689 1,615 32,629 1,218 9,416 43,263 Notes to Financial Statements The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the year ended June 30, 2006 (in thousands of dollars). For the Fiscal Year Ended June 30, 2006 Changes in Long-Ter m Liabilities Internal Service Funds serve primarily the governmental funds, the long-term liabilities of which are included as part of the governmental activities. For the year ended June 30, 2006, $464,000 of accrued compensated absences is included in the above amount. For the governmental activities, the General Fund, Special Revenue Funds and Capital Projects Funds generally liquidate accrued compensated absences. The compensated absences presented in this note are net of the current liability of $56,000 in the governmental funds and $2,000 in the Internal Service funds. Beginning Balance Business-type Activities: Bonds Payable: General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Capital Lease Compensated Absences Business-type Activity Long-term Liabilities City of Scottsdale, Arizona $ $ 6,515 65,735 79,430 6,059 (1,530) 156,209 1,971 158,180 Additional Obligations, Interest Accretion and Net Increases Current Maturities, Retirements, and Net Decreases $ $ $ 88,360 3,767 92,127 213 1,241 93,581 $ (6,515) (3,330) (5,825) (649) 285 (16,034) (34) (1,031) (17,099) Ending Balance $ $ 62,405 161,965 9,177 (1,245) 232,302 179 2,181 234,662 Amounts Due Within One Year $ $ 3,475 4,535 8,010 40 1,000 9,050 79 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Debt Ser vice Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2006. Deferred issuance costs and deferred amounts on refunding are not included. Governmental Activities (in thousands of dollars) General Obligation Bonds Issued To Provide Water, Sewer, Light Parks, and Open Spaces 20% Limitation Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2025 Total Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 2032-2036 Capital Appreciation ** Total Principal $ 9,090 8,590 11,445 13,450 21,890 84,560 111,605 111,915 $ Interest 17,261 16,802 16,374 15,856 15,202 61,354 41,183 13,039 $ General Obligation Bonds Issued For All Other Purposes 6% Limitation Total 26,351 25,392 27,819 29,306 37,092 145,914 152,788 124,954 $ 372,545 $ 197,071 $ 569,616 Principal $ 14,075 13,165 11,220 10,115 3,995 46,575 27,675 - $ $ 126,820 $ Interest 5,757 5,157 4,598 4,081 3,607 13,963 2,317 - $ Total General Obligation Bonds Total 19,832 18,322 15,818 14,196 7,602 60,538 29,992 - 39,480 $ 166,300 Highway User Revenue Bonds Municipal Property Corporation Bonds Principal Interest Total $ 165 $ 3,155 2,990 $ - Principal Interest Total $ 370 $ 4,434 $ 4,804 609 4,441 5,050 260 4,410 4,670 1,448 4,451 5,899 1,243 4,370 5,613 12,211 23,547 35,758 28,934 25,677 54,611 17,640 13,396 31,036 23,755 8,506 32,261 21,085 2,329 23,414 $ - - 2,990 $ 165 $ 3,155 670 $ 108,225 $ Principal $ 23,165 21,755 22,665 23,565 25,885 131,135 139,280 111,915 Interest 23,018 $ 21,959 20,972 19,937 18,809 75,317 43,500 13,039 Total 46,183 43,714 43,637 43,502 44,694 206,452 182,780 124,954 $ 499,365 $ 236,551 $ 735,916 $ Scottsdale Preserve Authority Excise Tax Revenue Bonds (670) Principal Interest $ 2,965 $ 3,836 $ 3,110 3,672 3,260 3,500 3,365 3,367 3,470 3,229 19,930 13,435 25,670 7,982 18,800 1,721 - - 94,891 $ 203,116 $ 80,570 $ Total 6,801 6,782 6,760 6,732 6,699 33,365 33,652 20,521 - 40,742 $ 121,312 ** For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 Total Community Facilities Districts General Obligation Bonds Special Assessment Bonds Certificates of Participation Principal Interest Total $ 835 $ 229 $ 1,064 835 192 1,027 835 154 989 750 118 868 750 84 834 1,500 68 1,568 - Principal Interest Total $ 689 $ 228 $ 917 712 205 917 735 181 916 760 157 917 785 132 917 3,409 258 3,667 - Principal Interest $ 1,615 $ 2,046 $ 1,685 1,978 1,760 1,907 1,870 1,830 1,965 1,747 11,230 7,279 12,455 4,354 7,970 1,421 1,395 70 $ $ $ 5,505 $ 845 $ 6,350 7,090 $ 1,161 $ 8,251 41,945 $ 22,632 $ Total 3,661 3,663 3,667 3,700 3,712 18,509 16,809 9,391 1,465 64,577 (continued) 80 City of Scottsdale, Arizona Table of Contents Contracts Payable Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 2032-2036 Capital Appreciation Total Total Principal Interest Total $ 1,218 $ 430 $ 1,648 1,257 393 1,650 1,339 355 1,694 1,288 314 1,602 1,023 272 1,295 2,838 777 3,615 1,209 497 1,706 1,395 310 1,705 1,221 85 1,306 348 348 $ - 13,136 $3,433 $ Principal Interest $ 33,847 $ 34,386 $ 29,963 32,840 30,854 31,479 33,046 30,174 35,121 28,643 182,253 120,681 207,548 82,010 157,720 29,887 26,371 8,661 21,433 2,329 16,569 670 Total 68,233 62,803 62,333 63,220 63,764 302,934 289,558 187,607 35,032 23,762 (670) $ 758,826 $ 400,420 $ 1,159,246 Business-type Activities (in thousands of dollars) Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 Total Fiscal Year 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2026 2027-2031 Total Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Principal Interest Total $ 3,475 $ 2,997 $ 6,472 3,635 2,802 6,437 3,785 2,598 6,383 3,260 2,420 5,680 3,380 2,255 5,635 16,760 8,813 25,573 19,100 4,812 23,912 9,010 620 9,630 - Principal Interest Total $ 4,535 $ 8,117 $ 12,652 4,735 7,890 12,625 5,255 7,672 12,927 5,380 7,409 12,789 5,580 7,140 12,720 31,700 31,291 62,991 41,375 22,418 63,793 39,815 11,257 51,072 23,590 3,015 26,605 $ $ 62,405 $ 27,317 $ 89,722 161,965 $ 106,209 $ 268,174 Capital Lease Total Principal Interest Total $ 40 $ 7 $ 47 42 5 47 43 4 47 46 2 48 8 8 - Principal Interest Total $ 8,050 $ 11,121 $ 19,171 8,412 10,697 19,109 9,083 10,274 19,357 8,686 9,831 18,517 8,968 9,395 18,363 48,460 40,104 88,564 60,475 27,230 87,705 48,825 11,877 60,702 23,590 3,015 26,605 $ $ City of Scottsdale, Arizona 179 $ 18 $ 197 224,549 $ 133,544 $ Notes to Financial Statements (in thousands of dollars) For the Fiscal Year Ended June 30, 2006 Governmental Activities (concluded) 358,093 81 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to public, property, and aviation premises liability, self-insured benefits and workers compensation. Public liability includes public officials’ errors and omissions, automobile and general liability. The City is self-insured for the first $2,000,000 of public liability, the first $100,000 of property coverage, the first $150,000 of health benefits claims and the first $750,000 of workers compensation. Coverage in excess of these respective amounts is provided through the purchase of commercial insurance. During the fiscal year ending June 30, 2006, the global property-casualty re-insurance marketplace hardened dramatically as a result of the uncommonly severe 2004 and 2005 storm seasons, producing a restricted market that resulted in the City obtaining only $20 million in flood zone insurance. As for claim expenditures, settlements for each of the past five fiscal years have not exceeded the City’s excess insurance coverage amounts for any claims. The City reports its self-insurance activity in its Self-Insurance Internal Service Fund. Claims liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. The claims liabilities amount recorded in the accompanying financial statements is based on reported pending claims; and an actuarial analysis and projection of the accrued liability amounts necessary to fund the claims as well as a corridor reserve for the self-insured benefits. At June 30, 2006, the general liability claims payable totaled $9,678,473 and the self-insured benefits claims payable totaled $5,056,000. The City began to administer all selfinsured health and dental plans in January of 2004. Years Ended June 30 (in thousands of dollars) 2006 2005 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 15,565 16,366 (17,197) $ 14,678 18,016 (17,129) Claims Payable, June 30 $ 14,734 $ 15,565 B. Contingent Liabilities The City is a party to several lawsuits incidental to its normal operations. Management, with concurrence of the City Attorney, and outside legal counsel, is of the opinion that settlement of these lawsuits will not have a material effect on the financial position of the City. Therefore, no specific provision has been reflected in the accompanying basic financial statements for these matters. C. Commitments and Subsequent Events On July 11th, 2006, the City agreed to the sale of Planet Ranch, including all related water rights, farm infrastructure and equipment to Phelps Dodge Corporation. Planet Ranch is land that was purchased by the City in 1984 to secure future water supplies. It is located along the Bill Williams River in western Arizona, east of Parker. It consists of 8,300 acres of land and has 14,400 acre-feet of surface water rights to the Bill Williams River. When all conditions are satisfied and the sale of the property closes, the City is expected to receive a total value of $24.65 million, consisting of $12 million cash and water rights valued at $12.65 million. The major conditions for closure are: 82 City of Scottsdale, Arizona Table of Contents • • • On November 19, 2002, the City Council approved a development agreement with John Lund relating to a new automotive complex at the southeast corner of Scottsdale Road and Loop 101 Freeway. The terms of this agreement require the City to reimburse Lund for up to $5.5 million in public benefits relating to the project including the acquisition of public lands, reimbursement of the City’s water and sewer development fees, and reimbursement of the City’s stormwater retention payment in lieu. The actual amount will be dependent upon actual costs. However, the reimbursement amount may not exceed $5.5 million even if actual costs are higher. The City has also agreed to pay interest costs on Lund’s cost of borrowing on the unpaid balance beginning at 8.5% in the first year and dropping by .5% per year. The reimbursement of the costs listed above, will be accomplished by paying Lund quarterly payments equal to 67% of the City’s General Fund sales tax receipts received from the new dealership in that quarter, for a maximum of 10 years. The first payment is not due until the calendar quarter after the calendar quarter in which the first certificate of occupancy is issued. Payments are expected to be during or after fiscal year 2007/08. Notes to Financial Statements • Deposit of remaining cash balance into the City’s Water and Sewer Fund. Arizona Department of Water Resources approval of sever and transfer and change of use of a portion of Planet Ranch water rights for habitat restoration. Arizona Department of Water Resources approval of sever and transfer and change of use of a Horseshoe Dam water credits to the City of Scottsdale water service area. Completion of assignment agreement for Horseshoe Dam water credits between the Corporation, the City and Salt River Project. Creation of a conservation easement on Planet Ranch property. Completion of Lower Colorado River Multi-Species Conservation Program habitat Development Agreement insuring use of Planet Ranch property for habitat restoration purposes. For the Fiscal Year Ended June 30, 2006 • • The City has a Service Agreement with the Scottsdale Cultural Council (Council) that provides that the Council will manage the arts and cultural affairs within the Scottsdale community for a ten-year period, automatically renewable for two five-year periods. In return, the City will pay service fees to the Council based on the Service Agreement between the City and the Council. Payments to Scottsdale Cultural Council amounted to $3,048,929 for the year ended June 30, 2006. Contractual payments due in fiscal year 2006/07 are budgeted for $3,456,639. The City has a Service Agreement with the Scottsdale Convention and Visitors’ Bureau (SCVB) that provides that SCVB will manage the tourism promotion within the Scottsdale community for a ten-year period. In return, the City will pay service fees to SCVB based on the Service Agreement with the City. Payments to SCVB amounted to $5,975,110 for the year ended June 30, 2006. Contractual payments due in fiscal year 2006/07 are budgeted for $6,467,230. The City has entered into several agreements whereby it will reimburse developers for construction costs of certain public infrastructure improvements. The funding source for the reimbursements will come from Water and Sewer development fees paid over the life of the development. Only amounts paid subsequent to January 13, 1997 are eligible for reimbursement. The City does not become liable under the agreements until the City has accepted the cost, a development fee has been paid and a water meter has been set. The City has limited its liability to the lesser of the cost accepted by the City or the development fees paid. The City’s maximum contingent liability at June 30, 2006, is $14,416,975. The City has entered into several agreements whereby it will reimburse developers a portion of the sales tax collected on their site for a time period up to a maximum dollar amount. The funding source for the reimbursements will come from sales tax collected on the site over the life of the agreement. The City does not become liable under the agreements until the developer has collected and remitted the tax to the City. The City’s probable contingent liability at June 30, 2006, is $7,974,621. City of Scottsdale, Arizona 83 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents D. Joint Venture The City participates with the cities of Phoenix, Glendale, Mesa, and Tempe in the multi-city Sub-Regional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation, and maintenance of jointly used sewage treatment and transportation facilities. The facilities include the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor, and related transportation facilities. The City of Phoenix acts as lead agency and is responsible for the planning, budgeting, construction, operation, and maintenance of the facilities. In addition, the City of Phoenix provides all management, personnel, and financing arrangements and accepts federal grants on behalf of the participants. The JEPA requires each city to pay for its share of the actual cash costs of operating and maintaining the facilities based on relative sewage flows and strengths. The City records its share of SROG’s cash operating expenses, and its equity in the joint venture in the City’s Water and Sewer Fund. For the year ended June 30, 2005, (the latest audited information available from SROG), the City’s net investment in SROG was $77,221,000. SROG’s net cash operating expenses for the year ended June 30, 2005, were $29,416,544, of which the City’s share was $3,805,137, or 12.9 percent. For the year ended June 30, 2006, the City paid $12,502,537 for SROG capital contributions, and $3,725,223 for SROG operating expenses, including adjustments to the operating and replacement reserves. The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2005 for the multi-city SubRegional Operating Group (the latest SROG CAFR available) may be obtained from the Arizona Municipal Water Users Association, 4041 N. Central Avenue, Suite 900, Phoenix, AZ 85012. E. Related Organization The Industrial Development Authority (Authority) is a nonprofit corporation established by the City in 1984 to promote industry and develop trade by inducing manufacturing, industrial and commercial enterprises to locate and remain in Scottsdale. The Board of Directors of the Authority is appointed by the City Council; however, the City’s accountability for the authority does not extend beyond making the appointments. F. Retirement and Pension Plans All full-time employees of the City, the Mayor, and City Council are covered by one of three pension plans. All full-time City employees, except public safety personnel, participate in the Arizona State Retirement System, a multiple-employer cost sharing pension plan. All public safety personnel participate in the Public Safety Personnel Retirement System, which is an agent multiple-employer pension plan. The Mayor and Council participate in the Elected Officials’ Retirement Plan, a multiple-employer cost sharing pension plan. All three pension plans are administered by the State of Arizona. Arizona State Retirement System Plan Description All full-time City employees, except public safety personnel, participate in the Arizona State Retirement System (System), a multiple-employer cost sharing defined benefit pension plan. The System was established by the State of Arizona to provide pension benefits for employees of the state and employees of participating political subdivisions and school districts. The System is administered in accordance with Title 38, Chapter 5, of the Arizona Revised Statutes. The System provides for retirement, disability, health insurance premium benefits, and death and survivor benefits. The Arizona State Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to Arizona State Retirement System, P. O. Box 33910, Phoenix, AZ 85067-3910, or by calling 1-800-621-3778. 84 City of Scottsdale, Arizona Table of Contents Public Safety Personnel Retirement System Plan Description All of the City’s public safety personnel (police officers and firefighters) participate in the Public Safety Personnel Retirement System (PSPRS), an agent multiple-employer defined benefit pension plan. PSPRS was established by Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes to provide pension benefits for public safety employees of certain state and local governments. The PSPRS is jointly administered by the fund manager and 171 local boards. PSPRS provides retirement benefits, as well as death and disability benefits. The Public Safety Personnel Retirement System of the State of Arizona issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Public Safety Personnel Retirement System, 1020 East Missouri Avenue, Phoenix, AZ 85014 or by calling (602) 2555575. Notes to Financial Statements The Arizona Revised Statutes (ARS) provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of covered payroll. Employers are required to contribute at the same rate as employees. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is able to legislate a contribution rate other than the actuarially determined rate. The actuarially determined contribution rate for the years ended June 30, 2006, 2005, and 2004, were 7.40% (6.90% retirement and .50% long-term disability) 5.70% and 5.70%, respectively, for both employers and employees. The City’s contributions to the System for the years ending June 30, 2006, 2005, and 2004 were $6,876,822, $4,944,354, and $4,680,164, respectively, equal to the required contributions for each year. For the Fiscal Year Ended June 30, 2006 Funding Policy Funding Policy The System for both police and fire is funded through a member contribution of 7.65% of gross payroll, an employer contribution set by an actuarial valuation expressed as a percent of gross payroll, and a distribution of the net earnings of the Fund. The City’s current contribution rate for police is 11.56% of annual covered payroll, consisting of 10.60% for normal cost and .96% for amortization of unfunded actuarial accrued liability. Contribution rates for police were 7.65% and 7.77% in 2005 and 2004, respectively. The City’s current contribution rate for fire is 11.03% of annual covered payroll, which covers all normal costs. The City had no contribution rate for fire in 2004 because they contracted this service out to a third party vendor. Annual Pension Cost For 2006, the City’s annual pension costs of $2,897,078 for police and $1,600,785 for fire were equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2005 actuarial valuation using the individual entry-age actuarial cost method. The actuarial assumptions for both police and fire include (a) a rate of return on the investment of present and future assets of 8.75% per year compounded annually, (b) projected salary increases of 6.25% per year compounded annually, attributable to inflation and other across-the-board factors, and (c) additional projected salary increases ranging from 6.25% to 9.25% per year, attributable to seniority/merit. Included in (b) is an inflation component of 5.25%. The actuarial value of PSPRS assets was determined using techniques that smooth the market value of assets over a 4-year period. PSPRS’ unfunded accrued liability is being amortized as a level percent of projected payroll on an open basis. The remaining amortization period at July 1, 2005 was 20 years. City of Scottsdale, Arizona 85 For the Fiscal Year Ended June 30, 2006 Notes to Financial Statements Table of Contents Three-Year Trend Information for PSPRS (Police) (in thousands of dollars) Fiscal Year Ending 2004 2005 2006 Annual Pension Cost (APC) $ 1,794 2,102 2,897 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation - One-Year Trend Information for PSPRS (Fire) (in thousands of dollars) Fiscal Year Ending 2006 Annual Pension Cost (APC) $ 1,601 Percentage of APC Contributed 100% Net Pension Obligation - There is only one year of actuarial information available for the Fire Department as it was formed during fiscal year 2005. Elected Officials’ Retirement Plan Plan Description The City’s Mayor and Council participate in the Elected Officials’ Retirement Plan (EORP), a multiple-employer cost sharing defined benefit pension plan. The EORP was established and is administered by the State of Arizona to provide pension benefits for state and county elected officials, judges, and certain City-elected officials. The fund manager of the PSPRS is also the administrator for the EORP. EORP provides retirement benefits, as well as death and disability benefits. The Elected Officials’ Retirement Plan issues a publicly available financial report that includes financial statements and required supplementary information for EORP. That report may be obtained by writing to Elected Officials’ Retirement Plan, 1020 East Missouri Avenue, Phoenix, Arizona 85014 or by calling (602) 255-5575. Funding Policy Covered employees are required by state statute to contribute an amount equal to 7.00% of gross salary. Incorporated city or town employers are required to contribute an amount sufficient to meet both the normal cost of a levelcost method attributable to the EORP, plus the amount required to amortize the unfunded accrued liability for the employer. Such amount is to be determined each year by actuarial valuation and paid as a level percent of compensation. The contribution requirements for plan members are established and may be amended by the Fund Manager, a five-member board. The City’s rates for fiscal years ended June 30, 2006, 2005, and 2004, were 20.54%, 13.49%, and 13.49%, respectively. The City’s contributions to EORP for the years ending June 30, 2006, 2005, and 2004, were $29,720, $19,425, and $19,658, respectively, equal to the required contributions for each year. 86 City of Scottsdale, Arizona Table of Contents Twenty-seven participants were added during fiscal year 2005/06 increasing the total number of participants to 138 at fiscal year-end. The projected liability, as of June 30, 2006, for medical conversion was $11,317,198. Of this liability, $47,712 was considered current and reflected in the governmental fund statements. An additional $8,517,547 was considered payable within one year or greater and is not reflected as a current expenditure in the governmental fund statements. The projected liability is based on a January 1, 2006, actuarial valuation, as adjusted, based on the actuarial projection that for every additional 100 participants, future normal costs increase by an additional 3% per annum. Significant actuarial assumptions of the January 1, 2006 actuarial valuation include a) mortality rates based on the RP 2000 male and female rates, b) interest compounded 4.0 percent annually, c) salaries increase at a rate of 3.5% to 7.5% based on years of service per annum, d) projected unit credit cost method based on participant data as of January 1, 2006. City of Scottsdale, Arizona Notes to Financial Statements In addition to the pension benefits described in F the City provides an option of post-retirement health care benefits, in accordance with Chapter 14 of the City Code. At retirement, employees with medical leave accumulated prior to September 6, 1976 are eligible for payment of medical leave at one hundred percent cash value at current rate of pay. Employees hired before July 1, 1982 can elect to receive cash equal to fifty percent of the first five hundred twenty hours of unused medical leave plus twenty-five percent of all hours in excess of five hundred twenty. The conversion rate is the employee’s average hourly base pay rate for the five years immediately preceding retirement. Any retiring employee with 300 or more hours of accumulated medical leave, who chooses to remain on the City medical plan, may elect to apply the value of the sick leave to the employee’s portion of the health care premiums, up until age 65. The value of the accumulated medical leave is calculated at the employee’s hourly rate of pay at the time of retirement. For the Fiscal Year Ended June 30, 2006 G. Other Post-Employment Benefits 87 Table of Contents 88 City of Scottsdale, Arizona Table of Contents Actuarial Valuation June 30 2000 2001 2002 2003 2004 2005 (1) Actuarial Value of Assets 84,435 93,684 94,784 98,287 99,394 102,153 (2) Entry Age Actuarial Accrued Liability (AAL) 65,021 73,216 80,997 91,841 103,136 118,662 (3) Percent Funded (1)/(2) 129.9% 128.0% 117.0% 107.0% 96.4% 86.1% (4) Unfunded AAL (2) - (1) 19,414 (20,468) (13,787) (6,446) 3,742 16,509 (5) Annual Covered Payroll 18,547 20,406 20,930 21,996 22,647 23,816 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 0.0% 0.0% 0.0% 0.0% 16.5% 69.3% (5) Annual Covered Payroll 1,791 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 0.0% Required Supplementary Information (in thousands of dollars) For the Fiscal Year Ended June 30, 2006 Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress (in thousands of dollars) Actuarial Valuation June 30 2005 (1) Actuarial Value of Assets 2,205 City of Scottsdale, Arizona (2) Entry Age Actuarial Accrued Liability (AAL) 1,325 (3) Percent Funded (1)/(2) 166.4% (4) Unfunded AAL (2) - (1) (880) 89 Table of Contents Nonmajor Governmental Funds SPECIAL REVENUE FUNDS Special Revenue Funds are established to finance particular activities and are created out of receipts of specific taxes or other earmarked revenue. Such funds are authorized by statutory or charter provisions to pay for certain activities with some form of continuing revenue. Highway User Fuel Tax Fund This fund receives and expends the City’s allocation of the Arizona Highway User Revenue tax and other transportation related revenue. The amount available to each city is allocated on a population basis, which is determined by the latest federal census. These monies must be used for street construction, reconstruction, maintenance or transit. Community Development Block Grant Fund This fund receives and expends the City’s Community Development Block Grant revenues. The amount of the grant is awarded annually by the U.S. Department of Housing and Urban Development (HUD) upon application for funding by the City. Community Development Block Grant revenues may be used only for those projects approved in the grant budget and are subject to agency expenditure guidelines. Home Fund This fund receives and expends monies from the Maricopa County Home Consortium. Expenditures are made to provide affordable housing, expand the capacity of nonprofit housing providers, strengthen the ability of local governments to provide housing and leverage private-sector participation in housing. Section 8 Fund This fund receives and expends the City’s Section 8 Housing revenues. Assistance contracts are awarded by the U.S. Department of Housing and Urban Development (HUD) upon application by the City, and covers a five year period. Budgets are approved annually by HUD. Section 8 revenues may be used only for assistance approved by HUD and are subject to agency expenditure guidelines. Preserve Privilege Tax Fund This fund receives a 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (.2%) and 2004 (.15%). Revenues are transferred to Capital Projects Funds for land purchase and improvements in the McDowell Sonoran Preserve or are used for related debt service payments. Special Programs Fund This fund receives monies from a variety of sources. The monies are required to be expended for specific purposes related to the source of the revenue. DEBT SERVICE FUNDS These funds record the accumulation of resources for, and the payment of, long-term debt principal and interest not serviced by the proprietary funds. Municipal Property Corporation Fund This fund accounts for the principal and interest requirements of the City’s Municipal Property Corporation (MPC) bonds. Financing is provided primarily by transaction privilege tax. Grants Fund This fund receives and expends the City’s grant revenues. The amount of grants received is generally based upon application to granting agencies by the City and upon availability of funding by the grantors. Grant revenues may be used only for the stated purpose in the approved grant agreement and are subject to grantor expenditure guidelines. 90 City of Scottsdale, Arizona Table of Contents Special Assessments Fund This fund accounts for the principal and interest requirements of special assessment bonds. Financing is provided by special assessment levies against the benefited property holders. Community Facilities Districts Funds: Scottsdale Mountain Community Facilities District Fund McDowell Mountain Community Facilities District Fund DC Ranch Community Facilities District Fund Via Linda Road Community Facilities District Fund Waterfront Community Facilities District Fund These funds account for the principal and interest of general obligation bonds issued by community facilities districts. Although these bonds are not obligations of the City, generally accepted accounting principles indicate that the bonds should be disclosed herein. Scottsdale Preserve Authority Fund This fund accounts for the principal and interest requirements of excise tax revenue bonds issued by the Scottsdale Preserve Authority. Financing is provided by a 0.2 percent Preservation Privilege (Sales) Tax. Preserve Privilege Tax Fund Accounts for the resources used to acquire, and improve land within the McDowell Sonoran Preserve. Resources are provided by the proceeds from the sale of bonds and the .15% 2004-approved Preserve Privilege Tax. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements, regarding the use of the resources, are fully satisfied. Transportation Privilege Tax Fund Accounts for the authorized 0.2 percent Transportation Privilege (Sales) Tax dedicated to transportation capital improvements. Voters approved the tax on November 7, 1989. Community Facilities Districts Funds: McDowell Mountain Community Facilities District Fund DC Ranch Community Facilities District Fund Accounts for the proceeds issued by community facilities districts to acquire and improve public infrastructure in specified areas. CAPITAL PROJECTS FUNDS Capital Projects Funds account for the resources used to acquire, construct and improve major capital assets, other than those financed by proprietary funds. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. Municipal Property Corporation Bond Fund Accounts for the proceeds of Municipal Property Corporation bonds issued for acquisition or construction of capital improvements. City of Scottsdale, Arizona 91 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2006 (in thousands of dollars) Special Revenue Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivables Interest Privilege Tax Property Tax Highway User Tax Intergovernmental Grants Special Assessments Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Intergovernmental Guaranty and Other Deposits Other Total Liabilities $ $ 39,969 2,983 207 4,443 1,441 1,327 96 278 50,744 2,580 131 78 158 2,825 $ $ $ Total Nonmajor Governmental Funds Capital Projects Funds 7,046 13,751 164 5,436 26,397 29 5,588 4,520 $ $ $ 44,058 258 290 44,606 6,338 12 - $ $ $ 91,073 16,992 497 4,443 164 1,441 1,327 96 5,436 278 121,747 8,947 143 78 5,746 7,345 1,354 2,643 23 9,792 110 5,436 8 15,691 489 6,839 110 5,436 1,354 3,132 31 32,322 Fund Balances Reserved for Debt Service Unreserved, Undesignated 40,952 10,706 - 37,767 10,706 78,719 Total Fund Balances 40,952 10,706 37,767 89,425 Total Liabilities and Fund Balances 92 $ Debt Service Funds $ 50,744 $ 26,397 $ 44,606 $ 121,747 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) Special Revenue Funds REVENUES Taxes - Local Property Transaction Privilege Highway User Tax Local Transportation Assistance Fund Charges for Current Services Building and Related Permits Recreation Fees Fines, Fees and Forfeitures Code Enforcement Court Fines Court Enhancement Special Assessments Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Contributions and Donations Reimbursements From Outside Sources Other Total Revenues $ Debt Service Funds 55,503 15,708 1,098 $ Total Nonmajor Governmental Funds Capital Projects Funds 3,361 - $ - $ 3,361 55,503 15,708 1,098 38 931 - - 38 931 163 48 925 578 1,026 1,106 132 185 1,521 163 48 925 1,106 710 2,732 7,673 322 1,445 2 724 97 96 86,377 1,208 2 5,994 705 1,000 30 3,256 8,378 322 3,653 32 724 99 96 95,627 (continued) City of Scottsdale, Arizona 93 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) Special Revenue Funds EXPENDITURES Current General Government Police Transportation Community Services Municipal Services Citizen and Neighborhood Resources Human Resources Planning and Development Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures Total Nonmajor Governmental Funds Capital Projects Funds 1,170 974 10,099 9,151 8,268 8 9 21 263 - - 1,433 974 10,099 9,151 8,268 8 9 21 3,480 614 3,767 37,561 5,371 9,951 15,585 1 26 38,992 39,019 8,851 10,566 26 42,759 92,165 Excess (Deficiency) of Revenues Over Expenditures 48,816 (9,591) (35,763) 3,462 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Long-term Capital-Related Debt Issued Premium on Bonds Issued Total Other Financing Sources and (Uses) 3,775 (43,512) (39,737) 14,313 (4) 977 15,286 35,067 (1,117) 20,000 53,950 53,155 (44,633) 20,000 977 29,499 9,079 5,695 18,187 32,961 31,873 5,011 19,580 56,464 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 94 Debt Service Funds $ 40,952 $ 10,706 $ 37,767 $ 89,425 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2006 (in thousands of dollars) Highway User Fuel Tax ASSETS Cash and Investments Cash with Fiscal Agent Receivables Interest Privilege Tax Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Intergovernmental Guaranty and Other Deposits Other Total Liabilities $ $ $ Fund Balances Unreserved, Undesignated Total Fund Balances (Deficit) Total Liabilities and Fund Balances $ Community Development Block Grant HOME Grants Preserve Privilege Tax Section 8 Special Programs Total 3,334 $ 2,983 14 $ - - $ - 100 $ - 318 $ - 27,311 $ - 8,892 - 1,591 1,441 5 9,354 $ 78 92 $ - $ 18 22 140 $ 318 $ 172 2,852 30,335 $ 35 1,327 251 10,505 2,133 $ 117 158 2,825 82 $ 6 - 22 $ 78 - 220 $ 2 - 7 $ 6 - - $ - 116 - 40 5,273 88 100 27 249 13 - 1,327 2,603 23 4,069 1,354 2,643 23 9,792 4,081 4,081 4 4 (100) (100) (109) (109) 305 305 30,335 30,335 6,436 6,436 40,952 40,952 318 $ 30,335 $ 9,354 $ 92 $ - $ 140 $ 10,505 $ $ $ $ 39,969 2,983 207 4,443 1,441 1,327 96 278 50,744 2,580 131 78 158 2,825 50,744 95 Table of Contents 96 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) Highway User Fuel Tax REVENUES Taxes - Local Transaction Privilege Highway User Tax Local Transportation Assistance Fund Charges for Current Services Building and Related Permits Recreation Fees Fines, Fees and Forfeitures Code Enforcement Court Fines Court Enhancement Fee Property Rental Interest Earnings Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Contributions and Donations Reimbursements From Outside Sources Other Total Revenues $ Community Development Block Grant 20,020 15,708 1,098 $ HOME - $ Grants - $ Preserve Privilege Tax Section 8 - $ - $ Special Programs 35,483 - $ Total - $ 55,503 15,708 1,098 City of Scottsdale, Arizona - - - - - - 38 931 38 931 - - - 1 9 870 163 48 925 578 146 163 48 925 578 1,026 201 96 42 37,165 852 852 659 659 438 121 850 169 1,579 5,724 1 6 5,740 36,353 595 2 555 48 4,029 7,673 322 1,445 2 724 97 96 86,377 10,099 8,268 - 848 - 759 - 819 568 239 - 5,359 - 1 - 350 406 1,946 8 9 21 1,170 974 10,099 9,151 8,268 8 9 21 2,825 317 3,197 24,706 848 759 471 2,097 5,359 655 297 953 99 2,839 3,480 614 3,767 37,561 Excess (Deficiency) of Revenues Over Expenditures 12,459 4 (518) 381 35,400 1,190 48,816 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) 3,400 (13,338) (9,938) - 181 (5) 176 - (342) 381 EXPENDITURES Current General Government Police Transportation Community Services Municipal Services Citizen and Neighborhood Resources Human Resources Planning and Development Debt Service Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 2,521 4 1,560 - 4,081 $ 4 (100) (100) $ (100) $ 233 (109) $ 49 (29,725) (29,676) (76) 305 $ 145 (444) (299) 3,775 (43,512) (39,737) 5,724 891 9,079 24,611 5,545 31,873 30,335 $ 6,436 $ 40,952 Table of Contents City of Scottsdale, Arizona Highway User Fuel Tax - Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Intergovernmental State Grants Reimbursement From Outside Sources Other Total Revenues $ EXPENDITURES Current Transportation Municipal Services Debt Service Principal Interest and Fiscal Charges Capital Improvements Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 18,322 $ 18,322 $ 20,020 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ - $ 1,698 14,994 1,146 14,994 1,146 15,708 1,098 - 15,708 1,098 34,462 34,462 36,826 201 96 42 339 201 96 42 37,165 2,364 13,085 9,186 13,085 9,136 10,120 8,304 (21) (36) 10,099 8,268 2,965 832 2,825 317 3,181 28,594 2,825 317 3,181 28,544 2,825 317 3,197 24,763 (57) 2,825 317 3,197 24,706 (16) 3,781 5,868 5,918 12,063 396 12,459 6,145 3,364 (9,232) (5,868) 3,364 (9,232) (5,868) 3,400 (13,338) (9,938) 3,400 (13,338) (9,938) 36 (4,106) (4,070) - 714 (48) - 50 2,125 396 2,521 2,075 - - 1,560 - 1,560 1,560 - $ 50 $ 3,685 $ 396 $ 201 96 42 339 Explanation of Differences: The City does not budget for certain revenues: Grants Reimbursement From Outside Sources Other The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Compensated Absences 97 Net Increase in Fund Balance - Budget to GAAP 20,020 Variance Between Final Budget and Actual Amounts Budgetary Basis (57) $ 396 $ 4,081 $ 3,635 Table of Contents 98 Preserve Privilege Tax - Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Transaction Privilege Interest Earnings Total Revenues $ EXPENDITURES Current General Government Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning City of Scottsdale, Arizona Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 33,344 652 33,996 $ 33,344 652 33,996 $ 35,483 870 36,353 - $ 35,483 870 36,353 $ 2,139 218 2,357 - - 1 1 - 655 297 952 655 297 952 655 297 952 1 655 297 953 - 33,044 33,044 35,401 (1) 35,400 2,357 (38,492) (38,492) (38,492) (38,492) 49 (29,725) (29,676) - 49 (29,725) (29,676) 49 8,767 8,816 (5,448) (5,448) 5,725 (1) 5,724 11,173 17,703 17,703 24,611 - 24,611 60,017 12,255 $ 12,255 $ 30,336 $ 1 $ (1) The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Net (Decrease) in Fund Balance - Budget to GAAP $ Actual Amounts GAAP Basis - Explanation of Differences: Audit Expense Budget to GAAP Differences Variance Between Final Budget and Actual Amounts Budgetary Basis $ (1) $ 30,335 $ 71,190 Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2006 (in thousands of dollars) Municipal Property Corporation ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Special Assessments Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Other Total Liabilities $ $ $ Fund Balances Reserved for Debt Service Total Fund Balances Total Liabilities and Fund Balances $ Special Assessments Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD Scottsdale Preserve Authority Waterfront CFD Total 6,625 $ 2,577 351 $ 124 - $ 995 - $ 2,241 - $ 2,098 - $ 906 70 $ - 4,810 9,202 $ 5,436 5,911 $ 12 1,007 $ 36 2,277 $ 75 2,173 $ 41 947 $ 70 $ 4,810 - $ 2,407 170 11 $ 124 - 4 $ 98 290 4 $ 399 635 5 $ 480 505 4 $ 85 105 1 $ - 1,995 2,815 $ $ $ 7,046 13,751 164 5,436 26,397 29 5,588 4,520 2,577 5,436 8 5,579 7 399 19 1,057 51 1,041 33 227 1 4,810 110 5,436 8 15,691 6,625 6,625 332 332 608 608 1,220 1,220 1,132 1,132 720 720 69 69 - 10,706 10,706 2,277 $ 2,173 $ 947 $ 70 $ 9,202 $ 5,911 $ 1,007 $ 4,810 $ 26,397 99 Table of Contents 100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) Municipal Property Corporation REVENUES Taxes - Local Property Special Assessments Property Rental Interest Earnings Intergovernmental Miscellaneous Reimbursements from Outside Sources Total Revenues $ EXPENDITURES Current General Government Debt Service Principal Interest and Fiscal Charges Total Expenditures Scottsdale Mountain CFD Special Assessments - $ 132 1 McDowell Mountain CFD Via Linda Road CFD DC Ranch CFD Scottsdale Preserve Authority Waterfront CFD Total - $ 1,106 - 471 $ 28 1,412 $ 54 1,134 $ 66 344 $ 35 - $ - 1 $ 3,361 1,106 132 185 1,206 1,339 1,106 499 2 1,468 1 1,201 1 380 - 1 1,208 2 5,994 - 2 9 28 174 16 34 - 263 170 3,539 3,709 851 275 1,128 290 198 497 635 797 1,460 505 974 1,653 105 171 292 34 2,815 3,997 6,812 5,371 9,951 15,585 Excess (Deficiency) of Revenues Over Expenditures (2,370) (22) 2 8 (452) 88 (34) (6,811) (9,591) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Premium on Bonds Issued Total Other Financing Sources and (Uses) 7,395 977 8,372 - - - - - 107 (4) 103 6,811 6,811 14,313 (4) 977 15,286 6,002 (22) 2 8 (452) 88 69 - 5,695 354 606 1,212 1,584 632 - - 5,011 332 $ 608 $ 1,220 $ 1,132 $ 720 $ Net change in Fund Balances City of Scottsdale, Arizona Fund Balances - Beginning Fund Balances - Ending 623 $ 6,625 $ 69 $ - $ 10,706 Table of Contents City of Scottsdale, Arizona General Obligation Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original REVENUES Taxes - Local Property Reimbursements from Outside Sources Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Premium on Bonds Issued Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Final 28,401 28,401 $ 28,401 28,401 27,928 4 27,932 - 27,928 4 27,932 (473) 4 (469) 20,069 22,161 42,230 20,069 22,161 42,230 17,705 21,198 296 39,199 - 17,705 21,198 296 39,199 2,364 963 (296) 3,031 (13,829) (13,829) (11,267) - (11,267) 2,562 13,829 13,829 13,829 13,829 15,267 2,834 18,101 - 15,267 2,834 18,101 1,438 2,834 4,272 - - 6,834 - 6,834 6,834 7,296 7,296 5,602 - 5,602 (1,694) 7,296 $ 7,296 $ 12,436 $ - $ 12,436 $ 5,140 101 Table of Contents 102 Municipal Property Corporation Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ Budgeted Amounts Original REVENUES Property Rental Interest Earnings Intergovernmental Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Premium on Bonds Issued Total Other Financing Sources and Uses Net Change in Fund Balance City of Scottsdale, Arizona Fund Balance - Beginning Fund Balance - Ending $ 590 590 Actual Amounts Budgetary Basis Final $ 590 590 $ Budget to GAAP Differences 132 1 1,206 1,339 $ - 132 1 1,206 1,339 132 1 616 749 1,658 3,122 4,780 1,658 3,122 4,780 170 3,539 3,709 - 170 3,539 3,709 1,488 (417) 1,071 (4,190) (4,190) (2,370) - (2,370) 1,820 4,330 4,330 4,330 4,330 7,395 977 8,372 - 7,395 977 8,372 3,065 977 4,042 140 140 6,002 - 6,002 5,862 345 345 623 - 623 278 485 $ 485 $ 6,625 $ - $ 6,625 $ 6,140 Table of Contents City of Scottsdale, Arizona Special Assessments Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ Budgeted Amounts Original REVENUES Special Assessments Total Revenues $ EXPENDITURES Current: General Government Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 1,125 1,125 $ 1,125 1,125 $ Budget to GAAP Differences 1,106 1,106 $ - 1,106 1,106 (19) (19) - - 2 - 2 (2) 849 276 1,125 849 276 1,125 851 275 1,128 - 851 275 1,128 (2) 1 (3) - - 1,166 1,166 1,166 $ 1,166 $ (22) - (22) (22) 354 - 354 (812) 332 $ - $ 332 $ (834) 103 Table of Contents 104 Scottsdale Preserve Authority Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2006 (in thousands of dollars) Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ Budgeted Amounts Original REVENUES Interest Earnings Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning City of Scottsdale, Arizona Fund Balance - Ending $ Final - $ - 1 1 - 1 1 1 1 2,815 3,998 6,813 2,815 3,998 6,813 2,815 3,997 6,812 - 2,815 3,997 6,812 1 1 (6,813) (6,813) (6,811) - (6,811) 2 6,813 6,813 6,813 6,813 6,811 6,811 - 6,811 6,811 (2) (2) - - - - - - - - - - - - - $ - $ - $ - $ - $ - Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2006 (in thousands of dollars) Municipal Property Corporation ASSETS Cash and Investments Cash with Fiscal Agent Receivables Interest Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Guaranty and Other Deposits Total Liabilities $ $ $ Fund Balances Unreserved, Undesignated Total Fund Balances Total Liabilities and Fund Balances Preserve Privilege Tax 114 1 115 - $ $ $ 115 115 $ 115 595 595 $ 43,349 - $ DC Ranch CFD 154 154 289 43,638 $ 104 281 $ 1 282 6,057 $ 11 489 6,557 - 595 37,081 37,081 $ 43,638 $ $ 104 104 $ Total - $ 104 $ 313 313 $ McDowell Mountain CFD Transportation Privilege Tax 104 - $ $ $ 154 154 $ 154 44,058 258 290 44,606 6,338 12 489 6,839 37,767 37,767 $ 44,606 105 Table of Contents 106 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Year Ended June 30, 2006 (in thousands of dollars) Municipal Property Corporation REVENUES Interest Earnings Intergovernmental Federal Grants Miscellaneous Developer Contributions Total Revenues $ Preserve Privilege Tax Transportation Privilege Tax McDowell Mountain CFD DC Ranch CFD Total 4 $ 46 $ 1,468 $ 3 $ - 4 46 705 1,000 30 3,203 3 - 705 1,000 30 3,256 - 26 8,138 8,164 30,656 30,656 1 1 198 198 1 26 38,992 39,019 Excess (Deficiency) of Revenues Over Expenditures 4 (8,118) (27,453) 2 (198) (35,763) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Long-term Capital-Related Debt Issued Total Other Financing Sources and (Uses) 12 (28) (16) 6,848 (49) 20,000 26,799 28,207 (1,040) 27,167 - (12) 18,681 (286) 2 127 (18,368) 37,367 37,081 $ EXPENDITURES Debt Service Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 115 $ 313 $ $ 1,521 35,067 (1,117) 20,000 53,950 (198) 18,187 102 352 19,580 104 $ 154 $ 37,767 Table of Contents INTERNAL SERVICE FUNDS Internal Services Funds are established to finance and account for services and/or commodities furnished by one department or unit to other departments or units within the City. Fleet Management Fund The Fleet Management Fund is responsible for the maintenance and operations of various automobiles and other equipment of the City. Revenue to this fund is derived from charges to user programs. Self-Insurance Fund The Self-Insurance Fund is responsible for the administration of the City’s self-insurance program. Revenue to this fund is derived from charges to user programs and employee contributions for health and dental coverage. This fund provides coverage of unemployment, self-insured benefits, workmen’s compensation, property, and liability claims. City of Scottsdale, Arizona 107 Table of Contents Combining Statement of Net Assets Internal Service Funds June 30, 2006 (in thousands of dollars) Fleet Management SelfInsurance Total ASSETS Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Interest Miscellaneous Supplies Inventory $ Total Current Assets Noncurrent Assets Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Less Accumulated Depreciation 12,043 $ 19,350 $ 31,393 98 426 144 93 - 242 93 426 12,567 19,587 32,154 1,846 58,705 426 (35,603) - 1,846 58,705 426 (35,603) Total Capital Assets (net of accumulated depreciation) 25,374 - 25,374 Total Noncurrent Assets 25,374 - 25,374 37,941 19,587 57,528 936 53 2 166 - 158 14 66 14,734 1,094 67 2 232 14,734 1,157 14,972 16,129 175 175 57 57 232 232 1,332 15,029 16,361 25,374 11,235 4,558 25,374 15,793 Total Assets LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Current Accrued Compensated Absences - Due Within One Year Claims Payable Total Current Liabilities Noncurrent Liabilities Accrued Compensated Absences - Due in More Than One Year Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets 108 $ 36,609 $ 4,558 $ 41,167 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Funds For the Year Ended June 30, 2006 (in thousands of dollars) Fleet Management Operating Revenues Charges for Sales and Services Billings To User Programs Self Insurance Contributions-Employee State Contributions Other $ Total Operating Revenues 12,084 84 SelfInsurance $ 17,280 2,538 520 905 Total $ 29,364 2,538 520 989 12,168 21,243 33,411 9,378 5,190 2,592 4,608 16,366 1,915 - 9,378 2,592 4,608 16,366 1,915 5,190 14,568 25,481 40,049 Operating Income (Loss) (2,400) (4,238) (6,638) Non-Operating Revenues Property Tax Investment Income Gain on Sale of Capital Assets 478 94 701 718 - 701 1,196 94 572 1,419 1,991 (1,828) (2,819) (4,647) 1,169 1,860 (279) 1,836 (11) 1,169 3,696 (290) 922 (994) (72) 35,687 5,552 41,239 Operating Expenses Costs of Sales and Services Fleet Management Operations Self-Insurance Administration Self-Insurance Claims Self-Insurance Benefits Insurance and Bond Premiums Depreciation Total Operating Expenses Total Non-Operating Revenues Income (Loss) Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending City of Scottsdale, Arizona $ 36,609 $ 4,558 $ 41,167 109 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2006 (in thousands of dollars) Cash Flows from Operating Activities Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Other Operating Fleet Management SelfInsurance $ $ Net Cash Provided by (Used for) Operating Activities Cash Flows from Non-Capital Financing Activities Property Tax Transfers In Transfers Out Net Cash Provided by (Used) for Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Property and Equipment Sale of Capital Assets Net Cash (Used) for Capital and Related Financing Activities 1,860 (279) 701 1,836 (11) 701 3,696 (290) 1,581 2,526 4,107 (4,826) 168 - (4,826) 168 (4,658) - (4,658) 207 Supplemental Disclosure of Noncash Financing Activities Additions to Property, Plant, and Equipment Contributions from Other Government Units Total Non-Cash Financing Activities 657 11,836 1,087 (1,233) (1,026) 20,583 32,419 $ 12,043 $ 19,350 $ 31,393 $ (2,400) $ (4,238) $ (6,638) 5,190 - 32 (157) 268 (79) - Total Adjustments Net Cash Provided by (Used for) Operating Activities 32,581 (32,232) (3,452) 1,541 (1,562) Net Increase (Decrease) in Cash and Cash Equivalents Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by (Used for) Operating Activities Depreciation Changes in Assets and Liabilities Sources (Uses) of Cash Miscellaneous Receivables Supplies Inventory Accounts Payable Accrued Payroll and Benefits Claims Payable $ (4,416) 430 Cash and Cash Equivalents at End of Year 20,497 (25,720) (618) 1,425 2,854 Cash Flows from Investing Activities Income Received on Investments Cash and Cash Equivalents at Beginning of Year 110 12,084 (6,512) (2,834) 116 Total 5,190 679 (3) (23) (831) 5,254 711 (157) 265 (102) (831) (178) $ 2,854 $ $ $ 1,169 1,169 $ $ (4,416) - 5,076 $ (1,562) $ $ 1,169 1,169 City of Scottsdale, Arizona Table of Contents FIDUCIARY FUNDS Private Purpose Trust Funds and Agency Funds administer resources received and held by the City as the trustee or as the agent for others. Use of these funds facilitates the discharge responsibilities placed upon the governmental unit by virtue of law or other similar authority. Handicap Scholarship Private Purpose Trust Fund This fund accounts for monies received and expended for college scholarships for individuals with handicaps. Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund This fund accounts for monies received and expended for the redevelopment of Scottsdale Memorial Hospital. Family Self-Sufficiency Agency Fund This fund accounts for monies in escrow for Section 8 Housing Program participants. Retainage Escrow Agency Fund This fund accounts for monies held in escrow for construction contract retainage payable. City of Scottsdale, Arizona 111 Table of Contents 112 Combining Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2006 (in thousands of dollars) Private Purpose Trust Funds Scottsdale Memorial Handicap Scholarship Hospital Redevelopment Private Purpose Private Purpose Trust Fund Trust Fund ASSETS Cash and Cash Equivalents $ Total Assets LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities NET ASSETS Held in Trust for Other Purposes $ 4 $ Agency Funds Family Self-Sufficiency Agency Fund Total - $ 4 $ Retainage Escrow Agency Fund 86 $ Total 5,195 $ 5,281 4 - 4 86 5,195 5,281 - - - 86 - 5,195 86 5,195 - - - 86 5,195 5,281 4 $ - $ 4 $ - $ - $ - City of Scottsdale, Arizona Table of Contents Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2006 (in thousands of dollars) Scottsdale Memorial Hospital Redevelopment Private Purpose Trust Fund Handicap Scholarship Private Purpose Trust Fund ADDITIONS Contributions: Private Donations $ Total Additions DEDUCTIONS Scholarships Redevelopment Expenses Total Deductions Change in Net Assets Net Assets - Beginning Net Assets - Ending City of Scottsdale, Arizona $ Total 5 $ - $ 5 5 - 5 5 - 19 5 19 5 19 24 - (19) (19) 4 19 23 4 $ - $ 4 113 Table of Contents 114 Combining Statement of Changes in Assets and Liabilities Fiduciary Funds For the Year Ended June 30, 2006 (in thousands of dollars) Family Self-Sufficiency Balance July 1, 2005 Additions Deductions Retainage Escrow Balance June 30, 2006 Balance July 1, 2005 Additions Deductions Balance June 30, 2006 ASSETS Cash and Cash Equivalents Total Assets $ 101 $ 73 $ 88 $ 86 $ 4,721 $ 5,195 $ 4,721 $ 5,195 $ 101 $ 73 $ 88 $ 86 $ 4,721 $ 5,195 $ 4,721 $ 5,195 $ 101 $ - 73 $ - 88 $ - 86 - $ - $ 4,721 - $ 5,195 - $ 4,721 5,195 $ 101 $ 73 $ 88 $ 86 $ 4,721 $ 5,195 $ 4,721 $ 5,195 LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities City of Scottsdale, Arizona Table of Contents OTHER SUPPLEMENTARY INFORMATION Debt Requirements The supplemental debt service schedule provides a comprehensive overview of the City’s total debt. The Schedule of Changes in Long-Term Debt for the current fiscal year presents the City’s debt by debt type without regard to fund classification. Debt issued by community facilities districts is included for full disclosure although such debt is not legally an obligation of the City. City of Scottsdale, Arizona 115 Table of Contents 116 Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2006 (in thousands of dollars) July 1, 2005 GENERAL OBLIGATION BONDS Governmental Fund Type: 1993 Refunding 1993A GO Refunding 1997 GO Refunding 1989 Series I (1998) 1999A GO / Pima Road 1999 GO Preservation 2001 GO Preservation 2001 GO Refunding Various Purpose 2001 GO Refunding Preservation 2002 GO Various Purpose 2002 GO Preservation 2002 GO Refunding Various Purpose 2002 GO Refunding Preservation 2003 GO Refunding Various Purpose 2004 GO Various Purpose 2004 GO Preservation 2005 GO Refunding Various Purpose 2005 GO Refunding Preservation 2005A GO Various Purpose 2005B GO Preservation 2001 GO Refunding Series Deferred Issuance Premium 2001 GO Series Deferred Amount on Refunding 2002 GO Refunding Series Deferred Issuance Premium 2002 GO Series Deferred Amount on Refunding 2003 GO Series Deferred Amount on Refunding 2003 GO Refunding Series Deferred Issuance Premium 2004 GO Series Deferred Issuance Premium 2005 GO Series Deferred Amount on Refunding 2005 GO Refunding Series Deferred Issuance Premium 2005A GO Series Deferred Issuance Premium 2005B GO Series Deferred Issuance Premium Subtotal $ Business Type - General Obligation Bonds 1993 Refunding 1993 A GO Refunding Subtotal Total General Obligation Bonds City of Scottsdale, Arizona REVENUE BONDS Governmental Fund Type Highway User Revenue Fund Bonds 1993 HURF Refunding Subtotal 10,540 $ 140 19,685 7,235 4,500 7,150 4,520 9,910 28,715 10,855 5,755 53,560 8,100 14,975 48,000 63,800 8,540 66,090 1,065 (1,738) 2,620 (2,667) (253) 346 975 (3,944) 3,025 371,499 5,200 1,315 6,515 Retired 125,000 20,000 2,443 391 147,834 $ - 2,950 140 905 890 1,050 1,650 1,065 2,005 2,085 3,215 50 1,700 17,705 $ 5,200 1,315 6,515 Accretions, Amortizations & Contract Adjustments Bonds Defeased - $ - - $ - June 30, 2006 - $ (115) 187 (753) 766 59 (80) (51) 278 (213) (79) (13) (14) - 378,014 $ 147,834 $ 24,220 $ - $ - $ (14) $ $ 5,815 5,815 $ - $ 2,825 2,825 $ - $ - $ - 5,600 9,200 32,135 18,800 (156) (1,374) 1,514 65,719 $ 71,534 $ - 850 625 1,490 365 3,330 $ 6,155 $ *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). - $ - $ 37 248 (273) 12 $ 12 Governmental Activities 7,590 $ 18,780 6,345 3,450 5,500 3,455 7,905 28,715 8,770 5,755 50,345 8,100 14,925 48,000 62,100 8,540 66,090 125,000 20,000 950 (1,551) 1,867 (1,901) (194) 266 924 (3,666) 2,812 2,364 378 501,614 - $ Business Type - Revenue Bonds 1996 Utility Revenue Series Refunding 1989 Utility Series D (1998) 1989 Utility Series E (1998) 2004 Utility Revenue Series Refunding 1996 Revenue Series Deferred Amount on Refunding 2004 Revenue Series Deferred Amount on Refunding 2004 Refunding Series Deferred Issuance Premium Subtotal Total Revenue Bonds Issued Refunding Bonds Issued 7,590 $ 18,780 6,345 3,450 5,500 3,455 7,905 28,715 8,770 5,755 50,345 8,100 14,925 48,000 62,100 8,540 66,090 125,000 20,000 950 (1,551) 1,867 (1,901) (194) 266 924 (3,666) 2,812 2,364 378 501,614 - - - $ 501,614 $ - 2,990 2,990 $ 2,990 2,990 $ - 65,391 $ 2,990 4,750 8,575 30,645 18,435 (119) (1,126) 1,241 62,401 $ Final Payment Date 07/01/09 07/01/11 07/01/14 07/01/18 07/01/19 07/01/24 07/01/24 07/01/22 07/01/22 07/01/24 07/01/24 07/01/19 07/01/19 07/01/13 07/01/25 07/01/25 07/01/24 07/01/24 07/01/24 07/01/24 - 501,614 4,750 8,575 30,645 18,435 (119) (1,126) 1,241 62,401 $ Business Type-Activities 62,401 07/01/06 07/01/06 07/01/07 07/01/14 07/01/22 07/01/23 07/01/16 Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* (continued here and on following page) For the Year Ended June 30, 2006 (in thousands of dollars) July 1, 2005 MUNICIPAL PROPERTY CORPORATION BONDS Governmental Fund Type: 1998 MPC 2004A MPC 2005 MPC 2005D MPC 2004A Series Deferred Issuance Premium 2005 Series Deferred Issuance Premium 2005D Series Deferred Issuance Premium Subtotal $ Business Type - Municipal Property Corporation Bonds 1995 Transfer Station 2001 Scottswater 2004 Water/Sewer 2005E Water/Sewer 2001 Scottswater Deferred Issuance Premium 2004 Water/Sewer Deferred Issuance Premium 2005E Water Deferred Issuance Premium Subtotal Total Municipal Property Corporation Bonds SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Fund Type: 1998 Excise Tax Revenue 2001 Excise Tax Refunding 2004 Excise Tax Refunding 2001 Excise Tax Revenue Deferred Issuance Premium 2001 Excise Tax Revenue Deferred Amount on Refunding 2004 Excise Tax Revenue Deferred Issuance Premium 2004 Excise Tax Revenue Deferred Amount on Refunding Total Scottsdale Preserve Authority Bonds SPECIAL ASSESSMENT BONDS Governmental Fund Type: Pima Acres Paving & Drainage Series 105 Bell Road II Series 106 Total Special Assessment Bonds CERTIFICATES OF PARTICIPATION Governmental Fund Type: 2005 Certificates of Participation Total Certificates of Participation 520 40,760 19,973 1,048 383 62,684 Issued $ 1,485 5,135 72,810 114 4,431 83,975 $ $ $ $ 146,659 Retired 46,500 2,667 49,167 $ 88,360 3,767 92,127 170 170 Refunding Bonds Issued $ Bonds Defeased - $ - 1,485 - 4,340 - 1,485 141,294 $ 4,510 $ - $ 43,225 $ 17,235 22,925 104 (629) 2,214 (2,087) 82,987 $ - $ 2,050 690 75 2,815 $ - $ $ 340 6,000 6,340 $ $ 7,650 7,650 $ $ - $ $ - $ - 1,590 2,750 - $ $ $ 85 750 835 $ $ 560 560 $ $ $ - $ $ - *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). Accretions, Amortizations & Contract Adjustments $ $ 1,485 $ $ $ $ - - $ 642 (36) (24) (54) 528 (37) (247) (92) (376) $ - $ - $ - June 30, 2006 $ 152 $ - $ (6) 37 (79) 75 27 $ Business Type-Activities Final Payment Date 350 40,760 20,615 46,500 1,012 359 2,613 112,209 350 40,760 20,615 46,500 1,012 359 2,613 112,209 - 07/01/08 07/01/14 07/01/34 07/01/35 3,545 70,060 88,360 77 4,184 3,675 169,901 - 3,545 70,060 88,360 77 4,184 3,675 169,901 07/01/10 07/01/08 07/01/24 07/01/30 282,110 $ 41,175 16,545 22,850 98 (592) 2,135 (2,012) 80,199 $ $ - $ - $ 255 5,250 5,505 $ $ - 7,090 7,090 $ $ Governmental Activities 112,209 $ 169,901 41,175 16,545 22,850 98 (592) 2,135 (2,012) 80,199 $ - 07/01/24 07/01/22 07/01/16 01/01/09 01/01/13 01/01/2015 $ 255 5,250 5,505 $ - $ $ 7,090 7,090 $ $ - 117 Table of Contents 118 Schedule of Changes in Long-Term Debt* (continued) For the Year Ended June 30, 2006 (in thousands of dollars) July 1, 2005 COMMUNITY FACILITIES DISTRICT BONDS Governmental Fund Type: McDowell Mtn Ranch Refunding Series 1999 DC Ranch Series 1998 Via Linda Road Series 1999 DC Ranch Series 1999 Scottsdale Mountain Refunding Series 2002 DC Ranch Series 2002 Scottsdale Mountain 2002 Deferred Issuance Premium Scottsdale Mountain 2002 Deferred Amount on Refunding DC Ranch 2002 Deferred Issuance Premium Total Community Facilities District Bonds Total Bonds CONTRACTS PAYABLE Governmental Fund Type: US Corps of Engineers Dial Corporation US Patent Office McDowell Sonoran Preserve Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Underground Improvement District Series 104 Motor Mile Marketing Total Contracts $ 16,805 $ 4,595 3,030 3,000 4,600 11,450 28 (375) 60 43,193 Retired Accretions, Amortizations & Contract Adjustments Bonds Defeased - $ 635 160 105 90 290 255 1,535 $ - $ - $ June 30, 2006 - $ (4) 57 (3) 50 Governmental Activities 16,170 $ 4,435 2,925 2,910 4,310 11,195 24 (318) 57 41,708 Business Type-Activities 16,170 $ 4,435 2,925 2,910 4,310 11,195 24 (318) 57 41,708 - $ 736,377 $ 289,128 $ 40,630 $ - $ 1,485 $ 227 $ 983,617 $ 751,315 $ 232,302 $ 3,176 193 3 6,195 1,540 1,650 67 1,500 14,324 $ - $ 69 38 655 55 55 16 300 1,188 $ - $ - $ - $ $ - $ 3,107 155 3 5,540 1,485 1,595 51 1,200 13,136 $ $ 3,107 155 3 5,540 1,485 1,595 51 1,200 13,136 - $ CAPITAL LEASE Business Type: Modular Building - Water Operations TOTAL BONDS, CONTRACTS AND CAPITAL LEASES Issued Refunding Bonds Issued $ - $ 750,701 $ 213 $ 289,341 $ $ 34 $ 41,852 $ 179 $ - $ 1,485 $ 227 $ 996,932 - $ 764,451 $ 783,340 Compensated Absences Total Long-Term Debt *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). $ 179 $ 232,481 $ 234,662 18,889 2,181 Final Payment Date 07/15/22 07/15/23 07/15/23 07/15/24 07/15/18 07/15/27 2032 2008 2009 2013 2032 2035 01/01/13 City of Scottsdale, Arizona Table of Contents Statistical Section Contents Page Financial Trends 120 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 130 These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax and sale and use taxes. Debt Capacity 137 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Economic and Demographic Information 143 These schedules offer economic and demographic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information 145 These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. City of Scottsdale, Arizona 119 Table of Contents 120 City of Scottsdale Net Assets by Component Last Five Fiscal Years (accrual basis of accounting) ( in thousands) Table I Fiscal Year 2002 Governmental Activities Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Governmental Activities Net Assets Business-type Activities Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Business-type Activities Net Assets Primary Government Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Primary Government Net Assets $ $ $ $ $ $ 1,429,495 133,460 152,731 1,715,686 629,106 16,399 175,624 821,129 2,058,601 149,859 328,355 2,536,815 2003 2004 2005 $ 1,497,575 117,801 165,209 $ 1,780,585 $ 1,548,486 199,767 127,017 $ 1,875,270 $ 1,877,955 78,794 195,887 $ 2,152,636 $ $ $ 659,130 16,721 186,147 861,998 $ 2,156,705 134,522 351,356 $ 2,642,583 City of Scottsdale, Arizona (1) The increase from the prior period was caused by a substantial increase in capital asset contributions. (2) The increase from the prior period was caused by a substantial increase in unspent bond proceeds. $ 653,351 $ 20,842 272,431 (1) 946,624 $ $ 2,201,837 220,609 399,448 $ 2,821,894 2006 $ 2,029,375 197,691 (2) 77,132 $ 2,304,198 756,433 23,472 212,957 992,862 $ 806,749 27,000 239,535 $ 1,073,284 $ 2,634,388 102,266 408,844 $ 3,145,498 $ 2,836,124 224,691 316,667 $ 3,377,482 Table of Contents City of Scottsdale, Arizona City of Scottsdale Changes in Net Assets Last Five Fiscal Years (accrual basis of accounting) (in thousands) Table IIa Fiscal Year 2002 Expenses Governmental Activities: General Government Police Financial Services Transportation Community Services Information Services Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Service Districts Interest on Long-term Debt Total Governmental Activities Expenses $ Business-type Activities: Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Expenses Total Primary Government Expenses 26,982 52,719 7,464 72,159 53,325 10,821 16,494 11,482 2,484 18,269 1,044 28,063 301,306 2003 $ 51,125 24,007 2,648 14,071 91,851 $ 393,157 22,776 54,469 7,883 71,837 52,222 11,901 18,127 12,290 2,433 3,601 6,421 11,908 1,099 27,786 304,753 2004 $ 50,406 22,862 2,476 13,783 89,527 $ 394,280 23,839 60,027 7,655 78,373 55,087 11,135 19,570 13,024 2,812 3,462 6,130 11,697 1,024 28,028 321,863 $ 51,095 24,678 2,622 15,153 93,548 $ 415,411 (1) Increase from prior year was caused by the purchase of equipment, furnishing and clothing needed to start the city's Fire Department on July 1, 2005. $ 2005 2006 30,943 $ 63,076 8,315 85,835 57,519 7,941 28,620 (1) 16,520 3,496 3,333 8,026 12,522 1,094 32,466 359,706 42,729 74,408 8,343 82,047 57,931 14,589 26,943 14,746 3,419 3,615 7,549 12,883 617 37,192 387,011 59,723 28,324 3,346 15,508 106,901 53,961 27,854 2,922 16,412 101,149 466,607 $ 488,160 121 Table of Contents 122 City of Scottsdale Changes in Net Assets Last Five Fiscal Years (accrual basis of accounting) (in thousands) Table IIb Fiscal Year 2002 Program Revenue Governmental Activities: Charges for Services: General Government Police Transportatiom Community Services Fire Citizen and Neighborhood Resources Planning and Development Streetlight and Service Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues $ Business-type Activities: Charges for Services: Water Utility Sewer Utility Airport Solid Waste Capital Grants and Contributions Total Business-type Activities Revenues Total Primary Government Revenues City of Scottsdale, Arizona Net (Expense)/Revenue Governmental Activities Business-type Activities Total Primary Government Net Expense 11,243 5,706 3,229 15,764 1,012 22,200 77,412 136,566 2003 $ 68,064 24,017 1,689 15,796 38,733 148,299 11,402 4,227 3,405 15,449 1,018 21,219 70,369 127,089 2004 $ 66,626 25,316 2,424 16,250 28,487 139,103 12,742 6,760 3,759 17,314 1,000 24,508 105,794 171,877 2005 $ 70,613 25,587 2,936 16,488 71,709 187,333 12,106 11,514 3,914 18,188 998 26,865 73,092 146,677 2006 $ 72,612 27,503 3,162 16,984 38,313 158,574 13,783 9,938 277 4,028 1,010 (1) 163 20,515 511 26,355 136,745 (2) 213,325 81,517 27,119 3,342 17,163 55,580 184,721 $ 284,865 $ 266,192 $ 359,210 $ 305,251 $ 398,046 $ (164,740) 56,448 (108,292) $ (177,664) 49,576 (128,088) $ (149,986) 93,785 (56,201) $ (213,029) 51,673 (161,356) $ (173,686) 83,572 (90,114) $ $ $ $ $ (1) The City's Fire Department was formed on July 1, 2005. Prior to this time the City contracted with an external fire service provider. (2) Developer contributions increased significantly due to the increase in the assets donated and their valuation (increase in construction costs and land values). Table of Contents City of Scottsdale, Arizona City of Scottsdale Changes in Net Assets Last Five Fiscal Years (accrual basis of accounting) (in thousands) Table IIc Fiscal Year 2002 Governmental Revenues and Other Changes in Net Assets Governmental Activities: Taxes Intergovernmental Interest and Investment Income Miscellaneous and Special Items Transfers Total Governmental Activities $ Business-type Activities: Taxes Interest and Investment Income Miscellaneous Transfers Total Business-type Activities: Total Primary Government Change in Net Assets Governmental Activities Business-type Activities Total Primary Government 167,105 44,918 11,485 5,382 6,288 235,178 2003 $ 5,820 874 (6,289) 405 167,153 46,971 4,108 4,760 10,955 233,947 2004 $ 1,493 755 (10,955) (8,707) 183,039 45,163 2,655 2,777 11,037 244,671 $ 973 905 (11,037) (9,159) 2005 2006 217,325 (1) $ 48,346 6,765 4,100 9,567 286,103 240,731 54,481 13,714 5,786 10,536 325,248 4,288 (156) (9,567) (5,435) 119 6,581 686 (10,536) (3,150) $ 235,583 $ 225,240 $ 235,512 $ 280,668 $ 322,098 $ 70,438 56,853 127,291 $ 56,283 40,869 97,152 $ 94,685 84,626 179,311 $ 73,074 46,238 119,312 $ 151,562 80,422 231,984 $ $ $ $ (1) In May 2004, the City of Scottdale citizens approved an additional .15% Preservation Privilege Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. $ 123 Table of Contents 124 City of Scottsdale Governmental Activities Tax Revenues By Source Last Five Fiscal Years (accrual basis of accounting) (in thousands) Table III Fiscal Year 2002 2003 2004 2005 2006 Fiscal Year City of Scottsdale, Arizona 2002 2003 2004 2005 2006 (1) Privilege & Use General Property $ 39,485 42,218 46,371 48,416 50,610 $ 81,871 79,483 87,422 94,407 106,019 Sales and Use Taxes Privilege & Privilege & Use Use McDowell Mtn (1) Transportation $ Franchise Taxes Cable TV Light & Power Franchise Franchise $ 2,223 2,440 2,740 2,859 3,157 $ 5,238 5,147 5,488 5,596 6,308 15,814 15,645 16,981 31,301 35,483 State Shared Sales $ 15,621 15,853 17,054 18,779 21,664 $ 15,587 15,335 16,628 18,115 20,020 Privilege & Use Public Safety (1) $ Intergovernmental State Revenue Sharing $ 21,142 21,574 18,278 18,634 21,223 8,491 9,978 Other $ 512 611 663 1,337 962 In May 2004, the City of Scottdale citizens approved an additional .15% Preservation Privilege Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. Transient Occupancy $ 6,691 6,688 7,227 7,939 8,970 Table of Contents City of Scottsdale, Arizona City of Scottsdale Fund Balances of Governmental Funds Last Five Fiscal Years (modified accrual basis of accounting) (in thousands) Table IV Fiscal Year 2002 2003 2004 2005 2006 General Fund Reserved Unreserved $ 2,006 74,363 $ 1,992 71,236 $ 2,153 $ 59,707 (1) 872 72,772 $ 805 93,243 Total General Fund $ 76,369 $ 73,228 $ 61,860 $ 73,644 $ 94,048 $ 12,880 $ 13,670 $ 9,122 $ 10,613 $ 23,142 All Other Governmental Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds 25,775 168,550 $ 207,205 24,553 159,421 $ 197,644 22,122 224,422 (2) $ 255,666 31,873 148,626 $ (1) The decrease from prior period was caused by a defeasance of debt. (2) The increase from prior period was caused by unspent bond proceeds that were received in the last quarter of the fiscal year. 191,112 40,952 189,905 $ 253,999 125 Table of Contents 126 City of Scottsdale Changes in Fund Balances of Governmental Funds Last Five Fiscal Years (modified accrual basis of accounting) (in thousands) Table Va Fiscal Year 2002 City of Scottsdale, Arizona Revenues Taxes - Local Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Fines, Fees and Forfeitures Special Assessments Property Rental Interest Earnings Intergovernmental Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues $ 164,775 57,176 1,815 20,038 5,234 2,339 2,835 10,300 12,892 799 1,012 367 118 7,960 2,260 289,920 2003 $ 167,153 59,694 1,816 19,990 6,047 1,970 2,836 3,830 9,609 762 1,018 439 1,032 8,045 850 285,091 2004 $ 182,362 58,716 1,813 22,401 6,921 2,558 3,212 2,385 11,810 762 1,000 647 1,659 8,729 2,110 307,085 2005 $ 218,189 61,948 1,633 23,300 9,649 2,029 3,617 6,053 11,771 4,708 998 917 461 8,635 9,079 362,987 2006 $ 239,478 69,413 1,572 27,260 10,260 1,106 4,173 12,518 13,129 392 511 835 969 9,898 644 392,158 Table of Contents City of Scottsdale, Arizona City of Scottsdale Changes in Fund Balances of Governmental Funds Last Five Fiscal Years (modified accrual basis of accounting) (in thousands) Table Vb Fiscal Year 2002 Expenditures General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Streetlight and Services Districts Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Advance Refunding Escrow Capital Improvements 2003 2004 19,528 49,362 7,135 10,016 49,276 7,380 16,281 11,214 2,235 18,040 1,044 16,010 52,371 7,752 10,869 48,950 7,386 17,745 11,553 2,446 3,375 6,268 11,746 1,099 16,121 55,510 7,222 9,399 50,494 7,328 19,265 8,774 2,754 3,290 6,199 11,218 1,024 26,216 29,062 597 339 68,638 30,305 29,759 1,046 68,338 31,905 25,452 586 81,149 Total Expenditures 316,363 327,018 Excess of Revenues over (under) Expenditures (26,443) (41,927) (1) The increase from prior period was caused by land purchases related to capital improvement projects. 2005 21,793 59,874 7,631 8,760 49,941 7,674 21,320 11,813 2,831 3,261 6,506 12,111 1,094 2006 23,516 66,278 7,769 10,099 53,535 8,253 24,296 8,850 3,070 3,507 7,510 12,436 617 33,173 31,948 878 213,585 (1) 27,632 36,382 351 218,897 337,690 494,193 512,998 (30,605) (131,206) (120,840) 127 Table of Contents 128 City of Scottsdale Changes in Fund Balances of Governmental Funds Last Five Fiscal Years (modified accrual basis of accounting) (in thousands) Table Vc Fiscal Year 2002 2003 2004 2005 2006 Other Financing Sources (Uses) Transfers in Transfers out Refunding Bonds Issued Long-term Capital-Related Debt Issued Premium on Bonds Issued Payment to Bond Refunding Escrow Agent Sale of Capital Assets 71,095 (60,408) 74,025 75,500 2,390 (75,025) - 107,441 (91,582) 102,570 12,165 6,284 (108,077) 424 137,043 (126,269) 39,190 113,400 4,429 (90,534) - 141,783 (133,284) 74,630 68,355 4,536 (77,584) - 147,643 (140,513) 191,500 5,501 - Total Other Financing Sources and (Uses) 87,577 29,225 77,259 78,436 204,131 Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures $ 61,134 22.7% $ (12,702) $ 23.6% City of Scottsdale, Arizona (1) The change from the prior period was caused by the increase in spending for capital improvement projects. 46,654 22.6% $ (52,770) (1) $ 23.5% 83,291 21.9% Table of Contents City of Scottsdale, Arizona City of Scottsdale Governmental Activities Tax Revenues By Source Last Five Fiscal Years (modified accrual basis of accounting) (in thousands) Table VI Fiscal Year 2002 2003 2004 2005 2006 Fiscal Year 2002 2003 2004 2005 2006 (1) Property 38,413 41,583 46,088 48,249 49,651 Privilege & Use General 80,297 79,704 86,547 94,302 104,949 Franchise Taxes Cable TV Light & Power Franchise 2,223 2,440 2,740 2,859 3,157 Sales and Use Taxes Privilege & Privilege & Use Use McDowell Mtn (1) Transportation Franchise 5,238 5,147 5,488 5,596 6,308 15,814 15,645 16,981 31,301 35,483 State Shared Sales Transient Occupancy 8,491 9,978 6,691 6,688 7,227 7,939 8,970 15,587 15,335 16,628 18,115 20,020 Intergovernmental State Revenue Sharing 15,621 15,853 17,054 18,779 21,664 Privilege & Use Public Safety (1) 21,142 21,574 18,278 18,634 21,223 Other 512 611 663 1,337 962 In May 2004, the City of Scottdale citizens approved an additional .15% Preservation Privilege Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. 129 Table of Contents 130 City of Scottsdale Taxable Sales Subject to Privilege (Sales) Tax by Category Last Five Fiscal years (dollars are in thousands) Table VII Fiscal Year 2002 2003 2004 2005 2006 Automotive Construction Food Stores Hotel Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities 1,501,832 1,573,073 503,057 372,610 748,732 1,035,590 341,314 910,184 524,241 389,409 1,499,864 1,213,352 518,665 373,375 795,091 1,059,857 360,991 955,494 551,806 376,319 1,525,050 1,432,006 550,704 400,836 871,244 1,138,028 416,514 977,379 604,652 368,442 1,557,909 1,703,826 562,877 432,006 959,361 1,248,228 457,819 1,054,666 661,542 380,043 1,662,604 2,046,791 584,706 497,804 1,012,906 1,413,445 513,553 1,102,152 726,122 398,204 Total 7,900,042 7,704,814 8,284,855 9,018,277 9,958,287 City of Scottsdale, Arizona Note: In May 2004, the City of Scottsdale citizens approved an additional .15% Preservation Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. Table of Contents City of Scottsdale, Arizona City of Scottsdale Direct and Overlapping Sales Tax Rates Last Five Fiscal Years Table VIII Privilege (Sales) Tax Rates City Direct Fiscal Year Rate County Rate State Rate 2002 1.40% 0.70% 5.60% 2003 1.40% 0.70% 5.60% 2004 1.40% 0.70% 5.60% 2005 1.65% 0.70% 5.60% 2006 1.65% 0.70% 5.60% Use Tax Rates City Direct Fiscal Year Rate County Rate State Rate 2002 1.20% 0.00% 5.60% 2003 1.20% 0.00% 5.60% 2004 1.20% 0.00% 5.60% 2005 1.45% 0.00% 5.60% 2006 1.45% 0.00% 5.60% Transient Occupancy Tax Rates City Direct Fiscal Year Rate County Rate State Rate 2002 3.00% 1.77% 5.50% 2003 3.00% 1.77% 5.50% 2004 3.00% 1.77% 5.50% 2005 3.00% 1.77% 5.50% 2006 3.00% 1.77% 5.50% Jet Fuel Tax Rates (cents per gallon) City Direct Fiscal Year Rate County Rate State Rate 2002 1.80% 0.46% 2.90% 2003 1.80% 0.46% 2.90% 2004 1.80% 0.46% 2.90% 2005 1.80% 0.46% 2.90% 2006 1.80% 0.46% 2.90% Source: City Tax Audit Department Note: The following gives a general description of each tax. Complete details for each tax can be found in Appendix C of the Scottsdale Revised City Code. Privilege (Sales) Tax applies to the sale, lease, license for use and/or rental transactions. Use Tax applies to the storage or use of items within the city on which no privilege tax has been paid. Transient Occupancy Tax applies to transactions involving transient lodging. Jet Fuel Tax applies to transactions involving the sale of jet fuel. 131 Table of Contents 132 City of Scottsdale Sales Tax Revenue Payers by Industry Fiscal Years 2006 and 1997 (dollars are in thousands) Table IX Automotive Construction Food Stores Hotel Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Fiscal Year 2006 Number of Percentage Percentage Filers of Total Tax Revenue of Total 582 2.17% $ 27,250 16.22% 7,518 28.02% 34,090 20.29% 171 0.64% 10,258 6.11% 67 0.25% 8,374 4.98% 26 0.10% 15,611 9.29% 5,049 18.81% 25,024 14.89% 9,109 33.94% 9,733 5.79% 3,267 12.17% 19,157 11.40% 786 2.93% 12,007 7.15% 260 0.97% 6,508 3.87% 26,835 100.00% $ 168,012 100.00% Fiscal Year 1997 Number of Percentage Percentage Filers of Total Tax Revenue of Total 416 2.72% $ 10,508 14.04% 4,118 26.97% 15,875 21.21% 188 1.23% 5,589 7.47% 45 0.29% 4,991 6.67% 9 0.06% 5,742 7.67% 3,880 25.41% 12,006 16.04% 3,983 26.09% 5,175 6.91% 1,971 12.91% 6,671 8.91% 510 3.34% 4,852 6.48% 149 0.98% 3,444 4.60% 15,269 100.00% $ 74,853 100.00% Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories are intended to provide alternative information regarding the sources of the city's revenue. The industry classifications were based on Standard Industrial Classification (SIC) in 1997 and the North American Industry Classification System (NAICS) classifications in 2006. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale Property Tax Rates Direct and Overlapping Governments Last Five Fiscal Years Table X City Direct Rate Overlapping Rates Scottsdale Unified School District Fiscal Year Operating Rate 2002 2003 2004 2005 2006 $ 0.49 $ 0.51 0.48 0.45 0.44 Debt Service Rate Total City Rate 0.67 $ 0.65 0.64 0.62 0.60 Debt Service Rate Operating Rate 1.15 1.15 1.12 1.07 1.04 $ 4.08 $ 3.94 3.89 3.77 5.24 1.36 $ 1.36 1.30 1.26 2.41 EVIT Rate 0.11 $ 0.11 0.10 0.10 0.06 Total School Rate 5.55 5.41 5.29 5.13 7.71 Overlapping Rates County-Wide Jurisdictions Fiscal Year 2002 2003 2004 2005 2006 County County Operating Debt Service Rate Rate $ 1.18 $ 1.21 1.21 1.21 1.20 Community County County Education College Flood Equalization Rate Rate Rate 0.09 $ 0.08 0.07 - 1.11 $ 0.23 $ 1.11 0.21 1.08 0.21 1.04 0.21 1.03 0.21 Fire District Assistance Rate 0.50 $ 0.49 0.47 0.46 0.44 Central AZ County Free Project Library Rate Rate 0.01 $ 0.01 0.01 0.01 0.01 0.13 $ 0.13 0.12 0.12 0.12 0.04 $ 0.04 0.05 0.05 0.05 Total County Rate 3.29 3.28 3.22 3.09 3.06 Source: Maricopa County Department of Finance Publications On-Line "Tax Levy 2005" Note: The City has Community Facilities Districts (CFD) that levy property taxes independent of the City to property owners within a designated area. For FY 2005/06 the rates were as follows: Scottsdale Mountain CFD - $1.50, McDowell Mountain CFD $1.00, DC Ranch CFD - $1.00, and Via Linda Road CFD - $3.00. The Waterfront Commercial CFD did not levy taxes FY 2005/06. Total Direct & Overlapping Rates $ 9.99 9.85 9.63 9.30 11.81 133 Table of Contents 134 City of Scottsdale Principal Property Tax Payers June 30, 2006 (in thousands) Table XI 2006 Taxable Assessed Value Taxpayer Arizona Public Service Company Scottsdale Fashion Square Partnership Qwest Corporation First American Tax Valuation Gainey Drive Associates Gerneral Dynamics Decesion Systems Inc. Marvin F Poer & Co. Pederson/BVT Promenade Associates Scottsdale Acquisition LLC Drug (AZ) QRS 14-42 INC Motorola GEG Scottsdale Princess Partnership MAYO Clinic Arizona U S West Communications Inc. PCS Inc. Scottsdale Conference Center SHEA 90 Corporation $ 82,233 59,825 53,128 44,027 37,977 27,094 21,413 21,396 19,488 17,972 - 1997 Rank Percentage of Total Taxable Assessed Value 1 2 3 4 5 6 7 8 9 10 - 1.74% 1.26% 1.12% 0.93% 0.80% 0.57% 0.45% 0.45% 0.41% 0.38% - Taxable Assessed Value $ 56,828 33,646 22,168 41,641 32,939 27,271 17,983 16,898 12,304 12,171 Rank Percentage of Total Taxable Assessed Value 1 3 0 6 2 4 5 7 8 9 10 3.09% 1.83% 0.00% 1.21% 2.26% 1.79% 1.48% 0.98% 0.92% 0.67% 0.66% Source: 2006 information - The City of Scottsdale's Property Tax Auditor, as obtained from the Arizona Department of Revenue, Centrally Valued Property Department and the 2005 Maricopa County Treasurer's Roll. City of Scottsdale, Arizona Source: 1997 information - The City of Scottsdale's Property Tax Auditor, as obtained from the Arizona Department of Revenue, Division of Utilities and Mines and the tax rolls of the Maricopa County Assessor's Office. The Salt River Project Agricultural Improvement and Power District's (SRP) assessed valuation is not reflected in the total assessed valuation of the City. SRP is subject to a "voluntary contribution" in lieu of ad valorem taxation. The 2005/06 secondary assessed valuation of the Salt River Project within the City is $23,638,512. The estimated secondary in lieu contribution is $186,402. Table of Contents City of Scottsdale, Arizona City of Scottsdale Assessed Value and Estimated Actual Value of Taxable Property Last Five Fiscal Years (in thousands) Table XII Fiscal Year Ended June 30th 2002 2003 2004 2005 2006 Residential Property $ Real Property Commercial Vacant Property Land 1,815,234 $ 923,764 $ 1,921,093 1,045,250 2,373,446 1,043,384 2,460,307 1,205,827 2,789,200 1,525,116 Historic & Special Use 520,604 $ 615,184 656,600 809,560 580,288 1,090 1,483 1,575 2,213 1,359 Personal Property: Assessed Value $ Less: Total Taxable Tax Exempt Assessed Real Property Value 242,768 $ 247,739 256,958 257,783 241,168 (225,510) $ (304,144) (356,528) (392,236) (401,377) Total Direct Tax Rate 3,277,950 $ 3,526,605 3,975,435 4,343,454 4,735,754 0.67 $ 0.65 0.64 0.62 0.60 Estimated Actual Taxable Value 25,085,079 26,545,415 28,138,139 33,248,352 33,350,384 Assessed Value as a Percentage of Actual Value 13.1% 13.3% 14.1% 13.1% 14.2% Source: AZ Department of Revenue/Property Tax Division, Abstract of the Assessment Roll 2004 Under Arizona law, there are two property valuation bases: PRIMARY (P) and SECONDARY (S). The primary (limited assessed valuation is used when levying for maintenance and operation of cities, school districts, community college districts, counties, and the state. The secondary (full cash) assessed valuation is used when levying for debt retirement, voterapproved budget overrides, and maintenance and operation of special service districts. 135 Table of Contents 136 City of Scottsdale Property Tax Levies and Collections Last Five Fiscal Years (in thousands) Table XIII Collected within the Fiscal Year of the Levy Fiscal Year Ended June 30 2002 2003 2004 2005 2006 Source: Total Tax Levy for Fiscal Year $ 36,166 39,159 42,756 44,731 47,659 Amount $ 34,895 37,583 40,739 44,160 46,431 Percentage of Levy 96.5% 96.0% 95.3% 98.7% 97.4% Total Collections to Date Collections in Subsequent Years $ 964 999 1,638 304 - Amount $ 35,859 38,582 42,377 44,464 46,431 Percentage of Levy 99.2% 98.5% 99.1% 99.4% 97.4% Maricopa County Treasurer's Office 2006 Secured Tax Levy Report and the City of Scottsdale Financial Services Department. Amounts represent property taxes recorded in the General, Debt Service and the Self-Insurance Fund. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale Ratios of Outstanding Debt by Type Last Five Fiscal Years (in thousands) Table XIV Fiscal Year Ended June 30 2002 2003 2004 2005 2006 General Obligation Bonds $ 319,657 305,003 389,598 372,070 499,365 Revenue Bonds $ 13,385 10,990 8,475 5,815 2,990 Governmental Activities Scottsdale Preserve Special Authority Assessment Bonds Bonds Municipal Property Corporation Bonds $ 49,870 41,955 4,850 61,253 108,225 $ 90,585 88,270 85,980 83,385 80,570 $ 13,061 11,140 8,755 6,340 5,505 Certificates of Participation Community Facilities District Bonds Contracts Payable General Obligation Bonds $ $ $ $ Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Table XIX - Schedule of Demographic and Economic Statistics for personal income and population data. 7,650 7,090 34,935 46,355 44,950 43,480 41,945 21,416 19,627 13,702 14,324 13,136 18,315 14,323 10,651 6,515 - Business-Type Activities Municipal Property Revenue Corporation Bonds Bonds $ 73,945 71,230 68,365 65,735 62,405 $ 11,555 10,010 83,365 79,430 161,965 Capital Lease $ 179 Total Primary Government $ 646,724 618,903 718,691 745,997 983,375 Percentage of Personal Income 7.70% 7.04% 7.85% 7.84% 9.94% Per Capita $ 3,080 2,891 3,303 3,374 4,344 137 Table of Contents 138 City of Scottsdale Ratios of General Bonded Debt Outstanding Last Five Fiscal Years Table XV Governmental Activities General Obligation Bonds Fiscal Year Ended June 30 2002 2003 2004 2005 2006 $ 319,657,000 305,003,000 389,598,000 372,070,000 499,365,000 Less: Amounts Available in Debt Service Fund $ 8,448,962 9,006,329 3,468,780 5,601,739 12,435,797 Total 311,208,038 295,996,671 386,129,220 366,468,261 486,929,203 Percentage of Total Taxable Assessed Value of Property Per Capita 9.5% 8.4% 9.7% 8.4% 10.3% Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See the Schedule of Assessed Value and Estimated Actual Value of Taxable Property on Table XII for property value data. See the Schedule of Demographic and Economic Statistics (Table XIX) for population data. 1,482.23 1,382.58 1,774.86 1,657.25 2,150.84 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale Direct and Overlapping Governmental Activities Debt As of June 30, 2006 (in thousands) Table XVI Governmental Unit Debt repaid with property taxes Maricopa County Maricopa County Community College District Tempe Elementary School District No. 3 Balsz Elementary School District No. 31 Scottsdale Unified School District No. 48 Paradise Valley Unified School District No. 69 Cave Creek Unified School District No. 93 Fountain Hills Unified School District No. 98 Phoenix Union High School District No. 210 Tempe Union High School District No 213 East Valley Institute of Technology District No. 401 Scottsdale Mountain Community Facilities District McDowell Mountain Community Facilities District DC Ranch Community Facilities District Via Linda Road Community Facilities District Debt Outstanding $ Estimated Share of Overlapping Debt Estimated Percentage Applicable 399,805 59,700 15,545 320,655 305,225 38,040 25,090 188,640 153,980 4,310 16,170 18,540 2,925 14.2655% 14.2655% 0.0002% 5.5493% 75.0793% 33.4852% 68.6654% 2.9130% 0.3490% 0.0001% 19.2990% 100.0000% 100.0000% 100.0000% 100.0000% 312,940 100.0000% $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 57,034 863 240,746 102,205 26,120 731 658 4,600 16,805 19,045 3,030 471,837 312,940 $ 784,777 Source: Maricopa County Assessor's Office Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Scottsdale. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the county's taxable assessed value that is within the government's boundaries and dividing it by the county's total taxable assessed value. 139 Table of Contents 140 City of Scottsdale Legal Debt Margin Information Last Five Fiscal Years (in thousands) Table XVIIa Fiscal Year 2002 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ Total Net Debt Applicable to 20% Limit Legal 20% Debt Margin (Available Borrowing Capacity) $ City of Scottsdale, Arizona Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit 410,381 $ 196,677 $ 114,920 41.57% $ 467,921 $ 211,596 $ 139,901 33.88% $ 475,339 $ 238,531 $ 163,547 31.44% $ 554,905 $ 260,607 $ 195,808 24.86% 574,606 39.33% $ 64,799 $ 947,151 372,545 36.12% 74,984 $ 868,691 2006 313,786 40.22% 71,695 $ 795,104 2005 319,765 33.66% 81,757 $ 705,321 2004 237,400 37.40% Total Net Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) $ 245,209 Total Net Debt Applicable to the 20% Limit as a Percentage of 20% Debt Limit 6% Limitation Debt Limit Equal to 6% of Assessed Valuation 655,590 2003 284,145 126,820 $ 157,325 44.63% Table of Contents City of Scottsdale, Arizona City of Scottsdale Legal Debt Margin Information As of June 30, 2006 (in thousands) Table XVIIb Legal Debt Margin Calculation for Fiscal Year 2006 Net Secondary Assessed Valuation as of June 30, 2006 $ 4,735,755 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 947,151 Debt applicable to limit: General Obligation Bonds 372,545 Legal 20% Debt Margin (Available Borrowing Capacity) $ 574,606 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 284,145 Debt applicable to limit: General Obligation Bonds Legal 6% Debt Margin (Available Borrowing Capacity) 126,820 $ 157,325 Source: City of Scottsdale Financial Services Under Arizona law, cities can issue general obligation bonds for purposes of water, sewer, light, parks, and open space purposes, but outstanding bonds issued for such purposes may not exceed 20 percent of the City's net secondary assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of the City's net secondary assessed valuation. General obligation bonds of community facilities districts are not subject to or included in this computation since they are not bonds of the City of Scottsdale, Arizona. 141 Table of Contents 142 City of Scottsdale Pledged-Revenue Coverage Last Five Fiscal Years (in thousands) Table XVIII Water and Sewer Revenue Bonds Fiscal Year Ended June 30 2002 2003 2004 2005 2006 Operating Revenue(1) Less: Operating Expenses Net Operating Revenue $ $ $ 97,802 95,064 97,813 105,078 115,374 49,840 46,991 49,662 56,413 56,329 47,962 48,073 48,151 48,665 59,045 Development Fee Revenue $ 15,087 17,648 21,574 20,155 24,071 Net Revenue $ Special Assessment Bonds Fiscal Year Ended June 30 2002 2003 2004 2005 2006 Special Assessment Collections $ 2,339 1,970 2,558 2,016 1,106 Debt Service Principal Interest $ 2,208 1,990 2,425 2,448 851 $ 393 279 492 360 275 63,049 65,721 69,725 68,820 83,116 Highway User Revenue Bonds Debt Service Principal Interest $ 2,595 2,715 2,860 2,630 3,330 $ 3,937 3,792 3,159 3,570 3,182 Coverage 9.65 10.10 11.58 11.10 12.76 Highway User Tax Revenue $ 12,574 13,137 14,034 14,738 15,708 Scottsdale Preserve Authority Bonds Coverage (2) 0.90 0.87 0.88 0.72 0.98 0.2% and 0.15% Sales Tax (3) $ 6,839 6,881 6,267 7,014 6,811 Debt Service Principal Interest $ 2,185 2,315 2,445 2,595 2,815 $ 4,704 4,566 3,825 4,437 3,997 Excise Tax Coverage 0.99 1.00 1.00 1.00 1.00 $ (2) Coverage ratio is less than 1.0 due to prepayment of amounts that are currently in fund balance. City of Scottsdale, Arizona (3) In May 2004, the City of Scottdale citizens approved an additional .15% Preservation Privilege Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. $ 2,275 2,395 2,515 2,660 2,825 $ Coverage 828 715 592 460 317 4.05 4.22 4.52 4.72 5.00 Municipal Property Corporation Bonds (1) Includes investment income. (4) Includes debt service payments paid out of revenue from the Water and Sewer Fund. Debt Service Principal Interest 188,548 189,516 199,889 239,284 268,134 Debt Service (4) Principal Interest $ 8,325 9,145 7,170 8,265 5,995 $ 3,775 3,045 1,108 6,413 10,017 Coverage 15.58 15.55 24.15 16.30 16.75 Table of Contents City of Scottsdale, Arizona City of Scottsdale Demographic and Economic Statistics Last Five Fiscal Years Table XIX Fiscal Year Population (1) 2002 2003 2004 2005 2006 209,960 214,090 217,555 221,130 226,390 Personal Income (2) (in thousands) $ 8,396,720 8,787,110 9,158,195 9,515,538 9,896,159 Per Capita Personal Income (3) $ 39,992 41,044 42,096 43,148 43,713 Data Sources: 1 Arizona Department of Economic Security 2 Sites USA (estimate) 3 Sites USA 4 US Census Bureau (estimate) 5 Sites USA 6 Arizona Department of Education 7 Arizona Department of Economic Security; Arizona Workforce Median Age (4) Education Level in Years of Schooling (5) School Enrollment (6) Unemployment Rate (7) 41.1 40.5 40.2 39.9 39.5 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 27,436 27,479 27,328 26,559 27,000 4.1% 3.6% 3.9% 2.9% 3.0% 143 Table of Contents 144 City of Scottsdale Principal Employers Current Year and Nine Years Ago Table XX 2006 Employer City of Scottsdale, Arizona Scottsdale Healthcare General Dynamics Mayo Clinic - Scottsdale Scottsdale Unified School District City of Scottsdale Scottsdale Insurance Company CareMark Scottsdale Fairmont Princess Resort Rural Metro Corporation McKesson Scottsdale Memorial Health Systems Motorola PCS Health Systems (Eli Lilly) Dial Corporation Hyatt Regency Gainey Rancy Total Employees 4,400 4,000 3,995 3,500 2,191 2,000 1,636 1,200 875 700 24,497 Source: City of Scottsdale, Economic Vitality Department * 2006 labor force = 145,034; 1997 labor force = 98,592 Rank 1 2 3 4 5 6 7 8 9 10 - 1997 Percentage of Total City Employment* 3.00% 2.80% 2.80% 2.40% 1.50% 1.40% 1.10% 0.80% 0.60% 0.50% 16.90% Employees 1,000 2,480 2,000 1,050 1,300 4,500 4,100 1,544 800 800 19,574 Rank 8 3 4 7 6 1 2 5 9 10 Percentage of Total City Employment* 1.00% 2.50% 2.00% 1.10% 1.30% 4.60% 4.20% 1.60% 0.80% 0.80% 19.90% Table of Contents City of Scottsdale, Arizona City of Scottsdale Full-time Equivalent City Government Employees by Function Last Five Fiscal Years Table XXI Full-time Equivalent Employees as of June 30 Function 2002 General Government Police Financial Services Transportation Community Services Information Systems Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development Water Resources Aviation Solid Waste Source: The City of Scottsdale's Budget Department. 196.5 574.1 144.5 35.0 516.1 73.8 2.7 132.8 35.0 36.5 10.0 157.0 139.0 11.9 77.3 2003 195.5 591.1 144.5 34.0 516.1 73.8 2.7 132.8 35.0 35.5 10.0 151.0 136.0 12.4 80.3 2004 196.5 590.1 139.5 24.0 506.1 74.8 3.7 135.8 32.0 34.5 8.0 140.0 136.0 12.4 79.3 2005 202.0 631.1 143.0 25.0 513.6 78.8 3.7 139.8 37.0 36.5 10.0 140.0 139.0 12.4 79.3 2006 217.0 676.1 149.0 27.0 559.4 80.8 259.0 151.8 39.0 35.5 11.0 144.0 152.5 13.0 83.3 145 Table of Contents 146 City of Scottsdale Operating Indicators by Function Last Five Fiscal Years Table XXII Fiscal Year Function 2002 2003 2004 2005 2006 No Survey No Survey 90% 93% No Survey 518 466 456 651 890 20% 26% 30% 30% 32% 60 162 85 132 225 79,638 / 114,514 96,995 / 94,045 121,560 / 129,888 136,747 / 134,793 153,320 / 156,292 No Survey No Survey 86% 89% No Survey 277 215 182 247 250 49 55 53 57 59 N/A N/A 41 58 62 514 660 450 2,600 40 44.9 70.5 44.3 72.0 45.5 60.2 42.3 56.5 37.1 51.0 6:00 6:29 5:87 6:12 6:00 50% 60% 96% 98% 98% 35,636 35,344 34,547 37,954 41,194 General Government Legislative and Constituent/Gov. Relations % of survey respondents rating the "Overall Quality of Life in Scottsdale" as good to excellent City Clerk's Office # of legal postings City Attorney's Office % of cases resolved at first court appearance (arraignment) City Auditor's Office # of recommendations City Court Charges filed / charges adjudicated (resolved) City Manager's Office % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent Communications & Public Affairs News releases, media updates, traffic alerts, construction updates released to news media WestWorld # of special events The Downtown Group # of downtown special events coordinated Preservation Acres of land acquired for inclusion in the McDowell Sonoran Preserve Police Scottsdale Uniform Crime Report, Part 1 (crimes per thousand) Scottsdale Valley Average Achieve the standard of six minutes or less for response to emergency calls for service (includes medical and accident related calls) City of Scottsdale, Arizona Provide initial contact to 100% of citizen traffic concerns within seven days Financial Services # of Accounts Payable checks issued # of purchase orders 8,531 10,212 12,254 9,611 10,600 # of water meters read annually 943,212 971,508 986,080 1,000,870 1,033,600 # of customer contacts (utilities, taxes & licensing) 212,787 218,185 221,900 229,500 230,000 Table of Contents City of Scottsdale, Arizona City of Scottsdale Operating Indicators by Function Last Five Fiscal Years Table XXII Fiscal Year Function 2002 2003 2004 2005 2006 1,780,578 1,917,011 1,917,000 1,969,512 2,255,450 76 124 150 270 322 181,657 197,483 195,276 208,106 210,481 6,817,413 7,485,295 7,565,511 7,573,369 7,717,000 13,168,516 13,253,516 13,949,440 14,569,062 15,188,684 1,551,620 1,755,162 1,807,298 1,825,564 2,166,650 n/a 32,244 129,000 2,319,000 46,100,000 2.5 4.0 5.0 7.0 30.0 21,877 21,162 21,756 23,102 23,572 0.10 0.09 0.09 0.10 0.10 4:02 4:01 4:20 4:23 4:23 79,052 80,454 81,947 83,511 86,399 Drinking Water Supplied (million gallons per day) 70.4 67.6 70.0 67.7 73.1 Reclaimed Water Supplied (million gallons per day) Sewer Service Sewer Service Connections 11.8 14.2 11.8 11.6 11.5 69,121 70,732 72,034 73,232 74,143 24.0 24.5 24.2 25.5 24.2 101 118 116 183 199 # of homes serviced by Residential Refuse Collection 70,546 72,166 73,602 74,850 76,300 # of citizens serviced annually by Household Hazardous Waste collection program 1,708 1,900 2,201 1,718 1,900 Transportation Total citywide transit ridership Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies) Scottsdale Airport - Takeoffs and Landings Community Services # attending Parks & Recreation facilities, Human Services facilities and Libraries annually # of square feet of medians and rights of way maintained Facility inventory maintained (square feet) Information Systems # of SPAM emails blocked (monthly) from being delivered to the City (An average of 30 seconds per email is expended by staff) Annual Disk Storage size (DAS, NAS, and SAN) (Terabytes) Fire # of responses to calls for emergency services Responses per capita Average response time to urban calls for service (minutes) Water Service Water Service Connections Sewage Treated (million gallons per day) Municipal Services # of active Capital Projects (continued) 147 Table of Contents 148 City of Scottsdale Operating Indicators by Function Last Five Fiscal Years Table XXII Fiscal Year Function Citizen & Neighborhood Resources % increase of Neighborhood Watch groups annually 2002 2003 2004 2005 2006 n/a 15% 37% 37% 25% # of new Code Enforcement cases processed per year Human Resources # of vacant positions reviewed (FT & PT) 7,357 10,000 10,000 11,336 14,000 120 116 247 300 350 HR operating cost as a % of City payroll Economic Vitality Targeted job creation - number of companies / number of jobs 3.1% 2.6% 2.4% 2.3% 2.0% 10 / 1,305 17 / 1,716 23 / 1,800 10 / 1,443 10 / 1,200 - 2% 0% + 9% + 10% 10% - 13% 0% + 3% + 5% + 5% n/a n/a 45 25 15 Provide applicant with pre-application meeting within 30 days of submitting request. n/a n/a 90% 100% 100% % of inspections performed within 24 hours of the request 99% 99% 97% 98% 99% Sales Tax growth (% annual change) Bed Tax growth (% annual change) Planning & Development Services Customer wait-time (in minutes) at One Stop Shop Source: The City of Scottsdale's Budget Department and applicable City departments. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale Capital Asset Statistics by Function Last Five Fiscal Years Table XXIII Fiscal Year Function Public Safety Police: Stations Police Vehicles Fire Stations Highways and Streets Square Yards of Pavement Equivalent 12' Wide Lane Miles Streetlights Traffic Signals Culture and Recreation Parks Parks Acreage Swimming Pools Tennis Courts Community Centers Water Water Mains (miles) Fire Hydrants Sewer Sanitary Sewers (miles) Storm Sewers (miles) Source: City of Scottsdale departments. 2002 2003 2004 2005 2006 3 261 10 3 295 12 3 286 12 3 290 13 3 345 13 19,100,000 2,713 9,510 250 19,100,000 2,713 10,300 253 19,231,553 2,732 10,500 258 19,231,553 2,732 10,650 262 19,660,273 2,793 10,828 276 40 869 3 49 6 40 869 3 49 6 40 849 3 49 6 40 849 3 49 6 40 937 3 49 6 1,738 8,659 1,815 8,928 1,854 9,193 1,897 9,541 1,933 9,839 1,155.0 68.7 1,262.0 68.7 1,280.0 137.7 1,287.4 142.8 1309.0 148.0 149 Table of Contents 150 City of Scottsdale, Arizona