City of Scottsdale Arizona Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2010 City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2010 Prepared by: Finance and Accounting Division David N. Smith City Treasurer Jeff Nichols, CPA Accounting Director City of Scottsdale, Arizona City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2010 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal – City Treasurer, Finance and Accounting...................................................................................... 1 Certificate of Achievement – Government Finance Officers Association...................................................................... 7 List of Elected and Appointed Officials................................................................................................................................8 Organizational Chart.................................................................................................................................................................9 FINANCIAL SECTION Independent Auditors’ Report...............................................................................................................................................11 Management’s Discussion and Analysis...............................................................................................................................13 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets..............................................................................................................................................32 Statement of Activities................................................................................................................................................33 Fund Financial Statements Balance Sheet – Governmental Funds......................................................................................................................34 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets.............................................................................................................................................................36 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds................................................................................................................................................37 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities..........................................................39 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund........................................................................................................................40 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund...........................................................................................41 Statement of Net Assets – Proprietary Funds.........................................................................................................42 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds......................................................................................................................................................44 Statement of Cash Flows – Proprietary Funds........................................................................................................45 Statement of Fiduciary Net Assets – Fiduciary Funds...........................................................................................47 Statement of Changes in Fiduciary Net Assets – Fiduciary Funds......................................................................48 Notes to Financial Statements...............................................................................................................................................49 I. Summary of Significant Accounting Policies...........................................................................................................49 II. Reconciliation of Government-wide and Fund Financial Statements.................................................................58 III. Stewardship, Compliance, and Accountability.........................................................................................................64 IV. Detailed Notes on All Funds......................................................................................................................................67 A. Cash and Investments...................................................................................................................................67 B. Receivables......................................................................................................................................................71 C. Capital Assets.................................................................................................................................................72 D. Interfund Balances and Interfund Transfers.............................................................................................74 E. Leases...............................................................................................................................................................76 F. Bonds, Loans, and Other Payables..............................................................................................................76 City of Scottsdale, Arizona  Page V. Other Information........................................................................................................................................................89 A. Risk Management..........................................................................................................................................89 B. Contingent Liabilities....................................................................................................................................89 C. Commitments and Subsequent Events......................................................................................................90 D. Joint Venture...................................................................................................................................................91 E. Pollution Remediation...................................................................................................................................92 F. Related Organization.....................................................................................................................................92. G. Retirement and Pension Plans.....................................................................................................................93 H. Other Postemployment Benefits.................................................................................................................96 I. Postemployment Benefits Other Than Pensions......................................................................................97 Required Supplementary Information................................................................................................................................101 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Nonmajor Governmental Funds ..................................................................................106 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds...............................................................................................107 Combining Balance Sheet – Nonmajor Special Revenue Governmental Funds.....................................................109 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Governmental Funds..................................................................110 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: Highway User Fuel Tax – Special Revenue Fund..................................................................................................111 Preserve Privilege Tax – Special Revenue Fund....................................................................................................112 Combining Balance Sheet – Nonmajor Debt Service Governmental Funds...........................................................113 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Debt Service Governmental Funds...............................................................114 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: General Obligation Bond – Debt Service Fund....................................................................................................115 Municipal Property Corporation Bond – Debt Service Fund.............................................................................116 Special Assessments Bond – Debt Service Fund..................................................................................................117 Scottsdale Preserve Authority Bond – Debt Service Fund..................................................................................118 Combining Balance Sheet – Nonmajor Capital Projects Governmental Funds......................................................119 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Governmental Funds..................................................................120 Combining Statement of Net Assets – Internal Service Funds.................................................................................122 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets – Internal Service Funds.............................................................................................................123 Combining Statement of Cash Flows – Internal Service Funds................................................................................124 Combining Statement of Fiduciary Net Assets – Fiduciary Funds...........................................................................126 Combining Statement of Changes in Assets and Liabilities – Fiduciary Funds......................................................127 Other Supplementary Information: Schedule of Changes in Long-Term Debt.........................................................................................................................129 City of Scottsdale, Arizona STATISTICAL SECTION  Page Financial Trends Net Assets by Component – Last Nine Fiscal Years (accrual basis of accounting)���������������������������������������������� 134 Changes in Net Assets – Last Nine Fiscal Years (accrual basis of accounting)����������������������������������������������������� 135 Governmental Activities Tax Revenue by Source – Last Nine Fiscal Years (accrual basis of accounting).������������������������������������������������������������������������������������������������������������������������������������ 138 Fund Balances of Governmental Funds – Last Nine Fiscal Years (modified accrual basis of accounting).������������������������������������������������������������������������������������������������������������������� 139 Changes in Fund Balances of Governmental Funds – Last Nine Fiscal Years (modified accrual basis of accounting)�������������������������������������������������������������������������������������������������������������������� 140 Governmental Activities Tax Revenue by Source – Last Nine Fiscal Years (modified accrual basis of accounting)�������������������������������������������������������������������������������������������������������������������� 143 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category – Last Nine Fiscal Years�������������������������������������������� 144 Direct and Overlapping Sales Tax Rates – Last Nine Fiscal Years��������������������������������������������������������������������������� 145 Sales Tax Revenue Payers by Industry – Current Year and Nine Years Ago���������������������������������������������������������� 146 Property Tax Rates – Direct and Overlapping Governments – Last Nine Fiscal Years��������������������������������������� 147 Principal Property Tax Payers – Current Year and Nine Years Ago������������������������������������������������������������������������ 148 Assessed Value of Taxable Property – Last Nine Fiscal Years.�������������������������������������������������������������������������������� 149 Property Tax Levies and Collections – Last Nine Fiscal Years��������������������������������������������������������������������������������� 150 Debt Capacity Ratios of Outstanding Debt by Type – Last Nine Fiscal Years�������������������������������������������������������������������������������� 151 Ratios of General Bonded Debt Outstanding – Last Nine Fiscal Years����������������������������������������������������������������� 152 Direct and Overlapping Governmental Activities Debt as of June 30, 2010��������������������������������������������������������� 153 Legal Debt Margin Information – Last Nine Fiscal Years���������������������������������������������������������������������������������������� 154 Pledged-Revenue Coverage – Last Nine Fiscal Years������������������������������������������������������������������������������������������������� 156 Demographic and Economic Information Demographic and Economic Statistics – Last Nine Fiscal Years����������������������������������������������������������������������������� 157 Principal Employers – Current Year and Nine Years Ago���������������������������������������������������������������������������������������� 158 Operating Information Full-time Equivalent City Government Employees by Function – Last Nine Fiscal Years��������������������������������� 159 Operating Indicators by Division – Last Nine Fiscal Years�������������������������������������������������������������������������������������� 160 Capital Asset Statistics by Function – Last Nine Fiscal Years����������������������������������������������������������������������������������� 163 City of Scottsdale, Arizona City of Scottsdale, Arizona Table of Contents October 29, 2010 Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: Transmittal Letter For the Fiscal Year Ended June 30, 2010 City of Scottsdale Scottsdale, Arizona The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2010, 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 on a comprehensive framework of internal control 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. LarsonAllen, LLP has issued an unqualified (“clean”) opinion on the City’s financial statements for the year ended June 30, 2010. 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 approximately 184 square miles, stretching 31 miles from north to south. The City is bordered on the west by Phoenix, the state capital, by Tempe on the south, and by the Salt River/Pima Maricopa Indian Community on the east. Scottsdale and its neighboring cities form the greater metropolitan Phoenix area, which is the economic, political and population center of the state. City of Scottsdale, Arizona 1 Table of Contents 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. Portions of the City’s charter have been modified several times by vote of the citizens. The City has experienced significant increases in population, with the 1950 census reporting 2,032 residents, and the 2000 census reporting 202,705. The City’s population for 2010 is estimated at 243,500. 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 six Charter officers (City Manager, City Attorney, City Auditor, City Clerk, City Judge, and City Treasurer) who have full responsibility for carrying out City Council policies and administering City operations. The City provides a full range of services including police and fire protection, sanitation/ solid waste service, water and sewer services, construction and maintenance of streets, and recreational activities, including libraries 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; the maximum legal expenditure permitted for the fiscal year is the total budget as adopted. 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 ensuing fiscal year. Additional expenditures may be authorized if directly necessitated by a natural or man-made disaster as prescribed in the Arizona State Constitution, Article 9, Section 20. During fiscal year (FY) 2009/10, there were no such supplemental budgetary appropriations authorized. The expenditure appropriations in the adopted budget are by division; however, divisional appropriations may be amended during the year. On 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 divisions; and 2) unexpended appropriations may be transferred from one division to another. Local Economy The City of Scottsdale’s tax revenue base consists of a variety of tax categories, the most significant being taxes applicable to retail sales. The City also benefits from favorable conditions including a stable, diversified economic base and being a desirable location to work and live. Scottsdale is beyond its historic period of peak expansion and the long-term economic outlook for the City recognizes this fact. 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. 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 headquarters and regional offices; high-tech, research and development; bio-med; luxury resorts and hotels; and business and professional services. The following categories represent key indicators affecting Scottsdale’s economic and financial success: 2 City of Scottsdale, Arizona Table of Contents Tourism Tourism is one of Scottsdale’s largest and most vibrant industries, and is a significant contributor to the City’s economy. A variety of lodging properties, including several world-class resorts and “boutique” hotels, provide over 11,000 guest rooms, along with spectacular spas, trend-setting dining and one-of-a kind Sonoran desert golf courses. With over 17,000 retail shops, nearly 600 restaurants, national and international events, and spectacular southwest Sonoran desert setting, Scottsdale continues to be a popular destination for visitors year-round and is well-positioned as the economy emerges from the current recession. Bed tax revenues to the City declined by 6 percent for FY 2009/10, due largely to the declining national economy. Scottsdale visitors contribute about 20 percent of the City’s total privilege and use tax revenues. Retail Sales Scottsdale’s largest revenue source is sales tax generated from a balanced variety of business categories including automotive, construction, food stores, hotels/motels, department stores, retail stores, restaurants, utilities and rentals. Sales tax is generated directly from the City’s own applied tax rate and indirectly as the City receives a share of sales tax generated from the Arizona State applied tax rate. The City saw retail sales tax revenues decrease by 8 percent in FY 2009/10 after falling 17 percent in the previous fiscal year, a result of the national recession. Employment Scottsdale’s unemployment rate was 6.6 percent in June 2010, significantly lower than the state level of 9.8 percent. Historically, Scottsdale’s unemployment rate is about 2 percent lower than the state’s average. Firms relocating to Scottsdale in FY 2009/10 created 855 new jobs over the past year. New employers to announce moves to Scottsdale last year included AxoSoft, Eventinterface.com, and International Cruise & Excursions. Commercial Vacancy Rates Scottsdale’s citywide office vacancy rate was about 23 percent for the last quarter of FY 2009/10 – slightly higher than the Phoenix market average of 21 percent. There were only 13 commercial buildings under construction in the Phoenix market during the second quarter of 2010; none of the buildings were located in Scottsdale. City of Scottsdale, Arizona 3 Table of Contents Long-term Financial Planning Scottsdale’s Five-Year Financial Plan is based on sound financial reserves, low debt burden and conservative revenue growth forecasts. The potential for State legislative initiatives to reduce revenue sharing and additional demands for essential City services such as police, fire, transportation and social services pose a fiscal a challenge. Achieving and maintaining fiscal stability requires many elements, all working in concert with one another. The following identifies key elements of our financial plan: Adopted Comprehensive Financial Policies Financial policies establish the guidance for Scottsdale’s overall fiscal planning and management. They set forth guidelines against which current budgetary performance can be measured and proposals for future programs can be evaluated. The City has 53 adopted financial policies governing operations, capital planning, debt management, reserves and financial reporting. Regular review and refinement of these policies is done in conjunction with financial plan development and are adopted annually by the City Council. Financial Resource Planning Scottsdale’s strategic financial planning begins with a determination of the City’s fiscal capacity, based on long-term financial forecasts of available revenues. Conservative financial forecasts, coupled with financial trend analysis techniques and reserve analysis help preserve the fiscal well-being of Scottsdale. Strategic financial planning is a critical element to maintain long-term financial stability. Multi-Year Operating Budget Planning Multi-year budgeting encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to community expectations and broad goals of the City Council. While the City is required to adopt a one-year budget to meet State statutory requirements, Scottsdale builds a five-year financial plan to help anticipate future impacts and ensure achievement of the City’s long-term 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 budgets. Projects with significant operating impacts are carefully timed to avoid contingent liabilities that future operating resources cannot meet. All capital funding sources are conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used, capital project plans are sized to conform to existing debt management policies. Debt Management Scottsdale has a financial policy that prohibits the issuance of debt for operating expenses. With that as a governing framework, all debt issuances are for the purpose of financing infrastructure or long-lived costly assets. Each debt issuance is evaluated against policies addressing: debt service as a percent of operating expenditures, tax and revenue bases for the repayment of debt, overall debt burden on the community, statutory limitations and market factors affecting interest costs. In all cases, a long-term analysis is made considering the debt capacity that fits the financial wherewithal (and willingness) of our community to pay 4 City of Scottsdale, Arizona Table of Contents for the capital projects. Sizing of the City’s Capital Improvement Plan based on debt capacity in conjunction with conservatively estimated revenues helps stabilize per capita debt and lower annual debt service costs to the City over the long-term. The City retained credit ratings of “Aaa”, “AAA”, and “AAA” from the three major credit rating agencies (Moody’s Investors Service, Standard and Poor’s Rating Group, and Fitch Investors Services, respectively) on the City’s outstanding general obligation bonds where debt service is supported by property taxes. These are the highest ratings possible and are held by only a handful of local governments across the nation. Ratings for the City’s bonds where debt service is supported by enterprise revenues or excise taxes are also highly rated by the three major credit rating agencies and, in some cases, have been upgraded in the past year. A summary of the City’s bond ratings are shown as follows: City of Scottsdale Bonded Debt Ratings As of June 30, 2010 Moody's Investors Service Standard and Poor's Rating Group Fitch Investors Services General Obligation (GO) Aaa AAA AAA Water and Sewer Revenue (W&S) Aaa AAA AAA Municipal Property Corp (MPC) Aa1 AAA AAA Scottsdale Preserve Authority (SPA) Aa2 AA AA+ Highway User Revenue Fund (HURF) Aa3 AA Not Rated Major Initiatives The City of Scottsdale’s adopted FY 2010/11 budget reflects continued downward pressure on revenues in the local economy. Budgeted expenditures reflect a “maintenance budget” reflecting council direction to maintain or reduce expenditures from the prior year’s levels. Even with those guidelines, the initial shortfall between forecasted revenues and expenditures was approximately $18.0 million. To close the gap, $8.3 million in low priority expenditures and services were reduced or eliminated, a portion of the beginning unreserved fund balance of $4.2 million was used as a funding source, a transfer of $3.2 million of excess Self Insurance Fund reserves was authorized and contingency reserves were reduced to $2.5 million (a level consistent with historic averages). In the process we were able to accomplish an important objective in that we made the needed reductions while limiting the impacts on our direct services to citizens. We were able to hold the increase in the primary property tax rate to $0.0186 per $100 of assessed value, an increase of approximately 5 percent over the FY 2009/10 rate (2 percent of the increase was related to the statutorily allowed increase over prior year’s levy as approved by Council; the remainder of increase is primarily due to decreasing property values). For the 2011/12 budget year, the City Council, the Budget Review Commission, our citizens and staff are faced with difficult choices necessary to close a forecast budget deficit of $28.4 million. City of Scottsdale, Arizona 5 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, 2009. This was the 37th 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 also received the “Distinguished Budget Presentation Award” for the fiscal year beginning July 1, 2009 from the GFOA for our conformity in budget presentation. We believe that our current budget continues to conform to the program requirements and we expect to receive this award again for the fiscal year beginning July 1, 2010. The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Finance and Accounting Division, the assistance of administrative personnel in the various departments, and the valuable oversight and critique of our independent auditors. I also wish to express my sincere appreciation to the City Council and the City Manager 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, David N. Smith City Treasurer 6 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona 7 Table of Contents City of Scottsdale, Arizona List of Elected and Appointed Officials City Council W.J. “Jim” Lane, Mayor Lisa M. Borowsky Wayne Ecton Susan Klapp Robert W. Littlefield Ron McCullagh Marg Nelssen Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2010 Charter Offices David Richert, City Manager Bruce Washburn, City Attorney Sharron Walker, City Auditor Carolyn Jagger, City Clerk B. Monte Morgan, City Judge David N. Smith, City Treasurer City of Scottsdale Scottsdale, Arizona 8 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Organizational Model Chart June 30, 2010 Citizens of Scottsdale Scottsdale City Council Boards and Commissions City Manager City Attorney City Auditor City Clerk City Judge City Treasurer City Court Finance & Accounting Assistant City Manager Administrative Services Purchasing Tax Audit Community Services Human Resources Information Technology Community Services Human Resources Information Technology Public Safety Fire Police Public Works & Water Resources Planning, Neighborhoods & Transportation Economic Vitality Public Works Current Planning Aviation Water Resources Development Services Code Enforcement Long Range/General Plan Downtown Group Neighborhoods Economic Vitality Transportation WestWorld 9 Table of Contents 10 City of Scottsdale, Arizona Table of Contents INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and the City Council City of Scottsdale, Arizona Scottsdale, Arizona We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Scottsdale, Arizona (City), as of and for the year ended June 30, 2010, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Scottsdale, Arizona, as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2010 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. (11) An independent member of Nexia International City of Scottsdale, Arizona 11 Table of Contents The Honorable Mayor and the City Council City of Scottsdale, Arizona The management’s discussion and analysis on pages 13 through 30, the Public Safety Personnel Retirement System Schedule of Funding Progress on pages 101 and 102 and the Other Postemployment Benefit Plan Schedule of Funding Progress on page 103 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, other supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules and other supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The accompanying introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. LarsonAllen LLP Mesa, Arizona October 29, 2010 (12) 12 City of Scottsdale, Arizona 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, 2010 and 2009. We encourage readers to consider the information presented here in conjunction with additional information furnished in our letter of transmittal and the basic financial statements. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2010 are as follows: • The assets of the City exceeded its liabilities at the close of the fiscal years 2010 and 2009 by $4.2 billion and $4.1 billion (net assets), respectively. Of these amounts, $395.0 million and $323.0 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 $137.0 million and $196.8 million during fiscal years 2010 and 2009, respectively. • As of June 30, 2010 and 2009, the City’s governmental funds had combined ending balances of $205.8 million and $221.3 million, respectively. • At the close of the fiscal year, the unreserved fund balance for the General Fund was $51.5 million or 23 percent of total General Fund expenditures of $227.3 million. City of Scottsdale, Arizona 13 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 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 other supplementary 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 and, accordingly, provide information about the whole City, presenting both an aggregate current 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. 14 City of Scottsdale, Arizona Table of Contents 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 (businesstype activities). The governmental activities of the City include general government, finance, accounting, economic vitality, public works, water resources, planning, neighborhoods, transportation, public safety, human resources, community services, information technology, administrative services, street light and services districts. The business-type activities of the City include water, sewer, solid waste, and airport operations. The government-wide financial statements are for the City itself; however, they include 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 Finance and Accounting Division, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251.) Management’s Discussion and Analysis 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, accrued revenues and expenses are reported in this statement for some items that are expected to result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses for earned but unused vacation and sick leave balances. For the Fiscal Year Ended June 30, 2010 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 an indicator of whether or not the financial position of the City is improving or deteriorating. The government-wide financial statements can be found on pages 32 and 33 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. City of Scottsdale, Arizona 15 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements; however, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources 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. Doing so highlights 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 purpose (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, and General Capital Improvement Plan (CIP) Capital Project 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 non-major governmental funds is provided in the form of combining statements in a separate section of this report. The basic governmental fund financial statements begin on page 34 of this report. Proprietary Funds Proprietary Funds are generally used to account for services for which the City charges customers— either outside customers, internal units or divisions 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 government-wide 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 its health insurance and general liability insurance activities. Because these services predominantly benefit internal units or divisions of the City, 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 42 of this report. 16 City of Scottsdale, Arizona Table of Contents The basic Fiduciary Fund financial statements begin on page 47 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 49 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 beginning on page 106. Management’s Discussion and Analysis Fiduciary Funds are used to account for resources held for the benefit of parties outside the City. The City has one private-purpose trust fund 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. For the Fiscal Year Ended June 30, 2010 Fiduciary Funds GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the City to provide services to its 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 private sector. The basis for this accounting takes into account all of the current year’s revenues and expenses regardless of when the cash is received or paid. These two statements report the City’s net assets and changes in those assets. The change in assets reflects 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 should also be considered. 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 $4.2 billion and $4.1 billion at the close of the fiscal years 2010 and 2009, respectively. City of Scottsdale, Arizona 17 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents Net Assets June 30, 2010 and 2009 (in thousands of dollars) Governmental Activities 2010 Assets Current and Other Assets Capital Assets Total Assets $ Liabilities Long-term Liabilities Outstanding Other Liabilities Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets 2009 Business-Type Activities 2010 2009 Total 2010 2009 395,442 $ 404,805 $ 411,675 $ 338,886 $ 807,117 $ 743,691 3,528,042 3,389,974 1,322,357 1,305,463 4,850,399 4,695,437 3,923,484 3,794,779 1,734,032 1,644,349 5,657,516 5,439,128 849,069 159,433 1,008,502 826,301 166,131 992,432 408,023 44,602 452,625 342,395 44,893 387,288 1,257,092 204,035 1,461,127 1,168,696 211,024 1,379,720 2,729,334 2,586,731 941,884 991,390 3,671,218 3,578,121 97,950 131,732 32,244 26,568 130,194 158,300 87,698 83,884 307,279 239,103 394,977 322,987 $ 2,914,982 $ 2,802,347 $ 1,281,407 $ 1,257,061 $ 4,196,389 $ 4,059,408 The largest portion (88 percent) of the City’s net assets reflects its investment in capital assets (e.g. land, buildings, and equipment) less any related outstanding debt used to acquire those assets. These amounted to $3.7 billion and $3.6 billion at June 30, 2010 and 2009, 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. A small portion (3 percent) of the City’s net assets ($130.2 million at June 30, 2010 and $158.3 million at June 30, 2009) represents resources that are subject to external restrictions on how they may be used. The remaining balance (9 percent) of unrestricted net assets at June 30, 2010 and 2009, $395.0 million and $323.0 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. Analysis of Changes in Net Assets The City’s total net assets increased by $137.0 million and $196.8 million during the fiscal years 2010 and 2009, 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. Such amounts are included in Capital Grants and Contributions on the table which follows. 18 City of Scottsdale, Arizona Table of Contents Governmental Activities 2010 2009 Revenues Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Property Taxes Business and Privilege Taxes Intergovernmental Taxes Interest and Investment Income Other Total Revenues Expenses General Government Finance & Accounting Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services Information Technology Administrative Services General Government Police Financial Services Transportation Community Services Information Systems The Downtown Group Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development WestWorld Streetlight and Services Districts Interest on Long-term Debt Water Utility Sewer Utility Airport Solid Waste Total Expenses Increase in Net Assets Before Transfers Transfers Increase in Net Assets Net Assets at Beginning of Year Net Assets at End of Year $ Business-type Activities 2010 2009 2010 Total 2009 42,088 $ 29,319 190,279 36,941 $ 26,272 240,289 152,374 $ 9,268 148,606 $ 22,067 194,462 $ 29,319 199,547 185,547 26,272 262,356 60,914 147,169 56,830 1,368 6,730 534,697 61,138 160,134 64,145 14,653 5,038 608,610 130 4,295 430 166,497 117 4,958 408 176,156 60,914 147,299 56,830 5,663 7,160 701,194 61,138 160,251 64,145 19,611 5,446 784,766 24,351 24,351 5,848 5,848 20,676 20,676 37,143 37,143 114,530 114,530 116,155 116,155 3,717 3,717 53,596 53,596 14,876 14,876 1,917 1,917 20,646 20,646 92,530 92,530 9,913 9,913 87,552 87,552 78,523 78,523 13,723 13,723 4,595 4,595 31,174 31,174 22,887 22,887 3,802 3,802 3,545 3,545 8,553 8,553 29,029 29,029 595 595 538 631 538 631 39,405 42,242 39,405 42,242 76,178 81,391 76,178 81,391 33,274 33,509 33,274 33,509 3,120 3,482 3,120 3,482 18,889 19,650 18,889 19,650 432,752 449,940 131,461 138,032 564,213 587,972 101,945 158,670 35,036 38,124 136,981 196,794 10,690 9,932 (10,690) (9,932) 28,192 136,981 196,794 112,635 168,602 24,346 2,802,347 2,633,745 1,257,061 1,228,869 4,059,408 3,862,614 $ 2,914,982 $ 2,802,347 $ 1,281,407 $ 1,257,061 $ 4,196,389 $ 4,059,408 Management’s Discussion and Analysis For the Years Ended June 30, 2010 and 2009 (in thousands of dollars) For the Fiscal Year Ended June 30, 2010 Changes in Net Assets Governmental Activities Governmental activities increased the City’s net assets by $112.6 million in fiscal year 2010 and $168.6 million in fiscal year 2009, thereby accounting for 86 percent and 82 percent, respectively, of the total growth in the net assets of the City. Capital grants and contributions continued to have a positive influence on the total growth in net assets, despite a reduction of approximately 21 percent from the previous fiscal year. In addition, charges for services increased approximately $5.1 million, helping to offset reductions in revenue from other sources. City of Scottsdale, Arizona 19 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents General revenues such as property, business, and privilege taxes are not shown by program, but are used to support program activities citywide. For governmental activities overall, without regard to program, capital grants and contributions (36 percent), are the largest single source of funds, followed by business taxes which includes sales and use taxes and franchise taxes (28 percent), property taxes (11 percent), intergovernmental taxes, including state shared revenues (11 percent), and charges for services (8 percent). Revenues by Source – Governmental Activities Fiscal Year 2009/10 (in thousands) Intergovernmental taxes $56,830 / 11% Interest and investment income $1,368 / 0% Charges for services $42,088 / 8% Operating grants and t ib ti contributions $29,319 / 5% Business taxes $147,169 / 28% Capital grants and contributions $190 279 / 36% $190,279 Other $6,730 / 1% Property taxes $60,914 / 11% Property taxes decreased by less than one percent from the previous year, due to a $0.05 decrease in the secondary tax rate which was partially offset with new construction assessed values being added to the tax roll. In addition, there was an increase in both the primary and secondary assessed valuations over the previous year. Business taxes decreased 8 percent from the previous year, primarily due to reduced sales tax collections, an effect of the economic recession which especially affected the automotive and construction sectors. The Scottsdale Police and Fire Departments, which together comprise the Public Safety Division, is the largest expense function (27 percent), followed closely by planning, neighborhood and transportation (26 percent), and community services (12 percent). The Transportation Department, one of three departments in the newly formed Planning, Neighborhood and Transportation Division, is charged with ensuring 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, and ensure seamless connections to the regional transportation network. 20 City of Scottsdale, Arizona Table of Contents Business-type activities increased the City’s net assets in fiscal years 2010 and 2009 by $24.3 million and $28.2 million, respectively, accounting for 18 percent and 14 percent, respectively, of the total growth in the City’s net assets. The key factor of this increase was Water and Sewer Utility Fund capital contributions from developers and grantors, resulting in $8.3 million and $22.1 million for fiscal years 2010 and 2009, respectively. The majority of this amount was infrastructure donated by developers and development fees received. Program Revenues and Expenses – Business-type Activities Fiscal Year 2009/10 Expenses sands) (in tho thousands) Program Revenues $100,000 $90,000 Management’s Discussion and Analysis Business-type Activities For the Fiscal Year Ended June 30, 2010 The City’s Community Services Division is responsibile for improving and maintaining facilities and sponsors services that provide opportunities for family interaction, cultural enrichment, and development of lifetime skills, promote healthy lifestyles and serve as a catalyst for community involvement. They also provide assistance and guidance to those in need and link citizens with information and resources throughout the world. $80,000 $70,000 $60,000 $50,000 $40 000 $40,000 $30,000 $20,000 $10,000 $0 Water Utility Sewer Utility Airport Solid Waste Revenues by Source – Business-type Activities Fiscal Year 2009/10 (in thousands) Interest and investment income $4,295 / 3% Capital grants and contributions $9,268 / 6% Business Taxes & Other Income $560 / 0% Charges for services, $152,374 / 91% City of Scottsdale, Arizona 21 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents 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, had expenses of $76.2 million and $33.3 million, respectively, in fiscal year 2010, followed by Solid Waste with operating expenses of $18.9 million and Aviation of $3.1 million. Charges for services provided the largest share of revenues (91 percent) followed by capital grants and contributions (6 percent), which are principally developer contributions and development fees. 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 Water Resources Department provides water service connections to approximately 87,400 customers. The Solid Waste Department provides delivery of safe, efficient and environmentally sound solid waste services to approximately 79,000 residential customers and 1,490 commercial customers. The Aviation Department operates the City’s general aviation reliever facility with no commercial commuter or airline service and is home to many of the Valley’s corporate aircraft. Approximately 10,000 passengers a year travel through Scottsdale Airport. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. 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. 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. Governmental Funds 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 may be useful in assessing the City’s financing requirements. In particular, the 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. As of the end of the current fiscal year, the City’s governmental funds reported a combined ending fund balance of $205.8 million, a decrease of $15.5 million in comparison to the balance at June 30, 2009 of $221.3 million. Approximately $185.0 million of the total at June 30, 2010 constitutes an unreserved fund balance. Portions of this unreserved balance are designated in the City’s budget plan for capital projects and operational contingency funding. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed, (e.g., $17.2 million is committed for debt service payments). Revenues for governmental functions overall totaled approximately $346.1 million in fiscal year 2010, a decrease of about 14.5 percent ($58.4 million) from the previous year total of $404.5 million. In fiscal 22 City of Scottsdale, Arizona Table of Contents The General Fund Balance decreased in fiscal year 2010 by $8.3 million. Overall, the General Fund’s performance resulted in expenditures exceeding revenue in the fiscal year ended June 30, 2010, of $0.7 million. Management’s Discussion and Analysis 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 $51.5 million, while the total fund balance was $52.1 million; the unreserved and total balances for the General Fund at the end of fiscal year 2009 were $59.5 million and $60.4 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 23 percent of the total General Fund expenditures of $227.3 million in fiscal year 2010 and 23 percent of the total General Fund expenditures of $257.2 million in fiscal year 2009. Total fund balance represents 23 percent and 24 percent of total fund expenditures for fiscal years 2010 and 2009, respectively. In fiscal year 2010 management has designated $26.1 million of the General Fund unreserved fund balance for various uses. See note section III.C in the Notes to the Financial Statements for further information regarding reservations and designations. For the Fiscal Year Ended June 30, 2010 year 2010 expenditures for governmental functions, totaled $422.6 million, a decrease of 21 percent ($111.3 million) from the fiscal year 2009 total of $533.9 million. In the fiscal years ended June 30, 2010 and 2009, expenditures for governmental functions exceeded revenues by approximately $76.5 million and $129.5 million respectively. The General Obligation Bond Debt Service fund is used to account for the accumulation of resources for, and the payment of, general obligation 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 $4.9 million, a decrease of $5.9 million from the $10.8 million at the end of fiscal year 2009. The majority of the decrease was due to planned use of reserve funds to lower the secondary property tax rate. The General CIP Construction Capital Project fund accounts for the resources used to acquire, construct and improve major capital facilities, other than those financed by Proprietary Funds. The fund balances were $31.6 million and $59.6 million at June 30, 2010 and 2009, respectively. Capital improvement expenditures in 2010 were $44.0 million. Proprietary Funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the fiscal years 2010 and 2009, the unrestricted net assets for the Water and Sewer Utility were $293.2 million and $227.0 million, respectively; Scottsdale Airport were $6.1 million and $5.1 million, respectively; and the Solid Waste Utility Fund were $8.0 million and $7.0 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, also had unrestricted net assets of $29.4 million and $26.1 million, respectively. The total growth in net assets for the Enterprise Funds was $24.3 million and $28.2 million for fiscal years 2010 and 2009, 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 $22.3 million due to capital contributions of $8.3 million as well as increased revenues. City of Scottsdale, Arizona 23 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents Fiduciary Funds The City maintains small Fiduciary Funds for the assets of the Family Self-Sufficiency Agency Fund ($4,000, Net Assets), the Retainage Escrow Agency Fund, and the Handicap Scholarship Private Purpose Trust Fund. General Fund Budgetary 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 year-end budget differs from the original adopted budget due to applying intra-year budget strategies to deal with the depth and duration of the economic recession. The major adjustments included to develop a revised budget were: • Net reduction in FTEs of approximately 200 before the beginning of the budget year, • Two percent across-the-board pay reduction effective July 1, 2009, • Carry forward of 2 percent pay increase that was cancelled in January 2009, and • Elimination of merit and Superior Performance Award programs. Additionally, the Council approved a restructuring of departments into larger divisions. Examples include the Police and Fire Departments being restructured into a combined Public Safety Division; the Planning and Development, Citizens and Neighborhood Resources and Transportation Departments being restructured a combined the Planning, Neighborhood & Transportation Division; and Economic Vitality, WestWorld, and Airport departments being restructured into a combined Economic Vitality Division. The actual budget based fund balance was $1.2 million less than the revised budget. Revenues and transfers in were $7.0 million less than projected primarily because of Transient Occupancy and Building and Related permits. However, expenses and transfers out were $5.8 million less than the revised budget. Specifically, overtime, professional services, medical claims, utility services (electric, gas and water) and materials to maintain and repair machinery and equipment were all significantly less than the revised budget. 24 City of Scottsdale, Arizona Table of Contents The City’s capital assets for its governmental and business-type activities as of June 30, 2010 and 2009, amount to $4.9 billion and $4.7 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) between fiscal years 2010 and 2009 was 3.3 percent as shown in the table below. Capital Assets, Net of Depreciation June 30, 2010 and 2009 (in thousands of dollars) Land Buildings and Land Improvements Streets and Storm Drains Machinery and Equipment Water Rights Water System Sewer System Motor Vehicles and Maintenance by Fleet Furniture, Fixtures and Office Equipment Construction in Progress Total $ $ Governmental Activities 2010 2009 1,512,943 $ 1,380,255 365,776 272,321 1,475,341 1,427,453 24,894 27,452 23,471 24,120 125,617 258,373 3,528,042 $ 3,389,974 $ $ Business-type Activities 2010 2009 37,969 $ 37,969 12,413 13,178 12,224 12,930 89,701 89,701 665,879 682,560 301,897 308,230 202,274 160,895 1,322,357 $ 1,305,463 $ $ Total 2010 1,550,912 $ 378,189 1,475,341 37,118 89,701 665,879 301,897 23,471 327,891 4,850,399 $ 2009 1,418,224 285,499 1,427,453 40,382 89,701 682,560 308,230 24,120 419,268 4,695,437 Management’s Discussion and Analysis Capital Assets For the Fiscal Year Ended June 30, 2010 Capital Assets and Debt Administration Major capital asset events during the current fiscal year included the following: • Construction in progress on implementation of the Public Safety Radio System-Phase I project that will allow for a city owned microwave communications network. Expenditures totaled $9.9 million this year against a budget of $22.1 million. Inception to date expenditures total $10.9 million, leaving a balance of $11.2 million. The project is anticipated to be completed in FY 2011/12. • Construction in progress on the implementation of the Public Safety Microwave Radio project that will enhance the Police Radio System by augmenting leased lines. Expenditures totaled $1.6 million against a budget of $2.6 million. Inception to date expenditures total $1.6 million, leaving a balance of $1.0 million. The project is anticipated to be completed in FY 2011/12. • Construction in progress on the renovation of the 30-year old Scottsdale Center for the Performing Arts located on Second Street. Expenditures totaled $4.0 million this year against a budget of $16.7 million. Inception to date expenditures total $16.6 million, leaving a balance of $28.5 thousand. The project is anticipated to be completed in FY 2011/12. • Construction in progress on the design and construction of the 25,000 square foot full service Appaloosa Library located in the northern part of the City. Expenditures totaled $3.1 this fiscal year against a budget of $10.7 million. Inception to date expenditures total $10.5 million, leaving a balance of $105.7 thousand. The project is anticipated to be completed in FY 2011/12. City of Scottsdale, Arizona 25 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents • Construction in progress of driveway closures, new turn lanes, bus bays and landscaped median to maximize through capacity in the existing four travel lanes on the Indian School Road – Drinkwater to Pima project. Expenditures totaled $7.2 million this year against a budget of $17.4 million. Inception to date expenditures total $16.6 million, leaving a balance of $801 thousand. The project is anticipated to be completed in FY 2011/12. • Construction in progress on design and construction of a six-lane parkway cross-section with landscaped median, turn lanes, grade-separated path crossing, bike lanes, sidewalks, curb and gutter, roadway drainage, Intelligent Transportation System facilities and noise mitigation on the Pima Road – Thompson Peak to Pinnacle Peak Road project. Expenditures totaled $6.4 million this year against a budget of $23.5 million. Inception to date expenditures total $7.6 million, leaving a balance of $15.9 million. The project is currently in the construction phase and is anticipated to be completed in July 2011. • Construction in progress of the four-lane minor arterial standards with landscaped median, turn lanes, bike lanes, curb and gutter and new all-weather crossing on the Indian Bend Road – Scottsdale to Hayden project. Expenditures totaled $6.2 million this fiscal year against a budget of $26.8 million. Inception to date expenditures total $24.9 million, leaving a balance of $1.9 million. The project is anticipated to be completed in FY 2011/12. • Construction in progress on the design and construction of a six-lane major arterial crosssection with landscaped median, turn lanes, bike lanes, sidewalks, curb and gutter, roadway drainage and Intelligent Transportation System facilities on the Scottsdale Road – Frank Lloyd Wright to Thompson Peak Parkway project. Expenditures totaled $2.2 million this fiscal year against a budget of $49.1 million. Inception to date expenditures total $30.5 million, leaving a balance of $18.6 million. Construction on East and West sides of the road is complete; construction related to the northern area of the project is pending future development and state land agreements. • Construction in progress on the expansion of the Corporation Yard Fleet Maintenance Facility to accommodate customer base growth due primarily to the absorption of a City Fire Department in July 2005. Expenditures this fiscal year totaled $1.4 million against a budget of $4.9 million. Inception to date expenditures total $2.2 million, leaving a balance of $2.7 million. Construction of Phase 3 building addition has commenced, with the truck wash replacement, knock down area and major utility work. The project is anticipated to be completed in July 2011. • The City’s water and sewer five-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 capital improvement projects cash expenditures include: o Arsenic Mitigation Treatment ($3.8 million) – Design and construction of arsenic removal treatment facilities and related distribution systems at various satellite sites throughout the City to comply with the Safe Drinking Water Act Arsenic Rule. The Safe Drinking Water Act lowered the maximum allowable levels for arsenic in drinking water from 50 ppb to 10 ppb as of January 2006. This new level for arsenic will require the City to utilize arsenic mitigation treatment systems in accordance with the 2001 Water Resources Master 26 City of Scottsdale, Arizona Table of Contents o Central Arizona Project (CAP) Plant expansion ($8.1 million) – Expansion of the existing CAP Water Treatment Plant from its current capacity of 50 million gallons per day (mgd) to a minimum capacity of 70 mgd to meet required standards. This will further reduce the use of groundwater and increase use of surface water. The project’s budget totals $96.0 million. Inception to date expenditures total $95.1 million, leaving a balance of $866 thousand. The project is anticipated to be completed in FY 2011/12. Management’s Discussion and Analysis o Multi-City Sub-Regional Operating Group (SROG) Wastewater Plant Expansion UP01 ($2.7 million) – Provides for additional sewer flow and solids handling capacity through contribution to the capital improvements at the Multi-City 91st Avenue Wastewater Treatment Plant located in Phoenix. Capacity expansion is due to planned increased demand. The City of Scottsdale proportionate cost share is derived through existing intergovernmental agreements with the SROG. This expansion is designated as the Unified Plant 2001 (UP01). The project’s budget totals $11.8 million. Inception to date expenditures total $6.7 million, leaving a balance of $5.1 million. The project is anticipated to be completed in FY 2011/12. For the Fiscal Year Ended June 30, 2010 Plan. The project’s budget totals $88.5 million. Inception to date expenditures total $88.2 million, leaving a balance of $251.3 thousand. The project is anticipated to be completed in FY 2011/12. o Advanced Water Treatment – Phase 4 ($5.1 million) – Design and construction of expansion of the advanced water treatment plant consistent with the capacity of the water reclamation plant as incorporated in the updated Water and Wastewater Master Plans. This expansion will help the City comply with sewer capacity regulatory requirements (CMOM) and minimize or eliminate the need for additional capacity in the SROG regional sewage transmission facilities. The project’s budget totals $59.3 million. Inception to date expenditures total $7.5 million, leaving a balance of $51.8 million. The project is in the construction phase and is anticipated to be complete in August 2011. o Sewer Collection System Improvements ($4.9 million) – Design and construction of sewer lines and rehabilitation of sewer manholes in the aging sewer system per the Asset Management Program. The project’s budget totals $39.5 million. Inception to date expenditures total $17.6 million, leaving a balance of $21.9 million. The project is anticipated to be completed in FY 2014/15. o Water Distribution System Improvements ($2.7 million) – Provides for water distribution system improvements needed due to age of the system and increasing demand. Includes replacement of mains, meters and valves, as well as design and construction of new water mains at various locations throughout the distribution system to improve service and to reduce operating costs. The project’s budget totals $53.7 million. Inception to date expenditures total $32.5 million, leaving a balance of $21.2 million. The project is anticipated to be completed in FY 2014/15. City of Scottsdale, Arizona 27 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents 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.C in the Notes to the Financial Statements for further information regarding capital assets. Debt Administration At the end of the fiscal years 2010 and 2009, the City had total long-term obligations outstanding of $1,286.9 million and $1,199.1 million, respectively. Of these amounts, $578.2 million and $551.5 million, respectively, are General Obligation Bonds backed by the full faith and credit of the City. The remainder includes revenue bonds, municipal property corporation bonds, preserve authority bonds, certificates of participation, and other obligations of $708.7 million and $647.6 million for fiscal years 2010 and 2009, respectively. Long-Term Liabilities June 30, 2010 and 2009 (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 Risk Management Claims Capital Lease Compensated Absences Post Employment Benefit - Implied Subsidy Total Long-Term Liabilities $ $ Governmental Activities 2010 2009 578,190 $ 551,455 $ 148,212 149,216 67,870 71,235 2,250 3,000 4,194 4,954 38,760 17,136 (7,223) 849,389 15,732 11,142 25,617 1,114 902,994 $ 40,665 17,572 (8,112) 829,985 16,828 11,530 22,553 1,157 882,053 $ Business-Type Activities 2010 2009 - $ - $ 45,230 48,345 316,780 249,735 23,562 (5,106) 380,466 7 3,223 181 383,877 $ Total 2010 2009 578,190 $ 551,455 45,230 48,345 464,992 398,951 67,870 71,235 2,250 3,000 4,194 4,954 38,760 40,665 21,532 40,698 39,104 (5,592) (12,329) (13,704) 314,020 1,229,855 1,144,005 15,732 16,828 11,142 11,530 53 7 53 2,797 28,840 25,350 185 1,295 1,342 317,055 $ 1,286,871 $ 1,199,108 During fiscal year 2010, the City’s total long-term debt increased approximately $87.8 million. The City issued $50.8 million of new general obligation bonds (Governmental Activities), the remaining balance of the Bond 2000 authorization. The City also issued $75.0 million of new Municipal Property Corporation Excise Tax Revenue bonds (Business-Type Activities) for water treatment plant expansion and sewer collection system improvements. The State constitution imposes debt limitations on the City equal to 6 percent and 20 percent of the assessed valuation of properties within the City. The City’s available debt margin at June 30, 2010 and 2009 is $426.1 million and $358.0 million, respectively, in the 6 percent capacity and $1,181.3 million and $1,241.4 million, respectively, in the 20 percent capacity. Additional information on the debt limitations and capacities may be found in Section IV.F of the Notes to the Financial Statements and also in Table XVIIa in the Statistical Section of this report. In accordance with Statement No. 45 of the Governmental Accounting Standards Board – GASB (Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions), the Net Other Post-Employment Benefit Obligation (NOPEBO) included in the Outstanding Long-Term Liabilities represents the City’s actuarial required contribution (ARC) pursuant to the actuarial calculations for the accrued cost of retiree health insurance as of June 30, 2010. The NOPEBO at the end of the fiscal years 2010 and 2009 were $1.3 million and $1.3 million, respectively. 28 City of Scottsdale, Arizona Table of Contents Economic Factors and Next Year’s Budget and Rates The City of Scottsdale’s FY 2010/11 budget included funding for the highest priorities of the City Council and citizens despite the economic recession. The budget is a maintenance budget. Staff was requested to maintain or reduce expenditures from the prior year’s final approved budget; therefore, increases were only allowed where contractually required or prudent based on changed conditions. Significant reductions included eliminating or reducing lower priority expenditures and services, which resulted in a reduction of $8.3 million in planned spending. Some, but not all, of these changes are structural reductions that will be maintained in future years. In addition, the contingency reserve was reduced to $2.5 million, a level consistent with historic average uses. Finally, fund balances (unreserved and Self Insurance Fund) were used as one-time revenue sources. 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 2010/11 is $677.7 million, which includes $440.5 million (or 65 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: • • • • • • • Management’s Discussion and Analysis Additional information in the City’s long-term liabilities can be found in Section IV.F of the Notes to the Financial Statements. For the Fiscal Year Ended June 30, 2010 The City is self insured and funds employee healthcare costs with current funds and designates a reserve for the self insured fund balance. 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 Troon Park North. 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 the Granite Reef Watershed, Upper Camelback Watershed, and Pima Road Drainage System. Public Safety – Construction of the Cactus Acres Fire Station 8, Eldorado Park Fire Station 1, and Public Safety Radio System. Service Facilities – Corporate Yard Fleet Maintenance Facility Expansion, Transfer Station Expansion and Network Infrastructure Extension. Transportation – Improvements to several main Scottsdale thorough ways including Scottsdale Road – Thompson Peak Parkway to Pinnacle Peak, and Pima Road – Thompson Peak Parkway to Pinnacle Peak Road. Additionally, improvements will be made to bicycle lanes and enhanced sidewalks. Water Services – Modification and improvements to water distribution and sewer collection system improvements. City of Scottsdale, Arizona 29 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2010 Table of Contents 30 The adopted budget continues the practice of designating 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. For FY 2010/11, this amount is $26.2 million and a $2.5 million contingency is maintained as well. Requests For Information 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 Finance and 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 Table of Contents Basic Financial Statements City of Scottsdale, Arizona 31 Table of Contents Statement of Net Assets June 30, 2010 (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 $ 26,442) Property Taxes and Penalties Other Local Taxes Intergovernmental Charges for Services Interest and Other Supplies Inventory $ 264,484 264 484 $ 52,791 127,943 127 943 61,280 $ 392 427 392,427 114,071 13,467 23,138 28,157 8,860 934 16 423 15,618 2,388 - 13,467 23,154 28,580 15,618 11,248 934 - 1,820 1,820 - 4,605 4,605 391,831 214,093 605,924 3,611 - 126,646 1,735 27,605 126,646 5,346 27,605 - 9,352 26,778 5,466 9,352 26,778 5,466 1,638,560 1,889,482 3,528,042 329,944 992,413 1,322,357 1,968,504 2,881,895 4,850,399 Total Noncurrent Assets 3,531,653 1,519,939 5,051,592 Total Assets 3,923,484 1,734,032 5,657,516 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 25,328 11,436 11 436 126 11,371 5,525 4,393 1,900 31,421 18,959 37,029 8,985 2,960 159,433 10,472 1 104 1,104 1,329 1,820 11,070 7,325 11,482 44,602 35,800 12,540 12 540 126 12,700 5,525 4,393 3,720 42,491 26,284 48,511 8,985 2,960 204,035 Noncurrent Liabilities A Accrued d Compensated d Ab Absences-Due in More Than One Year Deferred Revenue Bonds, Loans, and Other Payables-Due in More Than One Year Pollution Remediation Obligation Total Noncurrent Liabilities 14,246 834,823 849,069 1,894 9,352 369,172 27,605 408,023 16,140 9,352 1,203,995 27,605 1,257,092 1,008,502 452,625 1,461,127 2,729,334 941,884 3,671,218 5,466 26,778 307,279 1,281,407 22,659 39,7 39,711 31,586 396 8,684 380 26,778 394,977 4,196,389 Restricted Cash, Cash Equivalents, and Investments: Customer Advances and Deposits Other Restricted Assets Joint Venture Construction Deposits Total Current Assets Noncurrent Assets Equity in Joint Venture Deferred Charges Pollution Remediation Recoveries Restricted Cash, Cash Equivalents, and Investments: Deferred Revenue Water and Sewer System Replacement Revenue Bond Reserve p Assets Capital 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 ctivities Capital Projects Grants Special Programs Streetlight and Service District Water and Sewer System Replacement Unrestricted Total Net Assets $ 17,193 39,7 39,711 31,586 396 8,684 380 87,698 2,914,982 $ $ The notes to the financial statements are an integral part of this statement. 32 City of Scottsdale, Arizona Table of Contents Statement of Activities For the Year Ended June 30, 2010 (in thousands of dollars) Function/Programs Governmental Activities General Government Finance & Accounting Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services Information Technology Administrative Services Streetlight and Services Districts Interest on Long-term Debt Total Governmental Activities Expenses $ Business Type Activities Business-Type Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government $ Charges for Services 24,351 $ 5,848 20,676 37,143 114,530 116,155 3,717 53,596 14,876 1,917 538 39,405 432,752 Program Revenues Operating Capital Grants and Grants and Contributions Contributions 13,982 $ 2,552 6,837 12,655 5,773 289 42,088 76,178 33,274 3,120 18,889 131,461 94,199 35,027 2,879 20,269 152,374 564,213 $ 194,462 $ 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 1,026 $ 20 496 15,719 3,233 8,825 29,319 29,319 $ 47 186,880 3,352 190,279 Governmental Activities $ Business-type Activities (9,343) $ (5,848) (18,057) (36,647) 94,906 (100,267) (3,717) (35,646) (14,876) (1,917) (249) (39,405) (171,066) Total - $ - (9,343) (5,848) (18,057) (36,647) 94,906 (100,267) (3,717) (35,646) (14,876) (1,917) (249) (39,405) (171,066) 3,905 4,408 955 9,268 - 21,926 6,161 714 1,380 30,181 21,926 6,161 714 1,380 30,181 199,547 (171,066) 30,181 (140,885) 60,914 135,875 135 875 11,294 130 - 60,914 136,005 136 005 11,294 $ 17,227 30,309 9,294 1,368 6,730 10,690 283,701 112,635 2,802,347 2,914,982 $ 4,295 430 (10,690) (5,835) 24,346 1,257,061 1,281,407 $ 17,227 30,309 9,294 5,663 7,160 277,866 136,981 4,059,408 4,196,389 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 33 Table of Contents 34 Balance Sheet Governmental Funds June 30, 2010 (in thousands of dollars) General City of Scottsdale, Arizona ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Tax Audit Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Special Assessments Miscellaneous Due from Other Funds Supplies Inventory Total Assets (continued) (continued) $ $ General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds 59,083 $ 459 4,459 $ 37,066 36,451 $ 257 122,549 15,009 902 8,581 508 1,150 1,473 2,550 10,397 871 4,440 742 1,638 80 206 93,080 $ 1,688 43,213 $ 70 1 3,004 39,783 $ 167 3,299 315 232 1,230 25,284 2,872 1,897 217 173,071 Total Governmental Funds $ $ 222,542 52,791 1,139 11,880 823 3,070 1,473 2,550 10,397 871 4,440 1,230 742 25,284 2,873 1,897 4,859 80 206 349,147 Table of Contents City of Scottsdale, Arizona Balance Sheet Governmental Funds June 30, 2010 (in thousands of dollars) General Obligation Bond Debt Service General 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 Tax Audit Court Library Privilege Tax Transient Occupancy Tax Special Assessments Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities $ General CIP Construction Capital Projects Total Nonmajor Governmental Funds 8,444 751 80 5,883 6,973 Total Governmental Funds 8,222 $ 10,557 75 383 - $ 13,001 24,065 7,163 $ 23 - $ 23,829 11,331 80 18,959 31,421 945 4,440 4,270 871 1,739 430 834 4,388 862 2,960 40,976 1,215 38,281 1 3 5 1,002 8,197 158 1,897 31,721 36 55,943 2,318 4,440 4,270 871 1,739 430 1,897 31,722 837 4,393 1,900 2,960 143,397 206 380 - 4,932 - 3,000 12,261 - 206 380 17,193 3,000 73,904 30,963 117,128 173,071 26,126 25,392 102,490 30,963 205,750 349,147 Fund Balances Reserved for Inventory Streetlight and Services Districts Debt Service Miscellaneous Receivable Unreserved, Reported in General Fund - Designated Operating Reserve General Fund - Undesignated Capital Projects Funds Special Revenue Funds Total Fund Balances Total Liabilities and Fund Balances $ 35 The notes to the financial statements are an integral part of this statement. 26,126 25,392 52,104 93,080 $ 4,932 43,213 $ 28,586 31,586 39,783 $ $ Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2010 (in thousands of dollars) Fund Balances - Total Governmental Funds $ 205,750 Amounts reported for governmental activities in the statement of net assets are different because (see Note II A): Capital assets used in governmental activities are not financial resources; therefore, are not reported in the funds. 3,496,964 Bond issuance costs are not financial resources; therefore, are not reported in the funds. 3,611 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore, are not reported in the funds. (891,370) 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. 39,539 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. 60,488 Net Assets of Governmental Activities $ 2,914,982 The notes to the financial statements are an integral part of this statement. 36 City of Scottsdale, Arizona Table of Contents Statement of Revenues, Expenditures, and Changes in Fund Balances City of Scottsdale, Arizona Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) General Obligation Bond Debt Service General 37 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 Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees and Forfeitures Court Parking Photo Radar Court Enhancement Library Police Fees Special Assessments Property Rental Interest Earnings Investment 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) $ 23,251 $ 85,419 7,113 7,834 3,317 143 836 Total Nonmajor Governmental Funds General CIP Construction Capital Projects 31,620 $ - - $ - 3,483 41,024 - Total Governmental Funds $ 58,354 126,443 7,113 7,834 3,317 143 836 17,227 30,309 7,873 1,787 - - 13,342 585 - 17,227 30,309 7,873 13,342 585 1,787 6,907 3,386 2,552 1,312 - - 1,165 - 6,907 4,551 2,552 1,312 7,511 316 1,767 351 3,060 2,328 (5,165) - 960 224 3 1,067 622 765 293 1,726 245 7,514 316 1,767 1,067 351 622 765 3,353 5,014 (4,696) 31,620 3,352 82 5 90 45 4,758 7,915 4,069 1,382 2,426 1,261 667 871 161 83,072 1,038 10 289 9 2,095 13,288 438 226,601 7,915 7,421 2,420 2,518 289 1,275 2,852 14,159 644 346,051 Table of Contents 38 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) General Obligation Bond Debt Service General EXPENDITURES Current General Government Finance & Accounting Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services Information Technology Administrative Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures Excess (Deficiency) of Revenues Over Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Premium on Long Term Debt Proceeds of Long Term Debt Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ The notes to the financial statements are an integral part of this statement. Total Nonmajor Governmental Funds General CIP Construction Capital Projects Total Governmental Funds 15,627 6,059 10,700 16,937 14,155 109,546 3,654 36,400 9,469 1,859 538 - - 1,403 6,410 14,454 13,292 1,913 3 9,255 - 17,030 6,059 17,110 31,391 27,447 111,459 3,657 45,655 9,469 1,859 538 1,064 1,306 227,314 24,065 25,585 497 50,147 43,972 43,972 8,572 11,891 33,957 101,150 33,701 38,782 497 77,929 422,583 (713) (18,527) (39,214) (18,078) (76,532) 19,232 (26,837) (7,605) 13,956 (2,181) 843 12,618 21,677 (10,516) 11,161 53,201 (59,159) 50,800 44,842 108,066 (98,693) 843 50,800 61,016 (8,318) (5,909) (28,053) 26,764 (15,516) 60,422 10,841 59,639 90,364 221,266 52,104 $ 4,932 $ 31,586 $ 117,128 $ 205,750 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, 2010 (in thousands of dollars) Net Change in Fund Balances - Total Governmental Funds $ (15,516) Amounts reported for governmental activities in the statement of activities are different because (see Note 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. (42,658) Donations of capital assets are not capitalized on the governmental fund statements but are shown in the statement of activities. 179,690 Transfer of capital asset to the Internal Service Fund. (1,148) Some expenses reported in the statement of activities do not require the use of current financial resources; therefore, are not reported as expenditures in governmental funds. (3,003) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 7,796 Bond issuance costs are expended in the governmental funds when paid, 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. 240 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; however, neither i h transaction i h has any affect ff on net assets. Thi This iis the h amount b by which debt proceeds exceeded principal retirement in the current period. (17,942) Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refunding. (366) The net revenues of certain activities of internal service funds is reported with governmental activities. Changes in Net Assets of Governmental Activities 5,542 $ 112,635 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 39 Table of Contents General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Year Ended June 30, 2010 (in thousands of dollars) Budgeted Amounts Original g REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Tax 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 Recreation Fees Westworld Equestrian Facility Fees Fire Fees Police Fees Fines, Fees and Forfeitures Court P ki Parking Photo Radar Library Property Rental Interest Earnings Investment Income Intergovernmental Miscellaneous Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues $ 23,655 83,262 8,231 8,400 3,600 139 863 Actual Amounts Budgetary g y Basis Final $ 23,655 83,262 8,231 8,400 3,600 139 863 $ Budget to GAAP Differences 23,342 85,830 7,108 7,963 3,425 72 789 $ Variance Between Final Budget and Actual Amounts Budgetary g y Basis Actual Amounts GAAP Basis (91) (411) 5 (129) (108) 71 47 $ 23,251 85,419 7,113 7,834 3,317 143 836 $ (313) 2,568 (1,123) (437) (175) (67) (74) 18,048 30,308 8,000 1,680 17,855 30,309 8,000 1,680 17,275 30,309 7,948 1,787 (48) (75) - 17,227 30,309 7,873 1,787 (580) (52) 107 8,149 3,022 2,888 2,350 400 8,149 3,022 2,873 1,347 - 6,865 3,343 2,523 1,753 - 42 43 29 (441) - 6,907 3,386 2,552 1,312 - (1,284) 321 (350) 406 - 7,166 495 1,656 390 3,194 1,657 - 7,156 505 1,656 300 3,194 1,657 - 7,476 316 1,767 351 2,868 2,051 - 35 192 277 (5,165) 7,511 316 1,767 351 3,060 2,328 (5,165) 320 (189) 111 51 (326) 394 - 1,050 621 350 15,635 1,000 236,209 932 279 14 365 16,035 6,002 239,480 1,115 10 292 9 2,095 13,288 545 232,515 (77) (3) (107) (5,914) 1,038 10 289 9 2,095 13,288 438 226,601 183 10 13 (5) 1,730 (2,747) (5,457) (6,965) 15,361 5,062 9,631 18,983 17,164 116,256 4,086 38,499 10,334 3,213 732 1,790 (5,000) (12,537) 15,803 6,087 10,865 18,244 15,187 113,074 3,866 37,828 9,777 1,804 732 - 15,704 6,264 10,693 16,914 14,309 109,439 3,670 36,669 9,467 1,785 538 (44) - (77) (205) 7 23 (154) 107 (16) (269) 2 74 44 - 15,627 6,059 10,700 16,937 14,155 109,546 3,654 36,400 9,469 1,859 538 - 99 (177) 172 1,330 878 3,635 196 1,159 310 19 194 - 2,085 22,580 580 228,239 1,064 11,492 492 235,823 1,064 11,306 306 227,778 (464) 1,064 11,306 306 227,314 186 8,001 Excess (Deficiency) of Revenues Over Expenditures 7,970 3,657 4,737 (5,450) (713) 1,036 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) 18,790 (29,461) (10,671) 19,244 (24,596) (5,352) 19,232 (26,837) (7,605) - 19,232 (26,837) (7,605) (12) (2,241) (2,253) (2,701) (1,695) (2,868) (5,450) (8,318) (1,217) 35,184 42,254 42,254 18,168 60,422 - EXPENDITURES Current General Government Finance & Accounting Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services Information Technology Administrative Services Streetlight and Services Districts Inventory Leave Accrual Payments Estimated Personnel Savings from Vacant Positions Future Budget Reductions Debt Service Principal Interest and Fiscal Charges Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 32,483 $ 40,559 $ 39,386 $ 12,718 $ 52,104 $ (1,217) The notes to the financial statements are an integral part of this statement. 40 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, 2010 (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 $ The City budgets revenues on the cash basis, rather than on the modified accrual basis: Change in Receivables 749 Total Revenue Reconciling Items: 5,914 The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Claims and Compensated Absences Bad Debt Expense Inventory/Other Expenses 479 29 (44) Total Expenditure Reconciling Items: Net Increase in Fund Balance - Budget to GAAP 5,165 464 $ 5,450 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 41 Table of Contents Statement of Net Assets Proprietary Funds June 30, 2010 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Total Governmental Activities Internal Service Funds ASSETS Balance Sheet Current Assets Cash and Investments Cash with Fiscal Agent Governmental Funds Receivables June 30, Tax 2010 (in thousands of dollars) Privilege Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Restricted Cash, Cash Equivalents, and Investments: Customer Advances and Deposits ASSETS Other Restricted Assets Cash and Investments Joint Venture Construction Deposits $ 114,137 61,280 $ 5,904 - 13,808 13 315 1,855 General Cash with Fiscal Agent Receivables (net of allowance for Total Current Assets uncollectibles) Interest Noncurrent Assets Privilege Tax Equity in Joint Venture Transient Occupancy Tax Deferred Charges Property Tax Pollution Remediation Recoveries State Shared Sales Tax Restricted Cash, Cash Equivalents, and Investments: Franchise Fee Deferred Revenue Court Water andReceivable Sewer System Replacement LibraryBond Receivable Revenue Reserve Tax Audit Receivable Capital Assets User Tax Highway Land Auto Lieu Tax Water Rights Intergovernmental Water System Grants Sewer System Special Assessments Buildings and Improvements Miscellaneous Motor Vehicles Due fromand Other Funds Machinery Equipment Furniture Fixtures Supplies and Inventory Construction in Progress Total Assets 68 $ 4,605 59,083 $ 459 6,539 9,311 26,778 5,466 27,294 89,701 917,289 421,633 14,915 621 199,762 $ (375,821) Less Accumulated Depreciation $ 127,943 61,280 $ 41,942 - 16 15,618 423 342 General CIP 2,046 Construction Capital Projects 91 3 728 - 1,820 - 4,459 $ 4,605 36,451 -$ 257 214,093 42,764 37,066 9,789 902 8,581 508 1,150 1,473 2,550 41 10,397 871 4,440 7429,564 19,295 1,638 80 956 206 93,0801,782 $ 126,646 1,735 27,605 7,902 - 16 1,810 410 12 General15 129 Obligation Bond 62 Debt Service 1,752 197,765 $ - - 126,646 1,735 1,688 27,605 9,352 26,778 5,466 1,111 37,969 89,701 917,289 421,633 3,362 22,657 1,933 17,804 621 73043,213 $ 202,274 (8,918) (2,852) (387,591) 70 - - - - - 1 1,920 3,004 66,960 -768 - 6,796$ 39,783 (45,366) Total Capital Assets (net of accumulated depreciation) 1,295,394 22,679 4,284 1,322,357 31,078 Total Noncurrent Assets 1,492,935 22,720 4,284 1,519,939 31,078 Total Assets $ 1,690,700 $ 29,259 $ 14,073 $ 1,734,032 $ 73,842 (continued on next page) (continued) 42 Total Nonmajo Governmen Funds City of Scottsdale, Arizona 1 1 Table of Contents Statement of Net Assets Proprietary Funds June 30, 2010 (in thousands of dollars) Water and Sewer Utility Airport Solid Waste Governmental Activities Internal Service Funds Total LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due Within One Year Claims Payable - Due Within One Year Customer Advances and Deposits Matured Bonds Payable Matured Bond Interest Payable Bonds Payable and Other Payables - Due Within One Year $ Total Current Liabilities 9,720 847 951 1,752 11,070 7,325 11,482 $ 146 77 50 68 - $ 606 180 328 - $ 10,472 1,104 1,329 1,820 11,070 7,325 11,482 $ 1,499 231 221 5,525 - 43,147 341 1,114 44,602 7,476 1,147 9,311 369,113 27,605 83 41 9 - 664 50 - 1,894 9,352 369,172 27,605 219 5,659 - 407,176 133 714 408,023 5,878 450,323 474 1,828 452,625 13,354 914,921 22,679 4,284 941,884 31,078 26,778 5,466 - - 26,778 5,466 - Noncurrent Liabilities Accrued Compensated Absences - Due in More Than One Year Deferred Revenue Bonds Payable and Other Payables - Due in More Than One Year Pollution Remediation Obligation Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Water and Sewer System Replacement Restricted for Debt Service Unrestricted Total Net Assets $ 293,212 1,240,377 , , $ 6,106 28,785 , $ 7,961 12,245 , $ 307,279 1,281,407 , , $ 29,410 60,488 , The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 43 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2010 (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 Solid Waste Fees Airport Fees Other Services Other $ Total Operating Revenues Operating Expenses Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Total Operating Expenses Operating Income 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 Before Contributions and Transfers Capital Contributions Transfers In Transfers Out Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending $ 86,766 35,027 7,433 427 Airport $ Solid Waste 2,879 2 $ Governmental Activities Internal Service Funds Total 20,269 1 $ 86,766 35,027 7,433 20,269 2,879 430 $ 44,302 1,144 129,653 2,881 20,270 152,804 45,446 43,987 17,074 9,104 34,090 1,517 508 1,095 16,190 2,500 199 43,987 17,074 16,190 1,517 12,112 35,384 40,296 5,349 104,255 3,120 18,889 126,264 45,645 25,398 (239) 1,381 26,540 (199) 3,971 (5,197) - 130 145 - 179 - 130 4,295 (5,197) - 1,930 1,050 296 (1,226) 275 179 (772) 3,276 24,172 36 1,560 25,768 3,077 8,313 (10,228) 955 (61) (401) 9,268 (10,690) 1,148 1,353 (36) 22,257 930 1,159 24,346 5,542 1,218,120 27,855 11,086 1,257,061 54,946 1,240,377 $ 28,785 $ 12,245 $ 1,281,407 $ 60,488 The notes to the financial statements are an integral part of this statement. 44 City of Scottsdale, Arizona Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2010 (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 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 Water and Sewer Development Fee Credit Agreements Principal Payments on Capital Debt Interest Paid on Capital Debt Investment in Joint Venture & CIP Deposit Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Income Received on Investments Net Cash Provided by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ Airport 131,903 (52,329) (17,027) (299) $ 2,881 (1,030) (1,009) 2 62,248 Solid Waste $ Governmental Activities Internal Service Funds Total 20,358 (12,549) (5,814) 1 $ 155,142 (65,908) (23,850) (296) 844 1,996 65,088 4,968 (10,228) 128 (61) (401) 128 (10,690) 1,930 1,353 (36) (10,228) 67 (401) (10,562) 3,247 78,161 - - 78,161 - 3,126 94 (33,648) (5,062) (12,299) (14,912) 111 - 720 (1,061) (353) - - 3,126 814 (35,062) (5,062) (12,299) (14,912) 111 - (6,449) 360 15,571 (341) (353) 14,877 (6,089) 4,532 163 202 4,897 1,179 4,532 163 202 4,897 1,179 72,123 733 1,444 74,300 3,305 146,601 5,280 6,458 158,339 38,637 218,724 $ 6,013 7,902 $ 232,639 $ $ $ 44,305 (36,076) (4,405) 1,144 41,942 (continued) City of Scottsdale, Arizona 45 Table of Contents Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2010 (in thousands of dollars) 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 $ 114,137 61,280 43,307 $ 5,904 109 $ 7,902 - $ 127,943 61,280 43,416 $ 41,942 - Total Cash and Cash Equivalents $ 218,724 $ 6,013 $ 7,902 $ 232,639 $ 41,942 $ 25,398 $ (239) $ 1,381 $ 26,540 $ (199) Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation and Amortization Changes In Assets and Liabilities Sources (Uses) of Cash Accounts Receivable Miscellaneous Receivables Prepaid p Expenses p Supplies Inventory Accounts Payable Accrued Payroll and Benefits Claims Payable Deferred Revenue Other Liabilities Total Adjustments Net Cash Provided by Operating Activities 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 34,090 1,095 199 35,384 5,349 1,813 (727) 423 101 864 286 18 22 (50) (2) - 112 (21) 168 160 (3) 1,925 (730) 613 211 862 283 3 748 (154) (286) (101) (388) (4) 36,850 1,083 615 38,548 5,167 $ 62,248 $ 844 $ 1,996 $ 65,088 $ 4,968 $ 10,224 (160) $ - $ - $ 10,224 (160) $ 1,148 - $ 10,064 $ - $ - $ 10,064 $ 1,148 The notes to the financial statements are an integral part of this statement. 46 City of Scottsdale, Arizona Table of Contents Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2010 (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 $ 4,846 4 $ 4,846 - $ 126 4,720 - $ 4,846 4 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 47 Table of Contents Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2010 (in thousands of dollars) Private Purpose Trust Funds ADDITIONS Contributions: Private Donations $ Total Additions 6 DEDUCTIONS Scholarships 5 Total Deductions 5 Change in Net Assets 1 Net Assets - Beginning Net Assets - Ending 6 3 $ 4 The notes to the financial statements are an integral part of this statement. 48 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 confirmed by 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 confirmed by 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 and Accounting 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance and Accounting 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale Finance and Accounting 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, 2010 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 49 For the Fiscal Year Ended June 30, 2010 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) • • • • • • • 50 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. Blended City of Scottsdale Finance and Accounting 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 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. Blended City of Scottsdale Finance and Accounting 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 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. Blended City of Scottsdale Finance and Accounting 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 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 and Accounting 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 is 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 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. 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, 2010 B. Government-wide and 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. 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 31 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting; however, debt service expenditures, as well as 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. City of Scottsdale, Arizona 51 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 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 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. 52 City of Scottsdale, Arizona Table of Contents 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. D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments Notes to Financial Statements 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, solid waste fees, vehicle purchase/ maintenance 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. For the Fiscal Year Ended June 30, 2010 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 included among program revenues are reported instead as general revenues. 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. 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 receivables are shown net of an allowance for uncollectibles. City of Scottsdale, Arizona 53 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 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 after November 1 and after May 1, respectively. If a taxpayer owes $100 or less, the tax must be paid in full by November 1. 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. Property taxes levied for current operation and maintenance expenses on residential property are limited to 1.0 percent of the limited property 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 reserve and replacement account is used to report resources set aside to meet unexpected contingencies or to fund asset replacements. Assets are also restricted for enterprise funds for deposits received from water, sewer and airport customers. Additionally, the City has received a good faith deposit for the future planned sale of Planet Ranch. 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. 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. 54 City of Scottsdale, Arizona Table of Contents Sewer System....................................................................... 25 to 50 Years Buildings and Improvements............................................... 25 to 50 Years Streets and Storm Drains..............................................................30 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 Notes to Financial Statements Water System....................................................................... 10 to 75 Years For the Fiscal Year Ended June 30, 2010 Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: 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. Prior to July 1, 2009, employees who retire and have accumulated 300 or more hours of sick leave, could elect to apply the value of the sick leave toward their City medical plan premiums. Effective July 1, 2009, the City funds the value of medical leave balances in a Retiree Health Savings Account for the participant immediately upon retirement. Taxable portions for employees hired before July 1, 1982 will be retained by the City until age 65 or the account balance is exhausted. Vacation pay is calculated based on vacation taken and the medical leave conversion is based on an actuarial valuation dated January 1, 2010. The medical leave conversion and vacation pay amounts are accrued 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, 2010 in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2010 that resulted from employee resignations and retirements. 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. There is no long-term liability for compensated absences in the governmental funds. City of Scottsdale, Arizona 55 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 7. Long-term Obligations In the government-wide financial statements and the proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund 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. 8. Development Impact Fee Revenue The City has entered into several agreements whereby it will provide a development fee credit to developers for construction of certain public infrastructure improvements. The funding source for the reimbursements will come from Water and Sewer development fees, which are paid when units of the development are hooked up to the utility system. 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. 9. 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 management plans that are subject to change. 10. 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. 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. 56 City of Scottsdale, Arizona Table of Contents The City adopted the provisions of GASB Statement No. 51 Accounting and Financial Reporting for Intangible Assets. This statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. Accordingly, existing authoritative guidance related to the accounting and financial reporting for capital assets should be applied to these intangible assets. Examples of intangible assets include easements, water rights, patents, trademarks, and computer software. This Statement provides authoritative guidance on the nature of these intangible assets, determining the useful life, and amortization methods. It establishes a specified-conditions approach to recognizing intangible assets that are internally generated, which can be applied to the development cycle of computer software. The requirements of this Statement improve financial reporting by reducing inconsistencies that have developed in accounting and financial reporting for intangible assets. It fosters greater comparability among state and local government financial statements and results in a more faithful representation of the service capacity of intangible assets – and therefore the financial position of governments – and of the periodic cost associated with the usage of such service capacity in governmental financial statements. City of Scottsdale, Arizona Notes to Financial Statements 1. Governmental Accounting Standards Board (GASB) Statement No. 51 For the Fiscal Year Ended June 30, 2010 E. Implementation of New Accounting Principles 57 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents II. Reconciliation of Government-wide and Fund Financial Statements A. Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of nets assets The City’s total governmental fund balances, $205,750, differs from net assets of governmental activities, $2,914,982, reported in the statement of net assets. The difference primarily results from the longterm 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 to the Government-wide Statement of Net Assets (in thousands of dollars) Total Long-Term Assets/ Governmental Funds Liabilities (1) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Tax Audit 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 Bonds Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Tax Audit Court Library Privilege Tax Transient Occupancy Tax Special Assessments 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 58 $ $ $ 222,542 $ 52,791 - $ - 1,139 11,880 823 3,070 1,473 2,550 10,397 871 4,440 1 230 1,230 742 25,284 2,873 1,897 4,859 80 206 349,147 $ 3,496,964 3,611 3,500,575 $ 23,829 $ 11,331 80 18,959 31,421 - $ (126) 126 11,150 14,027 - 2,318 4,440 4,270 871 1,739 430 1,897 31,722 837 4,393 1,900 2,960 143,397 $ 205,750 349,147 $ (2,318) (4,440) (4,270) (871) (1,739) (430) (1,897) (23,224) (350) 866,193 851,831 2,648,744 3,500,575 $ Internal Service Funds (2) Reclassifications and Eliminations 41,942 $ - Statement of Net Assets Totals - $ - 264,484 52,791 73,842 $ (80) (80) $ 1,230 11,880 823 3,070 1,473 2,550 10,397 871 4,440 1 230 1,230 742 25,284 2,873 1,897 4,862 934 3,528,042 3,611 3,923,484 1,499 $ 231 221 219 5,525 - - $ (80) - 25,328 11,436 126 11,371 14,246 5,525 18,959 31,421 - - 5,659 13,354 (80) 8,498 487 4,393 1,900 2,960 871,852 1,008,502 60,488 73,842 $ (80) $ 2,914,982 3,923,484 91 3 728 31,078 City of Scottsdale, Arizona Table of Contents (1) When capital assets (land, buildings, equipment, etc.) that are to be used in governmental activities are purchased or constructed, the costs of those 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. Cost of capital assets Accumulated depreciation $ $ 4,930,446 (1,433,482) 3,496,964 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 @ 7/1/09 Bond issuance cost for fiscal year 2010 Amortization of bond issuance costs $ $ 3,371 497 (257) 3,611 Long-term liabilities 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, 2010 were: Contract and capital lease payables Bonds payable Deferred amount on refunding Deferred issuance premium Accrued vacation and sick leave pay Post Employment - Implied Subsidy $ $ (15,732) (839,476) 7,223 (17,136) (25,177) (1,072) (891,370) Notes to Financial Statements (in thousands of dollars) For the Fiscal Year Ended June 30, 2010 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Assets 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 library revenue Deferred court revenue Deferred tax revenue Deferred intergovernmental revenue Deferred other $ $ 1,897 871 4,270 8,927 23,224 350 39,539 $ 60,488 (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 59 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 60 B. Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities. The net change in fund balances for governmental funds, a deficit of $15,516, differs from the change in net assets for the governmental activities, $112,635, 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 Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands of dollars) Total Governmental Funds REVENUES: Taxes - Local: Property p y Transaction Privilege Transient Occupancy Tax 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 Locall TTransportation i A Assistance i Fundd Business and Liquor Licenses Charges for Current Services: Building and Related Permits Recreation Fees Westworld Equestrian Facility Fees Fire Fees Fines and Forfeitures: Court Parking Photo Radar Court Enhancement Library Police Fees Special Assessments Property Rental Interest Earnings Investment Loss Intergovernmental: Federal Grants State Grants Miscellaneous Developer p Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total $ Long-Term Revenue/ Expenses (3) 58,354 , $ 126,443 7,113 7,834 3,317 143 836 630 $ 1,889 430 - Capital Related Items (4) Internal Service Funds (5) - $ - Reclassifications and Eliminations (6) 1,930 , $ - Long-Term Debt Transactions (7) Statement of of Activities - $ - - $ - 60,914 , 128,332 7,543 7,834 3,317 143 836 17,227 30,309 7,873 13,342 585 1,787 82 - - - - 17,227 30,309 7,873 13,342 585 1,869 6,907 4,551 2,552 1,312 - - - (70) - - 6,837 4,551 2,552 1,312 7,514 316 1,767 1 067 1,067 351 622 765 3,353 5,014 (4,696) 57 (2) 2 871 (645) - - 1,050 - - - 7,571 314 1,769 1 067 1,067 1,222 622 120 3,353 6,064 (4,696) 7,915 7,421 2,420 2,518 , 289 1,275 2,852 14,159 644 346,051 4,897 8 (423) 7,796 - 296 3,276 (2,046) (2,116) - 7,915 7,421 7,317 2,518 , 289 1,275 2,860 12,113 517 355,007 (continued) City of Scottsdale, Arizona Table of Contents EXPENDITURES/EXPENSES Current: General Government Finance & Accounting Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services Information Technology Administrative Services 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 Bonds Issued Capital Contributions Long-term Capital-Related Debt Issued P i on Bonds Premium B d IIssuedd Total Net Change for the Year $ $ Capital Related Items (4) Internal Service Funds (5) Reclassifications and Eliminations (6) Statement of of Activities 17,030 $ 6,059 17,110 31,391 27,447 111,459 3,657 45,655 9,469 1,859 538 282 $ (118) 148 408 6 1,605 41 479 90 62 - 7,121 $ 158 3,404 4,940 88,102 3,702 36 7,638 5,482 4 - (82) $ (23) 14 807 (210) (152) (17) (105) (25) (8) - 33,701 38,782 497 77,929 422,583 3,003 (77,929) 42,658 199 (2,116) (33,701) 623 (497) (33,575) 39,405 432,752 9,373 50,800 843 61,016 - (1,148) 179,690 178,542 2,465 2,465 - (50,800) (843) (51,643) 10,690 179,690 190,380 135,884 $ 5,542 $ - $ (18,068) $ 112,635 (15,516) $ 4,793 $ - $ (228) (403) (815) (459) Long-Term Debt Transactions (7) (71) (140) - - $ - 24,351 5,848 20,676 37,143 114,530 116,155 3,717 53,596 14,876 1,917 538 Notes to Financial Statements Total Long-Term Governmental Revenue/ Funds Expenses (3) For the Fiscal Year Ended June 30, 2010 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands of dollars) (continued) City of Scottsdale, Arizona 61 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands of dollars) Reconciling Items Description: (3) 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 Library revenue Tax audit revenue Privilege tax revenue Transient Occupancy tax revenue Special Assessment revenue Intergovernmental revenue Other Receivable revenue $ $ 630 57 871 (85) 1,974 430 (645) 4,897 (333) 7,796 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 Accrual for long-term post employment implied subsidy $ $ 3,042 (39) 3,003 (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 p p p p , whereas net assets decrease byy the reported as depreciation expense. As a result,, fund balance decreases byy the amount of financial resources expended, amount of depreciation expense charged for the year, and the loss on disposal of capital assets. Capital expenditures Miscellaneous net capital expenditures Depreciation Expenses Loss on disposal of capital assets Difference $ Transfer of capital assets to Internal Service Fund $ 77,929 (15,065) (105,450) (72) (42,658) $ (1,148) $ 179,690 $ 5,542 $ (2,116) (2,116) - Donations of capital assets are not capitalized 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. Change in Net Assets (6) Interfund transactions between governmental activities, other than Internal Service Funds, are eliminated in the consolidation of these activities for the statement of activities. The elimination is reflected as a reduction of revenues and expenditures to eliminate the doubling up effect of these transactions within the governmental activities. Reduction in Revenues - Governmental Funds Reduction in Expenditures/Expenses - Governmental Funds (continued) 62 $ City of Scottsdale, Arizona Table of Contents Bond issuance costs for fiscal year 2010 Amortization of bond issuance costs Diff Difference $ $ 497 (257) 240 $ 33,701 $ $ (889) (756) 1,279 (366) $ (50,800) (843) (51 643) (51,643) 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 Bond proceeds are reported as financing sources in governmental funds and thus contribute to the change in fund balance. In the government-wide 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 Premium on Bonds City of Scottsdale, Arizona Notes to Financial Statements (7) 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. For the Fiscal Year Ended June 30, 2010 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands of dollars) 63 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents III. Stewardship, Compliance, and Accountability A. Budget And Budgetary Accounting The City prepared an annual budget that covered FY 2009/10. The 2009/10 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 2009/10, 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. The City discontinued the use of encumbrance accounting, as such, fund balance amounts are not reserved for purchase orders, contract or other commitments. 64 City of Scottsdale, Arizona Table of Contents The Municipal Bond Corporation Debt Service Fund exceeded its Debt Service Expenditure appropriation by $5,846. The additional expenditures incurred were funded by available fund balance. C. Deficit Fund Equity The Community Development Block Grant, Home and Grants Special Revenue Funds had a deficit balance of $153,000, $2,000 and $257,000 respectively, caused by certain grant reimbursements not being available. Revenue accruals were deferred in the current fiscal year due to the unavailability of the funds. These reimbursements due will be recognized as revenue when actually received. D. Fund Balance/Net Assets Reservations and Designations Only restrictions imposed by external sources are shown as restricted net assets on the governmentwide 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. Designations for operating reserves have been set in accordance with the City’s financial policy. Unrestricted fund balances for the City’s internal service funds have been designated in accordance with the purpose of the funds. The following are the reservations and designations of fund balance/net assets at June 30, 2010: City of Scottsdale, Arizona Notes to Financial Statements The Preserve Privilege Tax Special Revenue Fund exceeded its Special Revenue Expenditures appropriation by $2,100. Administrative costs incurred which were not included in the expenditures appropriation were funded by available fund balance. For the Fiscal Year Ended June 30, 2010 B. Excess of Expenditures over Appropriations 65 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Fund Balance Reservations and Designations (in thousands of dollars) General Fund Reserved for Inventory Reserved\Restricted for Streetlight and Service Districts Designated for Operating Reserve Total $ 206 380 26,126 26,712 Debt Service Fund Reserved for Debt Service $ 4,932 Capital Projects Fund Reserved for Miscellaneous Receivable $ 3,000 Water and Sewer p and Replacement p Restricted for Repair Restriced for Debt Service $ $ , 26,778 5,466 Major $ $ 12,261 The amounts presented below detail the City's planned use of the following Unrestricted Net Asset amounts: Water and Sewer D i t d ffor Operating Designated O ti Reserve R $ 20 20,238 238 Airport Designated for Repair and Replacement Designated for Operating Reserve $ $ 3,235 571 Solid Waste Designated for Operating Reserve $ 3,278 Fleet Management Designated for Acquisition and Maintenance of Vehicles $ 14,666 $ 7,102 7,642 14,744 Self-Insurance Designated for General Liability Claims Designated for Health Care Benefits $ 66 Nonmajor City of Scottsdale, Arizona Table of Contents 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, 2010, the carrying amount of the City’s deposits was $218,863,444, and the bank balance was $217,678,828. The $1,184,616 difference represents deposits in transit 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, 2010, 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. Notes to Financial Statements A. Cash and Investments For the Fiscal Year Ended June 30, 2010 IV. Detailed Notes on All Funds The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g. broker-dealer) 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. City of Scottsdale, Arizona 67 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Interest Rate Risk 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: Investment Maturities (in Years) (in thousands of dollars) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Guaranteed Investment Contracts Fair Value $ 50,333 256,706 28,565 Total Investments $ Less Than 1 1-2 $ 22,578 $ 27,745 128,686 * 84,255 20,411 8,154 2-3 $ 3+ 43,765 - 275 275 - - 335,879 $ 159,693 $132,411 $ 43,765 $ 10 - $ 10 * $25,063 of these bonds are callable on September 25, 2010 * $12,782 of these bonds are callable on November 11, 2010 * $10,000 of these bonds are callable on December 30, 2010 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, 2010 for each investment type: (in thousands of dollars) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Guaranteed Investment Contracts Total Investments 68 $ Total 50,333 256,706 28,565 A-1+ $ AAA - $ 246,706 28,565 Exempt from Disclosure $ 50,333 10,000 Not Rated $ - 275 $ 335,879 275 $ - $ 275,271 $ 60,333 $ 275 City of Scottsdale, Arizona Table of Contents The following is a listing by issuer of the City’s investments at June 30, 2010: (in thousands of dollars) Issuer U.S. Government Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corp. (FHLMC) Federal National Mortgage Association (FNMA) Key Corp. General Electric Capital Corp. Goldman Sachs PNC Bank SunTrust Bank Pacific Life Insurance Company Investment Type U.S. Government Securities Federal Agency Securities Federal Agency Securities Federal Agency Securities Corporate Note Corporate Note Corporate Note Corporate Note Corporate Note Guaranteed Investment Contract Total Investments Market Value $ 50,333 62,224 78,668 115,814 5,048 5,048 8,163 5,148 5,158 275 $ 335,879 Percent of Holdings 14.99% 18.53% 23.42% 34.48% 1.50% 1.50% 2.43% 1.53% 1.54% 0.08% 100.00% Notes to Financial Statements The City’s investment policy contains no limitations on the amount that can be invested in any one issuer. For the Fiscal Year Ended June 30, 2010 Concentration of Credit Risk Investments Total City cash and investments at fair value are as follows (in thousands of dollars): Cash on Hand Carrying Amount of City Deposits Investments $ 22 218,863 335,879 Total Cash and Investments $ 554,764 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 City of Scottsdale, Arizona $ 392,427 114,071 43,416 4 126 4,720 $ 554,764 69 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 70 Investment income comprises the following for the year ended June 30, 2010 (in thousands of dollars): Net Interest and Dividends Net Decrease in the Fair Value of Investments $ 9,710 (4,047) Total Net Investment Income $ 5,663 The net decrease in the fair value of investments during FY 2009/10 was $4,047,000. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. In a 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 $4,146,406 plus interest of $39,182 as a partial recovery. City of Scottsdale, Arizona Table of Contents Governmental and Governmental Activities Internal Service Funds: Governmental and Governmental Activities Internal Service Funds: Receivables Receivables Property Taxes and Penalties: Property PropertyTaxes and Penalties: Property Court Court Subtotal Property Taxes and Penalties Subtotal Property Taxes and Penalties General General Obligation Bond Obligation Bond Debt Service Debt Service General General Fund Fund $ $ 1,150 $ 1,150 $ 36,289 36,289 37,439 37,439 General CIP General CIP Construction Construction Capital Projects Capital Projects 1,688 $ 1,688- $ 1,6881,688 Nonmajor Nonmajor and Other and Other Funds Funds - $ -- $ -- Total Total Governmental and Governmental and Internal Service Funds Internal Service Funds 232 $ 232- $ 232232 3,070 3,070 36,289 36,289 39,359 39,359 Other local taxes: Other local taxes: Privilege Privilege Transient Occupancy Transient Occupancy State Shared Sales State Shared Franchise FeeSales Franchise Auto Lieu Fee Auto LieuUser Highway Highway UserLocal Taxes Subtotal Other Subtotal Other Local Taxes 13,021 13,021 508 508 1,473 1,473 2,550 2,550 742 74218,29418,294 ------- ------- 3,299 3,299 315 315--1,2301,230 4,844 4,844 16,320 16,320 823 823 1,473 1,473 2,550 2,550 742 742 1,230 1,230 23,138 23,138 Intergovernmental/Grants Intergovernmental/Grants - - 1 1 28,156 28,156 28,157 28,157 Interest and Other: Interest Interestand Other: Interest Library LibraryAssessments Special Special Assessments Miscellaneous Miscellaneous Subtotal Interest and Other Subtotal Interest and Other 902 902 1,421 1,4211,6381,638 3,961 3,961 ----- 70 70-3,0043,004 3,074 3,074 258 2581,8971,897 220 220 2,375 2,375 1,230 1,230 1,421 1,421 1,897 1,897 4,862 4,862 9,410 9,410 59,694 59,694 (26,442) (26,442) 33,252 $ 33,252 $ 1,688 1,6881,688 $ 1,688 $ Gross Receivable GrossAllowance Receivablefor Uncollectibles Less: Less: Allowance for Uncollectibles Net Total Receivables Net Total Receivables $ $ 3,075 3,0753,075 $ 3,075 $ 35,607 35,60735,607 $ 35,607 $ Notes to Financial Statements Receivables as of year end for the government’s individual major governmental funds, nonmajor governmental funds and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts are as follows (in thousand of dollars): For the Fiscal Year Ended June 30, 2010 B. Receivables 100,064 100,064 (26,442) (26,442) 73,622 73,622 Enterprise Funds: Enterprise Funds: Receivables Receivables Privilege Tax Privilegefor Taxservices Charges Charges for services Intergovernmental/Grants Intergovernmental/Grants Interest Interest Miscellaneous Miscellaneous Gross Receivable Gross Receivable Net Total Receivables Net Total Receivables City of Scottsdale, Arizona Water and Water Sewerand Sewer Utility Utility $ $ $ $ 13,80813,808 13 13 315 315 1,855 1,855 15,991 15,991 15,991 15,991 Airport Airport $ $ $ $ Total Total Enterprise Enterprise Fund Fund Solid Waste Solid Waste 16 16410410 12 12 129 129 567 567 567 567 $ $ $ $ 1,8101,8101515 62 62 1,887 1,887 1,887 1,887 $ $ $ $ 16 16 15,618 15,618 423 423 342 342 2,046 2,046 18,445 18,445 18,445 18,445 71 For the Fiscal Year Ended June 30, 2010 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 thousand of dollars): Property Tax Tax Audit Court Library Privilege Tax Transient Occupancy Tax Special Assessments Intergovernmental Other Unavailable $ 2,318 4,440 4,270 871 1,739 430 1,897 23,224 350 Total $ 39,539 Unearned $ 8,498 487 $ 8,985 C. Capital Assets Capital asset activity for the year ended June 30, 2010, was as follows (in thousands of dollars): Governmental Activities Capital Assets, not being depreciated: Land Construction In Progress Total Capital Assets, not being depreciated: $ Increases 1,380,255 $ 258,373 1,638,628 132,688 $ 82,388 215,076 Capital Assets, being depreciated: Buildings and Land Improvements Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Capital Assets, being depreciated: 459,208 2,516,968 63,216 3,622 82,330 3,125,344 Less Accumulated depreciation for: Buildings and Land Improvements Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Accumulated depreciation: Total Capital Assets, being depreciated, net: Governmental activities Capital Assets, net: 72 Beginning Balance $ Decreases Ending Balance - $ (215,144) (215,144) 1,512,943 125,617 1,638,560 110,846 129,405 4,628 4,192 249,071 (4,457) (49) (1,579) (6,085) 570,054 2,646,373 63,387 3,573 84,943 3,368,330 186,887 1,089,515 39,594 3,124 54,878 1,373,998 17,391 81,517 5,077 137 6,677 110,799 (4,394) (49) (1,506) (5,949) 204,278 1,171,032 40,277 3,212 60,049 1,478,848 1,751,346 138,272 (136) 1,889,482 3,389,974 $ 353,348 $ (215,280) $ 3,528,042 City of Scottsdale, Arizona Table of Contents 37,969 $ 89,701 160,895 288,565 - $ 45,680 45,680 Ending Balance Decreases - $ (4,301) (4,301) 37,969 89,701 202,274 329,944 Capital Assets, being depreciated: Water System Sewer System Buildings and Land Improvements Machinery and Equipment Furniture, Fixtures and Office Equipment Total Capital Assets, being depreciated: 911,050 417,352 22,300 17,825 621 1,369,148 6,239 4,281 357 22 10,899 (43) (43) 917,289 421,633 22,657 17,804 621 1,380,004 Less Accumulated depreciation for: Water System Sewer System Buildings and Land Improvements Machinery and Equipment Furniture, Fixtures and Office Equipment Total Accumulated depreciation: 228,490 109,122 9,122 4,895 621 352,250 22,921 10,614 1,122 727 35,384 (43) (43) 251,411 119,736 10,244 5,579 621 387,591 1,016,898 (24,485) - 992,413 1,305,463 $ 21,195 $ Total Capital Assets, being depreciated, net: Business-type activities capital assets, net: $ (4,301) $ 1,322,357 Notes to Financial Statements $ Increases For the Fiscal Year Ended June 30, 2010 Beginning Balance Business-type Activities Capital Assets, not being depreciated: Land Water Rights Construction In Progress Total Capital Assets, not being depreciated: During FY 2009/10, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $8,611,658. Total interest expense in this fund before capitalization was $13,810,088. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands of dollars): Governmental Activities General Government Economic Vitality Public Works & Water Resources Planning/Neighborhood/Transportation Public Safety Finance & Accounting Human Resources Community Services Information Technology Administrative Services 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 $ 110,799 City of Scottsdale, Arizona 7,117 2,128 162 82,434 3,085 158 36 6,440 3,879 11 5,349 73 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Water and Sewer System Airport Solid Waste Business-type Activities $ 34,090 1,095 199 Total Depreciation Expense - Business-type Activities $ 35,384 Construction Commitments The City has active construction projects as of June 30, 2010. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands of dollars): Construction Commitments Spent to Date Streets Traffic Fire Police Drain/Flood Control Community/Preserve Parks/Recreation Municipal Facilities Technology Libraries Airport Transit Water System Sewer System Total Construction Commitments Remaining Commitment $ 102,484 9,211 4,869 46,349 13,336 184,974 6,757 13,598 25,992 11,826 5,326 5,963 328,986 136,299 $ 17,174 1,154 4,563 32 622 4,834 1,843 2,779 11,134 421 2,261 3,361 3,789 5,194 $ 895,970 $ 59,161 The traffic commitments are being financed by the 0.2 percent 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. D. Interfund Balances and Interfund Transfers Due To and Due From Other Funds “Due to” and “Due from” balances have been recorded to address temporary cash flow needs. The composition of interfund balances as of June 30, 2010, is as follows: 74 Receivable Fund (in thousands of dollars) General $ Amount 80 Total $ 80 Payable Fund (in thousands of dollars) Nonmajor Governmental Funds $ Amount 80 Total $ 80 City of Scottsdale, Arizona Table of Contents 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) charged to Enterprise Funds. Net transfers (in thousands of dollars): Transfers Out From: Major Governmental Funds General Debt Service, General Obligation Bond Capital Projects General CIP Construction Transfers In To: $ 26,837 2,181 10,516 Major Governmental Funds General $ Capital Projects General CIP Construction 10,417 Nonmajor Governmental Funds 18,764 Internal Service Total Major Governmental Funds Major Enterprise Funds Water and Sewer Airport Solid Waste $ 39,534 Total Major Governmental Funds 10,228 Major Governmental Funds General 61 401 10,690 1,353 39,534 $ 9,603 Capital Projects General CIP Construction 625 Major Governmental Funds General 48 Capital Projects General CIP Construction 13 Major Governmental Funds General Capital Projects General CIP Construction Nonmajor Governmental Funds Total Major Enterprise Funds 9,000 Total Major Enterprise Funds Notes to Financial Statements Interfund Transfers For the Fiscal Year Ended June 30, 2010 The Community Develop Block Grant Special Revenue Fund had a deficit cash balance of $73,000, due to grants being received on a reimbursement basis. The HOME Special Revenue Fund had a deficit cash balance of $7,000, due to grants being received on a reimbursement basis. 11 32 358 10,690 (continued) City of Scottsdale, Arizona 75 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Transfers Out From: Transfers In To: Nonmajor Governmental Funds 59,159 Total Nonmajor Governmental Funds 59,159 Internal Service 36 Total Internal Service Funds Total 36 $ 109,419 Major Governmental Funds General 570 Debt Service General Obligation Bond 13,956 Capital Projects General CIP Construction 10,554 Nonmajor Governmental funds 34,079 Total Nonmajor Governmental Funds 59,159 Major Governmental Funds Capital Projects General CIP Construction 36 Total Internal Service Funds 36 Total $ 109,419 E. Leases Operating Leases The City has entered into rental agreements of retail and parking facilities. Rental payments on these facilities during FY 2009/10 were $997,979. 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; 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 $17,367. F. Bonds, Loans, and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2010. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2010. 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. 76 City of Scottsdale, Arizona Table of Contents 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 2004 MPC bonds, the 2005E MPC bonds, the 2010 MPC bonds, a portion of the 2006 MPC Refunding bonds and the 2008A MPC bonds are recorded in and paid out of the revenues of the Water and Sewer Enterprise Fund. Notes to Financial Statements 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, 2010, the City had $6,400,000 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 0.15 percent sales tax increase to be used to finance Preserve land acquisitions. At June 30, 2010, the City had $460,000,000 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 1 percent City sales tax approved by voters in May 1995 to be used specifically to finance land acquisitions for the McDowell Sonoran Preserve. For the Fiscal Year Ended June 30, 2010 General Obligation Bonds The City has pledged to repay $659,900,322 in MPC bonds issued in 2001 through 2010. The bonds are payable through 2024, 2030, and 2036. The coverage ratio (revenues to debt service) for 2010 is 6.16. The total principal and interest remaining to be paid on the bonds is $767,715,591. Principal and interest paid for the current year and total excise tax were $28,204,901 and $173,352,000, respectively. Scottsdale Preserve 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 May 1995 to be used specifically for this purpose. In May 2004, voters approved an additional 0.15 percent sales tax increase. SPA bonds are recorded as governmental activities long-term debt and are paid out of the SPA Debt Service Fund. The City has pledged to repay $117,420,000 in SPA bonds issued in 1998, 2001, and 2004. The bonds are payable through 2024, 2022, and 2016. The coverage ratio (revenues to debt service) for 2010 is 3.94. The total principal and interest remaining to be paid on the bonds is $94,237,298. Principal and interest paid for the current year and total sales tax were $6,731,751 and $26,416,000, respectively. City of Scottsdale, Arizona 77 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents 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, 2010, the funds reserved for this purpose were $26,778,447. The City has pledged to repay $54,170,000 in water and sewer revenue bonds issued in 2004 and 2008. The bonds are payable through 2016 and 2023. The coverage ratio (revenues to debt service) for 2010 is 12.18. The total principal and interest remaining to be paid on the bonds is $61,955,137. Principal and interest for the current year and total customer net revenues were $5,466,237 and $66,585,000, respectively. 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, 2010, 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, 2010, there were two separate series of special assessment improvement bonds outstanding, each series issued as serial bonds to be repaid over 10 years. Bonds issued September 1998 through December 2001 totaling $8,350,000 mature January 2009 through January 2013. The coverage ratio (revenues to debt service) for 2010 is 0.87 due to prepayment of amounts that are currently in fund balance. The total principal and interest remaining to be paid on the bonds is $2,401,875. Principal and interest paid for the current year and total collections were $878,000 and $765,000 respectively. 78 City of Scottsdale, Arizona Table of Contents Community Facilities Districts General Obligation Bonds 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. Notes to Financial Statements 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. For the Fiscal Year Ended June 30, 2010 Certificates of Participation 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 FY 2009/10. 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 were deposited in irrevocable trusts at commercial banks and invested in U.S. Government securities which, together with interest earned thereon, provided 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. There was no CFD refunded debt outstanding at June 30, 2010. City of Scottsdale, Arizona 79 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Bonds payable at June 30, 2010, are comprised of the following: Classified in Governmental Activities on the Government-wide Financial Statements: General Obligation Bonds 1989 Capital Improvement Project Serial Bonds (Series B issued 1991) due in annual installments of $740,000 to $1,175,000 through July 1, 2011; interest at 6.0 percent to 8.5 percent. Original issue amount $19,000,000. $ - 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. 5,890 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. 4,445 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. 35,555 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. 7,315 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. 41,125 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. 4,505 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. 104,800 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. 113,250 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. 16,700 2008A Various Purpose Bonds (issued May 13, 2008) due in annual installments of $3,075,000 to $9,800,000 through July 1, 2028; interest at 3.25 percent to 5 percent. Original issue amount $100,000,000. 100,000 2008B Preservation Bonds (issued May 13, 2008) due in annual installments of $325,000 to $1,250,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $20,000,000. 19,175 2010 Various Purpose Bonds (issued April 7, 2010) due in annual installments of $950,000 to $4,800,000 through July 1, 2030; interest at 2 percent to 4 percent. Original issue amount of $50,800,000. 50,800 Total General Obligation Bonds Outstanding 80 Bonds Outstanding (in thousands of dollars) $ 578,190 City of Scottsdale, Arizona Table of Contents 1989 Capital Improvement Project Serial Bonds (issued April 6, 1998) due in annual Municipal Property Corporation Bonds 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. 2004A Municipal Property Corporation Excise Tax Revenue Bonds (issued September 15, Original issue amount $20,500,000. 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. On November 29, 2006, $30,975,000 due 2017 and 2020 2001 Refunding (issued July issue 18, 2001) due$40,760,000. in annual installments of $70,000 to through 2034 wereBonds refunded. Original amount $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 2005 Municipal Property Corporation Excise Tax Revenue Bonds (issued June 15, 2005) due $51,155,000. 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. 2002 Various Purpose Bonds (issued May 16, 2002) due in annual installments of $1,740,000 to $5,000,000 through July Corporation 1, 2024; interest at 4Tax percent to 5 Bonds percent.(issued On June 15, 2004, 2005D Municipal Property Excise Revenue December 1, $3,000,000 due 2010 through 2011 were defeased, and on March 29, 2005 an additional 2005) due in annual installments of $200,000 to $3,625,000 through July 1, 2035; interest at $42,665,000 through and 2021 2024 were due refunded. Original2030 issue 3.25 percent due to 52012 percent. On 2019 November 29, through 2006, $25,925,000 2017 through amount $68,000,000. were refunded. Original issue amount $46,500,000. $ - 5,890 4,445 $ 8,865 35,555 22,842 7,315 19,700 2002 Refunding (issued SeptemberExcise 26, 2002) in annualRefunding installments of $1,625,000 2006 Municipal Bonds Property Corporation TaxdueRevenue Bonds (issued to $8,795,000 July 2019;installments interest at 2ofpercent to 5topercent. On through April 15,July 2004, November 29, through 2006) due in 1, annual $1,105,000 $2,730,000 1, $1,510,000 due 2010 were defeased. Original issue amount $72,000,000. 2034; interest at 5 percent. Original issue amount $55,450,000. 41,125 55,450 2003 Refunding (issued September 24, 2003) in annual installments of $45,00029,to 2006A MunicipalBonds Property Corporation Excise Tax due Revenue Bonds (issued November $5,515,000 through July 1, 2013; interest at 2 percent to 4.5 percent. Original amount 2006) due in annual installments of $240,000 to $625,000 through July 1, 2031; issue interest at 4 $16,265,000. percent to 5 percent. Original issue amount $10,000,000. 4,505 8,855 2004 Various Purpose Bonds (issued MayExcise 13, 2004) in annual installments of $1,600,000 2006B Municipal Property Corporation Tax due Revenue Bonds (issued November 29, to $30,300,000 through July 1, 2025; interest at 3 percent to 5 percent. Original amount 2006) due in annual installments of $950,000 to $2,475,000 through July 1, 2031;issue interest at 4 $113,400,000. percent to 5 percent. Original issue amount $32,500,000. 104,800 32,500 2005 Refunding Bonds (issued March 29, 2005) due in annual installments of $2,715,000 to Total MPC Bonds Outstanding $11,075,000 through July 1, 2024; interest at 3.85 percent to 5 percent. Original issue amount $74,630,000. Scottsdale Preserve Authority Bonds 2005A Various Preserve Purpose Authority Bonds (issued 1, 2005) installments of of 1998 Scottsdale ExciseDecember Tax Revenue Bondsdue due in in annual annual installments $2,500,000 to to $6,585,000 $10,750,000beginning through July 2024; through interest atJuly 3.51,percent to 5 percent. Original $1,015,000 July 1, 1, 1999, 2024; interest at 6.0 percent issue $125,000,000. to 4.75amount percent. On March 30, 2004, $22,770,000 due 2009 through 2016 were refunded. Original issue amount $77,000,000. 2005B Preservation Bonds (issued December 1, 2005) due in annual installments of $775,000 to $1,575,000 JulyExcise 1, 2024; at 3.5 percent Bonds to 5 percent. Original 2001 Scottsdale Preservethrough Authority Taxinterest Revenue Refunding issued July 18, issue amount $20,000,000. 2001, due in annual installments of $60,000 to $1,465,000 beginning July 1, 2002, through $ 113,250 $ City of Scottsdale, Arizona 36,725 16,700 13,475 100,000 17,670 $ 2010 Various Purpose Bonds (issued April 7, 2010) due in annual installments of $950,000 to $4,800,000 through July 1, 2030; interest at 2 percent to 4 percent. Original issue amount of $50,800,000. Total General Obligation Bonds Outstanding 148,212 74,630 July 1, 2022; interest at 4.375 percent to 5.25 percent. Original issue amount $17,495,000. 2008A Various Purpose Bonds (issued May 13, 2008) due in annual installments of $3,075,000 to $9,800,000 through July 1, 2028; interest atRefunding 3.25 percent to 5issued percent. Original 2004 Scottsdale Preserve Authority Excise Tax Revenue Bonds March 30, issue amount $100,000,000. 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. 2008B Preservation Bonds (issued May 13, 2008) due in annual installments of $325,000 to $1,250,000 through July 1, Authority 2034; interest Total Scottsdale Preserve Bondsat 3 percent to 5 percent. Original issue amount $20,000,000. Notes to Financial Statements 1989 Capital Project Serial2002 Bonds (Series B issued 1991)2002 dueRefunding in annual Portions of theImprovement 2001 Refunding Bonds, Various Purpose Bonds, installments of $740,000 to $1,175,000 July 1, 2011; at 6.0 percent to 8.5 Bonds, 2004 Various Purpose Bonds and through 2005 Refunding Bondsinterest of $28,715,000, $5,755,000, percent. Original issue amount $19,000,000. respectively, are paid from the .2 percent $8,100,000, $55,900,000 and $66,090,000, Preservation Sales Tax. The 2005B Preservation Bonds and the 2008B Preservation Bonds 1997 Refundingand Bonds (issued September 3, 1997) due in annual $50,000 to of $17,575,000 $19,675,000, respectively, are paid from the installments .15 percent of Preservation $3,510,000 Sales Tax. through July 1, 2014, interest at 4.45 percent to 5.5 percent. Original issue amount $19,900,000. For the Fiscal Year Ended June 30, 2010 General Obligation Bonds Bonds Outstanding (in thousands of dollars) 67,870 19,175 50,800 $ 578,190 81 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents General Obligation Bonds Special Assessment Bonds 1989 Capital Improvement Project Serial Bonds (Series B issued 1991) due in annual installments of $740,000 to $1,175,000 through July 1, 2011; interest at 6.0 percent to 8.5 percent. Original issue amount $19,000,000. 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 1997 Refunding Bonds (issued September 3, 1997) due in annual installments of $50,000 to $750,000; interest at 4.5 percent to 4.625 percent. Total original issue amount $8,350,000. $3,510,000 through July 1, 2014, interest at 4.45 percent to 5.5 percent. Original issue amount $19,900,000. Certificates of Participation 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 2005 Certificates of Participation issued January 26, 2005, due in annual installments of percent. On September 26, 2002, $8,180,000 due 2009 through 2015 were refunded. $223,832 to $450,965 beginning January 1, 2006, through July 1, 2015. Original issue Original issue amount $20,500,000. amount $7,650,000. 2001 Refunding Bonds (issued July 18, 2001) due in annual installments of $70,000 to Community Facilities Districts General Obligation Bonds $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 1998 DC Ranch Community Facilities District General Obligation Bonds due in annual $51,155,000. installments of $155,000 to $385,000 beginning July 15, 2005 through July 15, 2023; interest at 4.75 percent to 5.5 percent. Original issue amount $4,750,000. 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, 1999 Via Linda Road Community Facilities District General Obligation Bonds due in annual $3,000,000 due 2010 through 2011 were defeased, and on March 29, 2005 an additional installments of $95,000 to $255,000 beginning July 15, 2004 through July 15, 2023; interest at $42,665,000 due 2012 through 2019 and 2021 through 2024 were refunded. Original issue 5.0 percent to 5.75 percent. Original issue amount $3,225,000. amount $68,000,000. Bonds Outstanding (in thousands of dollars) $ $ $ 3,710 2,455 7,315 41,125 13,265 4,505 2,500 104,800 3,005 74,630 10,080 113,250 2005B PreservationCommercial Bonds (issued December 1, 2005) due General in annualObligation installments of 2007 Waterfront Community Facilities District Bonds $775,000 to $1,575,000 through 1, 2024;installments interest at of 3.5 $25,000 percent to to $300,000 5 percent.beginning Original (issued December 11, 2007) dueJuly in annual issue July amount 15, 2009$20,000,000. through July 15, 2032. Interest at 4.85 percent to 6.05 percent. Original issue 16,700 3,745 $ 38,760 100,000 $ 839,476 19,175 2010 Various Purpose Bonds (issued April 7, 2010) due in annual installments of $950,000 to $4,800,000 through July 1, 2030; interest at 2 percent to 4 percent. Original issue amount of $50,800,000. 82 4,445 4,194 35,555 $ 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 1999 DC Ranch Community Facilities District General Obligation Bonds (issued November $16,265,000. 1, 1999) due in annual installments of $85,000 to $260,000 beginning July 15, 2005 through July 15, 2011. Interest at 5.45 percent to 6.50 percent. Original issue amount $3,085,000. 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 2002 Scottsdale Mountain Community Facilities District General Obligation Refunding $113,400,000. 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 2005 Refunding Bonds (issued March 29, 2005) due in annual installments of $2,715,000 to amount $5,375,000. $11,075,000 through July 1, 2024; interest at 3.85 percent to 5 percent. Original issue amount $74,630,000. 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 2005A Purpose (issued 1, 2005) due in Original annual installments of throughVarious July 15, 2027.Bonds Interest at 3December percent to 5 percent. issue amount $2,500,000 to $10,750,000 through July 1, 2024; interest at 3.5 percent to 5 percent. Original $12,165,000. issue amount $125,000,000. Total General Obligation Bonds Outstanding 2,250 5,890 1999 McDowell Mountain Ranch Community Facilities District General Obligation 2002 Refunding Bonds (issued September 26, 2002) due in annual installments of $1,625,000 Refunding Bonds due in annual installments of $320,000 to $1,455,000 beginning July 15, to $8,795,000 through July 1, 2019; interest at 2 percent to 5 percent. On April 15, 2004, 1999 through July 15, 2022; interest at 4.0 percent to 6.0 percent. Original issue amount $1,510,000 due 2010 were defeased. Original issue amount $72,000,000. $20,245,000. amount $3,805,000. 2008A Various Purpose Bonds (issued May 13, 2008) due in annual installments of $3,075,000 to $9,800,000 through July 1,General 2028; interest at 3.25 percent to 5 percent. Original Total Community Facilities Districts Obligation Bonds Outstanding issue amount $100,000,000. Total Bonds Payable Recorded in Governmental Activities 2008B Preservation Bonds (issued May 13, 2008) due in annual installments of $325,000 to $1,250,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $20,000,000. - 50,800 $ 578,190 City of Scottsdale, Arizona Table of Contents Water and Sewer Revenue Bonds 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. 2008 Water and Sewer Revenue Refunding Bonds (Series 2008 issued February 6, 2008) due in annual installments of $190,000 to $4,375,000 through July 1, 2023; interest at 3.25 percent to 5.25 percent. Original issue amount $35,290,000. Total Water and Sewer Revenue Bonds Outstanding $ 11,975 33,255 Bonds Outstanding $ 45,230 (in thousands of dollars) Municipal Property Corporation Bonds 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. These bonds are recorded and paid out of the Water and Sewer Enterprise Fund. On November 29, 2006, $44,835,000 due 2015 through 2024 were refunded. Original issue amount $75,000,000. $ 13,440 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. On November 29, 2006 $67,455,000 due 2015 through 2030 were refunded. Original issue amount $88,360,000. 16,330 2006 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued November 29, 2006) due in annual installments of $3,600,000 to $10,140,000 through July 1, 2030; interest at 5 percent. Original issue amount $110,510,000. 110,510 2008A Municipal Property Corporation Excise Tax Revenue Bonds (issued May 13, 2008) due in annual installments of $1,800,000 to $7,250,000 through July 1, 2032; interest at 4 percent to 5 percent. Original issue amount $105,875,000. 101,500 2010 Municipal Property Corporation Excise Tax Revenue Bonds (issued April 7, 2010) due in annual installments of $180,000 to $7,800,000 through July 1, 2036; interest at 3 percent to 5 percent. Original issue amount $75,000,000. 75,000 Total Municipal Property Corporation Bonds Outstanding Total Bonds Payable Recorded in Business-type Activities Total Long-term Bonds Payable City of Scottsdale, Arizona $ 316,780 $ 362,010 $ 1,201,486 Notes to Financial Statements Bonds Outstanding (in thousands of dollars) For the Fiscal Year Ended June 30, 2010 Classified in Business-type Activities on the Government-wide Financial Statements: 83 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Statutory Debt Limitation 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, 2010 (in thousands of dollars): General Obligation Bonds Issued to Provide Water, Sewer, Light, 20% Constitutional Limit $ 1,681,200 General Obligation Bonds Issued for All Other Purposes 6% Constitutional Limit $ 504,360 Less General Obligation 20% Bonds Outstanding Less General Obligation 6% Bonds Outstanding Available 20% Limitation Borrowing Capacity (499,945) $ 1,181,255 Available 6% Limitation Borrowing Capacity (78,245) $ 426,115 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, 2010. Advance Refundings and Defeasances 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 table reflects refunded debt outstanding at June 30, 2010, net of any amounts to be paid or retired by the trustee on July 1, 2010. 84 City of Scottsdale, Arizona Table of Contents 42,665 44,835 30,975 25,925 67,455 $ 211,855 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, 2010. Notes to Financial Statements 2002 General Obligation Bonds 2004 MPC Excise Tax Revenue Bonds 2004A MPC Excise Tax Revenue Bonds 2005D MPC Excise Tax Revenue Bonds 2005E MPC Excise Tax Revenue Bonds For the Fiscal Year Ended June 30, 2010 Refunded in Prior Years (in thousands of dollars) 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. $ 2,795 Contract payable for the maintenance of a federal patent; due in three year installments beginning January 1, 2001 through January 1, 2011; 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. 5,525 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. 4,796 Contract payable for the undergrounding of 69kv power lines; due in annual installments beginning January 1999 through January 2010; interest at 10.0 percent. 13 Contract payable for the purchase of a portion of 2,685 acres of land for the McDowell Sonoran Preserve; due in 15 annual installments beginning July 1, 1999 through July 1, 2013; interest from 3.75 percent to 6.0 percent. 2,600 Total Contracts Payable Recorded in Governmental Activities City of Scottsdale, Arizona $ 15,732 85 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Changes in Long-Term Liabilities The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the year ended June 30, 2010 (in thousands of dollars). Governmental Activities: Bonds payable: Governmental Activities: General Obligation Bonds Bonds payable: Municipal Property Corporation Bonds General Obligation Scottsdale Preserve Bonds Authority Bonds Municipal Property Corporation Bonds Special Assessments Bonds Scottsdale Authority Bonds CertificatesPreserve of Participation Special Assessments Community FacilitiesBonds Districts General Certificates of Participation Obligation Bonds Community Facilities Districts General Add Deferred Issuance Premiums Obligation Less DeferredBonds Amounts on Refunding Add Deferred Total Bonds Issuance Payable Premiums Less Deferred Amounts on Refunding Contracts Payable Total Bonds Payable Risk Management Claims Contracts Payable Compensated Absences Risk Management Post Employment Claims Benefit - Implied Subsidy Compensated Absences Governmental Activity Long-term Liabilities Post Employment Benefit - Implied Subsidy Governmental Activity Long-term Liabilities Beginning Balance Beginning Balance Additional Obligations, Additional Interest Obligations, Accretion Interest and Net Accretion Increases and Net Increases $ $ $ $ $ 551,455 149,216 551,455 71,235 149,216 3,000 71,235 4,954 3,000 4,954 40,665 17,572 40,665 (8,112) 17,572 829,985 (8,112) 16,828 829,985 11,530 16,828 22,553 11,530 1,157 22,553 882,053 1,157 882,053 $ $ $ 50,800 756 50,800756--- 843 -843 52,399 -52,399 24,292 13,39224,29213,392 90,083 90,083 Current Maturities, Current Retirements, Maturities, and Net Retirements, Decreases and Net Decreases $ $ $ $ (24,065) (1,760) (24,065) (3,365) (1,760) (750) (3,365) (760) (750) (760) (1,905) (1,279) (1,905) 889 (1,279) (32,995) 889 (1,096) (32,995) (24,680) (1,096) (10,328) (24,680) (43) (10,328) (69,142) (43) (69,142) Ending Balance Ending Balance $ $ 578,190 148,212 578,190 67,870 148,212 2,250 67,870 4,194 2,250 4,194 38,760 17,136 38,760 (7,223) 17,136 849,389 (7,223) 15,732 849,389 11,142 15,732 25,617 11,142 1,114 25,617 $ 902,994 1,114 $ 902,994 Amounts Due Within Amounts One Year Due Within One Year $ $ $ $ 27,335 1,513 27,335 3,470 1,513 750 3,470 785 750 785 2,015 2,01535,868 1,161 35,868 5,525 1,161 11,371 5,52511,371 53,925 53,925 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, 2010, $439,723 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 $125,563 in the governmental funds and $0 in the Internal Service funds. Business-type Activities: Bonds Payable: Business-type Activities: Water and Sewer Revenue Bonds Bonds Payable: Municipal Property Corporation Bonds Water and Sewer Revenue Bonds Add Deferred Issuance Premiums Municipal Property Corporation Bonds Less Deferred Amounts on Refunding Add Deferred Issuance Premiums Total Bonds Payable Less Deferred Amounts on Refunding Capital Lease Total Bonds Payable Compensated Absences Capital Lease Post Employment Benefit - Implied Subsidy Compensated Absences Business-type Activity Long-term Liabilities Post Employment Benefit - Implied Subsidy Business-type Activity Long-term Liabilities 86 Beginning Balance Beginning Balance Additional Obligations, Additional Interest Obligations, Accretion Interest and Net Accretion Increases and Net Increases $ $ $ $ $ 48,345 249,735 48,345 21,532 249,735 (5,592) 21,532 314,020 (5,592) 53 314,020 2,797 53 185 2,797 317,055 185 317,055 $ $ $ 75,000 3,532 75,000 3,532 78,532 78,532 1,575 1,575 80,107 80,107 Current Maturities, Current Retirements, Maturities, and Net Retirements, Decreases and Net Decreases $ $ $ $ (3,115) (7,955) (3,115) (1,502) (7,955) 486 (1,502) (12,086) 486 (46) (12,086) (1,149) (46) (4) (1,149) (13,285) (4) (13,285) Ending Balance Ending Balance $ 45,230 316,780 $ 45,230 23,562 316,780 (5,106) 23,562 380,466 (5,106) 7 380,466 3,223 7 181 3,223 $ 383,877 181 $ 383,877 Amounts Due Within Amounts One Year Due Within One Year $ $ $ $ 3,220 8,255 3,220 8,255 11,475 7 11,475 1,329 7 1,329 12,811 12,811 City of Scottsdale, Arizona Table of Contents Governmental Activities (in thousands of dollars) General Obligation Bonds Issued To Provide Water, Sewer, Light Parks, and Open Spaces 20% Limitation Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 Total $ $ Principal 23,340 22,780 23,700 22,995 19,185 136,735 192,960 53,550 4,700 $ 499,945 $ Interest 22,239 21,185 20,096 19,008 17,932 74,964 39,374 7,146 540 $ General Obligation Bonds Issued For All Other Purposes 6% Limitation Total 45,579 43,965 43,796 42,003 37,117 211,699 232,334 60,696 5,240 222,484 $ 722,429 $ $ Municipal Property Corporation Bonds Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 $ Capital Appreciation ** Total Principal 1,513 3,091 3,135 3,745 3,710 36,676 28,533 35,835 28,535 $ 3,439 $ 148,212 $ Interest 6,100 6,229 5,938 6,653 6,487 33,464 19,770 11,868 3,579 $ Principal 3,995 4,500 5,500 10,000 11,975 42,275 - $ 78,245 $ Interest 3,606 3,445 3,221 2,946 2,446 4,220 - $ Total General Obligation Bonds Total 7,601 7,945 8,721 12,946 14,421 46,495 - 19,884 $ 98,129 $ $ Scottsdale Preserve Authority Excise Tax Revenue Bonds Total 7,613 9,320 9,073 10,398 10,197 70,140 48,303 47,703 32,114 (3,439) $ 244,861 $ - - 96,649 $ Principal 3,470 3,625 3,790 3,965 4,165 24,400 24,455 - $ 67,870 $ Interest 3,229 3,061 2,884 2,697 2,502 9,166 2,828 - $ - $ 578,190 $ Interest 25,845 $ 24,630 23,317 21,954 20,378 79,184 39,374 7,146 540 Total 53,180 51,910 52,517 54,949 51,538 258,194 232,334 60,696 5,240 242,368 $ 820,558 Special Assessment Bonds Total 6,699 6,686 6,674 6,662 6,667 33,566 27,283 - $ - 26,367 $ Principal 27,335 27,280 29,200 32,995 31,160 179,010 192,960 53,550 4,700 Notes to Financial Statements The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2010. Deferred issuance costs and deferred amounts on refunding are not included. For the Fiscal Year Ended June 30, 2010 Debt Service Requirements to Maturity 94,237 $ Principal Interest 750 $ 84 $ 750 51 750 17 - - 2,250 $ 152 $ Total 834 801 767 2,402 ** For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Community Facilities Districts General Obligation Bonds Certificates of Participation Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 Total $ $ Principal Interest 785 $ 132 $ 811 105 838 79 866 51 894 22 4,194 $ 389 $ Total 917 916 917 917 916 - $ 4,583 $ Principal Interest 2,015 $ 1,966 $ 2,105 1,874 2,230 1,776 2,335 1,671 2,460 1,558 12,965 5,890 10,150 2,605 3,915 607 585 54 38,760 $ 18,001 $ Contracts Payable Total 3,981 3,979 4,006 4,006 4,018 18,855 12,755 4,522 639 56,761 $ $ Principal Interest 1,161 $ 273 $ 1,201 227 1,263 179 370 129 389 124 2,259 529 2,888 352 3,482 127 2,719 3 15,732 $ 1,943 $ Total 1,434 1,428 1,442 499 513 2,788 3,240 3,609 2,722 17,675 (continued) City of Scottsdale, Arizona 87 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Governmental Activities (concluded) (in thousands of dollars) Total Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 Capital Appreciation Total Principal 37,029 38,863 41,206 44,276 42,779 255,310 258,986 96,782 36,539 Interest 37,629 36,177 34,190 33,155 31,071 128,233 64,929 19,748 4,176 3,439 855,209 $ $ Total 74,658 75,040 75,396 77,431 73,850 383,543 323,915 116,530 40,715 (3,439) 385,869 $ 1,241,078 Business-type Activities (in thousands of dollars) Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036-2039 Total Fiscal Year 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036-2039 Total 88 Water and Sewer Revenue Bonds $ $ Principal Interest 3,220 $ 2,199 $ 3,380 2,056 3,115 1,891 3,240 1,738 2,940 1,599 16,885 5,911 , , 12,450 1,331 45,230 $ 16,725 $ Municipal Property Corporation Bonds Total 5,419 5,436 5,006 4,978 4,539 22,796 , 13,781 61,955 $ $ Principal Interest 8,255 $ 16,085 $ 8,750 14,912 9,220 14,478 9,760 14,024 10,240 13,540 63,270 59,305 , , 77,990 41,918 77,450 23,776 44,045 7,646 7,800 390 316,780 $ Capital Lease $ $ Principal 7 $ 7 $ Interest - $ - $ 206,074 $ Total 24,340 23,662 23,698 23,784 23,780 122,575 , 119,908 101,226 51,691 8,190 522,854 Total Total 7 - $ 7 $ Principal Interest 11,482 $ 18,284 $ 12,130 16,968 12,335 16,369 13,000 15,762 13,180 15,139 80,155 65,216 90,440 43,249 77,450 23,776 44,045 7,646 7,800 390 362,017 $ 222,799 $ Total 29,766 29,098 28,704 28,762 28,319 145,371 133,689 101,226 51,691 8,190 584,816 City of Scottsdale, Arizona Table of Contents The City is exposed to various risks of loss related to public, property, and aviation premises liability, selfinsured 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 $325,000 of health benefits claims for an individual in a fiscal year and the first $750,000 of workers compensation. Coverage in excess of these respective amounts is provided through the purchase of commercial insurance. As for claim expenditures, settlements for each of the past seven 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. At June 30, 2010, the general liability claims payable totaled $9,600,340 and the self-insured benefits claims payable totaled $1,542,000. The City began to administer all self-insured health and dental plans in January of 2004. Notes to Financial Statements A. Risk Management For the Fiscal Year Ended June 30, 2010 V. Other Information Years Ended June 30 2010 (in thousands of dollars) 2009 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 11,530 24,292 (24,680) $ 10,519 22,031 (21,020) Claims l Payable, bl June 30 $ 11,142 $ 11,530 B. Contingent Liabilities The City is a party to several lawsuits incidental to its normal operations. Of those lawsuits, management, with the concurrence of the City Attorney, is of the opinion that, collectively, estimated potential losses ranging from $15,000 up to $75,000 are probable, and $15,000 up to $7,000,000 are reasonably possible. Reasonably possible is defined that the chance of the loss occurring is more than remote but less than probable. The City is self-insured for the first $2,000,000 of public liability, coverage in excess of these amounts is provided through the purchase of commercial insurance. For more information on the City’s self-insurance, please see the Note V.A. on page 89. City of Scottsdale, Arizona 89 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents C. Commitments and Subsequent Events On July 11, 2006, the City agreed to the sale of Planet Ranch, including all related water rights, farm infrastructure and equipment to Phelps Dodge Corporation. Phelps Dodge Corporation has since been acquired by Freeport McMoRan Copper and Gold, Inc. (Freeport). Planet Ranch 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: • 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 portion of Planet Ranch water rights to serve Feeport’s Bagdad mining property, • Arizona Department of Water Resources approval of sever and transfer and change of use of Horseshoe Dam water credits to the City of Scottsdale water service area, • Completion of assignment agreement for Horseshoe Dam water credits between Freeport, the City and Salt River Project, and • Completion of a Lease Agreement between Freeport and the Bureau of Reclamation, and a Donation Agreement between Freeport and the Arizona Game and Fish Department, thus insuring use of Planet Ranch property for habitat restoration purposes. 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 on 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 percent in the first year and dropping by 0.5 percent per year. The reimbursement of the costs listed above, will be accomplished by paying Lund quarterly payments equal to 67 percent 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. 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 10-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 $3,349,255 for the year ended June 30, 2010. Contractual payments due in FY 2010/11 are budgeted for $4,206,735. 90 City of Scottsdale, Arizona Table of Contents The City of Scottsdale is analyzing the issuing of Preserve Authority Excise Tax Revenue Refunding Bonds Series 2010. The approximate issue amount is $35,565,000 to refund $36,725,000 of Preserve Series 1998 Bonds with a call date of July 2021. These bonds will have the same structure for principal payments to be from July 2017 through July 2024 as the current Preserve Series 1998 Bonds have. The City of Scottsdale entered into a lease agreement, Series 2010, (Public Safety Communications Project), on August 24, 2010 to finance the purchase of Public Safety equipment. The total amount of the lease is $20,000,000 and the first principal payment is July 2012 with a coupon rate of 2.970 percent. Notes to Financial Statements 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, 2010 is $61,114,738. For the Fiscal Year Ended June 30, 2010 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 10-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 $5,252,070 for the year ended June 30, 2010. Contractual payments due in FY 2010/11 are budgeted for $4,995,833. 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, 2009, (the latest audited information available from SROG), the City’s net investment in SROG was $124,288,000. SROG’s net cash operating expenses for the year ended June 30, 2009, were $38,334,627, of which the City’s share was $3,298,038, or 8.6 percent. For the year ended June 30, 2010, the City paid $2,738,373 for SROG capital contributions, and $6,320,531 for SROG operating expenses, including adjustments to the operating and replacement reserves. The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009 for the multi-city Sub-Regional 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. City of Scottsdale, Arizona 91 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents E. Pollution Remediation In the proprietary funds financial statements, a long-term pollution remediation obligation is recognized for the remaining remediation period. In 1981, groundwater contamination was discovered when elevated levels of trichloroethylene (TCE) and other volatile organic chemicals were detected in two City wells. The City immediately shut down the affected wells. Following an investigation by the Environmental Protection Agency (EPA), the Indian Bend Wash Site was placed on the federal Superfund list in 1983. The Superfund law was enacted in order to provide funding and regulatory authority for the study and cleanup of contaminated sites. The EPA directs the cleanup of the North Indian Bend Wash (NIBW) Site that encompasses groundwater contamination plumes in Scottsdale. Following its investigation, the EPA identified three companies, Motorola, Inc., Siemens Corporation, and SmithKline Beecham Corporation, as the primary parties potentially responsible for causing the contamination and directed the companies to pay the costs associated with the cleanup. In 1991, EPA, the State of Arizona, the City, Salt River Project and these three participating companies entered into a Consent Decree in order to begin the containment and remediation of the contaminated groundwater plume and provide Scottsdale citizens with a potable water source. The companies agreed to pay for the construction and operation of the Central Groundwater Treatment Facility (CGTF), an air stripping plant that removes contaminants from the groundwater. As the CGTF operator and drinking water provider, the City ensures the water produced by the plant meets all federal and state water quality standards before water is delivered into the City’s distribution system. The measurement of the City’s pollution remediation obligation liability includes all remediation work that the City expects to perform; including work expected to be performed for the participating companies. In order to estimate the liability, six projected cash flows, based on the prior six years of historical costs and weighted equally, were used to calculate an average annual cost. This average cost was then projected over the remaining remediation period of 41 years; remediation began in 2001 and is estimated to be required for approximately 50 years. Improvements in technology and changes in laws or regulations did not impact the average annual cost. The liability is revalued annually. FY 2009/10 outlays for operating and monitoring the CGTF were $570,233. The total liability is expected to be fully recovered by the participating companies and therefore a corresponding Pollution Remediation Recoveries receivable has been accrued. F. 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. 92 City of Scottsdale, Arizona Table of Contents Arizona State Retirement System Plan Description All benefitted 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. Notes to Financial Statements All benefitted 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. For the Fiscal Year Ended June 30, 2010 G. Retirement and Pension Plans Funding Policy 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, 2010, 2009, and 2008, were 9.40 percent (9.0 percent retirement and .40 percent long-term disability), 9.45 percent (8.95 percent retirement and .50 percent long-term disability), and 9.60 percent (9.10 percent retirement and .50 percent long-term disability), respectively, for both employers and employees. The City’s contributions to the System for the years ending June 30, 2010, 2009, and 2008 were $9,859,954, $10,860,822, and $10,731,440, respectively, equal to the required contributions for each year. 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 233 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. The report may be obtained by writing to Public Safety Personnel Retirement System, 3010 E. Camelback Road, Suite 200, Phoenix, AZ 85016 or by calling (602) 255-5575. City of Scottsdale, Arizona 93 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Funding Policy The System for both police and fire is funded through a member contribution of 7.65 percent 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 contribution rate for police for the fiscal year ended June 30, 2010 was 19.64 percent of annual covered payroll. Contribution rates for police were 20.46 percent and 15.16 percent in 2009 and 2008, respectively. The City’s contribution rate for fire for the fiscal year ended June 30, 2010 was 8.68 percent of annual covered payroll. The City’s contribution rate for fire was 9.41 percent and 8.24 percent in 2009 and 2008, respectively. Annual Pension Cost For 2010, the City’s annual pension costs of $6,295,211 for police and $1,528,963 for fire were equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2009 actuarial valuation using the projected unit credit cost method. Three-Year Trend Information for PSPRS (Police) (in thousands of dollars) Fiscal Year Ending 2007 2008 2009 Annual Pension Cost (APC) $ 3,468 4,855 7,237 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation - Three-Year Trend Information for PSPRS (Fire) (in thousands of dollars) Fiscal Year Ending 2007 2008 2009 Annual Pension Cost (APC) $ 1,870 1,497 1,817 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation - Actuarial Methods and Assumptions The actuarial assumptions for both police and fire include (a) a rate of return on the investment of present and future assets of 8.50 percent per year compounded annually, (b) projected salary increases of 5.50 percent per year compounded annually, attributable to inflation and other across-the-board factors, and (c) additional projected salary increases ranging from 0 percent to 3.00 percent per year, attributable to seniority/merit. Included in (b) is an inflation component of 5.50 percent. The maximum amount of post retirement benefits is 4 percent of the average normal benefit. The actuarial value of PSPRS assets was determined using techniques that smooth the market value of assets over time. PSPRS’ unfunded accrued liability is being amortized as a level percent of projected payroll over a closed period of 30 years, 27 years remaining as of June 30, 2009 (20 year open period for any excess of valuation assets over actuarial accrued liability). 94 City of Scottsdale, Arizona Table of Contents Public Safety Personnel Retirement System (Police) Funded Status (in thousands of dollars) Actuarial Accrued Liability Retired members and survivors Former members with vested benefits Active members DROP members Total June 30, 2009 $ Valuation Assets 72,295 541 75,292 16,652 164,780 120,870 Unfunded Actuarial Accrued Liability 43,910 Stabilization Reserve Notes to Financial Statements The funded status of each plan (Police and Fire) as of June 30, 2009, the most recent actuarial valuation dates, is as follows: For the Fiscal Year Ended June 30, 2010 Funded Status - Net Unfunded Actuarial Liability $ 43,910 Public Safety Personnel Retirement System (Fire) Funded Status (in thousands of dollars) Actuarial Accrued Liability Retired members and survivors Former members with vested benefits Active members DROP members Total June 30, 2009 $ 40 17,331 17,371 Valuation Assets 21,436 Unfunded Actuarial Accrued Liability (4,065) Stabilization Reserve 2,801 Net Unfunded Actuarial Liability City of Scottsdale, Arizona $ (1,264) 95 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Elected Officials’ Retirement Plan Plan Description The City’s Mayor and Council participate in the Elected Officials’ Retirement Plan (EORP), a multipleemployer 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. The report may be obtained by writing to Elected Officials’ Retirement Plan, 3010 E. Camelback Road, Suite 200, Phoenix, Arizona 85016 or by calling (602) 255-5575. Funding Policy Covered employees are required by state statute to contribute an amount equal to 7.00 percent of gross salary. Incorporated city or town employers are required to contribute an amount sufficient to meet both the normal cost of a level-cost 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, 2010, 2009, and 2008, were 26.25 percent, 28 percent, and 20.21 percent, respectively. The City’s contributions to EORP for the years ending June 30, 2010, 2009, and 2008, were $37,800, $40,902, and $29,103, respectively, equal to the required contributions for each year. H. Other Postemployment Benefits In addition to the pension benefits described in the previous section (G) 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 100 percent cash value at current rate of pay. Employees hired before July 1, 1982 can elect to receive cash equal to 50 percent of the first 520 hours of unused medical leave plus 25 percent of all hours in excess of 520. 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. Effective July 1, 2009, the City funds the value of the medical leave balances in a Retiree Health Savings account for the participant immediately upon retirement. The taxable portion of the accounts for participants hired before July 1, 1982 will be retained by the City and used to pay participant health premiums. The taxable portion of the medical leave conversion program retained by the City included nineteen participants added and ten removed during FY 2009/10 for a total number of participants of 146 at June 30, 2010. The actual liability for retirees, as of June 30, 2010, for medical conversion was $950,580. The projected liability for active employees, as of June 30, 2010, was $15,137,959. Of this liability, $102,968 was considered current and reflected in the governmental fund financial statements. The remaining $15,034,991 was considered payable within one year or greater and was considered non-current and 96 City of Scottsdale, Arizona Table of Contents The cost of postemployment healthcare benefits, from an accrual accounting perspective, similar to the cost of pension benefits, should be associated with the periods in which the cost occurs, rather than in the future year when it will be paid. In early implementing the requirements of GASB Statement No. 45 during the fiscal year ended June 30, 2007, the City recognized the cost of postemployment healthcare in the year the employee services are received, reports the accumulated liability from prior years, and provides information useful in assessing potential demands on the City’s future cash flows. Recognition of the liability accumulated from prior years will be amortized over 30 years, the first period began with the fiscal year ending June 30, 2007. Plan Description The City provides postemployment medical care (OPEB) for retired employees through a single-employer defined benefit medical plan. The plan provides medical benefits for eligible retirees, their spouses and dependents though the City’s group health insurance plans, which covers both active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Employee Benefit Coordination Team and approved by the Scottsdale City Council. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. Notes to Financial Statements I. Postemployment Benefits Other Than Pensions For the Fiscal Year Ended June 30, 2010 included in the proprietary and government-wide financial statements. Significant actuarial assumptions of the January 1, 2010 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 percent to 5 percent based on years of service, d) traditional unit credit cost method based on participant data as of January 1, 2010. Benefits Provided The City provides postemployment medical care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the state retirement plans for public employees and be covered under the City’s medical plan during their active status. Retirees can enroll in a City plan up to 60 days after they retire, after that their eligibility for this benefit ceases. Effective July 1, 2009 this benefit will only apply to employees hired before July 1, 2009 and for employees who retire before July 1, 2012. All medical care benefits are provided through the City’s self-insured health plan. The benefit levels are the same as those afforded to active employees. Upon a retiree reaching 65 years of age, the retiree and related dependents are no longer eligible for City coverage. As of June 30, 2010, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Terminated Employees Eligible for Benefits, But Not Yet Enrolled Active Employees Total Participating Employers City of Scottsdale, Arizona 276 2,370 2,646 1 97 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Funding Policy The plan premium rates are determined annually in collaboration with an outside employee benefits actuarial and consulting firm, and approved by the Scottsdale City Council. City code requires the City Council to authorize the contribution rates for employee health benefits. The retiree’s contribution is 100 percent of the actuarially determined blended premium rate. The City makes no contribution to the retirees’ premiums other than allowing them to participate through the City’s pooled benefits. By providing retirees with access to the City’s healthcare plans based on the same rates it charges to active employees, the City is in effect providing a subsidy to retirees. This implied subsidy exists because on average retiree health care costs are higher than active employee healthcare costs. By the City not contributing anything toward this plan in advance, the City employs a pay-as-you-go method through paying the higher rate for active employees each year. For fiscal year ending June 30, 2010, retirees contributed $964,000 and the City contributed $227,000 (implied subsidy). Annual OPEB costs and Net OPEB Obligation The City’s annual other postemployment benefit (OPEB) cost for each plan is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The City’s annual OPEB cost for the current year and the related information for each plan are as follows at June 30, 2010 (dollar amounts in thousands): Annual Required Contribution $ Interest on Net OPEB Obligation 179 54 Adjusted to Annual Required Contribution (53) Annual OPEB Cost 180 Contributions Made (227) Change in Net OPEB Obligation (47) Net OPEB Obligation - Beginning of year Net OPEB Obligation - End of year $ 1,342 1,295 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2010 were as follows (dollar amounts in thousands): Fiscal Year Ended 2010 2009 2008 98 Annual OPEB Cost 180 208 881 Employer Contributions 227 191 163 Percentage of OPEB Cost Contributed 126.1% 91.8% 18.5% Net OPEB Obligation 1,295 1,342 1,325 City of Scottsdale, Arizona Table of Contents Actuarial Valuation June 30 2008 2009 2010 (1) Employer Contributions $ 163 191 227 (2) Annual (3) Required Percent Contribution Contributed (ARC) (1)/(2) $ 880 18.5% 208 91.8% 180 126.1% Funded Status The funded status of the plan as of June 30, 2010 was as follows (dollar amounts in thousands): Actuarial Accrued Liability Actuarial Value of Plan Assets Unfunded actuarial accrued liability $ $ Funded ratio Covered payroll Unfunded actuarial accrued liability as a percentage of covered payroll 3,602 3,602 Notes to Financial Statements (in thousands of dollars) For the Fiscal Year Ended June 30, 2010 City of Scottsdale, Arizona Other Post-Employment Benefit Plan Schedule of Employer Contribution 0% $ 48,285 7.5% Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. City of Scottsdale, Arizona 99 For the Fiscal Year Ended June 30, 2010 Notes to Financial Statements Table of Contents Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant method and assumptions used for this fiscal year valuation were as follows: Actuarial Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method June 30, 2010 Projected Unit Credit Closed 26 N/A Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Healthcare Inflation Rate 4%* 3-5%+ 9% initial rate, 5% ultimate rate * Investment rate of return based on City's own investments. + Projected salary increases based on City's past salary increases. Medical Reimbursements The federal government may provide the City subsidies per the Medicare Part D Prescription Drug Subsidy Program for providing healthcare for Medicare eligible employees. Any current and future year subsidies are recorded as revenue in the year received and is not recognized as a reduction to the actuarial accrued liability. 100 City of Scottsdale, Arizona Table of Contents Required Supplementary Information Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Pension Actuarial Valuation June 30 2007 2008 2009 (in thousands of dollars) (2) Projected Unit Credit Cost (1) Actuarial (3) (4) (5) Actuarial Accrued Percent Unfunded Annual Value of Liability Funded AAL Covered Assets (AAL) (1)/(2) (2) - (1) Payroll $ 104,800 $ 149,605 70.0% $ 44,805 $ 28,232 111,692 153,785 72.6% 42,092 33,143 120,870 160,131 75.5% 39,261 33,650 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 158.7% 127.0% 116.7% Required Supplementary Information The following schedules of funding progress, presented as required supplementary information (RSI), present multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits: For the Fiscal Year Ended June 30, 2010 Funding Progress Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Pension (in thousands of dollars) Actuarial Valuation June 30 2007 2008 2009 (2) Projected Unit Credit Cost (1) Actuarial Actuarial Accrued Value of Liability Assets (AAL) $ 11,565 $ 10,360 15,509 12,207 21,436 16,998 City of Scottsdale, Arizona (3) Percent Funded (1)/(2) 111.6% 127.1% 126.1% (4) (5) Unfunded Annual AAL Covered (2) - (1) Payroll $ 1,205 $ 17,327 (3,302) 18,162 (4,438) 18,850 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 7.0% 0.0% 0.0% 101 Required Supplementary Information For the Fiscal Year Ended June 30, 2010 Table of Contents Required Supplementary Information Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Health Insurance (in thousands of dollars) (2) Projected Unit (6) Credit Unfunded Cost AAL as a (1) Actuarial (3) (4) (5) Percentage Actuarial Actuarial Accrued Percent Unfunded Annual of Covered Valuation Value of Liability Funded AAL Covered Payroll June 30 Assets (AAL) (1)/(2) (2) - (1) Payroll (4)/(5) 2007 $ - $ 5,384 0.0% $ 5,384 $ 28,232 19.1% 2008 5,361 0.0% 5,361 33,143 16.2% 2009 4,649 0.0% 4,649 33,650 13.8% Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Health Insurance (in thousands of dollars) (2) Projected Unit (6) Credit Unfunded Cost AAL as a (1) Actuarial (3) (4) (5) Percentage Actuarial Actuarial Accrued Percent Unfunded Annual of Covered Valuation Value of Liability Funded AAL Covered Payroll June 30 Assets (AAL) (1)/(2) (2) - (1) Payroll (4)/(5) 2007 $ - $ 218 0.0% $ 218 $ 17,327 1.3% 2008 206 0.0% 206 18,162 1.1% 2009 373 0.0% 373 18,850 2.0% 102 City of Scottsdale, Arizona Table of Contents (in thousands of dollars) Actuarial Valuation June 30 2008 2009 2010 (1) Actuarial Value of Assets $ - (2) Projected Unit Actuarial Accrued Liability (AAL) $ 6,822 3,664 3,602 (3) Percent Funded (1)/(2) 0.0% 0.0% 0.0% (4) (5) Unfunded Annual AAL Covered (2) - (1) Payroll $ 6,822 $ 143,209 3,664 52,675 3,602 48,285 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 4.8% 7.0% 7.5% Required Supplementary Information City of Scottsdale, Arizona Other Post-Employment Benefit Plan Schedule of Funding Progress For the Fiscal Year Ended June 30, 2010 Required Supplementary Information City of Scottsdale, Arizona Other Post-Employment Benefit Plan Schedule of Employer Contribution (in thousands of dollars) Actuarial Valuation June 30 2008 2009 2010 City of Scottsdale, Arizona (1) Employer Contributions $ 163 191 227 (2) Annual (3) Required Percent Contribution Contributed (ARC) (1)/(2) $ 880 18.5% 208 91.8% 180 126.1% 103 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 percent) and 2004 (.15 percent). Revenues are transferred to Capital Projects Funds for land purchases 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 on application to granting agencies by the City and on 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. 104 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 Commercial 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% 2004approved 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. General Obligation Bond Fund Accounts for proceeds of the sale of 1989, 1992 and 2000 voter-approved general obligation bonds that are used for authorized capital improvements. City of Scottsdale, Arizona 105 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2010 (in thousands of dollars) Special Revenue Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy 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 Bonds Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Intergovernmental Guaranty and Other Deposits Total Liabilities $ $ $ Fund Balances Reserved for Debt Service Unreserved Total Fund Balances Total Liabilities and Fund Balances 106 $ Debt Service Funds 34,283 - 90 3,299 315 1,230 6,042 1,986 214 47,459 4,060 727 80 - $ $ $ Total Nonmajor Governmental Funds Capital Projects Funds 10,230 14,812 232 19,242 1,897 3 46,416 2 5,883 6,973 $ $ $ 78,036 197 77 886 79,196 4,382 24 - $ $ $ 122,549 15,009 167 3,299 315 232 1,230 25,284 2,872 1,897 217 173,071 8,444 751 80 5,883 6,973 11,593 36 16,496 158 1,897 19,242 34,155 886 5,292 158 1,897 31,721 36 55,943 30,963 12,261 - 73,904 12,261 104,867 30,963 12,261 73,904 117,128 47,459 $ 46,416 $ 79,196 $ 173,071 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, 2010 (in thousands of dollars) REVENUES Taxes - Local Property Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Charges for Current Services Recreation Fees Fines, Fees and Forfeitures Court Court Enhancement Police Fees Special Assessments Property Rental Interest Earnings Investment Income Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Contributions and Donations Reimbursements From Outside Sources Indirect Costs Other Total Revenues Special Revenue Funds $ Debt Service Funds 41,024 $ Total Nonmajor Governmental Funds Capital Projects Funds 3,483 - $ - $ 3,483 41,024 13,342 585 - - 13,342 585 1,165 - - 1,165 3 1,067 622 148 767 56 765 145 15 - 944 189 3 1,067 622 765 293 1,726 245 7,793 520 1,289 20 1,261 437 871 161 71,131 93 4,501 122 3,549 2,406 230 7,440 7,915 4,069 1,382 2,426 1,261 667 871 161 83,072 (continued) City of Scottsdale, Arizona 107 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) Special Revenue Funds EXPENDITURES Current General Government Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community 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 Proceeds of Long-Term Debt Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 108 $ Debt Service Funds Total Nonmajor Governmental Funds Capital Projects Funds 1,252 6,410 14,454 13,292 1,913 3 9,255 151 - - 1,403 6,410 14,454 13,292 1,913 3 9,255 785 167 47,531 7,787 11,724 19,662 33,957 33,957 8,572 11,891 33,957 101,150 23,600 (15,161) (26,517) (18,078) 12,937 (36,284) (23,347) 14,027 14,027 26,237 (22,875) 50,800 54,162 53,201 (59,159) 50,800 44,842 253 (1,134) 27,645 26,764 30,710 13,395 46,259 90,364 30,963 $ 12,261 $ 73,904 $ 117,128 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2010 (in thousands of dollars) Highway User Fuel Tax ASSETS Cash and Investments Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupany Tax Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Deferred Revenue Intergovernmental Guaranty and Other Deposits Total Liabilities HOME Grants Preserve Privilege Tax Section 8 Special Programs Total $ 3,580 $ - $ - $ 467 $ 818 $ 17,610 $ 11,808 $ 1,177 1,230 1,265 7,252 $ 152 152 $ 8 8 $ 561 41 1,069 $ 818 $ 69 2,122 19,801 $ 21 315 6,042 173 18,359 2,948 $ 597 - 72 $ 7 73 - $ 1 7 521 $ 11 - 2 $ 8 - 324 $ - 193 103 - $ Fund Balances Unreserved Total Fund Balances Total Liabilities and Fund Balances Community Development Block Grant $ $ 34,283 $ 90 3,299 315 1,230 6,042 1,986 214 47,459 $ 4,060 727 80 1,265 36 4,846 153 305 2 10 794 1,326 10 324 9,379 9,675 11,593 36 16,496 2,406 2,406 (153) (153) (2) (2) (257) (257) 808 808 19,477 19,477 8,684 8,684 30,963 30,963 7,252 $ 152 $ 8 $ 818 $ 19,801 $ 1,069 $ 18,359 $ 47,459 109 Table of Contents 110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) Highway User Fuel Tax REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Charges for Current Services Recreation Fees Fines, Fees and Forfeitures Court Court Enhancement Fee Police Fees Property Rental Interest Earnings Investment Income Intergovernmental Federal Grants State Grants Miscellaneous Developer Contributions Contributions and Donations Reimbursements From Outside Sources Indirect Costs Other Total Revenues $ City of Scottsdale, Arizona EXPENDITURES Current General Government Economic Vitality Public Works & Water Resources Planning, Neighborhood & Transportation Public Safety Human Resources Community Services 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) Section 8 Special Programs - $ - $ 13,342 585 - - - - - - 13,342 585 - - - - - - 1,165 1,165 - - - - 1 - 619 56 3 1,067 622 148 147 - 3 1,067 622 148 767 56 336 776 370 871 56 30,944 794 794 21 21 681 184 121 745 1,731 6,297 2 22 6,322 27,091 392 20 516 65 83 4,228 7,793 520 1,289 20 1,261 437 871 161 71,131 13,958 13,195 - 947 23 5 509 496 56 889 291 6,039 2 - 1,245 5,901 41 1,024 3 1,955 1,252 6,410 14,454 13,292 1,913 3 9,255 27,153 947 23 2,246 6,039 785 167 954 10,169 785 167 47,531 3,791 (153) (2) (515) 283 26,137 (5,941) 23,600 - 15 15 2,837 (26,621) (23,784) 6,467 (2,193) 4,274 12,937 (36,284) (23,347) (2) (500) 283 2,353 (1,667) 253 - 243 525 17,124 10,351 30,710 808 $ 19,477 $ 2,406 $ (153) (153) $ (2) $ (257) $ - 26,416 $ Total - $ 2,467 $ Grants - $ (61) Fund Balances - Beginning HOME Preserve Privilege Tax 14,608 $ 3,618 (7,470) (3,852) Net Change in Fund Balances Fund Balances - Ending Community Development Block Grant - 8,684 $ $ 41,024 30,963 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, 2010 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway g y User Tax Local Transportation Assistance Fund Intergovernmental Federal Grants State Grants Miscellaneous Reimbursement From Outside Sources Indirect Costs Other Total Revenues $ EXPENDITURES Current Planning, Neighborhood & Transportation Public Works & Water Resources Leave Accrual Payments E i Estimated dP Personnell S Savings i ffrom Vacant V Positions P ii Total Expenditures Excess (Deficiency) of Revenues Over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and Uses 14,345 $ 14,345 $ Budget to GAAP Differences 14,626 (18) $ 14,608 $ 281 14,187 , 1,057 13,385 , 585 ((43)) - 13,342 , 585 ((802)) (472) 1,568 312 820 120 32,409 6,168 312 820 120 37,009 336 776 370 871 56 31,005 (61) 336 776 370 871 56 30,944 (6,168) 336 464 370 51 (64) (6,004) 13,631 17,649 86 (270) 31,096 13,540 17,643 31,183 13,215 13,970 27,185 (20) (12) (32) 13,195 13,958 27,153 325 3,673 3,998 1,313 5,826 3,820 (29) 3,791 (2,006) 5,929 (7,242) (1,313) 1,264 (7,242) (5,978) 3,618 (7,470) (3,852) 3,618 (7,470) (3,852) 2,354 (228) 2,126 - (152) (32) - 32 32 Fund Balance - Beginning $ - $ (120) $ - Explanation of Differences: The City budgets revenues on the cash basis, rather than on the modified accrual basis: Change in Receivables $ g p The Cityy budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Compensated Absences Net Decrease in Fund Balance - Budget to GAAP $ Actual Amounts GAAP Basis 14,187 , 1,057 Net Change in Fund Balance Fund Balance - Ending Actual Amounts Budgetary Basis Final Variance Between Final Budget and Actual Amounts Budgetary Basis (61) (32) $ (29) (29) (61) 2,435 $ 2,406 120 2,467 $ 2,406 $ 120 111 Table of Contents 112 Preserve Privilege Tax – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Year Ended June 30, 2010 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Transaction Privilege I t Interest t Earnings E i Investment Income 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 g in Fund Balance Net Change Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 26,110 302 26,412 26,412 2 - 2 - 2 (2) 952 954 785 167 952 785 167 954 - 785 167 954 (2) 25,458 25,460 26,332 (31,311) (31,311) (31,811) (31,811) 2,837 (26,621) (23,784) ((5,853)) ((6,351)) 2,548 20,138 14,738 14,738 $ 26,110 302 8,387 $ City of Scottsdale, Arizona $ 17,286 $ 56 Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Change in Fair Value of Investments The City budgets revenues on the cash basis, rather than on the modified accrual basis: Change in Receivables Net Decrease in Fund Balance - Budget to GAAP (251) $ (195) $ Actual Amounts GAAP Basis 26,532 754 27,286 14,285 $ Budget to GAAP Differences Variance Between Final Budget and Actual Amounts Budgetary Basis (116) (135) 56 (195) $ (195) ((195)) 2,386 2,191 $ 26,137 - $ 26,416 619 56 27,091 $ 422 452 874 872 2,837 (26,621) (23,784) 2,837 5,190 8,027 2,353 8,899 17,124 - 19,477 $ 8,899 Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2010 (in thousands of dollars) Municipal Property Corporation ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Intergovernmental Special Assessments Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Matured Bonds Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Special Assessments Intergovernmental Total Liabilities $ 19,242 - McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Scottsdale Preserve Authority Total - $ 651 - $ 1,416 - $ 1,604 - $ 642 321 $ 573 5,048 13 1 665 $ 24 1,440 $ 137 2 1,743 $ 12 654 $ 46 940 $ 5,048 - $ 73 345 - $ 336 800 - $ 433 600 - $ 73 125 - $ 110 35 1,683 3,365 $ 33,349 $ $ - $ 3,124 1,703 2 $ 51 - $ Scottsdale Mountain CFD 629 $ 51 1,897 2,577 $ Fund Balances Reserved for Debt Service Total Fund Balances Total Liabilities and Fund Balances 9,280 $ 4,827 Special Assessments $ $ $ 10,230 14,812 232 19,242 1,897 3 46,416 2 5,883 6,973 19,242 24,069 1,897 1,950 7 425 12 1,148 87 1,120 7 205 45 190 5,048 158 1,897 19,242 34,155 9,280 9,280 627 627 240 240 292 292 623 623 449 449 750 750 - 12,261 12,261 654 $ 940 $ 33,349 $ 2,577 $ 665 $ 1,440 $ 1,743 $ 5,048 $ 46,416 113 Table of Contents 114 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) Municipal Property Corporation REVENUES Taxes - Local Property Special Assessments Property Rental Interest Earnings Intergovernmental Miscellaneous 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 Total Other Financing Sources and (Uses) Net change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Scottsdale Mountain CFD Special Assessments McDowell Mountain CFD Via Linda Road CFD DC Ranch CFD Waterfront Commercial CFD Scottsdale Preserve Authority Total - $ 145 - - $ 765 - 382 $ - 1,187 $ - 1,445 $ - 178 $ 15 291 $ - - $ 93 238 765 382 1,187 1,445 193 291 - 93 4,501 - 3 9 10 70 9 50 - 151 1,760 6,150 7,910 757 121 881 345 151 505 800 673 1,483 600 881 1,551 125 150 284 35 224 309 3,365 3,374 6,739 7,787 11,724 19,662 (7,672) (116) (123) (296) (106) (91) (18) (6,739) (15,161) 7,288 7,288 - - - - - - 6,739 6,739 14,027 14,027 (384) (116) (123) (296) (106) (91) (18) - (1,134) 9,664 743 363 588 729 540 768 - 13,395 9,280 $ 627 $ 240 $ 292 $ 623 $ 449 $ 750 $ - $ 3,483 765 145 15 12,261 City of Scottsdale, Arizona 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, 2010 (in thousands of dollars) Budgeted Amounts Original REVENUES Taxes - Local Property 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 Transfers Out Premium on Long Term Debt Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 31,796 31,796 Actual Amounts Budgetary Basis Final $ 31,796 31,796 $ 31,624 31,624 Budget to GAAP Differences $ (4) (4) Variance Between Final Budget and Actual Amounts Budgetary Basis Actual Amounts GAAP Basis $ 31,620 31,620 $ (172) (172) 24,853 26,419 51,272 24,853 26,419 51,272 24,065 25,585 497 50,147 - 24,065 25,585 497 50,147 788 834 (497) 1,125 (19,476) (19,476) (18,523) (4) (18,527) 953 13,961 13,961 13,961 13,961 13,956 (2,181) 843 12,618 - 13,956 (2,181) 843 12,618 843 838 (5,515) (5,515) (5,905) (4) (5,909) 1,791 9,098 10,364 10,364 3,583 $ 4,849 $ 4,459 $ (4) Explanation of Differences: The City budgets for certain revenues on the cash basis, rather than on the modified accrual basis. Change in Receivables 477 $ 473 (5) 10,841 $ 4,932 $ 1,791 115 Table of Contents 116 Municipal Property Corporation Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Year Ended June 30, 2010 (in thousands of dollars) Budgeted Amounts Original REVENUES Property Rental 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 Total Other Financing Sources and Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final 145 612 757 $ 145 612 757 $ Budget to GAAP Differences 145 93 238 $ - Variance Between Final Budget and Actual Amounts Budgetary Basis Actual Amounts GAAP Basis $ 145 93 238 $ (519) (519) 1,703 6,201 7,904 1,703 6,201 7,904 1,760 6,150 7,910 - 1,760 6,150 7,910 (57) 51 (6) (7,147) (7,147) (7,672) - (7,672) (525) 7,295 7,295 7,295 7,295 7,288 7,288 - 7,288 7,288 (7) (7) 148 148 (384) - (384) (532) 9,009 9,664 9,664 - 9,664 - 9,157 $ 9,812 $ 9,280 $ - $ 9,280 $ (532) City of Scottsdale, Arizona 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, 2010 (in thousands of dollars) 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 888 888 $ 888 888 $ Budget to GAAP Differences 749 749 $ 16 16 Variance Between Final Budget and Actual Amounts Budgetary Basis Actual Amounts GAAP Basis $ 765 765 $ (139) (139) - - 3 - 3 (3) 746 131 877 758 137 895 757 121 881 - 757 121 881 1 16 14 11 (7) (132) 16 (116) (125) 941 759 759 (16) 743 - 952 $ 752 $ 627 $ (16) Explanation of Differences: The City budgets for certain revenues on the cash basis, rather than on the modified accrual basis. Change in Receivables $ - $ 627 $ (125) 117 Table of Contents 118 Scottsdale Preserve Authority Bond Debt Service Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Year Ended June 30, 2010 (in thousands of dollars) 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 Fund Balance - Ending $ Actual Amounts Budgetary Basis Final - $ - $ Budget to GAAP Differences - $ - Variance Between Final Budget and Actual Amounts Budgetary Basis Actual Amounts GAAP Basis $ - $ - 3,365 3,374 6,739 3,365 3,374 6,739 3,365 3,374 6,739 - 3,365 3,374 6,739 - (6,739) (6,739) (6,739) - (6,739) - 6,740 6,740 6,740 6,740 6,739 6,739 - 6,739 6,739 (1) (1) 1 1 - - - (1) - - - - - - 1 $ 1 $ - $ - $ - $ (1) City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2010 (in thousands of dollars) General Obligation Bond ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Grants Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Deferred Revenue Intergovernmental Total Liabilities $ $ $ Fund Balances Unreserved Total Fund Balances Total Liabilities and Fund Balances $ Preserve Privilege Tax Transportation Privilege Tax McDowell Mountain CFD DC Ranch CFD Total 55,827 $ - 1,333 $ - 20,876 $ - - $ 110 87 $ 52 55,879 $ 1,333 $ 25 886 21,787 $ 110 $ 87 - $ - 152 $ 2 4,230 $ 22 - $ - - - 154 886 5,138 - - 886 5,292 55,879 55,879 1,179 1,179 16,649 16,649 110 110 87 87 73,904 73,904 55,879 $ 1,333 $ 21,787 $ 110 $ 87 $ $ $ 78,036 197 77 886 79,196 4,382 24 79,196 119 Table of Contents 120 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Year Ended June 30, 2010 (in thousands of dollars) General Obligation Bond REVENUES Interest Earnings Investment Income Intergovernmental Federal Grants State Grants Developer Contributions Reimbursements from Outside Sources Total Revenues $ 608 $ 97 - EXPENDITURES Capital Improvements Total Expenditures Excess (Deficiency) of Revenues Over Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds of Long-Term Debt Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Preserve Privilege Tax $ Transportation Privilege Tax - $ - 336 $ 92 McDowell Mountain CFD DC Ranch CFD Total - $ - - $ 944 189 705 - 122 3,549 2,406 230 6,735 - - 122 3,549 2,406 230 7,440 - 4,447 4,447 29,510 29,510 - - 33,957 33,957 705 (4,447) (22,775) - - (26,517) (22,171) 50,800 28,629 5,925 (656) 5,269 20,312 (48) 20,264 - - 26,237 (22,875) 50,800 54,162 29,334 822 (2,511) - - 27,645 26,545 357 19,160 110 87 46,259 16,649 $ 110 $ 87 55,879 $ 1,179 $ $ 73,904 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 121 Table of Contents Combining Statement of Net Assets Internal Service Funds June 30, 2010 (in thousands of dollars) Fleet Management SelfInsurance Total ASSETS Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Interest Miscellaneous Supplies Inventory $ 15,727 $ 26,215 $ 41,942 33 728 58 3 - 91 3 728 16,488 26,276 42,764 1,920 66,960 768 6,796 (45,366) - 1,920 66,960 768 6,796 (45,366) Total Capital Assets (net of accumulated depreciation) 31,078 - 31,078 Total Noncurrent Assets 31,078 - 31,078 47,566 26,276 73,842 1,259 152 185 - 240 79 36 5,525 1,499 231 221 5,525 1,596 5,880 7,476 190 36 226 29 6 5,617 5,652 219 42 5,617 5,878 1,822 11,532 13,354 31,078 14,666 14,744 31,078 29,410 Total Current Assets Noncurrent Assets Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Less Accumulated Depreciation Total Assets LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due Within One Year Claims Payable - Due Within One Year Total Current Liabilities Noncurrent Liabilities Accrued Compensated Absences - Due in More Than One Year Other Post Employment Benefit - Implied Subsidy Other Payables - 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 122 $ 45,744 $ 14,744 $ 60,488 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, 2010 (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 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 T l Operating O i Expenses E Operating Income (Loss) Non-Operating Revenues Property Tax Investment Income Gain on Sale of Capital Assets Total Non-Operating Non Operating Revenues Income 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 $ 13,222 90 SelfInsurance $ 25,791 4,190 1,099 1,054 Total $ 39,013 4,190 1,099 1,144 13,312 32,134 45,446 10,212 5,349 3,251 3,221 21,847 1,765 - 10,212 3,251 3,221 21,847 1,765 5,349 15 15,561 561 30 30,084 084 45 45,645 645 (2,249) 2,050 (199) 415 296 1,930 635 - 1,930 1,050 296 711 2,565 3,276 (1,538) 4,615 3,077 1,148 1,353 (27) 936 (9) 4,606 1,148 1,353 (36) 5,542 44,808 10,138 54,946 45,744 $ 14,744 $ 60,488 123 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2010 (in thousands of dollars) Fleet Management Cash Flows from Operating Activities Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Other Operating $ Net Cash Provided (Used) by Operating Activities $ Total 31,083 (29,536) (1,058) 1,054 $ 44,305 (36,076) (4,405) 1,144 3,425 1,543 4,968 Cash Flows from Non-Capital Non Capital Financing Activities Property Tax Transfers In Transfers Out 1,353 (27) 1,930 (9) 1,930 1,353 (36) Net Cash Used by Non-Capital Financing Activities 1,326 1,921 3,247 Cash Flows from Capital and Related Financing Activities Acquisition and Construction off P Property and dE Equipment i Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities (6 (6,449) 449) 360 - (6,449) (6 449) 360 (6,089) - (6,089) Cash Flows from Investing Activities Income Received on Investments 476 Net Increase in Cash and Cash Equivalents q Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year 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 Prepaid Expenses Supplies Inventory Accounts Payable Accrued Payroll and Benefits O Other h P Payables bl Claims Payable Net Cash Provided (Used) by Operating Activities Supplemental Disclosure of Noncash Financing Activities Additions to Property, Plant, and Equipment Contributions from Other Government Units Total Non-Cash Financing Activities 703 1,179 ((862)) 4,167 , 3,305 , 16,589 22,048 38,637 $ 15,727 $ 26,215 $ $ (2,249) $ 2,050 $ 5,349 - 748 (154) (264) (3) (2) - Total Adjustments 124 13,222 (6,540) (3,347) 90 SelfInsurance (199) 5,349 3 (22) (98) (2) (388) 5,674 41,942 3 748 (154) (286) (101) (4) (388) (507) 5,167 $ 3,425 $ 1,543 $ 4,968 $ $ 1,148 1,148 $ $ - $ $ 1,148 1,148 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 on 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. 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 125 Table of Contents 126 Combining Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2010 (in thousands of dollars) Private Purpose Trust Funds Handicap Scholarship Private Purpose 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 $ Agency Funds Family Self-Sufficiency Agency Fund Total 4 $ 4 $ Retainage Escrow Agency Fund 126 $ Total 4,720 $ 4,846 4 4 126 4,720 4,846 - - 126 - 4,720 126 4,720 - - 126 4,720 4,846 4 $ 4 $ - $ - $ - City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Statement of Changes in Assets and Liabilities Fiduciary Funds For the Year Ended June 30, 2010 (in thousands of dollars) Family Self-Sufficiency Balance July 1, 2009 Additions Retainage Escrow Deductions Balance June 30, 2010 Balance July 1, 2009 Additions Deductions Balance June 30, 2010 ASSETS Cash and Cash Equivalents Total Assets $ 127 $ 52 $ 53 $ 126 $ 9,340 $ 4,720 $ 9,340 $ 4,720 $ 127 $ 52 $ 53 $ 126 $ 9,340 $ 4,720 $ 9,340 $ 4,720 $ 127 $ - 51 $ - 52 $ - 126 - $ - $ 9,340 - $ 4,720 - $ 9,340 4,720 $ 127 $ 51 $ 52 $ 126 $ 9,340 $ 4,720 $ 9,340 $ 4,720 LIABILITIES Accounts Payable Designated Escrow Payable Total Liabilities 127 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. 128 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2010 (in thousands of dollars) July 1, 2009 GENERAL OBLIGATION BONDS Governmental Fund Type: 1997 GO Refunding 1989 Series I (1998) 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 2008A GO Various Purpose 2008B GO Preservation 2010 GO Various Purpose Bonds 2001 GO Refunding Series Deferred Issuance Premium 2001 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 2008A GO Series Deferred Issuance Premium 2008B GO Series Deferred Issuance Premium 2010 GO Bonds Deferred Issuance Premium Total General Obligation Bonds REVENUE BONDS Business Type - Revenue Bonds 2004 Utility Revenue Series Refunding 2008 Utility Revenue Series Refunding 2004 Revenue Series Deferred Amount on Refunding 2004 Refunding Series Deferred Issuance Premium 2008 Revenue Series Deferred Amount on Refunding 2008 Refunding Series Deferred Issuance Premium Total Revenue Bonds Issued Refunding Bonds Issued Retired $ 9,400 4,445 6,840 28,715 2,010 5,755 39,890 8,100 10,020 48,000 59,900 8,540 66,090 116,500 17,575 100,000 19,675 605 (990) (18) 26 771 (2,830) 2,173 1,956 312 2,107 134 555,701 $ 50,800 843 51,643 $ $ 14,885 33,460 (382) 422 (670) 3,914 51,629 $ - $ 3,510 450 6,865 5,515 3,100 3,250 875 500 24,065 $ 2,910 205 3,115 *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). **The July 1, 2009 balance was (18). It was brought over higher due to rounding differences. $ Accretions, Amortizations & Contract Adjustments Bonds Defeased June 30, 2010 Governmental Activities Business-type Activities Final Payment Date - $ - $ (115) 187 18 (26) (51) 278 (213) (136) (22) (112) (5) (11) (208) $ 5,890 4,445 6,840 28,715 1,560 5,755 33,025 8,100 4,505 48,000 56,800 8,540 66,090 113,250 16,700 100,000 19,175 50,800 490 (803) 720 (2,552) 1,960 1,820 290 1,995 129 832 583,071 $ 5,890 4,445 6,840 28,715 1,560 5,755 33,025 8,100 4,505 48,000 56,800 8,540 66,090 113,250 16,700 100,000 19,175 50,800 490 (803) 720 (2,552) 1,960 1,820 290 1,995 129 832 583,071 $ - 07/01/14 07/01/18 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 07/01/28 07/01/34 07/01/30 - - $ 248 (273) 49 (288) (264) $ 11,975 33,255 (134) 149 (621) 3,626 48,250 $ - $ 11,975 33,255 (134) 149 (621) 3,626 48,250 07/01/16 07/01/23 - $ 129 Table of Contents 130 Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2010 (in thousands of dollars) (continued here and on following page) July 1, 2009 MUNICIPAL PROPERTY CORPORATION BONDS Governmental Fund Type: 2004A MPC 2005 MPC 2005D MPC 2006 MPC Refunding 2006A MPC 2006B MPC 2004A Series Deferred Issuance Premium 2005 Series Deferred Issuance Premium 2005D Series Deferred Issuance Premium 2006 Series Deferred Amount on Refunding 2006 Refunding Series Deferred Issuance Premium 2006A Series Deferred Issuance Premium 2006B Series Deferred Issuance Premium Subtotal Retired Accretions, Amortizations & Contract Adjustments Bonds Defeased June 30, 2010 Governmental Activities Business-type Activities Final Payment Date 9,785 22,446 19,925 55,450 9,110 32,500 173 287 988 (2,303) 6,177 106 193 154,837 - 920 360 225 255 1,760 - - 756 (17) (24) (38) 89 (247) (5) (9) 505 8,865 22,842 19,700 55,450 8,855 32,500 156 263 950 (2,214) 5,930 101 184 153,582 8,865 22,842 19,700 55,450 8,855 32,500 156 263 950 (2,214) 5,930 101 184 153,582 - 07/01/19 07/01/21 07/01/35 07/01/34 07/01/30 07/01/31 16,520 18,630 110,510 104,075 898 554 11,270 (4,540) 4,474 262,391 75,000 3,532 78,532 3,080 2,300 2,575 7,955 - - (181) (79) (451) 189 (196) (34) (752) 13,440 16,330 110,510 101,500 75,000 717 475 10,819 (4,351) 4,278 3,498 332,216 - 13,440 16,330 110,510 101,500 75,000 717 475 10,819 (4,351) 4,278 3,498 332,216 07/01/14 07/01/16 07/01/30 07/01/32 07/01/36 $ 417,228 $ 78,532 $ 9,715 $ - $ - $ (247) $ 485,798 $ 153,582 $ 332,216 $ - $ - $ - $ 815 2,550 3,365 $ - $ - $ - $ - $ - $ (6) 37 (237) 223 17 $ 36,725 13,475 17,670 74 (444) 1,187 (1,120) 67,567 $ 36,725 13,475 17,670 74 (444) 1,187 (1,120) 67,567 $ - 07/01/24 07/01/22 07/01/16 Business Type - Municipal Property Corporation Bonds 2004 Water/Sewer 2005E Water/Sewer 2006 MPC Refunding 2008A Water/Sewer 2010 MPC Bonds Water/Sewer 2004 Water/Sewer Deferred Issuance Premium 2005E Water Deferred Issuance Premium 2006 Refunding Series Deferred Issuance Premium 2006 Series Deferred Amount on Refunding 2008A Series Deferred Issuance Premium 2010 Water/Sewer Deferred Issuance Premium Subtotal Total Municipal Property Corporation Bonds Issued Refunding Bonds Issued City of Scottsdale, Arizona 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 $ 36,725 $ 14,290 20,220 80 (481) 1,424 (1,343) 70,915 $ SPECIAL ASSESSMENT BONDS Governmental Fund Type: Bell Road II Series 106 Total Special Assessment Bonds $ $ 3,000 $ 3,000 $ - $ - $ 750 $ 750 $ - $ - $ - $ - $ - $ - $ 2,250 $ 2,250 $ 2,250 $ 2,250 $ - 01/01/13 CERTIFICATES OF PARTICIPATION Governmental Fund Type: 2005 Certificates of Participation Total Certificates of Participation $ $ 4,954 $ 4,954 $ - $ - $ 760 $ 760 $ - $ - $ - $ - $ - $ - $ 4,194 $ 4,194 $ 4,194 $ 4,194 $ - 01/01/15 *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2010 (in thousands of dollars) 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 Waterfront Commercial Series 2007 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 US Patent Office McDowell Sonoran Preserve Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Underground Improvement District Series 104 Total Contracts CAPITAL LEASES Business Type: Modular Building - Water Operations TOTAL BONDS, CONTRACTS AND CAPITAL LEASES (continued) July 1, 2009 Issued Retired $ 14,065 $ 3,905 2,580 2,610 3,350 10,375 3,780 12 (147) 48 40,578 - $ - $ 1,144,005 $ 130,175 $ $ 2,879 3 3,385 4,906 5,635 20 $ Refunding Bonds Issued - $ - 800 195 125 110 345 295 35 1,905 $ 43,675 $ 84 785 110 110 7 $ Accretions, Amortizations & Contract Adjustments Bonds Defeased - $ Business-type Activities Final Payment Date $ - $ (2) 57 (3) 52 13,265 $ 3,710 2,455 2,500 3,005 10,080 3,745 10 (90) 45 38,725 13,265 $ 3,710 2,455 2,500 3,005 10,080 3,745 10 (90) 45 38,725 - - $ - $ (650) $ 1,229,855 $ 849,389 $ 380,466 - - $ - - $ - 2,795 $ 3 2,600 4,796 5,525 13 2,795 $ 3 2,600 4,796 5,525 13 - $ - Governmental Activities June 30, 2010 $ 16,828 $ - $ 1,096 $ - $ - $ - $ 15,732 $ 15,732 $ - $ $ 53 $ 53 $ - $ - $ 46 $ 46 $ - $ - $ - $ - $ - $ - $ 7 $ 7 $ - $ - $ 7 7 $ 1,160,886 $ 130,175 $ 44,817 $ - $ - $ (650) $ 1,245,594 $ 865,121 $ 380,473 Compensated Absences Other Post Employment Benefit - Implied Subsidy Risk Management Claims Total Long-Term Debt *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). 25,617 1,114 11,142 $ 902,994 $ 3,223 181 383,877 07/15/22 07/15/23 07/15/23 07/15/24 07/15/18 07/15/27 07/15/32 2032 2009 2013 2033 2035 2010 2010 131 Table of Contents 132 City of Scottsdale, Arizona Table of Contents Statistical Section Contents Page Financial Trends 134 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 144 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 151 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 157 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 159 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 and consistantly present information beginning with fiscal year 2002, when the City implemented Statement 34. City of Scottsdale, Arizona 133 Table of Contents 134 City of Scottsdale, Arizona Net Assets by Component Last Nine Fiscal Years (accrual basis of accounting) ( in thousands) Table I Fiscal Year 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 $ $ $ $ $ $ 2002 2003 2004 2005 2006 2007 2008 2009 2010 1,429,495 $ 133,460 152,731 1,715,686 $ 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 $ 2,029,375 $ 102,293 (2) 172,530 (2) 2,304,198 $ 2,198,130 $ 108,686 206,386 2,513,202 $ 2,353,573 $ 189,540 90,632 2,633,745 $ 2,586,731 $ 131,732 83,884 2,802,347 $ 2,729,334 97,950 87,698 2,914,982 629,106 $ 16,399 175,624 821,129 $ 659,130 $ 16,721 186,147 861,998 $ 653,351 $ 20,842 272,431 (1) 946,624 $ 756,433 $ 23,472 212,957 992,862 $ 806,749 27,000 239,535 1,073,284 $ 895,636 $ 33,649 224,607 1,153,892 $ 909,632 $ 26,147 293,090 1,228,869 $ 991,390 $ 26,568 239,103 1,257,061 $ 941,884 32,244 307,279 1,281,407 2,058,601 $ 149,859 328,355 2,536,815 $ 2,156,705 $ 134,522 351,356 2,642,583 $ 2,634,388 $ 102,266 408,844 3,145,498 $ 2,836,124 129,293 412,065 3,377,482 $ 3,093,766 $ 142,335 430,993 3,667,094 $ 3,263,205 $ 215,687 383,722 3,862,614 $ 3,578,121 $ 158,300 322,987 4,059,408 $ 3,671,218 130,194 394,977 4,196,389 2,201,837 220,609 399,448 2,821,894 (1) The increase from the prior period was caused by a substantial increase in capital asset contributions. (2) Restated Restricted and Unrestricted Net Assets related to the classification of unspent bond proceeds. $ $ $ $ $ City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Net Assets Last Nine Fiscal Years (accrual basis of accounting) (in thousands) Table IIa Fiscal Year Expenses Governmental Activities: General Government Police Financial Services Transportation Community Services Information Services The Downtown Group Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development WestWorld Streetlight and Service Districts Finance and Accounting Public Works and Water Resources Planning, Neighborhood and Transportation Public Safety Information Technology Administrative Services 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 2002 2003 2004 2005 2006 2007 2008 2009 2010 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 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 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 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 45,682 $ 81,375 9,843 95,214 70,527 13,329 28,054 17,698 3,727 3,800 9,475 15,133 597 38,981 433,435 40,698 $ 91,102 10,930 90,039 78,285 13,704 31,943 20,153 3,663 4,790 9,711 31,933 712 39,457 467,120 20,646 $ 92,530 9,913 87,552 78,523 13,723 4,595 31,174 22,887 3,802 3,545 8,553 29,029 595 631 42,242 449,940 24,351 53,596 3,717 20,676 538 5,848 37,143 114,530 116,155 14,876 1,917 39,405 432,752 59,723 28,324 3,346 15,508 106,901 53,961 27,854 2,922 16,412 101,149 64,915 26,089 2,958 17,895 111,857 71,140 26,947 3,343 18,772 120,202 81,391 33,509 3,482 19,650 138,032 76,178 33,274 3,120 18,889 131,461 488,160 $ 545,292 $ 587,322 $ 587,972 $ 564,213 51,125 24,007 2,648 14,071 91,851 $ 393,157 $ 50,406 22,862 2,476 13,783 89,527 394,280 $ 51,095 24,678 2,622 15,153 93,548 415,411 $ 466,607 $ 135 (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. (2) In FY2010, the City's Governmental Activities were restructured from Departments to Divsions which resutled in the shift of reporting associated expenses. (2) Table of Contents 136 City of Scottsdale, Arizona Changes in Net Assets Last Nine Fiscal Years (accrual basis of accounting) (in thousands) Table IIb Fiscal Year Program Revenue Governmental Activities: Charges for Services: General Government Police Transportation Community Services Fire Citizen and Neighborhood Resources Economic Vitality Planning and Development WestWorld Streetlight and Service Districts Planning, Neighborhood and Transportation Public Safety 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 2002 2003 2004 2005 2006 11,243 $ 5,706 3,229 15,764 1,012 22,200 77,412 136,566 11,402 $ 4,227 3,405 15,449 1,018 21,219 70,369 127,089 12,742 $ 6,760 3,759 17,314 1,000 24,508 105,794 171,877 12,106 $ 11,514 3,914 18,188 998 26,865 73,092 146,677 13,783 9,938 277 4,028 1,010 (1) 163 20,515 511 26,355 136,745 (2) 213,325 68,064 24,017 1,689 15,796 38,733 148,299 66,626 25,316 2,424 16,250 28,487 139,103 70,613 25,587 2,936 16,488 71,709 187,333 72,612 27,503 3,162 16,984 38,313 158,574 81,517 27,119 3,342 17,163 55,580 184,721 284,865 $ 266,192 $ 359,210 $ 305,251 $ 398,046 City of Scottsdale, Arizona Total Primary Government Revenues $ Net (Expense)/Revenue Governmental Activities Business-type Activities Total Primary Government Net Expense $ (164,740) $ (177,664) $ (149,986) $ (213,029) $ (173,686) 56,448 49,576 93,785 51,673 83,572 $ (108,292) $ (128,088) $ (56,201) $ (161,356) $ (90,114) 2007 $ 14,102 15,071 326 4,388 1,155 228 16,128 546 29,293 211,707 (3) 292,944 2008 $ 486,627 $ (140,491) 81,826 $ (58,665) (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). (3) Developer contributions increased significantly due to the increase in the assets donated and their valuation (increase in construction costs). 2010 15,581 $ 16,664 4,637 1,095 21 12,800 595 28,409 157,808 237,610 14,670 $ 5,703 4,619 2,275 6,393 2,682 599 26,272 240,289 303,502 13,982 5,773 2,552 289 6,837 12,655 29,319 190,279 261,686 90,741 33,930 3,380 19,824 50,679 198,554 91,546 34,198 2,813 20,049 22,067 170,673 94,199 35,027 2,879 20,269 9,268 161,642 436,164 $ 474,175 $ 423,328 $ (229,510) $ 78,352 $ (151,158) $ (146,438) $ 32,641 (113,797) $ (171,066) 30,181 (140,885) 84,381 32,250 3,451 18,490 55,111 193,683 $ 2009 $ Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Net Assets Last Nine Fiscal Years (accrual basis of accounting) (in thousands) Table IIc Fiscal Year 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 2002 2003 2004 2005 2006 2007 2008 2009 2010 167,105 $ 44,918 11,485 5,382 6,288 235,178 167,153 $ 46,971 4,108 4,760 10,955 233,947 183,039 $ 45,163 2,655 2,777 11,037 244,671 217,325 (1) $ 48,346 6,765 4,100 9,567 286,103 240,731 $ 54,481 13,714 5,786 10,536 325,248 249,411 $ 60,520 23,013 5,377 11,174 349,495 246,330 $ 65,933 19,187 7,606 10,997 350,053 221,272 $ 64,145 14,653 5,038 9,932 315,040 208,083 56,830 1,368 6,730 10,690 283,701 1,493 755 (10,955) (8,707) 973 905 (11,037) (9,159) 119 6,581 686 (10,536) (3,150) 195 9,265 496 (11,174) (1,218) 195 6,910 517 (10,997) (3,375) 117 4,958 408 (9,932) (4,449) 130 4,295 430 (10,690) (5,835) 5,820 874 (6,289) 405 4,288 (156) (9,567) (5,435) $ 235,583 $ 225,240 $ 235,512 $ 280,668 $ 322,098 $ 348,277 $ 346,678 $ 310,591 $ 277,866 $ 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 $ 209,004 $ 80,608 289,612 $ 120,543 $ 74,977 195,520 $ 168,602 $ 28,192 196,794 $ 112,635 24,346 136,981 $ (1) In May 2004, the City of Scottsdale, Arizona citizens approved an additional .15% Preservation Privilege Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. $ 137 Table of Contents 138 City of Scottsdale, Arizona Governmental Activities Tax Revenues By Source Last Nine Fiscal Years (accrual basis of accounting) (in thousands) Table III Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 City of Scottsdale, Arizona Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Property $ 39,485 42,218 46,371 48,416 50,610 50,961 54,139 61,138 60,914 Privilege & Use General $ 81,871 79,483 87,422 94,407 106,019 109,143 105,277 87,430 79,767 Sales and Use Taxes Privilege & Privilege & Use Use McDowell Mtn (1) Transportation $ 15,814 $ 15,587 15,645 15,335 16,981 16,628 31,301 18,115 35,483 20,020 37,281 20,910 35,604 19,823 29,121 16,141 26,416 14,608 Franchise Taxes Cable TV Light & Power Franchise $ 2,223 2,440 2,740 2,859 3,157 3,355 3,544 3,606 3,317 State Shared Franchise $ 5,238 5,147 5,488 5,596 6,308 7,284 8,030 7,831 7,834 $ Sharing 15,621 15,853 17,054 18,779 21,664 22,312 21,575 18,677 17,227 8,491 9,978 10,578 10,145 8,289 7,541 Intergovernmental State Revenue Sales $ Privilege & Use Public Safety (1) $ 21,142 21,574 18,278 18,634 21,223 26,653 33,037 35,103 30,309 Other $ 512 611 663 1,337 962 929 957 959 979 (1) In May 2004, the City of Scottsdale 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 9,723 9,621 7,577 7,543 Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) (in thousands) Table IV Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 General Fund Reserved Unreserved $ 2,006 $ 74,363 1,992 $ 71,236 2,153 59,707 (1) $ 872 $ 72,772 805 $ 93,243 754 $ 89,534 924 $ 61,379 835 $ 59,587 586 51,518 Total General Fund $ 76,369 $ 73,228 $ 61,860 $ 73,644 $ 94,048 $ 90,288 $ 62,303 $ 60,422 $ 52,104 $ 12,880 $ 13,670 $ 9,122 $ 10,613 $ 23,142 $ 21,249 $ 25,600 $ 27,236 $ 20,193 All Other Governmental Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds $ 25,775 168,550 24,553 159,421 22,122 224,422 (2) 207,205 $ 197,644 $ 255,666 $ 31,873 148,626 40,952 189,905 52,484 179,477 35,179 212,676 30,710 102,898 30,963 102,490 191,112 $ 253,999 $ 253,210 $ 273,455 $ 160,844 $ 153,646 (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. 139 Table of Contents 140 City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) (in thousands) Table Va Fiscal Year Revenues Taxes - Local Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Fines, Fees and Forfeitures Special Assessments Property Rental Interest Earnings Investment Income Intergovernmental Developer Contributions Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues 2002 2003 2004 2005 2006 2007 2008 2009 2010 $ 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 2,260 167,153 $ 59,694 1,816 19,990 6,047 1,970 2,836 3,830 9,609 762 1,018 439 1,032 8,045 850 182,362 $ 58,716 1,813 22,401 6,921 2,558 3,212 2,385 11,810 762 1,000 647 1,659 8,729 2,110 218,189 $ 61,948 1,633 23,300 9,649 2,029 3,617 6,053 11,771 4,708 998 917 461 8,635 9,079 239,478 $ 69,413 1,572 27,260 10,260 1,106 4,173 12,518 13,129 392 511 835 969 9,898 644 251,017 $ 76,545 1,626 23,291 14,779 1,825 3,868 21,083 15,763 2,024 546 1,878 568 10,208 700 246,175 $ 81,246 1,761 20,376 15,210 895 3,733 17,298 15,552 7,775 595 1,673 1,824 11,577 934 219,846 $ 77,408 1,733 15,719 11,459 821 3,527 13,491 31,813 9,425 599 1,519 1,210 14,917 991 204,040 69,336 1,787 15,322 11,637 765 3,353 5,014 (4,696) 17,756 2,518 289 1,275 2,852 14,159 644 $ 289,920 $ 285,091 $ 307,085 $ 362,987 $ 392,158 $ 425,721 $ 426,624 $ 404,478 $ 346,051 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) (in thousands) Table Vb Fiscal Year Expenditures General Government Police Financial Services Transportation Community Services Information Systems The Downtown Group Fire Municipal Services Citizen and Neighborhood Resources Human Resources Economic Vitality Planning and Development WestWorld Streetlight and Services Districts Finance and Accounting Public Works and Water Resources Planning, Neighborhood and Transportation Public Safety Information Technology Administrative Services Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Advance Refunding Escrow Capital Improvements 2002 $ 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 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 $ 33,173 31,948 878 213,585 (1) 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 - 2007 24,938 $ 78,261 9,080 13,439 61,778 8,931 26,614 9,692 3,254 3,855 9,016 14,331 597 - 2008 26,633 $ 89,725 9,433 14,301 69,200 10,149 29,785 19,140 3,621 3,854 9,373 15,012 712 - 2009 19,216 $ 89,802 9,701 15,580 70,807 9,904 4,627 30,767 18,800 3,732 3,465 8,246 16,671 3,704 632 - 27,632 36,382 351 218,897 34,252 38,279 735 147,367 33,043 38,651 1,028 196,976 31,308 41,612 155,358 2010 17,030 45,655 3,657 17,110 538 6,059 31,391 27,447 111,459 9,469 1,859 33,701 38,782 497 77,929 Total Expenditures $ 316,363 $ 327,018 $ 337,690 $ 494,193 $ 512,998 $ 484,419 $ 570,636 $ 533,932 $ 422,583 Excess of Revenues over (under) Expenditures $ (26,443) $ (41,927) $ (30,605) $ (131,206) $ (120,840) $ (58,698) $ (144,012) $ (129,454) $ (76,532) 141 (1) The increase from prior period was caused by land purchases related to capital improvement projects. (2) In FY2010, the City's Governmental Activities were restructured from Departments to Divsions which resutled in the shift of reporting associated expenses. (2) Table of Contents 142 City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) (in thousands) Table Vc Fiscal Year 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 Proceeds from Capital Lease Proceeds of Long Term Debt Proceeds from Notes Payable Sale of Capital Assets 2002 $ Total Other Financing Sources and (Uses) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures $ 2003 2004 2005 71,095 $ 107,441 $ 137,043 $ 141,783 (60,408) (91,582) (126,269) (133,284) 74,025 102,570 39,190 74,630 75,500 12,165 113,400 68,355 2,390 6,284 4,429 4,536 (75,025) (108,077) (90,534) (77,584) 424 2006 $ 87,577 29,225 77,259 78,436 61,134 $ (12,702) $ 46,654 $ (52,770) (1) $ 22.7% 23.6% 22.6% (1) The change from the prior period was caused by the increase in spending for capital improvement projects. 23.5% 2007 2008 2009 147,643 $ 162,965 $ 195,170 $ 160,319 $ (140,513) (155,295) (185,082) (145,357) 55,450 191,500 42,500 123,805 5,501 7,199 2,379 (61,845) 175 3,000 204,131 83,291 $ 21.9% 54,149 136,272 14,962 (4,549) $ (7,740) $ (114,492) $ 21.7% 19.5% 19.3% 2010 108,066 (98,693) 843 50,800 61,016 (15,516) 21.2% City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Governmental Activities Tax Revenues By Source Last Nine Fiscal Years (modified accrual basis of accounting) (in thousands) Table VI Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 $ Property 38,413 41,583 46,088 48,249 49,651 50,732 53,778 60,493 58,354 Privilege & Use General $ 80,297 79,704 86,547 94,302 104,949 110,225 104,673 85,829 77,878 Sales and Use Taxes Privilege & Privilege & Use Use McDowell Mtn (1) Transportation $ 15,814 $ 15,587 15,645 15,335 16,981 16,628 31,301 18,115 35,483 20,020 37,281 20,910 35,604 19,823 29,121 16,141 26,416 14,608 Franchise Taxes Cable TV Light & Power $ Franchise 2,223 2,440 2,740 2,859 3,157 3,355 3,544 3,606 3,317 $ Franchise 5,238 5,147 5,488 5,596 6,308 7,284 8,030 7,831 7,834 State Shared $ Sales 15,621 15,853 17,054 18,779 21,664 22,312 21,575 18,677 17,227 Privilege & Use Public Safety (1) $ 8,491 9,978 10,578 10,145 8,289 7,541 Intergovernmental State Revenue $ Sharing 21,142 21,574 18,278 18,634 21,223 26,653 33,037 35,103 30,309 $ Other 512 611 663 1,337 962 929 957 959 979 143 (1) In May 2004, the City of Scottsdale, Arizona 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 9,723 9,621 7,577 7,113 Table of Contents 144 City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Nine Fiscal Years Table VII Fiscal Year Automotive Construction Food Stores Hotel Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities 2002 2003 2004 2005 2006 $ 1,501,832 $ 1,499,864 $ 1,525,050 $ 1,557,909 $ 1,662,604 $ 1,573,073 1,213,352 1,432,006 1,703,826 2,046,791 503,057 518,665 550,704 562,877 584,706 372,610 373,375 400,836 432,006 497,804 748,732 795,091 871,244 959,361 1,012,906 1,035,590 1,059,857 1,138,028 1,248,228 1,413,445 341,314 360,991 416,514 457,819 513,553 910,184 955,494 977,379 1,054,666 1,102,152 524,241 551,806 604,652 661,542 726,122 389,409 376,319 368,442 380,043 398,204 Total $ 7,900,042 $ 7,704,814 $ 8,284,855 $ 9,018,277 $ 9,958,287 $ 10,435,752 $ 9,853,689 $ 8,045,422 $ 7,253,013 Note: In May 2004, the City of Scottsdale, Arizona citizens approved an additional .15% Preservation Tax and a .10% Public Safety Tax. These taxes were effective July 1, 2004. 2007 2008 2009 2010 1,622,601 $ 1,370,365 $ 918,219 $ 818,517 2,208,957 1,932,043 1,251,432 754,583 626,083 652,226 624,917 611,083 533,055 529,862 416,216 395,229 1,011,240 974,330 864,676 865,614 1,478,112 1,364,347 1,078,674 1,107,272 551,095 532,751 556,842 449,455 1,211,551 1,308,247 1,217,688 1,144,939 774,598 754,103 684,188 670,311 418,460 435,415 432,570 436,010 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Nine Fiscal Years Table VIII Privilege (Sales) Tax Rates City Direct Rate County Rate State Rate Fiscal Year 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% 2007 1.65% 0.70% 5.60% 2008 1.65% 0.70% 5.60% 2009 1.65% 0.70% 5.60% 2010 * 1.65% 0.70% 6.60% 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% 2007 1.45% 0.00% 5.60% 2008 1.45% 0.00% 5.60% 2009 1.45% 0.00% 5.60% 2010 * 1.45% 0.00% 6.60% 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% 2007 3.00% 1.77% 5.50% 2008 3.00% 1.77% 5.50% 2009 3.00% 1.77% 5.50% 2010 * 3.00% 1.77% 6.50% 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% 2007 1.80% 0.46% 2.90% 2008 1.80% 0.46% 2.90% 2009 1.80% 0.46% 2.90% 2010 * 1.80% 0.46% 2.90% Source: Note: City Tax Audit Section 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. 145 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. * The state tax rate increased, except for jet fuel, on 6/1/2010 due to approval from the voters in the May 2010 election. Table of Contents 146 City of Scottsdale, Arizona Sales Tax Revenue Payers by Industry Fiscal Years 2010 and 2001 (in thousands) Automotive Construction Food Stores Hotel Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 497 7,653 170 65 30 4,740 3,717 3,765 843 267 21,747 Fiscal Year 2010 Percentage Percentage of Total Tax Revenue of Total 2.28% $ 13,868 11.04% 35.19% 13,168 10.48% 0.78% 10,101 8.04% 0.30% 6,622 5.27% 0.14% 14,802 11.79% 21.80% 19,892 15.84% 17.09% 8,948 7.12% 17.31% 19,565 15.58% 3.88% 11,272 8.98% 1.23% 7,365 5.86% 100.00% $ 125,602 100.00% Table IX Number of Filers 626 6,325 186 69 22 6,224 2,534 2,787 816 260 19,849 Fiscal Year 2001 Percentage Percentage of Total Tax Revenue of Total 3.15% $ 20,278 18.10% 31.86% 22,074 19.71% 0.94% 7,287 6.51% 0.35% 6,165 5.50% 0.11% 8,500 7.59% 31.36% 16,722 14.93% 12.77% 6,736 6.01% 14.04% 11,605 10.36% 4.11% 7,344 6.56% 1.31% 5,293 4.73% 100.00% $ 112,004 100.00% 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 2001 and the North American Industry Classification System (NAICS) classifications in 2010. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Nine Fiscal Years Table X City Direct Rate Overlapping Rates Scottsdale Unified School District Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Operating Rate $ 0.49 $ 0.51 0.48 0.45 0.44 0.42 0.38 0.35 0.36 Debt Service Rate 0.67 0.65 0.64 0.62 0.60 0.55 0.41 0.43 0.38 Total City Rate 1.16 1.15 1.12 1.07 1.04 0.97 0.79 0.79 0.74 $ Operating Rate 4.08 $ 3.94 3.89 3.77 3.46 3.45 3.42 2.82 2.44 Debt Service Rate 1.36 $ 1.36 1.30 1.26 1.22 1.26 1.26 1.07 1.34 EVIT Rate 0.11 $ 0.11 0.10 0.10 0.06 0.05 0.05 0.05 0.05 Total School Rate 5.55 5.41 5.29 5.13 4.74 4.76 4.73 3.94 3.83 Overlapping Rates County-Wide Jurisdictions Fiscal 2002 2003 2004 2005 2006 2007 2008 2009 2010 County County Community County County Education Operating Debt Service College Flood Equalization $ 1.18 $ 1.21 1.21 1.21 1.20 1.18 1.10 1.03 0.99 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 1.06 0.20 0.98 0.15 0.94 0.14 0.88 0.14 $ Fire District Central AZ County Free County Special Assistance Project Library Health Care 0.50 $ 0.49 0.47 0.46 0.44 0.33 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 $ 0.13 $ 0.13 0.12 0.12 0.12 0.12 0.10 0.10 0.10 0.04 $ 0.04 0.05 0.05 0.05 0.05 0.04 0.04 0.04 0.12 0.12 0.09 0.09 0.09 Total County Total Direct & Overlapping $ $ 3.29 3.28 3.22 3.09 3.18 2.74 2.47 2.33 2.58 147 Source: Maricopa County Department of Finance Publications On-Line "Tax Levy 2009" 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 2009/10 the rates were as follows: Scottsdale Mountain CFD - $0.80, McDowell Mountain CFD - $.50, DC Ranch CFD $0.40, Via Linda Road CFD - $0.75 and the Waterfront Commercial CFD - $2.30. 10.00 9.85 9.63 9.30 8.96 8.47 7.99 7.06 7.15 Table of Contents 148 City of Scottsdale, Arizona Principal Property Taxpayers June 30, 2010 and 2001 (in thousands) Table XI 2010 Taxpayer Scottsdale Fashion Square LLC* Arizona Public Service Company Gainey Drive Associates Quest Corporation** Portales Corporate Center LLC/Etal JEMB Scottsdale LLC Blackwell Robert L/Etal Pacific Promenade LLC DC Ranch LLC Scottsdale Fiesta Retail Center LLC First American Title Motorola, Inc. 92 Mountain View LLC Massachusetts Mutual Life Ins. Co. Southwest Gas Corporation Gainey Ranch Financial Ltd. Ptr. 2001 Taxable Assessed Value $ 66,131 61,193 26,771 26,730 25,786 22,213 22,152 17,576 17,529 16,079 Rank 1 2 3 4 5 6 7 8 9 10 Percentage of Total Taxable Assessed Value 0.787% 0.728% 0.318% 0.318% 0.307% 0.264% 0.264% 0.209% 0.209% 0.191% - - - Taxable Assessed Value $ 47,335 44,413 18,195 26,778 26,741 20,656 14,965 10,832 10,179 9,746 Rank 1 2 6 3 - Percentage of Total Taxable Assessed Value 1.640% 1.540% 0.630% 0.930% - 4 5 7 8 9 10 0.930% 0.720% 0.520% 0.380% 0.350% 0.340% Source: 2010 information - The Maricopa County Assessor's Office. City of Scottsdale, Arizona Source: 2001 information - The City of Scottsdale's Financial Advisor, as obtained from the records of 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 2009/10 secondary assessed valuation of the SRP within the City is $19,333,564 as provided by SRP. The secondary in lieu contribution received by the City of Scottsdale for 2009/10 was $143,094. *Scottsdale Fashion Square LLC was operating under the name Scottsdale Fashion Square Ptr. in 2001. **Quest Corporation was operating under the name U S West Wireless LLC in 2001. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Assessed Value of Taxable Property Last Nine Fiscal Years (in thousands) Table XII Fiscal Year Ended June 30th Residential Property $ 1,699,156 $ 1,815,234 Real Property Commercial Vacant Property Land 815,273 923,764 $ 355,384 520,604 Personal Property: Assessed Value Historic & Special Use 2002 2002 P S $ 675 1,091 2003 2003 P S 1,870,142 1,921,093 913,222 1,045,249 400,448 615,184 878 1,484 2004 2004 P S 2,148,272 2,373,446 968,183 1,043,487 473,966 656,600 2005 2005 P S 2,370,252 2,460,307 1,071,915 1,203,844 2006 2006 P S 2,622,605 2,792,337 2007 2007 P S 2008 2008 $ 242,757 242,768 Less: Tax Exempt Property $ Total Taxable Assessed Value Total Direct Tax Rate (166,942) $ (225,510) 2,946,303 $ 3,277,951 0.49 0.67 266,959 266,959 (220,195) (323,364) 3,231,454 3,526,605 0.51 0.65 1,100 1,575 277,334 277,334 (269,136) (376,920) 3,599,719 3,975,522 0.48 0.64 572,909 809,560 1,374 2,214 257,783 277,482 (285,524) (409,953) 3,988,709 4,343,454 0.45 0.62 1,220,872 1,309,263 614,301 784,962 1,507 2,136 225,683 246,619 (320,326) (404,264) 4,364,642 4,731,053 0.44 0.60 2,846,492 2,919,838 1,347,926 1,545,559 674,315 921,888 1,474 1,797 238,279 240,843 (322,012) (420,481) 4,786,474 5,209,444 0.42 0.55 P S 3,358,045 4,583,036 1,406,676 1,711,178 787,106 1,193,455 1,645 1,888 388,502 402,675 (442,551) (648,410) 5,499,423 7,243,822 0.38 0.41 2009 2009 P S 3,947,876 5,237,939 1,584,811 1,987,377 950,456 1,505,737 1,727 2,073 403,064 427,495 (559,516) (888,204) 6,328,418 8,272,417 0.35 0.43 2010 2010 P S 4,409,444 4,989,883 1,879,139 2,436,470 1,177,944 1,765,907 1,845 2,070 259,145 259,145 (717,210) (1,047,474) 7,010,307 8,406,001 0.36 0.38 Source: Arizona Department of Revenue Abstract of the Assessment Roll. 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, voter-approved budget overrides, and maintenance and operation of special service districts. 149 Table of Contents 150 City of Scottsdale, Arizona Property Tax Levies and Collections Last Nine Fiscal Years (in thousands) Table XIII Fiscal Year Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Total Tax Levy for Fiscal Year $ 36,166 39,159 42,756 44,879 47,809 48,778 50,838 58,179 57,380 Collected within the Fiscal Year of the Levy Amount $ 34,993 37,858 41,728 43,688 46,431 47,105 49,408 55,876 55,221 Percentage of Levy 96.8% 96.7% 97.6% 97.3% 97.1% 96.6% 97.2% 96.0% 96.2% Collections in Subsequent Years $ 672 743 772 658 941 1,071 1,310 - Total Collections to Date Amount $ 35,665 38,601 42,500 44,346 47,372 48,176 50,718 55,876 55,221 Percentage of Levy 98.6% 98.6% 99.4% 98.8% 99.1% 98.8% 99.8% 96.0% 96.2% "Total Tax Levy Amount for Fiscal Year" = Maricopa County Tax Levy Reports on County Finance Website. Collections Amounts = Maricopa County Finance Office "Secured Tax Levy Report". 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, Arizona Ratios of Outstanding Debt by Type Last Nine Fiscal Years (in thousands) Table XIV Fiscal Year Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal Year E d d Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Municipal Property Corporation Bonds $ 49,870 41,955 4,850 61,253 108,225 149,176 149,007 149,216 148,212 General Obligation Bonds $ 319,657 305,003 389,598 372,070 499,365 476,200 574,445 551,455 578,190 Revenue Bonds $ 13,385 10,990 8,475 5,815 2,990 - General Obli Obligation ti Bonds $ 18,315 14,323 10,651 6,515 - Business-type Activities Municipal Property Revenue R C Corporation ti Bonds Bonds $ 73,945 $ 11,555 71,230 10,010 68,365 83,365 65,735 79,430 62,405 161,965 58,930 155,650 52,005 256,790 48,345 249,735 45,230 316,780 Governmental Activities Scottsdale Preserve Special Authority Assessment Bonds Bonds $ 90,585 $ 13,061 88,270 11,140 85,980 8,755 83,385 6,340 80,570 5,505 77,605 4,670 74,495 3,835 71,235 3,000 67,870 2,250 Certificates of Participation $ 7,650 7,090 6,401 5,689 4,954 4,194 Community Facilities District Bonds $ 34,935 46,355 44,950 43,480 41,945 40,330 42,450 40,665 38,760 Total Primary P i Government $ 646,724 618,903 718,691 745,997 983,375 989,092 1,176,829 1,135,486 1,217,225 Percentage off Personal P l Income 7.70% 7.04% 7.85% 7.84% 9.94% 9.54% 10.39% 10.79% 10.21% P Per Capita $ 3,080 2,891 3,303 3,374 4,344 4,151 4,901 4,686 4,999 $ Capital C it l Lease 179 139 97 53 7 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 151 See Table XIX - Schedule of Demographic and Economic Statistics for personal income and population data. Contracts Payable $ 21,416 19,627 13,702 14,324 13,136 19,819 17,875 16,828 15,732 $ Capital Lease 172 141 - Table of Contents 152 City of Scottsdale, Arizona Ratios of General Bonded Debt Outstanding Last Nine Fiscal Years Table XV Fiscal Year Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Governmental Activities General Obligation Bonds $ 319,657,000 305,003,000 389,598,000 372,070,000 499,365,000 476,200,000 574,445,000 551,455,000 578,190,000 Less: Amounts Available in Debt Service Fund $ 8,448,962 9,006,329 3,468,780 5,601,739 12,435,797 9,382,702 9,520,257 10,841,183 4,932,433 $ Total 311,208,038 295,996,671 386,129,220 366,468,261 486,929,203 466,817,298 564,924,743 540,613,817 573,257,567 Percentage of Total Taxable Assessed Value of Property (1) 9.5% 8.4% 9.7% 8.4% 10.3% 9.0% 7.8% 6.5% 6.8% $ Per Capita 1,482.23 1,382.58 1,774.86 1,657.25 2,150.84 1,959.19 2,352.62 2,230.83 2,354.23 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) Percentage of Total Taxable Assessed Value of Property was corrected using the information from table XII for years Fiscal Years 2006-2010. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2010 (in thousands) 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 Waterfront Community Facilities District Debt Outstanding $ Table XVI Estimated Share of Overlapping Debt Estimated Percentage Applicable 653,040 124,850 6,280 282,860 261,120 18,410 16,205 266,380 85,410 3,005 13,265 16,290 2,455 3,745 14.2650% 14.2650% 0.0002% 4.7528% 69.9434% 32.8795% 62.6405% 3.1612% 0.2930% 0.0001% 19.4538% 100.0000% 100.0000% 100.0000% 100.0000% 100.0000% 376,855 100.0000% $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 93,156 298 197,842 85,855 11,532 512 780 3,005 13,265 16,290 2,455 3,745 428,736 376,855 $ 805,591 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. 153 The City direct debt excludes from the general obligation bonds debt outstanding as of June 30, 2010 Preserve general obligation of $201,335. Table of Contents 154 City of Scottsdale, Arizona Legal Debt Margin Information Last Nine Fiscal Years (in thousands) Table XVIIa Fiscal Year 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 2002 $ Total Net Debt Applicable to 20% Limit Legal 20% Debt Margin (Available Borrowing Capacity) $ 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 Total Net Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit 2005 2006 2007 705,321 $ 795,104 $ 868,691 $ 947,151 $ 1,041,889 $ 245,209 237,400 319,765 313,786 372,545 363,455 410,381 $ 467,921 $ 475,339 $ 554,905 $ 574,606 $ 678,434 $ 196,677 $ 81,757 $ 2004 655,590 $ 37.40% $ 2003 114,920 $ 41.57% 33.66% 211,596 $ 71,695 139,901 $ 33.88% 40.22% 238,531 $ 74,984 163,547 $ 31.44% 36.12% 260,607 $ 64,799 195,808 $ 24.86% 39.33% 34.88% 2008 2009 1,448,765 $ 1,654,483 $ 1,681,200 424,865 413,095 29.33% 24.97% 312,567 $ 434,629 $ 496,345 $ 126,820 112,745 149,580 138,360 157,325 $ 199,822 $ 285,049 $ 357,985 $ 36.07% 499,945 1,023,900 $ 1,241,388 $ 1,181,255 284,145 $ 44.63% 2010 34.42% 27.88% 29.74% 504,360 78,245 426,115 15.51% City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2010 (in thousands) Table XVIIb Legal Debt Margin Calculation for Fiscal Year 2010 Net Secondary Assessed Valuation as of June 30, 2010 $ 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 8,406,000 1,681,200 Debt applicable to limit: General Obligation Bonds 499,945 Legal 20% Debt Margin (Available Borrowing Capacity) $ 1,181,255 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 504,360 Debt applicable to limit: General Obligation Bonds Legal 6% Debt Margin (Available Borrowing Capacity) 78,245 $ 426,115 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. 155 Table of Contents 156 City of Scottsdale, Arizona Pledged-Revenue Coverage Last Nine Fiscal Years (in thousands) Table XVIII Water and Sewer Revenue Bonds Fiscal Year Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Operating Revenue(1) $ 97,802 95,064 97,813 105,078 115,374 125,880 131,553 130,782 133,624 Less: Operating Expenses $ 49,840 46,991 49,662 56,413 56,329 64,089 66,077 71,236 70,165 Net Operating Revenue $ 47,962 48,073 48,151 48,665 59,045 61,791 65,476 59,546 63,459 Development Fee Revenue $ 15,087 17,648 21,574 20,155 24,071 17,878 15,280 3,043 3,126 Net Revenue $ 63,049 65,721 69,725 68,820 83,116 79,669 80,756 62,589 66,585 Special Assessment Bonds Fiscal Year Ended June 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 Special Assessment Collections $ 2,339 1,970 2,558 2,016 1,106 1,825 895 821 765 Debt Service Principal Interest $ 2,208 $ 393 1,990 279 2,425 492 2,448 360 851 275 848 235 846 197 845 158 757 121 Highway User Revenue Bonds Debt Service Principal Interest $ 2,595 $ 3,937 2,715 3,792 2,860 3,159 2,630 3,570 3,330 3,182 3,475 2,997 3,640 2,582 3,660 2,507 3,115 2,351 Coverage 9.65 10.10 11.58 11.10 12.76 12.31 12.98 10.15 12.18 Scottsdale Preserve Authority Bonds Coverage (2) 0.90 0.87 0.88 0.72 0.98 1.69 0.86 0.82 0.87 0.2% and 0.15% Sales Tax (3) $ 15,814 13,377 16,981 31,301 35,483 37,281 35,604 29,121 26,416 Debt Service Principal Interest $ 2,185 $ 4,704 2,315 4,566 2,445 3,825 2,595 4,437 2,815 3,997 2,965 3,843 3,110 3,676 3,260 3,502 3,365 3,374 Highway User Tax Revenue $ 12,574 13,137 14,034 14,738 15,708 16,778 16,123 14,083 13,342 Debt Service Principal Interest $ 2,275 $ 828 2,395 715 2,515 592 2,660 460 2,825 317 2,990 165 - Municipal Property Corporation Bonds Coverage 2.30 1.94 2.71 4.45 5.21 5.48 5.25 4.31 3.92 Excise Tax (5) $ 156,069 157,302 165,799 180,005 202,081 218,205 216,600 186,404 173,352 Debt Service (4) Principal Interest $ 8,325 $ 3,775 9,145 3,045 7,170 1,108 8,265 6,413 5,995 10,017 5,305 10,057 5,584 13,988 7,570 19,482 9,715 18,415 City of Scottsdale, Arizona (1) Includes investment income. (2) Coverage ratio is less than 1.0 due to prepayment of amounts that are currently in fund balance. (3) In May 2004, the City of Scottsdale, Arizona citizens approved an additional .15% Preservation Privilege Tax. This tax was effective July 1, 2004. (4) Includes debt service payments paid out of revenue from the Water and Sewer Fund. (5) Excise Tax was recalculated for prior years using correct items from Table VI and the Statement of Revenue, Expenditures, and Changes in Fund Balances for the Governmental Funds. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Coverage 4.05 4.22 4.52 4.72 5.00 5.32 N/A N/A N/A Coverage 12.90 12.90 20.03 12.26 12.62 14.20 11.07 6.89 6.16 Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Demographic and Economic Statistics Last Nine Fiscal Years Table XIX Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Population (1) 209,960 214,090 217,555 221,130 226,390 238,270 240,126 242,337 243,501 Personal Income (2) (in thousands) $ 8,396,720 8,787,110 9,158,195 9,515,538 9,896,159 10,367,366 11,329,384 10,526,392 11,920,591 Per Capita Personal Income (3) $ 39,992 41,044 42,096 43,148 43,713 43,511 47,181 43,437 48,955 Median Age (4) 41.1 40.5 40.2 39.9 39.5 41.0 40.2 40.6 40.6 Education Level in Years of Schooling (5) 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 13 to 16 Data Sources: (1) Arizona Department of Commerce estimate (2) Sites USA (estimate) (3) Sites USA (estimate) (4) Sites USA (estimate) (5) Sites USA (estimate) (6) Arizona Department of Education (7) Arizona Department of Economic Security; Arizona Workforce year-end average unemployment rates Note: (8) Unemployment Rate for FY2009 was restated to actual in FY2010 School Enrollment (6) 27,436 27,479 27,328 26,559 27,000 26,653 26,567 27,029 27,093 Unemployment Rate (7) 4.3% 4.1% 3.3% 3.0% 2.7% 2.3% 3.8% (8) 6.6% 6.6% 157 Table of Contents 158 City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago Table XX 2010 Employer Scottsdale Healthcare Mayo Clinic(2) General Dynamics(3) Scottsdale Unified School District(4) City of Scottsdale(5) CVS - CareMark Go Daddy Group The Vanguard Group Troon Golf LLC Scottsdale Insurance Company Scottsdale Memorial Health Systems Advanced PCS Scottsdale Princess Resort Hickey Mitchell Insurance Total Employees 6,650 4,900 3,600 3,126 2,538 2,048 1,915 1,899 1,539 1,400 29,615 Rank 1 2 3 4 5 6 7 8 9 10 - Percentage of Total City Employment(1) 3.64% 2.68% 1.97% 1.71% 1.39% 1.12% 1.05% 1.04% 0.84% 0.77% 16.20% City of Scottsdale, Arizona Source: City of Scottsdale, Arizona's Economic Vitality Department (1) 2010 total Scottsdale employment = 182,771 (Source: SitesUSA); 2000 total employment- 126,918 (2) Includes all Mayo Clinic employees in Metro Phoenix (3) Includes all General Dynamics employees that report to Scottsdale site (4) Includes all Full-time equivalent (FTE) Scottsdale Unified School District employees as of Jan/Feb 2009 (5) Includes all City of Scottsdale Full-time equivalent (FTE) 2001 Employees 3,000 3,600 2,700 1,700 1,118 959 4,473 2,700 1,080 1,000 22,330 Rank Percentage of Total City Employment(1) 3 2 4 6 13.43% 16.12% 12.09% 7.61% 7 5.01% 10 1 5 8 9 4.29% 20.03% 12.09% 4.84% 4.48% 100.00% Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Nine Fiscal Years Table XXI Full-time Equivalent Employees as of June 30 Function Administrative Services Aviation Citizen and Neighborhood Resources Communications & Public Affairs Community Services Economic Vitality Financial Services Finance & Accounting General Government Human Resources Information Systems Municipal Services Planning and Development Planning/Neighborhood/Transportation Public Safety Public Safety - Fire Public Safety - Police Public Works Solid Waste Transportation Water Resources Total 2002 2003 2004 2005 2006 2007 11.9 35.0 12.4 35.0 12.4 32.0 12.4 36.0 13.0 39.0 516.1 10.0 144.5 516.1 10.0 144.5 506.1 8.0 139.5 512.6 10.0 143.0 559.4 11.0 149.0 15.0 40.0 14.7 580.3 40.0 151.0 196.5 36.5 73.8 132.7 157.0 195.5 35.5 73.8 132.7 151.0 196.5 34.5 74.8 135.7 140.0 215.0 35.5 78.8 139.7 140.0 217.0 35.5 80.8 151.7 144.0 172.6 36.5 83.8 170.5 167.0 2.7 574.1 2.7 590.1 3.7 590.1 260.7 630.1 259.0 676.1 268.0 705.6 77.3 35.0 140.0 2,143.0 80.3 34.0 139.0 2,152.5 79.3 24.0 136.0 2,112.5 79.3 25.0 139.0 2,457.0 83.3 27.0 152.5 2,598.3 85.3 30.0 162.0 2,722.2 2008 2009 2010 15.0 38.5 16.0 546.1 77.0 134.0 543.1 54.0 110.5 172.6 53.5 91.8 167.1 35.5 81.8 92.5 155.0 30.0 78.8 205.2 999.6 224.0 167.5 248.5 85.8 268.0 713.6 323.0 89.0 265.0 688.6 295.0 89.0 169.0 2,797.9 90.0 2,754.1 91.0 2,537.7 Source: The City of Scottsdale, Arizona's Budget Department. (1) In FY2010, the Full-time Equivalent Employees for prior years were restated to actual. In addition, the City's Governmental Activities were restructured from Departments to Divisions which resulted in the shift of reporting associated Full-time Equivalent Employees. 35.0 14.0 489.3 47.0 (1) 159 Table of Contents 160 City of Scottsdale, Arizona Operating Indicators by Division (1) Last Nine Fiscal Years Table XXII Fiscal Year Division General Government City Attorney % of cases resolved at first court appearance (arraignment) City Auditor # of audits performed City Clerk # of legal postings City Court Charges filed / charges adjudicated (resolved) Finance & Accounting (3) # of Accounts Payable checks issued # of water meters read annually # of customer contacts (utilities, taxes & licensing) Strategic Resources Group - City Manager City of Scottsdale, Arizona % of survey respondents rating the "Overall Quality of Life in Scottsdale" as good to excellent News releases, media updates, traffic alerts, construction updates released to news media Acres of land acquired for inclusion in the McDowell Sonoran Preserve Administrative Services # of purchase orders Community Services # attending Parks & Recreation facilities, Human Services facilities and Libraries annually # of square feet of medians and rights of way maintained Economic Vitality Targeted job creation number of companies / number of jobs Hotel/Motel average occupancy rate Bed Tax growth (% annual change) Scottsdale Airport - Takeoffs and Landings # of new Code Enforcement cases processed per year # of special events at WestWorld # of Downtown special events coordinated 2002 2003 2004 2005 2006 2007 2008 2009 2010 (2) 20% 26% 30% 30% 32% 34% 35% 34% 32% 3 6 9 10 15 10 11 13 16 518 466 456 651 1,011 1,138 1,173 1,158 1,301 79,638 / 114,514 96,995 / 94,045 121,560 / 129,888 136,747 / 134,793 156,051 / 132,096 201,866 / 216,000 221,400 / 219,980 115,319 / 137,887 107,720 / 113,382 35,636 943,212 212,787 35,344 971,508 218,185 34,547 986,080 218,185 37,954 1,000,870 208,037 41,194 1,015,662 212,888 42,000 1,030,368 216,764 38,000 1,044,205 230,143 36,442 1,049,008 176,680 33,620 1,050,067 175,918 No Survey No Survey 90% 93% No Survey 90% No Survey No Survey No Survey 277 267 182 247 205 220 220 NA 240 514 660 450 2,600 138 251 648 25 399 8,531 10,212 12,254 9,611 10,778 9,460 8,224 6,234 5,748 6,797,090 13,168,516 7,485,295 13,229,497 7,565,511 13,949,440 7,573,369 14,569,062 7,877,216 15,188,684 7,838,000 15,460,961 7,940,283 16,918,438 8,747,495 17,000,000 8,634,522 17,000,000 17 / 1,716 59.5% - 13% 181,657 23 / 2,032 61.3% 0% 197,483 23 / 1,800 57.5% + 3% 195,276 10 / 1,443 60.0% + 5% 208,106 11 / 1,275 69.0% + 5% 210,481 7 / 1,800 69.0% +9% 185,241 5 / 1,374 65.0% -2% 201,958 7 / 394 59.2% -21% 169,972 10 / 731 58.0% -6% 156,896 7,357 30 N/A 10,000 47 N/A 10,000 53 41 11,336 57 58 13,137 49 62 16,900 43 71 15,570 44 65 20,568 31 100 16,452 28 110 (continued) Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Operating Indicators by Division (1) Last Nine Fiscal Years Table XXII Fiscal Year Division Human Resources Citywide turnover HR operating cost as a % of City payroll Information Techonology # 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) Planning / Neighborhood / Transportation Customer wait-time (in minutes) at One Stop Shop Provide applicant with pre-application meeting within 30 days of submitting request. % of inspections performed within 24 hours of the request % increase of Neighborhood Watch groups annually (4) % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent Total citywide transit ridership Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies) (5) Public Safety 2002 2003 2004 2005 2006 2007 2008 2009 2010 (2) 6.0% 3.1% 6.7% 2.6% 6.8% 2.4% 7.3% 2.3% 11.1% 2.3% 9.0% 2.0% 12.0% 2.1% 6.0% 2.1% 9.5% 1.6% n/a 32,244 129,000 2,319,000 25,400,000 654,100 1,200,000 2,200,000 2,100,000 2.5 4.0 5.0 7.0 30.0 30.0 80.0 147.8 170.0 n/a n/a 45 25 15 20 20 7 7 n/a n/a n/a n/a 90% 97% 100% 98% 100% 99% 100% 99% 100% 99% 100% 100% 100% 100% n/a 15% 15% 37% 5% 5% 5% -56% 5% No Survey 1,780,578 No Survey 1,917,011 86% 1,917,000 89% 1,969,512 No Survey 2,104,382 94% 2,365,204 No Survey 2,584,837 No Survey 3,472,828 No Survey 3,103,185 76 124 150 270 322 375 475 NA 8,578 44.3 72.0 44.8 80.1 45.5 60.2 42.3 56.5 34.9 51.0 37.1 51.0 35.6 51.0 34.3 NA 29.6 NA Police Fire 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) Provide initial contact to 100% of citizen traffic concerns within seven days 6:41 6:30 6:27 6:12 NA 6:06 5:07 5:07 5:01 43% 60% 96% 98% 98% 100% 100% 100% 100% # of responses to calls for emergency services Responses per capita Average response time to urban calls for service (minutes) 21,877 0.10 4:02 21,162 0.09 4:01 21,756 0.09 4:20 23,102 0.10 4:23 23,952 0.10 4:20 22,894 0.10 4:15 22,936 0.10 4:21 23,953 0.10 4:23 23,996 0.10 4:28 161 (continued) Table of Contents 162 City of Scottsdale, Arizona Operating Indicators by Division (1) Last Nine Fiscal Years Table XXII Fiscal Year Division Public Works and Water Resources Public Works Facility inventory maintained (square feet) # of active Capital Projects # of homes serviced by Residential Refuse Collection # of citizens serviced annually by Household Hazardous Waste collection program Water Resources Water Service Connections Drinking Water Supplied (million gallons per day) Reclaimed Water Supplied (million gallons per day) Sewer Service Connections Sewage Treated (million gallons per day) 2002 2003 2004 2005 2006 2007 2008 2009 2010 (2) 1,551,620 101 70,546 1,551,780 118 72,166 1,807,298 116 73,602 1,825,564 183 74,850 2,166,650 219 76,300 2,221,650 202 77,206 2,271,550 180 78,024 2,334,310 178 78,607 2,929,802 168 79,006 1,708 1,900 1,514 1,718 2,000 2,100 2,200 1,923 1,497 79,052 70.4 11.8 69,121 24.0 80,454 67.6 14.2 70,732 24.5 81,947 70.0 11.8 72,034 24.2 83,511 67.7 11.6 73,232 25.5 86,399 73.1 11.5 74,143 24.2 86,728 72.1 11.4 76,092 25.3 87,248 73.7 11.7 76,849 23.9 87,349 69.4 9.6 77,363 19.7 87,409 68.4 11.2 77,605 21.0 Source: The City of Scottsdale's Budget Office and applicable City divisions. (1) This presentation is consistent with the organizational structure approved as part of the FY 2009/10 Budget. It has been noted where changes were approved by the City Council mid-year. (2) In FY2010, the indicators for prior years were restated to actuals. (3) Effective December 2009, the City Council approved placing Financial Management under the control of the City Treasurer, renaming the department "Finance & Accounting," moving Payroll and Risk Management from Human (4) During fiscal year 2008/09, the Neighborhood Watch program was reviewed; participants that were no longer eligible for the program were removed, thus reducing the numbers. (5)The statistic for 'Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)' has increased due to automation of the process. Prior to FY 2009/10 changing signal timing City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Capital Asset Statistics by Function Last Nine 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 2002 2004 2005 2006 2007 2008 2009 2010 3 261 10 3 295 12 3 286 12 3 290 13 3 345 13 3 375 13 3 383 13 4 363 14 4 357 14 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 20,393,288 2,897 11,022 276 20,562,017 2,921 11,132 285 20,644,388 2,932 9,134 295 20,873,951 2,965 8,257 289 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 40 937 4 51 5 43 962 4 55 5 41 931 4 55 5 41 941 4 55 5 1,738 8,659 1,815 8,928 1,854 9,193 1,897 9,541 1,933 9,839 1,997 10,147 2,030 10,367 2,044 10,365 2,061 10,664 1,155.0 68.7 1,262.0 68.7 1,280.0 137.7 1,287.4 142.8 1309.0 148.0 1,350.0 153.5 1,353 157.2 1,360 166.9 1,421 164.0 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) 2003 Source: City of Scottsdale, Arizona departments. 163 Table of Contents 164 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Finance and Accounting Division (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance