Compr ehensi v eAnnual Fi nanci al Repor t Ci t yofScot t sdal e, Ar i z ona Fort heFi scal YearEndedJune30, 2013 City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013 Prepared by: Finance and Accounting Division Jeffery M. Nichols, CPA City Treasurer/Chief Financial Officer Joyce L. Gilbride, CPA Accounting Director City of Scottsdale, Arizona City of Scottsdale, Arizona Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2013 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...............................................................................................................................14 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position..........................................................................................................................................34 Statement of Activities................................................................................................................................................35 Fund Financial Statements: Balance Sheet – Governmental Funds......................................................................................................................36 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position..........................................................................................................................................................38 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds................................................................................................................................................39 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities..........................................................41 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund........................................................................................................................42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund...........................................................................................44 Statement of Fund Net Position – Proprietary Funds...........................................................................................45 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds......................................................................................................................................................47 Statement of Cash Flows – Proprietary Funds........................................................................................................48 Statement of Fiduciary Net Position – Fiduciary Funds........................................................................................50 Statement of Changes in Fiduciary Net Position – Fiduciary Funds...................................................................51 Notes to Financial Statements: I. Summary of Significant Accounting Policies...........................................................................................................52 II. Reconciliation of Government-wide and Fund Financial Statements.................................................................62 III. Stewardship, Compliance, and Accountability.........................................................................................................68 IV. Detailed Notes on All Funds: A. Cash and Investments...................................................................................................................................71 B. Receivables......................................................................................................................................................74 C. Capital Assets.................................................................................................................................................75 D. Interfund Balances and Interfund Transfers.............................................................................................77 E. Leases...............................................................................................................................................................78 F. Service Concession Arrangements..............................................................................................................80 G. Bonds, Loans, and Other Payables..............................................................................................................81 City of Scottsdale, Arizona  Page V. Other Information: A. Risk Management..........................................................................................................................................92 B. Contingent Liabilities....................................................................................................................................92 C. Subsequent Events.........................................................................................................................................93 D. Joint Venture...................................................................................................................................................94 E. Pollution Remediation...................................................................................................................................94 F. Related Organization.....................................................................................................................................95 G. Effect of Implementation of Future Accounting Standard...................................................................95 H. Retirement and Pension Plans.....................................................................................................................95 I. Other Postemployment Benefits.................................................................................................................99 J. Postemployment Benefits Other Than Pensions....................................................................................100 Required Supplementary Information................................................................................................................................103 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Nonmajor Governmental Funds...................................................................................108 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds...............................................................................................109 Combining Balance Sheet – Nonmajor Special Revenue Governmental Funds.....................................................111 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Governmental Funds..................................................................113 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual: Highway User Fuel Tax – Special Revenue Fund..................................................................................................115 Community Development Block Grant – Special Revenue Fund......................................................................116 HOME – Special Revenue Fund..............................................................................................................................117 Grants – Special Revenue Fund...............................................................................................................................118 Section 8 Housing – Special Revenue Fund...........................................................................................................119 Preserve Privilege Tax – Special Revenue Fund....................................................................................................120 Streetlight Districts – Special Revenue Fund..........................................................................................................121 Special Programs – Special Revenue Fund.............................................................................................................122 Tourism Development – Special Revenue Fund....................................................................................................123 Combining Balance Sheet – Nonmajor Debt Service Governmental Funds...........................................................124 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Debt Service Governmental Funds...............................................................125 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual: General Obligation Bond Debt Service Fund.......................................................................................................126 Municipal Property Corporation Bond Debt Service Fund................................................................................127 Special Assessments Bond Debt Service Fund......................................................................................................128 Scottsdale Preserve Authority Bond Debt Service Fund.....................................................................................129 Combining Balance Sheet – Nonmajor Capital Projects Governmental Funds......................................................130 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Governmental Funds..................................................................131 Combining Statement of Fund Net Position – Internal Service Funds....................................................................133 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Internal Service Funds..........................................................................................................134 Combining Statement of Cash Flows – Internal Service Funds................................................................................135 Combining Statement of Fiduciary Net Position – Fiduciary Funds........................................................................137 Combining Statement of Changes in Assets and Liabilities – Agency Funds.........................................................138 City of Scottsdale, Arizona  Page Other Supplementary Information: Schedule of Changes in Long-Term Debt.....................................................................................................................140 STATISTICAL SECTION Financial Trends Net Position by Component – Last Ten Fiscal Years (accrual basis of accounting)��������������������������������������������� 144 Changes in Net Position – Last Ten Fiscal Years (accrual basis of accounting)���������������������������������������������������� 145 Fund Balances of Governmental Funds – Last Ten Fiscal Years (modified accrual basis of accounting).������������������������������������������������������������������������������������������������������������������� 148 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years (modified accrual basis of accounting)�������������������������������������������������������������������������������������������������������������������� 149 Tax Revenue by Source – Last Ten Fiscal Years (modified accrual basis of accounting)�������������������������������������������������������������������������������������������������������������������� 152 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category – Last Ten Fiscal Years���������������������������������������������� 153 Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years����������������������������������������������������������������������������� 154 Sales Tax Revenue Payers by Industry – Current Year and Nine Years Ago���������������������������������������������������������� 155 Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years����������������������������������������� 156 Principal Property Taxpayers – Current Year and Nine Years Ago������������������������������������������������������������������������� 157 Assessed Value of Taxable Property – Last Ten Fiscal Years.���������������������������������������������������������������������������������� 158 Property Tax Levies and Collections – Last Ten Fiscal Years����������������������������������������������������������������������������������� 159 Debt Capacity Ratios of Outstanding Debt by Type – Last Ten Fiscal Years���������������������������������������������������������������������������������� 160 Ratios of Net General Bonded Debt Outstanding – Last Ten Fiscal Years����������������������������������������������������������� 161 Direct and Overlapping Governmental Activities Debt as of June 30, 2013��������������������������������������������������������� 162 Legal Debt Margin Information – Last Ten Fiscal Years������������������������������������������������������������������������������������������ 163 Pledged-Revenue Coverage – Last Ten Fiscal Years��������������������������������������������������������������������������������������������������� 165 Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years������������������������������������������������������������������������������� 166 Principal Employers – Current Year and Nine Years Ago���������������������������������������������������������������������������������������� 167 Operating Information Full-time Equivalent City Government Employees by Function – Last Ten Fiscal Years����������������������������������� 168 Operating Indicators by Division – Last Ten Fiscal Years���������������������������������������������������������������������������������������� 169 Capital Asset Statistics by Function – Last Ten Fiscal Years������������������������������������������������������������������������������������� 172 City of Scottsdale, Arizona City of Scottsdale, Arizona Table of Contents October 30, 2013 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: Letter of Transmittal The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2013, is submitted in accordance with Article 6, Section 14, of the City Charter. Management assumes full responsibility for the completeness and reliability of the information presented in this report, based upon a comprehensive framework of internal control established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. This letter of transmittal provides a non-technical summary of City finances, For the Fiscal Year economic prospects, and achievements. Management’s discussion and analysis Ended June 30, 2013 (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview and analysis of the City’s basic financial statements. MD&A complements this letter of transmittal and should be read in City of Scottsdale conjunction with it. Scottsdale, Arizona The City contracted with CliftonLarsonAllen, LLP, a firm of Certified Public Accountants, to perform the annual independent audit. The auditors expressed an opinion that the City’s financial statements for the fiscal year ended June 2013 are fairly stated in conformity with accounting principles in the United States. This is the most favorable conclusion and is commonly known as an “unmodified” or “clean” opinion. The independent auditors’ report is located at the front of the financial section of this report. In addition, CliftonLarsonAllen, LLP audited the City’s major program expenditures of federal funds for compliance with the Federal Single Audit Act. The report of the Single Audit is published separately from this report and may be obtained upon request. CITY OF SCOTTSDALE PROFILE Scottsdale was founded in the 1800s 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. City of Scottsdale, Arizona 1 Table of Contents 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. The City has experienced significant increases in population, with the 1950 census reporting 2,032 residents, and the 2010 census reporting 217,385. The City’s population is currently estimated at 219,713 residents making it the sixth largest city in Arizona. 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 and serve overlapping four-year terms. The City Council directly appoints six officers (City Attorney, City Auditor, City Clerk, City Manager, City Treasurer, and Presiding Judge) who have full responsibility for carrying out City Council policies and administering day-to-day City operations. The City provides a full range of municipal services including police and fire protection, sanitation 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. 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 final budget adoption in order to obtain taxpayer comments. In June, the budget is legally enacted through passage of an ordinance. The ordinance sets the maximum legal expenditure limit for 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 2012/13, 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 benefits from 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 business 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-technology; healthcare and medical; 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 in the area, including several world-class resorts and “boutique” hotels, provide over 9,300 guest rooms, along with spectacular spas, trend-setting dining and one-of-a kind Sonoran desert golf courses. With close to 5,000 retail shops, more than 600 restaurants, 125 golf courses, national and international events, art galleries, and a spectacular southwest Sonoran desert setting, Scottsdale continues to be a popular destination for visitors year-round and is well-positioned as the economy recovers. Transient Occupancy Tax revenues to the City increased by 3 percent for fiscal year 2012/13, due to a strengthening Scottsdale tourism industry. McDowell Sonoran Preserve The Preserve encompasses some of the most scenic desert lands and mountains in Arizona and includes hundreds of miles of trails, including the award-winning Bajada Nature Trail, for explorers of all skill levels. Ultimately the Preserve is planned to span about 34,000 acres – about one-third of the City’s land mass. 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 State of Arizona applied tax rate. The City saw a third consecutive year of growth in retail sales tax revenues with a year-over-year increase of 4 percent in fiscal year 2012/13 and the highest collections seen since fiscal year 2007/08. Property Values The City benefits from a robust assessed valuation of the properties contained within the City boundaries. These strong assessed valuations, even though reduced from historical highs due to the recession and housing bubble, results in Scottsdale having lower property tax rates than most of the surrounding municipalities in the Phoenix metro area. Employment Scottsdale’s unemployment rate for the month of June 2013 was 6.1 percent, significantly lower than the state level of 8.5 percent. Historically, Scottsdale’s unemployment rate is about 2 percent lower than the state’s rate. The Scottsdale Airpark is one of the largest employment centers in Arizona boasting about 41,000 employees in more than 1,300 businesses. A total of 22 companies relocated to Scottsdale in fiscal year 2012/13 creating approximately 540 new jobs. Additionally, the expansion of 14 companies resulted in another 1,045 jobs. Commercial Vacancy Rates Scottsdale’s citywide average office vacancy rate was 22.4 percent for the second quarter of calendar year 2013 – similar to the Phoenix market average of 22.1 percent. Of the commercial construction underway in the Phoenix Market area at the end of the second quarter 2013, 6,100 square feet of retail construction was 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 City anticipates a moderate increase in revenues over the next few years with a continued focus on efficient spending to maintain essential City services to the community such as police, fire, transportation and social services. Achieving and maintaining fiscal stability requires many elements, all working in concert with one another. The following identifies other key elements of the City’s 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 45 adopted financial policies governing operations, capital management, debt management, reserves and financial reporting. Regular review and refinement of these policies is done in conjunction with financial plan development and policies which are adopted annually by the City Council. Financial Resources 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 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 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. In recent years, the City has generally issued two types of debt: voter approved General Obligation bonds and non-voter approved Municipal Property Corporation bonds and Certificates of Participation (see Section IV.G. of the Notes to the Financial Statements for further information). 4 City of Scottsdale, Arizona Table of Contents 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. Scottsdale is one of a handful of cities in the nation to earn this distinction. 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. A summary of the City’s bond ratings follows: City of Scottsdale Bonded Debt Ratings As of June 30, 2013 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+ MAJOR INITIATIVES The City of Scottsdale’s adopted fiscal year 2013/14 budget anticipates a moderate increase in revenues with a continued focus on efficient spending to maintain services to the community. Key issues and initiatives include reinvesting in the workforce and building a high performance organization, addressing deferred maintenance at city facilities, and ensuring financial sustainability by improving support of tourism events, and developing economic development and transportation strategies. In fiscal year 2013/14 citizen tax bills will reflect an estimated combined property tax rate of $1.2946 which is $0.0694 more than the combined rate for the prior year. The adopted budget also reflects a net increase of 6.85 full time equivalent (FTE) positions across all funds to address several years of deferrals. This will bring the City’s total FTE count to 2,430, which is 13 percent lower that the City’s peak authorized staffing of 2,808 in fiscal year 2008/09. The fiscal year 2013/14 Capital Improvement Plan totals $517.4 million and funds a variety of infrastructure and utility projects. One-time savings will be used to address many of these issues including deferred maintenance of buildings and equipment and replacement of equipment at playgrounds and pools. AWARDS AND ACKNOWLEDGEMENTS Certificates of Achievement 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, 2012. This was the fortieth consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government has to publish an easily readable and efficiently organized CAFR that satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. However, 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 award. City of Scottsdale, Arizona 5 Table of Contents The City of Scottsdale also received the “Distinguished Budget Presentation Award” for the fiscal year beginning July 1, 2012 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, 2013. Acknowledgments The preparation of this report would not have been possible without the talent, effort, and dedication of the entire staff of the Finance and Accounting division. I wish to thank all City divisions for their assistance in providing the data necessary to prepare this report. I also wish to express my sincere appreciation to the City Council and the City Manager for their support in maintaining the highest standards of professionalism in planning and conducting the financial affairs of the City of Scottsdale. Respectfully submitted, Jeffery M. Nichols, CPA City Treasurer/Chief Financial Officer 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 Suzanne Klapp Virginia Korte Robert W. Littlefield Linda Milhaven Guy Phillips Dennis Robbins Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2013 Charter Offices Fritz Behring, City Manager Bruce Washburn, City Attorney Sharron Walker, City Auditor Carolyn Jagger, City Clerk Joseph Olcavage, Presiding Judge Jeffery M. Nichols, City Treasurer/Chief Financial Officer City of Scottsdale Scottsdale, Arizona 8 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Organization Chart January 2013 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 Report on the Financial Statements 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, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. An independent member of Nexia International City of Scottsdale, Arizona (11) 11 Table of Contents The Honorable Mayor and the City Council City of Scottsdale, Arizona 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, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter During the fiscal year ended June 30, 2013, the City adopted the provisions of Governmental Accounting Standards Board Statement (GASBS) No. 60, Accounting and Reporting for Service Concession Arrangements. As a result of the implementation of GASBS No. 60, the City reported a change in accounting principle (See Note I.E.5.) to report the service concession arrangement. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 14 through 32, the Public Safety Personnel Retirement System Schedule of Funding Progress on pages 103 and 104, and the Other Postemployment Benefit Plan Schedule of Funding Progress on page 105 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual fund financial statements and schedules, the other supplementary information, and the introductory and statistical sections, as referenced in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. (12) 12 City of Scottsdale, Arizona Table of Contents The Honorable Mayor and the City Council City of Scottsdale, Arizona The combining and individual fund financial statements and schedules and other supplementary information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 30, 2013, on our consideration of the City of Scottsdale, Arizona's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Scottsdale, Arizona’s internal control over financial reporting and compliance. Phoenix, Arizona October 30, 2013 (13) City of Scottsdale, Arizona 13 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents M ANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Scottsdale, Arizona’s (the City) Comprehensive Annual Financial Report (CAFR) presents a narrative overview and comparative analysis of the financial activities of the City for the fiscal years ended June 30, 2013 and 2012. Readers are encouraged to consider the information presented here in conjunction with the basic financial statements that immediately follow, along with the letter of transmittal, and other portions of this CAFR. The City adopted provisions of Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Readers should note that GASB 63 changes the previous classification of net assets to net position, and consequently the statement of net assets to the statement of net position. Additional information regarding this change can be found in Note I. E. 4. on page 61 of this report. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2013 are as follows: 14 • The total assets of the City exceeded total liabilities at the close of the fiscal years 2013 and 2012 by $4.3 billion and $4.3 billion (net position), respectively. Of these amounts, $376.7 million and $317.2 million (unrestricted net position), respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net position increased by $31.0 million and $83.7 million during fiscal years 2013 and 2012, respectively. • As of June 30, 2013 and 2012, the City’s governmental funds had combined ending balances of $218.2 million and $207.8 million, respectively. • At the close of the fiscal year, the unassigned fund balance for the General Fund was $48.7 million or 19.5 percent of total General Fund expenditures of $250.1 million. • The City’s total long-term liabilities increased by $91.4 million to $1.4 billion at June 30, 2013. Primary factors leading to this increase include the issuance of $75 million of new McDowell Sonoran Preserve General Obligation bonds and $65 million of new Municipal Property Corporation bonds, partially offset by payments on long-term debt. City of Scottsdale, Arizona Table of Contents (1) Government-wide Financial Statements (2) Fund Financial Statements (3) Notes to the Financial Statements (4) Required Supplementary Information In addition, this report also contains other supplementary information. 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 Management’s Discussion and Analysis This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which are comprised of four components: For the Fiscal Year Ended June 30, 2013 OVERVIEW OF THE FINANCIAL STATEMENTS 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 City of Scottsdale, Arizona Statistical Section 15 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents 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, to provide information about the City as a whole, 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 major fund financial statements also display the City’s most significant funds. The statement of net position presents financial information on all of the City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that are expected to result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and earned but unused vacation and medical leave balances. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public works, community and economic development, public safety, community services, administrative services, and streetlight districts. The business-type activities of the City include water, sewer, solid waste management, and airport operations. The government-wide financial statements include not only the City (known as the primary government), but also 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. The government-wide financial statements can be found on pages 34 and 35 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. 16 City of Scottsdale, Arizona Table of Contents 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 funds balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, General Obligation Bond Debt Service Fund, Municipal Property Corporation Debt Service Fund, General Capital Improvement Plan (CIP) Capital Projects Fund, and the Preserve Privilege Tax Capital Projects Fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements in the combining and individual funds statements and schedules section of this report. Management’s Discussion and Analysis 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, and provide the 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. For the Fiscal Year Ended June 30, 2013 Governmental Funds The basic governmental fund financial statements can be found on pages 36-44 of this report. Proprietary Funds Proprietary Funds are generally used to account for services for which the City charges customers; either outside customers, or internal units/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 Management 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, personal computer replacement, and 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 are provided in the form of combining statements in a separate section of this report. The basic Proprietary Fund financial statements can be found on pages 45-49 of this report. City of Scottsdale, Arizona 17 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents Fiduciary Funds 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 three agency funds, which are reported under the Fiduciary Funds. Fiduciary Funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for Fiduciary Funds is much like that used for Proprietary Funds. The basic Fiduciary Fund financial statements can be found on pages 50-51 of this report. Notes to the Financial Statements The notes to the financial statements provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 52-102 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information. The required supplementary information (RSI) provides additional information regarding the City’s other post-employment benefit (OPEB) and the Public Safety Personnel Retirement system. RSI can be found on pages 103-105 of this report. Combining Statements The combining statements referred to earlier in connection with nonmajor Governmental Funds, Internal Service Funds, and Fiduciary Funds are presented on pages 108-138. Other Supplementary Information The supplemental schedule of changes in long-term debt provides a comprehensive overview of the City’s total debt and can be found on pages 139-142. Statistical Information The statistical section, found on pages 143-172, presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information indicates about the City’s overall financial health. 18 City of Scottsdale, Arizona Table of Contents These two statements report the City’s net position and changes in net position. The change in net position reflects whether the financial position of the City as a whole has improved or diminished; however, in evaluating the overall financial 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 Position As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $4.3 billion and $4.3 billion at the close of the fiscal years 2013 and 2012, respectively. The following table is a condensed summary of the City’s net position for governmental and businesstype activities: Management’s Discussion and Analysis While this document contains information about the funds used by the City to provide services to its citizens, the Statement of Net Position 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. For the Fiscal Year Ended June 30, 2013 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position June 30, 2013 and 2012 (in thousands) ASSETS Current and Other Assets Capital Assets Total Assets LIABILITIES Long-Term Liabilities Outstanding Other Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Unrestricted Total Net Position Governmental Activities 2013 2012 $ 452,841 $ 3,663,472 4,116,313 380,880 3,587,980 3,968,860 954,334 171,424 1,125,758 858,618 156,020 1,014,638 2,756,186 2,800,451 100,472 100,275 133,897 74,124 $ 2,990,555 $ 2,974,850 Business-Type Activities 2013 2012 $ 344,660 $ 1,400,476 1,745,136 356,665 45,283 401,948 357,734 1,391,647 1,749,381 380,403 50,350 430,753 1,058,880 1,036,985 41,545 38,576 242,763 243,067 $ 1,343,188 $ 1,318,628 Totals $ 2013 2012 797,501 $ 5,063,948 5,861,449 738,614 4,979,627 5,718,241 1,310,999 216,707 1,527,706 1,239,021 206,370 1,445,391 3,815,066 3,837,436 142,017 138,851 376,660 317,191 $ 4,333,743 $ 4,293,478 The largest portion (88 percent) of the City’s net position reflects its net investment in capital assets (e.g. land, buildings, water and sewer system, and streets and storm drains) less any related outstanding debt used to acquire those assets. These amounted to $3.8 billion and $3.8 billion at June 30, 2013 and 2012, respectively. Although the City’s net investment in 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 position ($142.0 million at June 30, 2013, and $138.9 million at June 30, 2012) represents resources that are subject to external restrictions on how they may be used. Unrestricted net position (9 percent of the City’s total net position) at June 30, 2013 and 2012, $376.7 million and $317.2 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. City of Scottsdale, Arizona 19 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents Analysis of Changes in Net Position For the fiscal year ending June 30, 2013, GASB Statements No. 60 and No. 62 were implemented. The implementation of Statement No. 60 resulted in certain contracts payable that were previously reported at their gross value to be discounted to their present value. Intangible assets relating to the City’s service concession arrangements were also recorded. The implementation of Statement No. 62 resulted in the City capitalizing certain leasing arrangements that were previously expensed. As a result, the City’s government-wide net position as of June 30, 2012, increased by $9.3 million. See Note I.E.5. on page 61 for additional information. The City’s total net position increased by $31.0 million and $83.7 million during the fiscal years 2013 and 2012, respectively. These increases are explained in the governmental and business-type activities discussion herein, and are primarily a result of charges for service, business taxes, and contributions from developers of infrastructure assets. Such amounts are included in the table that follows. Changes in Net Position For the fiscal years ended June 30, 2013 and 2012 (in thousands) REVENUES Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Property Taxes Business Taxes Intergovernmental - Taxes Intergovernmental - Other Interest and Investment Income Other Revenue Total Revenues EXPENSES General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Interest on Long-Term Debt Water Utility Sewer Utility Airport Solid Waste Total Expenses Increase (Decrease) in Net Position Before Transfers Transfers Change in Net Position Net Position at Beginning of Year Net Effect of Accounting Change Net Position at Beginning of Year - restated Net Position at End of Year 20 Governmental Activities 2013 2012 Business-Type Activities 2013 2012 $ $ 38,942 31,255 66,917 $ 37,338 28,144 112,163 161,564 25,638 $ Totals 2013 165,578 8,607 $ 200,506 31,255 92,555 2012 $ 202,916 28,144 120,770 64,918 169,664 39,998 9,056 985 12,557 434,292 64,479 163,484 35,334 8,701 1,063 20,405 471,111 144 763 188,109 132 421 174,738 64,918 169,808 39,998 9,056 1,748 12,557 622,401 64,479 163,616 35,334 8,701 1,484 20,405 645,849 791 921 5,778 647 5,621 807 6,420 36,477 148,666 118,033 55,158 16,863 569 38,389 435,140 (848) 7,244 6,396 734 1,118 5,419 617 5,736 842 4,498 34,416 126,622 115,740 54,442 17,318 572 40,647 408,721 62,390 7,366 69,756 90,205 43,169 3,785 19,146 156,305 31,804 (7,244) 24,560 90,829 41,218 3,681 17,671 153,399 21,339 (7,366) 13,973 791 921 5,778 647 5,621 807 6,420 36,477 148,666 118,033 55,158 16,863 569 38,389 90,205 43,169 3,785 19,146 591,445 30,956 30,956 734 1,118 5,419 617 5,736 842 4,498 34,416 126,622 115,740 54,442 17,318 572 40,647 90,829 41,218 3,681 17,671 562,120 83,729 83,729 2,974,850 9,309 2,984,159 $ 2,990,555 2,905,094 2,905,094 $ 2,974,850 1,318,628 1,318,628 $ 1,343,188 1,304,655 1,304,655 $ 1,318,628 4,293,478 9,309 4,302,787 $ 4,333,743 4,209,749 4,209,749 $ 4,293,478 City of Scottsdale, Arizona Table of Contents General revenues such as property, franchise, and privilege taxes are not shown by program, but are used to support program activities citywide. For governmental activities overall, without regard to program, business taxes, which includes sales and use taxes and franchise taxes (39 percent), are the largest single source of funds, followed by capital grants and contributions (16 percent), property taxes (15 percent), intergovernmental revenues (including state shared revenues) (11 percent), and charges for services (9 percent). Revenues by Source – Governmental Activities Fiscal Year 2012/13 (in thousands) Intergovernmental $49,054 11% Interest and Investment Income $985 0% Charges for Services $38,942 9% Operating Grants and Contributions $31,255 7% Capital Grants and Contributions $66,917 16% Business Taxes $169,664 39% Other Revenue $12,557 3% City of Scottsdale, Arizona Management’s Discussion and Analysis In fiscal year 2013, governmental activities increased the City’s net position by $6.4 million and by $69.8 million in fiscal year 2012. Governmental activities accounted for 21 percent of the total growth in net position of the City for fiscal year 2013. Capital grants and contributions posted a year-over-year decrease of 40 percent. This was caused primarily by a $20 million reduction in funding from Growing Smarter State Trust Land Acquisition Grants and lower developer contributions over the prior fiscal year. For the Fiscal Year Ended June 30, 2013 Governmental Activities Property Taxes $64,918 15% 21 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents Property taxes increased by 1 percent from the previous year, primarily due to growth on the property tax rolls caused by new construction. A decrease in both the primary and secondary assessed valuations from the prior year caused increases in both the primary ($0.06) and secondary ($0.7) tax rates per $100 of assessed value. Business taxes increased 4 percent from the previous year. For the third year in a row, sales tax posted a year-over-year growth in the 2013 fiscal year resulting in an increase of 4 percent. Categories with the largest increases over the prior year include other taxable activity, automotive, and construction. The Community and Economic Development Division is the largest expense function (34 percent) followed by the Scottsdale Police and Fire Departments, which together comprise the Public Safety Division (27 percent), and Community Services Division (13 percent). The Community and Economic Development Division is charged with stimulating economic activity and offering a diverse range of value-added programs to build, revitalize and sustain Scottsdale’s unique lifestyle and character. Overall, expenses increased by $22 million or 17 percent during fiscal year 2013 primarily due to the prepayment of a lease. The Public Safety Division provides police and fire/emergency services throughout the City. The division confronts community crime, responds to community needs, and reduces the incidence and severity of emergencies through timely and skilled all-hazard services. Overall, expenses increased by $2.3 million or 2 percent during fiscal year 2013 due to increases in wages and overtime. The City’s Community Services Division is responsible for improving and maintaining facilities and sponsors services that provide opportunities for family interaction, cultural enrichment, and development of lifetime skills, promoting healthy lifestyles and serving as a catalyst for community involvement. They also provide assistance and guidance to those in need through federal, state, local and private resources. Overall, expenses increased by $0.7 million or 1 percent during fiscal year 2013 due to machinery and equipment purchases. Business-Type Activities Business-type activities increased the City’s net position in fiscal years 2013 and 2012 by $24.6 million and $14.0 million, respectively, accounting for 79 percent and 17 percent, respectively, of the total growth in the City’s net position. One key factor of this increase was Water and Sewer Utility Fund capital contributions from developers and grantors, resulting in $25.6 million and $8.6 million for fiscal years 2013 and 2012, respectively. The majority of this amount was due to capital contributions received from Irrigation Water Distribution System participants. Other contributing factors were an increase in development fees due to an improving economy, and infrastructure donated by developers. 22 City of Scottsdale, Arizona Table of Contents $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Water Utility Sewer Utility Program Revenues Airport Solid Waste Expenses Management’s Discussion and Analysis $140,000 For the Fiscal Year Ended June 30, 2013 Program Revenues and Expenses - Business-Type Activities Fiscal Year 2012/13 (in thousands) Revenues by Source – Business-Type Activities Fiscal Year 2012/13 (in thousands) Interest and Investment Income $763 0% Charges for Services $161,564 86% Capital Grants and Contributions $25,638 14% Business Taxes and Other Income $144 0% City of Scottsdale, Arizona 23 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents As shown in the “Program Revenues and Expenses for Business-Type Activities” chart, the largest of Scottsdale’s business-type activities, Water and Sewer utilities, had expenses of $90.2 million and $43.2 million, respectively, in fiscal year 2013, followed by Solid Waste with operating expenses of $19.1 million and Aviation of $3.8 million. As shown on the “Revenues by Source - Business-Type Activities” chart, charges for services provided the largest share of revenues (86 percent) followed by capital grants and contributions (14 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 provided 87,851 water service connections to customers in fiscal year 2012/13. The Solid Waste Department provides delivery of safe, efficient and environmentally sound solid waste services to 80,013 residential customers and 1,163 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. More than 146,000 take-offs and landings occurred last year at 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 spendable and nonspendable resources. Such information may be useful in assessing the City’s financing requirements. In particular, the unassigned fund balance may serve as a useful measure of a government’s net resources available for discretionary use 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 $218.2 million, an increase of $10.4 million in comparison to the balance at June 30, 2012 of $207.8 million. Approximately $47.3 million of the total at June 30, 2013, constitutes unassigned fund balance. The remainder of fund balance is either nonspendable, restricted, committed, or assigned to indicate that it is not available for new spending. 24 City of Scottsdale, Arizona Table of Contents Overall, the General Fund’s performance resulted in expenditures exceeding revenues in the fiscal year ended June 30, 2013, by $24.1 million. One reason for the variance is due to receipting Transient Occupancy Tax to the new Tourism Development Special Revenue Fund rather the General Fund. The General Fund balance decreased in fiscal year 2013 by $3.7 million. The primary reason for the decrease in fund balance was the planned use of fund balance for City Council approved initiatives in the fiscal year 2013 budget which included performance-based pay increases for employees, infrastructure improvements, and capital maintenance. 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 unassigned fund balance of the General Fund was $48.7 million, while the total fund balance was $48.9 million; the unassigned and total balances for the General Fund at the end of fiscal year 2012 were $52.1 million and $52.6 million, respectively. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 19.5 percent of the total General Fund expenditures of $250.1 million in fiscal year 2013 and represented 23.9 percent of the total General Fund expenditures of $217.7 million in fiscal year 2012. Total fund balance represented 19.6 percent and 24.2 percent of total fund expenditures for fiscal years 2013 and 2012, respectively. For the Fiscal Year Ended June 30, 2013 Revenues for governmental functions overall totaled approximately $406.4 million in fiscal year 2013, a decrease of 1.7 percent ($6.9 million) from the previous year total of $413.3 million. In fiscal year 2013 expenditures for governmental functions totaled $576.8 million, an increase of 23.5 percent ($109.9 million) from the fiscal year 2012 total of $466.9 million. In the fiscal years ended June 30, 2013 and 2012, expenditures for governmental functions exceeded revenues by approximately $170.4 million and $53.6 million respectively. This deficit was offset by $180.9 million from other financing sources and uses. 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 $10.1 million, an increase of $4.3 million from the $5.8 million as of June 30, 2012. The increase in fund balance was primarily caused by $2.4 million of the 2013 McDowell Sonoran Preserve General Obligation Bond premium being deposited into the debt service fund. This premium will be used to offset future debt service payments on said bonds. The Municipal Property Corporation Debt Service Fund is used for the accumulation of resources for, and the payment of, revenue bond principal, interest and related costs. At the end of the current fiscal year, the fund balance of the Municipal Property Corporation Debt Service Fund was $10.0 million, an increase of $0.9 million from the $9.1 million as of June 30, 2012, due to increased payments from the Arizona Sports and Tourism Authority. 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. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Projects fund was $44.3 million, an increase of $9.2 million from the $35.1 million at June 30, 2012. The primary reason for the increase was proceeds received from the sale of bonds. Capital improvement expenditures in 2013 and 2012 were $66.9 million, and $56.7 million, respectively. City of Scottsdale, Arizona 25 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents The Preserve Privilege Tax Capital Projects Fund accounts for the resources used to acquire and improve land within the McDowell Sonoran Preserve. Significant transactions in fiscal year 2012/13 include the purchase of more than 6,000 acres of state trust land. The transaction was partially funded by a state land trust grant and the remainder of the purchase was financed using bond proceeds. The debt service will be paid from voter approved Preserve Privilege Tax. 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 2013 and 2012, the unrestricted net position for the Water and Sewer Utility were $222.4 million and $225.0 million, respectively; Scottsdale Airport’s were $6.5 million and $5.7 million, respectively; and the Solid Waste Fund’s were $13.9 million and $12.3 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, also had unrestricted net position of $18.1 million and $22.1 million, respectively. The total growth in net position for the Enterprise Funds was $24.6 million and $14.0 million for fiscal years 2013 and 2012, 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 position increased by $22.8 million due to capital contributions of $25.2 million. 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 primarily due to the City Council approved budget transfer for the prepayment of a lease agreement, and the transfer of the Bed Tax revenue budget within the Community and Economic Development Division to the new Tourism Development Special Revenue Fund. Revenues were $7.0 million more than projected. The largest drivers of the favorable variance were $2.7 million in Building and related Permit Charges which performed better than expected primarily attributable to large new commercial projects; $1.3 million settlement with the Arizona State Retirement System; and $0.6 million state sales tax refund for water consumption on government activities. Expenses were $2.2 million less than the revised budget. Specifically, full-time and part-time wages, other professional services, and specialty lines were all less than the revised budget. Capital Assets and Debt Administration Capital Assets The City’s capital assets for its governmental and business-type activities as of June 30, 2013 and 2012, totaled to $5.1 billion and $5.0 billion, respectively (net of accumulated depreciation). Capital assets include land, buildings and improvements, streets and storm drains, 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 2013 and 2012 was 1.7 percent. 26 City of Scottsdale, Arizona Table of Contents Business-Type Activities 2013 2012 $ 54,560 $ 40,699 18,439 17,919 13,154 13,993 87,171 87,171 786,064 805,830 402,618 407,741 129 164 38,341 18,130 $ 1,400,476 $ 1,391,647 Total 2013 $ 1,863,776 $ 413,264 1,302,362 41,866 87,171 786,064 402,618 22,973 129 143,725 $ 5,063,948 $ 2012* 1,734,260 372,663 1,342,950 38,972 87,171 805,830 407,741 19,945 164 169,931 4,979,627 * The June 30, 2012, Governmental Activities balances for Buildings and Land Improvements, Streets and Storm Drains, and Machinery and Equipment were restated due to the implementation of GASB Statement No. 60 and reclassification of certain improvements to Service Concession Arrangement. Major capital asset events during the current fiscal year included the following: • The Police Special Investigations Building project consists of a building purchase with secure parking and restoration to a warehouse building for storing sensitive equipment. Expenditures totaled $2.0 million this year against a budget of $2.7 million, leaving a balance of $0.7 million. The project is anticipated to be completed in fiscal year 2013/14. • The Pavement Overlay Program project consists of an on-going program that completed street pavement overlays. Expenditures totaled $2.4 million this year against a budget of $2.5 million leaving a minor balance of $0.1 million. The balance will be spent in fiscal year 2013/14. • The Scottsdale Road Preservation Streetscape Enhancement project acquires, preserves and restores desert land along Scottsdale Road, and promotes its designation as a scenic corridor. Expenditures totaled $2.8 million this year against a budget of $26.9 million. As of June 30, 2013, the inception to date expenditures total $17.6 million, leaving a balance of $9.3 million. The project is anticipated to be completed in fiscal year 2014/15. • The Brown’s Ranch Trailhead is for the design and construction of trailhead amenities. Expenditures totaled $2.9 million this year against a budget of $4.1 million. As of June 30, 2013, the inception to date expenditures total $3.3 million, leaving a balance of $0.8 million. The project is anticipated to be completed in fiscal year 2013/14. • The Upper Camelback Wash Watershed project has a goal to reduce flooding as much as feasible for this major wash corridor. Expenditures totaled $3.9 million this year against a budget of $17.7 million. As of June 30, 2013, the inception to date expenditures total $9.1 million, leaving a balance of $8.6 million. The project is anticipated to be completed in fiscal year 2014/15. • The Scottsdale/Thunderbird Park and Ride Facility project will provide vehicle parking for nearby residents who use public transit, vanpool and carpool. Expenditures totaled $5.2 million against a budget of $8.6 million. As of June 30, 2013, the inception to date expenditures total $7.8 million, leaving a balance of $0.8 million. The project is anticipated to be completed in fiscal year 2013/14. City of Scottsdale, Arizona Management’s Discussion and Analysis 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 2013 2012* $ 1,809,216 $ 1,693,561 394,825 354,744 1,302,362 1,342,950 28,712 24,979 22,973 19,945 105,384 151,801 $ 3,663,472 $ 3,587,980 For the Fiscal Year Ended June 30, 2013 Capital Assets, Net of Depreciation June 30, 2013 and 2012 (in thousands) 27 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents • The Scottsdale Road-Thompson Peak Parkway to Pinnacle Peak project will design and construct a six-lane major arterial cross-section. Expenditures totaled $5.5 million against a budget of $17.5 million. As of June 30, 2013, the inception to date expenditures total $7.3 million, leaving a balance of $10.2 million. The project is anticipated to be completed in fiscal year 2014/15. • The Airpark Area Access Projects Phase I project will design and construct a new public collector street, a new frontage road and capacity improvements. Expenditures totaled $6.4 million this year against a budget of $6.1 million. As of June 30, 2013, the inception to date expenditures total $7.0 million, with the anticipation that the budget is to increase to $11.1 million in FY 13/14. The project is anticipated to be completed in fiscal year 2014/15. • The expenditures for the Tony Nelssen Equestrian Center Expansion project totaled $29.5 million this year against a budget of $46.6 million. As of June 30, 2013, the inception to date expenditures total $34.8 million, leaving a balance of $11.8 million. The project is anticipated to be completed in fiscal year 2013/14. • Preserve land purchased under the Expanded McDowell Sonoran Preserve project. Expenditures totaled $74.5 million this year against a budget of $271.2 million. As of June 30, 2013, the inception to date expenditures total $248.3 million, leaving a balance of $22.9 million. Preserve land may continue to be purchased in future years within the 36,400 acre planned Preserve boundary, as approved by the voters in May 1995 and November 1998. • Preserve land purchased was acquired with funding from three Growing Smarter Grant projects. Expenditures totaled $16.0 million this year against a budget of $16.0 million. The project was completed and closed when the state grant funds were spent on the land purchase. • The City’s water and sewer 5-year capital improvement plan includes significant cost impacts from “unfunded” federal water quality mandates for treatment of arsenic and disinfection by-product requirements, in addition to plant and infrastructure expansion to accommodate growth. The most significant CIP cash expenditures include: o Chaparral Water Treatment Plant Pretreatment – This project will examine specific pretreatment processes to prevent Trihalomethanes (THM) from being formed within water treatment plant prior to distribution into the distribution system. The project’s budget totals $10 million. As of June 30, 2013, the inception to date expenditures total $5.2 million, leaving a balance of $4.8 million. This project is anticipated to be completed in fiscal year 2014/15. o Gravity Thickener – Design and construction of a third gravity thickener at the CAP plant. The project’s budget totals $3.9 million. As of June 30, 2013, the inception to date expenditures total $2.2 million, leaving a balance of $1.7 million. The project is anticipated to be completed in fiscal year 2013/14. o Water Campus Chlorine Generation – This project will modify the existing chlorine storage system. The project’s budget totals $10.0 million. As of June 30, 2013, the inception to date expenditures total $9.9 million, leaving a balance of $0.1 million. The project is anticipated to be completed in fiscal year 2013/14. 28 City of Scottsdale, Arizona Table of Contents o Wastewater Collection System Improvements – 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 $55.7 million. As of June 30, 2013, the inception to date expenditures total $49.7 million, leaving a balance of $6.0 million. The project is anticipated to be completed in fiscal year 2013/14. o Advanced Water Treatment – Phase 4 – 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, management, operations, and maintenance regulatory requirements and minimize or eliminate the need for additional capacity in the Sub-Regional Operating Group regional sewage transmission facilities. The project’s budget totals $58.9 million. As of June 30, 2013, the inception to date expenditures total $58.1 million, leaving a balance of $0.8 million. The project is in the construction phase and is anticipated to be complete in fiscal year 2013/14. Management’s Discussion and Analysis o Water Quality Improvements-Southern Neighborhoods – This project will upgrade components of the water production system as needed to meet system demands. The project’s budget totals $17.5 million. As of June 30, 2013, the inception to date expenditures total $14.0 million, leaving a balance of $3.5 million. The project is anticipated to be completed in fiscal year 2014/15. For the Fiscal Year Ended June 30, 2013 o Reclaimed Water Distribution Systems (RWDS) Improvements – Provides for improvements to the RWDS pipeline pump stations and reservoirs. The project’s budget totals $7.1 million. As of June 30, 2013, the inception to date expenditures total $6.0 million, leaving a balance of $1.1 million. The project is anticipated to be completed in fiscal year 2013/14. o Water Distribution System Improvements – 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 $62.4 million. As of June 30, 2013, the inception to date expenditures total $59.1 million, leaving a balance of $3.3 million. The project is anticipated to be completed in fiscal year 2013/14. Additional information on the City’s capital assets can be found in Note IV.C. on pages 75-77 of this report. City of Scottsdale, Arizona 29 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents Debt Administration At the end of the fiscal years 2013 and 2012, the City had total long-term liabilities of $1,365.4 million and $1,267.9 million, respectively. Of these amounts, $639.1 million and $594.4 million, respectively, are General Obligation Bonds backed by the full faith and credit of the City. The remainder includes water and sewer revenue bonds, municipal property corporation bonds, preserve authority bonds, certificates of participation, and other obligations of $726.3 million and $673.5 million for fiscal years 2013 and 2012, respectively. Long-Term Liabilities June 30, 2013 and 2012 (in thousands) General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Net Other Postemployment Benefit Total Long-Term Liabilities Governmental Activities 2013 2012* $ 639,135 $ 594,425 207,654 144,977 52,465 56,265 750 16,003 18,031 31,885 44,182 (13,457) 977,867 2,570 183 3,144 12,882 23,906 288 $ 1,020,840 $ 34,640 25,610 (7,519) 867,179 3,529 391 3,298 10,611 25,172 910,180 Business-Type Activities 2013 2012 $ - $ 35,515 38,630 290,555 299,775 - $ 19,422 (3,896) 341,596 3,007 344,603 $ 20,752 (4,495) 354,662 3,039 357,701 $ Total 2013 2012* 639,135 $ 594,425 35,515 38,630 498,209 444,752 52,465 56,265 750 16,003 18,031 31,885 34,640 63,604 46,362 (17,353) (12,014) 1,319,463 1,221,841 2,570 3,529 183 391 3,144 3,298 12,882 10,611 26,913 28,211 288 $ 1,365,443 $ 1,267,881 * The June 30, 2012, Governmental Activities balances for Contracts Payable to the Bureau of Reclamation, Capital Leases, and Service Concession Arrangements were restated due to the implementation of GASB Statement No. 60 and 62. During fiscal year 2013, the City’s total long-term liabilities increased approximately $97.6 million. This is due primarily to the City issuing $75 million of new Preserve General Obligation bonds and $65 million of new Municipal Property Corporation (MPC) bonds partially offset by paying down approximately $49.0 million of debt ($30 million of General Obligation bonds, $12 million of MPC bonds, and $7 million of Revenue bonds). Additionally, a portion of the change was due to the implementation of GASB 60 and 62. As part of the new issuance process, the City’s ratings on its uninsured General Obligation Bonds and MPC bonds were affirmed by the Rating Agencies in January 2013 (see the Letter of Transmittal page 5 for more information). 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, 2013 and 2012 is $226.8 million and $271.8 million, respectively, in the 6 percent capacity and $454.9 million and $613.7 million, respectively, in the 20 percent capacity. Additional information on the debt limitations and capacities may be found in Section IV.G. of the Notes to the Financial Statements and also in Tables XVIa and XVIb in the Statistical Section of this report. 30 City of Scottsdale, Arizona Table of Contents Economic Factors and Next Year’s Budget and Rates The City’s long-term financial plan remains one of conservative economic growth as Scottsdale’s economy continues to grow. City revenues are forecast to increase by modest amounts again in fiscal year 2013/14. A particularly positive revenue category is sales tax related to construction which has seen a boost over the prior year as well as permit revenues. These increases combined with a focus on efficient spending, continue the trend from the prior two years. The City of Scottsdale’s fiscal year 2013/14 budget includes funding for a pay program designed to reward employee performance and address other pay issues along with one-time funding to address Police Department employee salary inequity issues. The City Council directed the use of a portion of unassigned fund balance for improvement and upkeep of infrastructure and deferred maintenance of buildings and equipment and also reinstated the employee tuition reimbursement program. Management’s Discussion and Analysis Additional information in the City’s long-term liabilities can be found in Section IV.G. of the Notes to the Financial Statements on pages 81-91 of this report. For the Fiscal Year Ended June 30, 2013 In accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, the Net Other Postemployment Benefit Obligation (NOPEBO) included in the Outstanding Long-Term Liabilities represents the City’s unfunded annual required contributions (ARC) pursuant to the actuarial calculations for the accrued cost of eligible retiree health insurance as of June 30, 2013. The NOPEBO at the end of the fiscal years 2013 and 2012 were $0.3 million and $(0.2) million, respectively. In fiscal year 2013/14, citizen tax bills will reflect an estimated combined property tax rate of $1.2946 which is $0.0694 more than the adopted combined fiscal year 2012/13 rate of $1.2252. Water rate and charges include a revised residential and non-residential rate structure, a new irrigation tiered-rate structure for non-residential irrigation, revised water service charges and a flat stormwater fee. Water reclamation rate and charges will see a 4 percent across-the-board increase. The budget also includes various rate and fee adjustments for Planning and Development, Community Services, and City Court. 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 2013/14 is $517.4 million, which includes $334.9 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: • • • • Community Facilities – Acquire, preserve, and restore desert lands along Scottsdale Road to promote its designation as a Scenic Corridor, Scottsdale Stadium infrastructure improvements, and completion of the Tony Nelssen Equestrian Center Expansion. Preservation – Construct trails supporting the gateway to the preserve and expansion of preserve lands. Drainage and Flood Control – Improve drainage to several areas within Scottsdale including the Granite Reef Watershed, Upper Camelback Watershed, and Pima Road Drainage System. Public Safety – Build out of the Police Special Investigations building, and purchase of various technologies such as telephone interception equipment and throwbox. City of Scottsdale, Arizona 31 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2013 Table of Contents • • • Service Facilities – Solid Waste vehicle monitoring system and purchase of Street Operations Work and Asset Management System. Transportation – Reconstruction of Taxiway “A” and Exits in the airport, and improvements to several main Scottsdale thorough ways including Pima Road-McDowell to 90th Street and Airpark Area Access Projects Phase I. Additionally, improvements will be made to bicycle lanes, enhanced sidewalks, and street pavement. Water Services – Modification and improvements to water distribution and wastewater collection system improvements. The adopted budget continues the practice of maintaining 10 percent of the General Fund and Highway User Fund (Transportation Fund) program budgets to ensure the City can provide basic services in the event of major emergencies. For fiscal year 2013/14, this amount is $35.4 million (including a $5.0 million contingency). Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: 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 32 City of Scottsdale, Arizona Table of Contents Basic Financial Statements City of Scottsdale, Arizona 33 Table of Contents Statement of Net Position June 30, 2013 (in thousands of dollars) Governmental Activities ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivables (net of uncollectible amounts of $33,645) Property Taxes and Penalties Other Local Taxes Charges for Services Intergovernmental Interest and Other Supplies Inventory $ 237,186 77,414 $ 116,907 20,520 Total $ 354,093 97,934 11,872 23,945 31,022 8,475 1,088 12 18,638 118 2,965 - 11,872 23,957 18,638 31,140 11,440 1,088 - 1,137 1,137 391,002 4,535 164,832 4,535 555,834 38,289 23,550 110,778 1,253 23,182 - 110,778 39,542 23,182 23,550 - 3,070 36,539 5,006 3,070 36,539 5,006 1,914,600 1,748,872 3,663,472 180,072 1,220,404 1,400,476 2,094,672 2,969,276 5,063,948 3,725,311 1,580,304 5,305,615 4,116,313 1,745,136 5,861,449 LIABILITIES 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, and Other Payables Matured Bonds, Loans, and Other Interest Payable Bonds, Loans, and Other Payables - Due within one year Unearned Revenue Other Liabilities Total Current Liabilities 18,876 7,485 2 9,970 5,244 3,914 1,779 40,814 19,527 51,292 9,728 2,793 171,424 8,424 1,012 1,190 1,137 12,335 8,185 13,000 45,283 27,300 8,497 2 11,160 5,244 3,914 2,916 53,149 27,712 64,292 9,728 2,793 216,707 Noncurrent Liabilities Accrued Compensated 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 13,936 940,398 954,334 1,817 3,070 328,596 23,182 356,665 15,753 3,070 1,268,994 23,182 1,310,999 1,125,758 401,948 1,527,706 2,756,186 1,058,880 3,815,066 36,060 35,487 23,272 25 1,329 4,047 252 133,897 2,990,555 5,006 36,539 242,763 1,343,188 41,066 35,487 23,272 25 1,329 4,047 252 36,539 376,660 4,333,743 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 Service Concession Arrangements Restricted Cash, Cash Equivalents, and Investments Deferred Revenue Water and Sewer System Replacement Revenue Bond Reserve Capital Assets Land, Water Rights, and Construction in Progress Facilities, Infrastructure, and Equipment (net of accumulated depreciation) Total Capital Assets (net of accumulated depreciation) Total Noncurrent Assets Total Assets Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Debt Service Highway User and Preserve Privilege Tax Activities Capital Projects Community Development Block Grant Grants Special Programs Streetlight and Service District Repair and Replacement Unrestricted Total Net Position 34 Business-Type Activities $ $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona Table of Contents Statement of Activities For the Fiscal Year Ended June 30, 2013 (in thousands of dollars) Expenses FUNCTIONS/PROGRAMS Governmental Activities General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Interest on Long-Term Debt Total Governmental Activities $ Business-Type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government Charges for Services 791 921 5,778 647 5,621 807 6,420 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 $ 90,205 43,169 3,785 19,146 156,305 $ 591,445 225 299 764 204 250 2,598 1,498 14,736 9,139 5,523 3,155 551 38,942 Program Revenues Operating Grants and Contributions $ 100,615 36,939 3,552 20,458 161,564 $ 200,506 90 1 42 1,064 188 13,554 6,547 9,769 31,255 Capital Grants and Contributions $ $ 31,255 135 50,214 278 16,290 66,917 Governmental Activities $ 18,475 6,714 449 25,638 $ 92,555 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 Position Net Position - Beginning, restated $ Net Position - Ending Business-Type Activities (566) (532) (5,013) (443) (5,579) (557) (2,758) (34,584) (69,010) (102,069) (24,800) (13,708) (18) (38,389) (298,026) $ (298,026) - Total $ (566) (532) (5,013) (443) (5,579) (557) (2,758) (34,584) (69,010) (102,069) (24,800) (13,708) (18) (38,389) (298,026) 28,885 484 216 1,312 30,897 28,885 484 216 1,312 30,897 30,897 (267,129) 64,918 157,779 11,885 144 - 64,918 157,923 11,885 17,793 22,205 9,056 985 12,557 7,244 304,422 6,396 2,984,159 2,990,555 763 (7,244) (6,337) 24,560 1,318,628 1,343,188 17,793 22,205 9,056 1,748 12,557 298,085 30,956 4,302,787 4,333,743 $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 35 Table of Contents 36 Balance Sheet Governmental Funds June 30, 2013 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles $33,594) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Total Assets (continued) General $ $ 49,104 1,267 565 14,369 914 1,549 1,977 9,562 157 353 2,289 3 265 82,374 General Obligation Bond Debt Service $ $ 9,674 43,591 1,278 54,543 Municipal Property Corporation Debt Service $ $ 8,477 7,169 21,480 37,126 General CIP Construction Capital Projects Preserve Privilege Tax Capital Projects $ $ $ 30,099 15,661 82 255 2,916 49,013 $ 536 536 Total Nonmajor Governmental Funds $ $ 107,557 9,726 221 3,821 702 118 48 1,126 6,512 2,775 1,817 134,423 Total Governmental Funds $ $ 205,447 77,414 868 18,190 702 2,310 1,549 2,025 9,562 157 1,126 353 27,992 3,030 7,022 3 265 358,015 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Balance Sheet Governmental Funds June 30, 2013 (in thousands) 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 Court Library Privilege Tax Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities and Fund Balances The notes to the financial statements are an integral part of this statement. General $ $ 4,901 6,907 253 1,014 General Obligation Bond Debt Service $ 13,297 30,290 Municipal Property Corporation Debt Service $ 4,032 3,135 General CIP Construction Capital Projects Preserve Privilege Tax Capital Projects Total Nonmajor Governmental Funds $ $ $ 4,424 25 - 528 8 - 7,546 398 3 1,945 6,375 Total Governmental Funds $ 17,399 7,338 3 19,527 40,814 619 3,675 157 6,440 978 3,914 1,779 2,793 33,430 851 44,438 19,914 27,081 255 2 4,706 536 65 12,712 590 29,634 1,535 3,675 157 6,440 32,881 1,570 3,914 1,779 2,793 139,825 265 48,679 48,944 82,374 10,105 10,105 54,543 3,776 6,269 10,045 37,126 9,697 1,534 33,076 44,307 49,013 536 91,098 14,764 321 (1,394) 104,789 134,423 265 114,676 16,298 39,666 47,285 218,190 358,015 $ $ $ $ $ $ 37 Table of Contents Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2013 (in thousands) Fund Balances - Total Governmental Funds $ 218,190 Amounts reported for governmental activities in the statement of net position are different because (see Note II A): Capital assets used in governmental activities are not financial resources; therefore, are not reported in the funds. 3,629,255 Bond issuance costs, prepayments, and service concession arrangements are not financial resources; therefore, are not reported in the funds. 61,839 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore, are not reported in the funds. (1,007,625) 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. 36,530 Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and vehicles to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the statement of net position. 52,366 Net Position of Governmental Activities $ 2,990,555 The notes to the financial statements are an integral part of this statement. 38 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) General 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 Income 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 on next page) General Obligation Bond Debt Service $ $ 24,900 97,681 8,171 3,461 260 838 $ 36,164 - Municipal Property Corporation Debt Service $ General CIP Construction Capital Projects - $ - Preserve Privilege Tax Capital Projects Total Nonmajor Governmental Funds $ $ - 3,844 47,228 13,852 253 - Total Governmental Funds $ 64,908 144,909 13,852 8,424 3,461 260 838 17,793 22,205 7,273 1,739 - - - - 11,903 639 24 17,793 22,205 7,273 11,903 639 1,763 11,464 3,621 2,890 724 - - 190 - - 350 1,588 43 12,004 5,209 2,890 767 4,084 253 2,174 338 2,259 1,450 (942) - 160 - 382 (203) - 157 958 508 591 1,813 792 (494) 4,241 253 2,174 958 338 508 591 4,232 2,624 (1,639) 1,129 90 3,699 7,037 1,449 226,040 36,164 1,763 3 1,926 23 16,006 5,904 217 475 265 23,259 67 67 15,501 299 12,837 203 551 2,439 1,760 558 721 118,918 15,524 16,305 21,633 203 551 2,813 5,934 7,595 2,438 406,374 $ $ $ $ $ $ 39 Table of Contents 40 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) General EXPENDITURES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services 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 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds of Refunding Bonds Proceeds from Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. $ 775 893 5,662 665 3,610 829 5,335 17,787 53,153 109,305 33,385 14,141 - General Obligation Bond Debt Service $ - Municipal Property Corporation Debt Service $ General CIP Construction Capital Projects - $ - Preserve Privilege Tax Capital Projects Total Nonmajor Governmental Funds $ $ - 1,812 114 11,871 17,198 2,655 11,961 569 Total Governmental Funds $ 775 893 5,662 665 5,422 829 5,449 29,658 70,351 111,960 45,346 14,141 569 2,484 2,103 250,127 30,290 25,598 1,089 56,977 3,135 7,011 648 10,794 66,928 66,928 80,793 80,793 27,325 4,077 178 33,468 111,228 63,234 38,789 1,915 181,189 576,847 (24,087) (20,813) (8,868) (43,669) (80,726) 7,690 (170,473) 9,221 (19,819) 26,295 4,705 20,402 21,079 83,025 92 11,068 (90,135) 25,129 9,170 655 9,825 10,757 (1,423) 38,705 4,855 52,894 5,818 74,908 80,726 22,126 (49,677) 28,225 799 (9,549) (8,076) 78,171 (70,919) 111,250 140,000 22,082 (99,684) 180,900 (3,685) 4,316 957 9,225 - (386) 10,427 52,629 48,944 $ 5,789 10,105 $ 9,088 10,045 $ 35,082 44,307 $ - $ 105,175 104,789 $ 207,763 218,190 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 Fiscal Year Ended June 30, 2013 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ 10,427 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. 44,111 Donations of capital assets are not capitalized on the governmental fund statements, but are shown in the statement of activities. 28,044 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. 608 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (492) Bond issuance costs and prepayments are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net position. This is the amount by which current year bond issuance costs and prepayments exceeded amortization expense in the current period. 33,941 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 transaction has any affect on net position. This is the amount by which debt proceeds exceeded principal retirement in the current period. (110,463) Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refunding. 808 The net revenues of certain activities of Internal Service Funds is reported with governmental activities. (588) Changes in Net Position of Governmental Activities $ 6,396 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 41 Table of Contents 42 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts City of Scottsdale, Arizona REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State-Shared Sales State Revenue Sharing Auto Lieu Tax Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees, and Forfeitures Court Parking Photo Radar Library Property Rental Interest Earnings Investment Income Intergovernmental Miscellaneous Contributions and Donations Reimbursements and Outside Sources Indirect Costs Other Total Revenues (continued) Original $ $ 25,272 97,329 13,385 8,210 3,024 226 860 Final $ 25,272 97,329 7,960 3,024 226 860 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 24,900 97,681 8,171 3,461 260 838 - 24,900 97,681 8,171 3,461 260 838 (372) 352 211 437 34 (22) 18,178 22,203 7,207 1,780 18,178 22,203 7,207 1,780 17,793 22,205 7,273 1,739 - 17,793 22,205 7,273 1,739 (385) 2 66 (41) 8,730 3,658 2,729 466 8,730 3,658 2,729 466 11,464 3,621 2,890 724 - 11,464 3,621 2,890 724 2,734 (37) 161 258 4,315 260 2,110 319 3,275 1,116 - 4,315 260 2,110 319 1,772 1,116 - 4,084 253 2,174 338 2,259 1,450 - (942) 4,084 253 2,174 338 2,259 1,450 (942) (231) (7) 64 19 487 334 - 877 90 1,793 7,059 748 235,219 877 1,793 7,059 748 219,991 1,129 90 3,699 7,037 1,449 226,982 (942) 1,129 90 3,699 7,037 1,449 226,040 252 90 1,906 (22) 701 6,991 $ $ $ $ $ Table of Contents City of Scottsdale, Arizona General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts EXPENDITURES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer - Finance and Accounting Public Works Community and Economic Development* Public Safety Community Services Administrative Services Debt Service Principal Interest and Fiscal Charges Total Expenditures Original $ Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 779 998 5,582 754 3,746 880 5,453 17,686 23,704 108,773 33,819 16,153 Final $ 784 1,018 6,087 763 3,724 908 5,419 17,530 22,131 109,864 33,853 14,361 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 772 890 5,683 665 3,603 828 5,323 17,759 53,116 109,051 33,294 14,111 3 3 (21) 7 1 12 28 37 254 91 30 Actual Amounts GAAP Basis $ 775 893 5,662 665 3,610 829 5,335 17,787 53,153 109,305 33,385 14,141 Variance Between Final Budget and Actual Amounts Budgetary Basis $ 12 128 404 98 121 80 96 (229) (30,985) 813 559 250 2,495 3,743 224,565 31,695 3,743 251,880 2,484 2,103 249,682 445 2,484 2,103 250,127 29,211 1,640 2,198 10,654 (31,889) (22,700) (1,387) (24,087) 9,189 6,756 (25,771) (19,015) 9,456 (17,373) 31,000 23,083 9,221 (19,819) 26,295 4,705 20,402 - 9,221 (19,819) 26,295 4,705 20,402 (235) (2,446) (4,705) 4,705 (2,681) (8,361) (8,806) (2,298) (3,685) 6,508 39,432 31,071 $ 57,983 49,177 $ The notes to the financial statements are an integral part of this statement. *$31M payment was budgeted in the Debt Service Interest and Fiscal Charges, payment was actually made from Community & Economic Development. 57,983 55,685 (1,387) $ (5,354) (6,741) $ 52,629 48,944 $ 6,508 43 Table of Contents General Fund Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Investment Income $ The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accrual and Compensated Absences Bad Debt Expense Total Expenditure Reconciling Items: Net Decrease in Fund Balance - Budget to GAAP (942) 442 3 445 $ (1,387) The notes to the financial statements are an integral part of this statement. 44 City of Scottsdale, Arizona Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2013 (in thousands) ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivables (net of uncollectible amounts of $51) Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Restricted Cash, Cash Equivalents, and Investments Customer Advances and Deposits Other Restricted Assets Joint Venture Construction Deposits Water and Sewer Utility $ 97,482 20,520 Solid Waste Airport $ 6,361 - $ Governmental Activities Internal Service Funds Total 13,064 - $ 116,907 20,520 $ 31,739 - 16,587 407 2,144 - 12 118 16 318 - 2,051 28 52 - 12 18,638 118 451 2,514 - 428 823 1,082 55 - 1,137 - 4,535 - - 4,535 - 142,757 6,880 15,195 164,832 32,990 110,778 1,253 23,182 - - 110,778 1,253 23,182 - 1,203 36,539 5,006 1,867 - - 3,070 36,539 5,006 - 43,885 87,171 1,118,997 557,751 18,314 813 35,184 (494,748) 9,564 27,332 938 3,157 (12,226) 1,111 4,771 1,905 (3,443) 54,560 87,171 1,118,997 557,751 32,103 21,157 813 38,341 (510,417) 12,447 62,910 1,374 (42,514) Total Capital Assets (net of accumulated depreciation) 1,367,367 28,765 4,344 1,400,476 34,217 Total Noncurrent Assets 1,545,328 30,632 4,344 1,580,304 34,217 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 Capital Assets Land Water Rights Water System Sewer System Buildings and Improvements Motor Vehicles Machinery and Equipment Furniture and Fixtures Construction in Progress Less Accumulated Depreciation Total Assets $ 1,688,085 $ 37,512 $ 19,539 $ 1,745,136 $ 67,207 (continued on next page) City of Scottsdale, Arizona 45 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2013 (in thousands) 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 Water and Sewer Utility $ Noncurrent Liabilities Accrued Compensated 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 7,914 715 851 1,082 12,335 8,185 13,000 44,082 Airport $ Solid Waste 203 41 60 55 359 $ 307 256 279 842 Governmental Activities - Internal Service Funds Total $ 8,424 1,012 1,190 1,137 12,335 8,185 13,000 45,283 $ 1,477 149 159 5,244 7,029 1,332 1,203 328,596 23,182 354,313 63 1,867 1,930 422 422 1,817 3,070 328,596 23,182 356,665 174 7,638 7,812 398,395 2,289 1,264 401,948 14,841 NET POSITION Net Investment in Capital Assets 1,025,771 28,765 4,344 1,058,880 34,217 Restricted for Water and Sewer System Replacement Restricted for Debt Service Unrestricted Total Net Position 36,539 5,006 222,374 1,289,690 6,458 35,223 13,931 18,275 36,539 5,006 242,763 1,343,188 18,149 52,366 Total Liabilities $ $ $ $ $ The notes to the financial statements are an integral part of this statement. 46 City of Scottsdale, Arizona Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2013 (in thousands) 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 Water and Sewer Utility $ OPERATING EXPENSES Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Total Operating Expenses 90,700 35,783 9,266 1,805 137,554 Solid Waste Airport $ 3,415 137 3,552 $ Governmental Activities Internal Service Funds Total 20,451 7 20,458 $ 90,700 35,783 9,266 20,451 3,415 1,949 161,564 $ 48,368 1,269 49,637 46,292 21,868 5,487 45,556 119,203 2,282 440 1,063 3,785 17,246 1,668 210 19,124 46,292 21,868 17,246 2,282 7,595 46,829 142,112 47,822 4,385 52,207 18,351 (233) 1,334 19,452 (2,570) NON-OPERATING REVENUES (EXPENSES) Transaction Privilege Tax Property Tax Investment Income Interest Expense Gain (Loss) on Sale of Capital Assets Net Non-Operating Revenue (Expenses) 670 (14,150) (21) (13,501) 144 36 180 57 (22) 35 144 763 (14,150) (43) (13,286) 213 249 462 Income Before Contributions and Transfers 4,850 (53) 1,369 6,166 (2,108) 25,189 25 (7,248) 449 (5) (16) 25,638 25 (7,269) 1,528 (8) 22,816 391 1,353 24,560 (588) Operating Income (Loss) Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending $ 1,266,874 1,289,690 $ 34,832 35,223 $ 16,922 18,275 $ 1,318,628 1,343,188 $ 52,954 52,366 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 47 Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Water and Sewer Utility Airport Solid Waste Governmental Activities Internal Service Funds Total Cash Flows from Operating Activities Cash Received from Customers $ 136,426 $ 3,163 $ 20,395 $ 159,984 $ 48,030 Cash Payments to Suppliers for Goods/Services (54,214) (1,560) (12,359) (68,133) (41,246) Cash Payments to Employees for Services (18,613) (1,040) (6,486) (26,139) (4,195) Other Cash Receipts Net Cash Provided by Operating Activities 601 137 7 745 1,269 64,200 700 1,557 66,457 3,858 Cash Flows from Non-Capital Financing Activities Property Tax - - - - 213 Transaction Privilege Tax - 144 - 144 - 25 - - 25 - Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities (7,248) (5) (16) (7,269) (8) (7,223) 139 (16) (7,100) 205 Cash Flows from Capital and Related Financing Activities Capital Contributions from: Water and Sewer Development Fees 13,180 - - 13,180 - - 341 - 341 - (52,249) (678) (2) (52,929) (6,269) (200) - - (200) - Principal Payments on Capital Debt and Other Payables (12,293) - - (12,293) - Interest Paid on Capital Debt (16,679) - - (16,679) - Investment in Joint Venture and CIP deposit - - - - - Sale of Capital Assets - - - - 323 (68,241) (337) (2) (68,580) (5,946) 467 26 41 534 - 467 26 41 534 - Net Increase (Decrease) in Cash and Cash Equivalents (10,797) 528 1,580 (8,689) (1,883) Cash and Cash Equivalents at Beginning of Year 172,629 7,755 11,484 191,868 33,622 Capital Grants Acquisition and Construction of Property and Equipment Water and Sewer Development Fee Credit Agreements Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Income Received on Investments Net Cash Provided by Investing Activities Cash and Cash Equivalents at End of Year $ 161,832 $ 8,283 $ 13,064 $ 183,179 $ 31,739 (continued) 48 City of Scottsdale, Arizona Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2013 (in thousands) 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 Total Cash and Cash Equivalents 97,482 $ 20,520 161,832 $ 13,064 - 43,830 $ 6,361 $ - 1,922 116,907 $ 20,520 - 31,739 - 45,752 - $ 8,283 $ 13,064 $ 183,179 $ 31,739 $ (233) $ 1,334 $ 19,452 $ (2,570) Reconciliation of Operating Income to Net Cash Provided by Operating Activities Cash Flows from Operating Activities Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: $ Depreciation/Amortization Change in Equity in Joint Venture 18,351 45,556 1,063 210 46,829 4,385 5,183 - - 5,183 - 517 - (208) 309 (338) (1,204) (94) 152 (1,146) - Changes in Assets and Liabilities Sources (Uses) of Cash Accounts Receivable Miscellaneous Receivables Pollution Remediation Recoveries Accounts Payable Accrued Payroll and Compensated Absences Other Post Employment Benefit 163 - (4,252) 126 (147) 36 - Claims Payable Supplies Inventories - Deferred Revenue Total Adjustments Net Cash Provided by Operating Activities 163 - (20) (4,146) 259 (7) 74 (80) (17) 3 15 54 (31) - - - 2,271 - - - (101) (133) - (133) - (3) (25) - (28) - 45,849 933 223 47,005 6,428 - Other Liabilities - $ 64,200 $ $ 2,546 $ 700 $ - $ 1,557 $ 66,457 $ - $ 2,546 $ 3,858 Supplemental Disclosure of Non-cash Financing Activities Additions to Property, Plant, and Equipment Contributions from Developers - Amortization of deferred charges (159) - - (159) - Loss on Sale/Disposal of Assets (21) - (22) (43) - 5,183 - - 5,183 - Change in Equity in Joint Venture Total Non-Cash Financing Activities $ 7,549 $ - $ (22) $ 7,527 $ - The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 Table of Contents Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 (in thousands) ASSETS Cash and Cash Equivalents Total Assets LIABILITIES Escrow Payable Vouchers Designated Escrow Payable State Land Department Rebate Private Purpose Trust Funds $ 3 $ 3,210 $ 3 $ 3,210 $ - $ 75 1,720 1,415 - $ 3,210 Total Liabilities NET POSITION Held in Trust for Other Purposes Agency Funds $ 3 The notes to the financial statements are an integral part of this statement. 50 City of Scottsdale, Arizona Table of Contents Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Private Purpose Trust Funds ADDITIONS Contributions: Private Donations $ Total Additions Scholarships 6 6 DEDUCTIONS 6 Total Deductions 6 Change in Net Position - Total Net Position - Beginning Total Net Position - Ending 3 $ 3 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 51 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity 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, and public safety. 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) 52 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 District debt. • For financial reporting purposes, transactions are included as a governmental fund type, as if part of the City’s operation. 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 City of Scottsdale, Arizona Table of Contents • • • • • • • DC Ranch Community Facilities District (CFD) • • • • • • • Via Linda Road Community Facilities District (CFD) • • • • • • • Waterfront Commercial Community Facilities District (CFD) • • • • • • • City of Scottsdale, Arizona Reporting Method For Separate Financial Statements 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 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 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 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 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 Notes to Financial Statements McDowell Mountain Ranch Community Facilities District (CFD) Description and Criteria for Inclusion For the Fiscal Year Ended June 30, 2013 Component Unit 53 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position 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. The statement of activities demonstrates the degree to which the direct expenses for a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and trust fund financial statements. Agency funds do not have a measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. 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 earned 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. Because different measurement focuses and bases of accounting are used in the government-wide statement of net postion and in governmental fund balance sheets amounts reported as restricted fund balances in governmental funds may be different from amounts reported as restricted net position in the statement of net position. 54 City of Scottsdale, Arizona Table of Contents The General Fund is the government’s primary operating fund and is used to account for and report all financial resources not accounted for and reported in another fund. The General Obligation Bond Debt Service Fund is used to account for and report the accumulation of financial resources that are restricted, committed, or assigned to expenditures for the payment of longterm obligation debt principal, interest, and related costs. The Municipal Property Corporation Debt Service Fund is used to account for the principal and interest requirements of the City’s Municipal Property Corporation (MPC) bonds. Financing is provided primarily by transaction privilege tax. The General CIP Construction Capital Projects Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays including the acquisition, construction, and improvements to 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. Notes to Financial Statements The government reports the following major governmental funds: For the Fiscal Year Ended June 30, 2013 Property taxes, other local taxes, and licenses available within the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Interest is accrued in the same fiscal period in which the revenue is earned. All other revenue items are considered to be measurable and available only when the City receives cash. The Preserve Privilege Tax Capital Projects Fund is used to account 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 percent 2004-approved Preserve Privilege Tax. Capital Projects Funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. 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, computer replacements, 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, Crossroad East Development Agreements, 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. City of Scottsdale, Arizona 55 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are indirect costs, in-lieu, franchise fees, and other charges between the City’s governmental activities and the 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. 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, vehicle purchase/ maintenance amounts, computer replacement, 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 nonoperating revenues and expenses. When both restricted and unrestricted resources are available for specified expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed would be considered spent first (if available), followed by assigned (if available), and then unassigned amounts. D. Assets, Liabilities, and Net Position or Equity 1. Deposits and Investments Cash equivalents for purposes of the statements of cash flows are investments (including restricted assets) in mutual funds, demand deposits, repurchase agreements, and U.S. Treasury bills and notes with maturities of three months or less at acquisition date. 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, highly rated corporate bonds/notes, 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), which is overseen by the State of Arizona. 2. Receivables and Payables Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is 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 uncollectible amounts. 56 City of Scottsdale, Arizona Table of Contents 3. Inventories and Prepayments 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. Notes to Financial Statements 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. For the Fiscal Year Ended June 30, 2013 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. Prepayments of the governmental funds, which are prepared using the modified accrual basis of accounting, are recorded under the purchases method, and are therefore recorded as expenditures when purchased. Within the government-wide statements, which are prepared using the accrual basis of accounting, prepayments are recorded as assets and amortized over the life of the related agreement. 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 statement of net position because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. The revenue bond reserve and water and sewer replacement accounts are used to report resources set aside to meet unexpected contingencies or to fund asset replacements. Assets are also restricted in enterprise funds for deposits received from water, sewer, and airport customers, as well as deferred revenues related to cash received in advance of services provided. 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 $10,000 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. City of Scottsdale, Arizona 57 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Water System....................................................................... 10 to 75 Years Sewer System....................................................................... 25 to 50 Years Buildings and Improvements............................................... 25 to 50 Years 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 Compensated absences consist of vacation leave and a calculated amount of medical 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 the calendar year-end are forfeited. The City’s policy is to pay employees for unused accumulated vacation hours at termination or retirement. The City’s medical leave policy, however, is that only those employees hired full-time before July 1, 1982, receive cash for a portion of unused medical leave at death or retirement. For employees hired after July 1, 1982, the City funds the value of medical leave balances converted and remitted to a retiree health savings account for the participant immediately upon retirement. To be eligible for the medical leave conversion the employee must retire and have accumulated 300 or more hours of medical leave (420 or more hours for 56 hour workweek employees) and will be funded at 100 percent for any medical leave hours accrued prior to July 1, 2011. If an employee has not accrued 1,200 hours before July 1, 2011, the employee will be funded the unused medical leave accrued after July 1, 2011, at 50 percent of the employee’s hourly base rate at the time of retirement, up to and including 1,200 hours accrued both before and after July 1, 2011. Employees who work a 56 hour workweek will have the same rules apply, except their cap is 1,680 medical leave hours. 58 City of Scottsdale, Arizona Table of Contents 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 position. 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 refunding. 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. Notes to Financial Statements 7. For the Fiscal Year Ended June 30, 2013 Vacation pay is calculated based on vacation used and the medical leave conversion is based on an actuarial valuation dated January 1, 2013. 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, 2013, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2013, 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. 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 Balance Policies In the fund financial statements, governmental funds report fund balance into classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purpose for which amount in those funds can be spent. The classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable fund balances include amounts that cannot be spent because they are not in a spendable form, such as inventory or prepaid items, or because resources legally or contractually must remain intact. Restricted fund balances are the portion of fund balance that have externally enforceable limitations on their usage through legislation or limitations imposed by creditors, grantors, laws and regulations of other governments, or enabling legislation. City of Scottsdale, Arizona 59 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Committed fund balances are self imposed limitations by the highest level of decision making authority, namely Mayor and City Council, prior to the end of the reporting period. Mayor and City Council approval is required to commit resources or to rescind the commitment through a City Council resolution. Assigned fund balances are limitations imposed internally by management based on the intended use of the funds. In June 2011, through City Council Resolution No. 8751, the City Council authorized the City Treasurer to assign fund balance for specific purposes. Unassigned fund balances represent the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specified expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed would be considered spent first (if available), followed by assigned (if available), and then unassigned amounts. 10. Net Position The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted. Net Investment in Capital Assets – This category groups all capital assets, including infrastructure, into one component of net position. 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 Position – This category represents net position that has external restrictions imposed by creditors, grantors, contributors, laws or regulations of other governments, and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position – This category represents net position of the City not restricted for any project or other purpose. E. Implementation of New Accounting Principles 1. Governmental Accounting Standards Board Statement No. 60 The City adopted the provisions of GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. This Statement modifies financial reporting by addressing issues related to service concession arrangements (SCAs), which are a type of public-private or public-public partnership. As used in this Statement, an SCA is an arrangement between a transferor (a government) and an operator (governmental or nongovernmental entity) in which (1) the transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset (a “facility”) in exchange for significant consideration and (2) the operator collects and is compensated by fees from third parties. The City is engaged in two service concession arrangements in which it is the operator. 60 City of Scottsdale, Arizona Table of Contents The City adopted the provisions of GASB Statement No. 61, The Financial Reporting Entity: Omnibus. This Statement modifies existing requirements for the assessment of potential component units in determining what should be included in the financial reporting entity and financial reporting entity display and disclosure requirements. The requirements of Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, were amended to better meet user needs and to address reporting entity issues that have arisen since the issuance of those Statements. 3. Governmental Accounting Standards Board Statement No. 62 The City adopted the provisions of GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This Statement directly incorporates the applicable guidance from Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the American Institute of Certified Public Accountants’ Committee on Accounting Procedure, issued on or before November 30, 1989, into the state and local government accounting and financial reporting standards, with the provisions modified, as appropriate, to recognize the effects of the governmental environment and the needs of governmental financial statement users without affecting the substance of the applicable guidance. 4. Notes to Financial Statements Governmental Accounting Standards Board Statement No. 61 For the Fiscal Year Ended June 30, 2013 2. Governmental Accounting Standards Board Statement No. 63 The City adopted the provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This Statement provides financial reporting guidance for deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position and related disclosures. It also identifies net position as the residual of all other elements presented in a statement of financial position, or the difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. As implied above, this Statement changes the previous classification of net assets to net position, and consequently the statement of net assets to the statement of net position. 5. Restatement of Net Position For the fiscal year ending June 30, 2013, GASB Statements No. 60 Accounting and Financial Reporting for Service Concession Arrangements and No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (“the Statements”) were implemented. The implementation of Statement No. 60 resulted in certain contracts payable that were previously reported at their gross value to be discounted to their present value. Intangible assets relating to the City’s service concession arrangements were also recorded. The implementation of Statement No. 62 resulted in the City capitalizing certain leasing arrangements that were previously expensed. The City’s government-wide net position as of June 30, 2012, has been restated as follows (in thousands of dollars): Net assets at June 30, 2012, as previously reported GASB Statement No. 60 adjustment: Service concession arrangement GASB Statement No. 62 adjustment: Capital lease additions Net position at July 1, 2012, as restated City of Scottsdale, Arizona Governmental Activities $ 2,974,850 9,700 $ (391) 2,984,159 61 For the Fiscal Year Ended June 30, 2013 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 net position The City’s total governmental fund balances, $218,190,000 differs from net position of governmental activities, $2,990,555,000 reported in the statement of net position. The difference primarily results from the long-term economic focus in the statement of net position 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 Position (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectible amounts of $33,594) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Capital Assets (net of accumulated depreciation) Deferred charges and other assets Service Concession Arrangements Total Assets LIABILITIES Accounts Payable Accrued Payroll and Benefits Due to Other Funds Accrued Compensated Absences - Current Accrued Compensated Absences - Due within one year Accrued Compensated Absences - Due in more than one year Claims Payable - Due within one year Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Court Library Privilege Tax Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Fund Balances/Net Position Total Fund Balances/Net Position Total Liabilities and Fund Balances/Net Position 62 Total Governmental Funds Long-Term Assets/ Liabilities(1) $ $ $ $ 205,447 77,414 868 18,190 702 2,310 1,549 2,025 9,562 157 1,126 353 27,992 3,030 7,022 3 265 358,015 17,399 7,338 3 19,527 40,814 $ $ 1,535 3,675 157 6,440 32,881 1,570 3,914 1,779 2,793 139,825 $ 218,190 358,015 Internal Service Funds(2) - 3,629,255 38,289 23,550 3,691,094 (2) 2 9,811 13,762 - $ $ $ (1,535) (3,675) (157) (6,440) (24,106) (617) 984,052 971,095 $ 2,719,999 3,691,094 31,739 428 823 34,217 67,207 1,477 149 159 174 5,244 - $ $ $ 7,638 14,841 $ 52,366 67,207 Statement of Net Position Total Reclassifications and Eliminations (3) (3) (3) - $ $ $ (3) $ (3) 237,186 77,414 868 18,190 702 2,310 1,549 2,025 9,562 157 1,126 353 27,992 3,030 7,450 1,088 3,663,472 38,289 23,550 4,116,313 18,876 7,485 2 9,970 13,936 5,244 19,527 40,814 8,775 953 3,914 1,779 2,793 991,690 1,125,758 $ 2,990,555 4,116,313 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 position includes those capital assets among the assets of the City as a whole. $ 5,370,445 (1,741,190) $ 3,629,255 Cost of capital assets Accumulated depreciation Certain items that are recognized as assets on the statement of net position are expended in governmental funds when paid (such as bond issuance costs and long-term prepayments), while others arise from the incurrence of long-term liabilities or the receipt of capital assets from elsewhere within the City, such as service concession arrangements (SCAs). These assets are capitalized and amortized over the life of the corresponding bond or agreement. Bond issuance costs at 7/1/13 Bond issuance cost for fiscal year 2013 Refunded issuance cost for fiscal year 2013 Amortization of bond issuance costs $ Prepayments for fiscal year 2013 Amortization of prepayments $ SCAs for fiscal year 2013 Amortization of SCAs $ $ $ $ 4,636 1,915 (288) (408) 5,855 33,001 (567) 32,434 23,781 (231) 23,550 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 position. Balances at June 30, 2013, were: Contract and capital lease payables Bonds Payable Service Concession Arrangement Deferred amount on refunding Deferred issuance premium Accrued vacation and sick leave pay Post Employment - Explicit Subsidy Notes to Financial Statements (in thousands) For the Fiscal Year Ended June 30, 2013 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position $ (2,753) (947,142) (3,144) 13,457 (44,182) (23,573) (288) $ (1,007,625) 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. 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 library revenue Deferred court revenue Deferred tax revenue Deferred intergovernmental revenue Deferred other $ $ 157 3,675 7,975 24,106 617 36,530 $ 52,366 (2) Internal Service Funds are used by management to charge the costs of certain activities, such as fleet management, computer equipment, 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 position. 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, $10,427,000 differs from the change in net position for the governmental activities, $6,396,000 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 in the next table. City of Scottsdale, Arizona 63 Table of Contents Notes to Financial Statements 64 For the Fiscal Year Ended June 30, 2013 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) City of Scottsdale, Arizona 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 and Forfeitures Court Parking Photo Radar Court Enhancement Library Police Fees Special Assessments Property Rental Interest Earnings Investment Income 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) Total Governmental Funds 64,908 144,909 13,852 8,424 3,461 260 838 $ Capital Related Items(4) Long-Term Revenue/ Expenses(3) $ (203) (982) 46 $ Internal Service Funds(5) - $ Reclassifications and Eliminations(6) 213 - $ Long-Term Debt Transactions(7) - $ Statement of Activities - $ 64,918 143,927 13,852 8,424 3,461 260 884 17,793 22,205 7,273 11,903 639 1,763 18 - - - - 17,793 22,205 7,273 11,903 639 1,781 12,004 5,209 2,890 767 10 6 (29) - - (168) - - 11,846 5,215 2,890 738 4,241 253 2,174 958 338 508 591 4,232 2,624 (1,639) (338) (16) (11) (30) (568) 16 - - - - - 3,903 237 2,163 958 308 508 23 4,248 2,624 (1,639) 15,524 16,305 21,633 203 551 2,813 5,934 7,595 2,438 406,374 1,124 (2) 449 18 (49) (541) - 213 (14) (182) - 16,648 16,303 22,082 203 551 2,831 5,885 7,595 2,424 405,864 $ $ $ $ $ $ Table of Contents City of Scottsdale, Arizona Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) EXPENDITURES/EXPENSES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services 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 POSITION Net Transfers (to) from Other Funds Capital Contributions Proceeds from Sale of Assets Proceeds of Refunding Bonds Proceeds from Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Bond Refunding Escrow Agent Total Net Change for the Year Total Governmental Funds Long-Term Revenue/ Expenses(3) $ $ 775 893 5,662 665 5,422 829 5,449 29,658 70,351 111,960 45,346 14,141 569 Capital Related Items(4) (1) 18 31 (27) 53 (31) 468 (129) (32,843) (716) 272 (137) - $ (33,042) 63,234 38,789 1,915 181,189 576,847 62 404 7,027 110,080 6,502 10,322 2,681 - Internal Service Funds(5) $ (181,189) (44,111) 20 12 99 11 98 10 131 (31) 143 1,311 557 209 - Reclassifications and Eliminations(6) $ 2,570 Long-Term Debt Transactions(7) (3) (2) (14) (2) (14) (1) (32) (120) (217) (1,024) (115) (31) - $ (1,575) Statement of Activities - $ (63,234) (400) (1,915) (65,549) 791 921 5,778 647 5,621 807 6,420 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 $ 7,252 111,250 140,000 22,082 (99,684) 180,900 $ - $ 28,044 28,044 $ (8) 1,528 249 1,769 $ (1,393) (1,393) $ (111,250) (140,000) (22,082) 99,684 (173,648) $ 7,244 28,179 249 35,672 $ 10,427 $ 32,501 $ 72,155 $ (588) $ - $ (108,099) $ 6,396 (continued on next page) For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements 65 Table of Contents Notes to Financial Statements 66 For the Fiscal Year Ended June 30, 2013 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) Reconciling Items Description (3) Because some property taxes will not be collected for several months after the City's fiscal year end, 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 tax revenue Court revenue Library revenue Privilege tax revenue Special Assessment revenue Intergovernmental revenue Other Receivable revenue $ $ (203) (369) (30) (1,031) (568) 1,677 32 (492) $ (49) $ 33,001 (567) 32,434 Reimbursements received for the overpayment of debt have the effect of increasing fund balance because current financial resources have been received. For the government-wide statements, however, these payments increase the liabilities in the statement of net position. Some expenditures reported in the governmental funds are related to benefits that are allocable to periods beyond the end of the City's current fiscal year. Long-term prepaid lease Amortization of long-term prepaid leases $ 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 Amortization of service concession arrangements (SCAs) $ $ 1,233 (394) (231) 608 (4) When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds; however, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decrease by the amount of depreciation expense charged for the year and the loss on disposal of capital assets. City of Scottsdale, Arizona Capital expenditures Miscellaneous net capital expenditures Depreciation expenses Loss on disposal of capital assets $ $ 181,189 (27,168) (109,820) (90) 44,111 $ 28,044 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 (continued) Table of Contents City of Scottsdale, Arizona Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) (5) Internal Service funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, 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 position $ (588) $ (1,575) 1,575 - (6) Interfund transactions between governmental activities 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 $ (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. $ Bond issuance costs for fiscal year 2013 Amortization of bond issuance costs $ 1,915 (408) 1,507 Repayment of bond principal is reported as an expenditure, and payments made to a bond refunding escrow is treated as an other finanding use, in governmental funds. Thus, these payments have the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, these payments reduce the liabilities in the statement of net position and do not result in an expense in the statement of activities. Transferred to the paying agent Principal payments made Payment to bond refunding escrow - funded by refunding bonds $ $ 63,234 99,684 162,918 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 $ (1,321) (812) 2,941 808 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 position and does not affect the statement of activities. Proceeds were received from: $ $ (111,250) (140,000) (22,082) (273,332) Notes to Financial Statements 67 For the Fiscal Year Ended June 30, 2013 Refunding Bonds Long-Term Capital-Related Debt Premium on Bonds For the Fiscal Year Ended June 30, 2013 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 fiscal year 2012/13. The fiscal year 2012/13 budget appropriation is established and reflected in the financial statements as follows: The City prepares its budget on a basis generally consistent with GAAP, with such exceptions as eliminating the investment income activity, payroll accruals, compensated absences, and bad debt expenditures. A budgetary comparison statement for the General Fund is presented in the basic financial statements. This statement displays original budget, amended budget, and actual results. Budgetary comparison schedules are also included as supplementary schedules for certain other governmental funds. 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, Community Development Block Grant, HOME, Grants, Section 8 Housing, Preserve Privilege Tax, Streetlight Districts, Special Programs and Tourism Development, except for the Community Facilities Districts Special Revenue Funds), and Debt Service Funds (except for the Community Facilities Districts Debt Service Funds and the McDowell Preserve Privilege Bond Debt Service Fund); therefore, these funds have appropriated budgets, and budget to actual information is presented. 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, HOME, Grants, and Section 8 Housing 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 and 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. Three public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. In June, the budget is legally enacted through passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. Additional expenditures may be authorized for expenditures directly necessitated by a natural or man-made disaster as prescribed in the State Constitution, Article 9, Section 20. During fiscal year 2012/13, there were no supplemental budgetary appropriations to the original budget. The expenditure appropriations in the adopted budget are by division. The maximum legal expenditure permitted for the fiscal year is the total budget as adopted. Divisional appropriations may be amended during the year. 68 City of Scottsdale, Arizona Table of Contents B. Excess of Expenditures over Appropriations The Special Assessment Debt Service Fund and the Tourism Development Special Revenue Fund exceeded their expenditure appropriations $1,000 and $55,000, respectively. The additional expenditures incurred were funded by available fund balance or available revenues within the fund. C. Deficit Fund Equity The Community Development Block Grant Special Revenue Fund and HOME Special Revenue Fund had deficit ending fund balances of $132,000 and $1,000, 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 Classifications Notes to Financial Statements Management control of budgets is further maintained at a line-item level within the division. For the Fiscal Year Ended June 30, 2013 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 divisions; and 2) unexpended appropriations may be transferred from one division to another. The table on the following page details the fund balance categories and classifications for Governmental Funds (in thousands). City of Scottsdale, Arizona 69 Table of Contents Notes to Financial Statements 70 For the Fiscal Year Ended June 30, 2013 General (In thousands) Nonspendable Inventory Total Nonspendable Municipal Property Corporation Debt Service General Obligation Bond Debt Service General CIP Construction Capital Projects Preserve Privilege Tax Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds FUND BALANCES $ 265 265 $ - $ - $ - $ - $ - $ 265 265 City of Scottsdale, Arizona Restricted Bureau of Reclamation Funds for WestWorld and TPC Improvements Property Tax for Debt Service Property Tax for Community Facility Districts Developer Contributions for Community Facility Districts Street Light Districts General Government Special Programs Public Works Special Programs Public Safety Special Programs Community Services Special Programs Transaction Privilege & Highway User Tax for Transportation Purposes Transaction Privilege Tax for Preserve Land Purchase and Improvements Federal Grants for Section 8 Housing Federal, State and Other Grants Transportation Tax for Transportation Capital Projects MPC Bond Proceeds for Capital Improvements GO Bond Proceeds for Capital Improvements State Tourism Authority Contract for MPC Capital Improvements Total Restricted - 10,105 10,105 3,776 3,776 87 9,610 9,697 - 1,349 110 252 1,835 54 846 51 10,369 25,063 1,091 133 20,438 29,507 91,098 87 10,105 1,349 110 252 1,835 54 846 51 10,369 25,063 1,091 133 20,438 9,610 29,507 3,776 114,676 Committed General Government Special Programs Public Works Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs Transit Occupancy Tax for Tourism Development Scottsdale Stadium Improvements In Lieu Stormwater Fees for Drainage Improvements In Lieu Parking Fees for Parking Projects Total Committed - - - 694 666 174 1,534 - 2,077 1,380 1,825 384 1,894 7,204 14,764 2,077 1,380 1,825 384 1,894 7,204 694 666 174 16,298 Assigned Capital Projects for Capital Improvements Sales Tax Rebate for District Debt Service Excise Tax for MPC Debt Service Total Assigned - - 6,269 6,269 33,076 33,076 - 321 321 33,076 321 6,269 39,666 Unassigned Total Fund Balances $ 48,679 48,944 $ 10,105 $ 10,045 $ 44,307 $ - $ (1,394) 104,789 $ 47,285 218,190 Table of Contents Net Position Restrictions Only restrictions imposed by external sources are shown as restricted net position on the governmentwide financial statements. The following restrictions apply to the Business-Type Activities at June 30, 2013: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Debt Service IV. Detailed Notes on All Funds A. Cash and Investments $ $ 36,539 5,006 41,545 Notes to Financial Statements E. For the Fiscal Year Ended June 30, 2013 The Mayor and City Council have established a minimum fund balance policy of 10 percent of annual general governmental operating expenditures to be maintained in the General Fund and the Highway User Fuel Tax, Nonmajor Special Revenue Fund. The reserves in these funds are to be maintained for unforeseen emergencies or catastrophic impacts to the City. 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), highly rated corporate bonds/notes, repurchase agreements, mutual funds consisting of the foregoing, and the State of Arizona Local Government Investment Pool (LGIP). Deposits At June 30, 2013, the carrying amount of the City’s deposits was $236,972,236, and the bank balance was $241,995,454. The $5,023,218 difference represents outstanding checks, 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, 2013, in accordance with City policy, $500,000 of the City’s deposits was covered by federal depository insurance, $141,840,214 was collateralized by securities held by the City’s agent, and $99,655,240 was collateralized by securities held by the pledging financial institution’s trust department in the name of the City. Thus, the City had no deposits that were exposed to custodial credit risk. 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 71 For the Fiscal Year Ended June 30, 2013 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 five 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) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Fair Value $ 114,684 100,919 46,398 1,997 Total Investments $ Less than 1 $ 75,848 38,515 * 5,006 - 263,998 $ 119,369 $ $ 1-2 27,263 37,184 22,597 87,044 $ $ 2-3 11,573 25,220 13,694 - 3+ $ 50,487 5,101 1,997 $ 7,098 * $4,394 of these bonds are callable between August 28, 2013 and October 25, 2013 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, 2013, for each investment type: (in thousands) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Total Investments 72 Total $ 114,684 100,919 46,398 1,997 $ 263,998 $ $ A 8,936 8,936 $ $ A+ 12,976 12,976 $ $ AA- 13,329 13,329 $ $ AA 2,545 2,545 $ AA+ 100,919 8,612 $ 109,531 $ $ AAA 1,997 1,997 Exempt from Disclosure $ 114,684 $ 114,684 City of Scottsdale, Arizona Table of Contents The following is a listing by issuer of the City’s investments at June 30, 2013: (in thousands) Issuer U.S. Government Federal Home Loan Bank (FHLB) Federal National Mortgage Association (FNMA) Arizona School Facilities Board Apple Inc Bank of New York Mellon JP Morgan Chase & Co Berkshire Hathaway Inc Caterpillar Financial Coca-Cola Co Walt Disney Co General Electric Co IBM Corp Toyota Motor Credit U.S. Bank Wal-Mart Stores Inc Investment Type U.S. Government Securities Federal Agency Securities Federal Agency Securities Municipal Obligations Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Corporate Notes Market Value $ 114,684 34,161 66,758 1,997 2,325 7,970 5,805 1,070 2,445 5,101 687 6,286 5,517 2,711 5,006 1,475 Percent of Holdings 43.43% 12.93% 25.29% 0.76% 0.88% 3.02% 2.20% 0.41% 0.93% 1.93% 0.26% 2.38% 2.09% 1.03% 1.90% 0.56% Total Investments $ 263,998 100.00% 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, 2013 Concentration of Credit Risk Investments Total City cash and investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investments $ 22 236,972 263,998 Total Cash and Investments $ 500,992 Total City cash and investments are reported as follows (in thousands): 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 Crossroads East Dev Agreement Total Cash and Investments City of Scottsdale, Arizona $ 354,093 97,934 45,752 3 75 1,720 1,415 $ 500,992 73 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Investment income comprises the following for the year ended June 30, 2013 (in thousands): Net Interest and Dividends Net Decrease in the Fair Value of Investments $ 4,488 (2,740) Total Net Investment Income $ 1,748 The net decrease in the fair value of investments during fiscal year 2012/13 was $2,739,727. This amount takes into account all changes in fair value (realized and unrealized) that occurred during the year. B. Receivables Receivables as of June 30, 2013, 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 thousands): Governmental and Governmental Activities Internal Service Funds Receivables Property Taxes and Penalties Property Court Subtotal Property Taxes and Penalties $ 914 42,221 43,135 Other Local Taxes Privilege Transient Occupancy State Shared Sales Franchise Fee Auto Lieu Highway User Subtotal Other Local Taxes Intergovernmental/Grants Interest and Other Interest Library Miscellaneous Subtotal Interest and Other Gross Receivable Less: Allowances for Uncollectibles Net Total Receivables $ Business-Type Activities Enterprise Funds Receivables Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous 74 $ 1,278 1,278 $ - $ Nonmajor and Other Funds - $ 118 118 Total Governmental and Internal Service Funds $ 2,310 42,221 44,531 - - - 3,821 702 48 1,126 5,697 18,190 702 1,549 2,025 353 1,126 23,945 - - 21,480 255 - 9,287 31,022 565 1,092 2,289 3,946 - - 82 2,916 2,998 - 221 2,245 2,466 868 1,092 7,450 9,410 65,329 (33,594) 1,278 - 21,480 - 3,253 - - 17,568 - 108,908 (33,594) $ 1,278 16,631 407 2,144 19,138 $ 21,480 Airport $ 19,182 (44) $ - Preserve Privilege Tax Capital Projects - Water and Sewer Utility $ $ General CIP Construction Capital Projects 14,369 1,549 1,977 353 18,248 31,735 Gross Receivable Less: Allowances for Uncollectibles Net Total Receivables General Obligation Bond Debt Service General Municipal Property Corporation Debt Service 3,253 Solid Waste 12 118 16 318 $ 464 $ $ 464 2,058 28 52 2,131 - $ 17,568 $ 75,314 Total Enterprise Fund $ 2,138 (7) $ $ 12 18,689 118 451 2,514 21,784 (51) $ 21,733 City of Scottsdale, Arizona Table of Contents $ Total C. Unearned $ 8,775 953 36,530 $ 9,728 Capital Assets Capital asset activity for the year ended June 30, 2013, was as follows (in thousands): Governmental Activities Capital Assets, not being depreciated Land Construction in Progress Total Capital Assets, not being depreciated *Restated Beginning Balance $ 1,693,561 151,801 1,845,362 Increases $ Decreases 115,655 69,240 184,895 $ Ending Balance (115,657) (115,657) $ 1,809,216 105,384 1,914,600 Capital Assets, being depreciated Buildings and Land Improvements Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Capital Assets, being depreciated 591,649 2,683,425 56,230 3,151 84,720 3,419,175 59,888 44,545 7,158 9,033 120,624 (48) (36) (3,562) (67) (3,510) (7,223) 651,489 2,727,934 59,826 3,084 90,243 3,532,576 Less Accumulated depreciation for Buildings and Land Improvements Streets and Storm Drains Vehicles Maintenance by Fleet Machinery and Equipment Total Accumulated depreciation 236,905 1,340,475 36,533 2,903 59,741 1,676,557 19,795 85,103 4,028 32 5,247 114,205 (36) (6) (3,494) (65) (3,457) (7,058) 256,664 1,425,572 37,067 2,870 61,531 1,783,704 1,742,618 6,419 (165) 1,748,872 Total Capital Assets, being depreciated, net: Governmental Activities Capital Assets, net $ 3,587,980 $ 191,314 $ Notes to Financial Statements Property Tax Court Library Privilege Tax Intergovernmental Other Unavailable $ 1,535 3,675 157 6,440 24,106 617 For the Fiscal Year Ended June 30, 2013 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows (in thousands): (115,822) $ 3,663,472 *The Buildings and Land Improvements, Streets & Storm Drains, and Machinery & Equipment balances were restated due to the implementation of GASB Statement No. 60 and the reclassification of certain improvements to service concession arrangements. City of Scottsdale, Arizona 75 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Business-Type Activities Capital Assets, not being depreciated Land Water Rights Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 40,699 87,171 18,130 146,000 Increases $ 13,861 22,262 36,123 Decreases $ Ending Balance (2,051) (2,051) $ 54,560 87,171 38,341 180,072 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 1,108,799 548,222 30,516 20,939 813 1,709,289 10,221 9,549 1,655 222 21,647 (23) (20) (68) (4) (115) 1,118,997 557,751 32,103 21,157 813 1,730,821 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements Machinery and Equipment Furniture, Fixtures, and Office Equipment Total Accumulated depreciation 302,969 140,481 12,597 6,946 649 463,642 29,969 14,654 1,114 1,057 35 46,829 (5) (2) (47) - 332,933 155,133 13,664 8,003 684 510,417 Total Capital Assets, being depreciated, net: (25,182) 1,245,647 Business-Type Activities Capital Assets, net $ 1,391,647 (54) $ 10,941 (61) $ (2,112) 1,220,404 $ 1,400,476 During fiscal year 2012/13, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $1,658,255. Total interest expense in this fund before capitalization was $15,808,511. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands): Governmental Activities City Court Public Works Community and Economic Development Public Safety City Treasurer - Finance and Accounting Community Services 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 $ 62 6,198 87,451 4,694 94 8,429 2,892 4,385 $ 114,205 $ 45,556 1,063 210 $ 46,829 Business-Type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-Type Activities 76 City of Scottsdale, Arizona Table of Contents Construction Commitments Spent to Date Aviation Drainage and Flood Control Fire Protection Municipal Facilities Neighborhood and Community Parks Police Preservation Streets Technology Traffic Transit Wastewater Water Total Construction Commitments $ $ 1,234 3,802 330 7,654 275 4,021 22,018 13,284 265 4,838 15,432 19,582 92,735 Remaining Commitment $ $ 967 6,686 16 30 13,900 243 152 691 10,663 1,071 292 1,863 1,764 5,222 43,560 Notes to Financial Statements The City has active construction projects as of June 30, 2013. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands): For the Fiscal Year Ended June 30, 2013 Construction Commitments 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, 2013, is as follows: Receivable Fund (in thousands) General Fund $ Amount 3 Payable Fund (in thousands) Nonmajor Governmental Funds $ Amount 3 The HOME Special Revenue Fund had a deficit cash balance of $2,670 due to grants being received on a reimbursement basis. City of Scottsdale, Arizona 77 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Interfund Transfers Transfers are used to fund capital projects and debt service, to administer other operations, and for indirect administrative cost allocations (including in-lieu franchise fees) charged to Enterprise Funds. Net Transfers (in thousands of dollars) Governmental Funds General Debt Service - General Obligation Bond Municipal Property Corporation Capital Projects - General CIP Construction Capital Projects - Preserve Privilege Tax Nonmajor Governmental Funds Total Governmental Funds Transfers Out $ Enterprise Funds Water and Sewer Utility Airport Solid Waste Total Enterprise Funds Internal Service Funds Total Transfers E. $ Transfers In 19,819 1,423 49,677 70,919 $ 9,221 21,079 9,170 10,757 5,818 22,126 78,171 7,248 5 16 7,269 25 25 8 - 78,196 $ 78,196 Leases Operating Leases City as Lessee The City, as a lessee, has entered into lease agreements involving retail/parking facilities, office space, park equipment, vehicles, and a distributed antenna system. Payments relating to these leases totaled $1,951,820, of which $454,609 was minimum and $1,497,211 was contingent. Of the contingent payments, $233,841 were a percentage of the net revenues generated by the park equipment, and $1,263,370 was a portion of the sales tax revenues received from the retail/parking facilities. In July 2013, the City exercised its option to renew the office space lease through July 2016. Per the escalation clause in the lease agreement, the monthly payment increased by the change in the United States Consumer Price Index for All Urban Consumers, U.S. City Average, All Items. The distributed antenna system’s lease increases annually by three percent as per the lease agreement’s escalation clause, and may be renewed by the City for up to ten years subsequent to the initial lease term’s ending date of March 31, 2020. 78 City of Scottsdale, Arizona Table of Contents $ 69 69 69 6 6 9 228 $ City as Lessor The City has agreements in which it conveys the right to use land, airport facilities, and other capital assets that it accounts for as operating leases. Minimum future rentals on noncancelable operating leases at June 30, 2013, are as follows (in thousands): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 Thereafter Total $ $ 2,610 2,579 2,508 2,525 2,390 84,045 96,657 Notes to Financial Statements Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2020 Total For the Fiscal Year Ended June 30, 2013 The future lease payments under non-cancellable operating lease agreements are as follows (in thousands): The above amounts do not include contingent rentals, which totaled $1,669,531 for the fiscal year ended June 30, 2013. A summary of the assets leased to third parties under the City’s operating lease agreements at June 30, 2013, is as follows (in thousands): Cost Less: Accumulated Depreciation Carrying Value $ $ 78,424 (3,511) 74,913 Capital Leases The City has entered into a lease agreement as lessee for financing the acquisition of field maintenance equipment for its community services operations. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, is included in the City’s governmental capital assets. The equipment acquired through this lease agreement is recorded at a cost of $63,643, less accumulated amortization of $7,072. Current year amortization expense was $7,072. City of Scottsdale, Arizona 79 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents The City has entered into two lease agreements as lessee for financing the acquisition of printing and imaging equipment for its administrative operations. The lease agreements qualify as capital leases for accounting purposes and, therefore, are included in the City’s governmental capital assets. The equipment acquired through these lease agreements is recorded at a cost of $152,724, less accumulated amortization of $86,039. Current year amortization expense was $86,039. The City has entered into a lease agreement as lessee for financing the acquisition of street sweeping equipment for its public works operations. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, is included in the City’s governmental capital assets. The equipment acquired through this lease agreement is recorded at a cost of $53,347, less accumulated amortization of $11,114. Current year amortization expense was $11,114. The present value of net minimum future lease payments under capital lease agreements are as follows (in thousands): Fiscal Year Ending June 30, 2014 2015 2016 Less: Imputed Interest Total $ $ 133 41 15 (6) 183 F. Service Concession Arrangements During fiscal year 1983, the City entered into a cost-sharing and land use agreement with the United States Bureau of Reclamation (BOR), under which the City would operate and develop the land where the City’s WestWorld operation is located for a period of 50 years (with a mutual option to renew for an additional 25 years). The City entered into this agreement to develop the WestWorld facility for public recreation use and to enhance its revenue stream from rentals, concession sales, and parking fees. Beginning in fiscal year 2001, the BOR required the City to make annual payments for the administration of the agreement, and the present value of those payments as of June 30, 2013, is $1,519,246. The City also provided consideration in the form of land improvements with a book value of $10,501,827 that was reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $11,871,473 at year-end pursuant to the service concession arrangement. During fiscal year 1985, the City entered into a recreational land use agreement with the BOR, under which the City would develop, operate, and maintain the land where the City’s Tournament Players Club (TPC) golf complex is located for a period of 50 years (with a mutual option to renew for an additional 25 years). The City entered into this agreement to develop the TPC complex for public recreation use and to enhance its revenue stream from facility usage fees and rentals. Beginning in fiscal year 1999, the BOR required the City to make annual payments for the administration of the agreement, and the present value of those payments as of June 30, 2013, is $1,625,316. The City also provided consideration in the form of land improvements with a book value of $10,126,752 that was reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $11,678,236 at year-end pursuant to the service concession arrangement. 80 City of Scottsdale, Arizona Table of Contents The following are brief descriptions of bonds outstanding at June 30, 2013. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2013. General Obligation Bonds General obligation (GO) bonds are issued, after approval by City of Scottsdale voters at an authorized bond election, to finance the construction of water and sewer systems, artificial lighting, parks and open spaces, recreational facilities, and general purpose improvements. At June 30, 2013, the City had $6,400,000 of unissued various purpose GO bonds, which were authorized in September 2000. 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, 2013, the City had $312,475,000 of unissued Preservation GO bonds from the May 2004 authorization. Preservation GO bonds are backed by the full faith and credit of the City, and are repaid through the Preserve sales tax approved by voters in May 1995 and May 2004 to be used specifically to finance land acquisitions for the McDowell Sonoran Preserve. 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, a portion of the 2006 MPC Refunding bonds, the 2008A MPC bonds, and the 2010 MPC bonds are recorded in and paid out of the revenues of the Water and Sewer Enterprise Fund. Notes to Financial Statements Bonds, Loans, and Other Payables For the Fiscal Year Ended June 30, 2013 G. The City has pledged to repay $724,900,322 in MPC bonds issued in 2004 through 2013. The bonds are payable through 2036. The coverage ratio (revenues to debt service) for 2013 is 5.44. The total principal and interest remaining to be paid on the bonds is $764,293,458. Principal and interest paid for the current year and total excise tax were $33,834,505 and $184,079,000, 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 0.2 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 $67,795,000 in SPA bonds issued in 2004 through 2011. The bonds are payable through 2024. The coverage ratio (revenues to debt service) for 2013 is 4.69. The total principal and interest remaining to be paid on the bonds is $69,115,263. Principal and interest paid for the current year and total sales tax were $6,479,612 and $30,376,000, respectively. City of Scottsdale, Arizona 81 For the Fiscal Year Ended June 30, 2013 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, 2013, the funds restricted for this purpose were $36,538,630. 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 2013 is 17.42. The total principal and interest remaining to be paid on the bonds is $46,094,325. Principal and interest for the current year and total customer net revenues were $5,005,663 and $87,217,000, 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. Certificates of Participation Certificates of Participation are issued to finance acquisition and improvements of real property that is leased to the City. The City’s obligation to make lease payments is 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. 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 CFD bonds. 82 CFDs are created only by petition to the City Council by property owners within the district areas. As the 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. City of Scottsdale, Arizona Table of Contents General Obligation Bonds Bonds Outstanding (in thousands) 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. $ 1,350 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. 20,390 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. On July 11, 2012, $83,025,000 due 2016 through 2025 were defeased. Original issue amount $113,400,000. 11,575 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. 67,615 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. 99,750 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. 13,900 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. 96,925 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. 17,625 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 $50,800,000. 47,650 2011 Preservation Bonds (issued February 9, 2011) due in annual installments of $740,000 to $1,705,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $22,525,000. 21,030 2011 Refunding Bonds (issued April 6, 2011) due in annual installments of $640,000 to $7,265,000 through July 1, 2024; interest at 1 percent to 5 percent. Original issue amount $43,115,000. 33,505 2012 Preservation Bonds (issued February 2, 2012) due in annual installments of $1,400,000 to $18,000,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $50,000,000. 50,000 2012 Refunding Bonds (issued July 11, 2012) due in annual installments of $205,000 to $30,045,000 through July 1, 2025; interest at 2 percent to 4 percent. Original issue amount $83,025,000. 82,820 2013 Preservation Bond (issued February 13, 2013) due in annual installments of $1,000,000 to $8,665,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $75,000,000. 75,000 Total General Obligation Bonds Outstanding City of Scottsdale, Arizona $ 639,135 Notes to Financial Statements Classified in Governmental Activities on the Government-wide Financial Statements: For the Fiscal Year Ended June 30, 2013 Bonds payable at June 30, 2013, are comprised of the following: 83 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents All or portions of the 2002 Refunding Bonds, 2004 Various Purpose Bonds, 2005 Refunding Bonds, 2005B Preservation Bonds, 2008B Preservation Bonds, 2011 Preservation Bonds, 2011 Refunding Bonds, 2012 Preservation Bonds, 2012 Refunding Bonds, and 2013 Preservation Bonds of $8,100,000, $48,700,000, $66,090,000, $14,875,000, $18,150,000, $21,785,000, $32,705,000, $50,000,000, $44,500,000, and $75,000,000, respectively, are paid from the .2 percent and .15 percent Preservation Sales Taxes. Municipal Property Corporation Bonds 2004A Municipal Property Corporation Excise Tax Revenue Bonds (issued September 15, 2004) due in annual installments of $920,000 to $2,715,000 through July 1, 2034; interest at 3.25 percent to 5.25 percent. On November 29, 2006, $30,975,000 due 2017 and 2020 through 2034 were refunded. Original issue amount $40,760,000. $ 5,925 2005 Municipal Property Corporation Excise Tax Revenue Bonds (issued June 15, 2005) due in annual installments of $35,026 to $4,925,019 through July 1, 2021; interest at 3.22 percent to 5 percent. Original issue amount $19,945,322. 23,689 2005D Municipal Property Corporation Excise Tax Revenue Bonds (issued December 1, 2005) due in annual installments of $200,000 to $3,625,000 through July 1, 2035; interest at 3.25 percent to 5 percent. On November 29, 2006, $25,925,000 due 2017 through 2030 were refunded. Original issue amount $46,500,000. 19,025 2006 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued November 29, 2006) due in annual installments of $1,105,000 to $2,730,000 through July 1, 2034; interest at 5 percent. Original issue amount $55,450,000. 55,450 2006A Municipal Property Corporation Excise Tax Revenue Bonds (issued November 29, 2006) due in annual installments of $240,000 to $625,000 through July 1, 2031; interest at 4 percent to 5 percent. Original issue amount $10,000,000. 8,015 2006B Municipal Property Corporation Excise Tax Revenue Bonds (issued November 29, 2006) due in annual installments of $950,000 to $2,475,000 through July 1, 2031; interest at 4 percent to 5 percent. Original issue amount $32,500,000. 30,550 2013A Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $830,000 to $1,995,000 through July 1, 2028; interest at 3 percent to 5 percent. Original issue amount $26,295,000. 26,295 2013B Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $45,000 to $100,000 through July 1, 2033; interest at 3 percent to 5 percent. Original issue amount $1,440,000. 1,440 2013C Municipal Property Corporation Excise Tax Revenue Bonds (issued February 13, 2013) due in annual installments of $1,210,000 to $2,855,000 through July 1, 2033; interest at 3 percent to 5 percent. Original issue amount $37,265,000. 37,265 Total Municipal Property Corporation Bonds Outstanding 84 Bonds Outstanding (in thousands) $ 207,654 City of Scottsdale, Arizona Table of Contents $ 9,455 2010 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued October 10, 2010, due in annual installments of $3,110,000 to $6,090,000 through July 1, 2024; interest at 3 percent to 5.25 percent. Original issue amount $32,855,000. 32,855 2011 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued on April 6, 2011, due in annual installments of $920,000 to $1,350,000 through July 1, 2022; interest at 2 percent to 5 percent. Original issue amount $12,015,000. 10,155 Total Scottsdale Preserve Authority Bonds 52,465 Certificates of Participation 2010 Certificates of Participation issued August 24, 2010, due in semi-annual installments of $984,651 to $1,246,573 beginning January 1, 2012, through July 1, 2020; interest at 2.97 percent. Original issue amount $20,000,000. 16,003 Notes to Financial Statements 2004 Scottsdale Preserve Authority Excise Tax Revenue Refunding Bonds issued March 30, 2004, due in annual installments of $75,000 to $3,315,000 through July 1, 2016; interest at 2 percent to 5 percent. Original issue amount $22,925,000. For the Fiscal Year Ended June 30, 2013 Scottsdale Preserve Authority Bonds Bonds Outstanding (in thousands) Community Facilities Districts General Obligation Bonds 2002 Scottsdale Mountain Community Facilities District General Obligation Refunding Bonds (issued May 15, 2002) due in annual installments of $160,000 to $455,000 beginning July 15, 2003 through July 15, 2018; interest at 3.0 percent to 4.7 percent. Original issue amount $5,375,000. 1,880 2007 Waterfront Commercial Community Facilities District General Obligation Bonds (issued December 11, 2007) due in annual installments of $25,000 to $300,000 beginning July 15, 2009 through July 15, 2032. Interest at 4.85 percent to 6.05 percent. Original issue amount $3,805,000. 3,545 2012 DC Ranch Community Facilities District General Obligation Refunding Bonds due in annual installments of $555,000 to $1,245,000 beginning July 15, 2013 through July 15, 2027; interest at 3.41 percent. Original issue amount $14,670,000. 14,115 2012 McDowell Mountain Ranch Community Facilities District General Obligation Refunding Bonds due in annual installments of $1,020,000 to $1,335,000 beginning July 15, 2013 through July 15, 2022; interest at 2.84 percent. Original issue amount $11,555,000. 10,480 2012 Via Linda Community Facilities District General Obligation Refunding Bonds due in annual installments of $135,000 to $210,000 beginning July 15, 2013 through July 15, 2023; interest at 2.60 percent. Original issue amount $2,000,000. Total Community Facilities Districts General Obligation Bonds Outstanding Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona 1,865 $ 31,885 947,142 85 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Classified in Business-Type Activities on the Government-wide Financial Statements: Water and Sewer Revenue Bonds Bonds Outstanding (in thousands) 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. 32,645 Total Water and Sewer Revenue Bonds Outstanding 35,515 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. On November 29, 2006, $44,835,000 due 2015 through 2024 were refunded. Original issue amount $75,000,000. 3,545 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. On November 29, 2006, $67,455,000 due 2017 through 2030 were refunded. Original issue amount $88,360,000. 8,830 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. 93,150 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. 74,520 Total Municipal Property Corporation Bonds Outstanding 290,555 Total Bonds Payable Recorded in Business-Type Activities Total Long-Term Bonds Payable 86 2,870 326,070 $ 1,273,212 City of Scottsdale, Arizona Table of Contents General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation 20% Constitutional Limit $ 1,015,998,926 Less General Obligation (561,125,584) 20% Bonds Outstanding 6% Constitutional Limit Less General Obligation 6% Bonds Outstanding Available 20% Limitation Borrowing Capacity Available 6% Limitation Borrowing Capacity $ 454,873,342 General Obligation Bonds Issued for All Other Purposes $ 304,799,678 (78,009,416) $ 226,790,262 Arbitrage Notes to Financial Statements Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt issued for water, sewer, light, parks, open space purposes, public safety, and transportation facilities 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, 2013: For the Fiscal Year Ended June 30, 2013 Statutory Debt Limitation 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, 2013. 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. As a result, the refunded bonds are considered defeased and the liability has been removed from the governmental activities column of the financial statements. The City issued $83,025,000 of General Obligation Refunding Bonds, Series 2012, (advanced refunding) dated July 11, 2012, with an average interest rate of 3.67% to refund $83,025,000 of Series 2004 Bonds with an average interest rate of 4.63%. The City will reduce its total debt service payments over the next 13 years by approximately $8,313,700 and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $7,046,223 million. The Via Linda Road Community Facilities District issued $2,000,000 of District General Obligation Refunding Bonds, Series 2012, (current refunding) dated September 18, 2012, with an average interest rate of 2.6%, to refund $2,180,000 of Series 1999 District Bonds with an average interest rate of 5.7%. The District will reduce its total debt service payments over the next 11 years by approximately $401,814, and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $299,739. City of Scottsdale, Arizona 87 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents The DC Ranch Community Facilities District issued $14,670,000 of District General Obligation Refunding Bonds, Series 2012, (current and advance refunding) dated September 18, 2012, with an average interest rate of 3.4%, to refund $14,670,000 of Series 1998, Series 1999, and Series 2002 District Bonds with an average interest rate of 5.2%. The District will reduce its total debt service payments over the next 15 years by approximately $2,639,002, and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $2,130,037. The McDowell Mountain Ranch Community Facilities District issued $11,555,000 of District General Obligation Refunding Bonds, Series 2012, (current refunding) dated September 18, 2012, with an average interest rate of 2.8%, to refund $11,555,000 of Series 1999 District Bonds with an average interest rate of 4.9%. The District will reduce its total debt service payments over the next 10 years by approximately $1,548,118, and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $1,368,494. The following table reflects refunded debt outstanding at June 30, 2013, net of any amounts to be paid or retired by the trustee on July 1, 2013. Refunded in Prior Years (in thousands) 2004 MPC Excise Tax Revenue Bonds 2004A MPC Excise Tax Revenue Bonds 2005D MPC Excise Tax Revenue Bonds 2005E MPC Excise Tax Revenue Bonds 2004 Various Purpose GO Bonds $ 44,835 30,975 25,925 67,455 83,025 $ 252,215 Contracts Payable The City has entered into various purchase contracts related to economic development and acquisition of recreational facilities. The following is a summary of debt service to maturity for all long-term contracts at June 30, 2013. Classified in Governmental Activities on the Government-wide Financial Statements: Contracts Payable (in thousands) 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. 88 $ 2,570 City of Scottsdale, Arizona Table of Contents Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Special Assessments Bonds Certificates of Participation Communities Facilities Districts General Obligation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Contracts Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Net Other Postemployment Benefit *Beginning/ Restated Balance Additional Obligations, Interest Accretion, and Net Increases $ $ $ Governmental Activity Long-Term Liabilities 594,425 144,977 56,265 750 18,031 34,640 25,610 (7,519) 867,179 3,529 391 3,298 10,611 25,172 910,180 $ 158,025 65,812 28,225 22,082 (7,259) 266,885 31,786 9,138 288 308,097 Current Maturities, Retirements, and Net Decreases $ $ (113,315) (3,135) (3,800) (750) (2,028) (30,980) (3,510) 1,321 (156,197) (959) (208) (154) (29,515) (10,404) (197,437) Ending Balance $ $ 639,135 207,654 52,465 16,003 31,885 44,182 (13,457) 977,867 2,570 183 3,144 12,882 23,906 288 1,020,840 Amounts Due Within One Year $ $ 34,070 5,830 3,960 2,089 2,490 48,439 2,570 129 154 5,244 9,970 66,506 *Beginning balances for the Contracts Payables for the Bureau of Reclamation, Capital Leases, and Service Concession Arrangements were restated due to the implemenation of GASB Statements No. 60 and 62. Notes to Financial Statements The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the year ended June 30, 2013 (in thousands): For the Fiscal Year Ended June 30, 2013 Changes in Long-Term Liabilities Internal Service Funds serve primarily the governmental funds, the long-term liabilities of which are included as part of the governmental activities. For the year ended June 30, 2013, $332,832 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 $2,245 in the governmental funds and $0 in the Internal Service funds. Business-Type Activities Bonds Payable Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Deferred Issuance Premiums Less Deferred Amounts on Refunding Total Bonds Payable Compensated Absences Business-Type Activity Long-Term Liabilities City of Scottsdale, Arizona Beginning Balance $ $ 38,630 299,775 20,752 (4,495) 354,662 3,039 357,701 Additional Obligations, Interest Accretion and Net Increases $ $ 1,371 1,371 Current Maturities, Retirements, and Net Decreases $ $ (3,115) (9,220) (1,330) 599 (13,066) (1,403) (14,469) Ending Balance $ $ 35,515 290,555 19,422 (3,896) 341,596 3,007 344,603 Amounts Due Within One Year $ $ 3,240 9,760 13,000 1,190 14,190 89 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2013. Deferred issuance costs and deferred amounts on refunding are not included. Governmental Activities (in thousands) Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Total Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Capital Appreciation ** General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation Facilities 20% Limitation Principal Interest Total $ 22,707 $ 22,506 $ 45,213 19,768 21,517 41,285 17,950 20,651 38,601 24,735 19,828 44,563 27,605 18,756 46,361 182,865 74,133 256,998 173,935 34,302 208,237 77,340 10,201 87,541 14,220 529 14,749 General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 11,363 $ 3,337 $ 14,700 13,552 2,797 16,349 16,275 2,207 18,482 11,170 1,522 12,692 11,400 1,001 12,401 14,250 709 14,959 - Total General Obligation Bonds Principal Interest Total $ 34,070 $ 25,843 $ 59,913 33,320 24,314 57,634 34,225 22,858 57,083 35,905 21,350 57,255 39,005 19,757 58,762 197,115 74,842 271,957 173,935 34,302 208,237 77,340 10,201 87,541 14,220 529 14,749 $ 561,125 $ 222,423 $ $ $ 639,135 $ 233,996 783,548 Municipal Property Corporation Bonds Principal Interest Total $ 5,830 $ 9,427 $ 15,257 5,920 9,199 15,119 7,630 8,928 16,558 9,016 8,641 17,657 9,359 9,165 18,524 51,429 36,832 88,261 55,360 20,138 75,498 47,995 8,173 56,168 9,495 603 10,098 5,620 (5,620) 78,010 $ 11,573 $ 89,583 Scottsdale Preserve Authority Excise Tax Revenue Bonds Principal Interest Total $ 3,960 $ 2,508 $ 6,468 4,140 2,330 6,470 4,340 2,143 6,483 4,175 1,936 6,111 4,365 1,760 6,125 25,395 5,654 31,049 6,090 319 6,409 - - - - Total 873,131 Capital Leases Principal Interest Total $ 129 $ 4 $ 133 39 2 41 15 15 - - - - Total $ 207,654 $ 105,486 $ 313,140 $ 52,465 $ 16,650 $ 69,115 $ 183 $ **For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 $ 6 $ 189 Certificates of Participation Principal Interest Total $ 2,089 $ 460 $ 2,549 2,152 397 2,549 2,216 333 2,549 2,282 267 2,549 2,350 198 2,548 4,914 183 5,097 - Community Facilities Districts General Obligation Bonds Principal Interest Total $ 2,490 $ 1,121 $ 3,611 2,590 1,037 3,627 2,680 949 3,629 2,770 859 3,629 2,555 764 3,319 11,900 2,577 14,477 5,800 943 6,743 1,100 172 1,272 - Contracts Payable Principal Interest Total $ 98 $ - $ 98 103 103 109 109 114 114 120 120 700 700 899 899 427 427 - $ $ $ 16,003 $ 1,838 $ 17,841 31,885 $ 8,422 $ 40,307 2,570 $ - $ 2,570 (continued) 90 City of Scottsdale, Arizona Table of Contents Total Total Principal Interest Total $ 154 $ 114 $ 268 154 128 282 154 142 296 154 156 310 154 172 326 769 1,121 1,890 769 1,643 2,412 689 2,051 2,740 147 581 728 Principal Interest Total $ 48,820 $ 39,477 $ 88,297 48,418 37,407 85,825 51,369 35,353 86,722 54,416 33,209 87,625 57,908 31,816 89,724 292,222 121,209 413,431 242,853 57,345 300,198 127,551 20,597 148,148 23,862 1,713 25,575 - - - $ 3,144 $ 6,108 $ 9,252 5,620 (5,620) - $ 953,039 $ 372,506 $ 1,325,545 Business-Type Activities (in thousands) Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Total Water and Sewer Revenue Bonds Principal Interest Total $ 3,240 $ 1,738 $ 4,978 2,940 1,599 4,539 3,055 1,487 4,542 3,195 1,354 4,549 3,370 1,195 4,565 19,715 3,206 22,921 - Municipal Property Corporation Bonds Principal Interest Total $ 9,760 $ 14,024 $ 23,784 10,240 13,540 23,780 11,115 13,034 24,149 11,970 12,485 24,455 12,670 11,896 24,566 74,935 49,438 124,373 74,290 30,781 105,071 64,305 13,207 77,512 21,270 2,194 23,464 $ $ 290,555 $ 160,599 $ 451,154 35,515 $ 10,579 $ 46,094 Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Total Interest Total Principal $ 13,000 $ 15,762 $ 28,762 13,180 15,139 28,319 14,170 14,521 28,691 15,165 13,839 29,004 16,040 13,091 29,131 94,650 52,644 147,294 74,290 30,781 105,071 64,305 13,207 77,512 21,270 2,194 23,464 Total $ 326,070 $ 171,178 $ 497,248 City of Scottsdale, Arizona Notes to Financial Statements Fiscal Year 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Capital Appreciation Service Concession Arrangements For the Fiscal Year Ended June 30, 2013 Governmental Activities (continued) (in thousands) 91 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to public, property, and aviation premises liability; 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 $850,000 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 three 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 liability claims 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, 2013, the general liability claims payable totaled $11,057,180 and the self-insured benefits claims payable totaled $1,825,000. The City began to administer all self-insured health and dental plans in January of 2004. Years Ended June 30 2013 (in thousands) 2012 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 10,611 31,786 (29,515) $ 11,140 28,959 (29,488) Claims Payable, June 30 $ 12,882 $ 10,611 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 $12,000,000 are probable, and $15,000 up to $450,000 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 this amount is provided through the purchase of commercial insurance. For more information on the City’s self-insurance, please see the Note V.A. above. 92 City of Scottsdale, Arizona Table of Contents Notes to Financial Statements 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. As of June 30, 2013, a commercial building permit has not been issued. For the Fiscal Year Ended June 30, 2013 In January 2013, the City entered into a settlement agreement with Scottsdale Fashion Square LLC (SFS) to prepay an existing lease. In addition to a cash payment, the settlement included a provision for a waiver of $2.5 million against future City fees associated with the development of the Scottsdale Fashion Square parcel plus any property acquired in the future that is contiguous to the property. The eligible fees to be waived include water and sewer impact fees. Per Arizona Revised Statute 9-463.05, “If a municipality agrees to waive any of the development fees assessed on a development, the municipality shall reimburse the appropriate development fee accounts for the amount that was waived.” As of June 30, 2013, no building permits have been issued for the property. 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 estimated contingent liability at June 30, 2013, is $13,904,163. This is a significant decrease over the prior year due to the settlement with SFS mentioned above, that was approved by the City Council in January 2013, and satisfied any future obligation to reimburse sales tax under a lease agreement. C. Subsequent Events In July 2013, the City prepaid the full balance due on its February 13, 1976 contract with the U.S. Army Corps of Engineers. The cost-sharing contract was for recreation development at the Indian Bend Wash Flood Control Project. The early pay off, which totaled $2.8 million, will result in interest savings to the citizens of Scottsdale of more than $1.3 million. City of Scottsdale, Arizona 93 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents D. Joint Venture The City participates with the cities of Phoenix, Glendale, Mesa, and Tempe in the multi-city Sub-Regional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation, and maintenance of jointly used sewage treatment and transportation facilities. The facilities include the 91st Avenue Wastewater Treatment Plant, the Salt River Outfall Sewer, the Southern Avenue Interceptor, and related transportation facilities. The City of Phoenix acts as lead agency and is responsible for the planning, budgeting, construction, operation, and maintenance of the facilities. In addition, the City of Phoenix provides all management, personnel, and financing arrangements and accepts federal grants on behalf of the participants. The JEPA requires each city to pay for its share of the actual cash costs of operating and maintaining the facilities based on relative sewage flows and strengths. The City records its share of SROG’s cash operating expenses and its equity in the joint venture in the City’s Water and Sewer Fund. For the year ended June 30, 2012, (the latest audited information available from SROG), the City’s net investment in SROG was $116,127,000. SROG’s net cash operating expenses for the year ended June 30, 2012, were $38,774,083, of which the City’s share was $3,783,816, or 9.7 percent. For the year ended June 30, 2013, the City paid $0 for SROG capital contributions and $1,995,392 for SROG operating expenses, including adjustments to the operating and replacement reserves. The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2012, 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. 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, the City, EPA, State of Arizona, Salt River Project, and the above-referenced 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. 94 City of Scottsdale, Arizona Table of Contents F. Related Organization The Industrial Development Authority (IDA) is a nonprofit corporation established by the City in 1984 to promote the retention, expansion, and attraction of businesses and commercial enterprises in Scottsdale. The Board of Directors of the IDA is appointed by the City Council and City Council is also involved in granting or denying IDA bond applications. G. Effect of Implementation of Future Accounting Standard Notes to Financial Statements Improvements in technology and changes in laws or regulations did not impact the average annual cost. The liability is revalued annually. Fiscal year 2012/13 outlays for operating and monitoring the CGTF were $543,073. The City has a reimbursement agreement with the responsible parties and the total liability is expected to be fully recovered by the participating companies and therefore a corresponding Pollution Remediation Recoveries receivable has been accrued. For the Fiscal Year Ended June 30, 2013 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 38 years; remediation began in 2001 and is estimated to be required for approximately 50 years. The GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions (Statement No. 68), which revises existing, and establishes new, financial reporting requirements for most governments that provide their employees with pension benefits. The City provides its police officers and firefighters with pension benefits through an agent multiple employer defined benefit pension plan administered by the Public Safety Personnel Retirement System (PSPRS). All other employees are provided pension benefits through a multiple employer cost-sharing defined benefit retirement program administered by either the Arizona State Retirement System (ASRS) for non-elected officials or the Elected Officials’ Retirement Plan (EORP) for elected officials. Statement No. 68 requires an agent employer participating in the PSPRS plan, or a cost-sharing employer participating in the ASRS or EORP plans, to record their proportionate share, as defined in Statement No. 68, of the plans’ unfunded pension liabilities. The City has no legal obligation to fund this shortfall, nor does it have any ability to affect funding, benefits, or annual required contribution decisions made by PSPRS, ASRS, or EORP (“the plans”). The requirement of Statement No. 68 to record a portion of the plans’ unfunded liability will negatively impact the City’s future unrestricted net position. Statement No. 68 is effective for fiscal year ending June 30, 2015. At this time, management is unable to estimate the magnitude of this impact. Information regarding the plans’ current funding status can be found in their respective Comprehensive Annual Financial Reports. H. Retirement and Pension Plans All benefitted employees of the City, the Mayor, and the City Council are covered by one of three pension plans. All full-time City employees, except public safety personnel (police officers and firefighters) and the Mayor and City Council, participate in the Arizona State Retirement System, a cost-sharing multipleemployer 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 cost-sharing multiple-employer pension plan. All three pension plans are administered by the State of Arizona. City of Scottsdale, Arizona 95 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Arizona State Retirement System Plan Description All benefitted City employees, except public safety personnel and the Mayor and City Council, participate in the Arizona State Retirement System (System), a cost-sharing multiple-employer defined benefit pension plan. The System was established by the State of Arizona to provide pension benefits for employees of both the state and participating political subdivisions and school districts. The System is administered in accordance with Title 38, Chapter 5, Article 2 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. 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 authorized to legislate a contribution rate other than the actuarially determined rate. The contribution rate for the years ended June 30, 2013, 2012, and 2011, were 11.14 percent (10.90 percent retirement and .24 percent long-term disability), 10.74 percent (10.50 percent retirement and .24 percent long-term disability), and 9.85 percent (9.60 percent retirement and .25 percent long-term disability), respectively, for both employers and employees. The City’s actual contributions to the System for the years ending June 30, 2013, 2012, and 2011, were $10,757,059, $10,349,764, and $9,824,677, 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 acts as a common investment and administrative agent that is jointly administered by the Board of Trustees and 237 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. 96 City of Scottsdale, Arizona Table of Contents Annual Pension Cost For fiscal year ended June 30, 2013, the City’s annual pension costs of $7,301,757 for police and $2,202,061 for fire were equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2012, actuarial valuation using the entry age normal method. Three-Year Trend Information for PSPRS (Police) (dollars in thousands) Fiscal Year Ending 2010 2011 2012 Annual Pension Cost (APC) $ 6,295 5,938 6,328 Percentage of APC Contributed 100% 100% 100% $ Net Pension Obligation Notes to Financial Statements The System for both police and fire is funded through a member contribution of 9.55 percent of gross payroll, an employer contribution set by an actuarial valuation and required by state statute 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, 2013, was 23.90 percent of annual covered payroll. Contribution rates for police were 20.50 percent and 18.96 percent in 2012 and 2011, respectively. The City’s contribution rate for fire for the fiscal year ended June 30, 2013, was 12.45 percent of annual covered payroll. The City’s contribution rate for fire was 10.40 percent and 10.05 percent in 2012 and 2011, respectively. For the Fiscal Year Ended June 30, 2013 Funding Policy - Three-Year Trend Information for PSPRS (Fire) (dollars in thousands) Fiscal Year Ending 2010 2011 2012 Annual Pension Cost (APC) $ 1,528 1,726 1,806 Percentage of APC Contributed 100% 100% 100% $ Net Pension Obligation - Actuarial Methods and Assumptions The actuarial assumptions for both police and fire include a rate of return on the investment of present and future assets of 8.0 percent per year compounded annually, projected salary increases from 5.0 to 9.0 percent per year compounded annually, with 5.0 percent attributable to inflation, and other across-theboard factors and increases ranging from 0 percent to 4.0 percent per year attributable to seniority/merit. The maximum annual increase in post retirement benefits is 4.0 percent. The actuarial value of PSPRS assets was determined using the 7-year smoothed market value, 80%/120% market method. PSPRS’ unfunded accrued liability is being amortized as a level percent of projected payroll over a closed period of 30 years, 24 years remaining as of June 30, 2012. City of Scottsdale, Arizona 97 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents Funded Status The funded status of each plan (Police and Fire) as of June 30, 2012, the most recent actuarial valuation dates, is as follows: Public Safety Personnel Retirement System (Police) Funded Status for Pension and Health Insurance (dollars in thousands) June 30, 2012 Actuarial Accrued Liability (AAL) Retired members and beneficiaries Former members with vested benefits Active members DROP members $ Total 97,448 516 90,920 25,990 214,874 Valuation Assets 139,915 Unfunded Actuarial Accrued Liability 74,959 Stabilization Reserve $ Net Unfunded Actuarial Liability Percent Funded 74,959 65.1% Annual Covered Payroll $ Unfunded AAL as a Percentage of Covered Payroll 32,276 232.2% Public Safety Personnel Retirement System (Fire) Funded Status Pension and Health Insurance (dollars in thousands) Actuarial Accrued Liability (AAL) Retired members and beneficiaries Former members with vested benefits Active members DROP members June 30, 2012 $ Total 38,729 Valuation Assets 44,721 Unfunded Actuarial Accrued Liability (5,992) Stabilization Reserve Net Unfunded Actuarial Liability 4,811 $ Percent Funded Annual Covered Payroll 98 2,546 34,445 1,738 Unfunded AAL as a Percentage of Covered Payroll (1,181) 115.5% $ 18,203 0.00% City of Scottsdale, Arizona Table of Contents The City’s Mayor and Council participate in the Elected Officials’ Retirement Plan (EORP), a cost-sharing multiple-employer defined benefit pension plan. The EORP was established by Title 38, Chapter 5, Article 3 of the Arizona Revised Statutes to provide pension benefits to elected officials and judges of certain state, county, and local governments. The Board of Trustees 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 elected officials are required by state statute to contribute an amount equal to 11.5 percent of covered salary to ensure proper funding for the Plan. EORP employers are required to contribute a level percent of salary as determined by actuarial valuation to ensure proper funding for the Plan. The City’s rates for fiscal years ended June 30, 2013, 2012, and 2011, were 36.44 percent, 32.99 percent, and 29.79 percent, respectively. The City’s contributions to EORP for the years ending June 30, 2013, 2012, and 2011, were $52,788, $47,505, and $43,310, respectively, equal to the required contributions for each year. I. Notes to Financial Statements Plan Description For the Fiscal Year Ended June 30, 2013 Elected Officials’ Retirement Plan Other Postemployment Benefits In addition to the pension benefits described in the previous section (H), 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, 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. The medical leave not paid out in cash is applied to a retirement health savings account at the employee’s hourly rate of pay at the time of retirement. For shift fire employees with more than 420 hours and all other retirees with 300 or more hours of accumulated medical leave hired on or after July 1, 1982, the City will apply the value of the medical leave to a retirement health savings account. Medical leave balances accumulated through June 30, 2011, will be paid at 100 percent of the employee’s hourly rate at the time of retirement. Medical leave balances accumulated July 1, 2011, or after will be paid out at 50 percent of the employee’s hourly rate at retirement. Additionally, the payout is limited to the value of 1,200 combined hours for all retirees, except shift fire employees, who are limited to 1,680 hours earned both before and after July 1, 2011, unless more than 1,200 or 1,680 hours, respectively, were accrued prior to July 1, 2011. Total hours accrued before July 1, 2011, will be paid without limitation. The projected liability for active employees, as of June 30, 2013, was $13,501,510. The projected liability was considered payable within one year or greater and was therefore considered non-current and included in the proprietary and government-wide financial statements. Significant actuarial assumptions of the January 1, 2013, actuarial valuation include a) mortality rates based on the RP 2000 combined mortality table projected to 2015 using Projection Scale AA, b) interest compounded 4.0 percent annually, c) salary increases at a rate of 2 percent to 4 percent based on years of service, d) traditional unit credit cost method based on participant data as of January 1, 2013. City of Scottsdale, Arizona 99 For the Fiscal Year Ended June 30, 2013 Notes to Financial Statements Table of Contents J. Postemployment Benefits Other Than Pensions 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 costs occur, rather than in the future years when they 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 were 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 is being 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 eligible retired employees through a singleemployer defined benefit medical plan. The plan provides medical benefits for eligible retirees, their spouses, and their dependents through the City’s group health insurance plans. 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. Benefits Provided The City offers postemployment medical benefits to its eligible retirees. An eligible retiree is a Public Safety Personnel Retirement System Accidental Disability retired employee. Eligible retirees can enroll in a City plan up to 60 days after they retire; after that their eligibility for this benefit ceases. 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, 2013, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Terminated Employees Eligible for Benefits, But Not Yet Enrolled Active Employees Total Participating Employers 31 638 669 1 Funding Policy 100 The plan premium rates are determined annually in collaboration with an outside employee benefits consulting firm and approved by the Scottsdale City Council. City code requires the City Council to authorize the contribution rates for benefits. For fiscal year ending June 30, 2013, the eligible retirees paid 100 percent of the approved rate. By continuing to provide eligible retirees with access to the City’s healthcare plans based on the same rates it charges to active employees, the City is providing a subsidy to eligible retirees. This explicit 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, 2013, retirees contributed $193,049 and the City contributed $185,732 (explicit subsidy). City of Scottsdale, Arizona Table of Contents Annual Required Contribution Interest on Net OPEB Obligation (Asset) Adjustment to Annual Required Contribution Annual OPEB Cost Contributions Made Change in Net OPEB Obligation (Asset) Net OPEB Obligation (Asset) - Beginning of year Net OPEB Obligation (Asset) - End of year $ $ 635 (7) 8 636 (186) 450 (162) 288 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows (dollar amounts in thousands): Fiscal Year Ended 2011 2012 2013 Annual OPEB Cost $ 29 285 636 Employer Contributions $ 901 870 186 Percentage of OPEB Cost Contributed 3106.9% 305.3% 29.2% Notes to Financial Statements 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, 2013 (dollar amounts in thousands): For the Fiscal Year Ended June 30, 2013 Annual OPEB costs and Net OPEB Obligation Net OPEB Obligation (Asset) $ 423 (162) 288 Funded Status The funded status of the plan as of June 30, 2013, 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 5,754 5,754 0% $ 42,805 13.4% 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. Multi-year trend information regarding the actuarial value of plan assets increasing or decreasing over time relative to the actuarial accrued liability is available in the Required Supplementary Information section on page 103. City of Scottsdale, Arizona 101 For the Fiscal Year Ended June 30, 2013 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 July 1, 2012 Projected Unit Credit Level Percentage of Payroll 24 years, Closed N/A Actuarial Assumptions Investment Rate of Return Inflation Rate Projected Salary Increases Healthcare Inflation Rate 4%* 3% 2.8% 9% initial rate, 5% ultimate rate *Investment rate of return based on City's own investments 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. 102 City of Scottsdale, Arizona Table of Contents Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Pension (dollars in thousands) Actuarial Valuation June 30 2010 2011 2012 (2) (1) Actuarial (3) Actuarial Value Accrued Liability Percent Funded of Assets (AAL)* (1)/(2) $ 124,093 $ 168,084 73.8% 131,468 187,471 70.1% 139,915 209,389 66.8% (6) Unfunded AAL as a Percentage (4) (5) of Covered Unfunded AAL Annual Covered Payroll (2)-(1) Payroll (4)/(5) $ 43,991 $ 31,984 137.5% 56,003 30,945 181.0% 69,474 32,276 215.2% Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Health Insurance (dollars in thousands) Actuarial Valuation June 30 2010 2011 2012 (2) (1) Actuarial (3) Actuarial Value Accrued Liability Percent Funded of Assets (AAL)* (1)/(2) $ - $ 4,888 0.0% 5,725 0.0% 5,485 0.0% (6) Unfunded AAL as a Percentage (4) (5) of Covered Unfunded AAL Annual Covered Payroll (2)-(1) Payroll (4)/(5) $ 4,888 $ 31,984 15.3% 5,725 30,945 18.5% 5,485 32,276 17.0% 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, 2013 Funding Progress * Projected Unit Credit method used for June 30, 2010 valuation. Entry Age Normal method used for June 30, 2011 and 2012 valuations. City of Scottsdale, Arizona 103 Required Supplementary Information For the Fiscal Year Ended June 30, 2013 Table of Contents Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Pension (dollars in thousands) Actuarial Valuation June 30 2010 2011 2012 (2) (1) Actuarial Actuarial Value Accrued Liability of Assets (AAL)* $ 25,668 $ 19,990 32,871 28,467 44,721 37,670 (6) Unfunded AAL as a Percentage (3) (4) (5) of Covered Percent Funded Unfunded AAL Annual Covered Payroll (1)/(2) (2)-(1) Payroll (4)/(5) (5,678) $ 17,607 0.0% 128.4% $ (4,404) 17,025 0.0% 115.5% (7,051) 18,203 0.0% 118.7% Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Health Insurance (dollars in thousands) Actuarial Valuation June 30 2010 2011 2012 (2) (1) Actuarial (3) Actuarial Value Accrued Liability Percent Funded of Assets (AAL)* (1)/(2) $ - $ 460 0.0% 886 0.0% 1,059 0.0% (6) Unfunded AAL as a Percentage (4) (5) of Covered Unfunded AAL Annual Covered Payroll (2)-(1) Payroll (4)/(5) $ 460 $ 17,607 2.6% 886 17,025 5.2% 1,059 18,203 5.8% * Projected Unit Credit method used for June 30, 2010 valuation. Entry Age Normal method used for June 30, 2011 and 2012 valuations. 104 City of Scottsdale, Arizona Table of Contents (1) Actuarial Value of Assets $ - Other Post-Employment Benefit Plan Schedule of Employer Contribution (dollars in thousands) Actuarial Valuation July 1 2010 2011 2012 City of Scottsdale, Arizona (2) (1) Annual Required Employer Contribution Contributions (ARC) $ 901 $ 34 870 287 186 635 (3) Percent Contributed (1)/(2) 2650.0% 303.1% 29.3% Required Supplementary Information Actuarial Valuation July 1 2010 2011 2012 (dollars in thousands) (2) (6) Projected Unit Unfunded AAL Credit Cost as a Percentage Actuarial (3) (4) (5) of Covered Accrued Liability Percent Funded Unfunded AAL Annual Covered Payroll (AAL) (1)/(2) (2)-(1) Payroll (4)/(5) $ 746 0.0% $ 746 $ 136,414 0.5% 3,834 0.0% 3,834 131,342 2.9% 5,754 0.0% 5,754 42,805 13.4% For the Fiscal Year Ended June 30, 2013 Other Post-Employment Benefit Plan Schedule of Funding Progress 105 Table of Contents Nonmajor Governmental Funds SPECIAL REVENUE FUNDS Special Revenue Funds are established to finance particular activities and are created out of receipts from specific taxes, grant awards, contributions received, or other earmarked revenue. All funds in the Special Revenue Funds have either legal restrictions stipulated by an external party or are committed to a specific purpose through formal action from the City Council. 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). 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. Grants Fund This fund receives and expends the City’s grant revenues not accounted for in other funds. 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. 106 Section 8 Housing Fund This fund receives and expends the City’s Section 8 Housing revenues. Funding is awarded by the U.S. Department of Housing and Urban Development (HUD) to provide rental housing assistance. Budgets are approved annually by HUD. Section 8 Housing 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. Community Facilities Districts Fund Scottsdale Mountain Community Facilities District McDowell Mountain Ranch Community Facilities District DC Ranch Community Facilities District Via Linda Road Community Facilities District Waterfront Commercial Community Facilities District These funds account for the non-debt related expenditures incurred by community facilities districts. Streetlight Districts Fund This fund accounts for the property tax revenues received from the streetlight districts generated through the annual streetlight district levy. These funds are restricted for electricity expenditures of each streetlight district. Special Programs Fund This fund receives monies from a variety of sources. The monies are either restricted by an outside source or committed by City Council and are required to be expended for specific purposes related to the intention of the source of the revenue. Tourism Development Fund This fund receives revenues generated through transient occupancy taxes and certain lease rentals. The use of these funds has been committed by the City Council for tourism-related purposes. City of Scottsdale, Arizona Table of Contents DEBT SERVICE FUNDS Debt Service Funds record the accumulation of resources for, and the payment of, long-term debt principal and interest not serviced by the proprietary funds. 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 McDowell Mountain Ranch Community Facilities District DC Ranch Community Facilities District Via Linda Road Community Facilities District Waterfront Commercial Community Facilities District 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. 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 Bond 2000 voter-approved general obligation bonds that are used for authorized capital improvements. 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 Ranch Community Facilities District DC Ranch Community Facilities District These funds account for the proceeds issued by community facilities districts to acquire and improve public infrastructure in specified areas. 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 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (.2 percent) and 2004 (.15 percent). McDowell Preserve Privilege Tax Fund This fund accounts for the principal and interest requirements of a Preserve contract payable. Financing is provided by a 0.2 percent Preservation Privilege (Sales) Tax. City of Scottsdale, Arizona 107 Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2013 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Franchise Fee Property Tax Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Intergovernmental Other Total Liabilities Special Revenue Funds $ $ $ Fund Balances Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities and Fund Balances 108 $ 53,558 109 93 3,821 702 48 1,126 6,512 393 328 66,690 2,216 378 3 - Debt Service Funds $ $ $ 321 9,507 118 9,946 1,945 6,375 Capital Projects Funds Total Nonmajor Governmental Funds $ $ $ $ 53,678 110 128 2,382 1,489 57,787 5,330 20 - $ $ 107,557 9,726 221 3,821 702 48 118 1,126 6,512 2,775 1,817 134,423 7,546 398 3 1,945 6,375 10,330 590 13,517 65 8,385 2,382 7,732 65 12,712 590 29,634 39,803 14,764 (1,394) 53,173 1,240 321 1,561 50,055 50,055 91,098 14,764 321 (1,394) 104,789 66,690 $ 9,946 $ 57,787 $ 134,423 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees Fire 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 Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues Special Revenue Funds $ $ 29 47,228 13,852 253 Debt Service Funds $ Total Nonmajor Governmental Funds Capital Projects Funds 3,815 - $ - $ 3,844 47,228 13,852 253 11,903 639 24 - - 11,903 639 24 1,588 43 - 350 - 350 1,588 43 157 958 508 1,813 210 (242) 591 8 - 574 (252) 157 958 508 591 1,813 792 (494) 9,248 299 4,679 551 2,439 966 558 278 97,981 4,414 6,253 8,158 203 794 443 16,523 15,501 299 12,837 203 551 2,439 1,760 558 721 118,918 $ $ $ (continued on next page) City of Scottsdale, Arizona 109 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) EXPENDITURES Current General Government City Court City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements Total Expenditures Special Revenue Funds $ Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds of Refunding Bonds Premium on Long-Term Debt Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 110 $ 1,812 114 11,871 17,198 2,655 11,961 569 Debt Service Funds - - 1,812 114 11,871 17,198 2,655 11,961 569 46,180 27,325 4,077 178 31,580 33,468 33,468 27,325 4,077 178 33,468 111,228 51,801 (27,166) (16,945) 7,690 5,658 (46,758) (41,100) 7,442 (248) 28,225 799 (9,549) 26,669 9,026 (2,671) 6,355 22,126 (49,677) 28,225 799 (9,549) (8,076) 10,701 (497) (10,590) (386) 42,472 53,173 $ Total Nonmajor Governmental Funds Capital Projects Funds $ - 2,058 1,561 $ $ - 60,645 50,055 $ $ 105,175 104,789 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2013 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Franchise Fee 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 Other Total Liabilities $ $ $ Fund Balances Restricted Committed Unassigned Total Fund Balances Total Liabilities and Fund Balances (continued on next page) Community Development Block Grant Highway User Fuel Tax $ 9,579 1,355 1,126 55 40 12,155 1,473 258 - $ $ $ HOME 714 179 25 918 68 12 - $ $ $ Section 8 Housing Grants 3 3 3 $ $ $ 767 156 4 927 45 8 - $ $ $ Preserve Privilege Tax 1,121 1,121 8 22 - $ $ $ McDowell Mountain Ranch CFD Scottsdale Mountain CFD 22,506 91 2,466 25,063 - $ $ $ - - $ $ $ - - 55 1,786 945 25 1,050 1 4 218 523 794 30 - - - 10,369 10,369 (132) (132) (1) (1) 133 133 1,091 1,091 25,063 25,063 - - 12,155 $ 918 $ 3 $ 927 $ 1,121 $ 25,063 $ - $ - 111 Table of Contents 112 Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2013 (in thousands) (continued from previous page) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Franchise Fee 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 Other Total Liabilities DC Ranch CFD Via Linda Road CFD $ $ $ $ Fund Balances Restricted Committed Unassigned Total Fund Balances Total Liabilities and Fund Balances $ 75 75 - $ $ Waterfront Commercial CFD - - $ $ $ Streetlight Districts 34 34 - $ $ $ Tourism Development Special Programs 246 6 252 - $ $ $ 11,821 2 48 6,512 128 18,511 201 72 - $ $ $ 6,804 702 125 7,631 421 6 - Total $ $ $ 53,558 109 93 3,821 702 48 1,126 6,512 393 328 66,690 2,216 378 3 - - - - 9,111 42 9,426 427 10,330 590 13,517 75 75 - 34 34 252 252 2,786 7,560 (1,261) 9,085 7,204 7,204 39,803 14,764 (1,394) 53,173 75 $ - $ 34 $ 252 $ 18,511 $ 7,631 $ 66,690 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fire Fees Fines, Fees, and Forfeitures Court Court Enhancement Police Fees Property Rental Interest Earnings Investment Income Intergovernmental Federal Grants State Grants Miscellaneous Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues $ EXPENDITURES Current General Government City Court City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending (continued on next page) Community Development Block Grant Highway User Fuel Tax $ 16,852 - $ HOME - $ Grants - $ Section 8 Housing - $ - Preserve Privilege Tax $ 30,376 - McDowell Mountain Ranch CFD Scottsdale Mountain CFD $ 9 - $ 10 - 11,903 639 - - - - - - - - - - - - - - - - - - - - 1 - - - 826 1,298 206 558 32 32,314 1,303 1,303 387 387 962 299 66 1,199 2,526 5,770 1 11 5,783 140 30,462 9 10 11,620 8,198 1,048 20,866 1,295 1,295 339 339 18 672 1,414 2,104 5,744 5,744 4 4 9 9 10 10 11,448 8 48 422 39 30,458 - - (8,481) (8,481) - - (31) (31) (1) (1) (31,539) (31,539) - - 2,967 8 48 391 38 (1,081) - - 7,402 10,369 $ (140) (132) $ (49) (1) $ (258) 133 $ 1,053 1,091 170 (224) $ 26,144 25,063 $ - $ - 113 Table of Contents 114 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) (continued from previous page) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fire Fees Fines, Fees, and Forfeitures Court Court Enhancement Police Fees Property Rental Interest Earnings Investment Income Intergovernmental Federal Grants State Grants Miscellaneous Streetlight and Services Districts Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues DC Ranch CFD $ City of Scottsdale, Arizona EXPENDITURES Current General Government City Court City Treasurer - Finance and Accounting Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ - Via Linda Road CFD Waterfront Commercial CFD $ $ 10 - - Streetlight Districts $ Tourism Development Special Programs - $ 253 $ Total 13,852 - $ 29 47,228 13,852 253 - - - - 24 - 11,903 639 24 - - - - 1,588 43 - 1,588 43 - - - - 157 958 508 374 39 (18) 1,439 - 157 958 508 1,813 210 (242) - 10 - 551 551 3,315 1,240 678 95 9,254 81 15,372 9,248 299 4,679 551 2,439 966 558 278 97,981 71 71 10 10 10 10 569 569 1,794 251 503 1,983 2,121 6,652 8,497 8,497 1,812 114 11,871 17,198 2,655 11,961 569 46,180 (71) - (10) (18) 2,602 6,875 51,801 146 146 - 44 44 270 270 2,180 (4,017) (1,837) 3,018 (2,689) 329 5,658 (46,758) (41,100) 75 - 34 252 765 7,204 10,701 75 - 34 252 8,320 9,085 7,204 $ $ $ $ $ $ 42,472 53,173 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 Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Intergovernmental Federal Grants State Grants Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues Original $ EXPENDITURES Current Public Works Community and Economic Development Community Services Administrative Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final 16,788 $ 16,788 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 16,852 - 16,852 64 12,234 - 12,234 - 11,903 639 - 11,903 639 (331) 639 700 610 500 50 30,882 700 610 500 558 50 31,440 826 1,298 206 558 32 32,314 - 826 1,298 206 558 32 32,314 126 (610) 798 206 (18) 874 12,509 9,250 1,052 22 22,833 12,547 9,350 1,052 22,949 11,608 8,197 1,048 20,853 12 1 13 11,620 8,198 1,048 20,866 939 1,153 4 2,096 8,049 8,491 11,461 (13) 11,448 2,970 558 (8,412) (7,854) (8,412) (8,412) (8,481) (8,481) - (8,481) (8,481) 195 79 2,980 (13) 2,967 4,332 4,527 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis 13 $ 7,452 7,531 $ 7,452 10,432 $ (50) (63) $ 7,402 10,369 (69) (69) 2,901 $ 2,901 115 Table of Contents 116 Community Development Block Grant – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Intergovernmental Federal Grants Total Revenues Original REVENUES $ EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures Fund Balances - Beginning Fund Balances - Ending Final 4,258 4,258 4,262 4,262 Budget to GAAP Differences $ $ 1,303 1,303 - Actual Amounts GAAP Basis $ 1,303 1,303 $ (2,959) (2,959) 4,258 4,258 3,886 3,886 1,294 1,294 1 1 1,295 1,295 2,592 2,592 - 376 9 (1) 8 (367) $ - $ 1 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (130) 246 $ (130) (121) $ (10) (11) $ (140) (132) $ (367) City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona HOME – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Intergovernmental Federal Grants Total Revenues Original REVENUES $ EXPENDITURES Current Community Services Total Expenditures Excess of Revenues over Expenditures Fund Balances - Beginning Fund Balances - Ending $ Final 1,533 1,533 $ 1,533 1,533 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 387 387 - 387 387 (1,146) (1,146) 1,533 1,533 1,533 1,533 339 339 - 339 339 1,194 1,194 - - 48 - 48 48 - $ (49) (49) $ (49) (1) $ - $ (49) (1) $ 48 117 Table of Contents 118 Grants – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Total Revenues Original $ EXPENDITURES Current General Government City Court Community and Economic Development Public Safety Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Final 6,064 213 138 2,615 9,030 7,253 251 138 1,400 9,042 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 962 299 66 1,199 2,526 - 962 299 66 1,199 2,526 (6,291) 48 (72) (201) (6,516) 207 4,763 4,060 9,030 213 1,334 1,985 3,532 18 675 1,413 2,106 (3) 1 (2) 18 672 1,414 2,104 (18) 213 659 572 1,426 - 5,510 420 2 422 (5,090) - - (31) (31) - (31) (31) (31) (31) - 5,510 389 2 391 (5,121) $ - $ (2) Explanation of Difference: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (257) 5,253 $ (257) 132 $ (1) 1 $ (258) 133 $ (5,121) Table of Contents City of Scottsdale, Arizona Section 8 Housing – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Interest Earnings Intergovernmental Federal Grants Reimbursements from Outside Sources Other Total Revenues Original $ EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending - $ - $ Budget to GAAP Differences 1 $ Actual Amounts GAAP Basis - $ 1 $ 1 7,008 7,008 7,016 7,016 5,770 1 11 5,783 - 5,770 1 11 5,783 (1,246) 1 11 (1,233) 7,008 7,008 7,019 7,019 5,742 5,742 2 2 5,744 5,744 1,277 1,277 - (3) 41 (2) 39 44 - (1) (1) (1) (1) - (1) (1) - - (4) 40 (2) 38 44 $ - $ 2 Explanation of Difference: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals Actual Amounts Budgetary Basis Final Variance Between Final Budget and Actual Amounts Budgetary Basis $ 1,066 1,062 $ 1,066 1,106 $ (13) (15) $ 1,053 1,091 $ 44 119 Table of Contents 120 Preserve Privilege Tax – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transaction Privilege Interest Earnings Investment Income Other Total Revenues Original $ EXPENDITURES Current General Government City Treasurer - Finance and Accounting Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Explanation of Difference: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Investment Income $ $ Final 30,186 250 30,436 $ 30,186 250 30,436 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ 30,376 170 140 30,686 (224) (224) Variance Between Final Budget and Actual Amounts Budgetary Basis 30,376 170 (224) 140 30,462 $ 190 (80) 140 250 2 956 958 2 956 958 4 4 - 4 4 (2) 956 954 29,478 29,478 30,682 (224) 30,458 1,204 (32,276) (32,276) (32,276) (32,276) (31,539) (31,539) - (31,539) (31,539) 737 737 (2,798) (2,798) (857) (224) (1,081) 1,941 20,206 17,408 (224) $ 26,289 23,491 $ 26,289 25,432 $ (145) (369) $ 26,144 25,063 $ 1,941 Table of Contents City of Scottsdale, Arizona Streetlight Districts – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Streetlight and Services Districts Total Revenues Original $ EXPENDITURES Current Streetlight and Services Districts Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Total Other Financing Sources Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final 647 647 $ 647 647 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 551 551 - 551 551 (96) (96) 647 647 647 647 569 569 - 569 569 78 78 - - (18) - (18) (18) - - 270 270 - 270 270 270 270 - - 252 - 252 252 - $ - $ 252 $ - $ 252 $ 252 121 Table of Contents 122 Special Programs – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Original REVENUES Taxes - Local Light and Power Franchise Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Recreation Fees Fire Fees Fines, Fees, and Forfeitures Court Court Enhancement Police Fees Property Rental Interest Earnings Investment Income Intergovernmental Miscellaneous Contributions and Donations Reimbursements from Outside Sources Other Total Revenues $ EXPENDITURES Current General Government City Court Public Works Community and Economic Development Public Safety Community Services Administrative Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final - $ 250 Budget to GAAP Differences $ $ 253 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 253 3 70 70 24 - 24 (46) 1,587 - 1,587 - 1,588 43 - 1,588 43 1 43 85 1,012 470 692 5 - 85 1,012 470 692 5 - 157 958 508 374 39 - (18) 157 958 508 374 39 (18) 72 (54) 38 (318) 34 - 5,498 1,313 611 11,343 5,498 1,313 611 11,593 3,315 1,240 678 95 9,272 (18) 3,315 1,240 678 95 9,254 (2,183) (73) 67 95 (2,321) 1,921 1,380 7,912 1,832 2,659 46 15,750 1,938 1,630 1,294 2,456 2,668 9,986 1,794 251 503 1,985 2,119 6,652 (2) 2 - 1,794 251 503 1,983 2,121 6,652 144 1,379 791 471 549 3,334 (4,407) 1,607 2,620 (18) 2,602 1,013 8,562 (3,359) 5,203 1,869 (3,359) (1,490) 2,180 (4,017) (1,837) - 2,180 (4,017) (1,837) 311 (658) (347) 796 117 783 (18) 765 666 8,785 9,581 Explanation of Difference: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Investment Income $ Actual Amounts Budgetary Basis (18) $ 8,323 8,440 $ 8,323 9,106 $ (3) (21) $ 8,320 9,085 $ 666 Table of Contents City of Scottsdale, Arizona Tourism Development – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts REVENUES Taxes - Local Transient Occupancy Tax Property Rental Reimbursements from Outside Sources Total Revenues Original $ EXPENDITURES Current Community and Economic Development Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending Final - 13,385 1,503 90 14,978 Budget to GAAP Differences $ $ 13,852 1,439 81 15,372 - Actual Amounts GAAP Basis $ $ 13,852 1,439 81 15,372 467 (64) (9) 394 - 8,436 8,436 8,491 8,491 6 6 8,497 8,497 (55) (55) - 6,542 6,881 (6) 6,875 339 - 3,018 (5,578) (2,560) 3,018 (2,689) 329 - 3,018 (2,689) 329 2,889 2,889 - 3,982 7,210 (6) 7,204 3,228 $ - $ 6 Explanation of Difference: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ 3,982 $ 7,210 $ (6) $ 7,204 $ 3,228 123 Table of Contents 124 Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2013 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agents Receivables (net of allowance for uncollectibles) Property Tax Total Assets LIABILITIES AND FUND BALANCES Liabilities Matured Bond Interest Payable Matured Bonds Payable Deferred Revenue Property Tax Total Liabilities Special Assessments $ $ $ Fund Balances Restricted Assigned Total Fund Balances Total Liabilities and Fund Balances $ - - Scottsdale Mountain CFD McDowell Mountain Ranch CFD $ $ $ $ 532 13 545 51 390 $ $ 1,528 30 1,558 164 1,075 DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ $ $ 1,407 60 1,467 257 890 $ $ 344 9 353 26 135 $ $ 321 556 6 883 107 85 Scottsdale Preserve Authority $ $ $ 5,140 5,140 1,340 3,800 McDowell Preserve Privilege Tax $ $ $ - - Total $ $ $ 321 9,507 118 9,946 1,945 6,375 - 4 445 17 1,256 34 1,181 6 167 4 196 5,140 - 65 8,385 - 100 100 302 302 286 286 186 186 366 321 687 - - 1,240 321 1,561 - $ 545 $ 1,558 $ 1,467 $ 353 $ 883 $ 5,140 $ - $ 9,946 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Special Assessments REVENUES Taxes - Local Property Special Assessments Property Rental Interest Earnings Intergovernmental Miscellaneous Other Total Revenues $ EXPENDITURES Current Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Proceeds of Refunding Bonds Premium on Long-Term Debt Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 591 - Scottsdale Mountain CFD McDowell Mountain Ranch CFD $ $ 446 - 1,440 - DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ 1,399 - 234 8 296 - Scottsdale Preserve Authority $ - McDowell Preserve Privilege Tax $ - Total $ 3,815 591 8 591 446 1,440 1,399 242 296 - - 4,414 755 17 772 390 104 494 12,630 419 58 13,107 6,440 513 62 7,015 2,315 76 58 2,449 85 216 301 3,800 2,686 6,486 910 46 956 27,325 4,077 178 31,580 (181) (48) (11,667) (5,616) (2,207) (5) (6,486) (956) (27,166) (248) (248) - 11,555 217 11,772 14,670 582 (9,549) 5,703 2,000 2,000 - 6,486 6,486 956 956 7,442 (248) 28,225 799 (9,549) 26,669 (429) (48) 105 87 (207) (5) - - (497) 429 - $ 148 100 $ 197 302 $ 199 286 $ 393 186 $ 692 687 $ - $ - $ 2,058 1,561 125 Table of Contents 126 General Obligation Bond Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Taxes - Local Property Total Revenues Original 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 Proceeds of Refunding Bonds Proceeds from Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final 36,702 36,702 $ 36,702 36,702 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 36,164 36,164 - Actual Amounts GAAP Basis $ 36,164 36,164 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (538) (538) 30,738 28,112 58,850 30,738 28,112 58,850 30,290 25,598 1,089 56,977 - 30,290 25,598 1,089 56,977 448 2,514 (1,089) 1,873 (22,148) (22,148) (20,813) - (20,813) 1,335 22,140 22,140 22,140 22,140 21,079 83,025 92 11,068 (90,135) 25,129 - 21,079 83,025 92 11,068 (90,135) 25,129 (1,061) 83,025 92 11,068 (90,135) 2,989 (8) (8) 4,316 - 4,316 4,324 6,787 6,779 $ 5,789 5,781 $ 5,789 10,105 $ - $ 5,789 10,105 $ 4,324 Table of Contents City of Scottsdale, Arizona Municipal Property Corporation Bond Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Property Rental Intergovernmental Other Total Revenues REVENUES Original $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Premium on Long-Term Debt Issued Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final 145 678 823 $ 145 678 823 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 160 1,763 3 1,926 - 160 1,763 3 1,926 15 1,085 3 1,103 4,846 7,767 12,613 4,846 7,767 12,613 3,135 7,011 648 10,794 - 3,135 7,011 648 10,794 1,711 756 (648) 1,819 (11,790) (11,790) (8,868) - (8,868) 2,922 11,751 11,751 11,751 11,751 9,170 655 9,825 - 9,170 655 9,825 (2,581) 655 (1,926) (39) (39) 957 - 957 996 8,373 8,334 $ 9,088 9,049 $ 9,088 10,045 $ - $ 9,088 10,045 $ 996 127 Table of Contents 128 Special Assessments Bond Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Special Assessments Total Revenues REVENUES Original $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Final 771 771 $ 771 771 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 591 591 - 591 591 (180) (180) 754 17 771 754 17 771 755 17 772 - 755 17 772 (1) (1) - - (181) - (181) (181) - - (248) (248) - (248) (248) (248) (248) - - (429) - (429) (429) 516 516 $ 429 429 $ 429 - $ - $ 429 - $ (429) City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Scottsdale Preserve Authority Bond Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2013 (in thousands) Budgeted Amounts Total Revenues REVENUES Original $ 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 Balances Fund Balances - Beginning Fund Balances - Ending $ Final - $ - Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ - - Actual Amounts GAAP Basis $ - Variance Between Final Budget and Actual Amounts Budgetary Basis $ - 3,800 2,686 6,486 3,800 2,686 6,486 3,800 2,686 6,486 - 3,800 2,686 6,486 - (6,486) (6,486) (6,486) - (6,486) - 6,486 6,486 6,486 6,486 6,486 6,486 - 6,486 6,486 - - - - - - - 37 37 $ - $ - $ - $ - $ - 129 Table of Contents 130 Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2013 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agents Receivables (net of allowance for uncollectibles) Interest Grants Miscellaneous Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Deferred Revenue Intergovernmental Total Liabilities General Obligation Bonds $ $ $ Fund Balances Restricted Total Fund Balances City of Scottsdale, Arizona Total Liabilities and Fund Balances $ 29,426 81 29,507 - Transportation Privilege Tax $ $ $ 24,252 47 2,382 1,489 28,170 5,330 20 McDowell Mountain CFD DC Ranch CFD $ $ $ $ 110 110 - $ $ Total - - $ $ $ 53,678 110 128 2,382 1,489 57,787 5,330 20 - 2,382 7,732 - - 2,382 7,732 29,507 29,507 20,438 20,438 110 110 - 50,055 50,055 29,507 $ 28,170 $ 110 $ - $ 57,787 Table of Contents City of Scottsdale, Arizona Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Fiscal Year Ended June 30, 2013 (in thousands) REVENUES Charges for Current Services Building and Related Permits Interest Earnings Investment Income Intergovernmental Federal Grants Miscellaneous Developer Contributions Reimbursements from Outside Sources Other Total Revenues General Obligation Bond Transportation Privilege Tax McDowell Mountain CFD $ $ $ EXPENDITURES Current Capital Improvements Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 321 (166) 350 253 (86) DC Ranch CFD - $ Total - $ 350 574 (252) 186 341 6,253 8,158 203 794 257 16,182 - - 6,253 8,158 203 794 443 16,523 - 33,468 33,468 - - 33,468 33,468 341 (17,286) - - (16,945) (2,501) (2,501) 9,026 (83) 8,943 - (87) (87) 9,026 (2,671) 6,355 (2,160) (8,343) - (87) (10,590) 31,667 29,507 $ 28,781 20,438 $ 110 110 $ 87 - $ 60,645 50,055 131 Table of Contents INTERNAL SERVICE FUNDS Internal Service Funds are established to account for the financing, on a cost-reimbursement basis, of commodities or services provided by one program for the benefit of other programs within the City. This allows for the internal users of services to be charged for those services based on their use. Fleet Management Fund This fund is used to account for the expenses associated with purchasing and maintaining the City’s vehicles. Self-Insurance Fund This fund is used for the administration of the City’s self-insurance program. This fund provides coverage of unemployment, self-insured benefits, workers’ compensation, property, and liability claims. Computer Replacement Fund This fund is used to account for the expenses associated with purchasing the City’s computers, monitors, and printers. 132 City of Scottsdale, Arizona Table of Contents Combining Statement of Fund Net Position Internal Service Funds June 30, 2013 (in thousands) Fleet Management ASSETS Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Total Current Assets $ 10,444 Computer Replacement Self-Insurance $ 20,688 $ Total 607 $ 31,739 823 11,267 428 21,116 607 428 823 32,990 12,447 62,910 1,374 (42,514) 34,217 - - 12,447 62,910 1,374 (42,514) 34,217 45,484 21,116 607 67,207 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 721 126 135 982 756 23 24 5,244 6,047 - 1,477 149 159 5,244 7,029 Noncurrent Liabiliites Accrued Compensated Absences - Due in more than one year Other Payables - Due in more than one year Total Noncurrent Liabilities 139 139 35 7,638 7,673 - 174 7,638 7,812 1,121 13,720 - 14,841 34,217 10,146 7,396 607 34,217 18,149 Noncurrent Assets Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Less Accumulated Depreciation Total Noncurrent Assets Total Assets Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position City of Scottsdale, Arizona $ 44,363 $ 7,396 $ 607 $ 52,366 133 Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Fleet Management OPERATING REVENUES Charges for Sales and Services Billings to User Programs Self Insurance Contributions - Employee Self Insurance Contributions - Retiree 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 Computer Replacement Total Operating Expenses Operating Income (Loss) NON-OPERATING REVENUES (EXPENSES) Property Tax Gain on Sale of Capital Assets Total Non-Operating Revenues Income (Loss) Before Contributions and Transfers Capital Contribution Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending 134 $ 17,609 45 17,654 Computer Replacement Self-Insurance $ 22,630 6,223 652 419 1,224 31,148 $ Total 835 835 $ 41,074 6,223 652 419 1,269 49,637 11,573 4,385 15,958 2,938 9,132 22,654 542 35,266 983 983 11,573 2,938 9,132 22,654 542 4,385 983 52,207 1,696 (4,118) (148) (2,570) 249 249 213 213 - 213 249 462 1,945 1,528 (7) 3,466 (3,905) (1) (3,906) (148) (148) (2,108) 40,897 44,363 $ 11,302 7,396 $ 755 607 1,528 (8) (588) $ 52,954 52,366 City of Scottsdale, Arizona Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Fleet Management Cash Flows from Operating Activities Cash Received from Customers Cash Payments to Employees for Services Cash Payments to Suppliers for Goods/Services Other Cash Receipts Net Cash Provided by (Used for) Operating Activities $ Cash Flows from Non-Capital Financing Activities Property Tax Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities Net Decrease in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Computer Replacement Self-Insurance 17,609 (3,167) (8,738) 45 5,749 $ 29,586 (1,028) (31,506) 1,224 (1,724) $ Total 835 (1,002) (167) $ 48,030 (4,195) (41,246) 1,269 3,858 (7) (7) 213 (1) 212 - 213 (8) 205 (6,269) 323 (5,946) - - (6,269) 323 (5,946) (204) (1,512) (167) (1,883) 10,648 22,200 774 33,622 $ 10,444 $ 20,688 $ 607 $ 31,739 $ 1,696 $ (4,118) $ (148) $ (2,570) Reconciliation of Operating Income to Net Cash Provided by (Used for) Operating Activities Operating Income (Loss) Income (Loss) to Net Cash Provided by (Used for) Operating Activities Depreciation Accounts Receivable Inventories Accounts Payable Accrued Payroll Compensated Absences Payable Claims Payable Net Other Post Employment Benefit Total Adjustments Net Cash Provided by (Used for) Operating Activities City of Scottsdale, Arizona 4,385 (101) (194) (5) (33) 1 4,053 $ 5,749 (338) 472 (12) (19) (19) 2,271 1 2,394 $ (1,724) $ (167) 4,385 (338) (101) 259 (17) (33) 2,271 2 6,428 $ 3,858 135 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 disabilities. 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. Crossroads East Development Agreement This fund accounts for monies in escrow for the Arizona State Land Department. 136 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 (in thousands) ASSETS Cash and Cash Equivalents Private Purpose Trust Funds Handicap Scholarship Private Purpose Trust Fund Total $ Total Assets LIABILITIES Escrow Payable Vouchers Designated Escrow Payable State Land Department Rebate Total Liabilities NET POSITION Held in Trust for Other Purposes $ 3 $ Agency Funds Family SelfSufficiency Agency Fund 3 $ 75 Retainage Escrow Agency Fund $ 1,720 Crossroads East Dev Agreement Agency Fund $ 1,415 Total $ 3,210 3 3 75 1,720 1,415 3,210 - - 75 - 1,720 - 1,415 75 1,720 1,415 - - 3 $ 3 $ 75 $ 1,720 $ 1,415 $ 3,210 137 Table of Contents 138 Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2013 (in thousands) Family Self-Sufficiency ASSETS Cash and Cash Equivalents Total Assets LIABILITIES Escrow Payable Vouchers Designated Escrow Payable State Land Department Rebate Total Liabilities Balance July 1, 2012 Additions Deductions Retainage Escrow Balance June 30, 2013 Balance July 1, 2012 Additions Deductions Crossroads East Dev Agreement Balance June 30, 2013 Balance July 1, 2012 Additions Deductions Balance June 30, 2013 $ 75 $ 50 $ 50 $ 75 $ 1,720 $ 1,720 $ 1,720 $ 1,720 $ 1,415 $ - $ - $ 1,415 $ 75 $ 50 $ 50 $ 75 $ 1,720 $ 1,720 $ 1,720 $ 1,720 $ 1,415 $ - $ - $ 1,415 $ 75 - $ 50 - $ 50 - $ 75 - $ 1,720 - $ 1,720 - $ 1,720 - $ 1,720 - $ 1,415 $ - $ - $ 1,415 $ 75 $ 50 $ 50 $ 75 $ 1,720 $ 1,720 $ 1,720 $ 1,720 $ 1,415 $ - $ - $ 1,415 City of Scottsdale, Arizona Table of Contents OTHER SUPPLEMENTARY INFORMATION Debt Requirements The Schedule of Changes in Long-Term Debt for the current fiscal year presents the City’s debt by debt type without regard to fund classification. Debt issued by community facilities districts is included for full disclosure although such debt is not legally an obligation of the City. City of Scottsdale, Arizona 139 Table of Contents 140 Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2013 (in thousands of dollars) **Restated July 1, 2012 Issued Retired Refunding Bonds Issued Accretions, Amortizations & Contract Adjustments Bonds Defeased June 30, 2013 Governmental Activities Business-type Activities Final Payment Date GENERAL OBLIGATION BONDS City of Scottsdale, Arizona Governmental Fund Type: 1997 GO Refunding 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 2011 GO Preserve 2011 GO Refunding Various Purpose 2011 GO Refunding Preservation 2012 GO Preservation 2012 GO Refunding Various Purpose 2012 GO Refunding Preservation 2013 GO Preserve 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 2011 GO Preserve Series Deferred Issuance Premium 2011 GO Series Deferred Amount on Refunding 2011 GO Refunding Series Deferred Issuance Premium 2012 GO Preserve Deferred Issuance Premium 2012 GO Refunding Series Deferred Issuance Premium 2012 GO Series Deferred Amount on Refunding 2013 GO Preserve Deferred Issuance Premium Total General Obligation Bonds REVENUE BONDS Business Type - Revenue Bonds 2004 Utility Revenue Series Refunding 2008 Utility Revenue Series Refunding 2008 Revenue Series Deferred Amount on Refunding 2008 Refunding Series Deferred Issuance Premium Total Revenue Bonds $ $ $ $ 2,605 $ 17,720 8,100 1,375 48,000 48,700 5,825 66,090 105,250 14,875 100,000 18,150 48,800 21,785 4,445 32,705 50,000 618 (1,996) 1,534 1,548 246 1,771 119 748 247 (1,697) 3,461 2,402 603,426 $ - $ 75,000 3,100 78,100 $ 1,255 $ 5,430 1,375 2,100 4,300 5,500 975 3,075 525 1,150 755 3,645 91 114 30,290 $ - $ 38,525 44,500 7,968 (6,668) 84,325 $ 5,770 $ 32,860 (523) 3,050 41,157 $ - $ - $ 2,900 $ 215 3,115 $ - $ - $ *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). - $ 38,525 44,500 530 83,555 $ - $ $ - $ (30) 277 (216) (134) (20) (111) (6) (42) (12) 74 (294) (112) (613) 513 (56) (782) $ 1,350 $ 12,290 8,100 9,475 2,100 1,525 66,090 99,750 13,900 96,925 17,625 47,650 21,030 4,445 29,060 50,000 38,434 44,386 75,000 58 (1,719) 1,318 1,414 226 1,660 113 706 235 (1,623) 3,167 2,290 7,355 (6,155) 3,044 651,224 $ 1,350 $ 12,290 8,100 9,475 2,100 1,525 66,090 99,750 13,900 96,925 17,625 47,650 21,030 4,445 29,060 50,000 38,434 44,386 75,000 58 (1,719) 1,318 1,414 226 1,660 113 706 235 (1,623) 3,167 2,290 7,355 (6,155) 3,044 651,224 $ - $ 49 (288) (239) $ 2,870 $ 32,645 (474) 2,762 37,803 $ - $ - $ - 2,870 32,645 (474) 2,762 37,803 07/01/14 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 07/01/34 07/01/18 07/01/24 07/01/34 07/01/25 07/01/25 07/01/34 07/01/16 07/01/23 Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* (continued here and on following page) For the Year Ended June 30, 2013 (in thousands of dollars) MUNICIPAL PROPERTY CORPORATION BONDS Governmental Fund Type: 2004A MPC 2005 MPC 2005D MPC 2006 MPC Refunding 2006A MPC 2006B MPC 2013A MPC 2013B MPC 2013C 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 2013A MPC Series Deferred Issuance Premium 2013B MPC Series Deferred Issuance Premium 2013C MPC Series Deferred Issuance Premium Subtotal **Restated July 1, 2012 $ 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 SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Fund Type: 2004 Excise Tax Refunding 2010 Excise Tax Refunding 2011 Excise Tax Refunding 2004 Excise Tax Revenue Deferred Issuance Premium 2004 Excise Tax Revenue Deferred Amount on Refunding 2010 Excise Tax Revenue Deferred Issuance Premium 2010 Excise Tax Revenue Deferred Amount on Refunding 2011 Excise Tax Revenue Deferred Issuance Premium 2011 Excise Tax Revenue Deferred Amount on Refunding Total Scottsdale Preserve Authority Bonds SPECIAL ASSESSMENT BONDS Governmental Fund Type: Bell Road II Series 106 6,935 $ 23,487 19,250 55,450 8,305 31,550 122 215 874 (1,898) 5,436 91 166 149,983 6,965 11,430 110,510 96,050 74,820 356 317 9,917 (3,972) 3,886 3,226 313,505 Issued Retired - $ 26,295 1,440 37,265 4,971 200 5,044 75,215 - Refunding Bonds Issued Accretions, Amortizations & Contract Adjustments Bonds Defeased 1,010 $ 610 225 290 1,000 3,135 - $ - - 3,420 2,600 2,900 300 9,220 - - - $ Business-type Activities Governmental Activities June 30, 2013 - $ 812 (18) (24) (38) 89 (247) (3) (8) (124) (4) (95) 340 5,925 $ 23,689 19,025 55,450 8,015 30,550 26,295 1,440 37,265 104 191 836 (1,809) 5,189 88 158 4,847 196 4,949 222,403 - (180) (79) (451) 550 (196) (136) (492) 3,545 8,830 110,510 93,150 74,520 176 238 9,466 (3,422) 3,690 3,090 303,793 5,925 $ 23,689 19,025 55,450 8,015 30,550 26,295 1,440 37,265 104 191 836 (1,809) 5,189 88 158 4,847 196 4,949 222,403 - Final Payment Date - 3,545 8,830 110,510 93,150 74,520 176 238 9,466 (3,422) 3,690 3,090 303,793 $ 463,488 $ 75,215 $ 12,355 $ - $ - $ (152) $ 526,196 $ 222,403 $ 303,793 $ $ 12,315 $ 32,855 11,095 713 (674) 4,263 (588) 991 (666) 60,304 $ - $ - $ 2,860 $ 940 3,800 $ - $ - $ - $ - $ - $ (239) 227 (346) 48 (102) 62 (350) $ 9,455 $ 32,855 10,155 474 (447) 3,917 (540) 889 (604) 56,154 $ 9,455 $ 32,855 10,155 474 (447) 3,917 (540) 889 (604) 56,154 $ - $ 750 $ - $ 750 $ - $ - $ - $ - $ - $ - *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). 07/01/19 07/01/21 07/01/35 07/01/34 07/01/31 07/01/31 07/01/28 07/01/33 07/01/33 07/01/14 07/01/16 07/01/30 07/01/32 07/01/36 07/01/16 07/01/24 07/01/22 141 Table of Contents 142 Schedule of Changes in Long-Term Debt* (continued) For the Year Ended June 30, 2013 (in thousands of dollars) **Restated July 1, 2012 CERTIFICATES OF PARTICIPATION Governmental Fund Type: Series 2010-Public Safety Communications Project 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 DC Ranch Refunding Series 2012 McDowell Mtn Ranch Refunding Series 2012 Via Linda Road Refunding Series 2012 Scottsdale Mountain 2002 Deferred Issuance Premium DC Ranch 2002 Deferred Issuance Premium DC Ranch 2012 Deferred Issuance Premium DC Ranch 2012 Deferred Amount on Refunding McDowell Mnt Ranch 2012 Deferred Issuance Premium Total Community Facilities District Bonds Total Bonds CONTRACTS PAYABLE** Governmental Fund Type: US Corps of Engineers McDowell Sonoran Preserve Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Underground Improvement District Series 104 Total Contracts CAPITAL LEASES** Governmental Fund Type: Field Maintenance Equipment - Community Services Copier Equipment - Administrative Services Copier Equipment - Administrative Services Street Maintenance Equipment - Public Works Total Capital Leases SERVICE CONCESSION ARRANGEMENTS Governmental Fund Type: Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Total Service Concession Arrangements City of Scottsdale, Arizona TOTAL BONDS, CONTRACTS, CAPITAL LEASES, AND SERVICE CONCESSION ARRANGEMENTS Issued Refunding Bonds Issued Retired $ 18,031 $ - $ 2,028 $ $ 11,555 3,290 2,180 2,260 2,270 9,455 3,630 6 39 34,685 $ - $ 11,555 3,290 2,180 2,260 390 335 85 555 1,075 135 21,860 $ $ 1,221,841 $ 153,315 $ 74,198 $ 112,758 $ 2,614 910 5 3,529 $ - $ 44 910 5 959 $ - $ $ $ $ 79 136 107 69 391 $ $ $ $ - $ $ $ $ 1,599 1,699 3,298 $ - $ 1,229,059 $ 153,315 $ 20 95 67 26 208 $ $ $ $ $ 80 74 154 $ 75,519 Accretions, Amortizations & Contract Adjustments Bonds Defeased - $ - $ - - $ 14,670 11,555 2,000 582 (591) 217 28,433 9,120 39 9,159 $ - $ (31) 31 (16) (16) $ 92,714 $ (1,539) $ $ - $ - $ $ $ $ $ - $ 112,758 - $ $ $ $ $ - $ 92,714 $ $ Governmental Activities June 30, 2013 - $ $ $ - $ - $ 16,003 $ - $ 1,880 3,545 14,115 10,480 1,865 6 551 (560) 201 32,083 Final Payment Date $ - 07/01/20 - $ 1,880 3,545 14,115 10,480 1,865 6 551 (560) 201 32,083 - 07/15/22 07/15/23 07/15/23 07/15/24 07/15/18 07/15/27 07/15/32 07/15/27 07/15/22 07/15/23 1,319,463 $ 977,867 $ 341,596 2,570 2,570 $ 2,570 2,570 $ - 2032 2013 2032 2035 2013 - 2016 2014 2014 2015 2032 2035 $ $ $ $ 59 41 40 43 183 $ 1,519 1,625 3,144 $ $ 1,519 1,625 3,144 $ - (1,539) $ 1,325,360 $ 983,764 $ 341,596 $ 59 41 40 43 183 $ Compensated Absences Other Post-Employment Benefit - Explicit Subsidy Risk Management Claims Total Long-Term Debt 16,003 Business-type Activities $ 23,906 288 12,882 $ 1,020,840 *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). **Beginning balances for the Contracts Payables for the Bureau of Reclamation, Capital Leases, and Service Concession Arrangements were restated as a result of the implementation of GASB Statements No. 60 and 62. 3,007 $ 344,603 Table of Contents Statistical Section Contents Page Financial Trends 144 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 153 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 160 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. Demographic and Economic Information 166 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 168 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. City of Scottsdale, Arizona 143 Table of Contents 144 City of Scottsdale, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Governmental Activities Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position Business-Type Activities Net Investment in Capital Assets Restricted Unrestricted Total Business-Type Activities Net Position Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position (1) 2004 2005 2006 $ 1,548,486 199,767 127,017 $ 1,875,270 $ 1,877,955 78,794 195,887 $ 2,152,636 $ 2,029,375 102,293 172,530 $ 2,304,198 $ $ $ 653,351 20,842 272,431 946,624 $ 2,201,837 220,609 399,448 $ 2,821,894 $ 756,433 23,472 212,957 992,862 $ 2,634,388 102,266 408,844 $ 3,145,498 Restated restricted and unrestricted net position related to the classification of unspent bond proceeds. (2) In FY2013, beginning net position was restated due to the implementation of GASB Statements 60 and 62. Table I Fiscal Year 2008 2009 2007 2010 2011 2012 2013 $ 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 $ 2,704,433 91,862 108,799 $ 2,905,094 $ 2,800,451 100,275 74,124 $ 2,974,850 $ 2,756,186 100,472 133,897 $ 2,990,555 $ 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 $ 1,009,973 36,287 258,395 $ 1,304,655 $ 1,036,985 38,576 243,067 $ 1,318,628 $ 1,058,880 41,545 242,763 $ 1,343,188 $ 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 $ 3,714,406 128,149 367,194 $ 4,209,749 $ 3,837,436 138,851 317,191 $ 4,293,478 $ 3,815,066 142,017 376,660 $ 4,333,743 (1) (1) (2) City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Expenses Governmental Activities: General Government Public Works Community and Economic Development Public Safety Human Resources Community Services Information Technology Administrative Services Citizen and Neighborhood Resources Economic Vitality Finance and Accounting Financial Services Fire Information Services Municipal Services Planning and Development Planning, Neighborhood and Transportation Police The Downtown Group Transportation WestWorld Streetlight and Service Districts Interest on Long-Term Debt Total Governmental Activities Expenses 2004 $ Business-Type Activities: Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Expenses Total Primary Government Expenses 23,839 3,462 55,087 2,812 6,130 7,655 19,570 11,135 13,024 11,697 60,027 78,373 1,024 28,028 321,863 2005 $ 51,095 24,678 2,622 15,153 93,548 $ 415,411 (1) 30,943 3,333 57,519 3,496 8,026 8,315 28,620 7,941 16,520 12,522 63,076 85,835 1,094 32,466 359,706 2006 $ 59,723 28,324 3,346 15,508 106,901 $ 466,607 42,729 3,615 57,931 3,419 7,549 8,343 26,943 14,589 14,746 12,883 74,408 82,047 617 37,192 387,011 488,160 Fiscal Year 2008 2009 2007 $ 53,961 27,854 2,922 16,412 101,149 $ Table IIa 45,682 3,800 70,527 3,727 9,475 9,843 28,054 13,329 17,698 15,133 81,375 95,214 597 38,981 433,435 $ 64,915 26,089 2,958 17,895 111,857 $ 545,292 40,698 4,790 78,285 3,663 9,711 10,930 31,943 13,704 20,153 31,933 91,102 90,039 712 39,457 467,120 $ 71,140 26,947 3,343 18,772 120,202 $ 587,322 20,646 3,545 78,523 3,802 8,553 9,913 31,174 13,723 22,887 29,029 92,530 4,595 87,552 595 631 42,242 449,940 2010(2) $ 81,391 33,509 3,482 19,650 138,032 $ 587,972 24,351 37,143 116,155 3,717 53,596 14,876 1,917 20,676 5,848 114,530 538 39,405 432,752 2011(3) $ 76,178 33,274 3,120 18,889 131,461 $ 564,213 21,495 35,605 134,221 111,227 3,047 51,974 13,491 2,905 578 40,358 414,901 2012(4) $ 83,888 34,533 3,680 18,853 140,954 $ 555,855 (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. In FY2010, the City's Governmental Activities were restructured from Departments to Divisions, which resulted in the shift of reporting associated expenses. (3) In FY2011, Economic Vitality merged with Planning, Neighborhood and Transportation, to become the Community and Economic Development Division. In addition, Finance and Accounting was merged into General Government. (4) In FY2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. 145 (2) 18,964 34,416 126,622 115,740 54,442 17,318 572 40,647 408,721 2013 $ 90,829 41,218 3,681 17,671 153,399 $ 562,120 20,985 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 90,205 43,169 3,785 19,146 156,305 $ 591,445 Table of Contents 146 City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Program Revenue Governmental Activities: Charges for Services: General Government Public Works Community and Economic Development Public Safety Human Resources Community Services Information Technology Administrative Services Planning, Neighborhood, and Transportation Citizen and Neighborhood Resources Economic Vitality Fire Planning and Development Police Transportation WestWorld Streetlight and Service Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 2004 $ Business-Type Activities: Charges for Services: Water Utility Sewer Utility Airport Solid Waste Capital Grants and Contributions Total Business-Type Activities Revenues City of Scottsdale, Arizona Total Primary Government Revenues Net (Expense)/Revenue Governmental Activities Business-Type Activities Total Primary Government Net Expense 12,742 3,759 17,314 6,760 1,000 24,508 105,794 171,877 2005 $ 70,613 25,587 2,936 16,488 71,709 187,333 12,106 3,914 18,188 11,514 998 26,865 73,092 146,677 2006 $ 72,612 27,503 3,162 16,984 38,313 158,574 13,783 4,028 163 1,010 20,515 9,938 277 511 26,355 136,745 213,325 Table IIb Fiscal Year 2008 2009 2007 $ 14,102 4,388 228 1,155 16,128 15,071 326 546 29,293 211,707 292,944 (1) (2) 81,517 27,119 3,342 17,163 55,580 184,721 $ (3) 84,381 32,250 3,451 18,490 55,111 193,683 15,581 4,637 21 1,095 12,800 16,664 595 28,409 157,808 237,610 $ 90,741 33,930 3,380 19,824 50,679 198,554 14,670 4,619 2,275 6,393 5,703 2,682 599 26,272 240,289 303,502 2010 $ 91,546 34,198 2,813 20,049 22,067 170,673 13,982 12,655 5,773 6,837 2,552 289 29,319 190,279 261,686 2011 $ 94,199 35,027 2,879 20,269 9,268 161,642 4,777 4,666 9,604 9,917 973 4,617 2,485 635 478 32,205 41,072 111,429 2012 $ (4) 94,056 34,533 2,816 20,940 17,889 170,234 3,965 3,543 10,958 10,102 5,573 2,549 551 28,144 112,163 177,548 2013 $ 97,944 36,032 3,248 20,744 8,607 166,575 4,340 1,498 14,736 9,139 5,523 3,155 551 31,255 66,917 137,114 100,615 36,939 3,552 20,458 25,638 187,202 $ 359,210 $ 305,251 $ 398,046 $ 486,627 $ 436,164 $ 474,175 $ 423,328 $ 281,663 $ 344,123 $ 324,316 $ (149,986) 93,785 (56,201) $ (213,029) 51,673 (161,356) $ (173,686) 83,572 (90,114) $ (140,491) 81,826 (58,665) $ (229,510) 78,352 (151,158) $ (146,438) 32,641 (113,797) $ (171,066) 30,181 (140,885) $ (303,472) 29,280 (274,192) $ (231,173) 13,176 (217,997) $ (298,026) 30,897 (267,129) $ $ $ $ $ (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). (4) In FY2011, Economic Vitality was merged with Planning, Neighborhood and Transportation, to become the Community and Economic Development Division. $ $ $ $ $ Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) 2004 General Revenues and Other Changes in Net Position 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 Position Governmental Activities Business-Type Activities Total Primary Government (1) 183,039 45,163 2,655 2,777 11,037 244,671 2005 $ 973 905 (11,037) (9,159) 217,325 48,346 6,765 4,100 9,567 286,103 2006 (1) $ 4,288 (156) (9,567) (5,435) 240,731 54,481 13,714 5,786 10,536 325,248 Table IIc Fiscal Year 2008 2009 2007 $ 119 6,581 686 (10,536) (3,150) 249,411 60,520 23,013 5,377 11,174 349,495 $ 195 9,265 496 (11,174) (1,218) 246,330 65,933 19,187 7,606 10,997 350,053 $ 195 6,910 517 (10,997) (3,375) 221,272 64,145 14,653 5,038 9,932 315,040 2010 $ 117 4,958 408 (9,932) (4,449) 208,083 56,830 1,368 6,730 10,690 283,701 2011 $ 130 4,295 430 (10,690) (5,835) 222,118 49,190 248 11,849 10,179 293,584 2012 $ 134 2,658 1,355 (10,179) (6,032) 227,963 44,035 1,063 20,502 7,366 300,929 2013 $ 132 421 7,610 (7,366) 797 234,582 49,054 985 12,557 7,244 304,422 144 763 (7,244) (6,337) $ 235,512 $ 280,668 $ 322,098 $ 348,277 $ 346,678 $ 310,591 $ 277,866 $ 287,552 $ 301,726 $ 298,085 $ 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 $ (9,888) 23,248 13,360 $ 69,756 13,973 83,729 $ 6,396 24,560 30,956 $ $ $ $ $ $ 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. $ $ $ $ 147 Table of Contents 148 City of Scottsdale, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Table III Fiscal Year General Fund Nonspendable Restricted Committed Assigned Unassigned Reserved Unreserved Total General Fund All Other Governmental Funds Nonspendable Restricted Committed Assigned Unassigned, Reported in: Special Revenue Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds (1) 2004 2005 2006 2007 2008 2009 2011(1) 2010 $ $ $ 2,153 59,707 61,860 $ $ 872 72,772 73,644 $ $ 805 93,243 94,048 $ $ 754 89,534 90,288 $ $ 924 61,379 62,303 $ $ 835 59,587 60,422 $ $ 586 51,518 52,104 $ $ $ 9,122 $ 22,122 224,422 $ 255,666 In FY2011, fund balances were stated in classifications required by GASB54. 10,613 $ 191,112 $ 40,952 189,905 31,873 148,626 $ 23,142 $ 253,999 21,249 $ 52,484 179,477 $ 253,210 25,600 $ 35,179 212,676 $ 273,455 27,236 $ 30,710 102,898 $ 160,844 153,646 247 281 53,199 53,727 $ 3,000 104,284 6,221 36,609 $ $ (640) - 20,193 30,963 102,490 $ 2012 149,474 264 260 52,105 52,629 $ 2,980 108,073 7,345 37,183 $ $ (447) - $ 2013 155,134 114,676 16,298 39,666 (1,394) - $ 265 48,679 48,944 $ 169,246 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 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 2004 2005 2006 Table IVa Fiscal Year 2008 2009 2007 2010 2011 2012 2013 $ 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 $ 221,236 61,754 1,745 15,119 8,579 733 4,204 2,705 (3,397) 52,300 254 478 1,157 4,673 14,800 1,892 $ 228,823 53,834 1,805 16,985 9,133 719 4,630 2,837 (1,403) 67,725 101 551 2,521 12,642 9,096 3,265 $ 236,652 59,813 1,763 20,870 8,472 591 4,232 2,624 (1,639) 53,462 203 551 2,813 5,934 7,595 2,438 $ 307,085 $ 362,987 $ 392,158 $ 425,721 $ 426,624 $ 404,478 $ 346,051 $ 388,232 $ 413,264 $ 406,374 149 Table of Contents 150 City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Expenditures General Government Public Works Community and Economic Development Public Safety Human Resources Community Services Information Technology Administrative Services Finance and Accounting Economic Vitality Planning, Neighborhood, and Transportation Planning and Development WestWorld Information Systems The Downtown Group Fire Police Financial Services Transportation Municipal Services Citizen and Neighborhood Resources Streetlight and Services Districts Debt Service: Principal Interest and Fiscal Charges Bond Issuance Costs Capital Improvements 2004 $ 16,121 3,290 50,494 6,199 11,218 7,328 19,265 55,510 7,222 9,399 8,774 2,754 1,024 2005 $ 31,905 25,452 586 81,149 2006 21,793 3,261 49,941 6,506 12,111 7,674 21,320 59,874 7,631 8,760 11,813 2,831 1,094 33,173 31,948 878 213,585 $ 23,516 3,507 53,535 7,510 12,436 8,253 24,296 66,278 7,769 10,099 8,850 3,070 617 27,632 36,382 351 218,897 (1) Fiscal Year 2008 2009 2007 $ 24,938 3,855 61,778 9,016 14,331 8,931 26,614 78,261 9,080 13,439 9,692 3,254 597 Table IVb $ 34,252 38,279 735 147,367 26,633 3,854 69,200 9,373 15,012 10,149 29,785 89,725 9,433 14,301 19,140 3,621 712 $ 33,043 38,651 1,028 196,976 19,216 3,465 70,807 8,246 16,671 3,704 9,904 4,627 30,767 89,802 9,701 15,580 18,800 3,732 632 2010 $ 31,308 41,612 155,358 (2) 17,030 31,391 111,459 3,657 45,655 9,469 1,859 6,059 17,110 27,447 538 2011 $ 33,701 38,782 497 77,929 (3) 19,783 31,463 42,357 108,003 3,013 43,967 9,357 3,031 578 2012 $ 37,677 40,091 1,057 107,448 (4) 18,523 27,307 38,369 107,934 44,762 14,450 572 2013 $ 44,700 40,487 774 129,025 19,695 29,658 70,351 111,960 45,346 14,141 569 63,234 38,789 1,915 181,189 City of Scottsdale, Arizona Total Expenditures $ 337,690 $ 494,193 $ 512,998 $ 484,419 $ 570,636 $ 533,932 $ 422,583 $ 447,825 $ 466,903 $ 576,847 Excess of Revenues over (under) Expenditures $ (30,605) $ (131,206) $ (120,840) $ (58,698) $ (144,012) $ (129,454) $ (76,532) $ (59,593) $ (53,639) $ (170,473) (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 Divisions which resulted in the shift of reporting associated expenditures. (3) In FY2011, Economic Vitality merged with Planning, Neighborhood and Transportation, to become the Community and Economic Development Division. In addition, Finance and Accounting was merged into General Government. (4) In FY2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Other Financing Sources (Uses) Transfers In Transfers Out Refunding Bonds Issued Long-Term Capital-Related Debt Issued Premium on Long-Term Debt Payment to Bond Refunding Escrow Agent Proceeds from Capital Lease Proceeds of Long-Term Debt Proceeds from Notes Payable Proceeds from Sale of Assets 2004 $ Total Other Financing Sources and (Uses) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures (1) 137,043 (126,269) 39,190 113,400 4,429 (90,534) - 2005 $ 77,259 $ 46,654 22.4% 2006 141,783 (133,284) 74,630 68,355 4,536 (77,584) - $ 78,436 $ (52,770) 147,643 (140,513) 191,500 5,501 204,131 (1) 23.2% The change from the prior period was caused by the increase in spending for capital improvement projects. $ 83,291 21.8% Fiscal Year 2008 2009 2007 $ 162,965 (155,295) 55,450 42,500 7,199 (61,845) 175 3,000 - $ 54,149 $ (4,549) 21.5% Table IVc 195,170 (185,082) 123,805 2,379 - $ 136,272 $ (7,740) 19.2% 160,319 (145,357) - 2010 $ 14,962 $ (114,492) 19.3% 108,066 (98,693) 843 50,800 - 2011 $ 61,016 $ (15,516) 21.0% 79,592 (69,378) 87,985 42,525 10,047 (94,818) 1,091 2012 $ 57,044 $ (2,549) 22.8% 81,579 (75,826) 2,448 50,000 - 2013 $ 58,201 $ 4,562 25.2% 78,171 (70,919) 111,250 22,082 (99,684) 140,000 180,900 $ 10,427 25.8% 151 Table of Contents 152 City of Scottsdale, Arizona Tax Revenues By Source Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 City of Scottsdale, Arizona Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) $ $ Property 46,088 48,249 49,651 50,732 53,778 60,493 58,354 65,970 65,089 64,908 Privilege and Use General $ 86,547 94,302 104,949 110,225 104,673 85,829 77,878 80,119 84,633 89,002 Franchise Taxes Cable TV Light and Power Franchise Franchise 2,740 $ 5,488 2,859 5,596 3,157 6,308 3,355 7,284 3,544 8,030 3,606 7,831 3,317 7,834 3,163 7,842 3,445 8,115 3,461 8,424 Privilege and Use McDowell Mtn(1) $ 16,981 31,301 35,483 37,281 35,604 29,121 26,416 27,199 28,809 30,376 Sales and Use Taxes Privilege and Use Transportation $ 16,628 18,115 20,020 20,910 19,823 16,141 14,608 15,042 15,985 16,852 State Shared Sales $ 17,054 18,779 21,664 22,312 21,575 18,677 17,227 17,844 16,987 17,793 Intergovernmental State Revenue Sharing $ 18,278 18,634 21,223 26,653 33,037 35,103 30,309 22,849 18,347 22,205 Table V Privilege and Use Public Safety(1) $ 8,491 9,978 10,578 10,145 8,289 7,541 7,765 8,231 8,679 $ Other 663 1,337 962 929 957 959 979 1,010 1,086 838 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. (2) The Transient Occupancy tax rate increased from 3% to 5%, effective July 1, 2010. $ Transient Occupancy 7,227 7,939 8,970 9,723 9,621 7,577 7,113 13,126 13,430 13,852 (2) Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Ten Fiscal Years (dollars in thousands) Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities 2004 $ 1,525,050 1,432,006 550,704 400,836 871,244 1,138,028 416,514 977,379 604,652 368,442 2005 $ 1,557,909 1,703,826 562,877 432,006 959,361 1,248,228 457,819 1,054,666 661,542 380,043 2006 $ 1,662,604 2,046,791 584,706 497,804 1,012,906 1,413,445 513,553 1,102,152 726,122 398,204 Total $ 8,284,855 $ 9,018,277 $ 9,958,287 $ 10,435,752 1.40% 1.65% 1.65% 1.65% City District Sales Tax $ 2007 1,622,601 2,208,957 626,083 533,055 1,011,240 1,478,112 551,095 1,211,551 774,598 418,460 $ $ Fiscal Year 2008 2009 1,370,365 $ 918,219 1,932,043 1,251,432 652,226 624,917 529,862 416,216 974,330 864,676 1,364,347 1,078,674 532,751 556,842 1,308,247 1,217,688 754,103 684,188 435,415 432,570 9,853,689 1.65% Table VI $ 2010 818,517 754,583 611,083 395,229 865,614 1,107,272 449,455 1,144,939 670,311 436,010 $ 2011 862,091 718,652 611,825 401,413 882,376 1,194,790 502,739 1,113,821 713,420 429,035 $ 2012 950,450 786,402 626,883 420,494 897,617 1,299,083 525,480 1,134,785 799,231 430,169 2013 $ 1,074,591 861,934 639,362 440,522 907,857 1,321,572 626,171 1,189,304 794,034 432,356 $ 8,045,422 $ 7,253,013 $ 7,430,162 $ 7,870,594 $ 8,287,703 1.65% 1.65% 1.65% 1.65% 1.65% 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. 153 Table of Contents 154 City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Table VII City of Scottsdale, Arizona Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Privilege (Sales) Tax Rates City Direct Rate County Rate 1.40% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% 1.65% 0.70% Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Transient Occupancy Tax Rates City Direct Rate County Rate 3.00% 1.77% 3.00% 1.77% 3.00% 1.77% 3.00% 1.77% 3.00% 1.77% 3.00% 1.77% 3.00% 1.77% 5.00% 1.77% 5.00% 1.77% 5.00% 1.77% State Rate 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% State Rate 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 6.50% 6.50% 6.50% 5.50% (1) (3) (1) (2) (3) Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Use Tax Rates City Direct Rate County Rate 1.20% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% 1.45% 0.00% State Rate 5.60% 5.60% 5.60% 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jet Fuel Tax Rates (cents per gallon) City Direct Rate County Rate 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% 1.80% 0.46% State Rate 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% 2.90% Source: City Tax Audit Section Note: The following gives a general description of each tax. Complete details for each tax can be found in Appendix C of the Scottsdale Revised City Code. Privilege (Sales) Tax applies to the sale, lease, license for use and/or rental transactions. Use Tax applies to the storage or use of items within the City on which no privilege tax has been paid. Transient Occupancy Tax applies to transactions involving transient lodging. Jet Fuel Tax applies to transactions involving the sale of jet fuel. (1) The state tax rate increased, except for jet fuel, on 6/1/2010 due to approval from the voters in the May 2010 election. (2) The Transient Occupancy tax rate increased from 3% to 5%, effective July 1, 2010. (3) The state tax rate decreased, except for jet fuel, on 6/1/2013 due to approval from the voters in the May 2010 election. (1) (3) Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Sales Tax Revenue Payers by Industry Current Year and Nine Years Ago (dollars in thousands) Table VIII Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 524 7,377 191 86 27 4,838 3,846 4,205 916 278 22,288 Fiscal Year 2013 Percentage of Total Tax Revenue 2.35% $ 18,179 33.08% 14,871 0.86% 10,675 0.39% 7,447 0.12% 15,109 21.71% 23,647 17.26% 13,764 18.87% 20,710 4.11% 13,279 1.25% 7,228 100.00% $ 144,909 Percentage of Total 12.55% 10.26% 7.37% 5.14% 10.43% 16.31% 9.50% 14.29% 9.16% 4.99% Number of Filers 702 7,491 207 67 27 7,156 3,251 3,303 960 265 100.00% 23,429 Fiscal Year 2004 Percentage of Total Tax Revenue 3.00% $ 20,819 31.97% 21,739 0.88% 8,069 0.29% 5,775 0.12% 9,761 30.54% 17,733 13.87% 8,929 14.10% 13,696 4.10% 8,377 1.13% 5,317 100.00% $ 120,215 Percentage of Total 17.33% 18.08% 6.71% 4.80% 8.12% 14.75% 7.43% 11.39% 6.97% 4.42% 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 Other Taxable Activity category includes all license fees, penalties, and interest. 155 Table of Contents 156 City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Table IX City Direct Rate Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Operating $ 0.48 0.45 0.44 0.42 0.38 0.35 0.36 0.38 0.44 0.50 Debt Service $ 0.64 0.62 0.60 0.55 0.41 0.43 0.38 0.51 0.65 0.72 Overlapping Rates Total City $ 1.12 1.07 1.04 0.97 0.79 0.78 0.74 0.89 1.09 1.22 Operating $ 3.89 3.77 3.46 3.45 3.42 2.82 2.44 2.40 2.75 3.09 Scottsdale Unified School District Debt Service EVIT $ 1.30 $ 0.10 1.26 0.10 1.22 0.06 1.26 0.05 1.26 0.05 1.07 0.05 1.34 0.05 1.35 0.05 1.25 0.05 1.34 0.05 Total School $ 5.29 5.13 4.74 4.76 4.73 3.94 3.83 3.80 4.05 4.48 Overlapping Rates County-Wide Jurisdictions City of Scottsdale, Arizona Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 County Operating $ 1.21 1.21 1.20 1.18 1.10 1.03 0.99 1.05 1.24 1.24 County Debt Service $ 0.07 - Community College $ 1.08 1.04 1.03 1.06 0.98 0.94 0.88 0.97 1.21 1.38 County Flood $ 0.21 0.21 0.21 0.20 0.15 0.14 0.14 0.15 0.18 0.18 County Education Equalization $ 0.47 0.46 0.44 0.33 0.36 0.43 0.47 Fire District Assistance $ 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 Central AZ Project $ 0.12 0.12 0.12 0.12 0.10 0.10 0.10 0.10 0.10 0.10 County Free Library $ 0.05 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.05 0.05 County Special Health Care $ 0.12 0.12 0.09 0.09 0.09 0.11 0.15 0.17 Total County $ 3.22 3.10 3.18 2.74 2.47 2.35 2.58 2.79 3.37 3.60 Total Direct and Overlapping $ 9.63 9.30 8.96 8.47 7.99 7.07 7.15 7.48 8.51 9.30 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2012" 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 2012/13 the rates were as follows: Scottsdale Mountain CFD - $1.4714, McDowell Mountain CFD - $.9698, DC Ranch CFD - $0.6081, Via Linda Road CFD - $1.5754 and the Waterfront Commercial CFD - $4.1573. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) 2013 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC Scottsdale Princess Partnership (SHR Scottsdale) Qwest Corporation* Excel Promenade LLC SDQ FEE LLC WJ Small Grandchildrens Trust Gainey Drive Associates Portales Corporate Center LLC/Etal Scottsdale Fiesta Retail Center General Dynamics Decision Systems, Inc. First American DC Ranch, LLC Southwest Gas Corporation CMD Properties Desert Mountain Properties, LP Total Taxable Assessed Value $ 60,589 45,007 20,368 18,994 15,625 15,219 13,679 13,594 13,552 11,534 $ 228,161 Rank 1 2 3 4 5 6 7 8 9 10 - Table X Percentage of Total Taxable Assessed Value 1.193% 0.886% 0.401% 0.374% 0.308% 0.300% 0.269% 0.268% 0.267% 0.227% 4.493% 2004 Taxable Assessed Value $ 48,641 44,415 37,363 18,572 13,289 24,345 22,805 13,125 12,201 12,697 $ 247,453 Rank 1 2 3 6 7 4 5 8 10 9 Percentage of Total Taxable Assessed Value 1.22% 1.12% 0.94% 0.47% 0.33% 0.61% 0.57% 0.33% 0.31% 0.32% 6.22% Source: 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 2011/12 secondary assessed valuation of the SRP within the City is $20,757,418 as provided by SRP. *Qwest Corporation was operating under the name Qwest Communications, Inc. in 2002. 157 Table of Contents 158 City of Scottsdale, Arizona Assessed Value of Taxable Property Last Ten Fiscal Years (dollars in thousands) Fiscal Year Ended June 30th 2004 P 2004 S Residential Property $ 2,148,272 2,373,446 Real Property Commercial Property Vacant Land $ 968,183 1,043,487 $ 473,966 656,600 Historic and Special Use $ 1,100 1,575 Table XI Personal Property Less Tax Exempt Property Assessed Value $ 277,334 277,334 $ (269,136) (376,920) Total Taxable Assessed Value $ 3,599,719 3,975,522 Total Direct Tax Rate $ 0.48 0.64 City of Scottsdale, Arizona 2005 P 2005 S 2,370,252 2,460,307 1,071,915 1,203,844 572,909 809,560 1,374 2,214 257,783 277,482 (285,524) (409,953) 3,988,709 4,343,454 0.45 0.62 2006 P 2006 S 2,622,605 2,792,337 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 2007 P 2007 S 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 2008 P 2008 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 P 2009 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 P 2010 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 2011 P 2011 S 4,212,414 4,261,972 1,980,853 2,312,814 1,170,054 1,458,512 4,822 5,622 242,654 242,654 (724,635) (906,165) 6,886,162 7,375,409 0.38 0.51 2012 P 2012 S 3,521,958 3,524,902 1,615,176 1,623,645 969,618 1,021,533 4,217 4,300 224,822 224,822 (665,901) (707,211) 5,669,890 5,691,991 0.44 0.65 2013 P 2013 S 3,232,809 3,236,951 1,402,569 1,405,867 845,953 856,609 3,133 3,133 228,843 228,843 (643,724) (651,408) 5,069,583 5,079,995 0.50 0.72 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. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Property Tax Levies and Collections Last Ten Fiscal Years (dollars in thousands) Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total Tax Levy for Fiscal Year $ 42,756 44,879 47,809 48,778 50,838 58,179 57,380 64,327 62,033 62,187 Collected within the Fiscal Year of the Levy $ Amount 41,728 43,688 46,431 47,105 49,408 55,876 55,221 62,237 60,309 60,630 Percentage of Levy 97.6% 97.3% 97.1% 96.6% 97.2% 96.0% 96.2% 96.8% 97.2% 97.5% Collections in Subsequent Years $ 754 656 942 1,058 1,273 1,763 1,609 869 887 - Table XII Total Collections to Date $ Amount 42,482 44,344 47,373 48,163 50,681 57,639 56,830 63,106 61,196 60,630 Percentage of Levy 99.4% 98.8% 99.1% 98.7% 99.7% 99.1% 99.0% 98.1% 98.7% 97.5% Source: "Total Tax Levy Amount for Fiscal Year" = Marciopa 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 Funds. 159 Table of Contents 160 Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 City of Scottsdale, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands) Municipal Property Corporation Bonds $ 4,850 62,684 112,209 155,200 154,879 154,837 153,582 152,578 149,983 222,403 General Obligation Bonds $ 389,934 371,499 501,614 478,369 578,894 555,701 583,071 579,972 603,426 651,224 Revenue Bonds $ 8,475 5,815 2,990 - General Obligation Bonds $ 10,651 6,515 - Business-Type Activities Municipal Property Corporation Bonds Revenue Bonds $ 68,334 $ 88,194 65,719 83,975 62,401 169,901 58,933 165,154 55,553 269,802 51,629 262,391 48,250 332,216 44,776 323,107 41,157 313,505 37,803 303,793 Table XIII Governmental Activities Scottsdale Special Preserve Assessment Certificates of Authority Bonds Participation Bonds $ 85,569 $ 8,755 $ 82,987 6,340 7,650 80,199 5,505 7,090 77,251 4,670 6,401 74,158 3,835 5,689 70,915 3,000 4,954 67,567 2,250 4,194 64,309 1,500 23,409 60,304 750 18,031 56,154 16,003 Capital Lease $ 179 139 97 53 7 - City of Scottsdale, Arizona Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See Table XVIII - Schedule of Demographic and Economic Statistics for personal income and population data. Total Primary Government $ 723,077 750,701 996,932 1,006,251 1,203,236 1,160,886 1,245,594 1,240,995 1,235,216 1,325,360 Percentage of Personal Income 7.95% 7.95% 10.32% 10.47% 11.54% 12.13% 11.62% 11.77% 11.09% 11.76% Community Facilities District Bonds $ 44,613 43,193 41,708 40,143 42,313 40,578 38,725 36,762 34,685 32,083 $ Per Capita 3,348 3,428 4,510 4,555 5,444 5,267 5,691 5,709 5,667 6,032 Contracts Payable $ 13,702 14,324 13,136 19,819 17,875 16,828 15,732 14,582 13,375 2,570 Capital Lease $ 172 141 183 Service Concession Arrangements $ 3,144 Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years (dollars in thousands, except per capita) Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Governmental Activities - General Obligation Bonds $ 389,934 371,499 501,614 478,369 578,894 555,701 583,071 579,972 603,426 651,224 Business-Type Activities - General Obligation Bonds $ 10,651 6,515 - Less: Amounts Available in Debt Service Fund $ 3,469 5,602 12,436 9,383 9,520 10,841 4,932 6,787 5,789 10,105 Net General Bonded Debt $ 397,116 372,412 489,178 468,986 569,374 544,860 578,139 573,185 597,637 641,119 Table XIV Percentage of Total Taxable Assessed Value of Property (1) 10.0% 8.6% 10.3% 9.0% 7.9% 6.6% 6.9% 7.8% 10.5% 12.6% 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 XI for property value data. See the Schedule of Demographic and Economic Statistics (Table XVIII) for population data. (1) Percentage of Total Taxable Assessed Value of Property was corrected using the information from table XI for years Fiscal Years 2006-2010. Per Capita $ 1,839 1,701 2,213 2,123 2,576 2,472 2,641 2,637 2,742 2,918 161 Table of Contents 162 City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2013 (dollars in thousands) Governmental Unit Debt repaid with property taxes 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 Debt Outstanding $ 616,235 114,010 17,553 228,045 265,120 16,175 9,505 271,745 40,470 Table XV Estimated Percentage Applicable 14.7672% 0.0002% 5.4912% 70.6410% 31.3885% 62.5104% 3.4525% 0.3275% 0.0001% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 91,001 964 161,093 83,217 10,111 328 890 347,604 983,764 100.0000% 983,764 $ 1,331,368 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. City of Scottsdale, Arizona 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. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) Table XVIa Fiscal Year 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 2004 $ Total Net Debt Applicable to 20% Limit Legal 20% Debt Margin (Available Borrowing Capacity) $ Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit 475,339 $ 238,531 $ 163,547 31.44% $ 554,905 $ 36.12% $ 74,984 $ 868,691 2006 313,786 40.22% Total Net Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) $ 319,765 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 795,104 2005 260,607 195,808 24.86% 2008 2009 2010 2011 2012 2013 947,151 $ 1,041,889 $ 1,448,765 $ 1,654,483 $ 1,681,200 $ 1,475,082 $ 1,138,398 $ 1,015,999 372,545 363,455 424,865 413,095 499,945 498,490 524,675 561,126 678,434 $ 1,023,900 $ 1,241,388 $ 1,181,255 574,606 $ 39.33% $ 64,799 $ 2007 284,145 34.88% $ 126,820 $ 157,325 44.63% 312,567 29.33% $ 112,745 $ 199,822 36.07% 434,629 24.97% $ 149,580 $ 285,049 34.42% 496,345 29.74% $ 138,360 $ 357,985 27.88% $ 504,360 426,115 15.51% $ 33.79% $ 78,245 $ 976,592 442,524 368,274 16.78% $ 46.09% $ 74,250 $ 613,723 341,519 55.23% $ 69,750 $ 271,769 20.42% 454,873 304,799 78,009 $ 226,790 25.59% 163 Table of Contents 164 City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2013 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2013 Net Secondary Assessed Valuation as of June 30, 2013 $ 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 5,079,995 1,015,999 Debt applicable to limit: General Obligation Bonds 561,126 Legal 20% Debt Margin (Available Borrowing Capacity) $ 454,873 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 304,799 Debt applicable to limit: General Obligation Bonds Legal 6% Debt Margin (Available Borrowing Capacity) 78,009 $ 226,790 Source: City of Scottsdale City Treasurer - Finance and Accounting City of Scottsdale, Arizona Under Arizona law, cities can issue general obligation bonds for purposes of water, sewer, light, parks, open space purposes, public safety, and transportation facilities 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. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years (dollars in thousands) Table XVII Water and Sewer Revenue Bonds Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Operating Revenue(1) $ 97,813 105,078 115,374 125,880 131,553 130,782 133,624 132,441 134,336 138,224 Less: Operating Expenses $ 49,662 56,413 56,329 64,089 66,077 71,236 70,165 77,456 78,837 73,647 Net Operating Revenue $ 48,151 48,665 59,045 61,791 65,476 59,546 63,459 54,985 55,499 64,577 Development Fee Revenue $ 21,574 20,155 24,071 17,878 15,280 3,043 3,126 3,859 3,073 22,642 Special Assessment Bonds Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (1) Special Assessment Collections $ 2,558 2,016 1,106 1,825 895 821 765 733 719 591 Debt Service Principal $ 2,425 2,448 851 848 846 845 757 757 755 755 Debt Service Interest $ 492 360 275 235 197 158 121 86 52 17 Net Revenue $ 69,725 68,820 83,116 79,669 80,756 62,589 66,585 58,844 58,572 87,219 Highway User Revenue Bonds Debt Service Principal $ 2,860 2,630 3,330 3,475 3,640 3,660 3,115 3,220 3,380 3,115 Debt Service Interest $ 3,159 3,570 3,182 2,997 2,582 2,507 2,351 2,199 2,056 1,891 Coverage 11.58 11.10 12.76 12.31 12.98 10.15 12.18 10.86 10.77 17.42 Scottsdale Preserve Authority Bonds Coverage(2) 0.88 0.72 0.98 1.69 0.86 0.82 0.87 0.87 0.89 0.77 0.2 % and 0.15% Sales Tax(3) $ 16,981 31,301 35,483 37,281 35,604 29,121 26,416 27,199 28,809 30,376 Debt Service Principal $ 2,445 2,595 2,815 2,965 3,110 3,260 3,365 3,470 3,655 3,800 Debt Service Interest $ 3,825 4,437 3,997 3,843 3,676 3,502 3,374 2,471 2,835 2,680 Debt Service Principal $ 2,515 2,660 2,825 2,990 - Debt Service Interest $ 592 460 317 165 - Coverage 4.52 4.72 5.00 5.32 N/A N/A N/A N/A N/A N/A Municipal Property Corporation Bonds Coverage 2.71 4.45 5.21 5.48 5.25 4.31 3.92 4.58 4.44 4.69 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 V 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. Highway User Tax Revenue $ 14,034 14,738 15,708 16,778 16,123 14,083 13,342 13,396 10,885 11,903 Excise Tax(5) $ 165,799 180,005 202,081 218,205 216,066 185,801 170,638 168,641 171,075 184,079 Debt Service Principal(4) $ 7,170 8,265 5,995 5,305 5,584 7,570 9,715 9,785 11,841 12,355 Debt Service Interest(4) $ 1,108 6,413 10,017 10,057 13,988 19,482 18,415 22,185 21,141 21,480 Coverage 20.03 12.26 12.62 14.20 11.04 6.87 6.07 5.27 5.19 5.44 165 Table of Contents 166 City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Population(1) 215,969 218,984 221,030 220,907 221,031 220,410 218,888 217,365 217,965 219,713 Personal Income(2) (in thousands) $ 9,091,431 9,448,722 9,661,884 9,611,884 10,428,464 9,573,949 10,715,662 10,542,637 11,135,832 11,266,004 Per Capita Personal Income(3) $ 42,096 43,148 43,713 43,511 47,181 43,437 48,955 48,502 51,090 51,276 Median Age(4) 41.0 41.0 41.0 41.0 41.0 41.0 45.4 45.4 45.4 45.4 Table XVIII Charter and Public School Enrollment(5) 27,328 26,559 27,000 26,653 26,567 27,029 27,093 27,116 28,177 27,816 Year-End Average Unemployment Rate(6) 3.8% 3.2% 3.0% 2.6% 2.3% 3.9% 6.8% 7.2% 6.8% 5.7% Data Sources and Notes: (1) July 1 Population estimate, State of Arizona Office of Employment and Population Statistics, as published on December 15, 2012. (2) Calculated by multiplying per capita personal income by total population divided by 1,000. (3) Sites USA (estimate) 2003-2010; U.S. Census, American Community Survey 2007-2011 used for FY 2011-2013 estimates. (4) U.S. Census; 2003-2009 based on Census 2000; 2010-2012 based on Census 2010, 2013 based on U.S. Census, American Community Survey 2007-2011 (5) Arizona Department of Education. For 2013, Arizona Department of Education Oct. 1, 2012 total enrollment for 8 charter and 31 public schools located within Scottsdale city boundaries. (6) Arizona Office of Employment and Population Statistics, in cooperation with the U.S. Dept of Labor, Bureau of Labor Statistics, Local Area Unemployment Statistics. For calendar year that ended within the fiscal year. For example, FY 2013 is for Calendar Year 2012. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago 2013 Employer Scottsdale Healthcare Corporation General Dynamics C4 Systems City of Scottsdale CVS - CareMark (2) Vanguard Insurance Mayo Clinic Scottsdale Unified School District (3) Scottsdale Insurance Company Veri Fone Inc. International Cruise and Excursion Scottsdale Princess Resort Phase II Solutions Total Employees 6,600 2,764 2,465 2,400 2,186 1,972 1,828 1,525 1,431 1,130 24,301 Rank 1 2 3 4 5 6 7 8 9 10 - Percentage of Total City Employment(1) 5.82% 2.44% 2.17% 2.12% 1.93% 1.74% 1.61% 1.34% 1.26% 1.00% 21.43% Table XIX 2004 Employees 3,690 3,400 2,111 2,023 1,100 3,960 3,000 2,000 1,100 800 23,184 Rank 2 3 5 6 9 1 4 7 8 10 Source: City of Scottsdale Economic Trends Report, September 2004 and Economic Development Department communications with employers, August 2013. (1) Annual Employment according to the Arizona Office of Employment and Population Statistics was 113,444 in June 2013, and was 120,754 in June 2004. (2) CVS Caremark was known CareMark in 2004. Caremark was acquired by CVS in 2007. (3) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2013 numbers only report Scottsdale-based employees. 2004 included all employees. Percentage of Total City Employment(1) 3.06% 2.82% 1.75% 1.68% 0.91% 3.28% 2.48% 1.66% 0.91% 0.66% 19.21% 167 Table of Contents 168 City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years Table XX Full-time Equivalent Employees as of June 30 Function Administrative Services Aviation Citizen and Neighborhood Resources Communications and Public Affairs Community and Economic Development Community Services Economic Vitality Financial Services Finance and Accounting General Government Human Resources(2) Information Technology(2) Municipal Services Planning and Development Planning/Neighborhood/Transportation Public Safety Public Safety - Fire Public Safety - Police Public Works Solid Waste Transportation Water Resources Total 2004 2005 2006 2007 (1) 2013 124.6 14.0 214.5 487.6 188.5 459.5 175.5 454.2 12.4 36.0 13.0 39.0 15.0 40.0 14.7 15.0 506.1 8.0 139.5 512.6 10.0 143.0 559.4 11.0 149.0 580.3 40.0 151.0 546.1 77.0 134.0 543.1 54.0 110.5 196.5 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 83.8 170.5 167.0 172.6 53.5 91.8 167.1 35.5 81.8 92.5 155.0 30.0 78.8 95.5 153.0 30.5 75.8 83.5 141.0 93.0 140.0 205.2 999.6 224.0 981.6 167.5 953.6 957.6 933.6 924.6 248.5 85.8 233.0 89.0 197.0 89.0 206.0 89.0 205.0 89.0 204.0 89.0 169.0 2,798.1 180.0 2,754.1 189.0 2,537.7 189.0 2,547.5 202.0 2,454.9 204.0 2,422.9 259.0 676.1 268.0 705.6 79.3 24.0 136.0 2,112.6 79.3 25.0 139.0 2,457.1 83.3 27.0 152.5 2,598.3 85.3 30.0 162.0 2,722.3 489.3 47.0 2012(3) 138.8 14.0 12.4 32.0 260.7 630.1 2010 35.0 14.0 2011 35.0 14.0 2009 38.5 16.0 3.7 590.1 2008 City of Scottsdale, Arizona 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. (2) In FY2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. (3) In FY2012, Meter Reading Operations was transferred from Finance and Accounting to Water Resources. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Table XXI Fiscal Year Division General Government City Attorney % of cases resolved at first court appearance (arraignment) City Auditor # of reports performed City Clerk # of legal postings # of minutes City Court Charges filed / charges adjudicated (resolved) Finance and Accounting (3) # of Accounts Payable checks issued # of customer contacts (utilities, taxes and licensing) City Manager % 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 Total ad value equivalency generated(4) Acres of land acquired for inclusion in the McDowell Sonoran Preserve Administrative Services Human Resources Citywide turnover HR operating cost as a % of City payroll Information Technology # 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) Purchasing # of purchase orders Community Services # attending Parks and Recreation facilities, Human Services facilities, and Libraries annually # of square feet of medians and rights of way maintained 2004 2005 2006 2007 2008 2009 2010(2) 2011 2012 2013 30% 30% 32% 34% 35% 34% 32% 40% 30% 37% 9 10 15 10 11 13 16 17 14 14 456 651 79 1,011 99 1,138 90 1,173 90 1,158 71 1,301 87 1,241 66 1,185 63 1,124 63 121,560 / 129,888 136,747 / 134,793 156,051 / 132,096 201,866 / 216,000 221,400 / 219,980 115,319 / 137,887 107,720 / 113,382 104,301 / 108,003 102,953/ 100,929 93,306/ 90,016 34,547 218,185 37,954 208,037 41,194 212,888 42,000 216,764 38,000 230,143 36,442 176,680 33,620 175,918 45,592 255,124 45,112 246,319 33,599 254,992 90% 93% No Survey 90% No Survey No Survey No Survey 94% No Survey No Survey 182 N/A 247 N/A 205 N/A 220 N/A 220 N/A N/A N/A 240 N/A 281 N/A N/A 20,000 N/A 78,861 450 2,600 138 251 648 25 399 2,001 4,419 6,400 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% 7.3% 1.8% 7.1% 1.3% 7.3% 1.7% 129,000 2,319,000 25,400,000 654,100 1,200,000 2,200,000 2,100,000 1,775,000 1,870,000 1,588,935 5.0 7.0 30.0 30.0 80.0 147.8 170.0 266.0 266.0 167.3 12,254 9,611 10,778 9,460 8,224 6,234 5,748 5,310 5,018 4,678 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 8,855,120 23,168,510 8,471,649 23,475,510 8,223,148 22,726,329 (continued on next page) 169 (continued) Table of Contents 170 City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Table XXI Fiscal Year City of Scottsdale, Arizona Division Community and Economic Development Planning, Neighborhood, and 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 # of new Code Enforcement cases processed per year % increase of Neighborhood Watch groups annually(5) % 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)(6) Economic Development Targeted job creation number of companies / number of jobs Hotel/Motel average occupancy rate Bed Tax growth (% annual change) # of Downtown special events coordinated Aviation Scottsdale Airport - Takeoffs and Landings WestWorld # of special events at WestWorld Public Safety Police Scottsdale Uniform Crime Report, Part 1 (crimes per thousand)(7) 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 Fire Total incidents Responses per capita Travel time (en-route to on-scene) 2004 2005 2006 2007 2008 2009 2010(2) 2011 2012 2013 45 25 15 20 20 7 7 6 6 12 90% 97% 100% 98% 100% 99% 100% 99% 100% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 10,000 15% 11,336 37% 13,137 5% 16,900 5% 15,570 5% 20,568 -56% 16,452 5% 16,000 5% 16,500 5% 15,603 5% 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 No Survey 2,539,744 No Survey 2,499,000 No Survey 2,599,557 150 270 322 375 475 N/A 8,578 10,397 10,500 5,043 23 / 1,800 57.5% + 3% 41 10 / 1,443 60.0% + 5% 58 11 / 1,275 69.0% + 5% 62 7 / 1,800 69.0% +9% 71 5 / 1,374 65.0% -2% 65 7 / 394 59.2% -21% 100 10 / 731 58.0% -6% 110 7/ 450 58.8% 8% 95 8/ 1,595 61.5% 5% 119 36/ 1,593 63.0% 3% 126 195,276 208,106 210,481 185,241 201,958 169,972 156,896 136,089 146,058 146,432 53 57 49 43 44 31 28 20 20 27 45.5 60.2 42.3 56.5 34.9 51.0 37.1 51.0 35.6 51.0 34.3 N/A 29.6 N/A 31.9 N/A 32.8 N/A 29.1 N/A 6:27 6:12 N/A 6:06 5:07 5:07 5:01 4:57 5:11 4:54 96% 98% 98% 100% 100% 100% 100% 100% 100% 100% 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 25,586 0.10 4:22 26,344 0.10 4:18 27,075 0.12 4:26 (continued) (continued) Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Table XXI Fiscal Year Division 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(8) 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) # of water meters read annually(9) 2004 2005 2006 2007 2008 2009 2010(2) 2011 2012 2013 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 3,006,106 183 79,508 3,029,606 162 79,787 3,322,968 186 80,013 1,514 1,718 2,000 2,100 2,200 1,923 1,497 2,573 2,591 2,691 81,947 70.0 11.8 72,034 24.2 986,080 83,511 67.7 11.6 73,232 25.5 1,000,870 86,399 73.1 11.5 74,143 24.2 1,015,662 86,728 72.1 11.4 76,092 25.3 1,030,368 87,248 73.7 11.7 76,849 23.9 1,044,205 87,349 69.4 9.6 77,363 19.7 1,049,008 87,409 68.4 11.2 77,605 21.0 1,050,067 87,458 67.9 8.7 77,850 21.1 1,051,089 87,577 69.2 6.9 78,018 20.9 1,043,335 87,851 67.6 8.9 78,269 20.7 1,055,230 Source: The City of Scottsdale's Budget Office and applicable City divisions. 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. (1) (2) In FY 2010, 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 and Accounting," moving Payroll and Risk Management from Human Resources into the Finance and Accounting Department, and moving Tax Audit and Purchasing into a new division named Administrative Services. (4) Effective FY 2012 established more appropriate performance measures for Office of Communication activities and products (ad value equivalency). (5) During FY 2008/09, the Neighborhood Watch program was reviewed; participants that were no longer eligible for the program were removed, thus reducing the numbers. (6) 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 was a manual process. Starting June 2009, the process was automated through the Traffic Management Center. (7) The crime per thousand increase reflects a recalculation in population with the Census 2010 as a basepoint, rather than an increase in crime. In addition, crime stats are for the prior calendar year end, rather than fiscal year end. (8) The statistic for "# of citizens serviced annually by Household Hazardous Waste Collection program" number of events was restored in FY 2010/11. During FY 2008/09 and FY 2009/10 the number of events were reduced as a budget savings initiative. (9) Effective July 2011, the City Council approved placing Meter Reading under the control of the Water Resources Division. 171 (continued) Table of Contents 172 Function Public Safety Police: Stations Police Vehicles Fire Stations Highways and Streets Square Yards of Pavement Equivalent 12' Wide Lane Miles Traffic Signals Culture and Recreation Parks Parks Acreage Swimming Pools Tennis Courts Community Centers Water Water Mains (miles) Fire Hydrants Sewer Sanitary Sewers (miles) Storm Sewers (miles) Source: City of Scottsdale, Arizona divisions. City of Scottsdale, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2004 2005 2006 Table XXII Fiscal Year 2008 2009 2007 2010 2011 2012 2013 3 286 12 3 290 13 3 345 13 3 375 13 3 383 13 4 363 14 4 357 14 4 352 15 4 352 15 4 351 15 19,231,553 2,732 258 19,231,553 2,732 262 19,660,273 2,793 276 20,393,288 2,897 276 20,562,017 2,921 285 20,644,388 2,932 295 20,873,951 2,965 289 20,828,414 2,959 289 20,852,234 2,962 300 20,859,993 2,963 303 38 849 3 49 6 40 849 3 49 6 40 879 3 49 6 40 937 4 51 5 43 911 4 55 5 41 940 4 55 5 41 941 4 55 5 41 941 4 55 5 42 974 4 55 5 42 975 4 55 6 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 2,059 10,687 2,064 10,729 2,070 10,779 1,280.0 137.7 1,287.4 142.8 1309.0 148.0 1,350.0 153.5 1,352.6 157.2 1,360.0 166.9 1,421.0 164.0 1,421.0 163.0 1,422.0 168.0 1,424.0 169.0 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