City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014 Prepared by: City Treasurer’s Office 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, 2014 Table of Contents Page INTRODUCTORY SECTION Letter of Transmittal – City Treasurer, Finance and Accounting ..................................................................................... 1 Certificate of Achievement – Government Finance Officers Association ..................................................................... 6 List of Elected and Appointed Officials ............................................................................................................................... 7 Organizational Chart ................................................................................................................................................................ 8 FINANCIAL SECTION Independent Auditors’ Report ................................................................................................................................................ 9 Management’s Discussion and Analysis ..............................................................................................................................12 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position..........................................................................................................................................32 Statement of Activities ...............................................................................................................................................33 Fund Financial Statements: Balance Sheet – Governmental Funds .....................................................................................................................34 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position .........................................................................................................................................................36 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ...............................................................................................................................................37 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .........................................................39 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund .......................................................................................................................40 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund ..........................................................................................42 Statement of Fund Net Position – Proprietary Funds ..........................................................................................43 Reconciliation of the Proprietary Funds Statement of Net Position to the Statement of Net Position ......................................................................................................................................45 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds.....................................................................................................................................................46 Reconciliation of the Proprietary Funds Statement of Revenue, Expenses, and Changes Net Position to the Statement of Activities .........................................................................................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 ................................................................61 III. Stewardship, Compliance, and Accountability ........................................................................................................68 City of Scottsdale, Arizona Page 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 V. Other Information: A. Risk Management..........................................................................................................................................92 B. Contingent Liabilities ...................................................................................................................................92 C. Joint Venture ..................................................................................................................................................93 D. Pollution Remediation ..................................................................................................................................94 E. Related Organization ....................................................................................................................................95 F. Effect of Implementation of Future Accounting Standard ..................................................................95 G. Retirement and Pension Plans ....................................................................................................................96 H. Other Postemployment Benefits ..............................................................................................................100 I. Postemployment Benefits Other Than Pensions ...................................................................................101 Required Supplementary Information ...............................................................................................................................104 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Nonmajor Governmental Funds ..................................................................................109 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds ..............................................................................................110 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 Scottsdale Preserve Authority Bond Debt Service Fund ....................................................................................128 Combining Balance Sheet – Nonmajor Capital Projects Governmental Funds .....................................................129 City of Scottsdale, Arizona Page Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Governmental Funds .................................................................130 Combining Statement of Fund Net Position – Internal Service Funds...................................................................132 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Internal Service Funds. ........................................................................................................133 Combining Statement of Cash Flows – Internal Service Funds ...............................................................................134 Combining Statement of Fiduciary Net Position – Fiduciary Funds .......................................................................136 Combining Statement of Changes in Assets and Liabilities – Agency Funds ........................................................137 Other Supplementary Information: Schedule of Changes in Long-Term Debt ....................................................................................................................139 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, 2014 ......................................................... 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 Table of Contents City of Scottsdale, Arizona Table of Contents October 14, 2014 To the Honorable Mayor, Members of the City Council, and Citizens of the City of Scottsdale, Arizona: Letter of Transmittal For the Fiscal Year Ended June 30, 2014 City of Scottsdale Scottsdale, Arizona The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2014, is submitted in accordance with City Charter and state statutes. Both the City Charter and state statutes require that the City issue annually a report on its financial position and activity, and that this report be audited by certified public accountants independent of the City government. 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. To the best of our knowledge and belief, the enclosed data is accurate in all material aspects and is reported in a manner that presents fairly the financial position and results of operations of the various funds and component units of the City. 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 30, 2014, 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 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. This letter of transmittal provides a non-technical summary of City finances, economic prospects, and achievements. Management’s Discussion and Analysis (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview and analysis of the City’s basic financial statements. The MD&A starting on page 12 complements this letter of transmittal and should be read in conjunction with it. 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 184.5 square miles, stretching 31 miles from north to south, and 11.4 miles at its widest point. 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. At July 1, 2014, the City’s population was estimated at 224,800 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. BUDGET 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. Three 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 2013/14, 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 Business Scottsdale is one of the state’s leading job centers with a diverse economy built on medical research, high-tech innovation, tourism, and corporate headquarters. The Scottsdale Airport and the surrounding commerce Airpark are home to nearly 2,500 businesses and more than 48,000 jobs. The high-tech innovation center SkySong, located just a few miles from downtown, is designed to help companies grow through a unique partnership with nearby Arizona State University. Downtown is an emerging center for high-tech businesses. Farther north, the Scottsdale Cure Corridor is a partnership of premier health care providers and biomedical companies seeking to advance medicine and patient care through cutting-edge research. 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. With a variety of lodging properties in the area, including several world-class resorts and “boutique” hotels, along with spectacular spas, trend-setting dining and one-of-a kind Sonoran desert golf courses, Scottsdale is one of the most popular tourist destinations in Arizona. Sales Tax 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 continues to see growth in sales tax revenues with a year-over-year increase of 7.5 percent in fiscal year 2013/14. Changes to the administration and collection of sales taxes passed by the Arizona Legislature were scheduled to take effect in January 2015; however, the governor’s office recently agreed to delay implementation until January 2016. When it does occur, the change may result in a temporary cash-flow impact to Scottsdale during the transition from Scottsdale’s administration and collection of sales taxes to the Arizona Department of Revenue. 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, contribute to Scottsdale residents experiencing lower property tax rates and higher median housing values than most of the surrounding municipalities in the Phoenix metro area. 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. 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 46 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. City of Scottsdale, Arizona 3 Table of Contents 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). 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, 2014 4 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+ City of Scottsdale, Arizona Table of Contents PRIORITIES The City of Scottsdale’s adopted fiscal year 2014/15 budget anticipates a moderate increase in revenues with a continued focus on smarter spending to achieve policy direction given by the City Council. Key priorities include creating and adopting a comprehensive economic development strategy, reinvesting in the workforce and building a high performance organization, ensuring financial sustainability by improving support of tourism events, and developing a transportation strategy that anticipates future needs. 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, Arizona for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2013, marking the forty-first consecutive year the City has achieved this prestigious recognition. In order to be awarded a Certificate of Achievement, a government must 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. Additionally, the City of Scottsdale received the “Distinguished Budget Presentation Award” for the fiscal year beginning July 1, 2013 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, 2014. Acknowledgments The preparation of this report would not have been possible without the talent, effort, and dedication of the Accounting and Finance Departments. In addition, staff in all City divisions should be recognized for responding so positively to the requests for detailed information that accompanies each annual audit. 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 City of Scottsdale, Arizona 5 Table of Contents 6 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona List of Elected and Appointed Officials City Council 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, 2014 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 City of Scottsdale, Arizona 7 Table of Contents 8 Organization Chart Mayor & City Council City City Auditor City Clerk Boards, Commissions, Task Forces City Manager City Treasurer Presiding Judge Finance & City Court Civil City Treasurer & Finance Budget Business Services Risk Management City of Scottsdale, Arizona Services Human Resources Purchasing Community Services Community & Economic Development Planning & Admin. Human Services Library Systems Parks & Rec. Preserve Mgmt. Economic Dev. Planning / Neighborhood / WestWorld Public Safety Police Public Safety Fire Public Works Capital Proj. Mgmt. Fleet Mgmt. Solid Waste Mgmt. Water Resources Planning & Engineering Water Quality Tech. & Admin. Water Services 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, 2014, 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 City’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 City’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 9 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, 2014, 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, 2014, the City adopted the provisions of Governmental Accounting Standards Board Statement (GASBS) No. 65, Items Previously Reported as Assets and Liabilities. As a result, the City reported a change in accounting principle (See Note I.E.4.) Beginning net position was restated as debt issuance costs, except any portion related to prepaid insurance costs, are now recognized as an expense in the period incurred. Debt issuance costs were previously reported as an asset and recognized as an expense in a systematic and rational manner over the duration of the related debt. The auditors’ opinion was not modified with regards to the restatement. 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 12 through 29, the Public Safety Personnel Retirement System Schedule of Funding Progress on pages 104 and 105, and the Other Postemployment Benefit Plan Schedule of Funding Progress on page 106 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. 10 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 14, 2014, 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 14, 2014 City of Scottsdale, Arizona 11 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents 12 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, 2014 and 2013. 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. FINANCIAL HIGHLIGHTS The financial statements, which follow the Management’s Discussion and Analysis, provide these key financial highlights for fiscal year 2014: • The total assets and deferred outflows of resources of the City exceeded total liabilities at the close of the fiscal years 2014 and 2013 by $4.34 billion and $4.33 billion (net position), respectively. Of these amounts, $454.3 million and $376.7 million respectively, represent unrestricted net position which may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net position increased by $15.8 million and $31.0 million during fiscal years 2014 and 2013, respectively. • As of June 30, 2014 and 2013, the City’s governmental funds reported combined ending balances of $185.5 million and $218.2 million, respectively. Approximately 28 percent of the current year amount ($51.2 million) is available for spending at the City’s discretion (unassigned fund balance). • At the end of the current fiscal year, the unrestricted fund balance (the total of the committed, assigned, and unassigned components of fund balance) for the general fund was $52.4 million or approximately 23 percent of total General Fund expenditures of $229.1 million. • The City’s total long-term liabilities decreased by $40.2 million to $1.34 billion as of June 30, 2014. Primary factors leading to this decrease include scheduled principal payments partially offset by issuing $14.0 million of new Sonoran Preserve General Obligation bonds. City of Scottsdale, Arizona Table of Contents (1) Government-wide Financial Statements (2) Fund Financial Statements (3) Notes to the Financial Statements This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Relationship Between Comprehensive Annual Financial Report (CAFR) and Basic Financial Statements and Required Supplementary Information (RSI) General Information on the government structure, Introductory services and environment Section + Management’s Discussion and Analysis This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which are comprised of three components: For the Fiscal Year Ended June 30, 2014 OVERVIEW OF THE FINANCIAL STATEMENTS Management's Discussion and Analysis CAFR Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Financial Section Notes to the Financial Statements Additional Required Supplementary Information Information on individual funds and other supplementary information not required by GAAP + Trend data and nonfinancial data City of Scottsdale, Arizona Statistical Section 13 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 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/deferred outflows of resources and liabilities/deferred inflows of resources, with the difference 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. 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 aviation operations. The government-wide financial statements include not only the City itself (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 Scottsdale City Treasurer’s Office, 7447 East Indian School Road, Suite 210, Scottsdale, Arizona 85251. The government-wide financial statements can be found on pages 32 and 33 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into the following three categories: governmental funds, proprietary funds, and fiduciary funds. 14 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, and the general capital improvement plan (CIP) 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, 2014 Governmental Funds The basic governmental fund financial statements can be found on pages 34-42 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 rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The Internal Service Funds are combined into a single, aggregated presentation in the Propriety Fund financial statements. Individual fund data for the Internal Service Funds 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 43-49 of this report. City of Scottsdale, Arizona 15 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 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 52-103 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 104-106 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 107-137. 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 pages 138-141. 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. 16 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, total assets and deferred outflows of resources exceeded liabilities by $4.34 billion and $4.33 billion at the close of the fiscal years 2014 and 2013, 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/deferred outflows of resources and liabilities/deferred inflows of resources 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, 2014 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position June 30, 2014 and 2013 (in thousands) Governmental Activities 2014 2013 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Current and other assets Capital assets Total assets Total deferred outflows of resources Total assets and deferred outflows of resources $ 470,224 $ 3,609,808 4,080,032 19,872 4,099,904 452,841 3,663,472 4,116,313 4,116,313 LIABILITIES Long-term liabilities outstanding Other liabilities Total liabilities 943,451 180,791 1,124,242 954,334 171,424 1,125,758 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 2,685,105 109,615 180,942 2,975,662 $ 2,756,186 100,472 133,897 2,990,555 $ Business-Type Activities 2014 2013 $ 409,555 $ 1,373,850 1,783,405 3,660 1,787,065 375,287 45,011 420,298 $ 1,046,345 47,101 273,321 1,366,767 $ 344,660 1,400,476 1,745,136 1,745,136 Total $ 356,665 45,283 401,948 1,058,880 41,545 242,763 1,343,188 $ 2014 2013 879,779 $ 4,983,658 5,863,437 23,532 5,886,969 797,501 5,063,948 5,861,449 5,861,449 1,318,738 225,802 1,544,540 1,310,999 216,707 1,527,706 3,731,450 156,716 454,263 4,342,429 $ 3,815,066 142,017 376,660 4,333,743 The largest portion (85.9 percent) of the City’s net position reflects its net investment in capital assets (such as land, buildings, water and sewer system, and streets and storm drains) less any related outstanding debt used to acquire those assets. These amounted to $3.73 billion and $3.82 billion at June 30, 2014 and 2013, respectively. Although the City’s 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. An additional portion (3.6 percent) of the City’s net position ($156.7 million at June 30, 2014 and $142.0 million at June 30, 2013) represents resources that are subject to external restrictions on how they may be used. Unrestricted net position (10.5 percent of the City’s total net position) at June 30, 2014 and 2013, $454.3 million and $376.7 million, respectively, may be used to meet the government’s ongoing obligations to citizens and creditors. City of Scottsdale, Arizona 17 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents Analysis of Changes in Net Position For the fiscal year ending June 30, 2014, GASB (Governmental Accounting Standards Board) Statement No. 65, Items Previously Reported as Assets and Liabilities was implemented. The implementation of Statement No. 65 resulted in the City eliminating the bond issuance costs that were previously capitalized and amortized over the life of the related debt. As a result, the City’s governmental activities net position as of June 30, 2013, decreased $5.9 million and business-type activities net position as of June 30, 2013, decreased $1.3 million. See Note I.E.4. on page 61 for additional information. The City’s total net position increased by $15.8 million and $31.0 million during the fiscal years 2014 and 2013, respectively. The increases are explained in the governmental and business-type activities discussion herein, and are primarily a result of charges for service, business and property taxes, and capital grants and contributions. Such amounts are included in the table that follows. Changes in Net Position For the fiscal years ended June 30, 2014 and 2013 (in thousands) Business-Type Activities 2014 2013 $ $ Total 2014 2013 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 Total revenues EXPENSES General government: Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Interest on Long-Term Debt Bond Issuance Costs Water Utility Sewer Utility Airport Solid Waste Total expenses Increase (decrease) in net position before transfers Transfers Change in net position Net position - beginning Net effect of accounting change Net position - beginning restated Net position - ending 18 Governmental Activities 2014 2013 43,315 $ 27,710 38,817 38,942 31,255 66,917 168,436 $ 22,019 161,564 25,638 $ 211,751 $ 27,710 60,836 200,506 31,255 92,555 64,770 183,872 43,152 9,563 1,274 8,422 420,895 64,918 169,664 39,998 9,056 985 12,557 434,292 154 964 191,573 144 763 188,109 64,770 184,026 43,152 9,563 2,238 8,422 612,468 64,918 169,808 39,998 9,056 1,748 12,557 622,401 840 1,042 5,810 754 5,705 864 6,069 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 (15,240) 6,202 (9,038) 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 (848) 7,244 6,396 91,496 45,421 4,014 19,608 160,539 31,034 (6,202) 24,832 90,205 43,169 3,785 19,146 156,305 31,804 (7,244) 24,560 840 1,042 5,810 754 5,705 864 6,069 43,597 134,626 127,026 55,190 17,552 576 35,486 998 91,496 45,421 4,014 19,608 596,674 15,794 15,794 791 921 5,778 647 5,621 807 6,420 36,405 147,514 118,033 56,382 16,863 569 38,389 90,205 43,169 3,785 19,146 591,445 30,956 30,956 2,990,555 2,974,850 (5,855) 9,309 2,984,700 2,984,159 $ 2,975,662 $ 2,990,555 1,343,188 1,318,628 (1,253) 1,341,935 1,318,628 $ 1,366,767 $ 1,343,188 4,333,743 4,293,478 (7,108) 9,309 4,326,635 4,302,787 $ 4,342,429 $ 4,333,743 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 (44 percent), are the largest single source of funds, followed by property taxes (15 percent), intergovernmental revenues (including state shared revenues) (13 percent), and charges for services (10 percent). Governmental Activities Revenues Fiscal Year 2013/14 (in thousands) Interest and Investment Income $1,274 0% Intergovernmental $52,715 13% Charges for Services $43,315 10% Operating Grants and Contributions $27,710 7% Business Taxes $183,872 44% Capital Grants and Contributions $38,817 9% Other Revenue $8,422 2% City of Scottsdale, Arizona Management’s Discussion and Analysis Net position for governmental activities decreased $14.9 million or 0.5 percent during fiscal year 2014 from $2.991 billion to $2.976 billion. Total expenses were relatively unchanged from the prior fiscal year whereas total revenues decreased by $13.4 million. Expenses exceeded revenues resulting in a decrease in net position before transfers. A significant element of the decrease in net positon before transfers for governmental activities from June 30, 2013 to June 30, 2014 is capital grants and contributions posting a year-over-year decrease of $28.1 million or 42 percent. This was the result of a reduction of approximately $15.0 million in developer contributions, approximately $7.0 million less than the prior year in state grant funding for Preserve land purchases, and a decrease of approximately $6.0 million in federal grant-funded projects. For the Fiscal Year Ended June 30, 2014 Governmental Activities Property Taxes $64,770 15% 19 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents Property taxes remained relatively flat in fiscal year 2014 at $64.8 million compared to $64.9 million in fiscal year 2013. Business taxes, which include sales, use and franchise taxes, increased $14.2 million or 8 percent from the previous year. Sales and use tax revenue posted year-over-year growth of 9 percent in fiscal year 2014 indicating signs of continued economic recovery. Sales tax categories with the largest increases over the prior year include automotive, construction and miscellaneous retail stores. The Community and Economic Development Division is the largest expense function (31 percent) followed by the Scottsdale Police and Fire Departments, which together comprise the Public Safety Division (29 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 decreased by $12.9 million or 9 percent during fiscal year 2014, due primarily to lower capital expenditures. 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. Expenses increased by $9.0 million or 8 percent during fiscal year 2014 due to increases wages, overtime, and property, liability & workers’ compensation insurance. 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 were essentially the same during fiscal year 2014 as they were the prior year. Business-Type Activities Net position for business-type activities increased by $23.6 million or 1.8 percent during fiscal year 2014 from $1.343 billion to $1.367 billion. Total revenues increased modestly (2 percent) over the prior year; however, capital contributions decreased by 14 percent due to large capital contributions from Irrigation Water Distribution System participants received in fiscal year 2013 offset by higher developer contributions received in fiscal year 2014. Overall, total revenues continue to exceed expenses resulting in an increase in net position before transfers. As shown in the “Business-type Activities Program Revenues and Expenses” chart, the largest of Scottsdale’s business-type activities, Water and Sewer utilities, had expenses of $91.5 million and $45.4 million, respectively, in fiscal year 2014, followed by Solid Waste with operating expenses of $19.6 million and Aviation of $4.0 million. As shown on the “Business-type Activities Revenues by Source” chart, charges for services provided the largest share of revenues (88 percent) followed by capital grants and contributions (11 percent), which are principally developer contributions and development fees. 20 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, 2014 Business-type Activites Program Revenues and Expenses Fiscal Year 2013/14 (in thousands) Business-type Activities Revenues by Source Fiscal Year 2013/14 (in thousands) Interest and Investment Income $964 1% Capital Grants and Contributions $22,019 11% Business Taxes and Other Income $154 0% Charges for Services $168,436 88% City of Scottsdale, Arizona 21 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents 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 88,348 water service connections to customers in fiscal year 2013/14. The Solid Waste Department provided delivery of safe, efficient and environmentally sound solid waste services to 80,354 residential customers in fiscal year 2013/14. 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 142,000 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 non-spendable resources. Such information may be useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for discretionary use as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the City itself, or the City Treasurer who has been delegated authority to assign resources for use for particular purposes by the City Council. 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 $185.5 million, a decrease of $32.7 million in comparison to the balance at June 30, 2013 of $218.2 million. Approximately $51.2 million or 28 percent of the total at June 30, 2014, 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. Revenues for governmental functions totaled approximately $406.8 million in fiscal year 2014, an increase of 0.10 percent ($0.4 million) from the previous year total of $406.4 million. In fiscal year 2014, expenditures for governmental functions totaled $471.3 million, a decrease of 18.3 percent ($105.5 million) from the fiscal year 2013 total of $576.8 million. In the fiscal years ended June 30, 2014 and 2013, expenditures for governmental functions exceeded revenues by approximately $64.5 million and $170.4 million, respectively. The current year deficit is partially offset by $31.8 million from other financing sources and uses. 22 City of Scottsdale, Arizona Table of Contents 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 $9.4 million, a decrease of $0.7 million from the $10.1 million as of June 30, 2013. The decrease in fund balance was primarily caused by higher debt service payments on bonds. Management’s Discussion and Analysis Overall, the General Fund’s performance resulted in revenues exceeding expenditures in the fiscal year ended June 30, 2014, by $10.0 million. Key contributors to the positive variance were increases in privilege tax, building permit, and state shared revenues. The General Fund’s fund balance increased in fiscal year 2014 by $3.7 million. The combination of higher revenues and lower expenditures compared to the prior fiscal year were the primary reasons for the increase. For the Fiscal Year Ended June 30, 2014 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 $52.4 million, while the total fund balance was $52.6 million; the unassigned and total balances for the General Fund at the end of fiscal year 2013 were $48.7 million and $48.9 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 22.9 percent of the total General Fund expenditures of $229.1 million in fiscal year 2014 and represented 19.5 percent of the total General Fund expenditures of $250.1 million in fiscal year 2013. Total fund balance represented 23.0 percent and 19.6 percent of total fund expenditures for fiscal years 2014 and 2013, respectively. 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, community facility districts and preservation/transportation privilege taxes. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Projects fund was $9.5 million, a decrease of $34.8 million from the $44.3 million at June 30, 2013. A pending bond issuance of $15.5 million, the primary reason for the decrease, is planned for January 2015 and will reimburse existing expenditures of $14.6 million. Capital outlay expenditures in 2014 and 2013 were $64.6 million, and $66.9 million, respectively. 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 2014 and 2013, the unrestricted net position for Water and Sewer were $250.1 million and $222.4 million, respectively; Airport’s were $8.6 million and $6.5 million, respectively; and Solid Waste’s were $14.2 million and $13.9 million, respectively. The Internal Service Funds, which are used to account for certain governmental activities, also had unrestricted net position of $17.4 million and $18.1 million, respectively. The total growth in net position for the Enterprise Funds was $24.4 million and $24.6 million for fiscal years 2014 and 2013, 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 Water and Sewer Utility net position increased by $23.2 million, primarily due to capital contributions of $21.5 million. City of Scottsdale, Arizona 23 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents 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 following City Council approved contingency budget transfers: • • • • • Structural repair and maintenance of a city owned parking garage Creation of eight new firefighters during the fiscal year WestWorld marketing agreement Clinical modalities training in the Fire Department Unfavorable variance in Police overtime Revenues were $12.2 million more than projected. The largest drivers of the greater than anticipated revenues were $4.5 million privilege sales tax due to continued increased motor vehicle sales, wholesalers reporting large amounts of taxable sales, plus increased construction activity for both single family and multi-family building projects; $4.5 million in building and related permit charges, which include building permits, right-of-way fees, plan review fees, and engineering plan review fees, all exceeding budget based on the improved local and national economies. Expenses were $4.0 million less than the revised budget largely due to the Police Department only using $0.6 million of the one-time $2.5 million compensation adjustment authorized by City Council resulting in a savings at June 30, 2014 of $1.9 million. Additionally, full-time and part-time wages, software maintenance and licensing, utilities, and fuel for fleet 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, 2014 and 2013, totaled to $4.98 billion and $5.06 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 decrease in the City’s capital assets (net of accumulated depreciation) between fiscal years 2014 and 2013 was 1.6 percent. 24 City of Scottsdale, Arizona Table of Contents Land Buildings and Land Improvements Streets and Storm Drains Machinery and Equipment Water Rights Water System Sewer System Motor Vehicles and Equipment Maintained by Fleet Furniture, Fixtures, and Office Equipment Construction in Progress Total Governmental Activities 2014 2013* $ 1,839,212 $ 1,809,216 363,158 371,044 1,251,032 1,326,143 26,234 28,712 24,107 22,973 106,065 105,384 $ 3,609,808 $ 3,663,472 Business-Type Activities 2014 2013 $ 48,821 $ 54,560 16,871 18,439 14,390 13,154 87,171 87,171 791,540 786,064 404,607 402,618 199 94 129 10,157 38,341 $ 1,373,850 $ 1,400,476 Total 2014 2013* $ 1,888,033 $ 1,863,776 380,029 389,483 1,251,032 1,326,143 40,624 41,866 87,171 87,171 791,540 786,064 404,607 402,618 24,306 22,973 94 129 116,222 143,725 $ 4,983,658 $ 5,063,948 *The June 30, 2013 Buildings and Land Improvements and Streets & Storm Drains capital asset categories and accumulated depreciation were restated due to a prior period adjustment to reclassify a previous asset with a net book value of $23,781,000 from Buildings and Land Improvements to Streets & Storm Drains. Major capital asset events during the current fiscal year included the following: • Preserve land purchased under the Expanded McDowell Sonoran Preserve project. Expenditures totaled $13.9 million this year against a budget of $338.1 million. As of June 30, 2014, the inception to date expenditures total $262.2 million, leaving a balance of $75.9 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 $8.0 million this year against a budget of $8.0 million. The project was completed and closed when the state grant funds were spent with the land purchase. • The expenditures for the Tony Nelssen Equestrian Center Expansion project totaled $10.1 million this year against a budget of $47.0 million. As of June 30, 2014, the construction was substantially complete and the asset was placed in service with inception to date expenditures totaling $44.9 million, leaving a balance of $2.1 million. The project is anticipated to be completed in fiscal year 2014/15. • The Upper Camelback Wash Watershed project has a goal to reduce flooding for this major wash corridor. Expenditures totaled $5.4 million. As of June 30, 2014, the inception to date expenditures total $14.4 million against a budget of $17.7 million, leaving a balance of $3.3 million. The project is anticipated to be completed in fiscal year 2014/15. • The Northsight Boulevard Extension project will construct a new, modified minor collector roadway and the replacement of an existing traffic signal at the intersection of Hayden and Northsight with a two-lane roundabout. Expenditures totaled $5.2 million this year against a budget of $8.0 million. As of June 30, 2014, the inception to date expenditures total $6.8 million, leaving a balance of $1.2 million. The project is anticipated to be completed in fiscal year 2014/15. • The TPC Clubhouse and Stadium Course Renovation project includes an expansion to the men’s bathroom, the current patio and meeting room areas, resurfacing the greens, irrigation system and lake bank repair. Expenditures totaled $3.0 million this year. As of June 30, 2014, the inception to date expenditures totaled $8.4 million against a budget of $14.0 million, leaving a balance of $5.6 million. The project is anticipated to be completed in fiscal year 2014/15. City of Scottsdale, Arizona Management’s Discussion and Analysis June 30, 2014 and 2013 (in thousands) For the Fiscal Year Ended June 30, 2014 Capital Assets, Net of Depreciation 25 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 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 $4.6 million against a budget of $14.5 million. As of June 30, 2014, the inception to date expenditures total $11.9 million, leaving a balance of $2.6 million. The project is anticipated to be completed in fiscal year 2014/15. • The WestWorld Events Paving and Show Office Improvements project will reconfigure parking lots and electrical distribution systems adjacent to the Tony Nelssen Equestrian Center to facilitate different types of event set-ups for future users of the facility. Expenditures totaled $3.9 million against a budget of $4.3 million, leaving a balance of $0.4 million. The project is anticipated to be completed in fiscal year 2014/15. • 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 $3.6 million this year against a budget of $26.9 million. As of June 30, 2014, the inception to date expenditures total $21.2 million, leaving a balance of $5.7 million. The project is anticipated to be completed in fiscal year 2014/15. • The Pavement Overlay Program project consists of an on-going program that completed street pavement overlays. Expenditures totaled $3.1 million this year against a budget of $3.2 million leaving a minor balance of $0.1 million. The balance will be spent in fiscal year 2014/15. • The Scottsdale’s Museum of the West project will construct a 40,000 square foot museum and sculpture garden. Expenditures totaled $3.5 million this year against a budget of $13.6 million, leaving a balance of $10.1 million. The project is anticipated to be completed in fiscal year 2014/15. • 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 Water Distribution System Improvements ($5.4 million) – Provides for water distribution system improvements needed due to age of the system and increasing demand. Includes replacement of mains, meters and valves, as well as design and construction of new water mains at various locations throughout the distribution system to improve service and to reduce operating costs. The project’s budget totals $74.4 million. As of June 30, 2014, the inception to date expenditures total $64.5 million, leaving a balance of $9.9 million. o Wastewater Collection System Improvements ($2.9 million) – Design and construction of sewer lines and rehabilitation of sewer manholes in the aging sewer system per the Asset Management Program. The project’s budget totals $59.8 million. As of June 30, 2014, the inception to date expenditures total $52.6 million, leaving a balance of $7.2 million. o Reclaimed Water Distribution Systems (RWDS) Improvements ($2.4 million) – Provides for improvements to the RWDS pipeline pump stations and reservoirs. The project’s budget totals $9.1 million. As of June 30, 2014, the inception to date expenditures total $8.5 million, leaving a balance of $0.6 million. The project is anticipated to be completed in fiscal year 2014/15. 26 City of Scottsdale, Arizona Table of Contents o Booster Station Upgrades ($1.1 million) – This project will upgrade components of the water production system as needed to meet system demands. The project’s budget totals $12.8 million. As of June 30, 2014, the inception to date expenditures total $7.3 million, leaving a balance of $5.5 million. Additional information on the City’s capital assets can be found in Note IV.C. on pages 75-77 of this report. Management’s Discussion and Analysis o Chaparral Water Treatment Plant Pretreatment ($1.1 million) – 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 is $32.4 million. As of June 30, 2014, the inception to date expenditures total $6.4 million, leaving a balance of $26.0 million. For the Fiscal Year Ended June 30, 2014 o Site 71 Well Site and Water Booster Station ($1.3 million) – Design and construction of a new well site and booster station that will be a replacement for the original on-site well constructed in 1959 on the southwest corner of Thomas Road and Miller Road. The project’s budget totals $5.0 million. As of June 30, 2014, the inception to date expenditures total $1.3 million, leaving a balance of $3.7 million. The project is anticipated to be completed in fiscal year 2014/15. Debt Administration At the end of the fiscal years 2014 and 2013, the City had total long-term liabilities of $1,342.6 million and $1,382.8 million, respectively. Of these amounts, $619.1 million and $639.1 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 (MPC) bonds, Scottsdale Preserve Authority (SPA) bonds, certificates of participation, and other obligations of $723.5 million and $743.7 million for fiscal years 2014 and 2013, respectively. City of Scottsdale, Arizona 27 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2014 Table of Contents Long-Term Liabilities June 30, 2014 and 2013 (in thousands) General Obligation Bonds Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Issuance Premiums 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 2014 2013 $ 619,065 $ 639,135 200,840 207,654 48,505 52,465 13,914 16,003 29,395 31,885 52,186 44,182 963,905 991,324 2,570 329 183 2,990 3,144 15,663 12,882 24,881 23,906 627 288 $ 1,008,395 $ 1,034,297 Business-Type Activities 2014 2013 $ - $ 32,275 35,515 280,795 290,555 - $ 18,095 331,165 3,085 334,250 $ 19,422 345,492 3,007 348,499 Total 2014 2013 $ 619,065 $ 639,135 32,275 35,515 481,635 498,209 48,505 52,465 13,914 16,003 29,395 31,885 70,281 63,604 1,295,070 1,336,816 2,570 329 183 2,990 3,144 15,663 12,882 27,966 26,913 627 288 $ 1,342,645 $ 1,382,796 During fiscal year 2014, the City’s total long-term liabilities decreased approximately $40.2 million. This is due primarily to the City making $61.0 million of scheduled and early redemption principal payments slightly offset by issuing $14 million of new Preserve General Obligation bonds and increased issuance premium of $6.7 million. 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 April 2014 (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, 2014 and 2013 is $223.7 million and $226.8 million, respectively, in the 6 percent capacity and $412.4 million and $454.9 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. 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, 2014. The NOPEBO at the end of the fiscal years 2014 and 2013 were $0.6 million and $0.3 million, respectively. 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. 28 City of Scottsdale, Arizona Table of Contents • • • • • • $5.8 million or the equivalency of 3 percent of payroll, for a pay program designed to reward employee performance and address other pay issues. No increase to the primary property tax. The only increase was the addition of new construction from the prior year. $2.7 million in spending cuts in the general fund were achieved through the elimination of 18 general fund positions. Additional funding to the Capital Improvement Plan for the upkeep of the City’s infrastructure will be achieved by selling excess City buildings. No overall rate changes for water or sewer services. Various rate/fee adjustments for City Attorney, City Court, Community and Economic Development Service, Public Safety – Fire and Public Safety – Police. 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 City is projecting to spend $230 million on capital projects in fiscal year 2014/15, highlights include: • • • • • • • • • • Management’s Discussion and Analysis The City’s long-term financial plan remains one of conservative economic growth as Scottsdale continues its slow recovery. The fiscal year 2014/15 budget includes the priorities and policy given by City Council, with a focus on spending money smarter, making city government leaner and more efficient. Following are the major policy items included in the City’s adopted fiscal year 2014/15 budget: For the Fiscal Year Ended June 30, 2014 Economic Factors and Next Year’s Budget and Rates Complete Scottsdale’s Museum of the West. Complete renovations to the TPC Scottsdale Clubhouse and Stadium Course. Begin construction of a multi-use path along the Arizona Canal from Chaparral Road to McDonald Drive. Add bicycle and pedestrian capacity to the McDowell Road bridge over the Indian Bend Wash Greenbelt. Begin construction of a multilane roundabout and transit improvements at 90th Street and Shea Boulevard adjacent to Mustang Library. Complete bicycle lanes and pedestrian amenities on Thomas Road from Scottsdale Road to the Indian Bend Wash Greenbelt bridge. Purchase land and begin design of a permanent location for Fire Station 613. Upgrade treatment technology at Chaparral Water Treatment Plant to meet stricter regulations. Complete storm drainage improvements for the Upper Camelback Wash Watershed. Begin storm drainage improvements in the Granite Reef Watershed. 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 directed to: Scottsdale City Treasurer’s Office, 7447 E. Indian School Road, Suite 210, Scottsdale, AZ 85251. (480) 312-2437 Or visit our website at: http://www.scottsdaleaz.gov/finance City of Scottsdale, Arizona 29 Table of Contents 30 City of Scottsdale, Arizona Table of Contents Basic Financial Statements City of Scottsdale, Arizona 31 Table of Contents Statement of Net Position June 30, 2014 (in thousands) Governmental Activities Business-Type Activities Total ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivables (net of uncollectible amounts of $36,149) Property Taxes and Penalties Other Local Taxes Charges for Services Intergovernmental Interest and Other Internal Balances Supplies Inventory Prepaid Items $ $ 11,733 26,057 31,480 6,905 (438) 1,169 3 159,553 20,881 $ 388,679 86,581 14 16,905 12 2,329 438 866 11,733 26,071 16,905 31,492 9,234 1,169 869 - 1,037 1,037 371,735 4,613 206,648 4,613 578,383 31,467 67,022 104,866 52,596 - 104,866 31,467 52,596 67,022 - 1,190 1,767 37,510 4,978 1,190 1,767 37,510 4,978 1,945,277 1,664,531 3,609,808 146,149 1,227,701 1,373,850 2,091,426 2,892,232 4,983,658 3,708,297 1,576,757 5,285,054 4,080,032 1,783,405 5,863,437 19,872 3,660 23,532 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 23,053 8,621 302 11,144 6,589 3,557 2,013 47,394 17,315 47,211 11,069 2,523 180,791 7,365 1,211 1 1,336 1,037 13,000 7,881 13,180 45,011 30,418 9,832 303 12,480 6,589 3,557 3,050 60,394 25,196 60,391 11,069 2,523 225,802 Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Total Noncurrent Liabilities 13,737 929,714 943,451 1,749 1,190 1,767 317,985 52,596 375,287 15,486 1,190 1,767 1,247,699 52,596 1,318,738 1,124,242 420,298 1,544,540 2,685,105 1,046,345 3,731,450 35,182 40,073 30,296 249 3,739 76 180,942 2,975,662 4,978 37,510 4,613 273,321 1,366,767 40,160 40,073 30,296 249 3,739 76 37,510 4,613 454,263 4,342,429 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 Prepayments Pollution Remediation Recoveries Service Concession Arrangements Restricted Cash, Cash Equivalents, and Investments Advanced Construction Payments Advanced Lease Payments 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 DEFERRED OUTFLOWS OF RESOURCES Deferred Amounts on Refunding Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Debt Service Highway User and Preserve Privilege Tax Activities Capital Projects Grants Special Programs Streetlight and Service District Repair and Replacement Joint Venture Construction Deposits Unrestricted Total Net Position 32 229,126 65,700 $ $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Statement of Activities For the Fiscal Year Ended June 30, 2014 (in thousands) Charges for Services Expenses Program Revenues Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Business-Type Activities Total FUNCTIONS/PROGRAMS Governmental Activities General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Streetlight and Services Districts Interest on Long-Term Debt Bond Issuance Costs Total Governmental Activities $ Business-Type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government 840 1,042 5,810 754 5,705 864 6,069 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 $ 91,496 45,421 4,014 19,608 160,539 $ 596,674 225 279 756 197 219 2,606 1,580 17,981 10,268 5,914 2,890 400 43,315 $ 104,722 39,917 3,635 20,162 168,436 $ 211,751 4 35 173 136 13,754 5,647 7,961 27,710 $ $ 27,710 225 30,116 8,476 38,817 12,804 8,646 569 22,019 $ (615) (763) (5,050) (557) (5,670) (645) (3,290) (41,656) (72,775) (111,111) (32,839) (14,662) (176) (35,486) (998) (326,293) $ - 60,836 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 The notes to the financial statements are an integral part of this statement. $ (326,293) 64,770 171,673 12,199 $ 18,922 24,230 9,563 1,274 8,422 6,202 317,255 (9,038) 2,984,700 2,975,662 $ - $ (615) (763) (5,050) (557) (5,670) (645) (3,290) (41,656) (72,775) (111,111) (32,839) (14,662) (176) (35,486) (998) (326,293) 26,030 3,142 190 554 29,916 26,030 3,142 190 554 29,916 29,916 (296,377) 154 - 64,770 171,827 12,199 964 (6,202) (5,084) 24,832 1,341,935 1,366,767 18,922 24,230 9,563 2,238 8,422 312,171 15,794 4,326,635 4,342,429 $ 33 Table of Contents 34 Balance Sheet Governmental Funds June 30, 2014 (in thousands) General General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds ASSETS Cash and Investments Cash with Fiscal Agent Receivable (net of allowance for uncollectibles $36,105) 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 Prepaid Items Total Assets (continued) $ $ 54,501 1,267 308 15,216 819 1,606 2,876 9,695 292 332 1,880 93 263 3 89,151 $ $ 8,932 45,144 1,138 55,214 $ $ 16,630 70 1,552 181 2,834 21,267 $ $ 113,464 19,289 121 4,047 770 81 55 1,155 28,036 1,711 1,078 169,807 $ $ 193,527 65,700 499 19,263 770 2,038 1,606 2,931 9,695 292 1,155 332 29,588 1,892 5,792 93 263 3 335,439 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Balance Sheet Governmental Funds June 30, 2014 (in thousands) General LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances The notes to the financial statements are an integral part of this statement. $ 5,189 8,195 222 1,044 General Obligation Bond Debt Service $ 11,074 34,070 General CIP Construction Capital Projects $ 10,005 42 - Total Nonmajor Governmental Funds $ 4,599 497 93 6,019 12,280 Total Governmental Funds $ 19,793 8,734 93 17,315 47,394 408 3,557 2,008 2,523 23,146 45,144 3 10,050 9,761 897 5 34,151 9,761 1,308 3,557 2,013 2,523 112,491 13,385 701 1,734 21,655 37,475 36,531 45,845 11,784 55,806 149,966 266 52,354 52,620 9,369 9,369 1,008 1,113 7,362 9,483 95,460 19,735 (1,194) 114,001 266 105,837 20,848 7,362 51,160 185,473 89,151 $ 55,214 $ 21,267 $ 169,807 $ 335,439 35 Table of Contents Reconciliation of the Governmental Funds Balances Sheet to the Statement of Net Position June 30, 2014 (in thousands) Fund Balances - Total Governmental Funds $ 185,473 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 current financial resources; therefore, are not reported in the funds. 3,574,944 Prepayments and service concession arrangements are not current financial resources; therefore, are not reported in the funds. 98,489 Deferred amounts on refunding are not current financial resources; therefore are not reported in the funds 19,872 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore, are not reported in the funds. (992,371) 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 unavailable revenue in the funds. 37,475 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. 51,780 Net Position of Governmental Activities $ 2,975,662 The notes to the financial statements are an integral part of this statement. 36 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, 2014 (in thousands) General General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Cable TV Franchise Salt River Project In-Lieu Other Taxes Taxes - Intergovernmental State-Shared Sales State Revenue Sharing Auto Lieu Tax Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Building and Related Permits Recreation Fees WestWorld Equestrian Facility Fees Fire Fees Fines, Fees, and Forfeitures Court Parking Photo Radar Court Enhancement Library Police Fees 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) $ $ 25,265 104,934 8,220 3,722 268 900 $ 36,372 - $ - $ 3,277 50,771 15,303 257 - $ 64,914 155,705 15,303 8,477 3,722 268 900 18,922 24,230 7,755 1,752 - - 12,268 641 30 18,922 24,230 7,755 12,268 641 1,782 14,443 3,712 3,364 715 - 101 - 1,743 - 14,544 5,455 3,364 715 4,205 249 1,933 325 2,154 1,767 (1,001) - 303 (172) 166 961 504 2,116 904 (527) 4,371 249 1,933 961 325 504 4,270 2,974 (1,700) 1,221 3 75 1,809 6,556 1,601 239,099 $ 36,372 $ 290 8,044 1,525 61 211 16 1 10,380 $ 10,637 372 18,027 400 1,892 621 546 50 120,959 $ 10,927 8,416 20,773 64 400 2,178 2,446 7,102 1,652 406,810 37 Table of Contents 38 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2014 (in thousands) General General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds EXPENDITURES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer 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 Outlay Total Expenditures $ Excess (Deficiency) of Revenues over (under) Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Capital Lease Acquisitions Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. 835 1,035 5,702 740 3,724 842 4,948 19,696 23,367 117,007 33,269 14,950 - $ $ - $ 1,791 113 13,685 17,696 2,152 11,766 576 $ 835 1,035 5,702 740 5,515 842 5,061 33,381 41,063 119,159 45,035 14,950 576 2,382 584 1 229,082 42,114 24,108 710 66,932 64,602 64,602 14,891 12,631 287 35,120 110,708 59,387 37,323 998 99,722 471,324 10,017 (30,560) (54,222) 10,251 (64,514) 12,512 (19,149) 296 (6,341) 21,976 83,150 261 10,083 (85,646) 29,824 19,889 (491) 19,398 35,292 (63,056) 22,735 13,739 2,659 (22,453) (11,084) 89,669 (82,696) 296 105,885 14,000 12,742 (108,099) 31,797 (736) (34,824) (833) (32,717) 3,676 $ - 48,944 52,620 $ 10,105 9,369 $ 44,307 9,483 $ 114,834 114,001 $ 218,190 185,473 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, 2014 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ (32,717) 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 depreciation exceeded capital outlay in the current period. (20,952) Donations of capital assets are not capitalized on the governmental fund statements, but are shown in the statement of activities. 12,487 Some expenses reported in the statement of activities do not require the use of current financial resources; therefore, are not reported as expenditures in governmental funds. (3,648) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in governmental funds. 945 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 prepayments exceeded amortization expense in the current period. (967) 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 principal retirement exceeded debt proceeds in the current period. 34,563 Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refunding. 1,837 The net revenues of certain activities of Internal Service Funds is reported with governmental activities. (586) Change in Net Position of Governmental Activities $ (9,038) The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 39 Table of Contents 40 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2014 (in thousands) Budgeted Amounts Original City of Scottsdale, Arizona REVENUES Taxes - Local Property Transaction Privilege 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 Developer Contributions Contributions and Donations Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) $ $ 25,510 100,482 8,412 3,024 274 895 Final $ 25,510 100,482 8,412 3,024 274 895 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 25,265 104,934 8,220 3,722 268 900 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 25,265 104,934 8,220 3,722 268 900 (245) 4,452 (192) 698 (6) 5 18,784 24,253 7,246 1,766 18,784 24,253 7,246 1,766 18,922 24,230 7,755 1,752 - 18,922 24,230 7,755 1,752 138 (23) 509 (14) 9,900 3,624 3,168 660 9,900 3,624 3,168 660 14,443 3,712 3,364 715 - 14,443 3,712 3,364 715 4,543 88 196 55 4,035 236 2,330 357 1,969 1,000 - 4,035 236 2,330 357 1,969 1,000 - 4,205 249 1,933 325 2,154 1,767 - (1,001) 4,205 249 1,933 325 2,154 1,767 (1,001) 170 13 (397) (32) 185 767 - 1,221 1,402 6,502 863 227,913 1,221 1,402 6,502 863 227,913 1,221 3 75 1,809 6,556 1,601 240,100 (1,001) 1,221 3 75 1,809 6,556 1,601 239,099 3 75 407 54 738 12,187 $ $ $ $ $ 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, 2014 (in thousands) Budgeted Amounts Original EXPENDITURES Current General Government Mayor and City Council City Clerk City Attorney City Auditor City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Administrative Services Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures $ 812 1,218 5,708 750 3,896 887 5,687 18,525 22,827 117,242 33,689 16,354 Actual Amounts Budgetary Basis Final $ 861 1,228 5,816 869 3,816 902 5,225 20,239 23,702 117,299 33,842 15,324 $ 834 1,032 5,672 737 3,694 834 4,881 19,669 23,243 116,293 33,050 14,884 Budget to GAAP Differences $ Actual Amounts GAAP Basis 1 3 30 3 30 8 67 27 124 714 219 66 $ 835 1,035 5,702 740 3,724 842 4,948 19,696 23,367 117,007 33,269 14,950 Variance Between Final Budget and Actual Amounts Budgetary Basis $ 27 196 144 132 122 68 344 570 459 1,006 792 440 2,571 589 230,755 2,191 589 231,903 2,382 584 1 227,790 1,292 2,382 584 1 229,082 (191) 5 (1) 4,113 Excess (Deficiency) of Revenues over Expenditures (2,842) (3,990) 12,310 (2,293) 10,017 16,300 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Capital Lease Acquisitions Total Other Financing Sources (Uses) 10,913 (17,456) (6,543) 10,913 (17,456) (6,543) 12,512 (19,149) 296 (6,341) - 12,512 (19,149) 296 (6,341) 1,599 (1,693) 296 202 (9,385) (10,533) 5,969 (2,293) 3,676 16,502 Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending The notes to the financial statements are an integral part of this statement. $ 41,871 32,486 $ 55,685 45,152 $ 55,685 61,654 $ (6,741) (9,034) $ 48,944 52,620 $ 16,502 41 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, 2014 (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 Net Decrease in Fund Balance - Budget to GAAP (1,001) 1,292 $ (2,293) The notes to the financial statements are an integral part of this statement. 42 City of Scottsdale, Arizona Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2014 (in thousands) Water and Sewer Utility ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Cash with Fiscal Agent Receivables (net of uncollecbible amounts of $44) Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous Supplies Inventory Restricted Cash, Cash Equivalents, and Investments Customer Advances and Deposits Prepaid Expenses Other Restricted Assets Joint Venture Construction Deposits $ 137,345 20,881 Airport $ Solid Waste 8,515 - $ Governmental Activities Internal Service Funds Total 13,693 - $ 159,553 20,881 $ 35,599 - 15,096 172 1,751 - 14 12 4 266 - 1,809 11 125 - 14 16,905 12 187 2,142 - 322 906 985 866 52 - - 1,037 866 - 4,613 - - 4,613 - 181,709 8,863 15,638 206,210 36,827 104,866 52,596 - - 104,866 52,596 - 1,190 37,510 4,978 1,767 - - 1,190 1,767 37,510 4,978 - 38,146 87,171 1,154,144 574,721 20,485 813 6,640 (540,207) 9,564 25,988 830 861 3,480 (12,916) 1,111 4,771 1,905 37 (3,694) 48,821 87,171 1,154,144 574,721 30,759 830 23,251 813 10,157 (556,817) 12,447 60,817 1,374 56 (39,830) Total Capital Assets (net of accumulated depreciation) 1,341,913 27,807 4,130 1,373,850 34,864 Total Noncurrent Assets 1,543,053 29,574 4,130 1,576,757 34,864 1,724,762 38,437 19,768 1,782,967 71,691 3,660 - - 3,660 - Total Current Assets Noncurrent Assets Equity in Joint Venture Pollution Remediation Recoveries Restricted Cash, Cash Equivalents, and Investments Advanced Construction Payments Advanced Lease Payments 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 Deferred Outflows of Resources Deferred Amounts on Refunding Total Assets and Deferred Outflows of Resources $ 1,728,422 $ 38,437 $ 19,768 $ 1,786,627 $ 71,691 (continued on next page) City of Scottsdale, Arizona 43 Table of Contents Statement of Fund Net Position Proprietary Funds June 30, 2014 (in thousands) Water and Sewer Utility Airport Solid Waste Governmental Activities Internal Service Funds Total LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Current 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 $ Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Total Noncurrent Liabilities 6,911 829 1 968 985 13,000 7,881 13,180 43,755 $ 60 49 63 52 224 $ 394 333 305 1,032 $ 7,365 1,211 1 1,336 1,037 13,000 7,881 13,180 45,011 $ 3,260 189 166 6,589 10,204 1,238 1,190 317,985 52,596 373,009 80 1,767 1,847 431 431 1,749 1,190 1,767 317,985 52,596 375,287 195 9,074 9,269 416,764 2,071 1,463 420,298 19,473 NET POSITION Net Investment in Capital Assets 1,014,408 27,807 4,130 1,046,345 34,864 Restricted for Water and Sewer System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits Unrestricted Total Net Position 37,510 4,978 4,613 250,149 1,311,658 8,559 36,366 14,175 18,305 37,510 4,978 4,613 272,883 1,366,329 17,354 52,218 Total Liabilities $ $ $ $ $ The notes to the financial statements are an integral part of this statement. 44 City of Scottsdale, Arizona Table of Contents Reconciliation of the Proprietary Funds Statement of Net Position to the Statement of Net Position June 30, 2014 (in thousands) Total Proprietary Fund Net Position $ 1,366,329 Amounts reported for business-type activities in the government-wide statement of net position are different because: Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and vehicles to individual funds. A look-back adjustment applies to business-type activities and creates an internal balance. Net Position of Business-Type Activities 438 $ 1,366,767 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 45 Table of Contents Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2014 (in thousands) Water and Sewer Utility OPERATING REVENUES Charges for Sales and Services Water Service Fees Sewer Service Fees Proprietary - Non-potable water fees Solid Waste Fees Airport Fees Other Services Other Total Operating Revenues $ OPERATING EXPENSES Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Total Operating Expenses 90,270 38,389 11,233 1,326 141,218 Airport $ Solid Waste 3,531 104 3,635 $ Governmental Activities Internal Service Funds Total 20,162 20,162 $ 90,270 38,389 11,233 20,162 3,531 1,430 165,015 $ 52,953 717 53,670 48,349 24,532 5,010 46,421 124,312 2,039 452 1,095 3,586 18,209 1,640 251 20,100 48,349 24,532 18,209 2,039 7,102 47,767 147,998 49,412 4,728 54,140 16,906 49 62 17,017 (470) 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) 848 (12,554) 3,421 (8,285) 154 47 (425) (224) 69 69 154 964 (12,554) 2,996 (8,440) 145 457 602 Income Before Contributions and Transfers 8,621 (175) 131 8,577 132 21,450 520 (7,370) 569 754 (5) (101) 22,019 1,274 (7,476) 491 (771) 23,221 1,143 30 24,394 (148) Operating Income (Loss) Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning as Restated Total Net Position - Ending $ 1,288,437 1,311,658 $ 35,223 36,366 $ 18,275 18,305 $ 1,341,935 1,366,329 $ 52,366 52,218 The notes to the financial statements are an integral part of this statement. 46 City of Scottsdale, Arizona Table of Contents Reconciliation of the Proprietary Funds Statement of Revenues, Expenses, and Changes Net Position to the Statement of Activities For the Fiscal Year Ended June 30, 2014 (in thousands) Net Change in Total Proprietary Fund Net Position $ 24,394 Amounts reported for business-type activities in the government-wide statement of net position are different because: Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, computer equipment, and vehicles to individual funds. A look-back adjustment applies to business-type activities and creates an internal balance, which reduced the expenses. Change in Net Position of Business-Type Activities 438 $ 24,832 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, 2014 (in thousands) Water and Sewer Utility Airport Solid Waste Governmental Activities Internal Service Funds Total Cash Flows from Operating Activities Cash Received from Customers $ 140,475 $ 3,480 $ 20,331 $ 164,286 $ 53,218 Cash Payments to Suppliers for Goods/Services (54,410) (1,525) (12,934) (68,869) (42,409) Cash Payments to Employees for Services (18,938) (1,083) (6,716) (26,737) (4,206) 2,516 104 - 2,620 717 69,643 976 681 71,300 7,320 145 Other Cash Receipts Net Cash Provided by Operating Activities Cash Flows from Non-Capital Financing Activities Financing Activities Property Tax - - - - Transaction Privilege Tax - 154 - 154 - 520 754 - 1,274 - (7,370) (5) (101) (7,476) (771) (6,850) 903 (101) (6,048) (626) 15,651 - - 15,651 - - 434 - 434 - (18,593) (323) (38) (18,954) (3,458) (512) - - (512) - Principal Payments on Capital Debt and Other Payables (12,335) - - (12,335) - Interest Paid on Capital Debt (16,076) - - (16,076) - Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Capital Contributions from: Water and Sewer Development Fees Capital Grants Acquisition and Construction of Property and Equipment Water and Sewer Development Fee Credit Agreements Investment in Joint Venture and CIP deposit Sale of Capital Assets Net Cash Provided by (Used for) for Capital and Related Financing Activities (440) - - (440) - 9,486 2 - 9,488 624 (22,819) 113 (38) (22,744) (2,834) 1,083 59 87 1,229 - 1,083 59 87 1,229 - 41,057 2,051 629 43,737 3,860 161,832 8,283 13,064 183,179 31,739 Cash Flows from Investing Activities Income Received on Investments Net Cash Provided by Investing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 202,889 $ 10,334 $ 13,693 $ 226,916 $ 35,599 (continued) 48 City of Scottsdale, Arizona Table of Contents Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2014 (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 $ 137,345 $ 8,515 $ 13,693 $ 159,553 $ 35,599 Cash with Fiscal Agent 20,881 - - 20,881 - Restricted Cash and Investments 44,663 1,819 - 46,482 - Total Cash and Cash Equivalents $ 202,889 $ 10,334 $ 13,693 $ 226,916 $ 35,599 $ 16,906 $ 49 $ 62 $ 17,017 $ (470) 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 46,421 1,095 251 47,767 4,728 Change in Equity in Joint Venture 6,273 - - 6,273 - Change in Accounts Receivable 1,491 52 168 1,711 - 393 - - 393 265 - - - - (83) (866) - - (866) - Change in Miscellaneous Receivable Change in Inventories Change in Prepaid Expense Change in Customer Deposits Change in Accounts Payable Change in Accrued Payroll and Compensated Absences Change in Claims Payable Change in Advanced Lease Payments Total Adjustments Net Cash Provided by Operating Activities (110) (3) - (113) - (1,002) (146) 88 (1,060) 31 137 28 112 277 68 - - - - 2,781 - (99) - (99) - 52,737 927 619 54,283 7,790 $ 69,643 $ 976 $ 681 $ 71,300 $ 7,320 $ 6,311 $ - $ - $ 6,311 $ - Supplemental Disclosure of Non-cash Financing Activities Additions to Property, Plant, and Equipment Contributions from Developers Contributions (to)/from Others Change in Equity in Joint Venture Total Non-Cash Financing Activities $ - 241 - 241 (241) 6,273 - - 6,273 - 12,584 $ 241 $ - $ 12,825 $ (241) 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, 2014 (in thousands) Private Purpose Trust Funds ASSETS Cash and Cash Equivalents Total Assets LIABILITIES Escrow Payable Vouchers Designated Escrow Payable State Land Department Rebate $ 5 $ 1,465 $ 5 $ 1,465 $ - $ 50 1,415 - $ 1,465 Total Liabilities NET POSITION Held in Trust for Other Purposes Agency Funds $ 5 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, 2014 (in thousands) Private Purpose Trust Funds ADDITIONS Contributions: Private Donations $ Total Additions 6 6 DEDUCTIONS 4 Scholarships Total Deductions 4 Change in Net Position 2 Total Net Position - Beginning Total Net Position - Ending 3 $ 5 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, 2014 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 City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale City Treasurer’s Office 7447 E. Indian School Rd. Ste. 210 Scottsdale, AZ 85251 Blended City of Scottsdale City Treasurer’s Office 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 City Treasurer’s Office 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 City Treasurer’s Office 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 City Treasurer’s Office 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 City Treasurer’s Office 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, 2014 Component Unit 53 For the Fiscal Year Ended June 30, 2014 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. Indirect costs incurred by governmental activities and reimbursed by business-type activities are included in the program expense reported by the individual business-type functions. 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 position 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 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, community facility districts and preservation/transportation privilege taxes. 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, 2014 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 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. 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. City of Scottsdale, Arizona 55 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents 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, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance 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. 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. 56 City of Scottsdale, Arizona Table of Contents Inventories, Prepayments and Prepaid Items 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. 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. Prepaid items contain payments made to vendors applicable to future accounting periods in both the government-wide financial statements and the fund financial statements. The cost of a prepaid item is recorded as an expenditure/expense when consumed rather than when purchased. 4. Notes to Financial Statements 3. For the Fiscal Year Ended June 30, 2014 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. 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. The joint venture construction deposits with the City of Phoenix are used to for capital expansion, rehabilitation and expansion of the jointly used facilities. Assets are also restricted in enterprise funds for deposits received from water, sewer, and airport customers, as well as unearned 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. 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. City of Scottsdale, Arizona 57 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents 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 resulting 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. Vacation pay is calculated based on vacation used and the medical leave conversion is based on an actuarial valuation dated January 1, 2014. 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, 2014, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2014, 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. 58 City of Scottsdale, Arizona Table of Contents 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 are 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 bond issuance costs are expensed when incurred. 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. Deferred Outflows/Inflows of Resources In addition to assets, the government-wide financial statements and the proprietary fund financial statements include a section for deferred outflows of resources. This represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has only one item that qualifies for this category, the deferred amount on refunding. This results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Notes to Financial Statements Long-Term Obligations For the Fiscal Year Ended June 30, 2014 7. In addition to liabilities, the fund financial statements include a section for deferred inflows of resources. This represents an acquisition of fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has only one item that qualifies for this category, which arises only under the modified accrual basis of accounting, unavailable revenue. These amounts are recognized as an inflow of resources in the period that the amounts become available. 9. 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. 10. 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 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. City of Scottsdale, Arizona 59 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents 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. 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. 11. 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 and capital-related deferred outflows of resources, into one component of net position. Accumulated depreciation, the outstanding balances of debt, that are attributable to the acquisition, construction, or improvement of these assets, and the capital-related deferred inflows of resources 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. 65 The City adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This statement modifies financial reporting of certain assets and liabilities to be reclassified as deferred outflows of resources or deferred inflows of resources. This statement mandates that debt issuance costs, which had previously been capitalized and amortized over the life of the related debt, be expensed as incurred. 60 City of Scottsdale, Arizona Table of Contents The City adopted the provisions of GASB Statement No. 66 Technical Corrections. This statement improves accounting and financial reporting by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54 Fund Balance Reporting and Governmental Type Definitions, and No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This pronouncement did not impact the preparation of these financial statements. 3. Governmental Accounting Standards Board Statement No. 70 The City adopted the provisions of GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This statement establishes accounting and financial reporting for financial guarantees that are nonexchange transactions extended or received by the City. This pronouncement did not impact the preparation of these financial statements. 4. Restatement of Net Position For the fiscal year ending June 30, 2014, GASB Statement No. 65 Items Previously Reported as Assets and Liabilities (“the Statement”) was implemented. The implementation of the statement resulted in the City eliminating the bond issuance costs that were previously capitalized and amortized over the life of the related debt. The City’s government-wide net position and proprietary fund net position as of June 30, 2013, have been restated as follows (in thousands of dollars): Government-Wide Statement of Net Position Net position at June 30, 2013, as previously reported GASB Statement No. 65 adjustment: Bond Issuance Costs Net position at July 1, 2013, as restated Governmental Business-Type Activities Activities $ 2,990,555 $ 1,343,188 $ (5,855) 2,984,700 $ (1,253) 1,341,935 Notes to Financial Statements Governmental Accounting Standards Board Statement No. 66 For the Fiscal Year Ended June 30, 2014 2. Statement of Fund Net Position Water and Sewer Utility Fund $ 1,289,690 $ (1,253) 1,288,437 For the fiscal year ending June 30, 2014, the City established a Debt Stabilization Fund to account for revenues received for future debt payments from the Arizona Sports and Tourism Authority, the Maricopa County Stadium District, the San Francisco Giants and an amount committed by the City Council totaling $9,918,000. These amounts were previously recorded under the Municipal Property Corporation, Debt Service Fund. The City determined that the Municipal Property Corporation has no legal rights to these funds and established a Debt Stabilization Fund to account for these reserves. This adjustment had no effect to the Government-Wide Financial Statements or the totals in the Debt Service Fund Financial Statements for the prior fiscal years. 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, $185,473,000 differs from net position of governmental activities, $2,975,662,000 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. City of Scottsdale, Arizona 61 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectible amounts of $36,105) 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 Prepaid Items Capital Assets (net of accumulated depreciation) Prepayments Service Concession Arrangements Total Assets Total Governmental Funds Long-Term Assets/ Liabilities(1) $ $ Deferred Outflows of Resources Deferred Amounts on Refundings Total Assets and Deferred Outflows of Resources 193,527 65,700 Internal Service Funds(2) - $ Statement of Net Position Total Reclassifications and Eliminations 35,599 - $ - $ 229,126 65,700 499 19,263 770 2,038 1,606 2,931 9,695 292 1,155 332 29,588 1,892 5,792 93 263 3 335,439 3,574,944 31,467 67,022 3,673,433 322 906 34,864 71,691 (93) (93) 499 19,263 770 2,038 1,606 2,931 9,695 292 1,155 332 29,588 1,892 6,114 1,169 3 3,609,808 31,467 67,022 4,080,470 - 19,872 - - 19,872 $ 335,439 $ 3,693,305 $ 71,691 $ (93) $ 4,100,342 $ 19,793 8,734 93 17,315 47,394 $ (302) 302 10,978 13,542 - $ 3,260 189 438 166 195 6,589 - $ (93) - $ 23,053 8,621 438 302 11,144 13,737 6,589 17,315 47,394 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE/NET POSITION 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 Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Bonds, Loans, Capital Leases, and Other Payables Total Liabilities Deferred Inflows of Resources Unavailable Revenue Total Liabilities and Deferred Inflows of Resources Fund Balances/Net Position Total Fund Balances/Net Position Total Liabilities, Deferred Inflows of Resources, and Fund Balances/Net Position 62 $ 9,761 1,308 3,557 2,013 2,523 112,491 967,851 992,371 9,074 19,911 (93) 9,761 1,308 3,557 2,013 2,523 976,925 1,124,680 37,475 (37,475) - - - 149,966 954,896 19,911 (93) 1,124,680 185,473 2,738,409 51,780 - 2,975,662 335,439 $ 3,693,305 $ 71,691 $ (93) $ 4,100,342 City of Scottsdale, Arizona Table of Contents $ 5,421,664 (1,846,720) $ 3,574,944 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 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 agreement. Prepayments at 7/1/13 Amortization of prepayments $ $ SCAs at 7/1/13 Land improvements additions for SCAs Amortization of SCAs $ 32,434 (967) 31,467 $ 23,550 45,834 (2,362) 67,022 $ 19,872 $ (329) (911,719) (2,990) (52,186) (24,520) (627) (992,371) For current refundings and advance refundings resulting in defeasance of debt reported by governmental activities, the difference between the reacquisition price and the net carrying amount of the old debt should be reported as a deferred outflow of resources or a deferred inflow of resources. Notes to Financial Statements (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. For the Fiscal Year Ended June 30, 2014 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) 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, 2014, were: Capital leases payable Bonds payable Service concession arrangement Issuance premium Accrued vacation and sick leave pay Post employment - explicit subsidy $ 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 unavailable revenues in the governmental funds and thus are not included in fund balance. Certain tax and other revenues that are considered unavailable under modified accrual for governmental fund statements are recognized as revenue under accrual accounting for the government-wide statements. Unavailable library revenue Unavailable court revenue Unavailable property tax revenue Unavailable privilege tax revenue Unavailable intergovernmental revenue Unavailable other $ $ 291 4,521 1,246 6,852 23,072 1,493 37,475 $ 51,780 (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, $(32,717,000) differs from the change in net position for the governmental activities, $(9,038,000) 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, 2014 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 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 Long-Term Revenue/ Expenses(3) $ $ $ 64,914 155,705 15,303 8,477 3,722 268 900 (289) 420 245 (1) Capital Related Items(4) $ Internal Service Funds(5) - $ Reclassifications and Eliminations(6) 145 - $ Long-Term Debt Transactions(7) - $ Statement of Activities - $ 64,770 156,125 15,548 8,477 3,722 268 899 18,922 24,230 7,755 12,268 641 1,782 22 - - - - 18,922 24,230 7,755 12,268 641 1,804 14,544 5,455 3,364 715 115 55 69 - - (97) - - 14,562 5,455 3,419 784 4,371 249 1,933 961 325 504 4,270 2,974 (1,700) 792 42 21 134 42 - - - - - 5,163 291 1,954 961 459 504 4,312 2,974 (1,700) 10,927 8,416 20,773 64 400 2,178 2,446 7,102 1,652 406,810 (1,803) 2 786 270 16 7 945 - 145 (11) (108) - 9,124 8,418 21,559 64 400 2,448 2,462 7,102 1,648 407,792 $ $ $ $ $ $ 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 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 Outlay Total Expenditures/Expenses OTHER FINANCING USES/ CHANGES IN NET POSITION Net Transfers (to) from Other Funds Capital Contributions Proceeds from Sale of Assets Capital Lease Acquisitions Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Net Change for the Year Total Governmental Funds Long-Term Revenue/ Expenses(3) $ $ $ $ $ 835 1,035 5,702 740 5,515 842 5,061 33,381 41,063 119,159 45,035 14,950 576 59,387 37,323 998 99,722 471,324 6,973 296 105,885 14,000 12,742 (108,099) 31,797 (32,717) $ $ Capital Related Items(4) (4) 18 61 9 3 19 890 (134) 1,892 1,064 656 141 4,615 - $ $ $ $ (3,670) (16) 141 74 10,476 91,723 6,577 9,322 2,377 (99,722) 20,952 12,487 - Internal Service Funds(5) $ $ $ 12,487 $ (8,465) Reclassifications and Eliminations(6) 9 5 47 5 46 3 55 (72) 45 504 177 84 908 (771) 491 457 $ $ (586) (11) (54) (97) (278) (440) $ $ Statement of Activities (59,387) (1,837) (61,224) $ (332) (332) $ (296) (105,885) (14,000) (12,742) 108,099 (24,824) $ - $ 36,400 177 $ Long-Term Debt Transactions(7) $ $ $ $ 840 1,042 5,810 754 5,705 864 6,069 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 6,202 12,646 457 19,305 (9,038) (continued on next page) For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements 65 Table of Contents Notes to Financial Statements 66 For the Fiscal Year Ended June 30, 2014 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 Intergovernmental revenue Other receivable revenue $ $ (289) 846 134 412 (1,034) 876 945 $ (967) $ (947) (339) (2,362) (3,648) 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. 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) $ (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 expense Loss on disposal of capital assets Gain on early termination of capital lease $ $ 99,722 (9,918) (110,680) (77) 1 (20,952) 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) $ 12,487 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 adjust those funds by charging additional amounts to participating governmental activities and recording an amount due to/from the enterprise funds. $ Change in net position Internal payable to Enterprise Fund $ (148) (438) (586) (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/capital contributions - Governmental Funds Reduction in expenditures/expenses - Governmental Funds $ $ (7) (440) 440 - Repayment of bond principal is reported as an expenditure, and payments made to a bond refunding escrow is treated as an other financing 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 refunded bond escrow - funded by refunding bonds $ $ 59,387 108,099 167,486 Interest expense in the statement of activities differs from the amount reported in governmental funds because additional accrued and accreted interest was calculated for bonds and notes payable, and additional interest expense was recognized on the amortization of bond discount and premiums which are expended within the fund statements. Amortization of deferred charges on refundings Interest accretion and amortization Amortization of bond premium and discounts $ $ Bond and capital lease 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: Capital lease acquisitions Refunding bonds Long-Term capital-related debt Premium on bonds $ $ (1,687) (1) 3,525 1,837 (296) (105,885) (14,000) (12,742) (132,923) For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements 67 For the Fiscal Year Ended June 30, 2014 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 2013/14. The fiscal year 2013/14 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, and compensated absences. 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 Debt Service Stabilization 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 2013/14, 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 General Obligation Bond Debt Service Fund, Municipal Property Corporation Bond Debt Service Fund, Scottsdale Preserve Authority Bond Debt Service Fund and the Preserve Privilege Tax Special Revenue Fund exceeded their expenditure appropriations by $3,023,000, $1,839,000, $1,000 and $2,000, respectively. The additional expenditures incurred were funded by available fund balance or available revenues within the fund. C. Deficit Fund Equity The HOME Special Revenue Fund and Grants Special Revenue Fund had deficit ending fund balances of $1,000 and $400,000 respectively, caused by certain grant reimbursements not being available. Revenue accruals are not recognized in the current fiscal year due to the unavailability of the funds. These reimbursements due will be recognized as revenue when actually received. D. 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, 2014 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. Fund Balance Classifications 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, 2014 (In thousands) General Obligation Bond Debt Service General General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds FUND BALANCES Nonspendable Inventory Prepaid Items Total Nonspendable $ 263 3 266 $ - $ - $ - $ 263 3 266 City of Scottsdale, Arizona Restricted Property Tax for Debt Service Property Tax for Community Facility Districts MPC Funds for Debt Payments 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 Transaction Privilege Tax for Preserve Land Purchase and Improvements Federal Grants for CDBG Federal Grants for Section 8 Housing Transportation Tax for Transportation Capital Projects GO Bond Proceeds for Capital Improvements Stadium Surcharge Contributions for Stadium Capital Improvements Sales Tax Rebate for District Debt Service Stadium Surcharge for Debt Service Maricopa County Stadium District Contract for Debt Service State Tourism Authority Contract for Debt Service Total Restricted - 9,369 9,369 1,008 1,008 894 6 76 1,981 6 904 55 12,014 28,059 13 118 25,994 19,659 321 1,589 2,764 1,007 95,460 9,369 894 6 76 1,981 6 904 55 12,014 28,059 13 118 25,994 19,659 1,008 321 1,589 2,764 1,007 105,837 Committed General Government Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs Transit Occupancy Tax for Tourism Development Excise Tax Debt Reserve Tourism Development Capital Projects In Lieu Stormwater Fees for Drainage Improvements In Lieu Parking Fees for Parking Projects Total Committed - - 321 573 219 1,113 1,907 1,545 342 1,996 9,245 4,700 19,735 1,907 1,545 342 1,996 9,245 4,700 321 573 219 20,848 Assigned Capital Projects for Capital Improvements Total Assigned - - 7,362 7,362 - 7,362 7,362 Unassigned Total Fund Balances $ 52,354 52,620 $ 9,369 $ 9,483 $ (1,194) 114,001 $ 51,160 185,473 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, 2014: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits $ $ IV. Detailed Notes on All Funds A. Cash and Investments 37,510 4,978 4,613 47,101 Notes to Financial Statements E. For the Fiscal Year Ended June 30, 2014 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, Municipal Property Corporation, and Scottsdale Preserve Authority 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, 2014, the carrying amount of the City’s deposits was $261,215,859, and the bank balance was $261,967,290. The $751,431 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, 2014, in accordance with City policy, $500,000 of the City’s deposits was covered by federal depository insurance, $174,886,892 was collateralized by securities held by the City’s agent, and $86,580,398 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. City of Scottsdale, Arizona 71 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents 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. 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) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Commercial Paper Fair Value $ 103,005 81,840 69,112 2,021 5,995 Total Investments $ Less than 1 $ 40,929 37,122 28,326 5,995 261,973 $ 112,372 1-2 33,631 37,641 12,734 - $ $ $ 84,006 2-3 28,445 7,077 28,052 2,021 - $ 65,595 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). Presented below is the rating as of June 30, 2014, for each investment type: 72 Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Commercial Paper Total $ 103,005 81,840 69,112 2,021 5,995 Total Investments $ 261,973 A1 $ 4,479 - $ 4,479 A-1 $ 5,995 $ 5,995 A $ 11,453 - $ 11,453 A+ $ AA- 81,840 12,605 - $ 3,388 2,021 - Exempt from Disclosure $ 103,005 - $ 94,445 $ 5,409 $ 103,005 AA 14,048 - $ 8,263 - $ 14,876 - $ 14,048 $ 8,263 $ 14,876 AA+ $ AAA City of Scottsdale, Arizona Table of Contents The following is a listing by issuer of the City’s investments at June 30, 2014: (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 Berkshire Hathaway Inc Caterpillar Financial Coca-Cola Co Exxon Mobil General Electric Co IBM Corp JP Morgan Chase & Co Pepsico Inc Walt Disney Co Toyota Motor Credit Wal-Mart Stores Inc Wells Fargo and Company BNP Paribas Finance 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 Corporate Notes Corporate Notes Commercial Paper Market Value $ 103,005 31,346 50,494 2,021 6,551 7,893 6,069 2,458 6,381 3,389 6,055 5,523 5,713 4,479 3,281 2,740 2,425 6,155 5,995 Percent of Holdings 39.32% 11.97% 19.27% 0.77% 2.50% 3.01% 2.32% 0.94% 2.44% 1.29% 2.31% 2.11% 2.18% 1.71% 1.25% 1.05% 0.92% 2.35% 2.29% Total Investments $ 261,973 100.00% 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, 2014 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 $ 23 261,216 261,973 Total Cash and Investments $ 523,212 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 Crossroads East Dev Agreement Total Cash and Investments City of Scottsdale, Arizona $ 388,679 86,581 46,482 5 50 1,415 $ 523,212 73 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Investment income comprises the following for the year ended June 30, 2014 (in thousands): Net Interest and Dividends Net Decrease in the Fair Value of Investments $ 5,318 (3,080) Total Net Investment Income $ 2,238 The net decrease in the fair value of investments during fiscal year 2013/14 was $3,079,621. 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, 2014, 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 General Receivables Property Taxes and Penalties Property Court Subtotal Property Taxes and Penalties $ 819 44,518 45,337 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 $ General CIP Construction Capital Projects General Obligation Bond Debt Service $ 1,138 1,138 $ Total Governmental and Internal Service Funds Nonmajor and Other Funds - $ 81 81 $ 2,038 44,518 46,556 15,216 1,606 2,876 332 20,030 - - 4,047 770 55 1,155 6,027 19,263 770 1,606 2,931 332 1,155 26,057 - - 1,733 29,747 31,480 308 1,574 1,880 3,762 - 70 2,834 2,904 121 1,400 1,521 499 1,574 6,114 8,187 69,129 (36,105) 1,138 - 4,637 - 37,376 - 112,280 (36,105) 33,024 $ 1,138 $ 4,637 $ 37,376 $ 76,175 Business-Type Activities Enterprise Funds Water and Sewer Utility Receivables Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous $ Gross Receivable Less: Allowances for Uncollectibles Net Total Receivables 74 15,135 172 1,751 Airport $ 17,058 (39) $ 17,019 Solid Waste 14 12 4 266 $ 296 $ 296 1,814 11 125 Total Enterprise Fund $ 1,950 (5) $ 1,945 14 16,949 12 187 2,142 19,304 (44) $ 19,260 City of Scottsdale, Arizona Table of Contents $ Total C. 37,475 Unearned $ 9,761 1,308 $ 11,069 Capital Assets Capital asset activity for the year ended June 30, 2014, was as follows (in thousands): Governmental Activities Capital Assets, not being depreciated Land *Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 1,809,216 105,384 1,914,600 Increases $ Decreases 29,996 56,985 86,981 $ Ending Balance (56,304) (56,304) $ 1,839,212 106,065 1,945,277 Capital Assets, being depreciated **Buildings and Land Improvements **Streets and Storm Drains Vehicles Equipment Maintained by Fleet Machinery and Equipment Total Capital Assets, being depreciated 627,642 2,751,781 59,826 3,084 90,243 3,532,576 11,488 11,573 5,647 2,774 31,482 (15) (7,336) (403) (5,223) (12,977) 639,115 2,763,354 58,137 2,681 87,794 3,551,081 Less Accumulated depreciation for *Buildings and Land Improvements *Streets and Storm Drains Vehicles Equipment Maintained by Fleet Machinery and Equipment Total Accumulated depreciation 256,598 1,425,638 37,067 2,870 61,531 1,783,704 19,371 86,684 4,157 29 5,167 115,408 (12) (7,009) (403) (5,138) (12,562) 275,957 1,512,322 34,215 2,496 61,560 1,886,550 1,748,872 (83,926) (415) 1,664,531 Total Capital Assets, being depreciated, net: Governmental Activities Capital Assets, net $ 3,663,472 $ 3,055 $ Notes to Financial Statements Property Tax Court Library Privilege Tax Intergovernmental Other Unavailable $ 1,246 4,521 291 6,852 23,072 1,493 For the Fiscal Year Ended June 30, 2014 Governmental funds report deferred inflows in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned. At the end of the fiscal year, the various components of deferred inflows and unearned revenue reported in the governmental funds were as follows (in thousands): (56,719) $ 3,609,808 *The Construction in Progress had decreases of $45,834,027 for assets related to a Service Concessionaire Arrangement (SCA). The capitalized amounts have been included in the City's SCA asset classification per GASB 60. **The Buildings and Land Improvements and Streets & Storm Drains capital asset categories and accumulated depreciation were restated due to a prior period adjustment to reclassify a previous asset with a cost of $23,847,000 and accumulated depreciation of $66,000 from Buildings and Land Improvements to Streets & Storm Drains. City of Scottsdale, Arizona 75 For the Fiscal Year Ended June 30, 2014 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 $ 54,560 87,171 38,341 180,072 Increases $ Decreases 13 3,968 3,981 $ Ending Balance (5,752) (32,152) (37,904) $ 48,821 87,171 10,157 146,149 Capital Assets, being depreciated Water System Sewer System Buildings and Land Improvements *Machinery and Equipment *'Vehicles Furniture, Fixtures, and Office Equipment Total Capital Assets, being depreciated 1,118,997 557,751 32,103 21,157 813 1,730,821 36,201 16,970 2,392 830 56,393 (1,054) (1,344) (298) (2,696) 1,154,144 574,721 30,759 23,251 830 813 1,784,518 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements *Machinery and Equipment *'Vehicles Furniture, Fixtures, and Office Equipment Total Accumulated depreciation 332,933 155,133 13,664 8,003 684 510,417 30,479 14,981 1,145 1,101 631 35 48,372 (808) (921) (243) (1,972) 362,604 170,114 13,888 8,861 631 719 556,817 1,220,404 8,021 (724) 1,227,701 Total Capital Assets, being depreciated, net: Business-Type Activities Capital Assets, net $ 1,400,476 $ 12,002 $ (38,628) $ 1,373,850 * Assets were transferred from Internal Services to Business-Type which had cost of $846,000 and had accumulated depreciation of $605,000. During fiscal year 2013/14, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $2,126,612. Total interest expense in this fund before capitalization was $15,761,513. 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 $ 56 6,015 88,678 4,684 75 8,367 2,805 4,728 $ 115,408 $ 46,421 1,095 251 $ 47,767 Business-Type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-Type Activities 76 City of Scottsdale, Arizona Table of Contents Capital Project Program Classification Aviation Drainage and Flood Control Fire Protection Municipal Facilities Neighborhood and Community Parks Police Preservation Streets Technology Traffic Transit Wastewater Water Spent to Date $ 3,481 15,067 83 88 23,702 23 18,803 3,667 28,900 732 1,496 13,541 3,395 3,244 $ Total Construction Commitments Governmental Activities: General CIP Construction Capital Project Fund Nonmajor Governmental Funds Internal Service Funds $ Total Governmental Activities Business-Type Activities: Water & Sewer Utility Airport Solid Waste Total Business-Type Activities $ Total Construction Commitments D. 116,222 61,270 44,739 56 Commitment $ 325 2,134 5 570 18,513 39 1,812 902 1,905 65 547 5,970 2,145 3,115 $ 38,047 $ 26,619 5,458 255 106,065 32,332 6,639 3,481 37 5,260 325 130 10,157 5,715 116,222 Notes to Financial Statements The City has active construction projects as of June 30, 2014. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands): For the Fiscal Year Ended June 30, 2014 Construction Commitments $ 38,047 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, 2014, is as follows: Receivable Fund (in thousands) General Fund Amount $ 93 Payable Fund (in thousands) Nonmajor Governmental Funds Amount $ 93 The HOME Special Revenue Fund had a deficit cash balance of $92,996 due to grants being received on a reimbursement basis. City of Scottsdale, Arizona 77 For the Fiscal Year Ended June 30, 2014 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) Transfers Out Governmental Funds General Debt Service - General Obligation Bond Capital Projects - General CIP Construction Nonmajor Governmental Funds Total Governmental Funds $ Enterprise Funds Water and Sewer Utility Airport Solid Waste Total Enterprise Funds Internal Service Funds Total Transfers E. $ 19,149 491 63,056 82,696 Transfers In $ 12,512 21,976 19,889 35,292 89,669 7,370 5 101 7,476 520 754 1,274 771 - 90,943 $ 90,943 Leases Operating Leases City as Lessee The City, as a lessee, has entered into lease agreements involving office space, park equipment, vehicles, and a distributed antenna system. Payments relating to these leases totaled $619,249, of which $471,407 was minimum and $147,842 was contingent. The contingent payments were a percentage of the net revenues generated by the park equipment. On September 24, 2013, the City entered into a new agreement that supersedes the previous agreement regarding an office space lease. The new two year agreement does not include a payment increase prior to its scheduled termination date of September 30, 2015. The lease may be renewed by the City for an additional year upon the expiration of the initial lease term. If the City elects to renew the lease, the escalation clause in the lease agreement stipulates that the monthly payment would increase by the change in the United States Consumer Price Index for All Urban Consumers, U.S. City Average, All Items from the inception date of the lease to the renewal date of the lease. 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 $ 54 18 6 6 7 2 93 $ 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, 2014, are as follows (in thousands): Fiscal Year Ending June 30, 2015 2016 2017 2018 2019 Thereafter Total $ $ 2,681 2,596 2,552 2,449 2,352 81,735 94,365 Notes to Financial Statements Fiscal Year Ending June 30, 2015 2016 2017 2018 2019 2020 Total For the Fiscal Year Ended June 30, 2014 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 $1,584,510 for the fiscal year ended June 30, 2014. A summary of the assets leased to third parties under the City’s operating lease agreements at June 30, 2014, is as follows (in thousands): Cost Less: Accumulated Depreciation Carrying Value $ $ 77,832 (4,070) 73,762 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 $28,286. Current year amortization expense was $21,214. City of Scottsdale, Arizona 79 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents The City has entered into a lease agreement as lessee for financing the acquisition of printing and imaging equipment for its administrative operations. This 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 $296,434, less accumulated amortization of $29,643. Current year amortization expense was $29,643. 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 $37,788. Current year amortization expense was $26,674. The present value of net minimum future lease payments under capital lease agreements are as follows (in thousands): Fiscal Year Ending June 30, 2015 2016 2017 2018 2019 Less: Imputed Interest Total $ $ 112 81 65 66 33 (28) 329 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, 2014, is $1,439,286. The City has also provided consideration in the form of land improvements with a book value of $10,501,827 as of June 30, 2013, upon implementation of GASB Statement No. 60 and an additional $45,834,027 in fiscal year ending June 30, 2014. These improvements were reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $55,874,527 at yearend 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, 2014, is $1,551,438. The City also provided consideration in the form of land improvements with a book value of $10,126,752 as of June 30, 2013, upon implementation of GASB Statement No. 60. These improvements were reclassified from capital assets to an intangible asset. The City has recognized an intangible asset (net of accumulated amortization) in the amount of $11,147,407 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, 2014. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2014. 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, 2014, 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, 2014, the City had $298,475,000 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 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, 2014 G. The City has pledged to repay $584,900,322 in MPC bonds issued in 2004 through 2010, payable through 2036, with pledged revenues that include transient occupancy tax. The coverage ratio (revenues to debt service) for 2014 for these bonds is 4.82. The City issued $87,735,000 in MPC bonds in 2010 through 2014, payable through 2033, with pledged revenues that exclude the transient occupancy tax. The coverage ratio (revenues to debt service) for 2014 for these bonds is 4.45. The total principal and interest remaining to be paid on all MPC bonds is $723,242,938. Principal and interest paid for the current year was $41,193,920. Total excise tax collections (including transient occupancy taxes) for the current year that are pledged for MPC bonds issued before July 1, 2010 was $198,679,000. Total excise tax collections (excluding transient occupancy taxes) for the current year that are pledged for bonds issued after July 1, 2010 was $183,376,000. 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. City of Scottsdale, Arizona 81 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents 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 2014 is 5.05. The total principal and interest remaining to be paid on the bonds is $62,646,850. Principal and interest paid for the current year and total sales tax were $6,468,413 and $32,655,000, respectively. 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, 2014, the funds restricted for this purpose were $37,509,624. 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 2014 is 15.93. The total principal and interest remaining to be paid on the bonds is $41,116,187. Principal and interest for the current year and total customer net revenues were $4,978,138 and $79,314,000, respectively. 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. 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. 82 City of Scottsdale, Arizona Table of Contents General Obligation Bonds Bonds Outstanding (in thousands) 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. $ 14,685 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. 63,085 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. On May 7, 2014, $68,500,000 due 2017 through 2023 were refunded. Original issue amount $125,000,000. 25,250 2005B Preservation Bonds (issued December 1, 2005) due in annual installments of $775,000 to $1,575,000 through July 1, 2024; interest at 3.5 percent to 5 percent.On May 7, 2014, $9,175,000 due 2017 through 2023 were refunded. Original issue amount $20,000,000. 3,725 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. 93,575 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. 17,075 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. 46,400 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. 20,260 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. 30,295 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. 82,565 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 2014 Preservation Bond (issued May 7, 2014) due in annual installments of $465,000 to $945,000 through July 1, 2034; interest at 1.75 percent to 4 percent. Original issue amount $14,000,000. 14,000 2014 Refunding Bonds (issued May 7, 2014) due in annual installments of $3,845,000 to $12,230,000 through July 1, 2023; interest at 2 percent to 5 percent. Original issue amount $83,150,000. 83,150 Total General Obligation Bonds Outstanding $ Notes to Financial Statements Classified in Governmental Activities on the Government-wide Financial Statements: For the Fiscal Year Ended June 30, 2014 Bonds payable at June 30, 2014, are comprised of the following: 619,065 Some of the above General Obligation Bonds are paid from the .2 percent and .15 percent Preservation Sales Taxes. City of Scottsdale, Arizona 83 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Bonds Outstanding (in thousands) 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. On May 29, 2014, $2,610,000 due 2018 through 2019 were refunded. Original issue amount $40,760,000. 2,265 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. 23,170 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. 18,200 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. On May 29, 2014, $4,385,000 due 2018 through 2027 were refunded. Original issue amount $10,000,000. 3,330 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. On May 29, 2014, $16,725,000 due 2018 through 2027 were refunded. Original issue amount $32,500,000. 12,775 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. 25,465 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. 1,395 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. 36,055 2014 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued May 29, 2014) due in annual installments of $1,730,000 to $3,040,000 through July 1, 2027; interest at 1.75 percent to 5 percent. Original issue amount $22,735,000. 22,735 Total Municipal Property Corporation Bonds Outstanding 84 $ $ 200,840 City of Scottsdale, Arizona Table of Contents $ 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. 6,465 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. 9,185 Total Scottsdale Preserve Authority Bonds 48,505 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. 13,914 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, 2014 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. 1,475 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. 3,445 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. 13,315 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. 9,460 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. 1,700 Total Community Facilities Districts General Obligation Bonds Outstanding Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona $ 29,395 911,719 85 For the Fiscal Year Ended June 30, 2014 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. 30,315 Total Water and Sewer Revenue Bonds Outstanding 32,275 Municipal Property Corporation Bonds 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, 2016; interest at 5 percent. On November 29, 2006, $67,455,000 due 2017 through 2030 were refunded. Original issue amount $88,360,000. 6,105 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. 90,100 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. 74,080 Total Municipal Property Corporation Bonds Outstanding 280,795 Total Bonds Payable Recorded in Business-Type Activities Total Long-Term Bonds Payable 86 1,960 313,070 $ 1,224,789 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 $ 965,570,113 Less General Obligation (553,120,909) 20% Bonds Outstanding 6% Constitutional Limit Less General Obligation 6% Bonds Outstanding Available 20% Limitation Borrowing Capacity Available 6% Limitation Borrowing Capacity $ 412,449,204 General Obligation Bonds Issued for All Other Purposes $ 289,671,034 (65,944,091) $ 223,726,943 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, 2014: For the Fiscal Year Ended June 30, 2014 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, 2014. 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 $83,150,000 of General Obligation Refunding Bonds, Series 2014 (current and advance refunding) dated May 7, 2014, with an average interest rate of 3.84% to refund $83,150,000 of Series 2004 and Series 2005 Bonds with an average interest rate of 4.49%. The City will reduce its total debt service payments over the next 10 years by approximately $5,014,923 and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $4,954,706. City of Scottsdale, Arizona 87 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents The Scottsdale MPC issued $22,735,000 of Excise Tax Refunding Bonds, Series 2014 (current and advance refunding) dated May 29, 2014, with an average interest rate of 3.95% to refund $23,720,000 of Series 2004A, Series 2006A and 2006B Bonds with an average interest rate of 4.32%. The City will reduce its total debt service payments over the next 14 years by approximately $2,521,596 and obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $2,191,499. The following table reflects refunded debt outstanding at June 30, 2014, net of any amounts to be paid or retired by the trustee on July 1, 2014. Refunded in Prior Years (in thousands) 2005D MPC Excise Tax Revenue Bonds 2005E MPC Excise Tax Revenue Bonds 2006A MPC Excise Tax Revenue Bonds 2006B MPC Excise Tax Revenue Bonds 2005 Various Purpose GO Bonds $ 25,925 67,455 4,385 16,725 77,675 $ 192,165 Changes in Long-Term Liabilities The following is a summary of changes in long-term liabilities reported in the government-wide financial statements for the year ended June 30, 2014 (in thousands): Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Certificates of Participation Communities Facilities Districts General Obligation Bonds Add Issuance Premiums Total Bonds Payable Contracts Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Net Other Postemployment Benefit Governmental Activities Long-Term Liabilities 88 Beginning Balance $ $ 639,135 207,654 52,465 16,003 31,885 44,182 991,324 2,570 183 3,144 12,882 23,906 288 1,034,297 Additional Obligations, Interest Accretion, and Net Increases $ $ 97,150 22,735 12,742 132,627 296 31,813 11,415 339 176,490 Current Maturities, Retirements, and Net Decreases $ $ (117,220) (29,549) (3,960) (2,089) (2,490) (4,738) (160,046) (2,570) (150) (154) (29,032) (10,440) (202,392) Ending Balance $ $ 619,065 200,840 48,505 13,914 29,395 52,186 963,905 329 2,990 15,663 24,881 627 1,008,395 Amounts Due Within One Year $ $ 32,155 5,920 4,140 2,152 2,590 46,957 100 154 6,589 11,144 64,944 City of Scottsdale, Arizona Table of Contents Business-Type Activities Long-Term Liabilities City of Scottsdale, Arizona $ $ 35,515 290,555 19,422 345,492 3,007 348,499 $ $ 1,319 1,319 Current Maturities, Retirements, and Net Decreases $ $ (3,240) (9,760) (1,327) (14,327) (1,241) (15,568) Ending Balance $ $ 32,275 280,795 18,095 331,165 3,085 334,250 Amounts Due Within One Year $ $ 2,940 10,240 13,180 1,336 14,516 Notes to Financial Statements Business-Type Activities Bonds Payable Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Issuance Premiums Total Bonds Payable Compensated Absences Beginning Balance Additional Obligations, Interest Accretion and Net Increases For the Fiscal Year Ended June 30, 2014 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, 2014, $361,000 of accrued compensated absences is included in the above amount. For the governmental activities, the General Fund, Special Revenue Funds, and Capital Projects Funds generally liquidate accrued compensated absences. The compensated absences presented in this note are net of the current liability of $302,000 in the governmental funds and $0 in the Internal Service funds. 89 For the Fiscal Year Ended June 30, 2014 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, 2014. Governmental Activities (in thousands) Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 Total Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2039 Capital Appreciation ** General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation Facilities 20% Limitation Principal Interest Total $ 20,233 $ 22,189 $ 42,422 18,495 20,928 39,423 25,349 20,095 45,444 28,208 19,033 47,241 29,436 18,000 47,436 201,765 67,523 269,288 151,720 28,748 180,468 77,915 8,076 85,991 General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 11,922 $ 2,431 $ 14,353 16,275 1,847 18,122 11,631 1,162 12,793 11,697 806 12,503 10,469 437 10,906 3,950 178 4,128 - Total General Obligation Bonds Principal Interest Total $ 32,155 $ 24,620 $ 56,775 34,770 22,775 57,545 36,980 21,257 58,237 39,905 19,839 59,744 39,905 18,437 58,342 205,715 67,701 273,416 151,720 28,748 180,468 77,915 8,076 85,991 $ 553,121 $ 204,592 $ $ $ 619,065 $ 211,453 $ 757,713 Municipal Property Corporation Bonds Principal Interest Total $ 5,920 $ 9,118 $ 15,038 7,630 8,771 16,401 9,016 8,483 17,499 9,354 9,008 18,362 11,442 9,322 20,764 49,133 32,184 81,317 55,240 17,504 72,744 43,860 6,100 49,960 3,625 163 3,788 5,620 (5,620) 65,944 $ 6,861 $ 72,805 Scottsdale Preserve Authority Excise Tax Revenue Bonds Principal Interest Total $ 4,140 $ 2,330 $ 6,470 4,340 2,143 6,483 4,175 1,936 6,111 4,365 1,760 6,125 4,540 1,602 6,142 26,945 4,371 31,316 - - - - - Capital Leases Principal Interest Total $ 100 $ 12 $ 112 73 8 81 60 5 65 63 3 66 33 33 - - Total $ 200,840 $ 95,033 $ 295,873 $ 48,505 $ 14,142 $ 62,647 $ 329 $ 28 $ **For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 Total Certificates of Participation Principal Interest Total $ 2,152 $ 397 $ 2,549 2,216 333 2,549 2,282 267 2,549 2,350 198 2,548 2,421 128 2,549 2,493 55 2,548 - Community Facilities Districts General Obligation Bonds Principal Interest Total $ 2,590 $ 1,037 $ 3,627 2,680 949 3,629 2,770 859 3,629 2,555 764 3,319 2,475 680 3,155 10,735 2,189 12,924 4,740 718 5,458 850 105 955 $ $ 13,914 $ 1,378 $ 15,292 29,395 $ 7,301 $ 830,518 357 36,696 (continued) 90 City of Scottsdale, Arizona Table of Contents Total $ - - 2,990 $ 5,994 $ 8,984 Total Principal Interest Total $ 47,211 $ 37,642 $ 84,853 51,863 35,121 86,984 55,437 32,963 88,400 58,746 31,744 90,490 60,969 30,357 91,326 295,790 107,716 403,506 212,469 48,734 261,203 123,234 16,210 139,444 3,699 462 4,161 $ 5,620 (5,620) - 915,038 $ 335,329 $ 1,250,367 Business-Type Activities (in thousands) Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2039 Total Water and Sewer Revenue Bonds Principal Interest Total $ 2,940 $ 1,599 $ 4,539 3,055 1,487 4,542 3,195 1,354 4,549 3,370 1,195 4,565 3,540 1,026 4,566 16,175 2,180 18,355 - Municipal Property Corporation Bonds Principal Interest Total $ 10,240 $ 13,540 $ 23,780 11,115 13,034 24,149 11,970 12,485 24,455 12,670 11,896 24,566 13,375 11,273 24,648 79,200 45,779 124,979 73,025 27,223 100,248 54,390 10,215 64,605 14,810 1,130 15,940 $ $ 280,795 $ 146,575 $ 427,370 32,275 $ 8,841 $ 41,116 Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2039 Total Principal Interest Total $ 13,180 $ 15,139 $ 28,319 14,170 14,521 28,691 15,165 13,839 29,004 16,040 13,091 29,131 16,915 12,299 29,214 95,375 47,959 143,334 73,025 27,223 100,248 54,390 10,215 64,605 14,810 1,130 15,940 Total $ 313,070 $ 155,416 $ 468,486 City of Scottsdale, Arizona Notes to Financial Statements Fiscal Year 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2034 2035-2039 Capital Appreciation Service Concession Arrangements Principal Interest Total $ 154 $ 128 $ 282 154 142 296 154 156 310 154 172 326 153 188 341 769 1,216 1,985 769 1,764 2,533 609 1,929 2,538 74 299 373 For the Fiscal Year Ended June 30, 2014 Governmental Activities (continued) (in thousands) 91 For the Fiscal Year Ended June 30, 2014 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 and aviation premises liability, self-insured benefits, property, and workers compensation. Public liability includes public officials’ errors and omissions, law enforcement liability, 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 $1,000,000 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, 2014, the general liability claims payable totaled $14,216,195 and the self-insured benefits claims payable totaled $1,447,000. The City began to administer all self-insured health and dental plans in January of 2004. Years Ended June 30 (in thousands) 2014 2013 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 12,882 31,813 (29,032) $ 10,611 31,786 (29,515) Claims Payable, June 30 $ 15,663 $ 12,882 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 $4,500 up to $5,000,000 are probable, and $20,000 up to $50,000,000 are reasonably possible. Reasonably possible is defined that the chance of the loss occurring is more than remote, but less than probable. The City is self-insured for the first $2,000,000 of public liability; coverage in excess of 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, 2014, a commercial building permit has not been issued. For the Fiscal Year Ended June 30, 2014 In January 2013, the City entered into a settlement agreement with Scottsdale Fashion Square LLC 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 development 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, 2014, approximately $395,000 in fee waivers had been applied. 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, 2014, is $14,923,669. C. 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, 2013, (the latest audited information available from SROG), the City’s net investment in SROG was $110,541,000. SROG’s net cash operating expenses for the year ended June 30, 2013, were $38,667,316, of which the City’s share was $3,819,710, or 9.9 percent. For the year ended June 30, 2014, the City paid $677,216 for SROG capital contributions and $3,195,608 for SROG operating expenses, including adjustments to the operating and replacement reserves and prior year settlement. City of Scottsdale, Arizona 93 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2013, 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. D. 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 active City wells and three future wells. The City immediately shut down the affected wells. Following an investigation by the Environmental Protection Agency (EPA), the North Indian Bend Wash Site which includes the five wells above 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, in conjunction with the State of Arizona, directs the cleanup of the North Indian Bend Wash (NIBW) Site that encompasses a groundwater contamination plume in Scottsdale. Following its investigation, the EPA identified three companies, Motorola Solutions (MSI), Inc., Siemens Corporation, and GlaxoSmithKline 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 affected wells. 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. An Amended Consent Decree was signed by all parties in 2003 to capture additional voluntary and required work at the NIBW Site. No additional obligations were identified for the City. To facilitate groundwater sustainability and plume management, in 2012 the City voluntarily entered into an agreement with MSI to operate an additional groundwater treatment facility that would be designed and constructed to deliver treated water to the Chaparral Water Treatment Plant (CWTP). The North Indian Bend Wash Granular Activated Carbon Treatment Facility (NGTF) was completed in late 2013 and began delivery of water to the CWTP in August 2014. The facility is a granular activated carbon plant that is owned by MSI but operated and maintained by the City to treat a well owned by SRP. The type of treatment chosen was due to the lower concentration of contaminants in the well. All costs are reimbursed to the City by MSI. 94 City of Scottsdale, Arizona Table of Contents E. 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. 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 2013/14 reimbursable outlays for operating and monitoring the CGTF were $534,716 and for the NGTF were $232,973. 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, 2014 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 CGTF liability, seven projected cash flows, based on the prior seven years of historical costs and weighted equally, were used to calculate an average annual cost. In order to estimate the NGTF liability, a partial projected cash flow, based on the prior seven months of historical costs were annualized and weighted equally. These average costs were then projected over the remaining remediation period of 60 years for CGTF and the NGTF. It is estimated that future remediation will be required for approximately 50-70 years at each site; this estimate is reviewed and revised every five years with the next review in 2016. F. Effect of Implementation of Future Accounting Standard 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. City of Scottsdale, Arizona 95 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents G. 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. 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, 2014, 2013, and 2012, were 11.54% (11.30 percent retirement and .24 percent long-term disability), 11.14 percent (10.90 percent retirement and .24 percent long-term disability), and 10.74 percent (10.50 percent retirement and .24 percent long-term disability), respectively, for both employers and employees. The City’s actual contributions to the System for the years ending June 30, 2014, 2013, and 2012, were $11,342,210, $10,757,059, and $10,349,764, respectively, equal to the required contributions for each year. 96 City of Scottsdale, Arizona Table of Contents 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. Funding Policy The System for both police and fire is funded through a member contribution of 10.35 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, 2014, was 26.44 percent of annual covered payroll. Contribution rates for police were 23.90 percent and 20.50 percent in 2013 and 2012, respectively. The City’s contribution rate for fire for the fiscal year ended June 30, 2014, was 12.14 percent of annual covered payroll. The City’s contribution rates for fire were 12.45 percent and 10.40 percent in 2013 and 2012, respectively. City of Scottsdale, Arizona Notes to Financial Statements Plan Description For the Fiscal Year Ended June 30, 2014 Public Safety Personnel Retirement System 97 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Annual Pension Cost For fiscal year ended June 30, 2014, the City’s annual pension costs were $8,283,899 for police and $2,330,469 for fire, equal to the City’s required and actual contributions. The required contributions were determined as part of the June 30, 2013, actuarial valuations using the entry age normal method. Three-Year Trend Information for PSPRS (Police) (dollars in thousands) Fiscal Year Ending 2011 2012 2013 Annual Pension Cost (APC) $ 5,938 6,328 7,302 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation $ - Three-Year Trend Information for PSPRS (Fire) (dollars in thousands) Fiscal Year Ending 2011 2012 2013 Annual Pension Cost (APC) $ 1,726 1,806 2,202 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 7.85 percent per year compounded annually. The assumptions also include projected salary increases from 4.5 to 8.5 percent per year compounded annually, with 4.5 percent attributable to inflation and 0 percent to 4.0 percent attributable to seniority/merit and other across-the-board factors. 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, 23 years remaining as of June 30, 2013. 98 City of Scottsdale, Arizona Table of Contents Public Safety Personnel Retirement System (Police) Funded Status for Pension and Health Insurance (dollars in thousands) June 30, 2013 Actuarial Accrued Liability (AAL) Retired members and beneficiaries Former members with vested benefits Active members DROP members $ Total 104,575 1,201 90,505 27,407 223,688 Valuation Assets 144,927 Unfunded Actuarial Accrued Liability 78,761 Stabilization Reserve - Net Unfunded Actuarial Liability $ Percent Funded 78,761 Notes to Financial Statements The funded status of each plan (Police and Fire) as of June 30, 2013, the most recent actuarial valuation dates, is as follows: For the Fiscal Year Ended June 30, 2014 Funded Status 64.8% Annual Covered Payroll $ Unfunded AAL as a Percentage of Covered Payroll 30,601 257.4% Public Safety Personnel Retirement System (Fire) Funded Status Pension and Health Insurance (dollars in thousands) June 30, 2013 Actuarial Accrued Liability (AAL) Retired members and beneficiaries Former members with vested benefits Active members DROP members $ Total 5,301 17 36,625 1,900 43,843 Valuation Assets 50,368 Unfunded Actuarial Accrued Liability (6,525) Stabilization Reserve Net Unfunded Actuarial Liability 5,749 $ Percent Funded Annual Covered Payroll Unfunded AAL as a Percentage of Covered Payroll City of Scottsdale, Arizona (776) 114.9% $ 17,980 0.00% 99 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Elected Officials’ Retirement Plan Plan Description The City’s Mayor and Council participate in the Elected Officials’ Retirement Plan (EORP), a 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 13.0 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, 2014, 2013, and 2012, were 23.50 percent, 36.44 percent, and 32.99 percent, respectively. The City’s contributions to EORP for the years ending June 30, 2014, 2013, and 2012, were $46,163, $52,788, and $47,505, respectively, equal to the required contributions for each year. H. Other Postemployment Benefits In addition to the pension benefits described in the previous section (G), the City provides an option of post-retirement health care benefits, in accordance with Chapter 14 of the City Code. At retirement, employees with medical leave accumulated prior to September 6, 1976, are eligible for payment of medical leave at 100 percent cash value at current rate of pay. Employees hired before July 1, 1982, 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, 2014, was $14,145,144. 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, 2014, 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, and d) traditional unit credit cost method based on participant data as of January 1, 2014. 100 City of Scottsdale, Arizona Table of Contents The cost of postemployment healthcare benefits, from an accrual accounting perspective, should be associated with the periods in which the future costs are earned rather than in the future years when they will be paid (similar to the cost of pension benefits). 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 Notes to Financial Statements Postemployment Benefits Other Than Pensions For the Fiscal Year Ended June 30, 2014 I. 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, 2014, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Terminated Employees Eligible for Benefits, But Not Yet Enrolled Active Employees Total Participating Employers 31 659 690 1 Funding Policy 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, 2014, 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, 2014, retirees contributed $216,566 and the City contributed $113,627 (explicit subsidy). City of Scottsdale, Arizona 101 For the Fiscal Year Ended June 30, 2014 Notes to Financial Statements Table of Contents Annual OPEB costs and Net OPEB Obligation The City’s annual other postemployment benefit (OPEB) cost for the 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 the plan are as follows at June 30, 2014 (dollar amounts in thousands): Annual Required Contribution Interest on Net OPEB Obligation (Asset) Adjustment to Annual Required Contribution Annual OPEB Cost Contributions Made Change in Net OPEB Obligation Net OPEB Obligation - Beginning of year Net OPEB Obligation - End of year $ $ 455 12 (14) 453 (114) 339 288 627 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 2012 2013 2014 Annual OPEB Cost $ 285 636 453 Employer Contributions $ 870 186 114 Percentage of OPEB Cost Contributed 305.3% 29.2% 25.2% Net OPEB Obligation (Asset) $ (162) 288 627 Funded Status The funded status of the plan as of June 30, 2014, 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 4,148 4,148 0% $ 45,422 9.1% 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 106. 102 City of Scottsdale, Arizona Table of Contents Actuarial Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method July 1, 2013 Projected Unit Credit Level Percentage of Payroll 23 years, Closed N/A Actuarial Assumptions Investment Rate of Return Inflation Rate Projected Salary Increases Healthcare Inflation Rate 4%* 3% 2.8% 8.5% initial rate, 5% ultimate rate Notes to Financial Statements 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: For the Fiscal Year Ended June 30, 2014 Actuarial Methods and Assumptions *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 years subsidies are recorded as revenue in the year received and are not recognized as a reduction to the actuarial accrued liability. City of Scottsdale, Arizona 103 Required Supplementary Information For the Fiscal Year Ended June 30, 2014 Table of Contents Funding Progress 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: Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Pension (dollars in thousands) Actuarial Valuation June 30 2011 2012 2013 (2) (1) (3) (4) (5) Actuarial Actuarial Value Accrued Liability Percent Funded Unfunded AAL Annual Covered of Assets (1)/(2) (2)-(1) Payroll (AAL) $ 131,468 $ 187,471 70.1% $ 56,003 $ 30,945 139,915 209,389 66.8% 69,474 32,276 144,927 218,281 66.4% 73,354 30,601 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 181.0% 215.2% 239.7% Public Safety Personnel Retirement System (Police) Schedule of Funding Progress Health Insurance (dollars in thousands) Actuarial Valuation June 30 2011 2012 2013 104 (2) (1) (3) (4) (5) Actuarial Actuarial Value Accrued Liability Percent Funded Unfunded AAL Annual Covered of Assets (1)/(2) (2)-(1) Payroll (AAL) $ - $ 5,725 0.0% $ 5,725 $ 30,945 5,485 0.0% 5,485 32,276 5,407 0.0% 5,407 30,601 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 18.5% 17.0% 17.7% City of Scottsdale, Arizona Table of Contents Actuarial Valuation June 30 2011 2012 2013 (2) (1) (3) (4) (5) Actuarial Actuarial Value Accrued Liability Percent Funded Unfunded AAL Annual Covered of Assets (1)/(2) (2)-(1) Payroll (AAL) $ 32,871 $ 28,467 115.5% $ (4,404) $ 17,025 44,721 37,670 118.7% (7,051) 18,203 50,368 42,567 118.3% (7,801) 17,980 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 0.0% 0.0% 0.0% Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Health Insurance (dollars in thousands) Actuarial Valuation June 30 2011 2012 2013 (2) (1) (3) (4) (5) Actuarial Actuarial Value Accrued Liability Percent Funded Unfunded AAL Annual Covered of Assets (1)/(2) (2)-(1) Payroll (AAL) $ - $ 886 0.0% $ 886 $ 17,025 1,059 0.0% 1,059 18,203 1,276 0.0% 1,276 17,980 City of Scottsdale, Arizona (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 5.2% 5.8% 7.1% Required Supplementary Information (dollars in thousands) For the Fiscal Year Ended June 30, 2014 Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Pension 105 Required Supplementary Information For the Fiscal Year Ended June 30, 2014 Table of Contents 106 Other Post-Employment Benefit Plan Schedule of Funding Progress Actuarial Valuation July 1 2011 2012 2013 (1) Actuarial Value of Assets $ - (dollars in thousands) (2) (6) Projected Unit Unfunded AAL Credit Cost as a Percentage (3) (4) (5) Actuarial of Covered Accrued Liability Percent Funded Unfunded AAL Annual Covered Payroll (1)/(2) (2)-(1) Payroll (AAL) (4)/(5) $ 3,834 0.0% $ 3,834 $ 131,342 2.9% 5,754 0.0% 5,754 42,805 13.4% 4,148 0.0% 4,148 45,422 9.1% Other Post-Employment Benefit Plan Schedule of Employer Contribution (dollars in thousands) Actuarial Valuation July 1 2011 2012 2013 (2) (1) Annual Required Employer Contribution Contributions (ARC) $ 870 $ 287 186 635 114 455 (3) Percent Contributed (1)/(2) 303.1% 29.3% 25.1% City of Scottsdale, Arizona 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. City of Scottsdale, Arizona 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 (CFD) Funds Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD 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. 107 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. Municipal Property Corporation Debt Service Fund This fund accounts for the principal and interest requirements of the City’s Municipal Property Corporation (MPC) bonds. Financing is provided primarily by transaction privilege tax. Debt Service Stabilization Fund This fund accounts for revenues received for future debt payments from the Arizona Sports and Tourism Authority, the Maricopa County Stadium District, the San Francisco Giants and funds committed by the City Council to be used for repayment of debt. 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 the proceeds and interest 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 (CFD) Funds Scottsdale Mountain CFD McDowell Mountain Ranch CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD Preserve Privilege Tax Capital Projects Fund Accounts for the resources used to acquire and improve land within the McDowell Sonoran Preserve. Resources are provided by the proceeds from the sale of bonds and the .15 percent 2004-approved Preserve Privilege Tax. 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. Community Facilities Districts (CFD) Funds McDowell Mountain Ranch CFD 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). 108 City of Scottsdale, Arizona Table of Contents Combining Balance Sheet Nonmajor Governmental Funds June 30, 2014 (in thousands) Special Revenue Funds 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, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Unearned Revenue Intergovernmental Other Guaranty and Other Deposits Total Liabilities $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Committed Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances City of Scottsdale, Arizona $ 57,810 99 42 4,047 770 55 2 1,155 7,041 635 578 72,234 2,274 472 93 - Debt Service Funds $ $ $ 9,000 19,190 79 19,882 48,151 141 6,019 12,280 Capital Projects Funds Total Nonmajor Governmental Funds $ $ $ $ 46,654 79 1,113 1,076 500 49,422 2,184 25 - $ $ 113,464 19,289 121 4,047 770 55 81 1,155 28,036 1,711 1,078 169,807 4,599 497 93 6,019 12,280 9,761 897 5 13,502 18,440 2,209 9,761 897 5 34,151 1,564 18,531 1,560 21,655 15,066 36,971 3,769 55,806 43,327 15,035 (1,194) 57,168 6,480 4,700 11,180 45,653 45,653 95,460 19,735 (1,194) 114,001 72,234 $ 48,151 $ 49,422 $ 169,807 109 Table of Contents Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2014 (in thousands) Special Revenue Funds 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 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 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 Outlay Total Expenditures $ $ $ Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning, Restated Fund Balances - Ending 110 $ 101 50,771 15,303 257 Debt Service Funds $ Total Nonmajor Governmental Funds Capital Projects Funds 3,176 - $ - $ 3,277 50,771 15,303 257 12,268 641 30 - - 12,268 641 30 1,743 - - 1,743 166 961 504 1,969 349 (206) 147 - 555 (321) 166 961 504 2,116 904 (527) 6,935 372 4,766 400 1,886 621 546 47 100,430 $ 1,585 4,908 $ 3,702 11,676 6 3 15,621 $ 10,637 372 18,027 400 1,892 621 546 50 120,959 $ - $ - $ 1,791 113 13,685 17,696 2,152 11,766 576 - - 1,791 113 13,685 17,696 2,152 11,766 576 47,779 14,891 12,631 287 27,809 35,120 35,120 14,891 12,631 287 35,120 110,708 52,651 (22,901) (19,499) 10,251 1,538 (50,194) - 21,249 (1,715) 22,735 (48,656) 2,659 (22,453) 22,475 12,505 (11,147) 13,739 15,097 35,292 (63,056) 22,735 13,739 2,659 (22,453) (11,084) 3,995 (426) (4,402) (833) 53,173 57,168 $ 11,606 11,180 $ 50,055 45,653 $ 114,834 114,001 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2014 (in thousands) Community Development Block Grant Highway User Fuel Tax ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets $ $ 10,756 1,445 1,155 46 13,402 $ $ HOME 642 63 115 29 849 $ $ Grants 93 93 $ $ Section 8 Housing 757 427 17 1,201 $ $ 146 3 149 Preserve Privilege Tax Scottsdale Mountain CFD $ $ $ 25,431 42 2,602 28,075 $ McDowell Mountain CFD - $ $ - LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Unearned Revenue Intergovernmental Other Guaranty and Other Deposits Total Liabilities $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Committed Unassigned Total Fund Balances 1,055 333 - $ 68 12 - $ 93 $ 200 20 - $ 7 20 - $ 16 - $ - $ - 1,388 635 5 720 93 141 840 1,201 2 29 16 - - - 116 1 400 2 - - - 1,388 836 94 1,601 31 16 - - 12,014 12,014 13 13 (1) (1) (400) (400) 118 118 28,059 28,059 - - Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ (continued) 13,402 $ 849 $ 93 $ 1,201 $ 149 $ 28,075 $ - $ - 111 Table of Contents 112 Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2014 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets DC Ranch CFD Via Linda Road CFD $ $ $ 74 2 76 $ Waterfront Commercial CFD - $ - $ Streetlight Districts 25 $ 25 $ Tourism Development Special Programs 72 - $ 4 76 $ 11,166 55 6,978 109 18,308 $ $ 8,840 770 370 9,980 Total $ $ 57,810 99 42 4,047 770 2 55 1,155 7,041 635 578 72,234 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Unearned Revenue Intergovernmental Other Guaranty and Other Deposits Total Liabilities $ Deferred Inflows of Resources Unavailable Revenues - - $ - $ 446 79 - $ 482 8 - $ 2,274 472 93 - - 8,985 55 9,565 490 9,761 897 5 13,502 - - - - 800 245 1,564 - City of Scottsdale, Arizona 76 76 $ - - - Fund Balances Restricted Committed Unassigned Total Fund Balances $ - Total Liabilities and Deferred Inflows of Resources Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 76 - - $ - - 25 25 $ 25 10,365 76 76 $ 76 735 2,946 5,790 (793) 7,943 $ 18,308 15,066 9,245 9,245 $ 9,980 43,327 15,035 (1,194) 57,168 $ 72,234 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, 2014 (in thousands) Community Development Block Grant Highway User Fuel Tax HOME Grants Section 8 Housing Preserve Privilege Tax $ $ Scottsdale Mountain CFD McDowell Mountain CFD 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 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 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) $ 18,116 - $ - $ - $ - - 32,655 - $ 10 - $ 10 - 12,268 641 - - - - - - - - - - - - - - - - - 10 - - - - - - 402 725 6 546 30 32,734 1,064 1,074 94 94 725 372 105 1,290 2,492 4,650 1 12 4,663 32,783 10 10 13,298 7,615 1,053 21,966 1,280 1,280 94 94 32 136 239 1,154 1,464 3,025 5,633 5,633 4 4 10 10 10 10 32,779 - - 881 (30,664) (29,783) - - 2,996 - - 10,768 (206) - (9,123) (9,123) 351 351 - 1,645 145 - 10,369 12,014 $ (132) 13 $ (1) (1) (533) (970) - (3) (3) (533) $ 133 (400) 312 (184) (973) $ 1,091 118 $ 25,063 28,059 $ - $ - 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, 2014 (in thousands) Via Linda Road CFD DC Ranch CFD Waterfront Commerical CFD Streetlight Districts Tourism Development Special Programs Total 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 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 $ City of Scottsdale, Arizona EXPENDITURES Current General Government City Court City Treasurer 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 $ 71 - $ 10 - $ - $ - $ 257 $ 15,303 - $ 101 50,771 15,303 257 - - - - 30 - 12,268 641 30 - - - - 1,743 - 1,743 - - - - 71 10 - 400 400 3,936 596 598 5 9,117 16 16,972 6,935 372 4,766 400 1,886 621 546 47 100,430 70 70 10 10 9 9 576 576 1,759 251 501 998 2,242 5,751 9,341 9,341 1,791 113 13,685 17,696 2,152 11,766 576 47,779 1 - (9) (176) 3,366 7,631 52,651 - - - 306 (4,814) (4,508) (5,590) (5,590) 1,538 (50,194) (48,656) 1 - (9) (1,142) 2,041 3,995 75 76 $ - $ 34 25 166 961 504 306 37 (22) (176) $ 252 76 $ 9,085 7,943 1,653 - $ 7,204 9,245 166 961 504 1,969 349 (206) $ 53,173 57,168 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, 2014 (in thousands) Budgeted Amounts Original 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 $ EXPENDITURES Current Public Works Community and Economic Development 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 Actual Amounts Budgetary Basis Final 17,333 $ 17,333 $ 18,116 Budget to GAAP Differences $ - Actual Amounts GAAP Basis $ 18,116 Variance Between Final Budget and Actual Amounts Budgetary Basis $ 783 12,263 - 12,263 - 12,268 641 - 12,268 641 5 641 737 643 643 546 91 32,256 737 643 643 546 91 32,256 402 725 6 546 30 32,734 - 402 725 6 546 30 32,734 (335) (643) 82 6 (61) 478 13,629 8,916 1,051 23,596 13,740 8,396 1,051 23,187 13,233 7,606 1,053 21,892 65 9 74 13,298 7,615 1,053 21,966 507 790 (2) 1,295 8,660 9,069 10,842 (74) 10,768 1,773 (8,705) (8,705) (8,705) (8,705) (9,123) (9,123) - (9,123) (9,123) (418) (418) (45) 364 1,719 (74) 1,645 1,355 Fund Balances - Beginning Fund Balances - Ending $ 5,067 5,022 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 74 $ 10,432 10,796 $ 10,432 12,151 $ (63) (137) $ 10,369 12,014 $ 1,355 115 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ REVENUES Property Rental Intergovernmental Federal Grants Total Revenues $ EXPENDITURES Current Community Services 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 $ - $ - 10 - 10 10 3,087 3,087 3,087 3,087 1,064 1,074 - 1,064 1,074 (2,023) (2,013) 3,087 3,087 3,440 3,440 1,280 1,280 - 1,280 1,280 2,160 2,160 - (353) (206) - (206) 147 - - 351 351 - 351 351 351 351 - (353) 145 - 145 498 - $ (121) (474) $ (121) 24 $ (11) (11) $ (132) 13 $ 498 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ REVENUES Intergovernmental Federal Grants Total Revenues $ EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over Expenditures Fund Balances - Beginning Fund Balances - Ending $ 1,594 1,594 $ 1,594 1,594 94 94 - 94 94 (1,500) (1,500) 1,594 1,594 1,594 1,594 94 94 - 94 94 1,500 1,500 - - - - - - - $ (1) (1) $ (1) (1) $ - $ (1) (1) $ - 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, 2014 (in thousands) Budgeted Amounts Original REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Total Revenues $ EXPENDITURES Current General Government City Court Public Works Community and Economic Development Public Safety Community Services Total Expenditures Net Change in Fund Balances Final 2,038 418 138 2,795 5,389 $ 7,742 179 138 1,530 9,589 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 725 372 105 1,290 2,492 - 725 372 105 1,290 2,492 (7,017) 193 (33) (240) (7,097) 1,624 3,765 5,389 535 1,049 2,161 3,745 32 136 239 1,144 1,462 3,013 10 2 12 32 136 239 1,154 1,464 3,025 (32) (136) 296 (95) 699 732 - 5,844 (521) (12) (533) (6,365) City of Scottsdale, Arizona Fund Balances - Beginning Fund Balances - Ending $ - Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 12 $ 132 5,976 $ 132 (389) $ 1 (11) $ 133 (400) $ (6,365) 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, 2014 (in thousands) Original REVENUES Intergovernmental Federal Grants Reimbursements from Outside Sources Other Total Revenues $ 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 Final 7,038 7,038 $ 7,041 7,041 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ 4,650 1 12 4,663 - 4,650 1 12 4,663 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (2,391) 1 12 (2,378) 7,038 7,038 7,037 7,037 5,636 5,636 (3) (3) 5,633 5,633 1,401 1,401 - 4 (973) 3 (970) (977) - (3) (3) (3) (3) - (3) (3) - - 1 (976) 3 (973) (977) Fund Balances - Beginning Fund Balances - Ending $ - Explanation of Difference: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ (3) $ 1,106 1,107 $ 1,106 130 $ (15) (12) $ 1,091 118 $ (977) 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, 2014 (in thousands) Budgeted Amounts Original REVENUES Taxes - Local Transaction Privilege Interest Earnings Investment Income Total Revenues $ EXPENDITURES Current General Government City Treasurer Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) City of Scottsdale, Arizona Net Change in Fund Balances Final 31,270 151 31,421 $ 31,270 151 31,421 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ 32,655 312 32,967 (184) (184) Variance Between Final Budget and Actual Amounts Budgetary Basis 32,655 312 (184) 32,783 $ 1,385 161 1,546 2 2 2 2 4 4 - 4 4 (2) (2) 31,419 31,419 32,963 (184) 32,779 1,544 (34,692) (34,692) (34,692) (34,692) 881 (30,664) (29,783) - 881 (30,664) (29,783) 881 4,028 4,909 (3,273) (3,273) 3,180 (184) 2,996 6,453 Fund Balances - Beginning Fund Balances - Ending $ 18,970 15,697 Explanation of Difference: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Investment Income $ (184) $ 25,432 22,159 $ 25,432 28,612 $ (369) (553) $ 25,063 28,059 $ 6,453 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, 2014 (in thousands) Budgeted Amounts Original REVENUES Streetlight and Services Districts Total Revenues $ EXPENDITURES Current Streetlight and Services Districts Total Expenditures 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 $ $ $ $ 400 400 - 400 400 (247) (247) 647 647 647 647 576 576 - 576 576 71 71 - - (176) - (176) (176) 257 257 $ 252 252 $ 252 76 $ - $ 252 76 $ (176) 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis REVENUES Taxes - Local Light and Power Franchise Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Fines Court Enhancement Fees 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 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 City of Scottsdale, Arizona Fund Balances - Beginning Fund Balances - Ending Explanation of Difference: Items recorded as revenue 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 Accruals Net Decrease in Fund Balance – Budget to GAAP 250 250 257 - $ 257 $ 7 36 30 - 30 (6) 1,707 1,707 1,743 - 1,743 36 101 987 450 632 15 - 101 987 450 632 15 - 166 961 504 306 37 - (22) 166 961 504 306 37 (22) 65 (26) 54 (326) 22 - 5,110 777 691 96 10,852 5,110 777 691 96 10,852 3,936 596 598 5 9,139 (22) 3,936 596 598 5 9,117 (1,174) (181) (93) (91) (1,713) 2,048 250 1,144 1,462 2,716 7,620 2,070 250 1,144 1,669 2,691 7,824 1,761 251 501 992 2,239 5,744 (2) 6 3 7 1,759 251 501 998 2,242 5,751 309 (1) 643 677 452 2,080 3,232 3,028 3,395 (29) 3,366 367 60 (5,254) (5,194) 60 (5,254) (5,194) 306 (4,814) (4,508) - 306 (4,814) (4,508) 246 440 686 (1,962) (2,166) (1,113) (29) (1,142) 1,053 9,117 7,155 9,106 6,940 9,106 7,993 (21) (50) 9,085 7,943 (22) 7 $ $ 36 (29) $ $ $ $ $ 1,053 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, 2014 (in thousands) Budgeted Amounts Original REVENUES Taxes - Local Transient Occupancy Property Rental Reimbursements from Outside Sources Total Revenues $ EXPENDITURES Current Community and Economic Development 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 Explanation of Difference: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ $ Final 13,989 1,600 85 15,674 $ 13,989 1,600 85 15,674 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 15,303 1,653 16 16,972 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 15,303 1,653 16 16,972 1,314 53 (69) 1,298 9,374 9,374 10,042 10,042 9,340 9,340 1 1 9,341 9,341 702 702 6,300 5,632 7,632 (1) 7,631 2,000 (6,101) (6,101) (6,101) (6,101) (5,590) (5,590) - (5,590) (5,590) 511 511 199 (469) 2,042 (1) 2,041 2,511 6,872 7,071 1 $ 7,210 6,741 $ 7,210 9,252 $ (6) (7) $ 7,204 9,245 $ 2,511 123 Table of Contents 124 Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2014 (in thousands) Municipal Property Corporation Debt Service Stabilization Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD Waterfront Commercial CFD $ $ $ $ $ Scottsdale Preserve Authority Total ASSETS Cash and Investments Cash with Fiscal Agents Receivables (net of allowance for uncollectibles) Property Tax Intergovernmental Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Matured Bond Interest Payable Matured Bonds Payable Total Liabilities $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Committed Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 10,182 10,182 141 4,205 5,830 10,176 $ $ $ 8,679 19,882 28,561 - $ $ 490 14 504 42 405 447 $ $ 1,360 23 1,383 149 1,020 1,169 $ $ 1,146 34 1,180 241 800 1,041 $ $ 267 1 268 24 165 189 $ $ 321 531 7 859 104 100 204 $ $ $ 5,214 5,214 1,254 3,960 5,214 $ $ $ 9,000 19,190 79 19,882 48,151 141 6,019 12,280 18,440 - 18,501 5 11 13 1 - - 18,531 10,176 18,501 452 1,180 1,054 190 204 5,214 36,971 6 6 5,360 4,700 10,060 52 52 203 203 126 126 78 78 655 655 - 6,480 4,700 11,180 10,182 $ 28,561 $ 504 $ 1,383 $ 1,180 $ 268 $ 859 $ 5,214 $ 48,151 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, 2014 (in thousands) Municipal Property Corporation Debt Service Stabilization Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD $ $ $ $ Waterfront Commercial CFD Scottsdale Preserve Authority Total REVENUES Taxes - Local Property Property Rental Intergovernmental Miscellaneous Total Revenues $ EXPENDITURES Current Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues over Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Refunding Bonds Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning, Restated* Fund Balances - Ending *Restated due to a prior period adjustment to move fund balance of $9,918,000 from the Municipal Property Corporation to the Debt Stabilization Fund. $ - $ 147 444 - 1,221 - 1,126 - 106 - $ 279 - $ - $ 3,176 147 - 1,585 1,732 444 1,221 1,126 106 279 - 1,585 4,908 8,440 8,983 287 17,710 - 405 87 492 1,021 299 1,320 800 486 1,286 165 49 214 100 211 311 3,960 2,516 6,476 14,891 12,631 287 27,809 (17,710) 1,732 (48) (99) (160) (108) (32) (6,476) (22,901) 14,773 (125) 22,735 2,659 (22,453) 17,589 (1,590) (1,590) - - - - - 6,476 6,476 21,249 (1,715) 22,735 2,659 (22,453) 22,475 (121) 142 (48) (99) (160) (108) (32) - (426) 127 6 $ 9,918 10,060 $ 100 52 $ 302 203 $ 286 126 $ 186 78 $ 687 655 $ - $ 11,606 11,180 125 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ REVENUES Taxes - Local Property Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 36,712 36,712 $ 36,713 36,713 36,372 36,372 - 36,372 36,372 (341) (341) 34,070 27,039 61,109 36,733 27,176 63,909 42,114 24,108 710 66,932 - 42,114 24,108 710 66,932 (5,381) 3,068 (710) (3,023) (24,397) (27,196) (30,560) - (30,560) (3,364) 24,397 24,397 24,397 24,397 21,976 83,150 261 10,083 (85,646) 29,824 - 21,976 83,150 261 10,083 (85,646) 29,824 (2,421) 83,150 261 10,083 (85,646) 5,427 - (2,799) (736) - (736) 2,063 5,931 5,931 $ 10,105 7,306 $ 10,105 9,369 $ - $ 10,105 9,369 $ 2,063 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis REVENUES Property Rental Intergovernmental Other Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Bond Issuance Costs Total Expenditures 145 1,239 1,384 $ 145 1,239 1,384 - - $ - $ (145) (1,239) (1,384) 6,237 9,635 15,872 6,237 9,634 15,871 8,440 8,983 287 17,710 - 8,440 8,983 287 17,710 (2,203) 651 (287) (1,839) Excess (Deficiency) of Revenues over (under) Expenditures (14,488) (14,487) (17,710) - (17,710) (3,223) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Refunding Bonds Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Total Other Financing Sources and (Uses) 14,281 14,281 14,281 14,281 14,773 (125) 22,735 2,659 (22,453) 17,589 - 14,773 (125) 22,735 2,659 (22,453) 17,589 492 (125) 22,735 2,659 (22,453) 3,308 (207) (206) (121) - (121) 85 Net Change in Fund Balances Fund Balances - Beginning, Restated* Fund Balances - Ending $ 9,477 9,270 $ 127 (79) $ 127 6 $ - $ 127 6 $ 85 127 Table of Contents 128 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, 2014 (in thousands) Budgeted Amounts Original Final Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis REVENUES Total Revenues $ EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures - $ - - - $ - $ - 3,960 2,515 6,475 3,960 2,515 6,475 3,960 2,516 6,476 - 3,960 2,516 6,476 (1) (1) Excess (Deficiency) of Revenues over (under) Expenditures (6,475) (6,475) (6,476) - (6,476) (1) OTHER FINANCING SOURCES (USES) Transfers In Total Other Financing Sources and (Uses) 6,475 6,475 6,475 6,475 6,476 6,476 - 6,476 6,476 1 1 - - - - - - Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ - $ - $ - $ - $ - $ - City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2014 (in thousands) General Obligation Bonds Transportation Privilege Tax Preserve Privilege Tax McDowell Mountain CFD Total ASSETS Cash and Investments Receivables (net of allowance for uncollectibles) Interest Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable Accrued Payroll and Benefits Total Liabilities $ 19,615 $ 44 19,659 $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances Restricted Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ - $ 27,022 $ 35 1,113 1,076 500 29,746 $ 2,174 18 2,192 $ 17 $ 17 $ 10 7 17 $ - $ - $ - $ 46,654 $ 79 1,113 1,076 500 49,422 $ 2,184 25 2,209 - 1,560 - - 1,560 - 3,752 17 - 3,769 19,659 19,659 25,994 25,994 - - 45,653 45,653 19,659 $ 29,746 $ 17 $ - $ 49,422 129 Table of Contents 130 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Fiscal Year Ended June 30, 2014 (in thousands) General Obligation Bond Transportation Privilege Tax $ $ Preserve Privilege Tax McDowell Mountain CFD Total REVENUES Interest Earnings Investment Income Intergovernmental Federal Grants Miscellaneous Contributions and Donations Other Total Revenues EXPENDITURES Current Capital Improvements Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Issuance of Long-Term Capital-Related Debt Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 328 (189) 227 (132) $ - $ - $ 555 (321) 139 3,702 11,676 15,473 6 3 9 - 3,702 11,676 6 3 15,621 - 19,541 19,541 15,579 15,579 - 35,120 35,120 139 (4,068) (15,570) - (19,499) 159 (10,146) (9,987) 9,633 (9) 9,624 2,713 (882) 13,739 15,570 (110) (110) 12,505 (11,147) 13,739 15,097 (9,848) 5,556 - (110) (4,402) 29,507 19,659 $ 20,438 25,994 $ - $ 110 - $ 50,055 45,653 Table of Contents INTERNAL SERVICE FUNDS Internal Service Funds are used to report activities that provide goods or services to other funds, departments, or agencies of the primary government and its component units, on a cost-reimbursement basis. 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. City of Scottsdale, Arizona 131 Table of Contents Combining Statement of Fund Net Position Internal Service Funds June 30, 2014 (in thousands) Fleet Management Computer Replacement Self-Insurance Total ASSETS Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Total Current Assets $ Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Less Accumulated Depreciation Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Accrued Payroll and Benefits Accrued Compensated Absences - Due within one year Claims Payable - Due within one year Total Current Liabilities Noncurrent Liabiliites Accrued Compensated Absences - Due in more than one year Other Payables - Due in more than one year Total Noncurrent Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position 132 $ 13,288 $ 21,369 $ 942 $ 35,599 159 906 14,353 163 21,532 942 322 906 36,827 12,447 60,817 1,374 56 (39,830) 34,864 - - 12,447 60,817 1,374 56 (39,830) 34,864 49,217 21,532 942 71,691 2,399 158 140 2,697 858 31 26 6,589 7,504 3 3 3,260 189 166 6,589 10,204 161 161 34 9,074 9,108 - 195 9,074 9,269 2,858 16,612 3 19,473 34,864 11,495 4,920 939 34,864 17,354 46,359 $ 4,920 $ 939 $ 52,218 City of Scottsdale, Arizona Table of Contents Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2014 (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 Property Tax Gain on Sale of Capital Assets Total Non-Operating Revenues Income Before Contributions and Transfers Capital Contribution Transfers Out Change in Net Position Total Net Position - Beginning Total Net Position - Ending City of Scottsdale, Arizona $ 18,571 70 18,641 Computer Replacement Self-Insurance $ 26,056 6,583 487 243 647 34,016 $ Total 1,013 1,013 $ 45,640 6,583 487 243 717 53,670 12,097 4,728 16,825 2,797 7,907 23,906 2,024 36,634 681 681 12,097 2,797 7,907 23,906 2,024 4,728 681 54,140 1,816 (2,618) 332 (470) 457 457 145 145 - 145 457 602 2,273 (2,473) 332 132 491 (768) 1,996 (3) (2,476) 332 491 (771) (148) 44,363 46,359 $ 7,396 4,920 $ 607 939 $ 52,366 52,218 133 Table of Contents Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2014 (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 Operating Activities $ Cash Flows from Non-Capital Financing Activities Property Tax Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities 18,571 (3,195) (9,000) 70 6,446 Computer Replacement Self-Insurance $ 33,634 (1,011) (32,731) 647 539 $ Total 1,013 (678) 335 $ 53,218 (4,206) (42,409) 717 7,320 (768) (768) 145 (3) 142 - 145 (771) (626) 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 (3,458) 624 (2,834) - - (3,458) 624 (2,834) Net Increase in Cash and Cash Equivalents 2,844 681 335 3,860 10,444 20,688 607 31,739 Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 13,288 $ 21,369 $ 942 $ 35,599 $ 1,816 $ (2,618) $ 332 $ (470) Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income (Loss) Income Provided by Operating Activities Depreciation Accounts Receivable Inventories Accounts Payable Accrued Payroll Compensated Absences Payable Claims Payable Total Adjustments Net Cash Provided by Operating Activities Supplemental Disclosure of Non-cash Financing Activities Deductions from Property, Plant, and Equipment Contributions to Enterprise 134 4,728 (83) (74) 32 27 4,630 265 102 8 1 2,781 3,157 3 3 4,728 265 (83) 31 40 28 2,781 7,790 $ 6,446 $ 539 $ 335 $ 7,320 $ (241) $ - $ - $ (241) City of Scottsdale, Arizona Table of Contents FIDUCIARY FUNDS Private Purpose Trust Funds and Agency Funds administer resources received and held by the City as the trustee or as the agent for others. Use of these funds facilitates the discharge responsibilities placed on the governmental unit by virtue of law or other similar authority. Handicap Scholarship Private Purpose Trust Fund This fund accounts for monies received and expended for college scholarships for individuals with 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. City of Scottsdale, Arizona 135 Table of Contents 136 Combining Statement of Fiduciary Net Position Fiduciary Funds June 30, 2014 (in thousands) Private Purpose Trust Funds Handicap Scholarship Private Purpose Trust Fund Total ASSETS Cash and Cash Equivalents $ Total Assets LIABILITIES Escrow Payable Vouchers Designated Escrow Payable State Land Department Rebate Total Liabilities NET POSITION Held in Trust for Other Purposes $ 5 $ Agency Funds Family SelfSufficiency Agency Fund 5 $ 50 Retainage Escrow Agency Fund $ - Crossroads East Dev Agreement Agency Fund $ 1,415 Total $ 1,465 5 5 50 - 1,415 1,465 - - 50 - - 1,415 50 1,415 - - 5 $ 5 $ 50 $ - $ 1,415 $ 1,465 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2014 (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 Retainage Escrow Balance July 1, 2013 Additions Deductions Balance June 30, 2014 Balance July 1, 2013 Additions $ 75 $ 46 $ 71 $ 50 $ 1,720 $ $ 75 $ 46 $ 71 $ 50 $ 1,720 $ 75 - $ 46 - $ 71 - $ 50 - $ $ 75 $ 46 $ 71 $ 50 $ Crossroads East Dev Agreement Deductions Balance June 30, 2014 Balance July 1, 2013 Deductions Balance June 30, 2014 - $ 1,720 $ - $ 1,415 $ - $ - $ 1,415 $ - $ 1,720 $ - $ 1,415 $ - $ - $ 1,415 1,720 - $ - $ 1,720 - $ - $ 1,415 $ - $ - $ 1,415 1,720 $ - $ 1,720 $ - $ 1,415 $ - $ - $ 1,415 Additions 137 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. 138 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2014 (in thousands of dollars) July 1, 2013 Issued Retired Refunding Bonds Issued Accretions, Amortizations & Contract Adjustments Bonds Defeased June 30, 2014 Governmental Activities Business-type Activities Final Payment Date GENERAL OBLIGATION BONDS Governmental Fund Type: 1997 GO Refunding 2002 GO Refunding Various Purpose 2002 GO Refunding Preservation 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 2014 GO Preserve 2014 GO Refunding Various Purpose 2014 GO Refunding Preservation 2004 GO Series Issuance Premium 2005 GO Refunding Series Issuance Premium 2005A GO Series Issuance Premium 2005B GO Series Issuance Premium 2008A GO Series Issuance Premium 2008B GO Series Issuance Premium 2010 GO Bonds Issuance Premium 2011 GO Preserve Series Issuance Premium 2011 GO Refunding Series Issuance Premium 2012 GO Preserve Issuance Premium 2012 GO Refunding Series Issuance Premium 2013 GO Preserve Issuance Premium 2014 GO Preserve Issuance Premium 2014 GO Refunding Series Issuance Premium Total General Obligation Bonds REVENUE BONDS Business Type - Revenue Bonds 2004 Utility Revenue Series Refunding 2008 Utility Revenue Series Refunding 2008 Refunding Series Issuance Premium Total Revenue Bonds $ 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 1,318 1,414 226 1,660 113 706 235 3,167 2,290 7,355 3,044 - - $ 14,000 573 - 1,350 $ 5,705 4,000 2,100 1,525 3,005 6,000 1,000 3,350 550 1,250 770 3,210 113 142 - - $ 73,785 9,365 - $ 660,721 $ 14,573 $ 34,070 $ 92,660 $ $ 2,870 $ 32,645 2,762 38,277 $ - $ - $ 910 $ 2,330 3,240 $ - $ - $ $ 9,510 - $ 5,475 68,500 9,175 16 893 137 - - $ (42) (213) (48) (8) (112) (6) (42) (11) (295) (111) (613) (147) (5) (176) - $ 6,585 8,100 63,085 25,250 3,725 93,575 17,075 46,400 20,260 4,445 25,850 50,000 38,321 44,244 75,000 14,000 73,785 9,365 1,105 473 81 1,548 107 664 224 2,872 2,179 6,742 2,897 568 9,334 - $ 6,585 8,100 63,085 25,250 3,725 93,575 17,075 46,400 20,260 4,445 25,850 50,000 38,321 44,244 75,000 14,000 73,785 9,365 1,105 473 81 1,548 107 664 224 2,872 2,179 6,742 2,897 568 9,334 - 84,196 $ (1,829) $ 647,859 $ 647,859 $ - - $ (290) (290) $ 1,960 $ 30,315 2,472 34,747 $ - $ - $ 1,960 30,315 2,472 34,747 - $ $ 07/01/14 07/01/19 07/01/19 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 07/01/34 07/01/23 07/01/23 07/01/16 07/01/23 *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). (continued) 139 Table of Contents 140 Schedule of Changes in Long-Term Debt* (continued here and on following page) For the Year Ended June 30, 2014 (in thousands of dollars) July 1, 2013 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 2014 MPC Refunding 2004A Series Issuance Premium 2005 Series Issuance Premium 2005D Series Issuance Premium 2006 Refunding Series Issuance Premium 2006A Series Issuance Premium 2006B Series Issuance Premium 2013A MPC Series Issuance Premium 2013B MPC Series Issuance Premium 2013C MPC Series Issuance Premium 2014 Refunding Series Issuance Premium Subtotal $ City of Scottsdale, Arizona SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Fund Type: 2004 Excise Tax Refunding 2010 Excise Tax Refunding 2011 Excise Tax Refunding 2004 Excise Tax Revenue Issuance Premium 2010 Excise Tax Revenue Issuance Premium 2011 Excise Tax Revenue Issuance Premium Total Scottsdale Preserve Authority Bonds Retired Bonds Defeased 5,925 $ 23,689 19,025 55,450 8,015 30,550 26,295 1,440 37,265 104 191 836 5,189 88 158 4,847 196 4,949 224,212 - $ - 1,050 $ 519 825 300 1,050 830 45 1,210 5,829 3,545 8,830 110,510 93,150 74,520 176 238 9,466 3,690 3,090 307,215 - 3,545 2,725 3,050 440 9,760 $ 531,427 $ - $ 15,589 $ 25,394 $ $ 9,455 $ 32,855 10,155 474 3,917 889 57,745 $ - $ - $ 2,990 $ 970 3,960 $ - $ - $ 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 Issuance Premium 2005E Water Issuance Premium 2006 Refunding Series Issuance Premium 2008A Series Issuance Premium 2010 Water/Sewer Issuance Premium Subtotal Total Municipal Property Corporation Bonds Issued Refunding Bonds Issued $ *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). Accretions, Amortizations & Contract Adjustments - $ 22,735 2,659 25,394 - 2,610 $ 4,385 16,725 39 46 82 23,887 - - $ (22) (24) (38) (247) (2) (4) (332) (10) (252) (17) (948) June 30, 2014 2,265 $ 23,170 18,200 55,450 3,330 12,775 25,465 1,395 36,055 22,735 43 167 798 4,942 40 72 4,515 186 4,697 2,642 218,942 Governmental Activities Business-type Activities 2,265 $ 23,170 18,200 55,450 3,330 12,775 25,465 1,395 36,055 22,735 43 167 798 4,942 40 72 4,515 186 4,697 2,642 218,942 - 07/01/16 07/01/21 07/01/35 07/01/34 07/01/31 07/01/31 07/01/28 07/01/33 07/01/33 07/01/27 6,105 110,510 90,100 74,080 159 9,016 3,494 2,954 296,418 07/01/14 07/01/16 07/01/30 07/01/32 07/01/36 (176) (79) (450) (196) (136) (1,037) 6,105 110,510 90,100 74,080 159 9,016 3,494 2,954 296,418 23,887 $ (1,985) $ 515,360 $ 218,942 $ 296,418 - $ - $ - $ (237) (346) (102) (685) $ 6,465 $ 32,855 9,185 237 3,571 787 53,100 $ 6,465 $ 32,855 9,185 237 3,571 787 53,100 $ - - - Final Payment Date 07/01/16 07/01/24 07/01/22 Table of Contents City of Scottsdale, Arizona Schedule of Changes in Long-Term Debt* (continued) For the Year Ended June 30, 2014 (in thousands of dollars) July 1, 2013 CERTIFICATES OF PARTICIPATION Governmental Fund Type: Series 2010-Public Safety Communications Project Total Certificates of Participation COMMUNITY FACILITIES DISTRICT BONDS Governmental Fund Type: Scottsdale Mountain Refunding 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 Issuance Premium DC Ranch 2012 Issuance Premium McDowell Mnt Ranch 2012 Issuance Premium Total Community Facilities District Bonds Total Bonds CONTRACTS PAYABLE Governmental Fund Type: US Corps of Engineers 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 Copier Equipment - Administrative Services-2014 Total Capital Leases SERVICE CONCESSION ARRANGEMENTS Governmental Fund Type: Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Total Service Concession Arrangements TOTAL BONDS, CONTRACTS, CAPITAL LEASES, AND SERVICE CONCESSION ARRANGEMENTS Issued Retired Refunding Bonds Issued Accretions, Amortizations & Contract Adjustments Bonds Defeased $ $ 16,003 $ 16,003 $ - $ - $ 2,089 $ 2,089 $ - $ - $ - $ - $ $ $ 1,880 $ 3,545 14,115 10,480 1,865 6 551 201 32,643 $ - $ 405 $ 100 800 1,020 165 2,490 $ - $ - $ - $ 1,336,816 $ 14,573 $ 61,438 $ $ $ 2,570 $ 2,570 $ - $ - $ $ 59 $ 41 40 43 183 $ $ $ $ $ Governmental Activities June 30, 2014 Business-type Activities Final Payment Date - $ - $ 13,914 $ 13,914 $ 13,914 $ 13,914 $ - 07/01/20 1,475 $ 3,445 13,315 9,460 1,700 5 512 178 30,090 $ 1,475 $ 3,445 13,315 9,460 1,700 5 512 178 30,090 $ - 07/15/18 07/15/32 07/15/27 07/15/22 07/15/23 $ - $ (1) (39) (23) (63) $ 118,054 $ 108,083 $ (4,852) $ 1,295,070 $ 963,905 $ 331,165 2,570 $ 2,570 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - - $ 296 296 $ 18 $ 41 40 24 27 150 $ - $ - $ - $ - $ - $ - $ 41 $ 19 269 329 $ 41 $ 19 269 329 $ - 2016 2014 2014 2015 2018 1,519 $ 1,625 3,144 $ - $ 80 $ 74 154 $ - $ - $ - $ - $ - $ - $ 1,439 $ 1,551 2,990 $ 1,439 $ 1,551 2,990 $ - 2032 2035 - $ 1,342,713 $ 14,869 $ 64,312 $ 118,054 $ 108,083 $ (4,852) $ 1,298,389 $ 967,224 $ 331,165 $ $ Compensated Absences Other Post-Employment Benefit - Explicit Subsidy Risk Management Claims Total Long-Term Debt *This exhibit includes both Governmental Activities and Business-Type Activities debt (paid out of Enterprise Funds). 24,881 627 15,663 $ 1,008,395 $ 3,085 334,250 141 Table of Contents 142 City of Scottsdale, Arizona Table of Contents Statistical Section Contents Financial Trends Page 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) Table I Governmental Activities Net Investment in Capital Assets 2005 2006 $ 1,877,955 $ 2,029,375 78,794 102,293 (1) (1) 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 2008 2009 2010 2011 2012 2013 2014 $ 2,198,130 $ 2,353,573 $ 2,586,731 $ 2,729,334 $ 2,704,433 $ 2,800,451 $ 2,756,186 $ 2,685,105 108,686 189,540 131,732 97,950 91,862 100,275 100,472 109,615 195,887 172,530 206,386 90,632 83,884 87,698 108,799 74,124 133,897 $ 2,152,636 $ 2,304,198 $ 2,513,202 $ 2,633,745 $ 2,802,347 $ 2,914,982 $ 2,905,094 $ 2,974,850 $ 2,990,555 $ 756,433 23,472 212,957 $ $ $ $ $ 941,884 32,244 307,279 $ 1,009,973 36,287 258,395 $ 1,036,985 38,576 243,067 $ 1,058,880 41,545 242,763 $ 1,046,345 47,101 273,321 $ 992,862 $ 1,073,284 $ 1,153,892 $ 1,228,869 $ 1,257,061 $ 1,281,407 $ 1,304,655 $ 1,318,628 $ 1,343,188 $ 1,366,767 $ 2,634,388 102,266 408,844 $ 3,145,498 $ 2,836,124 129,293 412,065 $ 3,377,482 $ 3,093,766 142,335 430,993 $ 3,667,094 $ 3,263,205 215,687 383,722 $ 3,862,614 $ 3,578,121 158,300 322,987 $ 4,059,408 $ 3,671,218 130,194 394,977 $ 4,196,389 $ 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 $ 3,731,450 156,716 454,263 $ 4,342,429 806,749 27,000 239,535 (1) Restated restricted and unrestricted net position related to the classification of unspent bond proceeds. (2) In FY 2013, beginning net position was restated due to the implementation of GASB Statements 60 and 62. (3) 2007 In FY 2014, beginning net position was restated due to the implementation of GASB Statement 65. 895,636 33,649 224,607 909,632 26,147 293,090 991,390 26,568 239,103 180,942 (2) $ 2,975,662 (3) (3) 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) Table IIa 2005(1) 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 Bond Issuance Costs Total Governmental Activities Expenses $ Business-Type Activities: Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Expenses Total Primary Government Expenses (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 2007 $ 53,961 27,854 2,922 16,412 101,149 $ 488,160 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 2008 $ 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 2010(2) 2009 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 $ 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 18,964 34,416 126,622 115,740 54,442 17,318 572 40,647 408,721 $ 90,829 41,218 3,681 17,671 153,399 $ 562,120 2014(5) 2013 $ Increase from prior year was caused by the purchase of equipment, furnishing and clothing needed to start the City's Fire Department on July 1, 2005. (2) In FY2010, the City's Governmental Activities were restructured from Departments to 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. (5) In FY2014, the City adopted GASB Statement 65, which mandated the expensing of bond issuance costs as opposed to the previous practice of capitalizing such costs. 20,985 36,405 147,514 118,033 56,382 16,863 569 38,389 435,140 $ 21,084 43,597 134,626 127,026 55,190 17,552 576 35,486 998 436,135 90,205 43,169 3,785 19,146 156,305 91,496 45,421 4,014 19,608 160,539 591,445 $ 596,674 145 Table of Contents 146 City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIb 2005 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 $ 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 1) 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 2007 $ (1) (2) 81,517 27,119 3,342 17,163 55,580 184,721 14,102 4,388 228 1,155 16,128 15,071 326 546 29,293 211,707 292,944 2008 $ (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 2009 $ 14,670 4,619 2,275 6,393 5,703 2,682 599 26,272 240,289 303,502 90,741 33,930 3,380 19,824 50,679 198,554 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 66,917 137,114 305,251 $ 398,046 $ 486,627 $ 436,164 $ 474,175 $ 423,328 $ 281,663 $ 344,123 $ 324,316 $ (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) $ $ $ $ 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. $ $ $ $ 100,615 36,939 3,552 20,458 25,638 187,202 $ $ 2014 $ 4,282 1,580 17,981 10,268 5,914 2,890 400 27,710 38,817 109,842 104,722 39,917 3,635 20,162 22,019 190,455 $ 300,297 $ (326,293) 29,916 $ (296,377) 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) Table IIc 2005 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) 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 2007 $ 119 6,581 686 (10,536) (3,150) 249,411 60,520 23,013 5,377 11,174 349,495 2008 $ 195 9,265 496 (11,174) (1,218) 246,330 65,933 19,187 7,606 10,997 350,053 2009 $ 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 $ 248,642 52,715 1,274 8,422 6,202 317,255 144 763 (7,244) (6,337) 154 964 (6,202) (5,084) $ 312,171 $ 280,668 $ 322,098 $ 348,277 $ 346,678 $ 310,591 $ 277,866 $ 287,552 $ 301,726 $ 298,085 $ 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. $ $ $ 2014 $ $ (9,038) 24,832 15,794 147 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 2005 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) 2006 2007 2008 2009 2011(1) 2010 $ $ $ 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 $ $ $ 10,613 $ 31,873 148,626 $ 191,112 In FY2011, fund balances were stated in classifications required by GASB54. 23,142 $ 40,952 189,905 $ 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 $ 2012 247 281 53,199 53,727 3,000 104,284 6,221 36,609 $ $ $ 2013 264 260 52,105 52,629 2,980 108,073 7,345 37,183 $ $ $ 2014 265 48,679 48,944 114,676 16,298 39,666 $ $ $ 266 52,354 52,620 105,837 20,848 7,362 20,193 (640) - (447) - (1,394) - (1,194) - 30,963 102,490 - - - - 153,646 $ 149,474 $ 155,134 $ 169,246 $ 132,853 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) Table IVa 2005 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 2006 2007 2008 2009 2010 2011 2012 2013 2014 $ 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 $ 249,289 63,816 1,782 24,078 8,343 4,270 2,974 (1,700) 40,116 64 400 2,178 2,446 7,102 1,652 $ 362,987 $ 392,158 $ 425,721 $ 426,624 $ 404,478 $ 346,051 $ 388,232 $ 413,264 $ 406,374 $ 406,810 149 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) Table IVb 2005 City of Scottsdale, Arizona 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 Outlay (1) $ 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 2007 $ 27,632 36,382 351 218,897 (1) 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 2008 $ 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 2010(2) 2009 $ 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 $ 31,308 41,612 155,358 17,030 31,391 111,459 3,657 45,655 9,469 1,859 6,059 17,110 27,447 538 2011(3) $ 33,701 38,782 497 77,929 19,783 31,463 42,357 108,003 3,013 43,967 9,357 3,031 578 2012(4) $ 37,677 40,091 1,057 107,448 18,523 27,307 38,369 107,934 44,762 14,450 572 2013 $ 19,695 29,658 70,351 111,960 45,346 14,141 569 44,700 40,487 774 129,025 63,234 38,789 1,915 181,189 2014 $ 19,730 33,381 41,063 119,159 45,035 14,950 576 59,387 37,323 998 99,722 Total Expenditures $ 494,193 $ 512,998 $ 484,419 $ 570,636 $ 533,932 $ 422,583 $ 447,825 $ 466,903 $ 576,847 $ 471,324 Deficit of Revenues under Expenditures $ (131,206) $ (120,840) $ (58,698) $ (144,012) $ (129,454) $ (76,532) $ (59,593) $ (53,639) $ (170,473) $ (64,514) 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) Table IVc 2005 Other Financing Sources (Uses) Transfers In Transfers Out Capital Lease Acquisitions Issuance of Refunding Bonds Issuance of Long-Term Capital-Related Debt Premium on Long-Term Debt Issued Payment to Refunded Bonds Escrow Agent Proceeds from Notes Payable Proceeds from Sale of Assets $ Total Other Financing Sources and (Uses) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures (1) 141,783 (133,284) 74,630 68,355 4,536 (77,584) - 2006 $ 78,436 $ (52,770) (1) $ 23.2% 147,643 (140,513) 191,500 5,501 - 2007 $ 204,131 83,291 21.8% The change from the prior period was caused by the increase in spending for capital improvement projects. 162,965 (155,295) 175 55,450 42,500 7,199 (61,845) 3,000 - 2008 $ 54,149 $ (4,549) 21.5% 195,170 (185,082) 123,805 2,379 - 2009 $ 136,272 $ (7,740) 19.2% 160,319 (145,357) - 2010 $ 14,962 $ (114,492) 19.3% 108,066 (98,693) 50,800 843 - 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) 50,000 2,448 - 2013 $ 58,201 $ 4,562 25.2% 78,171 (70,919) 111,250 140,000 22,082 (99,684) - 2014 $ 180,900 $ 10,427 25.8% 89,669 (82,696) 296 105,885 14,000 12,742 (108,099) 31,797 $ (32,717) 26.0% 151 Table of Contents 152 City of Scottsdale, Arizona Tax Revenues By Source Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) Table V Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 City of Scottsdale, Arizona Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (1) $ $ Property 48,249 49,651 50,732 53,778 60,493 58,354 65,970 65,089 64,908 64,914 Privilege and Use General $ 94,302 104,949 110,225 104,673 85,829 77,878 80,119 84,633 89,002 95,604 Franchise Taxes Cable TV Light and Power Franchise Franchise 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 3,722 8,477 Privilege and Use McDowell Mtn(1) $ 31,301 35,483 37,281 35,604 29,121 26,416 27,199 28,809 30,376 32,655 Sales and Use Taxes Privilege and Use Transportation $ 18,115 20,020 20,910 19,823 16,141 14,608 15,042 15,985 16,852 18,116 Intergovernmental State Revenue State Shared Sales Sharing $ 18,779 $ 18,634 21,664 21,223 22,312 26,653 21,575 33,037 18,677 35,103 17,227 30,309 17,844 22,849 16,987 18,347 17,793 22,205 18,922 24,230 Privilege and Use Public Safety(1) $ 8,491 9,978 10,578 10,145 8,289 7,541 7,765 8,231 8,679 9,330 Other $ 1,337 962 929 957 959 979 1,010 1,086 838 900 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 7,939 8,970 9,723 9,621 7,577 7,113 13,126 13,430 13,852 15,303 (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) Table VI Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities 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 $ 9,018,277 1.65% City 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 2008 $ 1,370,365 1,932,043 652,226 529,862 974,330 1,364,347 532,751 1,308,247 754,103 435,415 $ 9,958,287 $ 10,435,752 $ 9,853,689 $ 8,045,422 $ 7,253,013 1.65% 1.65% 1.65% 1.65% 1.65% $ $ 2009 918,219 1,251,432 624,917 416,216 864,676 1,078,674 556,842 1,217,688 684,188 432,570 $ 2010 818,517 754,583 611,083 395,229 865,614 1,107,272 449,455 1,144,939 670,311 436,010 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 2014 $ 1,209,388 1,073,279 655,787 488,117 917,406 1,450,611 666,504 1,210,218 844,186 435,579 $ 7,430,162 $ 7,870,594 $ 8,287,703 $ 8,951,075 1.65% 1.65% 1.65% 1.65% $ 2011 862,091 718,652 611,825 401,413 882,376 1,194,790 502,739 1,113,821 713,420 429,035 $ 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Privilege (Sales) Tax Rates City Direct Rate County Rate 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% 1.65% 0.70% Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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% 5.00% 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% 6.60% 6.60% 6.60% 5.60% 5.60% State Rate 5.50% 5.50% 5.50% 5.50% 5.50% 6.50% 6.50% 6.50% 5.50% 5.50% (1) (3) (1) (2) (3) Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Use Tax Rates City Direct Rate County Rate 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% 1.45% 0.00% State Rate 5.60% 5.60% 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% 5.60% Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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, with the exception of 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, with the exception of 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 535 7,465 179 82 27 4,837 3,875 4,139 970 291 22,400 Fiscal Year 2014 Percentage of Tax Revenue Total 2.39% $ 20,399 33.32% 18,272 0.80% 10,847 0.37% 8,247 0.12% 15,213 21.59% 26,296 17.30% 14,605 18.48% 20,557 4.33% 14,049 1.30% 7,294 100.00% $ 155,779 Percentage of Total 13.09% 11.73% 6.96% 5.29% 9.77% 16.88% 9.38% 13.20% 9.02% 4.68% Number of Filers 691 7,805 190 72 28 6,973 3,428 3,651 997 260 100.00% 24,095 Fiscal Year 2005 Percentage of Tax Revenue Total 2.87% $ 25,096 32.39% 28,770 0.79% 9,601 0.30% 7,297 0.12% 12,246 28.94% 23,227 14.22% 11,373 15.15% 17,320 4.14% 10,895 6,399 1.08% 100.00% $ 152,224 Percentage of Total 16.49% 18.90% 6.31% 4.79% 8.04% 15.26% 7.47% 11.38% 7.16% 4.20% 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating $ 0.45 0.44 0.42 0.38 0.35 0.36 0.38 0.44 0.50 0.53 Debt Service $ 0.62 0.60 0.55 0.41 0.43 0.38 0.51 0.65 0.72 0.76 Overlapping Rates Total City $ 1.07 1.04 0.97 0.79 0.78 0.74 0.89 1.09 1.22 1.29 Operating $ 3.77 3.46 3.45 3.42 2.82 2.44 2.40 2.75 3.09 3.35 Scottsdale Unified School District Debt Service EVIT Total School $ 1.26 $ 0.10 $ 5.13 1.22 0.06 4.74 1.26 0.05 4.76 1.26 0.05 4.73 1.07 0.05 3.94 1.34 0.05 3.83 1.35 0.05 3.80 1.25 0.05 4.05 1.34 0.05 4.48 1.22 0.05 4.62 Overlapping Rates County-Wide Jurisdictions City of Scottsdale, Arizona Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 County Operating $ 1.21 1.20 1.18 1.10 1.03 0.99 1.05 1.24 1.24 1.28 Community College $ 1.04 1.03 1.06 0.98 0.94 0.88 0.97 1.21 1.38 1.53 County Flood $ 0.21 0.21 0.20 0.15 0.14 0.14 0.15 0.18 0.18 0.14 County Education Equalization $ 0.46 0.44 0.33 0.36 0.43 0.47 0.51 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 0.10 0.10 0.10 0.10 0.10 0.10 0.14 County Free Library $ 0.05 0.05 0.05 0.04 0.04 0.04 0.04 0.05 0.05 0.04 County Special Health Care $ 0.12 0.12 0.09 0.09 0.09 0.11 0.15 0.17 0.19 Total County $ 3.10 3.18 2.74 2.47 2.35 2.58 2.79 3.37 3.60 3.84 Total Direct and Overlapping $ 9.30 8.96 8.47 7.99 7.07 7.15 7.48 8.51 9.30 9.75 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2013" 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 2013/14 the rates were as follows: Scottsdale Mountain CFD - $1.4895, McDowell Mountain CFD - $.8177, DC Ranch CFD - $0.5289, Via Linda Road CFD - $0.7082 and the Waterfront Commercial CFD - $4.7797. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) Table X 2014 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC Excel Promenade LLC Gainey Drive Associates Qwest Corporation* Portales Corporate Center LLC/Etal SDQ FEE LLC WJ Small Grandchildrens Trust Scottsdale Fiesta Retail Center Southwest Gas Corporation DC Ranch, LLC First American Scottsdale Acquisition LLC Marvin F Poer & Co Pederson/BVT Promenade Associates Total Taxable Assessed Value $ 60,718 41,655 14,876 14,098 13,934 13,137 12,904 11,883 10,180 10,120 $ 203,505 Rank 1 2 3 4 5 6 7 8 9 10 - 2005 Percentage of Total Taxable Assessed Value 1.258% 0.863% 0.308% 0.292% 0.289% 0.272% 0.267% 0.246% 0.211% 0.210% 4.216% Taxable Assessed Value $ 47,752 41,698 18,792 36,168 13,639 38,571 25,008 15,497 10,371 10,336 $ 257,832 Rank 1 2 6 4 8 3 5 7 9 10 Percentage of Total Taxable Assessed Value 1.10% 0.96% 0.43% 0.83% 0.31% 0.89% 0.58% 0.36% 0.24% 0.24% 5.94% 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 2013/14 secondary assessed valuation of the SRP within the City is $20,709,006 as provided by SRP. *Qwest Corporation was operating under the name Qwest Communications, Inc. in 2005. 157 Table of Contents 158 City of Scottsdale, Arizona Assessed Value of Taxable Property Last Ten Fiscal Years (dollars in thousands) Table XI Fiscal Year Ended June 30th 2005 P 2005 S Residential Property $ 2,370,252 2,460,307 Real Property Commercial Property Vacant Land $ 1,071,915 1,203,844 $ 572,909 809,560 Personal Property Historic and Special Use $ 1,374 2,214 Less Tax Exempt Property Assessed Value $ 257,783 277,482 $ (285,524) (409,953) Total Taxable Assessed Value $ 3,988,709 4,343,454 Total Direct Tax Rate $ 0.45 0.62 City of Scottsdale, Arizona 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 2014 P 2014 S 3,179,924 3,190,808 1,234,395 1,238,888 763,038 793,269 2,810 2,852 213,781 214,245 (591,625) (612,212) 4,802,323 4,827,850 0.53 0.76 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) Table XII Collected within the Fiscal Year of the Levy Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Tax Levy for Fiscal Year $ 44,879 47,809 48,778 50,838 58,179 57,380 64,327 62,033 62,187 62,367 $ Amount 43,688 46,431 47,105 49,408 55,876 55,221 62,237 60,309 60,630 61,227 Percentage of Levy 97.3% 97.1% 96.6% 97.2% 96.0% 96.2% 96.8% 97.2% 97.5% 98.2% Total Collections to Date Collections in Subsequent Years $ 656 942 1,058 1,277 1,767 1,622 746 698 887 - $ Amount 44,344 47,373 48,163 50,685 57,643 56,843 62,983 61,007 61,517 61,227 Percentage of Levy 98.8% 99.1% 98.7% 99.7% 99.1% 99.1% 97.9% 98.3% 98.9% 98.2% 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 City of Scottsdale, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands) Table XIII Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 City of Scottsdale, Arizona Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Municipal Property Corporation Bonds $ 62,684 112,209 155,200 154,879 154,837 153,582 152,578 149,983 222,403 218,942 General Obligation Bonds $ 371,499 501,614 478,369 578,894 555,701 583,071 579,972 603,426 651,224 647,859 Revenue Bonds $ 5,815 2,990 - General Obligation Bonds $ 6,515 - Business-Type Activities Municipal Property Corporation Bonds Revenue Bonds $ 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 34,747 296,418 Governmental Activities Scottsdale Special Preserve Assessment Certificates of Authority Bonds Participation Bonds $ 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 53,100 13,914 Community Facilities District Bonds $ 43,193 41,708 40,143 42,313 40,578 38,725 36,762 34,685 32,083 30,090 Percentage of Personal Income 7.95% 10.32% 10.47% 11.54% 12.13% 11.62% 11.77% 11.09% 11.63% 11.43% Per Capita 3,428 4,510 4,555 5,444 5,267 5,691 5,709 5,667 5,965 5,776 Capital Lease $ 179 139 97 53 7 - 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 $ 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 1,298,389 Contracts Payable $ 14,324 13,136 19,819 17,875 16,828 15,732 14,582 13,375 2,570 - Capital Lease $ 172 141 183 329 Service Concession Arrangements $ 3,144 2,990 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) Table XIV Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Governmental Activities - General Obligation Bonds $ 371,499 501,614 478,369 578,894 555,701 583,071 579,972 603,426 651,224 647,859 Business-Type Activities - General Obligation Bonds $ 6,515 - Less: Amounts Available in Debt Service Fund $ 5,602 12,436 9,383 9,520 10,841 4,932 6,787 5,789 10,105 9,369 Net General Bonded Debt $ 372,412 489,178 468,986 569,374 544,860 578,139 573,185 597,637 641,119 638,490 Percentage of Total Taxable Assessed Value of Property (1) 8.6% 10.3% 9.0% 7.9% 6.6% 6.9% 7.8% 10.5% 12.6% 13.2% 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 $ 1,701 2,213 2,123 2,576 2,472 2,641 2,637 2,742 2,885 2,840 161 Table of Contents 162 City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2014 (dollars in thousands) Table XV 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 $ 712,375 97,230 15,105 262,079 273,525 14,975 8,505 246,635 80,225 Estimated Percentage Applicable 14.9798% 0.0002% 5.8069% 70.0601% 31.2013% 62.4632% 3.5953% 0.3591% 0.0001% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 106,712 877 183,613 85,343 9,354 306 886 387,091 967,224 100.0000% 967,224 $ 1,354,315 Source: Maricopa County Assessor's Office City of Scottsdale, Arizona Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Scottsdale. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the county's taxable assessed value that is within the government's boundaries and dividing it by the county's total taxable assessed value. Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) Table XVIa 2005 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 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 554,905 $ 36.12% $ Total Net Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) $ 313,786 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 868,691 2006 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 34.88% 29.33% 24.97% 29.74% 574,606 $ 39.33% $ 64,799 $ 2007 284,145 $ 126,820 $ 157,325 44.63% 312,567 $ 112,745 $ 199,822 36.07% 434,629 $ 149,580 $ 285,049 34.42% 496,345 $ 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 $ 613,723 341,519 271,769 20.42% $ $ 304,799 $ 226,790 25.59% 412,449 57.28% $ 78,009 $ 965,570 553,121 55.23% 69,750 $ 454,873 2014 289,671 65,944 $ 223,727 22.77% 163 Table of Contents 164 City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2014 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2014 Net Secondary Assessed Valuation as of June 30, 2014 $ 4,827,850 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 965,570 Debt applicable to limit: General Obligation Bonds 553,121 Legal 20% Debt Margin (Available Borrowing Capacity) $ 412,449 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 289,671 Debt applicable to limit: General Obligation Bonds Legal 6% Debt Margin (Available Borrowing Capacity) 65,944 $ 223,727 Source: City of Scottsdale City Treasurer 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Operating Revenue(1) $ 105,078 115,374 125,880 131,553 130,782 133,624 132,441 134,336 138,224 142,066 Less: Operating Expenses $ 56,413 56,329 64,089 66,077 71,236 70,165 77,456 78,837 73,647 77,891 Net Operating Revenue $ 48,665 59,045 61,791 65,476 59,546 63,459 54,985 55,499 64,577 64,175 Development Fee Revenue $ 20,155 24,071 17,878 15,280 3,043 3,126 3,859 3,073 12,213 15,139 Net Revenue $ 68,820 83,116 79,669 80,756 62,589 66,585 58,844 58,572 76,790 79,314 Special Assessment Bonds Highway User Revenue Bonds Debt Service Principal $ 2,630 3,330 3,475 3,640 3,660 3,115 3,220 3,380 3,115 3,240 Debt Service Interest $ 3,570 3,182 2,997 2,582 2,507 2,351 2,199 2,056 1,891 1,738 Coverage 11.10 12.76 12.31 12.98 10.15 12.18 10.86 10.77 15.34 15.93 Highway User Tax Revenue $ 14,738 15,708 16,778 16,123 14,083 13,342 13,396 10,885 11,903 12,268 Scottsdale Preserve Authority Bonds Debt Service Principal $ 2,660 2,825 2,990 - Debt Service Interest $ 460 317 165 - Coverage 4.72 5.00 5.32 N/A N/A N/A N/A N/A N/A N/A Municipal Property Corporation Bonds Includes Transient Occupancy Tax (6) Fiscal Year Ended June 30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (1) Special Assessment Collections $ 2,016 1,106 1,825 895 821 765 733 719 591 - Debt Service Principal $ 2,448 851 848 846 845 757 757 755 755 - Debt Service Interest $ 360 275 235 197 158 121 86 52 17 - Coverage(2) 0.72 0.98 1.69 0.86 0.82 0.87 0.87 0.89 0.77 N/A 0.2 % and 0.15% Sales Tax(3) $ 31,301 35,483 37,281 35,604 29,121 26,416 27,199 28,809 30,376 32,655 Debt Service Principal $ 2,595 2,815 2,965 3,110 3,260 3,365 3,470 3,655 3,800 3,960 Debt Service Interest $ 4,437 3,997 3,843 3,676 3,502 3,374 2,471 2,835 2,680 2,508 Coverage 4.45 5.21 5.48 5.25 4.31 3.92 4.58 4.44 4.69 5.05 Debt Debt Service Service Principal(4) Interest(4) $ 8,265 $ 6,413 5,995 10,017 5,305 10,057 5,584 13,988 7,570 19,482 9,715 18,415 9,785 22,185 11,841 21,141 12,355 21,480 18,200 22,994 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. Includes Transient Occupancy taxes which are pledged revenues for MPC bonds issued prior to July 1, 2010. (7) Excludes Transient Occupancy taxes that are no longer pledged revenues for MPC bonds issued on or after July 1, 2010. (6) Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Excise Tax(5) $ 180,005 202,081 218,205 216,066 185,801 170,638 168,641 171,075 184,079 198,679 Coverage 12.26 12.62 14.20 11.04 6.87 6.07 5.27 5.19 5.44 4.82 Excludes Transient Occupancy Tax (7) Excise Tax(5) $ 155,515 157,645 170,227 183,376 Coverage N/A N/A N/A N/A N/A N/A 4.86 4.78 5.03 4.45 165 Table of Contents 166 City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Table XVIII Fiscal Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Population(1) 218,984 221,030 220,907 221,031 220,410 218,888 217,365 217,965 222,200 224,800 Personal Income(2) (in thousands) $ 9,448,722 9,661,884 9,611,884 10,428,464 9,573,949 10,715,662 10,542,637 11,135,832 11,393,527 11,358,020 Per Capita Personal Income(3) $ 43,148 43,713 43,511 47,181 43,437 48,955 48,502 51,090 51,276 50,525 Median Age(4) 41.0 41.0 41.0 41.0 41.0 45.4 45.4 45.4 45.4 45.1 Charter and Public School Enrollment(5) 26,559 27,000 26,653 26,567 27,029 27,093 27,116 28,177 27,816 27,191 Year-End Average Unemployment Rate(6) 3.2% 3.0% 2.6% 2.3% 3.9% 6.8% 7.2% 6.8% 5.8% 5.6% Data Sources and Notes: (1) July 1 Population estimate, State of Arizona Office of Employment and Population Statistics. (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, 5-Year Estimates used for FY 2011-2014 estimates. (4) U.S. Census; 2003-2009 based on Census 2000; 2010-2012 based on Census 2010, 2013-2014 based on U.S. Census, American Community Survey, 5-Year Estimates. (5) Arizona Department of Education. For 2014, Arizona Department of Education Oct. 1, 2013 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 2014 is for Calendar Year 2013. City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago Table XIX 2014 Employer Scottsdale Healthcare Corporation General Dynamics C4 Systems (2) Scottsdale Unified School District City of Scottsdale Vanguard Mayo Clinic Scottsdale Insurance Company International Cruise and Excursion (3) CVS - CareMark McKesson Corporation DMS Direct Marketing Fairmont Princess Resort Total Employees 6,134 2,929 2,583 2,446 2,186 1,851 1,501 1,350 1,088 1,000 23,068 Rank 1 2 3 4 5 6 7 8 9 10 - 2005 Percentage of Total City Employment(1) 5.31% 2.54% 2.24% 2.12% 1.89% 1.60% 1.30% 1.17% 0.94% 0.87% 19.98% Employees 4,400 4,000 3,500 2,191 1,120 3,995 1,300 1,636 1,500 1,200 24,842 Rank 1 2 4 5 10 3 8 6 7 9 Source: City of Scottsdale Economic Trends Report, September 2005 and Economic Development Department communications with employers, July 2014. (1) Annual Employment according to the Arizona Office of Employment and Population Statistics was 115,456 in June 2014, and was 122,749 in June 2005. (2) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2014 numbers only report Scottsdale-based employees. 2005 included all employees. (3) CVS Caremark was known CareMark in 2005. Caremark was acquired by CVS in 2007. Percentage of Total City Employment(1) 3.58% 3.26% 2.85% 1.78% 0.91% 3.25% 1.06% 1.33% 1.22% 0.98% 20.22% 167 Table of Contents 168 City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years Table XX City of Scottsdale, Arizona 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 2005 12.4 36.0 512.6 10.0 143.0 215.0 35.5 78.8 139.7 140.0 260.7 630.1 79.3 25.0 139.0 2,457.1 2006 13.0 39.0 559.4 11.0 149.0 217.0 35.5 80.8 151.7 144.0 259.0 676.1 83.3 27.0 152.5 2,598.3 2007 2008 15.0 40.0 14.7 15.0 580.3 40.0 151.0 546.1 77.0 134.0 2009 38.5 16.0 543.1 54.0 110.5 (1) 2010 35.0 14.0 489.3 47.0 2011 35.0 14.0 2012(3) 138.8 14.0 2013 124.6 14.0 2014 127.4 14.0 214.5 487.6 188.5 459.5 175.5 454.2 176.5 454.2 95.5 153.0 30.5 75.8 83.5 141.0 93.0 140.0 93.0 140.0 172.6 53.5 91.8 167.1 35.5 81.8 92.5 155.0 30.0 78.8 205.2 999.6 224.0 981.6 167.5 953.6 957.6 933.6 924.6 934.6 248.5 85.8 233.0 89.0 197.0 89.0 206.0 89.0 205.0 89.0 204.0 89.0 204.0 90.0 169.0 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 2,422.9 204.0 2,437.7 172.6 36.5 83.8 170.5 167.0 268.0 705.6 85.3 30.0 162.0 2,722.3 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 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) City Treasurer (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 (4) News releases, media updates, traffic alerts, construction updates released to news media Total ad value equivalency generated (5) 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 (continued on next page) 2005 2006 2007 2008 Fiscal Year 2009 2010(2) 30% 32% 34% 35% 34% 32% 40% 37% 37% 34% 10 15 10 11 13 16 17 14 14 14 651 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 1,080 65 136,747 / 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 99,063/ 83,441 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 32,865 209,325 93% No Survey 90% No Survey No Survey No Survey 94% No Survey No Survey 98% 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 N/A 64,931 2,600 138 251 648 25 399 2,001 4,419 6,400 2,365 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% 6.0% 1.4% 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 1,335,869 7.0 30.0 30.0 80.0 147.8 170.0 266.0 266.0 167.3 45.8 9,611 10,778 9,460 8,224 6,234 5,748 5,310 5,018 4,678 5,019 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 7,765,110 22,502,626 2011 2012 2013 2014 169 Table of Contents 170 City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Table XXI Division Community and Economic Development Planning and Development 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 (6) % of survey respondents rating "Your Neighborhood as a Place to Live" as good to excellent(7) Transportation Total citywide transit ridership Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies) (8) Economic Development Targeted job creation number of companies / number of jobs(9) Tourism 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)(10) Scottsdale Valley Average Achieve the standard of six minutes or less for response to emergency calls for service (includes medical and accident related calls) City of Scottsdale, Arizona Provide initial contact to 100% of citizen traffic concerns within seven days Fire Total incidents Responses per capita Travel time (en-route to on-scene) (continued) Fiscal Year 2009 2010(2) 2005 2006 2007 2008 2011 2012 2013 2014 25 15 20 20 7 7 6 6 12 15 100% 98% 100% 99% 100% 99% 100% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 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% 14,222 2% 89% No Survey 90% No Survey No Survey No Survey 91% No Survey No Survey 93% 1,969,512 2,104,382 2,365,204 2,584,837 3,472,828 3,103,185 2,539,744 2,499,000 2,599,557 2,589,218 270 322 375 475 N/A 8,578 10,397 10,500 5,043 3,687 10 / 1,443 11 / 1,275 7 / 1,800 5 / 1,374 7 / 394 10 / 731 7 / 450 8 / 1,595 36 / 1,593 16 / 1,069 60.0% +5% 58 69.0% +5% 62 69.0% +9% 71 65.0% -2% 65 59.2% -21% 100 58.0% -6% 110 58.8% 8% 95 61.5% 5% 119 63.0% 3% 126 65.6% 10% 275 208,106 210,481 185,241 201,958 169,972 156,896 136,089 146,058 146,432 142,248 57 49 43 44 31 28 20 20 27 24 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 27.8 N/A 6:12 N/A 6:06 5:07 5:07 5:01 4:57 5:11 4:54 5:04 98% 98% 100% 100% 100% 100% 100% 100% 100% 100% 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 28,544 0.13 4:27 Table of Contents City of Scottsdale, Arizona City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Table XXI Division Public Works and Water Resources Public Works Facility inventory maintained (square feet) # of active Capital Projects # of homes serviced by Residential Refuse Collection # of citizens serviced annually by Household Hazardous Waste collection program(11) 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(12) Fiscal Year 2009 2010(2) 2005 2006 2007 2008 2011 2012 2013 2014 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 3,313,468 150 80,354 1,718 2,000 2,100 2,200 1,923 1,497 2,573 2,591 2,691 2,905 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 88,348 70.2 9.7 79,014 20.9 1,059,738 Source: The City of Scottsdale's Budget Office and applicable City divisions. (1) This presentation is consistent with the organizational structure approved as part of the FY 2013/14 Budget. It has been noted where changes were approved by the City Council mid-year. (2) In FY 2010, the indicators for prior years were restated to actuals. 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) The complete results for the most recent survey, as well as archived copies of prior year surveys can be found at http://www.scottsdaleaz.gov/CitizenSurvey/Citizen_Survey_Results (3) (5) Effective FY 2012 established more appropriate performance measures for Office of Communication activities and products (ad value equivalency). (6) 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. (7) The complete results for the most recent survey, as well as archived copies of prior year surveys can be found at http://www.scottsdaleaz.gov/CitizenSurvey/Citizen_Survey_Results (8) 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. (9) Effective FY 2013/14, only jobs verified through employer to be created within the first 12 months were counted in annual metrics; total announced job creation is significantly higher. (10) (11) 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. 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. (12) Effective July 2011, the City Council approved placing Meter Reading under the control of the Water Resources Division. 171 Table of Contents 172 City of Scottsdale, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years Table XXII 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. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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 4 359 15 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 20,748,525 2,947 297 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 42 975 4 55 6 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 2,079 10,874 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 1,429.0 187.7 City of Scottsdale, Arizona Table of Contents City of Scottsdale, Arizona City Treasurer’s Office (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance