Compr ehensi v eAnnual Fi nanci al Repor t Ci t yofScot t sdal e, Ar i z ona Fort heFi scal YearEndedJune30, 2016 City of Scottsdale, Arizona Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016 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 Comprehensive Annual Financial Report For the Fiscal Year ended June 30, 2016 Table of Contents Introductory Section Letter of Transmittal - City Treasurer....................................................................................................... 1 Certificate of Achievement - Government Finance Officers Association.......................................... 7 List of Elected and Appointed Officials................................................................................................... 9 Organizational Chart.................................................................................................................................. 11 Financial Section Independent Auditor’s Report.................................................................................................................. 13 Management’s Discussion and Analysis.................................................................................................. 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position................................................................................................................. 36 Statement of Activities....................................................................................................................... 38 Fund Financial Statements: Balance Sheet - Governmental Funds.............................................................................................. 39 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.................................................................................................................................... 41 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds.......................................................................................................................... 42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities............................... 44 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund................................................................................................... 45 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund.................................................................. 47 Statement of Fund Net Position - Proprietary Funds................................................................... 48 Reconciliation of the Proprietary Funds Statement of Fund Net Position to the Statement of Net Position...................................................................................................... 50 City of Scottsdale, Arizona i Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds................................................................................................................................ 51 Reconciliation of the Proprietary Funds Statement of Revenue, Expenses, and Changes in Fund Net Position to the Statement of Activities............................................. 52 Statement of Cash Flows - Proprietary Funds............................................................................... 53 Statement of Fiduciary Net Position - Fiduciary Funds............................................................... 55 Statement of Changes in Fiduciary Net Position - Fiduciary Funds.......................................... 56 Notes to Financial Statements: I. Summary of Significant Accounting Policies.................................................................................. 57 II. Reconciliation of Government-wide and Fund Financial Statements......................................... 68 III. Stewardship, Compliance and Accountability................................................................................. 76 IV. Detailed Notes on All Funds A. Cash and Investments.................................................................................................................... 80 B. Receivables....................................................................................................................................... 84 C. Capital Assets.................................................................................................................................. 85 D. Interfund Balances and Interfund Transfers ............................................................................. 88 E. Leases................................................................................................................................................ 89 F. Service Concession Arrangements............................................................................................... 90 G. Bonds, Loans and Other Payables............................................................................................... 91 V. Other Information A. Risk Management......................................................................................................................... 102 B. Contingent Liabilities .................................................................................................................. 102 C. Subsequent Event......................................................................................................................... 103 D. Joint Ventures................................................................................................................................ 103 E. Pollution Remediation................................................................................................................. 104 F. Related Organization.................................................................................................................... 105 G. Retirement and Pension Plans.................................................................................................... 106 H. Other Postemployment Benefits............................................................................................... 121 City of Scottsdale, Arizona ii I. Postemployment Benefits Other Than Pensions...................................................................... 122 Required Supplementary Information............................................................................................ 125 Notes to Required Supplementary Information........................................................................... 133 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds........................................................... 137 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds............................................................................................................ 138 Combining Balance Sheet - Nonmajor Special Revenue Governmental Funds............................. 139 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds.............................................................................. 141 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Transportation - Special Revenue Fund......................................................................................... 143 Community Development Block Grant - Special Revenue Fund.............................................. 144 HOME - Special Revenue Fund..................................................................................................... 145 Grants - Special Revenue Fund....................................................................................................... 146 Section 8 - Special Revenue Fund................................................................................................... 147 Preserve Privilege Tax - Special Revenue Fund............................................................................ 148 Streetlight Districts - Special Revenue Fund................................................................................. 149 Special Programs - Special Revenue Fund..................................................................................... 150 Tourism Development - Special Revenue Fund........................................................................... 151 Combining Balance Sheet - Nonmajor Debt Service Governmental Funds.................................. 152 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds.................................................................................... 153 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: General Obligation Bond Debt Service Fund.............................................................................. 154 Municipal Property Corporation Debt Service Fund.................................................................. 155 Debt Service Stabilization Debt Service Fund............................................................................. 156 Scottsdale Preserve Authority Debt Service Fund....................................................................... 157 City of Scottsdale, Arizona iii Combining Balance Sheet - Nonmajor Capital Projects Governmental Funds.............................. 158 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds............................................................................... 159 Combining Statement of Fund Net Position - Internal Service Funds........................................... 161 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds............................................................................................................................. 162 Combining Statement of Cash Flows - Internal Service Funds........................................................ 163 Combining Statement of Fiduciary Net Position - Fiduciary Funds................................................ 165 Combining Statement of Changes in Assets and Liabilities - Agency Funds................................. 166 Other Supplementary Information: Schedule of Changes in Long-Term Debt............................................................................................ 168 Statistical Section Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting)...................... 172 Changes in Net Position - Last Ten Fiscal Years (accrual basis of accounting)............................. 173 Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting).................................................................................................. 176 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting).................................................................................................. 177 Tax Revenues by Source - Last Ten Fiscal Years (modified accrual basis of accounting)............ 180 Revenue Capacity Taxable Sales Subject to Privilege (Sales) Tax by Category - Last Ten Fiscal Years....................... 181 Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years...................................................... 182 Sales Tax Revenue Payers by Industry - Current Year and Nine Years Ago................................... 183 Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years................... 184 Principal Property Taxpayers - Current Year and Nine Years Ago................................................... 185 Assessed Value of Taxable Property - Last Ten Fiscal Years............................................................ 186 Property Tax Levies and Collections - Last Ten Fiscal Years............................................................ 187 City of Scottsdale, Arizona iv Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years........................................................... 188 Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years.................................... 189 Direct and Overlapping Governmental Activities Debt as of June 30, 2016................................. 190 Legal Debt Margin Information - Last Ten Fiscal Years.................................................................... 191 Pledged-Revenue Coverage - Last Ten Fiscal Years............................................................................ 193 Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years........................................................ 194 Principal Employers - Current Year and Nine Years Ago.................................................................. 195 Operating Information Full-time Equivalent City Government Employees by Function - Last Ten Fiscal Years............. 196 Operating Indicators by Division - Last Ten Fiscal Years.................................................................. 197 Capital Asset Statistics by Function - Last Ten Fiscal Years.............................................................. 200 City of Scottsdale, Arizona v City of Scottsdale, Arizona vi Letter of Transmittal For the Fiscal Year Ended June 30, 2016 October 27, 2016 To the Honorable Mayor, Members of the City Council and Citizens of the City of Scottsdale, Arizona: The Comprehensive Annual Financial Report of the City of Scottsdale, Arizona, (the City) for the fiscal year ended June 30, 2016 is submitted in accordance with City Charter and state statute. Both require that the City issue an annual 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 contained in this report, based upon a comprehensive framework of internal control established for this purpose. Because the cost of internal control should not exceed anticipated benefits the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. 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. Heinfeld, Meech & Co., P.C., a firm of Certified Public Accountants, performed the annual independent audit and expressed an opinion that the City’s financial statements for the fiscal year ended June 30, 2016 are fairly stated in conformity with accounting principles in the United States. This is the most favorable conclusion and is commonly known as an unmodified or “clean” opinion. The independent auditor’s report is located at the front of the financial section of this report. Additionally, Heinfeld, Meech & Co., P.C. 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 from the City’s website. 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 auditor’s report and provides a narrative introduction, overview and analysis of the City’s basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. CITY OF SCOTTSDALE PROFILE History Scottsdale was founded in 1888 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 Current Profile 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 2,021 residents, and the 2010 census reporting 217,365. At July 1, 2016 the City’s population was estimated at 231,200 residents, making it the seventh largest municipality by population in Arizona. Government and Organization 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 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. Budgetary Controls 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. Each year 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 2015/16, 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 has a diverse economy built on medical research, high-tech innovation, tourism and corporate headquarters. The Scottsdale Airpark is one of the largest employment centers in the State of Arizona with more than 2,900 businesses and 51,000 employees in over 2 million square feet of commercial space. 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 Scottsdale is home to a number of technology and healthcare companies and one of the most successful shopping centers in the southwest United States – Scottsdale Fashion Square. 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. City of Scottsdale, Arizona 2 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 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’s applied tax rate. The City continues to experience growth in its municipal sales tax revenues with a year-over-year increase of 4.3 percent in fiscal year 2015/16, with the highest increases occurring in the rentals, miscellaneous retail, other taxable activities, and automotive categories. The Arizona Legislature passed a bill that required local municipal transaction privilege and affiliated excise taxes to be collected and administered by the Arizona Department of Revenue (ADOR) effective January 1, 2015; however, full implementation has been delayed until January 2017. When this does occur, the change may result in a temporary cash-flow impact to Scottsdale during the transition from the City’s administration and collection of the taxes to the ADOR. Property Values Scottsdale is a safe, family-friendly community and benefits from a robust assessed valuation of the properties contained within its boundaries. These strong assessed valuations contribute to Scottsdale residents experiencing lower property tax rates and higher median housing values than many of the surrounding municipalities in the Phoenix metropolitan area. Scottsdale property owners will see a reduction in the City’s portion of their property tax bill in the coming year. This reduction is achieved mainly through a decrease in tort recovery. 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 several years with a continued focus on efficient spending to maintain essential City services to the community such as police, fire, transportation and social services. 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 that are adopted annually by the City Council. City of Scottsdale, Arizona 3 Financial Resources Planning Scottsdale’s strategic financial planning begins with a determination of the City’s fiscal capacity, based on longterm financial forecasts of available revenues. Conservative financial forecasts, coupled with financial trend analysis techniques and reserve analysis, help preserve the fiscal well-being of Scottsdale. Strategic financial planning is a critical element to maintain long-term financial stability. Multi-Year Operating Budget Planning Multi-year budgeting encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to community expectations and broad goals of the City Council. While the City is required to adopt a one-year budget to meet State statutory requirements, Scottsdale builds a five-year financial plan to help anticipate future impacts and ensure achievement of the City’s long-term objectives. Strategic Capital Improvement Project Planning Scottsdale Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budgets. Projects with significant operating impacts are carefully timed to avoid contingent liabilities that future operating resources cannot meet. All capital funding sources are conservatively estimated to avoid overcommitting 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; and 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 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, Arizona 4 City of Scottsdale Bonded Debt Ratings As of June 30, 2016 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+ ACCOMPLISHMENTS AND PRIORITIES Highlights of activities and accomplishments for the fiscal year ended June 30, 2016 include the following: • Celebrated Scottsdale’s 65th birthday and the 40th anniversary of both Scottsdale Center for the Performing Arts and Scottsdale Public Art. • Increased diversion of recyclable materials from residential single-family homes to 28% (highest rate of any large Valley city). • Opened 7.5 miles of new trails in the northern preserve region. • Reconstructed wheelchair accessible (ADA) ramps at 293 intersections. • Created a new after school and summer Police P.L.A.Y. Program where Scottsdale youth interact with Police Officers through arts and crafts and recreational activities. • Attracted or expanded 9 businesses with 1,183 jobs and an average wage of $67,085. The City of Scottsdale’s adopted fiscal year 2016/17 budget incorporates the priorities and policy direction expressed by the City Council over the past year. It balances modest projected increases in revenue with additional expenses in priority areas like Downtown Scottsdale and employee compensation and benefits including: • Providing $0.3 million in funding for Downtown Events and an additional $0.5 million in tourism funds to install conduit and electrical outlets on existing city poles to expand seasonal lighting throughout Downtown. • An additional $1.1 million in the Fire Department to address fire fighter compensation and to remain competitive in the local market. • Addressing rising employee health care costs by including an additional $1.4 million to cover the City’s portion of the increase. City of Scottsdale, Arizona 5 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 for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2015, marking the forty-third 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 received the Distinguished Budget Presentation Award for the fiscal year beginning July 1, 2015 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, 2016. Lastly, the City was awarded a Certificate of Excellence in September 2016 from the International City/County Management Association (ICMA) for exceeding standards set by the ICMA in the identification and public reporting of key outcome measures, surveying of both residents and employees and the pervasiveness of performance management in the City’s culture. Acknowledgments The preparation of this report would not have been possible without the talent, effort and dedication of the Accounting and Finance departments and the many members of other departments who responded 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 6 City of Scottsdale, Arizona 7 This page is intentionally blank. City of Scottsdale, Arizona 8 Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2016 City of Scottsdale, Arizona List of Elected and Appointed Officials City Council W.J. “Jim” Lane, Mayor Suzanne Klapp Virginia Korte Kathy Littlefield Linda Milhaven Guy Phillips David N. Smith Charter Officers Brian Biesemeyer, Acting 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, Arizona 9 This page is intentionally blank. City of Scottsdale, Arizona 10 Citizens of Scottsdale Mayor and City Council Organization Chart City Attorney City Auditor Boards, Commissions, Task Forces City Clerk City Manager City Treasurer 11 City of Scottsdale, Arizona Civil Accounting Prosecution Budget Victim Services Business Services Presiding Judge City Court Finance Risk Management Public Safety Police Fire Administrative Services Community & Economic Development Information Technology Purchasing Public Works Human Services Capital Projects Airport Libraries Facilities Economic Development Parks & Recreation Fleet Planning & Development Preserve Communications Human Resources Community Services Tourism & Events Transportation WestWorld Solid Waste Street Operations Water Planning & Engineering Reclamation Services Water Quality Water Services City of Scottsdale, Arizona 12 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the City Council City of Scottsdale, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Scottsdale, Arizona (City), as of and for the year ended June 30, 2016, 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. Auditor’s 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. City of Scottsdale, Arizona 13 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, 2016, 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. Change in Accounting Principle As described in Note I.E., the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, for the year ended June 30, 2016, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and net pension liability and other post employment benefit plan information, as listed in the table of contents, 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. 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 Introductory Section, Combining and Individual Fund Statements and Schedules, Other Supplementary Information and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund 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 basic financial statements. Such 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules and Other Supplementary Information are fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. City of Scottsdale, Arizona 14 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 27, 2016, on our consideration of 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 results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Scottsdale, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Phoenix, Arizona October 27, 2016 City of Scottsdale, Arizona 15 City of Scottsdale, Arizona 16 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 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, 2016 and 2015. 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 City’s total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources at the close of fiscal years 2016 and 2015 by $4.89 billion and $4.10 billion (net position), respectively. Of these amounts, $251.8 million and $233.6 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 in fiscal year 2016 by $123.6 million compared to a decrease in net position of $16.9 million during fiscal year 2015. Total revenues exceeded total expenses in the current year due primarily to an increase in capital grants and contributions, charges for services and business taxes received, and a decrease in depreciation expense resulting from the reclassification of City assets. • As of June 30, 2016 and 2015, the City’s governmental funds reported combined ending fund balances of $229.2 million and $213.2 million, respectively. Approximately 26 percent of the current year amount ($59.6 million) is available for spending at the City’s discretion (unassigned fund balance). • At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned and unassigned components of fund balance) for the General Fund was $65.3 million or approximately 27 percent of total General Fund expenditures of $241.2 million. • The City’s total long-term liabilities decreased by $54.5 million to $1.56 billion during the fiscal year due primarily to the City making scheduled principal payments on its debt. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which include three components: (1) Government-wide Financial Statements (2) Fund Financial Statements (3) Notes to the Financial Statements City of Scottsdale, Arizona 17 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 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 CAFR Government-wide Financial Statements Basic Financial Statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Financial Section Notes to the Financial Statements Additional Required Supplementary Information Information on individual funds and other supplementary information not required by GAAP + Trend data and nonfinancial data Statistical Section Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business and, accordingly, 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, liabilities and 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. City of Scottsdale, Arizona 18 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 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 and sewer utility, solid waste management and airport operations. The government-wide financial statements include not only the City itself (known as the primary government), but also 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 36 and 38 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. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements; however, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, 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. 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. This comparison highlights the longterm impact of the government’s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. City of Scottsdale, Arizona 19 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 The City maintains several individual governmental funds organized according to their purpose (general, special revenue, debt service and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances 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. The basic governmental fund financial statements can be found on pages 39-47 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 its water, sewer, solid waste and aviation services. 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 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 is 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 48-54 of this report. 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 two 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 55-56 of this report. City of Scottsdale, Arizona 20 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 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 57-124 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the City’s portion of the net pension liability, schedule of contributions to the pension plans and progress in funding its obligation to provide other post-employment benefits (OPEB). Required supplementary information can be found on pages 125-133 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 135-166. 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 167-170. Statistical Information The statistical section, found on pages 171-200, 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. GOVERNMENT-WIDE FINANCIAL ANALYSIS While this document contains information about the funds used by the City to provide services to its citizens, the Statement of Net 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. These two statements report the City’s net position and change 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. City of Scottsdale, Arizona 21 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Analysis of Net Position As noted earlier, net position over time, may serve as a useful indicator of a government’s financial position. For the City, total assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $4.89 billion and $4.10 billion at the close of the fiscal years 2016 and 2015, respectively. The following table is a condensed summary of the City’s net position for governmental and business-type activities: Net Position June 30, 2016 and 2015 (in thousands) 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 Governmental Activities 2016 2015 $ 517,700 $ 4,263,858 4,781,558 71,239 4,852,797 489,053 3,574,505 4,063,558 75,785 4,139,343 LIABILITIES AND DEFERRED INFLOWS OF RESOURCES Long-term liabilities outstanding Other liabilities Total liabilities Total deferred inflows of resources Total liabilities and deferred inflows of resources 1,125,847 188,214 1,314,061 12,507 1,326,568 1,170,661 175,711 1,346,372 31,681 1,378,053 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 3,406,976 122,932 (3,679) 3,526,229 $ 2,663,269 117,485 (19,464) 2,761,290 $ Business-type Activities 2016 2015 $ 436,957 $ 1,370,730 1,807,687 9,852 1,817,539 398,594 54,006 452,600 2,914 455,514 $ 1,059,001 47,521 255,503 1,362,025 $ 425,957 1,358,970 1,784,927 11,043 1,795,970 Total $ 405,677 48,243 453,920 5,390 459,310 1,036,650 46,901 253,109 1,336,660 $ 2016 2015 954,657 $ 5,634,588 6,589,245 81,091 6,670,336 915,010 4,933,475 5,848,485 86,828 5,935,313 1,524,441 242,220 1,766,661 15,421 1,782,082 1,576,338 223,954 1,800,292 37,071 1,837,363 4,465,977 170,453 251,824 4,888,254 $ 3,699,919 164,386 233,645 4,097,950 The largest portion (91.4 percent) of the City’s net position reflects its net investment in capital assets (e.g., land, buildings, water and sewer system, and streets and storm drains) less any related outstanding debt used to acquire those assets. These amounted to $4.47 billion and $3.70 billion at June 30, 2016 and 2015, 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 (3.5 percent) of the City’s net position ($170.5 million at June 30, 2016 and $164.4 million at June 30, 2015) represents resources that are subject to external restrictions on how they may be used. Unrestricted net position (5.1 percent of the City’s total net position at June 30, 2016 and 5.7 percent at June 30, 2015), $251.8 million and $233.6 million, respectively, may be used to meet the government’s ongoing obligations to its citizens and creditors. Analysis of Changes in Net Position The City restated fiscal year 2016 beginning net position for both governmental and business-type activities due to a depreciation adjustment to capital assets and recording of a joint venture. More information on these adjustments can be found in Note I. F. on page 67 of this report. City of Scottsdale, Arizona 22 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Total revenues exceeded total expenses in the current year, resulting in an increase in the City’s total net position of $123.6 million in fiscal year 2016 compared to a decrease in net position of $16.9 million during fiscal year 2015. The reasons for this overall increase are explained in the governmental and business-type activities discussion herein and are due primarily to an increase in capital grants and contributions, charges for services and business taxes received, and a decrease in depreciation expense. Such amounts are included in the table that follows. Changes in Net Position For the fiscal years ended June 30, 2016 and 2015 (in thousands) REVENUES Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Business taxes Intergovernmental - taxes Intergovernmental - other Interest and investment income Other 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 prior period adjustments Net position - beginning restated Net position - ending Governmental Activities 2016 2015 Business-type Activities 2016 2015 $ $ 48,814 29,708 82,162 $ 45,656 28,397 14,831 174,825 22,545 $ 162,288 11,726 Total 2016 $ 223,639 29,708 104,707 2015 $ 207,944 28,397 26,557 63,221 202,195 46,820 10,810 2,955 9,987 496,672 66,229 191,631 46,183 10,133 1,372 13,829 418,261 145 2,531 200,046 169 1,346 175,529 63,221 202,340 46,820 10,810 5,486 9,987 696,718 66,229 191,800 46,183 10,133 2,718 13,829 593,790 813 1,129 6,893 821 4,964 1,974 5,658 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 91,136 7,174 98,310 790 927 6,103 792 5,682 1,828 5,088 40,631 138,899 135,647 55,134 17,849 583 34,134 1,643 445,730 (27,469) 6,579 (20,890) 100,854 42,058 3,894 20,786 167,592 32,454 (7,174) 25,280 95,958 44,352 3,703 20,911 164,924 10,605 (6,579) 4,026 813 1,129 6,893 821 4,964 1,974 5,658 38,291 102,892 136,261 53,322 20,264 589 31,665 100,854 42,058 3,894 20,786 573,128 123,590 123,590 790 927 6,103 792 5,682 1,828 5,088 40,631 138,899 135,647 55,134 17,849 583 34,134 1,643 95,958 44,352 3,703 20,911 610,654 (16,864) (16,864) 2,761,290 2,975,662 666,629 (193,482) 3,427,919 2,782,180 $ 3,526,229 $ 2,761,290 1,336,660 1,366,767 85 (34,133) 1,336,745 1,332,634 $ 1,362,025 $ 1,336,660 City of Scottsdale, Arizona 23 4,097,950 4,342,429 666,714 (227,615) 4,764,664 4,114,814 $ 4,888,254 $ 4,097,950 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Governmental Activities Net position for governmental activities increased $98.3 million after transfers during fiscal year 2016 compared to a decrease of $20.9 million after transfers in fiscal year 2015. Total revenues increased $78.4 million or 18.7 percent from the prior fiscal year and expenses decreased $40.2 million or 9.0 percent. Overall, revenues exceeded expenses resulting in an increase in net position. A significant reason for the positive change in net position before transfers for governmental activities was a $67.3 million increase in capital grants and contributions over the prior year. Also contributing, as noted earlier in the discussion of the analysis of change in net position, was a decrease in annual depreciation expense of $37.3 million resulting from the reclassification of assets from streets to land. More information on this prior period adjustment can be found on page 67. General revenues such as property, franchise and privilege taxes are not shown by program, but are used to support program activities citywide. Total general revenues were $6.6 million or 2.0 percent higher in fiscal year 2016 compared with fiscal year 2015. Property taxes were slightly lower in fiscal year 2016 at $63.2 million compared to $66.2 million in fiscal year 2015. Business taxes, which include sales, use and franchise taxes, increased $10.6 million or 5.5 percent from the previous year. This was due primarily to several large commercial building sales and one-time privilege tax audit payments. For governmental activities overall, without regard to program, business taxes, which includes sales and use taxes and franchise taxes (41 percent), are the largest single source of funds, followed by capital grants and contributions (16 percent), property taxes (13 percent), intergovernmental revenues (including state shared revenues) (12 percent), and charges for services (10 percent). Governmental Activities Revenues by Source Fiscal Year 2015/16 (in thousands) Interest and Investment Income $2,955 0% Intergovernmental $57,630 12% Charges for Services $48,814 10% Operating Grants and Contributions $29,708 6% Business Taxes $202,195 41% Capital Grants and Contributions $82,162 16% Property Taxes $63,221 13% Other Revenue $9,987 2% City of Scottsdale, Arizona 24 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 The Public Safety Division, which is comprised of the Police and Fire Departments, is the largest expense function (34 percent), followed by the Community and Economic Development Division (25 percent), and Community Services Division (13 percent). 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 $0.6 million or 0.5 percent during fiscal year 2016 due primarily to increased personnel costs in the Fire Department. 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. The division has six departments: Airport, Economic Development, Planning & Development, Tourism & Events, Transportation and WestWorld. Overall, expenses decreased by $36.0 million or 25.9 percent during fiscal year 2016, due primarily to a decrease in annual depreciation expense resulting from the reclassification of assets from streets to land. The City’s Community Services Division is responsible for improving and maintaining facilities and sponsors services that provide opportunities for family interaction, cultural enrichment, 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. The division has four departments: Parks & Recreation, Human Services, Library Systems and Preserve Management. Overall, expenses were $1.8 million or 3.3 percent lower than the prior fiscal year due primarily to a decrease in capital related expenses. Business-type Activities Net position for business-type activities increased by $25.3 million after transfers during fiscal year 2016 compared to $4.0 million after transfers in fiscal year 2015. Total revenues increased by $24.5 million or 14.0 percent due primarily to increases in charges for services and capital grants and contributions received. The $12.5 million increase in charges for services was driven by an increase in water service fees ($6.3 million) due to increased sales volume in the single family and multi-family categories; other revenues ($5.4 million increase) received for future expansion of infrastructure and higher volume charges for non-potable water fees ($0.8 million increase). Capital grants and contributions, which are chiefly made up of utility development fees and contributed capital from developers, increased $10.8 million, which includes airport federal and state aid ($5.6 million increase), non-cash developer contributions in the Water Fund ($2.5 million increase) and developer contributions in the Sewer Fund ($2.7 million increase). Overall, total revenues exceeded expenses resulting in an increase in net position for the fiscal year. City of Scottsdale, Arizona 25 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 As shown in 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). Business-type Activities Revenues by Source Fiscal Year 2015/16 (in thousands) Interest and Investment Income $2,531 1% Capital Grants and Contributions $22,545 11% Business Taxes $145 0% Charges for Services $174,825 88% As shown below in the Business-type Activities Program Revenues and Expenses chart, the largest of the City’s business-type activities, water and sewer utilities, had expenses of $100.9 million and $42.1 million, respectively, in fiscal year 2016, followed by solid waste with $20.8 million and airport with $3.9 million. Business-type Activites Program Revenues and Expenses Fiscal Year 2015/16 (in thousands) $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Water Utility Sewer Utility Solid Waste Program Revenues Program Expenses City of Scottsdale, Arizona 26 Airport Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 The Water and Sewer Utility’s combined expenses increased by 1.9 percent in fiscal year 2016 compared to fiscal year 2015. The increase was primarily driven by higher personnel, pension and other professional services expenses offset by lower indirect charges and net capital improvement expenses. 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 89,596 water service connections to customers in fiscal year 2016. Total Solid Waste program expenses were relatively unchanged in fiscal year 2016 compared to fiscal year 2015. The Solid Waste Department provided delivery of safe, efficient and environmentally sound refuse collection services to 81,187 residential customers in fiscal year 2016. The Airport’s total expenses increased by 5.2 percent in fiscal year 2016 compared to fiscal year 2015. The increase was primarily driven by higher depreciation, personnel, pension and other professional services costs. 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 162,000 take-offs and landings occurred in fiscal year 2016 at Scottsdale Airport. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 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 $229.2 million, an increase of $16.0 million in comparison to the balance at June 30, 2015 of $213.2 million. Approximately 26 percent or $59.6 million of this amount at June 30, 2016 constitutes unassigned fund balance. The remainder of fund balance is either nonspendable, restricted or committed to indicate that it is not available for new spending. City of Scottsdale, Arizona 27 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Revenues for governmental functions totaled $408.4 million in fiscal year 2016, a decrease of 0.9 percent ($3.6 million) from the previous year total of $412.0 million. In fiscal year 2016, expenditures for governmental functions totaled $403.1 million, a decrease of 16.1 percent ($77.6 million) from the fiscal year 2015 total of $480.7 million. For the current fiscal year, revenues exceeded expenditures for governmental functions by $5.2 million compared to a $68.7 million deficiency in fiscal year 2015. 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 $65.3 million, while the total fund balance was $65.6 million; the unassigned and total balances for the General Fund at the end of fiscal year 2015 were $56.0 million and $56.2 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 27.1 percent of the total General Fund expenditures of $241.2 million in fiscal year 2016 and represented 23.8 percent of the total General Fund expenditures of $235.2 million in fiscal year 2015. Total fund balance represented 27.2 percent and 23.9 percent of total fund expenditures for fiscal years 2016 and 2015, respectively. Overall, the General Fund’s performance resulted in revenues exceeding expenditures in the fiscal year ended June 30, 2016 by $15.8 million. Key contributors to the positive variance were increases in transaction privilege tax, franchise fees, state shared revenues and interest and investment earnings. The fund balance of the City’s General Fund increased in fiscal year 2016 by $9.4 million. The higher revenue received and lower other financing uses this fiscal year were the primary reasons for the increase. 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 $11.5 million, a decrease of approximately $0.7 million from the $12.2 million as of June 30, 2015. The decrease in fund balance was due primarily to lower property tax revenue. The General CIP Construction Capital Projects Fund accounts for the resources used to acquire, construct and improve major capital facilities from amounts transferred from the City’s General Fund. This fund also represents other City Council approved capital programs including transfers for tourism related capital projects and activity for the capital in-lieu parking and in-lieu stormwater. Previously this fund also accounted for activity funded from external resources, but in 2016 the City created a new “External Sources” fund to separately account for projects not financed by the General Fund. At the end of the current fiscal year, the fund balance of the General CIP Construction Capital Projects fund was $30.1 million, an increase of $3.9 million from the $26.2 million at June 30, 2015. Lower capital outlay was the primary contributor to the increase resulting from the newly created fund. Capital outlays in 2016 and 2015 were $8.0 million and $18.2 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. City of Scottsdale, Arizona 28 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 At the end of the fiscal years 2016 and 2015, the unrestricted net position for the Water and Sewer Utility Fund was $243.6 million and $238.7 million, respectively; the Airport Fund was $5.8 million and $8.0 million, respectively; and the Solid Waste Fund was $4.6 million and $5.4 million, respectively. The internal service funds, which are used to account for certain governmental activities, had unrestricted net position of $15.5 million and $14.0 million, respectively. The total growth in net position for the enterprise funds was $24.9 million and $3.4 million for fiscal years 2016 and 2015, respectively. Factors concerning the finances of these funds have been addressed previously in the discussion of the City’s business-type activities. 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: • Fire Department overtime • City Clerk elections due to a bond initiative • Scottsdale Cultural Council facility improvements These contingency budget transfers were significantly offset by divisions achieving more vacancy savings than expected. Revenues for fiscal year 2016 were $6.1 million more than projected. Drivers of the greater than anticipated revenues were: • Increased privilege sales tax due primarily to the sale of two apartment complexes, a commercial building and several large, one-time audit payments. • An increase in miscellaneous reimbursements and revenue due to the sale of a City-owned vacant residential lot. • Increased cable TV franchise fees primarily driven by aggressive cable TV campaigns to grow market share while facing a strong competition from online TV providers. • Better than anticipated interest earnings. City of Scottsdale, Arizona 29 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Expenses were $5.3 million less than the revised fiscal year 2016 budget largely due to the following: • Newly hired positions Citywide often began at rates lower than the previous incumbents. • More vacant positions and/or the length of time positions were held vacant occurred, which resulted in additional vacancy savings. • Retirement was less than originally planned due primarily to more sworn Police personnel entering the Deferred Retirement Option Program (DROP) than anticipated as the City does not pay retirement costs for those employees in the program. • Less unscheduled overtime usage than expected within the Police Department. • The price of fuel was lower than the estimated average price of diesel and unleaded gasoline that was used to build the budget. • Utilities were less than originally planned. • The jail services and photo enforcement contracts within the Police Department were less than projected. Capital Assets and Debt Administration Capital Assets The City’s capital assets for its governmental and business-type activities as of June 30, 2016 and 2015 totaled $5.63 billion and $5.60 billion, respectively (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, streets and storm drains, water and sewer systems, water rights, vehicles, machinery and equipment, furniture and fixtures, and construction in progress. The total increase in the City’s capital assets (net of accumulated depreciation) between fiscal years 2016 and 2015 was 0.6 percent. Capital Assets, Net of Depreciation June 30, 2016 and 2015 (in thousands) Land Buildings and Land Improvements Streets and Storm Drains Machinery and Equipment Water Rights Water System Sewer System Motor Vehicles Furniture, Fixtures, and Office Equipment Construction in Progress Total Governmental Activities 2016 2015* $ 3,034,137 $ 2,977,381 397,352 414,435 739,790 757,650 37,775 37,503 37,183 34,538 17,621 18,307 $ 4,263,858 $ 4,239,814 Business-type Activities 2016 2015 $ 50,325 $ 50,325 24,338 15,813 3,506 2,946 87,171 87,171 766,962 774,006 403,674 405,116 115 157 214 29 34,425 23,407 $ 1,370,730 $ 1,358,970 Total 2016 2015* $ 3,084,462 $ 3,027,706 421,690 430,248 739,790 757,650 41,281 40,449 87,171 87,171 766,962 774,006 403,674 405,116 37,298 34,695 214 29 52,046 41,714 $ 5,634,588 $ 5,598,784 *The June 30, 2015 Land asset category was increased by $1,118,512,723 and the Streets and Storm Drains category was decreased by $1,118,512,723 with accumulated depreciation of $666,566,315 due to a prior period adjustment. Additionally, the Machinery and Equipment category was restated due to a prior period adjustment to decrease cost by $1,267,932 with accumulated depreciation of $10,556. City of Scottsdale, Arizona 30 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Major capital asset events during fiscal year 2015/16 included the following: • Vehicles: $1.2 million for 2 Fire Pumper trucks and $1.2 million for 7 Solid Waste Loader vehicles. • Land: $56.0 million for land donated by developers that coincides with public street improvements for finalized permits. • Streets: $13.9 million related to streets, traffic control, sidewalks and storm drains and $18.9 million for new road improvements donated by developers. Additional information on the City’s capital assets can be found in Note IV.C. on pages 85-87 of this report. Debt Administration At the end of the fiscal years 2016 and 2015, the City had total long-term liabilities of $1,562.3 million and $1,616.8 million, respectively. Of these amounts, $551.5 million and $586.9 million, for fiscal years 2016 and 2015 respectively, are General Obligation Bonds backed by the full faith and credit of the City. The remainder includes water and sewer revenue bonds, Municipal Property Corporation bonds, Scottsdale Preserve Authority bonds, certificates of participation, net pension liability and other obligations of $1,010.8 million and $1,029.9 million for fiscal years 2016 and 2015, respectively. 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, 2016 and 2015 is $272.0 million and $256.6 million, respectively, in the 6 percent capacity and $518.6 million and $502.5 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. Long-Term Liabilities June 30, 2016 and 2015 (in thousands) Governmental Activities 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 Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Net Other Postemployment Benefit Net Pension Liabilities Total Long-Term Liabilities $ 2016 2015 551,515 $ 586,910 209,028 217,483 40,025 44,365 9,546 11,762 24,125 26,805 62,391 67,810 896,630 955,135 156 229 2,683 2,837 17,582 15,939 25,515 25,690 1,237 915 257,337 241,311 $ 1,201,140 $ 1,242,056 Business-type Activities $ 2016 $ City of Scottsdale, Arizona 31 26,280 274,682 - $ 23,021 323,983 3,491 33,722 361,196 $ 2015 Total 2016 2015 551,515 $ 586,910 26,280 29,335 483,710 503,925 40,025 44,365 9,546 11,762 29,335 286,442 - $ 24,891 340,668 3,298 30,821 374,787 24,125 26,805 85,412 92,701 1,220,613 1,295,803 156 229 2,683 2,837 17,582 15,939 29,006 28,988 1,237 915 291,059 272,132 $ 1,562,336 $ 1,616,843 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 During fiscal year 2016, the City’s total long-term liabilities decreased overall by $54.5 million due primarily to the City making scheduled principal payments on its debt. In accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions, the City’s proportionate share of its unfunded pension liabilities for pension plans in which it participates is also included in its outstanding long-term liabilities. The City’s net pension liabilities at the end of fiscal years 2016 and 2015 were $291.0 million and $272.1 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 91-101 of this report. Economic Factors and Next Year’s Budget and Rates The local economy is showing steady economic growth; however, the City’s long-term financial plan is still taking a conservative approach to spending. This is reflected in the fiscal year 2016/17 budget which includes the following priorities and policy given by City Council: • Preserve Meaningful Open Space • Support Economic Vitality • Enhance Neighborhoods • Advance Transportation • Seek Sustainability • Value Scottsdale’s Unique Lifestyle and Character A separate, key component of the annual financial plan is the City’s five-year Capital Improvement Plan for infrastructure and public facilities including roads, water and sewer improvements, parks, buildings and information technology. The City is projecting to spend up to $251 million for capital improvements in fiscal year 2016/17. Some notable projects include: • Build/Rebuild Fire Stations • Downtown Sidewalk, Lighting and Restroom • Frank Lloyd Wright Waterline & Booster Stations Modifications • Granite Reef Watershed Drainage Improvements • Pavement Replacement • Raintree Drive: Scottsdale Road to Hayden Road City of Scottsdale, Arizona 32 Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2016 Beginning in fiscal year 2016/17, the amount collected for the 1.1 percent sales tax on food for home consumption will be transferred to the Capital Improvement Plan in an effort to ensure the City’s assets are properly maintained. Also, in fiscal year 2016/17 citizen tax bills will reflect an estimated combined property tax rate of $1.1290 which is $0.0247 less than the adopted combined fiscal year 2015/16 rate of $1.1537. 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 the Scottsdale City Treasurer’s Office, 7447 E. Indian School Road, Suite 210, Scottsdale, AZ 85251. Or visit our website at: http://www.scottsdaleaz.gov/finance City of Scottsdale, Arizona 33 This page is intentionally blank. City of Scottsdale, Arizona 34 Basic Financial Statements City of Scottsdale, Arizona 35 Statement of Net Position June 30, 2016 (in thousands) Governmental Activities ASSETS Current Assets Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Taxes and Penalties Other Local Taxes Charges for Services Intergovernmental Interest and Other Internal Balances Supplies Inventory Prepaid Items $ 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 Ventures 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 Refundings Pensions Total Deferred Outflows of Resources $ 273,026 70,258 $ 186,748 28,056 Total $ 459,774 98,314 12,326 26,724 23,403 9,474 (1,452) 996 - 18 16,804 323 3,817 1,452 159 12,326 26,742 16,804 23,726 13,291 996 159 - 1,044 1,044 414,755 4,108 242,529 4,108 657,284 2,430 29,533 70,982 96,258 50,049 - 98,688 29,533 50,049 70,982 - 3,141 1,567 38,721 4,692 3,141 1,567 38,721 4,692 3,051,758 171,921 3,223,679 1,212,100 4,263,858 1,198,809 1,370,730 2,410,909 5,634,588 4,366,803 1,565,158 5,931,961 4,781,558 1,807,687 6,589,245 27,141 44,098 71,239 6,569 3,283 9,852 33,710 47,381 81,091 (continued) City of Scottsdale, Arizona 36 Business-type Activities $ $ Statement of Net Position June 30, 2016 (in thousands) Governmental Activities 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 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 $ Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Net Other Post Employment Benefit Net Pension Liabilities Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Total Noncurrent Liabilities Total Liabilities Pensions DEFERRED INFLOWS OF RESOURCES NET POSITION Net Investment in Capital Assets Restricted Debt Service Transportation and Preserve Privilege Tax Activities Capital Projects Grants Special Programs Streetlight and Services District Repair and Replacement Joint Venture Construction Deposits Unrestricted Total Net Position $ 14,671 10,355 137 11,513 6,903 4,196 2,871 51,978 17,230 56,877 8,246 3,237 188,214 $ 11,786 1,445 1 1,524 1,044 14,815 7,556 15,835 54,006 Total $ 26,457 11,800 138 13,037 6,903 4,196 3,915 66,793 24,786 72,712 8,246 3,237 242,220 14,002 1,237 257,337 853,271 1,125,847 1,967 3,141 1,567 33,722 308,148 50,049 398,594 15,969 3,141 1,567 1,237 291,059 1,161,419 50,049 1,524,441 1,314,061 452,600 1,766,661 12,507 2,914 15,421 3,406,976 1,059,001 4,465,977 35,518 49,471 31,796 2,177 3,958 12 (3,679) 3,526,229 4,692 38,721 4,108 255,503 1,362,025 40,210 49,471 31,796 2,177 3,958 12 38,721 4,108 251,824 4,888,254 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 37 Business-type Activities $ $ Statement of Activities For the Fiscal Year Ended June 30, 2016 (in thousands) Program Revenues FUNCTIONS/PROGRAMS 38 City of Scottsdale, Arizona 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 Total Governmental Activities $ Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-Type Activities Total Government Charges for Services Expenses 813 1,129 6,893 821 4,964 1,974 5,658 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 $ 100,854 42,058 3,894 20,786 167,592 $ 573,128 155 148 656 176 225 2,610 6,149 17,464 11,459 6,269 2,926 577 48,814 Operating Grants and Contributions $ 110,560 39,741 4,404 20,120 174,825 $ 223,639 Capital Grants and Contributions 7 4 5 871 192 15,041 3,042 10,546 29,708 $ $ 29,708 $ 335 79,700 255 1,872 82,162 Governmental Activities $ Net Position - Ending (651) (981) (6,233) (645) (4,959) (878) (3,048) (31,615) 9,313 (121,505) (34,635) (17,338) (12) (31,665) (244,852) $ Total - $ (651) (981) (6,233) (645) (4,959) (878) (3,048) (31,615) 9,313 (121,505) (34,635) (17,338) (12) (31,665) (244,852) 9,305 6,999 6,241 22,545 - 19,011 4,682 6,751 (666) 29,778 19,011 4,682 6,751 (666) 29,778 104,707 (244,852) 29,778 (215,074) 63,221 189,517 12,678 145 - 63,221 189,662 12,678 20,647 26,173 10,810 2,955 9,987 7,174 343,162 98,310 3,427,919 3,526,229 2,531 (7,174) (4,498) 25,280 1,336,745 1,362,025 20,647 26,173 10,810 5,486 9,987 338,664 123,590 4,764,664 4,888,254 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 The notes to the financial statements are an integral part of this statement. Business-type Activities $ $ $ Balance Sheet Governmental Funds June 30, 2016 (in thousands) ASSETS City of Scottsdale, Arizona 39 Cash and Investments Cash with Fiscal Agent Receivable (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Total Assets (continued) General $ $ 66,027 1,266 352 15,037 835 1,770 2,903 10,409 571 449 3,304 1,974 249 105,146 General Obligation Bond Debt Service $ $ 11,109 46,124 985 58,218 General CIP Construction Capital Projects $ $ 28,404 85 2,565 31,054 Total Nonmajor Governmental Funds $ $ 127,235 22,868 160 4,351 861 97 50 1,303 22,063 1,340 2,256 182,584 Total Governmental Funds $ $ 232,775 70,258 597 19,388 861 1,917 1,770 2,953 10,409 571 1,303 449 22,063 1,340 8,125 1,974 249 377,002 Balance Sheet Governmental Funds June 30, 2016 (in thousands) City of Scottsdale, Arizona 40 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) 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 General $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Nonspendable Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) The notes to the financial statements are an integral part of this statement. General Obligation Bond Debt Service $ 5,370 9,658 158 1,108 $ 10,729 35,395 General CIP Construction Capital Projects Total Nonmajor Governmental Funds $ $ 983 16 - 5,966 581 1,974 6,343 15,475 Total Governmental Funds $ 12,319 10,255 1,974 17,230 51,978 751 4,192 2,866 3,223 27,326 46,124 5 1,004 6,451 1,039 4 5 14 37,852 6,451 1,795 4,196 2,871 3,237 112,306 12,224 565 - 22,686 35,475 39,550 . 46,689 1,004 60,538 147,781 249 65,347 65,596 11,529 11,529 30,050 30,050 105,318 22,458 (5,730) 122,046 249 116,847 52,508 59,617 229,221 105,146 $ 58,218 $ 31,054 $ 182,584 $ 377,002 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2016 (in thousands) Fund Balances - Total Governmental Funds $ 229,221 Amounts reported for governmental activities in the statement of net position are different because (see Note II A): Capital assets used in governmental activities are not financial resources; therefore are not reported in the funds. 4,215,670 Change in equity in joint venture are not financial resources; therefore are not reported in the funds. 2,427 Prepayments and service concession arrangements are not financial resources; therefore are not reported in the funds. 100,515 Deferred outflows relating to deferred amounts on refunding and pensions are not financial resources; therefore are not reported in the funds. 70,744 Long-term liabilities, including bonds payable, are not due and payable in the current period; therefore are not reported in the funds. (1,178,020) Deferred inflows relating to pensions represent a future acquisition of net position that is not reported in the funds. Also, 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. 23,410 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. 62,262 Net Position of Governmental Activities $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 41 3,526,229 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) General REVENUES City of Scottsdale, Arizona 42 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) General Obligation Bond Debt Service $ $ 25,868 115,289 8,552 3,816 250 913 $ 32,098 - General CIP Construction Capital Projects $ Total Nonmajor Governmental Funds - $ 3,990 55,967 17,397 274 - Total Governmental Funds $ 61,956 171,256 17,397 8,826 3,816 250 913 20,647 26,173 8,991 1,838 - - 14,060 655 56 20,647 26,173 8,991 14,060 655 1,894 13,219 4,146 4,243 904 - 74 - 1,818 - 13,293 5,964 4,243 904 4,069 302 3,081 339 2,880 1,467 413 - 198 35 172 2,051 146 457 2,042 708 134 4,241 302 3,081 2,051 485 457 4,922 2,373 582 1,271 16 1,529 5,966 883 257,065 32,098 28 1 336 9,005 210 5,556 303 577 2,268 413 535 70 118,864 9,033 210 6,827 319 577 2,268 1,942 6,501 954 408,363 $ $ $ $ Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) General EXPENDITURES City of Scottsdale, Arizona 43 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 Capital Outlay Total Expenditures $ 742 1,138 7,118 824 4,042 1,094 5,670 18,244 23,180 126,077 34,523 15,648 - General Obligation Bond Debt Service $ - General CIP Construction Capital Projects $ Total Nonmajor Governmental Funds - $ 76 933 871 115 14,606 19,555 2,450 10,985 589 Total Governmental Funds $ 818 1,138 7,118 824 4,975 1,965 5,785 32,850 42,735 128,527 45,508 15,648 589 2,443 483 241,226 35,395 21,464 56,859 8,011 8,011 15,475 12,717 18,663 97,035 53,313 34,664 26,674 403,131 15,839 (24,761) (7,675) 21,829 5,232 OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of General Capital Assets Total Other Financing Sources (Uses) 11,760 (23,053) 4,806 (6,487) 24,118 24,118 9,606 (59) 9,547 39,596 (55,967) (16,371) 85,080 (79,079) 4,806 10,807 Net Change in Fund Balances (Deficits) 9,352 (643) 1,872 5,458 16,039 Excess (Deficiency) of Revenues over (under) Expenditures Fund Balances - Beginning, Restated * Fund Balances - Ending $ 56,244 65,596 $ 12,172 11,529 $ *Restated the General CIP Construction Capital Projects Fund by a deficit of $1,947,000 for the creation of the External Sources Nonmajor Capital Projects Fund. The notes to the financial statements are an integral part of this statement. 28,178 30,050 $ 116,588 122,046 $ 213,182 229,221 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, 2016 (in thousands) Net Change in Fund Balances - Total Governmental Funds $ 16,039 Amounts reported for governmental activities in the statement of activities are different because (see Note II B): Governmental funds report capital outlays as expenditures; however, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period. (54,810) Donations of capital assets and changes in joint venture equity interest are not capitalized on the governmental fund statements, but are shown in the statement of activities. 76,910 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. (25,984) Current-year pension contributions are reclassified from expenditures in the governmental funds to deferred outflows of resources in the government-wide statements. 21,185 Current-year joint venture contributions are reclassified from expenditures in the governmental funds to increase the joint venture asset in the government-wide statements. 817 Amounts provided by the State Treasurer directly to the Public Safety Personnel Retirement System on behalf of the City are not recognized in the governmental fund statements, but are shown in the statement of activities. 1,606 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 3,016 Prepayments are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net position. This is the amount of the 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. 53,313 Additional interest accretion calculated on bonds and notes payable and amortization of bond premium and deferred amounts on refunding. 2,999 The change in net position of the Internal Service Funds is attributed to governmental activities. 4,186 Change in Net Position of Governmental Activities $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 44 98,310 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 45 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 City Attorney Service Enhancement Parking Photo Radar Library Property Rental Interest Earnings Investment Income Intergovernmental Miscellaneous Developer Contributions Reimbursements from Outside Sources Indirect Costs Other Total Revenues (continued) Original $ $ 26,010 110,028 8,325 3,415 244 907 Actual Amounts Budgetary Basis Final $ 26,010 110,028 8,325 3,415 244 907 $ 25,868 115,289 8,552 3,816 250 913 Budget to GAAP Differences $ - Actual Amounts GAAP Basis $ 25,868 115,289 8,552 3,816 250 913 Variance Between Final Budget and Actual Amounts Budgetary Basis $ (142) 5,261 227 401 6 6 20,767 26,173 8,592 1,846 20,767 26,173 8,592 1,846 20,647 26,173 8,991 1,838 - 20,647 26,173 8,991 1,838 (120) 399 (8) 14,276 3,587 5,061 756 14,276 3,587 5,061 756 13,219 4,146 4,243 904 - 13,219 4,146 4,243 904 (1,057) 559 (818) 148 3,904 303 222 2,879 305 3,050 885 - 3,904 303 222 2,879 305 3,050 885 - 4,069 302 3,081 339 2,880 1,467 - 413 4,069 302 3,081 339 2,880 1,467 413 165 (303) 80 202 34 (170) 582 - 1,214 1,147 5,966 733 250,595 1,214 1,147 5,966 733 250,595 1,271 16 1,529 5,966 883 256,652 413 1,271 16 1,529 5,966 883 257,065 57 16 382 150 6,057 $ $ $ $ $ General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts City of Scottsdale, Arizona 46 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 Total Expenditures Original $ Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Sale of General Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance - Beginning Fund Balance - Ending The notes to the financial statements are an integral part of this statement. $ Final 760 719 6,353 873 4,328 1,279 5,899 18,260 24,217 128,009 35,038 17,088 $ 753 1,139 6,628 884 4,125 1,104 5,794 18,176 24,514 128,647 34,979 15,710 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 735 1,134 7,081 819 4,028 1,088 5,627 18,232 23,085 125,398 34,390 15,483 7 4 37 5 14 6 43 12 95 679 133 165 742 1,138 7,118 824 4,042 1,094 5,670 18,244 23,180 126,077 34,523 15,648 18 5 (453) 65 97 16 167 (56) 1,429 3,249 589 227 2,370 475 245,668 2,370 475 245,298 2,443 483 240,026 1,200 2,443 483 241,226 (73) (8) 5,272 4,927 5,297 16,626 (787) 15,839 11,329 9,089 (18,144) 4,193 (4,862) 9,089 (18,144) 4,193 (4,862) 11,760 (23,053) 4,806 (6,487) - 11,760 (23,053) 4,806 (6,487) 2,671 (4,909) 613 (1,625) 65 435 10,139 (787) 9,352 9,704 46,216 46,281 $ 65,937 66,372 $ 65,937 76,076 $ (9,693) (10,480) $ 56,244 65,596 $ 9,704 General Fund Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (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 1,200 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 47 413 (787) Statement of Fund Net Position Proprietary Funds June 30, 2016 (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 allowance for uncollectibles) 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 $ Airport 167,372 28,056 $ Solid Waste 7,149 - $ Governmental Activities Internal Service Funds Total 12,227 - $ 186,748 28,056 $ 40,251 - 15,023 279 3,015 - 16 323 11 437 - 2 1,781 18 57 - 18 16,804 323 308 3,509 - 181 747 949 159 95 - - 1,044 159 - 4,108 - - 4,108 - 218,961 8,031 14,085 241,077 41,179 96,214 50,049 4 - 40 - 96,258 50,049 3 - 3,141 38,721 4,692 1,567 - - 3,141 1,567 38,721 4,692 - 39,650 87,171 1,196,990 606,933 4,955 350 28,883 (635,421) 9,564 32,439 628 861 4 5,536 (11,746) 1,111 5,004 490 23 6 (2,701) 50,325 87,171 1,196,990 606,933 37,443 628 6,306 377 34,425 (649,868) 12,887 75,327 1,751 76 (41,853) Total Capital Assets (net of accumulated depreciation) 1,329,511 37,286 3,933 1,370,730 48,188 Total Noncurrent Assets 1,522,328 38,857 3,973 1,565,158 48,191 1,741,289 46,888 18,058 1,806,235 89,370 6,569 2,359 146 778 6,569 3,283 495 Total Current Assets Noncurrent Assets Equity in Joint Ventures 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 Pensions Total Assets and Deferred Outflows of Resources $ 1,750,217 $ 47,034 (continued) City of Scottsdale, Arizona 48 $ 18,836 $ 1,816,087 $ 89,865 Statement of Fund Net Position Proprietary Funds June 30, 2016 (in thousands) 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 Water and Sewer Utility $ Noncurrent Liabilities Accrued Compensated Absences - Due in more than one year Advanced Construction Payments Advanced Lease Payments Net Pension Liabilities Bonds, Loans, and Other Payables - Due in more than one year Pollution Remediation Obligation Total Noncurrent Liabilities 10,961 1,052 1,121 949 14,815 7,556 15,835 52,289 Airport $ Solid Waste 426 54 1 71 95 647 $ 399 339 332 1,070 Governmental Activities Internal Service Funds Total $ 11,786 1,445 1 1,524 1,044 14,815 7,556 15,835 54,006 $ 2,352 237 198 6,903 9,690 1,423 3,141 24,156 308,148 50,049 386,917 109 1,567 1,490 3,166 435 8,076 8,511 1,967 3,141 1,567 33,722 308,148 50,049 398,594 229 5,111 10,679 16,019 439,206 3,813 9,581 452,600 25,709 2,087 129 698 2,914 442 441,293 3,942 10,279 455,514 26,151 NET POSITION Net Investment in Capital Assets 1,017,782 37,286 3,933 1,059,001 48,191 Restricted for Water and Sewer System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits Unrestricted Total Net Position 38,721 4,692 4,108 243,621 1,308,924 5,806 43,092 4,624 8,557 38,721 4,692 4,108 254,051 1,360,573 15,523 63,714 Total Liabilities Deferred Inflows of Resources Pensions Total Liabilities and Deferred Inflows of Resources $ $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 49 $ $ $ Reconciliation of the Proprietary Fund Statement of Fund Net Position to the Statement of Net Position June 30, 2016 (in thousands) Total Enterprise Fund Net Position $ 1,360,573 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 1,452 $ 1,362,025 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 50 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2016 (in thousands) OPERATING REVENUES Charges for Sales and Services Water Service Fees Sewer Service Fees Proprietary - Non-potable water fees Solid Waste Fees Airport Fees Other Services Other Total Operating Revenues Water and Sewer Utility $ OPERATING EXPENSES Costs for Sales and Services Water Operations Sewer Operations Solid Waste Operations Airport Operations Other Services Indirect Costs Depreciation Total Operating Expenses 91,687 38,843 12,147 7,624 150,301 Airport $ Solid Waste 4,254 147 4,401 $ Governmental Activities Internal Service Funds Total 20,120 20,120 $ 91,687 38,843 12,147 20,120 4,254 7,771 174,822 $ 56,783 1,494 58,277 57,849 19,294 4,443 49,120 130,706 2,348 478 1,072 3,898 19,341 1,580 180 21,101 57,849 19,294 19,341 2,348 6,501 50,372 155,705 51,630 6,128 57,758 19,595 503 (981) 19,117 519 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) 2,311 (12,252) (39) (9,980) 145 92 3 240 128 128 145 2,531 (12,252) (36) (9,612) 1,313 356 1,669 Income Before Contributions and Transfers 9,615 743 (853) 9,505 2,188 16,304 (7,133) 6,241 (4) (37) 22,545 (7,174) 1,229 1,196 (23) 18,786 6,980 (890) 24,876 4,590 Operating Income (Loss) Capital Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning as Restated Total Net Position - Ending $ 1,290,138 1,308,924 $ 36,112 43,092 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 51 $ 9,447 8,557 $ 1,335,697 1,360,573 $ 59,124 63,714 Reconciliation of the Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position to the Statement of Activities For the Fiscal Year Ended June 30, 2016 (in thousands) Net Change in Total Enterprise Fund Net Position $ 24,876 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 404 $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 52 25,280 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Water and Sewer Utility Cash Flows from Operating Activities Cash Received from Customers Cash Payments to Suppliers for Goods/Services Cash Payments to Employees for Services Other Cash Receipts Net Cash Provided by (Used for) Operating Activities $ 140,567 (51,774) (21,850) 10,166 77,109 Cash Flows from Non-Capital Financing Activities Property Tax Transaction Privilege Tax Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Capital Contributions from: Water and Sewer Development Fees Capital Grants Acquisition and Construction of Property and Equipment Water and Sewer Development Fee Credit Agreements Principal Payments on Capital Debt and Other Payables Interest Paid on Capital Debt Investment in Joint Venture and CIP deposit Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Income Received on Investments Net Cash Provided by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year $ 3,978 (1,415) (1,315) 147 1,395 Solid Waste $ Total 20,204 (13,354) (7,304) (454) $ 164,749 (66,543) (30,469) 10,313 78,050 $ 56,993 (44,608) (4,685) 1,494 9,194 (7,133) (7,133) 145 (4) 141 (37) (37) 145 (7,174) (7,029) 1,313 1,196 (23) 2,486 5,469 (40,699) (313) (13,490) (13,338) 1,462 (39) (60,948) 6,013 (10,208) 3 (4,192) (73) (73) 5,469 6,013 (50,980) (313) (13,490) (13,338) 1,462 (36) (65,213) (8,161) (1) 636 (7,526) 2,211 86 122 2,419 - 2,211 86 122 2,419 - 11,239 (2,570) (442) 8,227 4,154 231,692 11,381 12,669 255,742 36,097 12,227 $ 263,969 $ 242,931 (continued) City of Scottsdale, Arizona 53 Airport Governmental Activities Internal Service Funds $ 8,811 $ $ 40,251 Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Water and Sewer Utility Cash and Cash Equivalents at End of Year includes: Cash and Investments Cash with Fiscal Agent Restricted Cash and Investments Total Cash and Cash Equivalents 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 (Used for) Operating Activities: Airport $ 167,372 28,056 47,503 $ 242,931 $ $ Depreciation/Amortization Pension Expense Current Year Pension Contributions Change in Equity in Joint Venture RWC Change in Equity in Joint Venture SROG Change in Accounts Receivable 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 Construction Payments Change in Advanced Lease Payments Total Adjustments 19,595 $ $ 7,149 1,662 8,811 $ 12,227 12,227 $ 503 $ (981) 49,120 2,469 (1,620) (20) 2,887 (1,342) (533) 904 (247) 3,062 292 2,542 57,514 Net Cash Provided by (Used for) Operating Activities Supplemental Disclosure of Non-cash Financing Activities Additions to Property, Plant, and Equipment Contributions from Developers Contributions from Others Change in Equity in Joint Venture RWC Change in Equity in Joint Venture SROG Total Non-Cash Financing Activities 1,072 131 (101) (1) (216) 41 41 25 (100) 892 Total $ 186,748 28,056 49,165 $ 263,969 $ $ 40,251 40,251 $ $ 519 180 732 (531) (11) 84 23 50 527 19,117 50,372 3,332 (2,252) (32) 2,887 (1,474) (533) 904 (206) 3,126 367 2,542 (100) 58,933 6,128 487 (338) 209 65 398 83 1,643 8,675 $ 77,109 $ 1,395 $ (454) $ 78,050 $ 9,194 $ 11,151 (20) 2,887 $ (1) - $ (11) - $ 11,151 (32) 2,887 $ 1,229 - $ 14,018 $ (1) $ (11) $ 14,006 $ 1,229 The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 54 Solid Waste Governmental Activities Internal Service Funds Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 (in thousands) Private Purpose Trust Funds ASSETS Cash and Cash Equivalents Total Assets LIABILITIES Escrow Payable Vouchers State Land Department Rebate $ 8 $ 1,503 $ 8 $ 1,503 $ - $ 88 1,415 - $ 1,503 Total Liabilities NET POSITION Held in Trust for Other Purposes Agency Funds $ The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 55 8 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Private Purpose Trust Funds Contributions Private Donations ADDITIONS $ Total Additions 4 4 DEDUCTIONS Scholarships / Program Activities 6 Total Deductions 6 Change in Net Position (2) Total Net Position - Beginning 10 $ Total Net Position - Ending The notes to the financial statements are an integral part of this statement. City of Scottsdale, Arizona 56 8 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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 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. The City has operational responsibility for the component units. Component Unit City of Scottsdale Municipal Property Corporation (MPC) Scottsdale Preserve Authority (SPA) Scottsdale Mountain Community Facilities District (CFD) Description and Criteria for Inclusion • • Non-profit corporation created in 1967. • • Governed by Board of Directors confirmed by City Council. • • Non-profit corporation created in 1997. • • Governed by a Board of Directors confirmed by City Council. • • Formed by 1992 petition to City Council. • • Able to levy taxes and issue bonds independent of the City. • • • City Council serves as the Board of Directors. 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 Sole purpose is to construct, acquire and equip buildings, structures or land improvements for the City. For financial reporting purposes, transactions are included as a governmental and proprietary fund type as if part of the City’s operation. Sole purpose is to finance land acquisitions for McDowell Sonoran Preserve. For financial reporting purposes, transactions are included as a governmental fund type as if part of the City’s operation. Created to acquire and improve public infrastructure in specified land area. Property owners within the designated area are assessed for District taxes and costs of operation. 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. City of Scottsdale, Arizona 57 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Component Unit McDowell Mountain Ranch Community Facilities District (CFD) • • • • • • • DC Ranch Community Facilities District (CFD) • • • • • • • Via Linda Road Community Facilities District (CFD) • • • • • • • Waterfront Commercial Community Facilities District (CFD) 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 Description and Criteria for Inclusion • • • • • • • City of Scottsdale, Arizona 58 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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. 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. Agency funds do not have a measurement focus but utilize the accrual basis of accounting for reporting their assets and liabilities. 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. Capital asset acquisitions are reported as expenditures in the governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. 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. City of Scottsdale, Arizona 59 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Property taxes, other local taxes and licenses available within the current fiscal period are all considered to be susceptible to accrual and 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 governmental funds: 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 to expenditures for the payment of long-term 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 committed to expenditures for capital outlays including the acquisition, construction and improvements to major capital facilities or capital equipment from amounts transferred from the City’s General Fund in accordance with the City’s comprehensive financial policies adopted by the City Council annually. The Capital Management policy requires a minimum of twenty five percent of all capital improvement projects be financed for each five-year planning period, excluding preservation and enterprise. This fund also represents other City Council approved capital programs including transfers for tourism related capital projects as well as activity for the capital in-lieu parking and in-lieu stormwater. The City created a new fund titled “External Sources” for fiscal year ending June 30, 2016 to account for project activity financed by outside sources. This activity was previously accounted for in the General CIP Construction Fund. The “External Sources” fund is presented separately as a non-major capital project fund. Capital projects funds allow the City to compile project cost data and demonstrate that legal or contractual requirements regarding the use of the resources are fully satisfied. The government reports the following major proprietary funds: The Water and Sewer Utility, Airport and Solid Waste Funds account for the operating revenues and expenses of the City’s water and sewer utility systems, airport and sanitation services (solid waste, brush removal, container maintenance, etc.), respectively. Additionally, the government reports the following fund types: The Internal Service Funds account for fleet management, computer replacements and self-insurance services provided to other departments or units of the City on a cost-reimbursement basis. The Agency Funds are purely custodial (assets equal liabilities) and do not involve measurement of results of operations. The City’s agency funds are used to record the Family Self-Sufficiency activity and the Crossroads East Development Agreement. The Private-Purpose Trust Funds are used to account for assets held in a trustee capacity for scholarships and other purposes as designated by the donors or by legal restrictions. Both the principal and earnings of these expendable trust funds can be expended for the trusts’ intended purposes. City of Scottsdale, Arizona 60 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 In general, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this rule are indirect costs, in-lieu franchise fees, and other charges between the City’s governmental activities and the Water and Sewer Utility Fund, Airport Fund and Solid Waste Fund, because elimination of these charges would distort the direct costs and program revenues reported in the statement of activities. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise and internal service funds are charges for customer services including: water, sewer, airport, solid waste, vehicle purchase/maintenance amounts, computer replacement and risk management charges. Operating expenses for enterprise funds and internal service funds include the cost of services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating 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 The City considers all highly liquid investments (including restricted assets) in mutual funds, demand deposits, bankers’ acceptances, repurchase agreements, and U.S. Treasury bills with an original maturity of three months or less to be cash equivalents. For the purposes of the statements of cash flows, all pooled cash and investments are also considered to be cash equivalents, although there are investments with maturities in excess of three months when purchased in the portfolio. This is due to the fact that the Proprietary funds may deposit or withdraw cash at any time without prior notice or penalty, having the characteristics of demand deposits. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools 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, bankers’ acceptances, repurchase agreements, commercial paper (A-1, P-1), 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 Office of the Arizona State Treasurer. 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.” City of Scottsdale, Arizona 61 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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. Property taxes levied for current operation and maintenance expenses on residential property are limited to one 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 two percent over the prior year’s levy, adjusted for new construction and annexations. Property taxes levied to pay principal and interest on bonded indebtedness are not limited. 3. Inventories, 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 yearend 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 and proprietary fund financial statements. The cost of a prepaid item is recorded as an expense when consumed rather than purchased. 4. Restricted Assets Certain proceeds of the City’s enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the statement of net position because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. The revenue bond reserve and water and sewer replacement accounts are used to report resources set aside to meet unexpected contingencies or to fund asset replacements. The joint venture construction deposits with the City of Phoenix are used 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. City of Scottsdale, Arizona 62 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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 acquisition value. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation and amortization of all assets are recorded and calculated using the straight-line method over the following estimated useful lives: Water System............................................................................................10 to 75 Years Sewer System............................................................................................25 to 50 Years Buildings and Improvements.................................................................25 to 50 Years 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. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. City of Scottsdale, Arizona 63 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 7. 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 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 shift fire 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. Shift fire employees 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, 2016. 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, 2016, in the governmental and proprietary funds. The current liability represents compensated absences that have matured but were not paid as of June 30, 2016, 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. 8. Long-term Obligations In the government-wide financial statements and the proprietary fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net 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. City of Scottsdale, Arizona 64 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 9. 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 two items that qualify for this category: deferred amounts on refunding and pension-related amounts. Deferred amounts on refunding result from the difference between 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. The pension-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, changes in proportion and differences between employer contributions and proportionate share of contributions, and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period. With the exception of the difference between projected and actual investment earnings and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period, the pension-related deferred outflows of resources should be recognized in pension expense, beginning in the current reporting period, using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions through the pension plan (active employees and inactive employees) determined as of the beginning of the measurement period. The deferred outflows of resources relating to the difference between projected and actual investment earnings should be recognized in pension expense using a systematic and rational method over a closed fiveyear period, beginning in the current reporting period. The deferred outflow of resources relating to contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period will reduce the beginning net pension liability in the following fiscal year. In addition to liabilities, the government-wide and fund financial statements include a section for deferred inflows of resources. This represents an acquisition of fund balance or net position 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 two items that qualify for this category: unavailable revenue and pension-related amounts. Unavailable revenue, which arises only under the modified accrual basis of accounting, is recognized as an inflow of resources in the period that the related amounts become available. The pension-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and changes in proportion and differences between employer contributions and proportionate share of contributions. With the exception of the difference between projected and actual investment earnings, the pension-related deferred inflows of resources should be recognized in pension expense, beginning in the current reporting period, using a systematic and rational method over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions through the pension plan (active employees and inactive employees) determined as of the beginning of the measurement period. The deferred inflows of resources relating to the difference between projected and actual investment earnings should be recognized in pension expense using a systematic and rational method over a closed five-year period, beginning in the current reporting period. City of Scottsdale, Arizona 65 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 10. 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 connected 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. 11. Fund Balance Policies In the fund financial statements, governmental funds report the 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. Restricted fund balances are the portion of a 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 City Council, prior to the end of the reporting period. 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 balances 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. 12. 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. City of Scottsdale, Arizona 66 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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. 72 The City adopted the provisions of GASB Statement No. 72, Fair Value Measurement and Application. This statement generally requires investments to be measured at fair value and requires disclosures to be made about fair value measurements including the level of fair value hierarchy and the valuation techniques utilized by the government. 2. Governmental Accounting Standards Board Statement No. 76 The City adopted the provisions of GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement establishes the order of priority of pronouncements and other sources of accounting and financial reporting guidance that a government should apply. This pronouncement did not impact the preparation of these financial statements. 3. Governmental Accounting Standards Board Statement No. 82 The City adopted the provisions of GASB Statement No. 82, Pension Issues – an amendment of GASB Statements No. 67, No. 68 and No. 73. The objective of this statement is to improve consistency in the application of pension accounting and financial reporting requirements by addressing certain issues that have been raised during the implementation of the three standards listed above. One of the significant changes included in this statement clarified the presentation of covered payroll in the required supplementary information to reflect the amount of payroll on which contributions made to the pension plan are based. F. Prior Period Adjustment Annually, the City receives capital contributions from developers that dedicate streets and the underlying land to the City. Prior to fiscal year ending June 30, 2006, the City recorded the entire capital contribution to the street category in the capital asset records. This correction moves the portion of the asset attributable to land from the street category to the land category. Although, the City’s capital assets as a whole remain the same, net position increased $666,566,315 for prior year depreciation expense attributable to the land, which is a non-depreciable asset. City of Scottsdale, Arizona 67 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 On October 20, 2009 the City entered into an intergovernmental agreement to join the Regional Wireless Cooperative (RWC) forming an unincorporated association of other municipalities to plan, design, construct, operate, maintain, and finance a regional wireless cooperative public safety communications network. In reviewing the components of the agreement, the City determined it met all requirements to be accounted for as a joint venture. The City has contributed $1,267,932 to the RWC that was previously accounted for in the City’s capital assets and therefore the beginning balance of the capital assets equipment category was reduced by this amount and $10,566 of accumulated depreciation from the asset was removed. Additionally, the City recorded equity in the joint venture of $1,405,305 to the participating funds between the governmental and business-type activities in accordance with the payments made. The following table shows a summary of all adjustments (in thousands): Government-Wide Statement of Net Position Governmental Business-type Activities Activities Net position at June 30, 2015, as previously reported Land and street - depreciation adjustment Joint venture - net asset adjustment Joint venture - equity adjustment Net position at July 1, 2015, as restated $ $ 2,761,290 $ 666,566 (1,257) 1,320 3,427,919 $ 1,336,660 85 1,336,745 Statements of Fund Net Position Water and Sewer Utility $ $ 1,290,084 54 1,290,138 Airport $ 36,109 $ 3 $ 36,112 $ Solid Waste Fleet Management 9,419 $ 28 9,447 $ 52,131 2 52,133 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, $229,221,000 differs from net position of governmental activities, $3,526,229,000 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 68 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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 uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax State Shared Sales Tax Franchise Fee Court Receivable Library Receivable Highway User Tax Auto Lieu Tax Intergovernmental Grants Miscellaneous Due from Other Funds Supplies Inventory Capital Assets (net of accumulated depreciation) Equity in Joint Ventures Prepayments Service Concession Arrangements Total Assets Total Governmental Funds $ 232,775 70,258 $ - Internal Service Funds(2) $ 40,251 - Reclassifications and Eliminations $ - Statement of Net Position Total $ 273,026 70,258 597 19,388 861 1,917 1,770 2,953 10,409 571 1,303 449 22,063 1,340 8,125 1,974 249 377,002 4,215,670 2,427 29,533 70,982 4,318,612 181 747 48,188 3 89,370 (1,974) (1,974) 597 19,388 861 1,917 1,770 2,953 10,409 571 1,303 449 22,063 1,340 8,306 996 4,263,858 2,430 29,533 70,982 4,783,010 - 27,141 43,603 70,744 495 495 - 27,141 44,098 71,239 $ 377,002 $ 4,389,356 $ 89,865 $ (1,974) $ 4,854,249 $ 12,319 10,255 1,974 17,230 51,978 $ $ 2,352 237 1,452 198 229 6,903 - $ (1,974) - $ 14,671 10,355 1,452 137 11,513 14,002 6,903 17,230 51,978 Deferred Outflows of Resources Deferred Amounts on Refundings Pension-Related Amounts Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Long-Term Assets & Deferred Outflows/ Liabilities and Deferred Inflows(1) 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 Pension-Related Amounts Total Deferred Inflows of Resources 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 $ (137) 137 11,315 13,773 - 6,451 1,795 4,196 2,871 3,237 112,306 1,152,932 1,178,020 15,790 27,161 (1,974) 6,451 1,795 4,196 2,871 3,237 1,168,722 1,315,513 35,475 35,475 (35,475) 12,065 (23,410) 442 442 - 12,507 12,507 147,781 1,154,610 27,603 (1,974) 1,328,020 229,221 3,234,746 62,262 - 3,526,229 377,002 $ 4,389,356 City of Scottsdale, Arizona 69 $ 89,865 $ (1,974) $ 4,854,249 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position (in thousands) (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. Cost of capital assets Accumulated depreciation $ 5,547,745 (1,332,075) $ 4,215,670 Equity in joint ventures that are to be used in governmental activities are reported in the governmental funds as expenditures. These assets are included in the statement of net position for the City as a whole. $ 2,427 Prepayments at 7/1/15 Amortization of prepayments $ 30,500 (967) 29,533 SCAs at 7/1/15 Land improvements additions for SCAs Amortization of SCAs $ 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. $ $ 74,417 818 (4,253) 70,982 Deferred outflows consist of items that will consume net position in a future reporting period(s) and do not meet the definition of an asset. Deferred amounts on refunding result from the difference between the carrying value of refunded debt and its reacquisition price. The pension-related amounts result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and contributions made to the pension plan from the employer subsequent to the measurement date of the net pension liability and before the end of the reporting period. Deferred amounts on refundings Pensions $ $ 27,141 43,603 70,744 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, 2016, were: Capital leases payable Bonds payable Service concession arrangements Issuance premium Accrued vacation and sick leave pay Post employment - implicit subsidy Net pension liabilities $ (156) (834,239) (2,683) (62,391) (25,088) (1,237) (252,226) $ (1,178,020) 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 transient occupancy tax revenue Unavailable intergovernmental revenue Unavailable other revenue $ $ 560 3,724 1,078 6,064 46 22,502 1,501 35,475 Deferred inflows represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows related to pensions may result from differences between expected and actual experience, changes of assumptions or other inputs, the difference between projected and actual investment earnings, and changes in proportion and differences between employer contributions and proportionate share of contributions. $ (12,065) (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. $ City of Scottsdale, Arizona 70 62,262 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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, $16,039,000 differs from the change in net position for the governmental activities, $98,310,000 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 71 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) $ $ $ 61,956 171,256 17,397 8,826 3,816 250 913 Capital Related Items(4) (48) 872 (8) 36 1 $ Internal Service Funds(5) - $ Reclassifications and Eliminations(6) 1,313 - $ - Long-Term Debt Transactions(7) $ Statement of Activities - $ 63,221 172,128 17,389 8,826 3,852 250 914 20,647 26,173 8,991 14,060 655 1,894 6 - - - - 20,647 26,173 8,991 14,060 655 1,900 13,293 5,964 4,243 904 55 1 (108) (37) - - (19) - - 13,329 5,965 4,135 867 4,241 302 3,081 2,051 485 457 4,922 2,373 582 (38) (9) (2) (181) 187 - - - - - 4,203 293 3,079 2,051 304 457 5,109 2,373 582 9,033 210 6,827 319 577 2,268 1,942 6,501 954 408,363 1,271 (39) 970 (2) 100 1,601 4,628 292 292 1,313 (11) (30) - 10,304 171 7,797 319 577 2,266 2,042 6,501 2,836 414,566 $ $ $ $ $ $ Notes to Financial Statements (continued) Long-Term Revenue/ Expenses(3) For the Fiscal Year Ended June 30, 2016 City of Scottsdale, Arizona 72 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 Total Governmental Funds Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities (in thousands) Net Change for the Year (continued) $ 818 1,138 7,118 824 4,975 1,965 5,785 32,850 42,735 128,527 45,508 15,648 589 53,313 34,664 26,674 403,131 $ 6,001 4,806 10,807 $ 16,039 $ (8) (12) (246) (5) (60) (12) (146) (356) 3,851 2,980 (4) (1,036) - $ $ $ 4,946 Capital Related Items(4) $ $ 2 39 22 12 6,299 56,772 4,855 7,840 5,643 (26,674) 54,810 Internal Service Funds(5) $ $ 3 1 21 2 10 (1) 18 (92) (17) (59) (10) 9 (115) Reclassifications and Eliminations(6) $ $ Long-Term Debt Transactions(7) (11) (410) (449) (42) (12) (924) $ $ Statement of Activities (53,313) (2,999) (56,312) $ $ 813 1,129 6,893 821 4,964 1,974 5,658 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 (9) (9) $ 76,618 76,618 $ 1,173 1,229 356 2,758 $ (894) (894) $ - $ 7,174 76,953 5,153 89,280 (327) $ 22,100 $ 4,186 $ - $ 56,312 $ 98,310 Notes to Financial Statements OTHER FINANCING USES/ CHANGES IN NET POSITION Net Transfers from Other Funds Capital Contributions Proceeds from Sale of Assets Total $ Long-Term Revenue/ Expenses(3) For the Fiscal Year Ended June 30, 2016 City of Scottsdale, Arizona 73 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 Capital Outlay Total Expenditures/Expenses Total Governmental Funds 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 Transient occupancy tax revenue Intergovernmental revenue Other receivable revenue $ $ (48) (42) (181) 872 (8) 2,202 221 3,016 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. (967) $ $ 212 (322) (21,621) (4,253) (25,984) $ 21,185 $ 817 $ 1,606 $ 26,674 (1,854) (76,997) (2,633) (54,810) 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. 74 City of Scottsdale, Arizona Accrual for long-term compensated absences Accrual for long-term post employment implied subsidy Pension expense Amortization of service concession arrangements (SCAs) Current-year pension contributions are reclassified to deferred outflows of resources on the statement of activities, and are therefore not a reduction of net position. Current-year joint venture contributions are reclassified to an increase of the joint venture asset on the statement of net position, and are therefore not a reduction of net position. The State Treasurer distributes funding directly to the Public Safety Personnel Retirement System (PSPRS) that is used to offset the contributions required to be made by the City to the PSPRS. This amount is recognized as revenue by the City although no cash is received directly from the State Treasurer. (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 decreases by the amount of depreciation expense charged for the year and the loss on disposal of capital assets. Capital expenditures Miscellaneous net capital expenditures Depreciation expense Loss on disposal of capital assets $ Donations of capital assets and investment in joint venture activity are not capitalized on the governmental fund statements, but are included in the assets of the City. On the statement of activities, the donations are shown as capital contributions; the joint venture activity is included as an operating revenue/expense. Change in equity interest for joint venture Capital contributions $ $ (continued) 292 76,618 76,910 Notes to Financial Statements $ For the Fiscal Year Ended June 30, 2016 Amortization of long-term prepaid leases 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 fleet management 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 $ $ 4,590 (404) 4,186 (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. 75 City of Scottsdale, Arizona $ (924) 924 - $ 53,313 Repayment of bond principal is reported as an expenditure 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 Interest expense in the statement of activities differs from the amount reported in governmental funds because additional interest was calculated for the amortization of deferred refunding costs, and reductions of interest expense were recognized due to the amortization of bond premiums which are expended within the fund statements. Amortization of deferred charges on refundings Amortization of bond premium and discounts $ $ (2,420) 5,419 2,999 Notes to Financial Statements (7) $ For the Fiscal Year Ended June 30, 2016 Reduction in revenues/capital contributions - Governmental Funds Reduction in expenditures/expenses - Governmental Funds Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABLILTY A. Budget and Budgetary Accounting The City prepared an annual budget that covered Fiscal Year 2015/16. The Fiscal Year 2015/16 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 adjustments for fair market value of investments, 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, certain Special Revenue Funds (Transportation, Community Development Block Grant, HOME, Grants, Section 8, Preserve Privilege Tax, Streetlight Districts, Special Programs and Tourism Development), and Debt Service Funds (except for the Community Facilities Districts Debt Service Funds); therefore, these funds have appropriated budgets, and budget to actual information is presented. 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 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 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 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 2015/16, 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. City of Scottsdale, Arizona 76 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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. Management control of budgets is further maintained at a line-item level within the division. B. Excess of Expenditures over Appropriations The Preserve Privilege Tax Special Revenue Fund and the Scottsdale Preserve Authority Bond Debt Service Fund exceeded their expenditure appropriation by $3,000 and $1,000 respectively. The additional expenditures incurred were funded by available fund balance or other financing sources within the fund. C. Deficit Fund Equity The Community Development Block Grant Special Revenue Fund, Grants Special Revenue Fund and the External Sources Capital Projects Fund had deficit ending fund balances of $128,000, $431,000, and $2,612,000, respectively. These deficits were caused by certain grant reimbursements and pending reimbursements from intergovernmental agreements related to capital projects the City is required to fund, not being available at the end of the fiscal year. 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. The Preserve Privilege Tax Capital Projects Fund had a deficit ending fund balance of $7,000 due to timing differences of cash transfers for the payroll accrual. City of Scottsdale, Arizona 77 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 D. Fund Balance Classifications The following table details the fund balance categories and classifications for Governmental Funds: General (In thousands) Nonspendable Inventory Total Nonspendable General Obligation Bond Debt Service General CIP Construction Capital Projects Total Nonmajor Governmental Funds Total Governmental Funds FUND BALANCES $ 249 249 $ - $ - $ - $ 249 249 Restricted Property Tax for Debt Service Transaction Privilege & Highway User Tax for Transportation Improvements Federal Grants for CDBG Federal Grants for Section 8 Housing Transaction Privilege Tax for Preserve Land Purchase and Improvements Property Tax for Community Facility Districts Street Light Districts General Government-Mayor and City Council Special Programs General Government-City Court Special Programs Public Works Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs 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 GO Bond Proceeds for Capital Improvements Transaction Privilege Tax for Transportation Capital Improvements MPC Bond Proceeds for Capital Improvements Federal Grant Capital Improvement Contributions for Stadium Capital Improvements Contributions for Drainage Capital Improvements Contributions for Transit Improvements Contributions for Traffic Light Improvements Total Restricted - 11,529 11,529 - 11,169 29 368 38,258 945 12 6 2,194 50 46 1,337 325 321 1,919 3,456 322 12,645 29,732 118 2 681 1,054 317 12 105,318 11,529 11,169 29 368 38,258 945 12 6 2,194 50 46 1,337 325 321 1,919 3,456 322 12,645 29,732 118 2 681 1,054 317 12 116,847 Committed General Fund Contribution for Capital Improvements Stadium Surcharge for Stadium Improvements McCormick Railroad Park Improvements In Lieu Parking Fees for Parking Projects In Lieu Stormwater Fees for Drainage Improvements Tourism Development Capital Projects Court Enhancement Capital Projects Risk Management Capital Contributions General Government-City Court Special Programs Community and Economic Development Special Programs Public Safety Special Programs Community Services Special Programs Transient Occupancy Tax for Tourism Development Excise Tax Debt Reserve Total Committed - - 27,325 467 2 352 73 1,826 2 3 30,050 3,610 2,023 94 1,598 10,433 4,700 22,458 27,325 467 2 352 73 1,826 2 3 3,610 2,023 94 1,598 10,433 4,700 52,508 Unassigned Total Fund Balances $ 65,347 65,596 $ City of Scottsdale, Arizona 78 11,529 $ 30,050 $ (5,730) 122,046 $ 59,617 229,221 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The City Council has established a minimum fund balance policy of 10 percent of annual general governmental operating expenditures to be maintained in the General Fund and the Transportation, Nonmajor Special Revenue Fund. The reserves in these funds are to be maintained for unforeseen emergencies or catastrophic impacts to the City. E. Net Position Restrictions Only restrictions imposed by external sources are shown as restricted net position on the government-wide financial statements. The following restrictions apply to the Business-type Activities at June 30, 2016: Net Position Restrictions (in thousands) Water and Sewer Restricted for System Replacement Restricted for Debt Service Restricted for Joint Venture Construction Deposits $ 38,721 4,692 4,108 47,521 $ City of Scottsdale, Arizona 79 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 IV. DETAILED NOTES ON ALL FUNDS A. Cash and Investments 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 certificates of deposit, repurchase agreements, commercial paper (A-1, P-1), highly rated corporate bonds/notes, obligations of the U.S. Treasury, U.S. Government agencies, bankers’ acceptances, mutual funds consisting of the foregoing, and the State of Arizona Local Government Investment Pool (LGIP). Deposits At June 30, 2016, the carrying amount of the City’s deposits was $284,557,693, and the bank balance was $286,739,354. The $2,181,661 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, 2016, in accordance with City policy, $500,000 of the City’s deposits were covered by federal depository insurance, $37,420,543 were Certificates of Deposit Account Registry Service (CDARS) covered by federal depository insurance, $150,504,398 were collateralized by securities held by the City’s agent, and $98,314,413 were securities held by the pledging financial institution’s trust department in the name of the City. Thus, the City had no deposits that were exposed to custodial credit risk. The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g., broker-dealer) to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City be conducted on a delivery-versus-payment basis. Securities are to be held by a third party custodian. City of Scottsdale, Arizona 80 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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 (in thousands): Investment Maturities (in Years) Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Fair Value $ 72,180 168,833 81,156 2,020 Total Investments $ Less than 1 $ 10,868 37,437 29,029 2,020 324,189 $ 79,354 $ $ 1-2 27,751 65,189 36,652 129,592 $ $ 2-3 26,331 66,207 15,475 108,013 3+ 7,230 - $ $ 7,230 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. Credit risk is measured by the assignment of a rating by Nationally Recognized Statistical Rating Organizations (NRSROs). The City’s investment policy limits its corporate debt investments to the top three rating categories by Moody’s Investors Service or Standard and Poor’s Corporation, its investments in municipal debt to the highest rating category by Moody’s Investors Service or Standard and Poor’s Corporation, and its investments in commercial paper to be rated P-1 by Moody’s Investors Service and A-1 by Standard & Poor’s. The City’s investments in the investment types referenced above at June 30, 2016, meet the aforementioned criteria. Presented below is the rating as of June 30, 2016, for each investment type (in thousands): Investment Type U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Total $ 72,180 168,833 81,156 2,020 Total Investments $ 324,189 $ A- 8,530 - $ 8,530 $ A 26,075 - $ 26,075 $ A+ 5,685 - $ 5,685 $ AA- 21,913 - $ $ 21,913 $ AA AA+ 4,656 - $ 168,833 10,678 - $ 4,656 $ 179,511 $ AAA 3,619 2,020 5,639 Exempt from Disclosure $ 72,180 $ 72,180 Concentration of Credit Risk The City investment guidelines place no limit on the amount that the City may invest in any one issuer of the US treasury obligations and the US agency obligations, however the overall percentage of callable securities is monitored. Supranational debt to an issuer is limited to 3 percent of the aggregate portfolio and investment in this sector class cannot exceed 10 percent of the portfolio. Certificates of deposit and medium-term corporate notes each have a per issuer limit of 5 percent of the aggregate portfolio and investment in each of these sectors is limited to 30 percent of the total portfolio. Commercial paper has a per issuer limit of 5 percent of the aggregate portfolio and investment in this sector is limited to 10 percent of the total portfolio. City of Scottsdale, Arizona 81 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The following is a listing by issuer of the City’s investments at June 30, 2016: (dollars in thousands) Issuer U.S. Government Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corporation (FHLMC) Federal National Mortgage Association (FNMA) AZ School Facilities Board American Express Co American Honda Finance Apple Inc Bank of New York Co Inc Berkshire Hathaway Inc Chevron Corp Cisco Systems Inc Coca-Cola Co Deere & Company Exxon Mobil Corp IBM Corp Johnson & Johnson JP Morgan Chase & Co PepsiCo Inc The Walt Disney Corporation Toyota Motor Corp Walmart Stores Inc Wells Fargo & Co Investment Type U.S. Government Securities Federal Agency 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 Corporate Notes Corporate Notes Corporate Notes Corporate Notes Market Value $ 72,180 12,377 49,809 106,647 2,020 5,774 5,685 5,357 5,631 3,719 2,795 8,828 1,265 6,781 5,321 5,597 3,619 2,755 5,008 2,604 3,429 938 6,050 Percent of Holdings 22.26% 3.82% 15.36% 32.90% 0.62% 1.78% 1.75% 1.65% 1.74% 1.15% 0.86% 2.72% 0.39% 2.09% 1.64% 1.73% 1.12% 0.85% 1.55% 0.80% 1.06% 0.29% 1.87% Total Investments $ 324,189 100.00% Investments Total City cash and investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investments $ 17 284,558 324,189 Total Cash and Investments $ 608,764 City of Scottsdale, Arizona 82 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The City has the following recurring fair value measurements as of June 30, 2016: Investments Measured at Fair Value (in thousands) U.S. Government Securities Federal Agency Securities Corporate Notes Municipal Obligations Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets (Level 1) Inputs (Level 2) Inputs (Level 3) $ $ 72,180 $ 168,833 81,156 2,020 $ $ 324,189 $ - Debt securities classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on inputs such as yield curve analysis, pricing of comparable securities, and option adjusted spread valuations to generate a price for a security. 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 Development Agreement Total Cash and Investments $ 459,774 98,314 49,165 8 88 1,415 $ 608,764 Investment income comprises the following for the year ended June 30, 2016 (in thousands). Net Interest and Dividends Net Increase in the Fair Value of Investments $ 4,469 1,017 Total Net Investment Income $ 5,486 The net increase in the fair value of investments for the fiscal year was $1,017,139. This amount takes into account all changes in fair value (realized and unrealized) that occurred during the year. City of Scottsdale, Arizona 83 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 B. Receivables Receivables as of June 30, 2016, for the government’s individual major governmental funds, nonmajor governmental funds, and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows (in thousands): Governmental and Governmental Activities Internal Service Funds Receivables Property Taxes and Penalties Property Court Subtotal Property Taxes and Penalties General Obligation Bond Debt Service General $ Other Local Taxes Privilege Transient Occupancy State Shared Sales Franchise Fee Auto Lieu Highway User Subtotal Other Local Taxes 835 49,544 50,379 Gross Receivable Less: Allowances for Uncollectibles Net Total Receivables $ 985 985 $ Total Governmental and Internal Service Funds Nonmajor and Other Funds - $ 97 97 $ 1,917 49,544 51,461 16,170 1,770 2,903 449 21,292 - - 4,351 861 50 1,303 6,565 20,521 861 1,770 2,953 449 1,303 27,857 - - - 23,403 23,403 352 1,840 3,304 5,496 - 85 2,565 2,650 160 2,437 2,597 597 1,840 8,306 10,743 77,167 (41,537) 985 - 2,650 - 32,662 - 113,464 (41,537) Intergovernmental/Grants Interest and Other Interest Library Miscellaneous Subtotal Interest and Other $ General CIP Construction Capital Projects 35,630 $ 985 $ 2,650 $ 32,662 $ 71,927 The City has an intergovernmental agreement with the Maricopa County Flood Control District to reimburse the City for capital expenditures of $2,202,784 and is not expected to be collected within the next year. The City has a development agreement relating to biomedical research activities with the Translational Genomics Research Institute (TGen) to repay $2,580,000 with interest through February 2024. Through the use of Community Development Block Grant (CDBG) funds, the City issues Green Housing Rehabilitation Program loans to qualified Scottsdale homeowners. As of June 30, 2016 the loan balances totaled $1,738,814, of which the majority is not expected to be collected within the next year. Business-type Activities Enterprise Funds Receivables Privilege Tax Charges for Services Intergovernmental Interest Miscellaneous Water and Sewer Utility $ Gross Receivable Less: Allowances for Uncollectibles Net Total Receivables 15,023 279 3,047 Airport $ 16 323 11 439 18,349 (32) $ 18,317 Solid Waste $ 789 (2) $ 787 $ 1,862 (4) $ City of Scottsdale, Arizona 84 2 1,781 18 61 Total Enterprise Fund 1,858 18 16,804 323 308 3,547 21,000 (38) $ 20,962 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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): Property Tax Transient Occupancy Tax Court Library Privilege Tax Intergovernmental Other $ Total C. Unavailable $ 1,078 46 3,724 560 6,064 22,502 1,501 35,475 Unearned $ 6,451 1,795 $ 8,246 Capital Assets Capital asset activity for the year ended June 30, 2016, was as follows (in thousands): Governmental Activities Capital Assets, not being depreciated Land* Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 2,977,381 18,307 2,995,688 Increases $ 58,099 26,889 84,988 Decreases $ (1,343) (27,575) (28,918) Ending Balance $ 3,034,137 17,621 3,051,758 Capital Assets, being depreciated Buildings and Land Improvements Streets and Storm Drains* Motor Vehicles Machinery and Equipment** Total Capital Assets, being depreciated 711,844 1,689,468 69,755 79,412 2,550,479 5,079 32,900 8,390 6,395 52,764 (3,659) (1,000) (4,855) (7,701) (17,215) 713,264 1,721,368 73,290 78,106 2,586,028 Less Accumulated depreciation for Buildings and Land Improvements Streets and Storm Drains* Motor Vehicles Machinery and Equipment** Total Accumulated depreciation 297,409 931,818 35,217 41,909 1,306,353 20,934 50,722 5,573 5,896 83,125 (2,431) (962) (4,683) (7,474) (15,550) 315,912 981,578 36,107 40,331 1,373,928 1,244,126 (30,361) (1,665) 1,212,100 Total Capital Assets, being depreciated, net Governmental Activities Capital Assets, net $ 4,239,814 $ 54,627 $ (30,583) $ 4,263,858 *The Land category beginning balace was increased by $1,118,512,723 and the Streets and Storm Drains category was decreased by $1,118,512,723 and accumulated depreciation of $666,566,315 due to a prior period adjustment. **The Machinery and Equipment category was restated due to a prior period adjustment to decrease cost by $1,267,932 and accumulated depreciation of $10,556. City of Scottsdale, Arizona 85 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Business-type Activities Capital Assets, not being depreciated Land Water Rights Construction in Progress Total Capital Assets, not being depreciated Beginning Balance $ 50,325 87,171 23,407 160,903 Increases $ Decreases 54,312 54,312 $ Ending Balance (43,294) (43,294) $ 50,325 87,171 34,425 171,921 Capital Assets, being depreciated Water System Sewer System Buildings and Land Improvements Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment Total Capital Assets, being depreciated 1,171,519 592,262 30,584 5,353 628 613 1,800,959 25,512 14,726 9,723 975 218 51,154 (41) (55) (2,864) (22) (454) (3,436) 1,196,990 606,933 37,443 6,306 628 377 1,848,677 Less Accumulated depreciation for Water System Sewer System Buildings and Land Improvements Machinery and Equipment Motor Vehicles Furniture, Fixtures, and Office Equipment 397,513 187,146 14,771 2,407 471 584 32,539 16,145 1,198 415 42 33 (24) (32) (2,864) (22) (454) 430,028 203,259 13,105 2,800 513 163 602,892 50,372 (3,396) 649,868 1,198,067 782 (40) 1,198,809 Total Accumulated depreciation Total Capital Assets, being depreciated, net Business-type Activities Capital Assets, net $ 1,358,970 $ 55,094 $ (43,334) $ 1,370,730 During the fiscal year, the Water and Sewer Utility Enterprise Fund capitalized net interest costs of $1,538,265. Total interest expense in this fund before capitalization was $15,112,462. Depreciation expense was charged to functions/programs of the primary government as follows (in thousands): Governmental Activities City Clerk City Court City Manager Public Works Community and Economic Development Public Safety City Treasurer 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 $ 6,128 $ Total Depreciation Expense - Government Activities City of Scottsdale, Arizona 86 2 39 22 7,294 52,715 4,240 56 8,406 4,223 83,125 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Business-type Activities Water and Sewer System Airport Solid Waste Total Depreciation Expense - Business-type Activities $ 49,120 1,072 180 $ 50,372 Construction Commitments The City has active construction projects as of June 30, 2016. At year-end the government’s commitments with contractors for specific projects are as follows (in thousands): Capital Project Program Classification Aviation Drainage and Flood Control Fire Protection Municipal Facilities Neighborhood and Community Parks Preservation Streets Technology Traffic Transit Wastewater Water Spent to Date $ 5,310 1,375 254 933 1,137 1,057 728 3,154 128 1,526 1,469 5,852 24,809 Total Construction Commitments Governmental Activities General CIP Construction Capital Projects Fund Nonmajor Governmental Funds Internal Service Funds Remaining Commitment $ 2,973 675 269 557 1,473 1,099 1,280 1,392 253 1894 7,609 3,479 12,844 $ 47,732 $ 35,797 $ 3,245 8,462 19 11,726 $ 3,514 12,638 158 16,310 Total Governmental Activities Business-type Activities Water and Sewer Utility Airport Solid Waste 30,668 5,310 28 36,006 Total Business-type Activities $ Total Construction Commitments City of Scottsdale, Arizona 87 47,732 16,389 2,973 125 19,487 $ 35,797 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 D. Interfund Balances and Interfund Transfers Due To and Due From Other Funds “Due to” and “Due from” balances have been recorded to address temporary cash flow needs. The composition of interfund balances as of June 30, 2016, is as follows (in thousands): Receivable Fund General Fund Amount $ 1,974 Payable Fund Nonmajor Governmental Funds Amount $ 1,974 The MPC Bonds Capital Project Fund had a deficit cash balance of $2,002 due to a timing difference for the City to be reimbursed from the cash with fiscal agent. The External Sources Capital Project Fund had a deficit cash balance of $1,928,591 due primarily to a pending reimbursement from an intergovernmental agreement. The Waterfront Commercial CFD Debt Service fund borrowed $43,000 from the City on a promissory note with a maturity date of June 30, 2017. 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) Governmental Funds General Debt Service - General Obligation Bond Capital Projects - General CIP Construction Nonmajor Governmental Funds Total Governmental Funds Transfers Out $ 23,053 59 55,967 79,079 Enterprise Funds Water and Sewer Utility Airport Solid Waste Total Enterprise Funds Internal Service Funds Fleet Self-Insurance Total Internal Service Funds Total Transfers Transfers In $ 11,760 24,118 9,606 39,596 85,080 7,133 4 37 7,174 - 18 5 23 1,196 1,196 86,276 City of Scottsdale, Arizona 88 $ $ 86,276 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 E. Leases Operating Leases City as Lessee The City, as a lessee, has entered into lease agreements involving office space, park equipment, motor vehicles, a distributed antenna system, and a street sweeper and trailer. Payments relating to these leases totaled $676,435, of which $502,852 was the minimum and $173,583 was contingent. The contingent payments were a percentage of the net revenues generated by the park equipment. The distributed antenna system’s lease increases annually by 3 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. The future lease payments under non-cancellable operating lease agreements are as follows (in thousands): Fiscal Year Ending June 30, 2017 2018 2019 2020 Total $ 21 6 7 2 36 $ 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 noncancellable operating leases at June 30, 2016, are as follows (in thousands): Fiscal Year Ending June 30, 2017 2018 2019 2020 2021 Thereafter Total $ $ 3,089 3,055 2,890 2,727 1,935 76,688 90,384 The above amounts do not include contingent rentals, which totaled $1,954,218 for the fiscal year ended June 30, 2016. City of Scottsdale, Arizona 89 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 A summary of the assets leased to third parties under the City’s operating lease agreements at June 30, 2016, is as follows (in thousands): Cost Less: Accumulated Depreciation Carrying Value $ $ 108,803 (20,679) 88,124 Capital Leases 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 $148,217. Current year amortization expense was $59,287. The present value of net minimum future lease payments under the capital lease agreement is as follows (in thousands): Fiscal Year Ending June 30, 2017 2018 2019 Less: Imputed Total F. $ $ 65 66 33 (9) 155 Service Concession Arrangements In 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, 2016, is $1,279,365. 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 $49,437,089 through the fiscal year ended June 30, 2016. 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 $53,046,974 at year-end pursuant to the service concession arrangement. City of Scottsdale, Arizona 90 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 In 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, 2016, is $1,403,682. 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 and an additional $8,513,248 through the fiscal year ended June 30, 2016. 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 $17,934,473 at year-end pursuant to the service concession arrangement. G. Bonds, Loans and Other Payables The following are brief descriptions of bonds outstanding at June 30, 2016. The totals shown are the principal amount outstanding, net of the current portion due July 1, 2016. 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, 2016, 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, 2016, 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. In addition, the City has $28,850,000 of unissued various purpose GO bonds that were authorized in November 2015. Municipal Property Corporation Bonds The City of Scottsdale Municipal Property Corporation (MPC) is a non-profit 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. A portion of the 2006 MPC refunding bonds, the 2008A MPC bonds, the 2010 MPC bonds, a portion of the 2015A MPC bonds, and a portion of the 2015 MPC refunding bonds are recorded in and paid out of the revenues of the Water and Sewer Enterprise Fund. City of Scottsdale, Arizona 91 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The City of Scottsdale entered into an Intergovernmental Agreement with the Arizona Tourism and Sports Authority, doing business as the Arizona Sports and Tourism Authority (AZSTA) pertaining to the Scottsdale municipal spring training facility renovation project in March 2005. Per this agreement, City of Scottsdale MPC bonds were issued for $20,000,000, with one third of the repayments provided by the City from funds received by the Maricopa County Stadium District (MCSD) and two thirds of the repayments provided to the City by the AZSTA. The parties acknowledge that the exact amount of revenue accruing to the MCSD or the AZSTA may vary from year to year. Recognizing this, if funds accruing to either are insufficient to cover the estimated finance costs over the term of the bonds, then the parties agree to extend the repayment time as needed until the total amount is repaid. If the repayment time were extended, the City of Scottsdale would utilize excise taxes for the shortfall until such time as the parties fulfilled the full obligation. The City has pledged to repay $635,885,322 in MPC bonds issued from 2005 through June 30, 2015, payable through 2036. Bonds issued prior to July 1, 2010, were pledged by revenues that included transient occupancy tax while bonds issued after this date exclude transient occupancy tax. The coverage ratio (revenues to debt service) for 2016 for MPC bonds is 4.48 (excluding the transient occupancy tax). The total principal and interest remaining to be paid on all MPC bonds is $695,364,344. Principal and interest paid for the current year and total excise tax collections (excluding transient occupancy taxes) were $43,435,462 and $194,560,000, respectively. Scottsdale Preserve Authority Bonds The Scottsdale Preserve Authority (SPA) is a non-profit corporation created by the City in 1997 to finance land acquisitions for the McDowell Sonoran Preserve. The SPA issues its own bonds, which are repaid through the 0.2 percent City sales tax approved by voters in May 1995 to be used specifically for this purpose. In May 2004, voters approved an additional 0.15 percent sales tax increase. SPA bonds are recorded as governmental activities long-term debt and are paid out of the SPA Debt Service Fund. The City has pledged to repay $44,870,000 in SPA bonds issued in 2010 and 2011. The bonds are payable through 2024. The coverage ratio (revenues to debt service) for 2016 is 5.56. The total principal and interest remaining to be paid on the bonds is $49,694,425. Principal and interest paid for the current year and total sales tax were $6,482,613 and $36,029,000, 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, 2016, the funds restricted for this purpose were $38,721,031. City of Scottsdale, Arizona 92 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The City has pledged to repay $35,290,000 in water and sewer revenue bonds issued in 2008. The bonds are payable through 2023. The coverage ratio (revenues to debt service) for 2016 is 16.77. The total principal and interest remaining to be paid on the bonds is $32,035,113. Principal and interest for the current year and total customer net revenues were $4,541,638 and $76,182,000, 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 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. City of Scottsdale, Arizona 93 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Bonds payable at June 30, 2016, comprised of the following: Classified in Governmental Activities on the Government-wide Financial Statements: 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. $ 5,030 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. On April 2, 2015, $75,225,000 due 2019 through 2028 were refunded. Original issue amount $100,000,000. 10,300 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. On April 2, 2015, $14,625,000 due 2019 through 2034 were refunded. Original issue amount $20,000,000. 1,275 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. 43,450 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. 19,475 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. 25,565 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. 75,440 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. 74,000 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. 12,990 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. 79,305 2015 Refunding Bonds (issued April 2, 2015) due in annual installments of $500,000 to $30,565,000 through July 1, 2034; interest at 3 percent to 4 percent. Original issue amount $160,415,000. 154,685 Total General Obligation Bonds Outstanding $ Some of the above General Obligation Bonds are paid from the .2 percent and .15 percent Preservation Sales Taxes. City of Scottsdale, Arizona 94 551,515 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Bonds Outstanding (in thousands) Municipal Property Corporation Bonds 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. On March 26, 2015, $22,630,000 due 2016 through 2021 were refunded. Original issue amount $19,945,322. $ 275 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. On March 26, 2015, $2,350,000 due 2028 through 2031 were refunded. Original issue amount $10,000,000. 340 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. On March 26, 2015, $9,300,000 of 2028 through 2031 were refunded. Original issue amount $32,500,000. 1,225 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. 23,535 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. 1,295 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. 33,535 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 2015A Municipal Property Corporation Excise Tax Revenue Bonds (issued January 6, 2015) due in annual installments of $205,000 to $865,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $12,200,000. 11,570 2015A Municipal Property Corporation Taxable Revenue Bonds (issued January 6, 2015) due in annual installments of $275,000 to $1,025,000 through July 1, 2034; interest at 2 percent to 4 percent. Original issue amount $14,615,000. 13,770 2015 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued March 26, 2015) due in annual installments of $1,460,000 to $6,877,488 through July 1, 2035; interest at 3 percent to 5 percent. Original issue amount $46,758,269. 45,298 Total Municipal Property Corporation Bonds Outstanding City of Scottsdale, Arizona 95 $ 209,028 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Scottsdale Preserve Authority Bonds Bonds Outstanding (in thousands) 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. $ 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. 32,855 7,170 Total Scottsdale Preserve Authority Bonds 40,025 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. 9,546 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 percent to 4.7 percent. Original issue amount $5,375,000. 615 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. 3,210 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. 11,625 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. 7,320 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. 1,355 Total Community Facilities Districts General Obligation Bonds Outstanding Total Bonds Payable Recorded in Governmental Activities City of Scottsdale, Arizona 96 $ 24,125 834,239 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Classified in Business-type Activities on the Government-wide Financial Statements: Water and Sewer Revenue Bonds Bonds Outstanding (in thousands) 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. $ 26,280 Municipal Property Corporation Bonds 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. 103,165 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. On March 26, 2015, $49,100,000 due 2019 through 2028 were refunded. Original issue amount $105,875,000. 34,425 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. 72,750 2015A Municipal Property Corporation Excise Tax Revenue Bonds (issued January 6, 2015) due in annual installments of $310,000 to $1,305,000 through July 1, 2034; interest at 3 percent to 5 percent. Original issue amount $18,485,000 17,530 2015 Municipal Property Corporation Excise Tax Revenue Refunding Bonds (issued March 26, 2015) due in annual installments of $3,788,459 to $5,822,479 through July 1, 2028; interest at 5 percent. Original issue amount $46,811,731. 46,812 Total Municipal Property Corporation Bonds Outstanding 274,682 Total Bonds Payable Recorded in Business-type Activities Total Long-Term Bonds Payable 300,962 $ City of Scottsdale, Arizona 97 1,135,201 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Statutory Debt Limitation 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 assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of a city’s 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’s general obligation bonded debt borrowing capacity at June 30, 2016: General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation 20% Constitutional Limit $ 1,032,346,225 Less General Obligation (513,767,656) 20% Bonds Outstanding 6% Constitutional Limit Less General Obligation 6% Bonds Outstanding Available 20% Limitation Borrowing Capacity Available 6% Limitation Borrowing Capacity $ 518,578,569 General Obligation Bonds Issued for All Other Purposes $ 309,703,867 (37,747,344) $ 271,956,523 Arbitrage Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. The requirements stipulate, in general, that the earnings from the investment of tax-exempt bond proceeds which exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City used an independent consultant to evaluate the City’s outstanding tax-exempt debt for arbitrage liability and determined that there is no arbitrage liability due as of June 30, 2016. 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 following table reflects refunded debt outstanding at June 30, 2016, net of any amounts to be paid or retired by the trustee on July 1, 2016 (in thousands): Refunded Debt Outstanding 2005C MPC Excise Tax Revenue Bonds $ 2008A MPC Excise Tax Revenue Bonds 2008 Various Purpose GO Bonds 18,555 49,100 89,850 $ 157,505 City of Scottsdale, Arizona 98 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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, 2016 (in thousands): Beginning Balance Governmental Activities Bonds Payable General Obligation Bonds Municipal Property Corporation Bonds Scottsdale Preserve Authority Bonds Certificates of Participation Community Facilities Districts General Obligation Bonds Add Issuance Premiums Total Bonds Payable Capital Lease Service Concession Arrangements Risk Management Claims Compensated Absences Net Other Postemployment Benefit Net Pension Liabilities $ 586,910 217,483 44,365 11,762 26,805 67,810 955,135 229 2,837 15,939 25,690 915 241,311 1,242,056 $ Governmental Activities Long-Term Liabilities Additional Obligations, Interest Accretion, and Net Increases $ 34,987 10,866 322 16,026 62,201 $ Current Maturities, Retirements, and Net Decreases $ $ Amounts Due Within One Year Ending Balance (35,395) (8,455) (4,340) (2,216) (2,680) (5,419) (58,505) (73) (154) (33,344) (11,041) (103,117) $ $ 551,515 209,028 40,025 9,546 24,125 62,391 896,630 156 2,683 17,582 25,515 1,237 257,337 1,201,140 $ $ 37,605 9,831 4,175 2,282 2,770 56,663 60 154 6,903 11,513 75,293 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, 2016, $427,000 of accrued compensated absences is included in the above amount for Internal Service Funds. For the governmental activities, the General Fund, Special Revenue Funds, Capital Projects Funds, and Internal Service Funds generally liquidate accrued compensated absences, the net other postemployment benefit, and the net pension liabilities. The compensated absences presented in this note are net of the current liability of $137,000 in the governmental funds and $0 in the Internal Service funds. Beginning Balance Business-type Activities Bonds Payable Water and Sewer Revenue Bonds Municipal Property Corporation Bonds Add Issuance Premiums Total Bonds Payable Compensated Absences Net Pension Liabilities $ Business-type Activities Long-Term Liabilities $ 29,335 286,442 24,891 340,668 3,298 30,821 374,787 Additional Obligations, Interest Accretion and Net Increases $ $ City of Scottsdale, Arizona 99 1,552 2,901 4,453 Current Maturities, Retirements, and Net Decreases $ $ (3,055) (11,760) (1,870) (16,685) (1,359) (18,044) Ending Balance $ $ 26,280 274,682 23,021 323,983 3,491 33,722 361,196 Amounts Due Within One Year $ $ 3,195 12,640 15,835 1,524 17,359 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for long-term liabilities at June 30, 2016: Governmental Activities (in thousands) Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 Total Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 General Obligation Bonds Issued to Provide Water, Sewer, Light, Parks, Open Spaces, Public Safety, and Transportation Facilities 20% Limitation Principal Interest Total $ 25,974 $ 18,777 $ 44,751 28,833 17,717 46,550 30,091 16,651 46,742 38,485 15,536 54,021 39,545 13,995 53,540 203,385 46,896 250,281 104,890 16,983 121,873 42,565 3,069 45,634 $ 513,768 $ 149,624 $ Municipal Property Corporation Bonds Principal Interest Total $ 9,831 $ 9,316 $ 19,147 11,200 8,810 20,010 14,157 8,369 22,526 15,552 7,773 23,325 10,952 7,042 17,994 55,030 27,499 82,529 62,237 14,190 76,427 29,990 2,904 32,894 Capital Appreciation ** Total 663,392 79 $ 209,028 (79) $ General Obligation Bonds Issued For All Other Purposes 6% Limitation Principal Interest Total $ 11,631 $ 1,162 $ 12,793 11,697 807 12,504 10,469 437 10,906 2,250 123 2,373 1,700 55 1,755 $ 37,747 294,852 2,584 $ 40,331 Scottsdale Preserve Authority Excise Tax Revenue Bonds Principal Interest Total $ 4,175 $ 1,936 $ 6,111 4,365 1,760 6,125 4,540 1,602 6,142 4,780 1,375 6,155 5,015 1,157 6,172 17,150 1,839 18,989 - - 85,824 $ $ $ 40,025 $ 9,669 Total General Obligation Bonds Principal Interest Total $ 37,605 $ 19,939 $ 57,544 40,530 18,524 59,054 40,560 17,088 57,648 40,735 15,659 56,394 41,245 14,050 55,295 203,385 46,896 250,281 104,890 16,983 121,873 42,565 3,069 45,634 $ 551,515 $ 152,208 $ Capital Leases Principal Interest Total $ 60 $ 5 $ 65 63 3 66 33 1 34 - $ 49,694 $ - - 156 $ 9 **For GAAP financial statement reporting, accretion of capital appreciation bonds is added to the principal balance outstanding. Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 Total Certificates of Participation Principal Interest Total $ 2,282 $ 267 $ 2,549 2,350 198 2,548 2,421 128 2,549 2,493 56 2,549 - Community Facilities Districts General Obligation Bonds Principal Interest Total $ 2,770 $ 859 $ 3,629 2,555 764 3,319 2,475 680 3,155 2,550 601 3,151 2,650 519 3,169 8,315 1,503 9,818 2,510 371 2,881 300 18 318 $ $ 9,546 $ 649 $ 10,195 24,125 $ 5,315 (continued) City of Scottsdale, Arizona 100 $ 29,440 703,723 $ 165 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Governmental Activities (in thousands) Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 Capital Appreciation Total Service Concession Arrangements Principal Interest Total $ 154 $ 156 $ 310 154 172 326 154 188 342 154 205 359 154 223 377 769 1,419 2,188 769 2,024 2,793 375 1,337 1,712 Total Governmental Activities Principal Interest Total $ 56,877 $ 32,478 $ 89,355 61,217 30,231 91,448 64,340 28,056 92,396 66,264 25,669 91,933 60,016 22,991 83,007 284,649 79,156 363,805 170,406 33,568 203,974 73,230 7,328 80,558 79 $ 2,683 $ 5,724 $ 8,407 $ 837,078 $ (79) 259,398 $ 1,096,476 Business-type Activities (in thousands) Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 Total Water and Sewer Revenue Bonds Principal Interest Total $ 3,195 $ 1,354 $ 4,549 3,370 1,195 4,565 3,540 1,026 4,566 3,725 849 4,574 3,930 654 4,584 8,520 677 9,197 - Municipal Property Corporation Bonds Principal Interest Total $ 12,640 $ 13,052 $ 25,692 13,365 12,435 25,800 13,979 11,792 25,771 14,798 11,106 25,904 15,558 10,381 25,939 79,915 40,035 119,950 80,707 21,267 101,974 43,720 5,762 49,482 $ $ 274,682 $ 125,830 $ 400,512 26,280 $ 5,755 $ 32,035 Fiscal Year 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 Total Business-type Activities Principal Interest Total $ 15,835 $ 14,406 $ 30,241 16,735 13,630 30,365 17,519 12,818 30,337 18,523 11,955 30,478 19,488 11,035 30,523 88,435 40,712 129,147 80,707 21,267 101,974 43,720 5,762 49,482 Total $ 300,962 $ 131,585 $ 432,547 City of Scottsdale, Arizona 101 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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, and 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 the 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, 2016, the general liability claims payable totaled $15,271,103 and the self-insured benefits claims payable totaled $2,311,000. The City began to administer all self-insured health and dental plans in January of 2004. Years Ended June 30 2016 (in thousands) 2015 Claims Payable, July 1 Current Year Claims Incurred Current Year Claim Payments $ 15,939 34,987 (33,344) $ 15,663 32,080 (31,804) Claims Payable, June 30 $ 17,582 $ 15,939 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 $135,000 up to $1,000,000 are probable, and $40,000 up to $10,000,000 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. City of Scottsdale, Arizona 102 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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, 2016, approximately $897,000 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 sales tax is generated, collected and remitted to the City. As of June 30, 2016, this requirement has not been met under any of the agreements. The City’s estimated contingent liability at June 30, 2016 is $17,232,905. C. Subsequent Event In September 2016 the City acquired 415 acres of land for its McDowell Sonoran Preserve at a cost of $30.4 million. Funding will come from two dedicated sales taxes approved by Scottsdale voters in 1995 and 2004. D. Joint Ventures Sub-Regional Operating Group (SROG) The City participates with the cities of Phoenix, Glendale, Mesa and Tempe in the multi-city SubRegional 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, 2015, (the latest audited information available from SROG), the City’s net investment in SROG was $101,036,000. SROG’s net cash operating expenses for the year ended June 30, 2015, were $35,105,846, of which the City’s share was $3,552,183, or 10.1 percent. For the year ended June 30, 2016, the City paid $568,784 for SROG capital contributions and $3,342,087 for SROG operating expenses, including adjustments to the operating and replacement reserves and prior year settlement. City of Scottsdale, Arizona 103 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015, for the multicity 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. Regional Wireless Cooperative (RWC) The City participates in the Regional Wireless Cooperative (RWC), an association of municipalities formed in 2008 to oversee the administration, operation, management, and maintenance of an expanding regional communications network. The RWC was formed through a governance structure founded on the principles of cooperation for the mutual benefit of all members, and has expanded to serve a still-growing list of cities, towns, and fire districts, along with many other area entities who serve public safety needs. A regional radio communications network was built to seamlessly serve the interoperable communication needs of first responders and other municipal radio users in and around the Phoenix Metropolitan Region. Financial responsibilities are shared by all members based on their relative size, and is measured by the number of subscriber units (radios) on the network. Currently, the City of Phoenix is responsible for the day-to-day operations and maintenance of the network, as well as the management of the RWC’s organization and finances. The City records its share of contributions to the RWC, third party contributions paid to the RWC for the benefit of the City, and equity in the joint venture in the City’s proprietary funds and governmentwide financial statements. The City contributed $856,248 and had $410,645 contributed for its benefit by third parties for the fiscal year ended June 30, 2016. For the fiscal year ended June 30, 2015 (the latest audited information available from RWC), the City’s net investment in RWC was $1,405,305, or 1.47 percent of the RWC’s total net position. The Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015, for the RWC may be obtained from the Regional Wireless Cooperative, 200 West Washington Street, 12th Floor, Phoenix, Arizona, 85003-1611. E. Pollution Remediation In the proprietary funds financial statements, a long-term pollution remediation obligation is recognized for the remaining remediation period. In 1981, groundwater contamination was discovered when elevated levels of trichloroethylene (TCE) and other volatile organic chemicals were detected in two 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. City of Scottsdale, Arizona 104 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Following its investigation, the EPA identified three companies, Motorola Solutions, Inc. (MSI), SMI Holdings, LLC, formerly 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. 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, nine projected cash flows, based on the prior nine years of historical costs and weighted equally, were used to calculate an average annual cost. In order to estimate the NGTF liability, three projected cash flows, based on the prior three years of historical costs and weighted equally, were used to calculate an average annual cost. These average costs were then projected over the remaining remediation period of 58 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 due in early calendar year 2017. Improvements in technology and changes in laws or regulations did not impact the average annual cost. The liability is revalued annually. Fiscal year 2015/16 reimbursable outlays for operating and monitoring the CGTF were $519,802 and for the NGTF were $257,104. 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. F. Related Organization The Industrial Development Authority (IDA) is a non-profit corporation established by the City in 1984 to promote the retention, expansion and attraction of businesses and commercial enterprises in Scottsdale. The City Council appoints the Board of Directors of the IDA and is also involved in granting and denying IDA bond applications. City of Scottsdale, Arizona 105 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 G. Retirement and Pension Plans All benefitted employees of the City including the Mayor and the City Council are covered by one of four 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 defined benefit pension plan. All public safety personnel participate in the Public Safety Personnel Retirement System, which is an agent multiple-employer defined benefit pension plan. The Mayor and City Council participate in either the Elected Officials’ Retirement Plan (a cost-sharing multiple-employer defined benefit pension plan) or the Elected Officials’ Defined Contribution Retirement System (a defined contribution plan). The City contributes to the Elected Officials’ Retirement Plan; however the plan is not described below because of its relative insignificance to the financial statements. All plans are component units of the State of Arizona. Arizona State Retirement System General Information about the Pension Plan Plan Description All benefitted City employees, except public safety personnel and the Mayor and City Council, participate in the Arizona State Retirement System (“ASRS”). ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term disability (OPEB) plan. ASRS was established by the State of Arizona to provide pension benefits for employees of both the state and participating political subdivisions and school districts. ASRS is administered in accordance with Title 38, Chapter 5, Articles 2 and 2.1 of the Arizona Revised Statutes (ARS). ASRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to ASRS, P. O. Box 33910, Phoenix, AZ 85067-3910, calling 1-800-621-3778, or by visiting https://www.azasrs.gov/ content/annual-reports. Benefits Provided ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefits terms. A member may retire upon meeting the following age and service requirements: Initial Membership Date Pre-July 1, 2011 July 1, 2011 and after Age Years of Service 65 N/A 62 10 Age plus years of service total 80 Age Years of Service 65 62 60 55 N/A 10 25 30 City of Scottsdale, Arizona 106 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The retirement benefit is based on a percentage of average monthly compensation multiplied by the years of credited service. The compensation generally does not include lump sum payments on termination of employment for accumulated vacation or annual leave, sick leave, compensatory time or any other form of termination pay (see discussion of pre-January 1, 1984 members below). The multiplier percentage and average monthly compensation are defined in the following schedules: Years of Service 0.00-19.99 years 20.00-24.99 years 25.00-29.99 years 30.00 or more years Multiplier 2.10% 2.15% 2.20% 2.30% Membership Date Pre-July 1, 2011 July 1, 2011 and after Average Monthly Compensation 36 consecutive months of highest compensation within final 120 months of service 60 consecutive months of highest compensation within final 120 months of service Members who began participation in the Plan prior to January 1, 1984 may choose to have average monthly compensation determined based upon the period of 60 consecutive months during which the member receives the highest compensation within the last 120 months of service, including lump sum payments as described above. Members who attain age 50 with at least five years of total credited service may take an early retirement; however, the amount of their retirement benefit is actuarially reduced. Survivor benefits are applicable if death occurs prior to retirement, and are payable, at the option of the beneficiary, by either of the following methods: 1. A lump sum equal to the sum of (a) and (b): a. the sum of the member’s employee and employer balances, and accumulated interest and b. the amount of the member’s employee and employer accounts along with supplemental credits, if any, transferred from the System (closed portion of ASRS) to the Plan, with interest 2. The beneficiary may elect to receive a monthly income, in the single life form, which is actuarially equivalent to the lump sum amount from number 1 above, at 8 percent. Retirees who have been retired one year are eligible for a permanent benefit increase (“PBI”) up to a maximum of a 4 percent increase. The PBI is paid from a reserve of “Excess Investment Earnings.” If there are no “Excess Investment Earnings” in reserve, then no PBI is paid. Further, PBI enhancements (“EPBI”) provide retired members with at least ten years of service who have been retired five or more years an additional benefit. For each complete 5-year period the member has been retired an incremental benefit is paid if monies to pay the benefit are available. This benefit is funded by an interest credit of 8 percent of the reserve for future PBIs. Due to legislation enacted in the 2013 legislative session, PBIs and EPBIs will not be awarded to members hired after September 13, 2013. City of Scottsdale, Arizona 107 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Contributions The ARS provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of the City’s covered payroll. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is authorized to approve a contribution rate other than the actuarially determined rate. Employees were required to contribute 11.47 percent (11.35 percent for retirement and 0.12 percent for long-term disability) of their annual pay for the fiscal year ended June 30, 2016, and the City’s required contribution rate was 11.47 percent (10.85 percent for retirement, 0.50 percent for health insurance premium benefit, and 0.12 percent for long-term disability) during the same time period. In addition, the City was required by statute to contribute at the actuarially determined rate of 9.36 percent (9.17 percent for retirement, 0.13 percent for health insurance premium benefit, and 0.06 percent for long-term disability) of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to the ASRS. The required contribution rate for the year ended June 30, 2016, was actuarially determined to yield contribution amounts sufficient to finance costs earned by employees during the year and to amortize the Plan’s unfunded actuarially accrued liability over the period specified in the statutes. Contributions to the pension plan from the City were $11,049,000 for the year ended June 30, 2016. The City’s contributions for the years ending June 30, 2016, 2015, and 2014 for OPEB were $626,315, $720,997, and $828,499 respectively, all of which were equal to the required contributions for each year. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the City reported a liability of $171,304,030 for its proportionate share of the collective net pension liability of the ASRS. The collective net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the collective net pension liability was determined by an actuarial valuation as of June 30, 2014. Update procedures were used to roll forward the total pension liability to the measurement date. The City’s proportion of the collective net pension liability was based on the City’s proportionate share of contributions to the pension plan relative to the contributions of all participating entities for the fiscal year ended June 30, 2015. At June 30, 2015, the City’s proportion was 1.099760 percent, which was a decrease of .002803 percent from its proportion measured as of June 30, 2014. For the year ended June 30, 2016, the City recognized a collective pension expense of $9,573,701. At June 30, 2016, the City reported a collective deferred outflow of resources and a collective deferred inflow of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Deferred Outflows of Resources $ 4,675 Net difference between projected and actual earnings on pension plan investments $ 8,976 - Changes in proportion and differences between City contributions and proportionate share of contributions 5,490 563 City contributions subsequent to the measurement date Total Deferred Inflows of Resources 333 11,049 $ 16,287 $ 14,799 City of Scottsdale, Arizona 108 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 The $11,049,000 reported as a collective deferred outflow of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the collective net pension liability in the year ended June 30, 2017. Other amounts reported as a collective deferred outflow of resources and a collective deferred inflow of resources related to pensions will be recognized in pension expense as follows (in thousands): Year ended June 30: 2017 2018 2019 2020 2021 Thereafter $ (3,354) (6,173) (3,997) 3,963 - Actuarial assumptions The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial valuation date Actuarial rollforward date Actuarial cost method Amortization method Plan amendments Investment gain/loss Assumption gain/loss Experience gain/loss Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2014 June 30, 2015 Entry age normal Immediate Five years Average future service lives Average future service lives Fair value 8% 3-6.75% 3% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Equity Fixed income Commodities Real estate Multi-asset class Target Allocation 58% 25% 2% 10% 5% 100% Long-Term Expected Arithmetic Real Rate 3.94% 0.93% 0.08% 0.42% 0.17% City of Scottsdale, Arizona 109 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Discount Rate The discount rate used to measure the total pension liability was 8 percent. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the actuarially determined amounts. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the City’s Proportionate Share of the Collective Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the collective net pension liability calculated using the discount rate of 8 percent, as well as what the City’s proportionate share of the collective net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (7 percent) or 1-percentage-point higher (9 percent) than the current rate: City's proportionate share of the collective net pension liability 1% Decrease (7.0%) Discount Rate (8.0%) 1% Increase (9.0%) $ 224,466,820 $ 171,304,030 $ 134,870,098 Pension Plan Fiduciary Net Position The pension plan’s fiduciary net position has been determined on the same basis used by the pension plan. The financial statements of ASRS are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America that apply to government accounting of fiduciary funds including the Governmental Accounting Standards Board (GASB) Statements 28, 34, 37, 40, 43, 53, 63 and 67. Benefits and refunds are recognized when due and payable. Publicly traded investments are reported at fair values determined by the custodial agent. The agents’ determination of fair values includes, among other things, utilization of pricing services or prices quoted by independent brokers at current exchange rates. ASRS’ derivative instruments which consist of futures, forward contracts, options, swaps, rights and warrants, are measured at fair value. The fair value of limited partnership investments is based on estimated current values and accepted industry practice. Fair value is based on estimates and assumptions from information and representations provided by the respective general partners, in the absence of readily ascertainable market values. Short-term investments are reported at cost plus accrued interest, which approximates fair value. For investments where no readily ascertainable fair value exists, management, in consultation with their investment advisors, has determined the fair values for the individual investments based on anticipated maturity dates and current interest rates commensurate with the investment’s degree of risk. Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. City of Scottsdale, Arizona 110 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Public Safety Personnel Retirement System General Information about the Pension Plan Plan Description All of the City’s sworn public safety personnel participate in Public Safety Personnel Retirement System (“PSPRS”). PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan (agent plans). PSPRS is administered in accordance with Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes. PSPRS acts as a common investment and administrative agent that is jointly administered by the Board of Trustees (“the Board”) and 237 local boards. PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to PSPRS, 3010 E. Camelback Road, Suite 200, Phoenix, AZ 85016, calling (602) 255-5575, or by visiting: http://www.psprs.com/sys_psprs/AnnualReports/cato_annual_rpts_psprs. htm. Benefits Provided PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefit terms. The calculation of retirement benefits for employees who became a member on or before December 31, 2011 commence the first day of the month following termination of employment and are based upon the following: 1. 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service. 2. Age 62 with 15 years of service, or 20 years of service with less than 20 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service. The pension is reduced by 4 percent per year for each year of credited service under 20 years. 3. 20 to 24.99 years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service plus 2 percent of the average monthly benefit compensation for each year of credited service between 20 and 24.99. 4. 25 or more years of credited service: 50 percent of the average monthly benefit compensation for the first 20 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year of credited service above 20 years - up to a maximum of 80 percent of the average monthly benefit compensation. The calculation of retirement benefits for employees who became a member on or after January 1, 2012 commence the first day of the month following termination of employment and are based upon the following: 1. Age 52.5 with 25 years of service: 62.5 percent of the average monthly benefit compensation. Benefits will be reduced by 4 percent for each year of credited service under 25 years. City of Scottsdale, Arizona 111 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 2. 25 or more years of service: 62.5 percent of the average monthly benefit compensation for the first 25 years of credited service plus 2.5 percent of the average monthly benefit compensation for each year over 25 years of credited service - up to a maximum of 80 percent of the average monthly benefit compensation. The pension is reduced by 4 percent per year for each year of credited service under 25 years with a pro-rata reduction for any fractional years. The phrase “average monthly benefit compensation,” as it is used in the above discussion, is defined as the average of the highest 36 consecutive months of compensation within the last 20 years of credited service (for employees who became a member on or before December 31, 2011) or as the average of the highest 60 consecutive months of compensation within the last 20 years of credited service (for employees who became a member on or after January 1, 2012). Disability benefits are calculated as follows: Accidental Disability Retirement: Catastrophic Disability Retirement: Ordinary Disability Retirement: 50% of average monthly compensation, or normal pension amount, whichever is greater. 90% of average monthly compensation for the first 60 months. Thereafter, the benefit is the greater of 62.5% of average monthly compensation or the member’s accrued normal pension. A percentage of normal pension on employee’s credited service (maximum of 20 years divided by 20). Survivor benefits are paid on behalf of an active member in the amount of 80 percent of the pension based on the calculation for an accidental disability retirement. If the member was killed in the line of duty, the benefit is 100 percent of the member’s average monthly benefit compensation. The benefit amount is allocated to the surviving spouse and, if applicable, eligible children. If there is no surviving spouse, and there is at least one eligible child, the guardian of the eligible child(ren) and the eligible child(ren) are the recipients of the benefit. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions. Benefits are paid on behalf of an inactive, non-retired member to the member’s named beneficiary in the amount of the member’s accumulated contributions. Death benefits are paid on behalf of a retired member in a manner similar to an active member. The surviving spouse (if married for at least two consecutive years at the time of the member’s death) will receive 80 percent of the member’s pension benefit for lifetime. The surviving children and guardian provisions are the same as those regarding active members, with the exception that the percentages received are based upon the pension amount as opposed to the amounts referenced above for active members. If there is no surviving spouse or eligible child(ren), the member’s named beneficiary on file will receive the member’s accumulated contributions less the pension payments made to the member. A retired member or survivor of a retired member may receive a Permanent Benefit Increase (PBI) from the System if monies are available. PBI eligibility and calculation is contingent upon the effective retirement date. City of Scottsdale, Arizona 112 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Members who retired on or before July 1, 2011, may be entitled to a PBI of up to 4 percent of the average normal PSPRS benefit being received on the preceding June 30. To be eligible for the increase the member or survivor must be age 55 or older on July 1 of the current year and have begun receiving benefits on or before July 31 of the previous year. A member or survivor is also eligible if he or she began receiving benefits on or before July 31 of the two previous years regardless of age. The increases are paid out of a PBI reserve account that is funded by one-half of the plan’s earnings in excess of nine percent. Members who retired on or after August 1, 2011 are eligible for and receive PBIs as follows: 1. A retired member who became a member on or before December 31, 2011, or the survivor of a retired member, was receiving benefits on or before July 31 of the two previous years, OR was 55 or older on July 1 of the current year and receiving benefits on or before July 31 of the previous year. 2. A retired member who became a member on or after January 1, 2012, or the survivor of a retired member, was 55 or older on July 1 of the current year and is receiving benefits, OR the retired member was under 55 on July 1 of the current year, was receiving an accidental disability or a catastrophic disability retirement benefit and was receiving benefits on or before July 31 of the two previous years, OR a survivor was under 55 on July 1 of the current year, is the survivor of a member who was killed in the line of duty and was receiving benefits on or before July 31 of the two previous years. The increase is contingent upon a total return of more than 10.5 percent for the prior fiscal year, and will be calculated as follows (if there are insufficient earnings to cover the maximum increases, the percentage increase is limited to the earnings available): Ratio of Actuarial Value of Assets to Liabilities 60-64% 65-69% 70-74% 75-79% 80% or more Maximum increase 2.00% 2.50% 3.00% 3.50% 4.00% From and after December 31, 2015, legislature may enact permanent one-time benefit increases after an analysis of the effect of the increase on the System by the Joint Legislative Budget Committee (JLBC). Employees covered by benefit terms At June 30, 2016, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active Employees Total 230 90 629 949 City of Scottsdale, Arizona 113 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Contributions and Annual OPEB Cost ARS Title 38, Chapter 5, Article 4, Section 38-843 provides the authority for determining the City and active employee contribution requirements to PSPRS pension and health insurance premium benefit plans. The contribution rates for employers are based on an actuarially determined rate recommended by an independent actuary contracted by the Board. The contribution rates for employees are prescribed by the ARS Section referenced above. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. For the fiscal year ended June 30, 2016, the employee contribution rate for pensions was 11.65 percent of annual pay for fire and police employees. The City’s contribution rate for pensions was 35.36 percent for police employees and 12.06 percent for fire employees. The City’s contribution rate for the health insurance premium benefit plans was 0.17 percent for police employees and 0.40 percent for fire employees. In addition, the City was required by statute to contribute at the actuarially determined rate of 28.62 percent of annual covered payroll of retired members who worked for the City in positions that would typically be filled by an employee who contributes to PSPRS. The City’s contributions to the pension plan and annual OPEB cost for the year ended June 30, 2016, were $12,725,792 and $141,513, respectively. ARS Title 9, Chapter 8, Article 3, Section 9-952 requires the state treasurer to distribute a fire insurance premium tax to the respective incorporated cities and towns and legally organized fire districts in proportion to the full cash value of the real property and improvements in each incorporated city and town and legally organized fire district which procures the services of a private fire company and in each area served by a department or legally organized fire district. The warrant issued by the state treasurer is identified as the “fire fighters’ relief and pension fund”, to cover the firefighting personnel deposit into the pension plan. The annual tax provided by law is based on a portion of the premiums received on policies and contracts of fire insurance covering property within the state. PSPRS received $1,535,903 of fire insurance premium tax for the City’s fire pension plan for fiscal year ended June 30, 2016. PSPRS accounts for the fire insurance premium tax collected for the City as employer contributions. Net Pension Liability The City’s net pension liability of $119,754,818 was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. In May 2016, voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of 2 percent. The change in the City’s net pension liability as a result of the statutory adjustments is not known. City of Scottsdale, Arizona 114 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Actuarial assumptions The total pension liability in the June 30, 2015 measurement was determined using the following actuarial assumptions: Actuarial Cost Method Asset Valuation Method Payroll growth Inflation Salary increases Investment rate of return Mortality rates Individual Entry Age Normal Fair Value of Assets 4.00% 3.00% 4.00%-8.00%, including inflation 7.85%, net of investment and administrative expenses RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females) The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study of the period July 1, 2006 to June 30, 2011. The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These real rates of return are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For each major asset class that is included in the pension plan’s target asset allocation as of June 30, 2015, these best estimates are summarized in the following table: Asset Class U.S. Equity Non-U.S. Equity Private Equity Fixed Income Credit Opportunities Absolute Return GTAA Real Assets Real Estate Risk Parity Short Term Investments Target Allocation 16.00% 14.00% 11.00% 7.00% 13.00% 5.00% 10.00% 8.00% 10.00% 4.00% 2.00% 100.00% Long-Term Expected Real Rate of Return* 6.23% 8.25% 9.50% 2.92% 7.08% 4.11% 4.38% 4.77% 4.48% 5.13% 0.75% * Arithmetic Real Rate of Return. Based on inflation assumption of 3.00%. Discount rate The discount rate used to measure the total pension liability was 7.85 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the statutorily mandated amounts and employer contributions will be made at the actuarially determined amounts. Based on those assumptions, the PSPRS plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. City of Scottsdale, Arizona 115 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Changes in the Net Pension Liability Public Safety Personnel Retirement System (Police) Changes in the Net Pension Liability (in thousands) Increase (Decrease) Balances at 6/30/15 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions/other inputs Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/16 Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a)-(b) $ $ $ $ 254,344 140,588 113,756 6,537 19,640 87 - 8,970 3,944 5,113 6,537 19,640 87 (8,970) (3,944) (5,113) (14,835) 11,429 265,773 (14,835) (125) (243) 2,824 143,412 125 243 8,605 122,361 $ $ Public Safety Personnel Retirement System (Fire) Changes in the Net Pension Liability (in thousands) Total Pension Liability (Asset) (a) Balances at 6/30/15 Changes for the year: Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions/other inputs Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at 6/30/16 $ $ 49,916 Plan Fiduciary Net Position (b) Net Pension Liability (Asset) (a)-(b) $ $ 54,681 (4,765) 3,720 4,037 994 - 2,247 2,337 2,046 3,720 4,037 994 (2,247) (2,337) (2,046) (691) 8,060 57,976 (691) (50) 12 5,901 60,582 50 (12) 2,159 (2,606) City of Scottsdale, Arizona 116 Increase (Decrease) $ $ Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Sensitivity of the net pension liability to changes in the discount rate The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.85 percent, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.85 percent) or 1-percentage-point higher (8.85 percent) than the current rate (in thousands): 1% Decrease (6.85%) Police net pension liability (asset) Fire net pension liability (asset) $ 154,981 6,631 Discount Rate (7.85%) $ 122,361 (2,606) 1% Increase (8.85%) $ 95,214 (10,065) Pension plan fiduciary net position The pension plan’s fiduciary net position has been determined on the same basis used by the pension plan. PSPRS financial statements are prepared using the accrual basis of accounting. Benefits are recognized when due and payable in accordance with the terms of PSPRS. Refunds are due and payable by state law within 20 days of receipt of a written application for a refund. Refunds are recorded when paid. PSPRS investments are reported at market value. Market values are determined as follows: Short-term investments are reported at cost plus accrued interest. Equity securities are valued at the last reported sales price. Fixed-income securities are valued using the last reported sales price or the estimated market value as determined by fixed income broker/dealers plus accrued interest. Investments in hedge funds are valued monthly at the last reported valuations. Limited partnership investments in credit opportunities, private equity, real assets and real estate are valued on a quarterly or monthly basis at last reported valuations adjusted by any subsequent cash flows. Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2016, the City recognized pension expense of $15,864,850. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources (in thousands): Differences between expected and actual experience Deferred Outflows of Resources Deferred Inflows of Resources $ $ Change of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments City contributions subsequent to the measurement date Total $ 1,356 621 16,266 - 745 - 12,726 - 31,093 $ City of Scottsdale, Arizona 117 621 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 City contributions subsequent to the measurement date of $12,725,792 were reported as deferred outflows and will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows (in thousands): Year ended June 30: 2017 2018 2019 2020 2021 Thereafter $ 3,215 3,215 3,215 5,161 1,888 1,052 Agent Plan OPEB Trend Information The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Three-Year Trend Information for PSPRS (Police) (dollars in thousands) Fiscal Year Ending 2016 2015 2014 Annual OPEB Cost $ 56 442 376 Percentage of Annual Cost Contributed 100% 100% 100% Net OPEB Obligation $ - Three-Year Trend Information for PSPRS (Fire) (dollars in thousands) Fiscal Year Ending 2016 2015 2014 Annual OPEB Cost $ 86 156 125 Percentage of Annual Cost Contributed 100% 100% 100% Net OPEB Obligation $ - Agent Plan OPEB Actuarial Assumptions Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multi-year trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. City of Scottsdale, Arizona 118 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Projections of benefits are based on (1) the plan as understood by the City and plan members and include the types of benefits in force at the valuation date and (2) the pattern of sharing benefit costs between the City and plan members to 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. The actuarial methods and assumptions used to establish the fiscal year 2016 contribution requirements are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation Retirement age Mortality Assumed future permanent benefit increases June 30, 2014 Entry age normal Level percentage of payroll, closed 22 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. 7-year smoothed market; 80%/120% market 7.85%, net of investment and administrative expenses 4.0% - 8.0% 4.0% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011. RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females). Members retired on or before July 1, 2011: 2% compounded on average. Members retired on or after August 1, 2011: 0.5% compounded on average. Since all current retirees receive the same dollar increase amount, approximation techniques were used to develop the assumed PBI for each member. The funded status of the PSPRS health insurance premium benefit plan in the June 30, 2015, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation June 30, 2015 Entry age normal Level percentage of payroll, closed 21 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. 7-year smoothed market; 80%/120% market 7.85%, net of investment and administrative expenses 4.0% - 8.0% 4.0% City of Scottsdale, Arizona 119 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Agent Plan OPEB Funded Status The following tables present the funded status of the health insurance premium benefit plans as of the most recent valuation date, June 30, 2015: Public Safety Personnel Retirement System (Police) Funded Status for Health Insurance (dollars in thousands) June 30, 2015 Actuarial Accrued Liability (AAL) Retired members and beneficiaries Active members DROP members Total Valuation Assets Net Unfunded Actuarial Accrued Liability $ $ 2,376 2,796 542 5,714 6,274 (560) 109.8% Percent Funded $ Annual Covered Payroll Unfunded AAL as a Percentage of Covered Payroll 33,075 0.0% Public Safety Personnel Retirement System (Fire) Funded Status for Health Insurance (dollars in thousands) June 30, 2015 Actuarial Accrued Liability (AAL) Retired members and beneficiaries Active members DROP members Total Valuation Assets Net Unfunded Actuarial Accrued Liability $ $ 131 1,398 22 1,551 1,235 316 79.6% Percent Funded $ Annual Covered Payroll Unfunded AAL as a Percentage of Covered Payroll City of Scottsdale, Arizona 120 20,420 1.5% Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Elected Officials’ Defined Contribution Retirement System The City contributes to the Elected Officials’ Defined Contribution Retirement System (EODCRS), which includes a defined contribution pension plan for elected officials and judges of certain state, county and local governments. Participants in this plan include only those elected officials who began service subsequent to December 31, 2013, and had no relationship to ASRS or EORP at the inception of service. The Board of Trustees of the PSPRS is also the administrator for the EODCRS. Benefit terms, including contribution requirements, for EODCRS are established by Title 38, Chapter 5, Article 3.1 of the Arizona Revised Statutes and may be amended by the State of Arizona. For each member of EODCRS, the City is required to contribute 6 percent of gross compensation to an individual member retirement account. Members are required to contribute 8 percent of gross compensation to their retirement account. Members are immediately vested in both their and the City’s contributions and earnings on those contributions. For the year ended June 30, 2016, the City recognized pension expense of $1,080. H. Other Postemployment Benefits In addition to the pension benefits described in the previous section (G), the City provides an option of postretirement health care benefits, in accordance with Chapter 14 of the City Code. 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, 2016, was $14,476,704. The projected liability was considered payable within one year or greater and all but the current portion of $102,807 was therefore considered non-current and included in the proprietary fund and government-wide financial statements. Significant actuarial assumptions of the January 1, 2016, actuarial valuation include: a) mortality rates based on the RPH-2015 Total Dataset Mortality Table fully generational using scale MP 2015, 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, 2016. City of Scottsdale, Arizona 121 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 I. Postemployment Benefits Other Than Pensions 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). GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, requires the City to recognize the cost of postemployment healthcare in the year the employee services were received, report the accumulated liability from prior years, and provide 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 ended June 30, 2007. Plan Description The City provides postemployment medical care (OPEB) for eligible retired employees through a single-employer 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 Committee and approved by the Scottsdale City Council. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. Benefits Provided The City offers postemployment medical benefits to its eligible retirees. An eligible retiree is a Public Safety Personnel Retirement System accidental disability retired employee. Eligible retirees can enroll in a City plan up to 60 days after they retire; after that their eligibility for this benefit ceases. All medical care benefits are provided through the City’s self-insured health plan. The benefit levels are the same as those afforded to active employees. Upon a retiree reaching 65 years of age, the retiree and related dependents are no longer eligible for City coverage. As of June 30, 2016, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Terminated Employees Eligible for Benefits, But Not Yet Enrolled Active Employees Total 22 674 696 Participating Employers 1 City of Scottsdale, Arizona 122 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 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 ended June 30, 2016, the eligible retirees paid 100 percent of the blended actuarial 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 in effect providing a subsidy to eligible retirees. This implied subsidy exists because on average retiree health care costs are higher than active employee healthcare costs. By the City not contributing anything toward this plan in advance, the City employs a pay-as-you-go method through paying the higher rate for active employees each year. For fiscal year ended June 30, 2016, retirees contributed $178,559 and the City contributed $92,890 (implied subsidy). 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, 2016 (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 $ $ 429 37 (51) 415 (93) 322 915 1,237 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows (dollars in thousands): Fiscal Year Ended 2014 2015 2016 Annual OPEB Cost $ 453 379 415 Employer Contributions $ 114 91 93 Percentage of OPEB Cost Contributed 25.2% 24.0% 22.4% City of Scottsdale, Arizona 123 Net OPEB Obligation (Asset) $ 627 915 1,237 Notes to Financial Statements For the Fiscal Year Ended June 30, 2016 Funded Status The funded status of the plan as of June 30, 2016 was as follows (dollars in thousands): Actuarial Accrued Liability Actuarial Value of Plan Assets Unfunded Actuarial Accrued Liability $ $ Funded Ratio 3,351 3,351 0% Covered Payroll $ Unfunded Actuarial Accrued Liability as a Percentage of Covered Payroll 49,422 6.8% 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 132. Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant method and assumptions used for this fiscal year valuation were as follows: Actuarial Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method July 1, 2015 Projected unit credit Level percentage of payroll 21 years, closed N/A Actuarial Assumptions Investment Rate of Return Inflation Rate Projected Salary Increases Healthcare Inflation Rate 4%* 3% 2.8% 10.72% initial rate, 5% ultimate rate *Investment rate of return based on City's own investments. Medical Reimbursements The federal government may provide the City subsidies per the Medicare Part D Prescription Drug Subsidy Program for providing healthcare for Medicare eligible retirees. 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 124 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Proportionate Share of Collective Net Pension Liability for Cost–Sharing Pension Plan Schedule of the City's Proportionate Share of the Collective Net Pension Liability Arizona State Retirement System Last Two Fiscal Years (dollars in thousands) City's proportion of the net collective pension liability 2016 2015 1.099760% 1.102563% City's proportionate share of the collective net pension liability $171,304 $163,142 City's covered payroll $101,962 $99,077 City's proportionate share of the collective net pension liability as a percentage of its covered payroll 168.01% 164.66% Plan fiduciary net position as a percentage of the total pension liability 68.35% 69.49% The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information prior to fiscal year 2015 is not available. City of Scottsdale, Arizona 125 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Changes in the City’s Net Pension Liability (Asset) and Related Ratios for Agent Pension Plan Public Safety Personnel Retirement System (Police) Schedule of Changes in the City's Net Pension Liability and Related Ratios Last Two Fiscal Years (dollars in thousands) 2016 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability-beginning Total pension liability-ending (a) Plan fiduciary net position Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position $ 2015 6,537 19,640 87 (14,835) 11,429 254,344 $ 265,773 6,363 16,898 3,987 (896) 22,122 (12,411) 36,063 218,281 $ 254,344 $ $ 8,970 3,944 5,113 (14,835) (125) (243) 2,824 $ 7,997 3,495 17,047 (12,411) (137) (50) 15,941 Plan fiduciary net position-beginning Plan fiduciary net position-ending(b) 140,588 $ 143,412 124,647 $ 140,588 City's net pension liability-ending ((a) - (b)) $ 122,361 $ 113,756 53.96% 55.27% $ 33,075 $ 31,438 369.95% 361.84% Plan fiduciary net position as a percentage of the total pension liability Covered payroll City's net pension liability as a percentage of covered payroll The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information for the prior years is not available. See accompanying notes to the schedule. City of Scottsdale, Arizona 126 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Public Safety Personnel Retirement System (Fire) Schedule of Changes in the City's Net Pension Liability (Asset) and Related Ratios Last Two Fiscal Year (dollars in thousands) 2016 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability-beginning Total pension liability-ending (a) $ 3,720 4,037 994 (691) 8,060 49,916 $ 57,976 $ 3,509 3,449 (448) 462 1,157 (780) 7,349 42,567 $ 49,916 Plan fiduciary net position Contributions-employer Contributions-employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position $ 2,247 2,337 2,046 (691) (50) 12 5,901 $ 2,392 2,629 6,294 (780) (51) (60) 10,424 Plan fiduciary net position-beginning Plan fiduciary net position-ending(b) 54,681 $ 60,582 44,257 $ 54,681 City's net pension asset-ending ((a) - (b)) $ (2,606) $ (4,765) 104.49% 109.55% $ 20,420 $ 19,336 0.00% 0.00% Plan fiduciary net position as a percentage of the total pension liability Covered payroll City's net pension liability as a percentage of covered payroll The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information for the prior years is not available. See accompanying notes to the schedule. City of Scottsdale, Arizona 127 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Schedule of City Contributions Arizona State Retirement System Last Four Fiscal Years (dollars in thousands) Statutorily required contribution $ Contributions in relation to the statutorily required contribution $ (11,049) Contribution deficiency (excess) $ Covered payroll Contributions as a percentage of covered payroll 2016 11,049 - 2015 11,092 $ (11,092) $ 2014 10,635 $ (10,635) 2013 9,949 (9,949) - $ - $ - $ 101,917 $ 101,962 $ 99,077 $ 97,257 10.84% 10.88% 10.73% The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information prior to fiscal year 2013 is not available. City of Scottsdale, Arizona 128 10.23% Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Schedule of City Contributions Public Safety Personnel Retirement System (Police) Last Three Fiscal Years (dollars in thousands) Actuarially determined contribution 2016 $ 11,635 2015 $ 8,921 2014 $ 7,997 11,635 8,921 7,997 Employer contributions in relation to the actuarially determined contribution Contribution deficiency (excess) $ - $ - $ - Covered payroll $ 33,073 $ 33,075 $ 31,438 Contributions as a percentage of covered payroll 35.18% 26.97% 25.44% The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information prior to 2014 is not available. See accompanying notes to the schedule. City of Scottsdale, Arizona 129 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Schedule of City Contributions Public Safety Personnel Retirement System (Fire) Last Three Fiscal Years (dollars in thousands) Actuarially determined contribution 2016 $ 2,626 2015 $ 2,276 2014 $ 2,392 2,626 2,276 2,392 Employer contributions in relation to the actuarially determined contribution Contribution deficiency (excess) $ - $ - $ - Covered payroll $ 21,498 $ 20,420 $ 19,336 Contributions as a percentage of covered payroll 12.22% 11.15% 12.37% The City implemented GASB Statement No. 68 for the fiscal year ended June 30, 2015. Information prior to 2014 is not available. See accompanying notes to the schedule. City of Scottsdale, Arizona 130 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Schedule of OPEB Plans’ 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 Health Insurance (dollars in thousands) Actuarial Valuation June 30 2013 2014 2015 (2) (1) (3) (4) (5) Actuarial Actuarial Value Percent Funded Unfunded AAL Annual Covered Accrued of Assets Liability (AAL) (1)/(2) (2)-(1) Payroll $ - $ 5,407 0.0% $ 5,407 $ 30,601 5,809 5,418 107.2% (391) 31,438 6,274 5,714 109.8% (560) 33,075 (6) Unfunded AAL as a Percentage of Covered Payroll (4)/(5) 17.7% 0.0% 0.0% See accompanying notes to the schedule. Public Safety Personnel Retirement System (Fire) Schedule of Funding Progress Health Insurance (dollars in thousands) Actuarial Valuation June 30 2013 2014 2015 (2) (1) (3) Actuarial Actuarial Value Accrued Liability Percent Funded of Assets (1)/(2) (AAL) $ - $ 1,276 0.0% 1,042 1,399 74.5% 1,235 1,551 79.6% (6) Unfunded AAL as a Percentage (4) (5) of Covered Unfunded AAL Annual Covered Payroll (2)-(1) Payroll (4)/(5) $ 1,276 $ 17,980 7.1% 357 19,336 1.8% 316 20,420 1.5% See accompanying notes to the schedule. City of Scottsdale, Arizona 131 Required Supplementary Information For the Fiscal Year Ended June 30, 2016 Actuarial Valuation July 1 2013 2014 2015 (1) Actuarial Value of Assets $ - Other Post-Employment Benefit Plan Schedule of Funding Progress (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 (2)-(1) (4)/(5) (1)/(2) Payroll (AAL) $ 4,148 0.0% $ 4,148 $ 45,422 9.1% 3,234 0.0% 3,234 46,522 7.0% 3,351 0.0% 3,351 49,422 6.8% Other Post-Employment Benefit Plan Schedule of Employer Contribution (dollars in thousands) Actuarial Valuation July 1 2013 2014 2015 (2) (1) Annual Required Contribution Employer Contributions (ARC) $ 114 $ 455 91 387 93 429 (3) Percent Contributed (1)/(2) 25.1% 23.5% 21.7% City of Scottsdale, Arizona 132 Notes to Required Supplementary Information For the Fiscal Year Ended June 30, 2016 I. Actuarially Determined Contribution Rates Actuarial determined contribution rates for PSPRS are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation Retirement age Mortality Assumed future permanent benefit increases II. June 30, 2014 Entry age normal Level percentage of payroll, closed 22 years; if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. 7-year smoothed market; 80%/120% market 7.85%, net of investment and administrative expenses 4.0% - 8.0% 4.0% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 - June 30, 2011. RP-2000 mortality table projected to 2015 using projection scale AA (adjusted by 105% for both males and females). Members retired on or before July 1, 2011: 2% compounded on average. Members retired on or after August 1, 2011: 0.5% compounded on average. Since all current retirees receive the same dollar increase amount, approximation techniques were used to develop the assumed PBI for each member. Factors that Affect the Identification of Trends Beginning in fiscal year 2014, PSPRS established separate funds for pension benefits and health insurance premium benefits. Previously, the plan recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plan transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from the plan’s Pension Fund to the new Health Insurance Fund. City of Scottsdale, Arizona 133 This page is intentionally blank. City of Scottsdale, Arizona 134 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. Section 8 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. Transportation This fund receives and expends the City’s allocation of the Arizona Highway User Revenue tax and 1.2% of transportation privilege tax for transportation improvements. The amount of Highway User Revenue available to each city is allocated on a population basis, which is determined by the latest federal census and must be used for street construction, reconstruction, maintenance or transit. Preserve Privilege Tax Fund This fund receives a 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (0.2 percent) and 2004 (0.15 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 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 non-profit 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 applications 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. 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. City of Scottsdale, Arizona 135 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. 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 principal and interest of general obligation bonds issued by community facilities districts. Although these bonds are not obligations of the City, generally accepted accounting principles indicate that the bonds should be disclosed herein. Scottsdale Preserve Authority Fund This fund accounts for the principal and interest requirements of excise tax revenue bonds issued by the Scottsdale Preserve Authority. Financing is provided by a 0.35 percent Preservation Privilege (Sales) Tax revenue approved by the voters in 1995 (0.2 percent) and 2004 (0.15 percent). 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 Bonds Fund Accounts for the proceeds and interest of the sale of 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. Preserve Privilege Tax Fund Accounts for the resources used to acquire and improve land within the McDowell Sonoran Preserve. Resources are provided by the 0.15 percent 2004-approved Preserve Privilege Tax. Municipal Property Corporation Bonds Fund Accounts for the activity related to the Municipal Property Corporation bond proceeds and authorized capital improvements. External Sources Fund Accounts for the activity related to monies received from a variety of external sources including federal and state grants and contributions. The revenues are restricted for specific types of capital improvements. City of Scottsdale, Arizona 136 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2016 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Franchise Fee Property Tax Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) 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 Special Revenue Funds $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 70,835 69 57 4,351 861 50 2 1,303 2,873 685 2,256 83,342 1,786 533 - Debt Service Funds $ $ $ 10,718 22,676 95 16,425 49,914 43 6,343 15,475 Capital Projects Funds Total Nonmajor Governmental Funds $ $ $ $ 45,682 123 103 2,765 655 49,328 4,180 48 1,931 - $ $ 127,235 22,868 160 4,351 861 50 97 1,303 22,063 1,340 2,256 182,584 5,966 581 1,974 6,343 15,475 6,451 1,039 4 5 14 9,832 21,861 6,159 6,451 1,039 4 5 14 37,852 2,897 16,461 3,328 22,686 12,729 38,322 9,487 60,538 53,865 17,758 (1,010) 70,613 6,892 4,700 11,592 44,561 (4,720) 39,841 105,318 22,458 (5,730) 122,046 83,342 $ City of Scottsdale, Arizona 137 49,914 $ 49,328 $ 182,584 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) REVENUES Taxes - Local Property Transaction Privilege Transient Occupancy Light and Power Franchise Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court 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 EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Debt Service Principal Interest and Fiscal Charges Capital Outlay Total Expenditures Special Revenue Funds $ $ $ Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning, Restated* Fund Balances (Deficits)- Ending $ 107 55,967 17,397 274 Debt Service Funds $ 3,883 - Total Nonmajor Governmental Funds Capital Projects Funds $ - $ 3,990 55,967 17,397 274 14,060 655 56 - - 14,060 655 56 1,818 - - 1,818 172 2,051 146 457 1,874 388 84 168 - 320 50 172 2,051 146 457 2,042 708 134 7,696 210 1,817 114 577 2,117 413 535 70 109,055 2,019 6,070 1,309 1,720 189 151 3,739 9,005 210 5,556 303 577 2,268 413 535 70 118,864 76 933 871 115 14,606 19,555 2,450 10,985 589 $ $ - $ $ - $ $ 76 933 871 115 14,606 19,555 2,450 10,985 589 50,180 15,475 12,717 28,192 18,663 18,663 15,475 12,717 18,663 97,035 58,875 (22,122) (14,924) 21,829 90 (53,460) (53,370) 24,552 (2,445) 22,107 14,954 (62) 14,892 39,596 (55,967) (16,371) 5,505 (15) (32) 5,458 65,108 70,613 $ 11,607 11,592 $ 39,873 39,841 $ 116,588 122,046 *Restated a deficit of $1,947,000 for the creation of the External Sources Non-major Capital Project Fund, amount previously included in the General CIP Construction Major Capital Project Fund. City of Scottsdale, Arizona 138 Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2016 (in thousands) 139 City of Scottsdale, Arizona ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Privilege Tax Transient Occupancy Tax Property Tax Franchise Fee Highway User Tax Intergovernmental Grants Miscellaneous Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Unearned Revenue Intergovernmental Other Due to Other Governments Guaranty and Other Deposits Other Total Liabilities Transportation $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) (continued) Community Development Block Grant $ 9,580 1,554 1,303 45 12,482 885 383 $ $ $ 294 244 1,745 2,283 101 18 HOME $ $ $ Grants 37 37 - $ $ $ Preserve Privilege Tax Section 8 891 441 3 1,335 127 21 $ $ $ 395 35 430 6 18 $ $ $ Scottsdale Mountain CFD 35,408 57 2,797 38,262 4 - $ $ $ McDowell Mountain CFD - - $ $ $ - - 1 1,269 384 4 5 512 37 37 154 1,032 1,334 3 27 4 - - 44 1,899 - 432 35 - - - 1,313 2,411 37 1,766 62 4 - - 11,169 11,169 29 (157) (128) - (431) (431) 368 368 38,258 38,258 - - 12,482 $ 2,283 $ 37 $ 1,335 $ 430 $ 38,262 $ - $ - Combining Balance Sheet Nonmajor Special Revenue Governmental Funds June 30, 2016 (in thousands) ASSETS 140 City of Scottsdale, Arizona 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 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits 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 (Deficits) Restricted Committed Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) Via Linda Road CFD DC Ranch CFD $ 60 2 62 - $ $ $ Waterfront Commerical CFD - - $ $ $ 9 9 - Streetlight Districts $ $ $ Tourism Development Special Programs 5 7 12 - $ $ $ 14,494 50 2,873 249 17,666 391 82 $ $ $ Total 9,731 861 172 10,764 272 11 $ $ $ 70,835 69 57 4,351 861 2 50 1,303 2,873 685 2,256 83,342 1,786 533 - - - - 5,876 3 12 6,364 2 285 6,451 1,039 4 5 14 9,832 - - - - 441 46 2,897 - - - - 6,805 331 12,729 62 62 - 9 9 12 12 3,958 7,325 (422) 10,861 10,433 10,433 53,865 17,758 (1,010) 70,613 62 $ - $ 9 $ 12 $ 17,666 $ 10,764 $ 83,342 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Taxes - Local Property Transaction Privilege REVENUES City of Scottsdale, Arizona 141 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 Library Police 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 EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures Transportation $ Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending (continued) Community Development Block Grant $ 19,938 $ HOME - $ Grants - $ Section 8 - $ - Preserve Privilege Tax Scottsdale Mountain CFD McDowell Mountain CFD $ $ $ 36,029 10 - 10 - - - - - - - - - 14,060 655 - - - - - - - - - - - - - - - - - 54 - - - (1) - 360 76 - - 237 338 535 16 35,779 1,108 1,162 356 356 1,151 210 108 1,744 3,213 5,081 6 5,086 36,465 10 10 14,405 7,396 1,457 23,258 1,250 1,250 1 1 871 201 639 643 907 3,261 5,048 5,048 5 5 10 10 10 10 12,521 (88) 355 (48) 38 36,460 - - (14,063) (14,063) - - 9 (49) (40) (3) (3) (31,349) (31,349) - - (1,542) (88) 355 (88) 35 5,111 - - 12,711 (40) (355) (343) 333 33,147 - 11,169 $ (128) $ - $ (431) $ 368 $ 38,258 $ - $ - Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) REVENUES City of Scottsdale, Arizona 142 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 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 DC Ranch CFD Via Linda Road CFD $ $ EXPENDITURES Current General Government Mayor and City Council City Court City Manager City Treasurer Public Works Community and Economic Development Public Safety Community Services Streetlight and Services Districts Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning Fund Balances (Deficits) - Ending $ 73 - Waterfront Commerical CFD 9 - $ 5 - Streetlight Districts $ Tourism Development Special Programs - $ 274 $ Total 17,397 - $ 107 55,967 17,397 274 - - - - 56 - 14,060 655 56 - - - - 1,818 - 1,818 - - - - 172 2,051 146 457 289 29 8 1,531 - 172 2,051 146 457 1,874 388 84 73 9 5 577 577 1,472 114 373 56 48 7,363 19 18,947 7,696 210 1,817 114 577 2,117 413 535 70 109,055 70 70 9 9 11 11 589 589 1 933 232 1,807 2,322 5,295 75 11,288 11,363 76 933 871 115 14,606 19,555 2,450 10,985 589 50,180 3 - (6) (12) 2,068 7,584 58,875 - - - - 81 (1,058) (977) (6,938) (6,938) 90 (53,460) (53,370) 3 - (6) (12) 1,091 646 5,505 59 62 $ - $ 15 9 $ 24 12 $ 9,770 10,861 $ 9,787 10,433 $ 65,108 70,613 Transportation – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts 143 City of Scottsdale, Arizona REVENUES Taxes - Local Transaction Privilege Taxes - Intergovernmental Highway User Tax Local Transportation Assistance Fund Intergovernmental Federal Grants Miscellaneous Reimbursements from Outside Sources Indirect Costs Other Total Revenues Original $ EXPENDITURES Current Public Works Community and Economic Development Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Sale of Capital Assets Total Other Financing Sources and (Uses) Net Change in Fund Balance Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending $ Final 19,019 $ 19,019 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 19,938 - 19,938 919 13,565 645 13,565 645 14,060 655 - 14,060 655 495 10 550 550 200 535 20 35,084 550 550 200 535 20 35,084 237 338 535 16 35,779 - 237 338 535 16 35,779 (550) (313) 138 (4) 695 14,711 9,544 1,321 25,576 14,743 9,504 1,431 25,678 14,368 7,372 1,457 23,197 37 24 61 14,405 7,396 1,457 23,258 375 2,132 (26) 2,481 9,508 9,406 12,582 (61) 12,521 3,176 (13,559) 10 (13,549) (13,559) 10 (13,549) (14,063) (14,063) - (14,063) (14,063) (504) (10) (514) (4,041) (4,143) (1,481) (61) (1,542) 2,662 9,158 5,117 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis 61 $ 12,836 8,693 $ 12,836 11,355 $ (125) (186) $ 12,711 11,169 $ 2,662 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, 2016 (in thousands) Budgeted Amounts Property Rental Intergovernmental Federal Grants Total Revenues REVENUES Original $ 144 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Deficiency of Revenues under Expenditures Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending $ Final 29 $ 29 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 54 - 54 25 1,816 1,845 1,816 1,845 1,108 1,162 - 1,108 1,162 (708) (683) 1,845 1,845 1,854 1,854 1,244 1,244 6 6 1,250 1,250 610 610 - (9) (82) (6) (88) (73) - Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis 6 $ (29) (38) $ (29) (111) $ (11) (17) $ (40) (128) $ (73) HOME – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts Intergovernmental Federal Grants Total Revenues Original REVENUES $ Final 703 703 $ 703 703 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 356 356 - 356 356 (347) (347) 145 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures 703 703 703 703 1 1 - 1 1 702 702 Excess of Revenues over Expenditures - - 355 - 355 355 Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending $ - $ (355) (355) $ (355) - $ - $ (355) - $ 355 Grants – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts REVENUES Intergovernmental Federal Grants State Grants Miscellaneous Contributions and Donations Total Revenues Original $ City of Scottsdale, Arizona 146 EXPENDITURES Current General Government City Manager Public Works Community and Economic Development Public Safety Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balance Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending Final 2,749 162 120 3,710 6,741 6,940 126 120 1,575 8,761 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ $ 1,151 210 108 1,744 3,213 - 1,151 210 108 1,744 3,213 (5,789) 84 (12) 169 (5,548) 2,137 4,604 6,741 865 201 354 861 2,448 4,729 871 201 639 636 905 3,252 7 2 9 871 201 639 643 907 3,261 (6) (285) 225 1,543 1,477 - 4,032 (39) (9) (48) (4,071) - - 9 (49) (40) - 9 (49) (40) 9 (49) (40) - 4,032 (79) (9) (88) (4,111) $ - $ 9 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ (339) 3,693 $ (339) (418) $ (4) (13) $ (343) (431) $ (4,111) Section 8 – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Interest Earnings Intergovernmental Federal Grants Other Total Revenues REVENUES Original $ 147 City of Scottsdale, Arizona EXPENDITURES Current Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Fund Balance (Deficit) - Beginning Fund Balance (Deficit) - Ending Final - - Budget to GAAP Differences $ $ (1) - Actual Amounts GAAP Basis $ $ (1) (1) 5,998 5,998 5,998 5,998 5,081 6 5,086 - 5,081 6 5,086 (917) 6 (912) 5,998 5,998 6,002 6,002 5,044 5,044 4 4 5,048 5,048 958 958 - (4) 42 (4) 38 46 - (3) (3) (3) (3) - (3) (3) - - (7) 39 (4) 35 46 $ - $ 4 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ 339 332 $ 339 378 $ (6) (10) $ 333 368 $ 46 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, 2016 (in thousands) Budgeted Amounts Taxes - Local Transaction Privilege Interest Earnings Investment Income Total Revenues Original REVENUES $ Final 34,312 163 34,475 $ 34,312 163 34,475 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis $ $ $ 36,029 360 36,389 76 76 Variance Between Final Budget and Actual Amounts Budgetary Basis 36,029 360 76 36,465 $ 1,717 197 1,914 City of Scottsdale, Arizona 148 EXPENDITURES Current General Government City Treasurer Community Services Total Expenditures 2 2 2 2 5 5 - 5 5 (5) 2 (3) Excess of Revenues over Expenditures 34,473 34,473 36,384 76 36,460 1,911 (36,494) (36,494) (36,494) (36,494) (31,349) (31,349) - (31,349) (31,349) 5,145 5,145 (2,021) (2,021) 5,035 76 5,111 7,056 OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 27,325 25,304 $ 76 Explanation of Differences: Items recorded as revenues for GAAP purposes that are not recorded for budget purposes: Investment Income $ 33,784 31,763 $ 33,784 38,819 $ (637) (561) $ 33,147 38,258 $ 7,056 Streetlight Districts – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts REVENUES Streetlight and Services Districts Total Revenues Original $ 149 City of Scottsdale, Arizona EXPENDITURES Current Streetlight and Services Districts Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures Fund Balance - Beginning Fund Balance (Deficit) - Ending $ Final 580 580 $ 580 580 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 577 577 - 577 577 (3) (3) 612 612 612 612 589 589 - 589 589 23 23 (32) (32) (12) - (12) 20 32 - $ 24 (8) $ 24 12 $ - $ 24 12 $ 20 Special Programs – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts Original REVENUES City of Scottsdale, Arizona 150 Taxes - Local Light and Power Franchise Taxes - Intergovernmental Business and Liquor Licenses Charges for Current Services Recreation Fees Fines, Fees, and Forfeitures Court Court Enhancement Library Police Property Rental Interest Earnings Investment Income Intergovernmental Miscellaneous Developer Contributions Contributions and Donations Reimbursements from Outside Sources Other Total Revenues $ EXPENDITURES Current General Government Mayor and City Council City Court Public Works Community and Economic Development Public Safety Community Services Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Final 250 $ 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 $ $ 274 - Actual Amounts GAAP Basis $ $ 274 24 25 56 - 56 31 1,702 1,702 1,818 - 1,818 116 152 1,604 480 383 19 - 152 1,604 480 383 19 - 172 2,051 146 457 289 29 - 8 172 2,051 146 457 289 29 8 20 447 146 (23) (94) 10 - 2,346 651 582 8,194 2,346 562 582 89 8,194 1,472 114 373 56 48 7,355 8 1,472 114 373 56 48 7,363 (874) 114 (189) (526) (41) (839) 1,756 250 507 2,649 2,514 7,676 1 1,768 250 507 2,614 2,525 7,665 1 931 232 1,802 2,316 5,282 2 5 6 13 1 933 232 1,807 2,322 5,295 837 250 275 812 209 2,383 518 529 2,073 (5) 2,068 1,544 60 (723) (663) 60 (723) (663) 81 (1,058) (977) - 81 (1,058) (977) 21 (335) (314) (145) (134) 1,096 (5) 1,091 1,230 7,689 7,544 8 13 $ 250 Budget to GAAP Differences 25 Explanation of Differences: Items recorded as revenue for GAAP purposes that are not recorded for budget purposes: Investment Income $ Actual Amounts Budgetary Basis Variance Between Final Budget and Actual Amounts Budgetary Basis (5) $ 9,815 9,681 $ 9,815 10,911 $ (45) (50) $ 9,770 10,861 $ 1,230 Tourism Development – Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts 151 City of Scottsdale, Arizona REVENUES Taxes - Local Transient Occupancy Tax Property Rental Reimbursements from Outside Sources Other Total Revenues Original $ Final 16,928 1,600 20 18,548 $ 16,928 1,600 20 18,548 Actual Amounts Budgetary Basis Budget to GAAP Differences $ $ 17,397 1,531 19 18,947 - Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ 17,397 1,531 19 18,947 469 (69) 19 (20) 399 EXPENDITURES Current General Government Mayor and City Council Community and Economic Development Total Expenditures 75 11,959 12,034 75 11,960 12,035 75 11,287 11,362 1 1 75 11,288 11,363 673 673 Excess of Revenues over Expenditures 6,514 6,513 7,585 (1) 7,584 1,072 (5,241) (5,241) (5,241) (5,241) (6,938) (6,938) - (6,938) (6,938) (1,697) (1,697) 1,273 1,272 647 (1) 646 (625) OTHER FINANCING USES Transfers Out Total Other Financing Uses Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 6,873 8,146 $ 1 Explanation of Differences: The City budgets for certain expenditures on the cash basis, rather than on the modified accrual basis: Payroll Accruals $ 9,794 11,066 $ 9,794 10,441 $ (7) (8) $ 9,787 10,433 $ (625) Combining Balance Sheet Nonmajor Debt Service Governmental Funds June 30, 2016 (in thousands) ASSETS Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Property Tax Intergovernmental Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Due to Other Funds Matured Bond Interest Payable Matured Bonds Payable Total Liabilities Municipal Property Corporation $ $ $ 152 City of Scottsdale, Arizona 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 $ Debt Service Stabilization 13,252 13,252 4,797 8,455 13,252 $ $ $ 10,718 16,425 27,143 - Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD $ $ $ $ $ $ 548 11 559 24 440 464 $ $ 1,401 23 1,424 119 1,085 1,204 $ $ 1,258 51 1,309 213 860 1,073 $ $ Waterfront Commercial CFD 233 4 237 20 175 195 $ $ $ 573 6 579 43 99 120 262 Scottsdale Preserve Authority $ $ $ 5,411 5,411 1,071 4,340 5,411 Total $ $ $ 10,718 22,676 95 16,425 49,914 43 6,343 15,475 21,861 - 16,425 4 10 22 - - - 16,461 13,252 16,425 468 1,214 1,095 195 262 5,411 38,322 - 6,018 4,700 10,718 91 91 210 210 214 214 42 42 317 317 - 6,892 4,700 11,592 13,252 $ 27,143 $ 559 $ 1,424 $ 1,309 $ 237 $ 579 $ 5,411 $ 49,914 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Debt Service Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Taxes - Local Property Property Rental Intergovernmental Miscellaneous Total Revenues Municipal Property Corporation REVENUES $ EXPENDITURES Current Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures 153 City of Scottsdale, Arizona OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ Debt Service Stabilization - $ 168 Scottsdale Mountain CFD McDowell Mountain CFD DC Ranch CFD Via Linda Road CFD $ $ $ $ 530 - 1,385 - 1,387 - Waterfront Commercial CFD 222 - $ 359 - Scottsdale Preserve Authority $ - Total $ 3,883 168 - 2,019 2,187 530 1,385 1,387 222 359 - 2,019 6,070 8,455 9,610 18,065 - 440 51 491 1,085 239 1,324 860 427 1,287 175 40 215 120 200 320 4,340 2,150 6,490 15,475 12,717 28,192 (18,065) 2,187 39 61 100 7 39 (6,490) (22,122) 18,062 18,062 (2,445) (2,445) - - - - - 6,490 6,490 24,552 (2,445) 22,107 (3) (258) 39 61 100 7 39 - (15) 3 - $ 10,976 10,718 $ 52 91 $ 149 210 $ 114 214 $ 35 42 $ 278 317 $ - $ 11,607 11,592 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, 2016 (in thousands) Budgeted Amounts Taxes - Local Property Total Revenues Original REVENUES $ 154 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Final 32,228 32,228 $ 32,228 32,228 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 32,098 32,098 - 32,098 32,098 (130) (130) 35,395 23,072 58,467 35,395 23,072 58,467 35,395 21,464 56,859 - 35,395 21,464 56,859 1,608 1,608 Deficiency of Revenues under Expenditures (26,239) (26,239) (24,761) - (24,761) 1,478 OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 25,724 25,724 25,724 25,724 24,118 24,118 - 24,118 24,118 (1,606) (1,606) (515) (515) (643) - (643) (128) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 11,686 11,171 $ 12,172 11,657 $ 12,172 11,529 $ - $ 12,172 11,529 $ (128) Municipal Property Corporation Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts Total Revenues REVENUES Original $ 155 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Deficiency of Revenues under Expenditures OTHER FINANCING SOURCES Transfers In Total Other Financing Sources Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final - $ - $ - Budget to GAAP Differences $ - Actual Amounts GAAP Basis $ - Variance Between Final Budget and Actual Amounts Budgetary Basis $ - - 8,455 9,613 18,068 8,455 9,610 18,065 - 8,455 9,610 18,065 3 3 - (18,068) (18,065) - (18,065) 3 - 15,625 15,625 18,062 18,062 - 18,062 18,062 2,437 2,437 - (2,443) (3) - (3) 2,440 - $ 3 (2,440) $ 3 - $ - $ 3 - $ 2,440 Debt Service Stabilization Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts Property Rental Intergovernmental Miscellaneous Total Revenues REVENUES Original $ City of Scottsdale, Arizona 156 EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Excess (Deficiency) of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Final 145 $ 145 Actual Amounts Budgetary Basis Budget to GAAP Differences Actual Amounts GAAP Basis Variance Between Final Budget and Actual Amounts Budgetary Basis $ $ $ $ 168 - 168 23 1,498 1,643 1,499 1,644 2,019 2,187 - 2,019 2,187 520 543 8,455 9,613 18,068 - - - - - (16,425) 1,644 2,187 - 2,187 543 15,625 15,625 - (2,445) (2,445) - (2,445) (2,445) (2,445) (2,445) (800) 1,644 (258) - (258) (1,902) 10,736 9,936 $ 10,976 12,620 $ 10,976 10,718 $ - $ 10,976 10,718 $ (1,902) Scottsdale Preserve Authority Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual For the Fiscal Year Ended June 30, 2016 (in thousands) Budgeted Amounts Total Revenues REVENUES Original $ 157 City of Scottsdale, Arizona EXPENDITURES Debt Service Principal Interest and Fiscal Charges Total Expenditures Actual Amounts Budgetary Basis Final - $ - $ - Budget to GAAP Differences $ - Actual Amounts GAAP Basis $ - Variance Between Final Budget and Actual Amounts Budgetary Basis $ - 4,340 2,149 6,489 4,340 2,149 6,489 4,340 2,150 6,490 - 4,340 2,150 6,490 (1) (1) Deficiency of Revenues under Expenditures (6,489) (6,489) (6,490) - (6,490) (1) OTHER FINANCING SOURCES Transfers In Total Other Financing Sources 6,489 6,489 6,489 6,489 6,490 6,490 - 6,490 6,490 1 1 - - - - - - Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ - $ - $ - $ - $ - $ - Combining Balance Sheet Nonmajor Capital Projects Governmental Funds June 30, 2016 (in thousands) ASSETS 158 City of Scottsdale, Arizona Cash and Investments Cash with Fiscal Agent Receivables (net of allowance for uncollectibles) Interest Intergovernmental Grants Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES (DEFICITS) Liabilities Accounts Payable Accrued Payroll and Benefits Due to Other Funds Total Liabilities General Obligation Bonds $ $ $ Deferred Inflows of Resources Unavailable Revenues Total Liabilities and Deferred Inflows of Resources Fund Balances (Deficits) Restricted Unassigned Total Fund Balances (Deficits) Total Liabilities, Deferred Inflows of Resources, and Fund Balances (Deficits) $ 13,015 53 13,068 452 6 458 Transportation Privilege Tax Preserve Privilege Tax Municipal Property Corporation Bonds $ $ $ $ $ 32,631 50 32,681 2,926 23 2,949 $ $ 36 36 36 7 43 $ $ External Sources 123 123 3 2 5 $ $ $ Total - 2,765 655 3,420 763 12 1,929 2,704 $ $ $ 45,682 123 103 2,765 655 49,328 4,180 48 1,931 6,159 - - - - 3,328 3,328 458 2,949 43 5 6,032 9,487 12,645 (35) 12,610 29,732 29,732 (7) (7) 118 118 2,066 (4,678) (2,612) 44,561 (4,720) 39,841 13,068 $ 32,681 $ 36 $ 123 $ 3,420 $ 49,328 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Governmental Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Interest Earnings Investment Income Intergovernmental Federal Grants Miscellaneous Developer Contributions Contributions and Donations Total Revenues 159 City of Scottsdale, Arizona Current Capital Outlay Total Expenditures REVENUES General Obligation Bonds $ 116 22 Transportation Privilege Tax Preserve Privilege Tax $ $ 138 200 27 99 189 515 Municipal Property Corporation Bonds - $ - - External Sources $ 4 1 Total $ 320 50 - 1,210 1,720 151 3,086 1,309 1,720 189 151 3,739 EXPENDITURES Deficiency of Revenues under Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Fund Balances (Deficits) - Beginning, Restated * Fund Balances (Deficits) - Ending $ 1,944 1,944 12,154 12,154 738 738 27 27 3,800 3,800 18,663 18,663 (1,806) (11,639) (738) (27) (714) (14,924) - 14,104 (2) 14,102 741 741 - 109 (60) 49 14,954 (62) 14,892 (1,806) 2,463 3 (27) (665) (32) 14,416 12,610 $ 27,269 29,732 $ (10) (7) $ 145 118 $ (1,947) (2,612) *Restated to move a deficit fund balance of $6,000 from Preserve to General Obligation Bond column. The External Sources column was previously included in the General CIP Construction Capital Project Major Fund. $ 39,873 39,841 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 motor 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, and 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 160 Combining Statement of Fund Net Position Internal Service Funds June 30, 2016 (in thousands) Fleet Management ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables (net of allowance for uncollectibles) Miscellaneous Supplies Inventory Total Current Assets $ Noncurrent Assets Equity in Joint Venture Capital Assets Buildings and Improvements Motor Vehicles Machinery and Equipment Construction in Progress Less Accumulated Depreciation Total Noncurrent Assets Total Assets Deferred Outflows of Resources Pensions LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 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 Net Pension Liabilities Other Payables - Due in more than one year Total Noncurrent Liabilities Total Liabilities Deferred Inflows of Resources Pensions NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position $ Computer Replacement Self-Insurance 12,710 $ 25,808 $ Total 1,733 $ 40,251 94 747 13,551 87 25,895 1,733 181 747 41,179 3 - - 3 12,887 75,327 1,090 76 (41,842) 47,541 - 661 (11) 650 12,887 75,327 1,751 76 (41,853) 48,191 61,092 25,895 2,383 89,370 411 84 - 495 1,540 192 161 1,893 797 45 37 6,903 7,782 15 15 2,352 237 198 6,903 9,690 184 4,271 4,455 45 840 10,679 11,564 - 229 5,111 10,679 16,019 6,348 19,346 15 25,709 369 73 - 442 47,541 7,245 6,560 650 1,718 48,191 15,523 54,786 $ City of Scottsdale, Arizona 161 6,560 $ 2,368 $ 63,714 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2016 (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 Contributions Transfers In Transfers Out Change in Net Position Total Net Position - Beginning as Restated Total Net Position - Ending $ 18,071 463 18,534 Computer Replacement Self-Insurance $ 30,604 6,762 179 157 1,029 38,731 $ Total 1,010 2 1,012 $ 49,685 6,762 179 157 1,494 58,277 11,331 6,117 17,448 2,394 7,839 27,148 2,875 40,256 11 43 54 11,331 2,394 7,839 27,148 2,875 6,128 43 57,758 1,086 (1,525) 958 519 356 356 1,313 1,313 - 1,313 356 1,669 1,442 (212) 958 2,188 1,229 (18) 2,653 1,196 (5) 979 958 1,229 1,196 (23) 4,590 52,133 54,786 $ City of Scottsdale, Arizona 162 5,581 6,560 $ 1,410 2,368 $ 59,124 63,714 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2016 (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 $ 18,071 (3,584) (7,363) 463 7,587 Cash Flows from Non-Capital Financing Activities Property Tax Transfers In Transfers Out Net Cash Provided by (Used for) Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets Investment in Joint Venture Sale of Capital Assets Net Cash Used for Capital and Related Financing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Computer Replacement Self-Insurance $ 37,912 (1,101) (37,192) 1,029 648 $ Total 1,010 (53) 2 959 $ 56,993 (4,685) (44,608) 1,494 9,194 (18) (18) 1,313 1,196 (5) 2,504 - 1,313 1,196 (23) 2,486 (7,515) (1) 636 (6,880) - (646) (646) (8,161) (1) 636 (7,526) 689 3,152 313 4,154 12,021 22,656 1,420 36,097 $ 12,710 $ 25,808 $ 1,733 $ 40,251 $ 1,086 $ (1,525) $ 958 $ 519 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income (Loss) Income Provided by (Used for) Operating Activities Depreciation Pension Expense Current Year Pension Contributions Miscellaneous 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 Additions to Property, Plant, and Equipment Contributions from other funds 6,117 430 (280) 65 117 30 22 6,501 57 (58) 209 291 18 13 1,643 2,173 11 (10) 1 6,128 487 (338) 209 65 398 48 35 1,643 8,675 $ 7,587 $ 648 $ 959 $ 9,194 $ 1,229 $ - $ - $ 1,229 City of Scottsdale, Arizona 163 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 of 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. Crossroads East Development Agreement Agency Fund This fund accounts for monies in escrow for the Arizona State Land Department. . City of Scottsdale, Arizona 164 Combining Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 (in thousands) Private Purpose Trust Funds ASSETS Cash and Cash Equivalents Handicap Scholarship Private Purpose Trust Fund $ Total Assets City of Scottsdale, Arizona 165 LIABILITIES Escrow Payable Vouchers State Land Department Rebate Total Liabilities NET POSITION Held in Trust for Other Purposes $ 8 Agency Funds Family SelfSufficiency Agency Fund Total $ 8 $ 88 Crossroads East Development Agreement Agency Fund $ 1,415 Total $ 1,503 8 8 88 1,415 1,503 - - 88 - 1,415 88 1,415 - - 8 $ 8 $ 88 $ 1,415 $ 1,503 Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2016 (in thousands) Family Self-Sufficiency ASSETS Cash and Cash Equivalents Total Assets 166 City of Scottsdale, Arizona LIABILITIES Escrow Payable Vouchers State Land Department Rebate Total Liabilities Balance July 1, 2015 Additions Crossroads East Development Agreement Deductions Balance June 30, 2016 Balance July 1, 2015 Additions Balance June 30, 2016 Deductions $ 55 $ 59 $ 26 $ 88 $ 1,415 $ - $ - $ 1,415 $ 55 $ 59 $ 26 $ 88 $ 1,415 $ - $ - $ 1,415 $ 55 - $ 59 - $ 26 - $ 88 - $ 1,415 $ - $ - $ 1,415 $ 55 $ 59 $ 26 $ 88 $ 1,415 $ - $ - $ 1,415 OTHER SUPPLEMENTARY INFORMATION Debt Requirements The Schedule of Changes in Long-Term Debt for the current fiscal year presents the City’s debt by debt type without regard to fund classification. Debt issued by community facilities districts is included for full disclosure although such debt is not legally an obligation of the City. City of Scottsdale, Arizona 167 Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2016 (in thousands) July 1, 2015 Issued Retired Refunding Bonds Issued Accretions, Amortizations and Contract Adjustments Bonds Defeased June 30, 2016 Governmental Activities Business-type Activities Final Payment Date GENERAL OBLIGATION BONDS City of Scottsdale, Arizona 168 Governmental Activities 2002 GO Refunding Various Purpose 2002 GO Refunding Preservation 2005A GO Various Purpose 2005B GO Preservation 2008A GO Various Purpose 2008B GO Preservation 2010 GO Various Purpose 2011 GO Preservation 2011 GO Refunding Various Purpose 2011 GO Refunding Preservation 2012 GO Preservation 2012 GO Refunding Various Purpose 2012 GO Refunding Preservation 2013 GO Preservation 2014 GO Preservation 2014 GO Refunding Various Purpose 2014 GO Refunding Preservation 2015 GO Refunding Various Purpose 2015 GO Refunding Preservation 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 2015 GO Refunding Series Issuance Premium Total General Obligation Bonds REVENUE BONDS Business-type Activities 2004 Utility Revenue Series Refunding 2008 Utility Revenue Series Refunding 2008 Refunding Series Issuance Premium Total Revenue Bonds $ $ $ $ 580 $ 8,100 8,000 1,100 14,675 1,875 45,000 19,475 4,445 24,240 50,000 38,145 44,020 74,000 13,535 69,940 9,365 86,400 74,015 143 25 278 14 622 212 2,577 2,068 6,129 2,749 540 8,297 14,052 624,616 $ - $ - $ 580 $ 3,070 8,000 1,100 4,375 600 1,550 1,410 1,710 6,725 545 5,730 35,395 $ 1,000 $ 28,335 2,183 31,518 $ - $ - $ 1,000 $ 2,055 3,055 $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) - $ - $ - $ - $ - $ (143) (25) (93) (5) (42) (11) (294) (111) (613) (148) (29) (1,037) (739) (3,290) $ - $ 5,030 10,300 1,275 43,450 19,475 3,035 22,530 50,000 31,420 44,020 74,000 12,990 69,940 9,365 86,400 68,285 185 9 580 201 2,283 1,957 5,516 2,601 511 7,260 13,313 585,931 $ - $ 5,030 10,300 1,275 43,450 19,475 3,035 22,530 50,000 31,420 44,020 74,000 12,990 69,940 9,365 86,400 68,285 185 9 580 201 2,283 1,957 5,516 2,601 511 7,260 13,313 585,931 $ - 07/01/16 07/01/19 07/01/16 07/01/16 07/01/18 07/01/18 07/01/30 07/01/34 07/01/18 07/01/24 07/01/34 07/01/21 07/01/25 07/01/34 07/01/34 07/01/23 07/01/23 07/01/28 07/01/34 - - $ - $ - $ (287) (287) $ - $ 26,280 1,896 28,176 $ - $ - $ 26,280 1,896 28,176 07/01/16 07/01/23 $ $ Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2016 (in thousands) City of Scottsdale, Arizona 169 MUNICIPAL PROPERTY CORPORATION BONDS Governmental Activities 2004A MPC 2005 MPC 2005D MPC 2006 MPC Refunding 2006A MPC 2006B MPC 2013A MPC 2013B MPC 2013C MPC 2014 MPC Refunding 2015A MPC 2015A MPC Taxable 2015 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 2015A Series Issuance Premium 2015A Taxable Series Issuance Premium 2015 Refunding Series Issuance Premium Subtotal Governmental Activities Business-type Activities 2005E Water/Sewer 2006 MPC Refunding 2008A Water/Sewer 2010 MPC Bonds Water/Sewer 2015A MPC Bonds WaterSewer 2015 MPC Refunding 2005E Water Issuance Premium 2006 Refunding Series Issuance Premium 2008A Series Issuance Premium 2010 Water/Sewer Issuance Premium 2015A Series Issuance Premium 2015 Refunding Series Issuance Premium Subtotal Business-type Activities Total Municipal Property Corporation Bonds SCOTTSDALE PRESERVE AUTHORITY BONDS Governmental Activities 2004 Excise Tax Refunding 2010 Excise Tax Refunding 2011 Excise Tax Refunding 2010 Excise Tax Revenue Issuance Premium 2011 Excise Tax Revenue Issuance Premium Total Scottsdale Preserve Authority Bonds July 1, 2015 $ $ $ $ Issued Retired Accretions, Amortizations and Contract Adjustments Bonds Defeased June 30, 2016 Governmental Activities Business-type Activities Final Payment Date 1,160 $ 275 1,025 55,450 665 2,375 24,550 1,345 34,810 22,735 11,995 14,340 46,758 22 14 55 4,695 9 15 4,184 176 4,445 2,439 1,116 262 8,129 243,044 - $ - 1,160 $ 1,025 325 1,150 1,015 50 1,275 425 570 1,460 8,455 - $ - - $ - - $ (22) (7) (55) (248) (5) (8) (331) (10) (252) (203) (58) (14) (406) (1,619) - $ 275 55,450 340 1,225 23,535 1,295 33,535 22,735 11,570 13,770 45,298 7 4,447 4 7 3,853 166 4,193 2,236 1,058 248 7,723 232,970 - $ 275 55,450 340 1,225 23,535 1,295 33,535 22,735 11,570 13,770 45,298 7 4,447 4 7 3,853 166 4,193 2,236 1,058 248 7,723 232,970 - 07/01/16 07/01/17 07/01/16 07/01/34 07/01/17 07/01/17 07/01/28 07/01/33 07/01/33 07/01/27 07/01/34 07/01/34 07/01/35 3,255 106,910 37,800 73,490 18,175 46,812 79 8,453 1,577 2,818 1,691 8,090 309,150 552,194 $ - $ 3,255 3,745 3,375 740 645 11,760 20,215 $ - $ - $ (79) (564) (93) (135) (89) (623) (1,583) (3,202) $ 103,165 34,425 72,750 17,530 46,812 7,889 1,484 2,683 1,602 7,467 295,807 528,777 $ 232,970 $ 103,165 34,425 72,750 17,530 46,812 7,889 1,484 2,683 1,602 7,467 295,807 295,807 07/01/16 07/01/30 07/01/32 07/01/36 07/01/34 07/01/28 3,315 $ 32,855 8,195 3,226 685 48,276 $ - $ - $ 3,315 $ 1,025 4,340 $ - $ - $ - $ - $ - $ (345) (102) (447) $ - $ 32,855 7,170 2,881 583 43,489 $ - $ 32,855 7,170 2,881 583 43,489 $ - 07/01/16 07/01/24 07/01/22 *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). (continued) Refunding Bonds Issued Schedule of Changes in Long-Term Debt* For the Year Ended June 30, 2016 (in thousands) July 1, 2015 CERTIFICATES OF PARTICIPATION Governmental Activities Series 2010-Public Safety Communications Project Total Certificates of Participation Issued Refunding Bonds Issued Retired Accretions, Amortizations and Contract Adjustments Bonds Defeased Governmental Activities June 30, 2016 City of Scottsdale, Arizona 170 07/01/20 07/15/18 07/15/32 07/15/27 07/15/22 07/15/23 $ - 1,220,613 $ 896,630 $ 323,983 - $ - $ - $ 156 156 $ - $ 156 156 $ - 2016 2018 - $ - $ - $ - $ 1,279 $ 1,404 2,683 $ 1,279 $ 1,404 2,683 $ - 2032 2035 - $ (7,289) $ 1,223,452 $ 899,469 $ 323,983 Compensated Absences Other Post-Employment Benefit - Implicit Subsidy Net Pension Liabilities Risk Management Claims $ 25,515 $ 1,237 257,337 17,582 3,491 33,722 - Total Long-Term Debt $ 1,201,140 $ 361,196 Total Bonds CAPITAL LEASES Governmental Activities Field Maintenance Equipment - Community Services Copier Equipment - Administrative Services Total Capital Leases SERVICE CONCESSION ARRANGEMENTS Governmental Activities Bureau of Reclamation\Westworld Bureau of Reclamation\TPC Total Service Concession Arrangements TOTAL BONDS, CAPITAL LEASES, AND SERVICE CONCESSION ARRANGEMENTS 11,762 $ 11,762 $ - $ - $ 2,216 $ 2,216 $ - $ - $ - $ - $ - $ - $ $ $ 1,055 $ 3,330 12,485 8,405 1,530 4 473 155 27,437 $ - $ - $ 440 $ 120 860 1,085 175 2,680 $ - $ - $ - $ - $ (2) (39) (22) (63) $ $ 1,295,803 $ - $ 67,901 $ - $ - $ (7,289) $ $ 15 $ 214 229 $ - $ - $ 15 $ 58 73 $ - $ - $ - $ - $ $ 1,359 $ 1,478 2,837 $ - $ - $ 80 $ 74 154 $ - $ - $ $ 1,298,869 $ - $ 68,128 $ - $ $ $ *This exhibit includes both Governmental Activities and Business-type Activities debt (paid out of Enterprise Funds). $ 9,546 $ 9,546 $ 615 3,210 11,625 7,320 1,355 2 434 133 24,694 $ $ 9,546 $ 9,546 $ Final Payment Date - COMMUNITY FACILITIES DISTRICT BONDS Governmental Activities 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 Mtn Ranch 2012 Issuance Premium Total Community Facilities District Bonds $ $ Business-type Activities 615 3,210 11,625 7,320 1,355 2 434 133 24,694 $ Statistical Section Contents Financial Trends Page 172 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 181 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 188 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 194 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 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 171 196 City of Scottsdale, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Governmental Activities Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position 172 City of Scottsdale, Arizona 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 2007 2008 2009 2010 2011 2012 2013 $ 2,198,130 108,686 206,386 $ 2,513,202 $ 2,353,573 189,540 90,632 $ 2,633,745 $ 2,586,731 131,732 83,884 $ 2,802,347 $ 2,729,334 97,950 87,698 $ 2,914,982 $ 2,704,433 91,862 108,799 $ 2,905,094 $ 2,800,451 100,275 74,124 $ 2,974,850 $ 2,756,186 100,472 133,897 $ 2,990,555 $ 895,636 33,649 224,607 $ 1,153,892 $ 909,632 26,147 293,090 $ 1,228,869 $ 991,390 26,568 239,103 $ 1,257,061 $ 941,884 32,244 307,279 $ 1,281,407 $ 1,009,973 36,287 258,395 $ 1,304,655 $ 1,036,985 38,576 243,067 $ 1,318,628 $ 1,058,880 41,545 242,763 $ 1,343,188 $ $ 3,093,766 142,335 430,993 $ 3,667,094 $ 3,263,205 215,687 383,722 $ 3,862,614 $ 3,578,121 158,300 322,987 $ 4,059,408 $ 3,671,218 130,194 394,977 $ 4,196,389 $ 3,714,406 128,149 367,194 $ 4,209,749 $ 3,837,436 138,851 317,191 $ 4,293,478 $ 3,815,066 142,017 376,660 $ 4,333,743 $ (1) In FY 2013, beginning net position was restated due to the implementation of GASB Statements 60 and 62. (2) In FY 2014, beginning net position was restated due to the implementation of GASB Statement 65. (3) In FY 2015, beginning net position was restated due to the implementation of GASB Statement 68 and an adjustment to capital assets. (4) In FY 2015, beginning net position was restated due to the implementation of GASB Statement 68 and an adjustment involving prior-year revenue. (5) In FY 2016, beginning net position was restated due to an adjustment to capital assets and the recognition of the City's involvement in a joint venture. (6) Table I In FY 2016, beginning net position was restated due the recognition of the City's involvement in a joint venture. 2014 $ (1) $ $ $ 2,685,105 109,615 180,942 2,975,662 1,046,345 47,101 273,321 1,366,767 3,731,450 156,716 454,263 4,342,429 2015 $ (2) $ $ (2) $ $ $ 2016 2,663,269 $ 3,406,976 117,485 122,932 (19,464) (3,679) 2,761,290 (3) $ 3,526,229 (5) 1,036,650 46,901 253,109 1,336,660 3,699,919 164,386 233,645 4,097,950 (4) $ 1,059,001 47,521 255,503 $ 1,362,025 $ 4,465,977 170,453 251,824 $ 4,888,254 (6) City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIa City of Scottsdale, Arizona 173 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 2007 $ Business-type Activities Water Utility Sewer Utility Airport Solid Waste Total Business-type Activities Expenses Total Primary Government Expenses (1) 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(1) 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(2) $ 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(3) $ 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(4) 2013 $ 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 2015 $ $ 21,210 40,631 138,899 135,647 55,134 17,849 583 34,134 1,643 445,730 2016 $ 22,252 38,291 102,892 136,261 53,322 20,264 589 31,665 405,536 95,958 44,352 3,703 20,911 164,924 100,854 42,058 3,894 20,786 167,592 610,654 $ 573,128 In FY2010, the City's Governmental Activities were restructured from Departments to Divisions, which resulted in the shift of reporting associated expenses. (2) 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. (3) In FY2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. (4) 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. City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) Table IIb City of Scottsdale, Arizona 174 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 Services Districts Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 2007 $ Business-type Activities: Charges for Services: Water Utility Sewer Utility Airport Solid Waste Capital Grants and Contributions Total Business-type Activities Revenues Total Primary Government Revenues Net (Expense)/Revenue Governmental Activities Business-type Activities Total Primary Government Net Expense 14,102 4,388 228 1,155 16,128 15,071 326 546 29,293 211,707 292,944 2008 $ 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 $ 90,741 33,930 3,380 19,824 50,679 198,554 14,670 4,619 2,275 6,393 5,703 2,682 599 26,272 240,289 303,502 2010 $ 91,546 34,198 2,813 20,049 22,067 170,673 13,982 12,655 5,773 6,837 2,552 289 29,319 190,279 261,686 2011 $ 94,199 35,027 2,879 20,269 9,268 161,642 4,777 4,666 9,604 9,917 973 4,617 2,485 635 478 32,205 41,072 111,429 2012 $ 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 2014 $ 100,615 36,939 3,552 20,458 25,638 187,202 4,282 1,580 17,981 10,268 5,914 2,890 400 27,710 38,817 109,842 2015 $ 104,722 39,917 3,635 20,162 22,019 190,455 4,279 1,861 19,474 10,350 6,334 2,827 531 28,397 14,831 88,884 2016 $ 98,495 39,541 4,020 20,232 11,726 174,014 3,970 6,149 17,464 11,459 6,269 2,926 577 29,708 82,162 160,684 110,560 39,741 4,404 20,120 22,545 197,370 $ 486,627 $ 436,164 $ 474,175 $ 423,328 $ 281,663 $ 344,123 $ 324,316 $ 300,297 $ 262,898 $ 358,054 $ (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) $ (326,293) 29,916 (296,377) $ (356,846) 9,090 (347,756) $ (244,852) 29,778 (215,074) $ $ $ $ $ $ $ $ $ $ City of Scottsdale, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (in thousands) General Revenues and Other Changes in Net Position Governmental Activities Taxes Intergovernmental Interest and Investment Income Miscellaneous and Special Items Transfers Total Governmental Activities 2007 $ City of Scottsdale, Arizona 175 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 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 Table IIc 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 2014 2015 2016 234,582 49,054 985 12,557 7,244 304,422 $ 248,642 52,715 1,274 8,422 6,202 317,255 $ 257,860 56,316 1,372 13,829 6,579 335,956 $ 265,416 57,630 2,955 9,987 7,174 343,162 144 763 (7,244) (6,337) 154 964 (6,202) (5,084) 169 1,346 (6,579) (5,064) 145 2,531 (7,174) (4,498) $ 312,171 $ 330,892 $ 338,664 $ $ (20,890) 4,026 $ (16,864) $ $ 348,277 $ 346,678 $ 310,591 $ 277,866 $ 287,552 $ 301,726 $ 298,085 $ 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 $ $ $ $ $ $ $ (9,038) 24,832 $ 15,794 98,310 25,280 $ 123,590 City of Scottsdale, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) General Fund Nonspendable Restricted Committed Assigned Unassigned Reserved Unreserved Total General Fund City of Scottsdale, Arizona 176 All Other Governmental Funds Nonspendable Restricted Committed Assigned Unassigned, Reported in: Special Revenue Funds Capital Project Funds Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds Total All Other Governmental Funds (1) 2007 $ $ $ 754 89,534 90,288 21,249 2008 $ $ $ 52,484 179,477 $ 253,210 924 61,379 62,303 25,600 2009 $ $ $ 35,179 212,676 $ In FY2011, fund balances were stated in classifications required by GASB54. 273,455 835 59,587 60,422 27,236 $ $ 30,710 102,898 $ 160,844 (1) 2010 $ 586 51,518 52,104 Table III 2011 2012 2013 2014 2015 2016 $ 247 281 53,199 $ 264 260 52,105 $ 265 48,679 $ 266 52,354 $ 227 56,017 $ 249 65,347 $ 53,727 $ 52,629 $ 48,944 $ 52,620 $ 56,244 $ 65,596 $ 3,000 104,284 6,221 36,609 $ 2,980 108,073 7,345 37,183 $ 114,676 16,298 39,666 $ 105,837 20,848 7,362 $ 113,237 49,554 - $ 116,847 52,508 - (640) - 20,193 (447) - (1,394) - (1,194) - (1,083) (4,770) (1,010) (4,720) 156,938 $ 163,625 30,963 102,490 $ 153,646 $ 149,474 $ 155,134 $ 169,246 $ 132,853 $ City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 177 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 (1) 2007 2008 2009 2010 Table IVa 2011 2012 2013 2014 (1) 2015 2016 $ 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 $ 258,851 68,603 1,925 25,855 10,000 5,282 1,934 (562) 19,846 653 531 3,558 3,445 6,987 5,134 $ 264,414 70,526 1,894 24,404 10,617 4,922 2,373 582 16,070 319 577 2,268 1,942 6,501 954 $ 425,721 $ 426,624 $ 404,478 $ 346,051 $ 388,232 $ 413,264 $ 406,374 $ 406,810 $ 412,042 $ 408,363 In FY2016, moved sales of assets from "Other" within the "Revenues" section to "Proceeds from Sale of Assets" within the "Other Financing Sources (Uses)" section. City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 178 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 2007 $ 24,938 3,855 61,778 9,016 14,331 8,931 26,614 78,261 9,080 13,439 9,692 3,254 597 2008 $ 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(1) 2009 $ 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 $ 17,030 31,391 111,459 3,657 45,655 9,469 1,859 6,059 17,110 27,447 538 Table IVb 2011(2) $ 19,783 31,463 42,357 108,003 3,013 43,967 9,357 3,031 578 2012(3) $ 18,523 27,307 38,369 107,934 44,762 14,450 572 34,252 38,279 735 147,367 33,043 38,651 1,028 196,976 31,308 41,612 155,358 33,701 38,782 497 77,929 37,677 40,091 1,057 107,448 44,700 40,487 774 129,025 Total Expenditures $ 484,419 $ 570,636 $ 533,932 $ 422,583 $ 447,825 $ 466,903 Excess (Deficiency) of Revenues over (under) Expenditures $ $ (144,012) $ (129,454) $ $ $ (58,698) (76,532) (59,593) (53,639) 2013 $ 19,695 29,658 70,351 111,960 45,346 14,141 569 2014 $ 19,730 33,381 41,063 119,159 45,035 14,950 576 2015 $ 105,930 36,706 1,643 52,164 53,313 34,664 26,674 $ 576,847 $ 471,324 $ 480,718 $ 403,131 $ (170,473) $ $ $ (64,514) 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. In FY2012, Human Resources and Information Technology were absorbed into the Division's Administrative Services function. 22,623 32,850 42,735 128,527 45,508 15,648 589 59,387 37,323 998 99,722 In FY2010, the City's Governmental Activities were restructured from Departments to Divisions which resulted in the shift of reporting associated expenditures. (3) $ 63,234 38,789 1,915 181,189 (1) (2) 20,815 34,518 44,550 123,761 44,998 15,050 583 2016 (68,676) 5,232 City of Scottsdale, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 179 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 Proceeds from Notes Payable Proceeds from Sale of Assets 2007 2008 2009 2010 $ 162,965 (155,295) 175 55,450 42,500 7,199 (61,845) 3,000 - $ 195,170 (185,082) 123,805 2,379 - $ 160,319 (145,357) - $ 108,066 (98,693) 50,800 843 - 54,149 136,272 14,962 61,016 (7,740) $ (114,492) 19.2% 19.3% Total Other Financing Sources and (Uses) Net Change in Fund Balances (Deficits) Debt Service as a Percentage of Noncapital Expenditures (1) $ (4,549) 21.5% $ $ (15,516) 21.0% Table IVc 2011 $ 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% In FY2016, moved sales of assets from "Other" within the "Revenues" section to "Proceeds from Sale of Assets" within the "Other Financing Sources (Uses)" section. 89,669 (82,696) 296 105,885 14,000 12,742 (108,099) - 2015 $ 31,797 $ (32,717) 26.0% $ 2016(1) 89,806 (83,211) 207,173 26,815 23,871 (168,069) - $ 85,080 (79,079) 4,806 96,385 10,807 27,709 $ 16,039 33.3% 23.4% City of Scottsdale, Arizona Tax Revenues By Source Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) City of Scottsdale, Arizona 180 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) $ $ Property 50,732 53,778 60,493 58,354 65,970 65,089 64,908 64,914 64,272 61,956 Privilege and Use General $ 110,225 104,673 85,829 77,878 80,119 84,633 89,002 95,604 100,560 104,995 Franchise Taxes Cable TV Light and Power Franchise Franchise 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 3,748 8,691 3,816 8,826 The Transient Occupancy tax rate increased from 3% to 5%, effective July 1, 2010. Privilege and Use McDowell Mtn $ 37,281 35,604 29,121 26,416 27,199 28,809 30,376 32,655 34,429 36,029 Sales and Use Taxes Privilege and Use Transportation $ 20,910 19,823 16,141 14,608 15,042 15,985 16,852 18,116 19,097 19,938 Intergovernmental State Revenue State Shared Sales Sharing $ 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 19,867 26,316 20,647 26,173 Table V Privilege and Use Public Safety $ 10,578 10,145 8,289 7,541 7,765 8,231 8,679 9,330 9,837 10,294 $ Other 929 957 959 979 1,010 1,086 838 900 906 913 $ Transient Occupancy 9,723 9,621 7,577 7,113 13,126 13,430 13,852 15,303 17,047 17,397 (1) City of Scottsdale, Arizona Taxable Sales Subject to Privilege (Sales) Tax by Category Last Ten Fiscal Years (dollars in thousands) City of Scottsdale, Arizona 181 2007 Automotive $ 1,622,601 Construction 2,208,957 Food Stores 626,083 Hotel/Motel 533,055 Major Department Stores 1,011,240 Miscellaneous Retail Stores 1,478,112 Other Taxable Activity 551,095 Rentals 1,211,551 Restaurants 774,598 Utilities 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 Total $ 10,435,752 $ 9,853,689 $ 8,045,422 $ 7,253,013 1.65% 1.65% 1.65% 1.65% City Sales Tax $ 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 2015 $ 1,335,511 1,057,986 690,837 525,421 937,370 1,612,954 695,566 1,315,545 925,948 435,879 2016 $ 1,403,834 969,281 713,187 543,121 927,469 1,708,411 728,596 1,417,607 961,340 497,773 $ 7,430,162 $ 7,870,594 $ 8,287,703 $ 8,951,075 $ 9,533,017 $ 9,870,619 1.65% 1.65% 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 Table VI $ City of Scottsdale, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years Table VII 182 City of Scottsdale, Arizona Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Privilege (Sales) Tax Rates City Direct County Rate 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% State Rate 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% Transient Occupancy Tax Rates City Direct County Fiscal Year State Rate Rate Rate 2007 3.00% 1.77% 5.50% 2008 3.00% 1.77% 5.50% 2009 3.00% 1.77% 5.50% 2010 3.00% 1.77% 6.50% 2011 5.00% 1.77% 6.50% 2012 5.00% 1.77% 6.50% 2013 5.00% 1.77% 5.50% 2014 5.00% 1.77% 5.50% 2015 5.00% 1.77% 5.50% 2016 5.00% 1.77% 5.50% (1) (3) (1) (2) (3) Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Use Tax Rates City Direct County Rate 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% Jet Fuel Tax Rates (cents per gallon) City Direct County Fiscal Year State Rate Rate Rate 2007 1.80% 0.46% 2.90% 2008 1.80% 0.46% 2.90% 2009 1.80% 0.46% 2.90% 2010 1.80% 0.46% 2.90% 2011 1.80% 0.46% 2.90% 2012 1.80% 0.46% 2.90% 2013 1.80% 0.46% 2.90% 2014 1.80% 0.46% 2.90% 2015 1.80% 0.46% 2.90% 2016 1.80% 0.46% 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) State Rate 5.60% 5.60% 5.60% 6.60% 6.60% 6.60% 5.60% 5.60% 5.60% 5.60% 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) City of Scottsdale, Arizona Sales Tax Revenue Payers by Industry Current Year and Nine Years Ago (dollars in thousands) Table VIII City of Scottsdale, Arizona 183 Automotive Construction Food Stores Hotel/Motel Major Department Stores Miscellaneous Retail Stores Other Taxable Activity Rentals Restaurants Utilities Total Number of Filers 593 5,832 185 78 26 5,456 4,380 5,632 1,070 312 23,564 Fiscal Year 2016 Percentage Tax of Total Revenue 2.52% $ 23,674 24.75% 16,995 0.79% 11,820 0.33% 9,175 0.11% 15,291 23.15% 29,959 18.59% 16,751 23.90% 23,897 4.54% 16,101 1.32% 7,455 100.00% $ 171,118 Percentage of Total 13.83% 9.93% 6.91% 5.36% 8.94% 17.50% 9.79% 13.97% 9.41% 4.36% Number of Filers 679 9,235 172 77 29 6,463 4,508 4,173 1,004 287 100.00% 26,627 Fiscal Year 2007 Percentage Tax of Total Revenue 2.55% $ 26,711 34.68% 35,499 0.65% 10,390 0.29% 9,199 0.11% 16,951 24.27% 26,433 16.93% 13,122 15.67% 20,827 3.77% 12,895 1.08% 6,966 100.00% $ 178,993 Percentage of Total 14.92% 19.83% 5.80% 5.14% 9.47% 14.78% 7.33% 11.64% 7.20% 3.89% 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. City of Scottsdale, Arizona Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Table IX City Direct Rate 184 City of Scottsdale, Arizona Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Operating $ 0.4200 0.3800 0.3537 0.3650 0.3836 0.4412 0.5027 0.5342 0.5580 0.5293 Debt Service $ 0.5500 0.4100 0.4327 0.3782 0.5140 0.6503 0.7225 0.7604 0.6869 0.6244 Overlapping Rates Total City $ 0.9700 0.7900 0.7864 0.7432 0.8976 1.0915 1.2252 1.2946 1.2449 1.1537 Operating $ 3.4500 3.4200 2.8179 2.4447 2.4017 2.7498 3.0875 3.3548 3.1091 2.8332 Scottsdale Unified School District Debt Service EVIT Total School $ 1.2600 $ 0.0500 $ 4.7600 1.2600 0.0500 4.7300 1.0742 0.0500 3.9421 1.3382 0.0500 3.8329 1.3529 0.0500 3.8046 1.2503 0.0500 4.0501 1.3390 0.0500 4.4765 1.2239 0.0500 4.6287 1.0045 0.0500 4.1636 1.0263 0.0500 3.9095 Overlapping Rates County-Wide Jurisdictions Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 County Operating $ 1.1800 1.1000 1.0327 0.9909 1.0508 1.2407 1.2407 1.2807 1.3209 1.3609 Community College $ 1.0646 0.9760 0.9386 0.8844 0.9728 1.2082 1.3778 1.5340 1.5187 1.4940 County Flood $ 0.2000 0.1500 0.1367 0.1367 0.1489 0.1780 0.1780 0.1392 0.1392 0.1592 County Education Equalization $ 0.3306 0.3564 0.4259 0.4717 0.5123 0.5089 0.5054 Fire District Assistance $ 0.0100 0.0100 0.0053 0.0057 0.0066 0.0084 0.0110 0.0121 0.0113 0.0116 Central AZ Project $ 0.1200 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.1400 0.1400 0.1400 County Free Library $ 0.0500 0.0400 0.0353 0.0353 0.0412 0.0492 0.0492 0.0438 0.0556 0.0556 County Special Health Care $ 0.1184 0.0935 0.0856 0.0914 0.1122 0.1494 0.1683 0.1939 0.1856 0.3021 Total County $ 2.7430 2.4695 2.3342 2.5750 2.7889 3.3598 3.5967 3.8560 3.8802 4.0288 Total Direct and Overlapping $ 8.4730 7.9895 7.0627 7.1511 7.4911 8.5014 9.2984 9.7793 9.2887 9.0920 Source: Maricopa County Department of Finance Publications On-Line "Tax Rate 2015" Note: The City has Community Facilities Districts (CFDs) that levy property taxes independent of the City to property owners within a designated area. For FY 2015/16 the rates were as follows: Scottsdale Mountain CFD - $1.5945, McDowell Mountain CFD $0.8359, DC Ranch CFD - $0.5616, Via Linda Road CFD - $1.2858 and the Waterfront Commercial CFD - $7.1179. City of Scottsdale, Arizona Principal Property Taxpayers Current Year and Nine Years Ago (dollars in thousands) Table X 2016 City of Scottsdale, Arizona 185 Taxpayer Arizona Public Service Company Scottsdale Fashion Square LLC/Etal SDQ FEE LLC Gainey Drive Associates Scottsdale Fashion Square LLC Qwest Corporation Excel Promenade LLC Portales Corporate Center LLC WJ Small Grandchildrens Trust/Etal Dial Corporation DC Ranch LLC Scottsdale Acquisition LLC Pederson/BVT Promenade Associates Scottsdale Princess Partnership General Dynamics Decision Systems Motorola GEG Total $ $ Taxable Assessed Value 59,358 27,657 17,359 13,712 13,303 13,183 13,029 12,717 12,344 10,470 193,132 Rank 1 2 3 4 5 6 7 8 9 10 - 2007 Percentage of Total Taxable Assessed Value 1.150% 0.536% 0.336% 0.266% 0.258% 0.255% 0.252% 0.246% 0.239% 0.203% 3.741% $ $ Taxable Assessed Value 63,160 203,257 86,581 33,878 181,988 83,829 76,879 51,393 50,174 48,996 880,135 Rank 6 1 3 10 2 4 5 7 8 9 Percentage of Total Taxable Assessed Value 0.021% 0.067% 0.029% 0.011% 0.060% 0.028% 0.026% 0.017% 0.017% 0.016% 0.292% Source: The Maricopa County Assessor's Office. Note: 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 2015/16 assessed valuation of the SRP within the City is $21,643,351 as provided by SRP. City of Scottsdale, Arizona Assessed Value of Taxable Property Last Ten Fiscal Years (dollars in thousands, excluding the Total Direct Tax Rate) Fiscal Year Ended June 30th 2007 P 2007 S Residential Property $ 2,846,492 2,919,838 Real Property Commercial Vacant Land Property $ 1,347,926 1,545,559 $ 674,315 921,888 Historic and Special Use $ 1,474 1,797 Table XI Personal Property Less Tax Exempt Property Assessed Value $ 238,279 240,843 $ (322,012) (420,481) Total Taxable Assessed Value $ 4,786,474 5,209,444 Total Direct Tax Rate $ 0.42 0.55 City of Scottsdale, Arizona 186 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 2014 2015 2015 P S P S 3,179,924 3,190,808 3,400,223 3,542,585 1,234,395 1,238,888 1,211,532 1,228,899 763,038 793,269 731,585 792,839 2,810 2,852 2,849 2,986 213,781 214,245 208,844 209,029 (591,625) (612,212) (569,038) (599,560) 4,802,323 4,827,850 4,985,995 5,176,778 0.53 0.76 0.56 0.69 2016 P 2016 S 3,608,260 4,210,065 1,197,395 1,306,932 759,840 912,980 3,143 3,541 196,631 196,972 (603,538) (674,098) 5,161,731 5,956,392 0.53 0.62 Source: Arizona Department of Revenue Abstract of the Assessment Roll. Note: Beginning in FY 2016, the primary (limited assessed valuation) is to be used by cities when levying for maintenance and operation and for debt retirement. Prior to that date, the secondary (full cash) assessed valuation was used when levying for debt retirement, voter-approved budget overrides, and maintenance and operation of special service districts. City of Scottsdale, Arizona Property Tax Levies and Collections Last Ten Fiscal Years (dollars in thousands) City of Scottsdale, Arizona 187 Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total Tax Levy for Fiscal Year $ 48,778 50,838 58,179 57,380 64,327 62,033 62,187 62,367 63,380 59,553 Collected within the Fiscal Year of the Levy $ Amount 47,105 49,408 55,876 55,221 62,237 60,309 60,630 61,227 62,233 58,714 Percentage of Levy 96.6% 97.2% 96.0% 96.2% 96.8% 97.2% 97.5% 98.2% 98.2% 98.6% Collections in Subsequent Years $ 1,057 1,277 1,765 1,621 737 672 810 627 641 - Table XII Total Collections to Date $ Amount 48,162 50,685 57,641 56,842 62,974 60,981 61,440 61,854 62,874 58,714 Percentage of Levy 98.7% 99.7% 99.1% 99.1% 97.9% 98.3% 98.8% 99.2% 99.2% 98.6% 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. City of Scottsdale, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands, except for Per Capita) City of Scottsdale, Arizona 188 Municipal Property Corporation Bonds $ 155,200 154,879 154,837 153,582 152,578 149,983 222,403 218,942 243,044 232,970 Scottsdale Preserve Authority Bonds $ 77,251 74,158 70,915 67,567 64,309 60,304 56,154 53,100 48,276 43,489 Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Obligation Bonds $ 478,369 578,894 555,701 583,071 579,972 603,426 651,224 647,859 624,616 585,931 Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Business-Type Activities Municipal Property Revenue Corporation Bonds Bonds Capital Leases $ 58,933 $ 165,154 $ 139 55,553 269,802 97 51,629 262,391 53 48,250 332,216 7 44,776 323,107 41,157 313,505 37,803 303,793 34,747 296,418 31,518 309,150 28,176 295,807 - 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. Table XIII Governmental Activities Community Special Facilities Certificates of Assessment District Bonds Bonds Participation $ 4,670 $ 6,401 $ 40,143 3,835 5,689 42,313 3,000 4,954 40,578 2,250 4,194 38,725 1,500 23,409 36,762 750 18,031 34,685 16,003 32,083 13,914 30,090 11,762 27,437 9,546 24,694 Total Primary Government $ 1,006,251 1,203,236 1,160,886 1,245,594 1,240,995 1,235,216 1,325,360 1,298,389 1,298,869 1,223,452 Percentage of Personal Income 10.47% 11.54% 12.13% 11.62% 11.77% 11.09% 11.63% 11.43% 11.26% 10.26% Per Capita $ 4,555 5,444 5,267 5,691 5,709 5,667 5,965 5,776 5,689 5,292 Contracts Payable $ 19,819 17,875 16,828 15,732 14,582 13,375 2,570 - Capital Leases $ 172 141 183 329 229 156 Service Concession Arrangements $ 3,144 2,990 2,837 2,683 City of Scottsdale, Arizona Ratios of Net General Bonded Debt Outstanding Last Ten Fiscal Years (dollars in thousands, except per capita) City of Scottsdale, Arizona 189 Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Governmental Activities - General Obligation Bonds $ 478,369 578,894 555,701 583,071 579,972 603,426 651,224 647,859 624,616 585,931 Less: Amounts Available in Debt Service Fund $ 9,383 9,520 10,841 4,932 6,787 5,789 10,105 9,369 12,172 11,529 Net General Bonded Debt $ 468,986 569,374 544,860 578,139 573,185 597,637 641,119 638,490 612,444 574,402 Percentage of Total Taxable Assessed Value of Property (1) 9.0% 7.9% 6.6% 6.9% 7.8% 10.5% 12.6% 13.2% 11.8% 9.6% Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Assessed Value of Taxable Property on Table XI for property value data. See the Schedule of Demographic and Economic Statistics on 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 2007-2010. Table XIV $ Per Capita 2,123 2,576 2,472 2,641 2,637 2,742 2,885 2,840 2,683 2,484 City of Scottsdale, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2016 (dollars in thousands) City of Scottsdale, Arizona 190 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 $ 593,820 112,635 16,095 221,161 324,660 32,285 14,210 278,960 100,500 Table XV Estimated Percentage Applicable 14.9081% 0.0002% 7.0377% 69.8418% 29.0470% 62.3382% 3.9889% 0.2895% 0.0001% Estimated Share of Overlapping Debt $ Subtotal, overlapping debt City direct debt Total direct and overlapping debt 88,527 1,133 154,463 94,304 20,126 567 808 359,928 899,469 100.0000% 899,469 $ 1,259,397 Source: Maricopa County Assessor's Office Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Scottsdale. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of the county's taxable assessed value that is within the government's boundaries and dividing it by the county's total taxable assessed value. City of Scottsdale, Arizona Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) Table XVIa 20% Limitation Debt Limit Equal to 20% of Assessed Valuation 2007 2008 2009 2010 2011 2012 2013 $ 1,041,889 $ 1,448,765 $ 1,654,483 $ 1,681,200 $ 1,475,082 $ 1,138,398 $ 1,015,999 363,455 424,865 413,095 499,945 498,490 524,675 561,126 678,434 $ 1,023,900 $ 1,241,388 $ 1,181,255 34.88% 29.33% 24.97% 29.74% Total Net Debt Applicable to 20% Limit Legal 20% Debt Margin (Available Borrowing Capacity) $ 191 City of Scottsdale, Arizona Total Net Debt Applicable to the 20% Limit as a Percentage of 20% Debt Limit 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ Total Net Debt Applicable to 6% Limit Legal 6% Debt Margin (Available Borrowing Capacity) Total Net Debt Applicable to the 6% Limit as a Percentage of 6% Debt Limit (1) 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% $ $ 55.23% $ 69,750 $ 454,873 304,799 226,790 25.59% 2016 (1) 965,570 $ 1,035,356 $ 1,032,346 553,121 532,888 513,768 412,449 $ 57.28% $ 78,009 $ 2015 2014 289,671 223,727 22.77% $ 51.47% $ 65,944 $ 502,468 310,606 49.77% $ 54,022 $ 256,584 17.39% 518,578 309,703 37,747 $ 271,956 12.19% Beginning in FY 2016, the primary (limited assessed valuation) is to be used by cities when levying for maintenance and operation and for debt retirement. Prior to that date, the secondary (full cash) assessed valuation was used when levying for debt retirement, voter-approved budget overrides, and maintenance and operation of special service districts. City of Scottsdale, Arizona Legal Debt Margin Information As of June 30, 2016 (in thousands) Table XVIb Legal Debt Margin Calculation for Fiscal Year 2016 Assessed Valuation as of June 30, 2016 $ 5,161,731,123 20% Limitation Debt Limit Equal to 20% of Assessed Valuation $ 1,032,346 192 City of Scottsdale, Arizona Debt applicable to limit: General Obligation Bonds 513,768 Legal 20% Debt Margin (Available Borrowing Capacity) $ 518,578 6% Limitation Debt Limit Equal to 6% of Assessed Valuation $ 309,703 Debt applicable to limit: General Obligation Bonds Legal 6% Debt Margin (Available Borrowing Capacity) 37,747 $ 271,956 Source: City of Scottsdale City Treasurer 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 assessed valuation. Outstanding general obligation bonded debt for all other purposes may not exceed 6 percent of the City's net 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. City of Scottsdale, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years (dollars in thousands) Table XVII Water and Sewer Revenue Bonds 193 City of Scottsdale, Arizona Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Operating (1) Revenue $ 125,880 131,553 130,782 133,624 132,441 134,336 138,224 142,066 139,242 152,612 Less: Operating Expenses $ 64,089 66,077 71,236 70,165 77,456 78,837 73,647 77,891 79,154 81,586 Net Operating Revenue $ 61,791 65,476 59,546 63,459 54,985 55,499 64,577 64,175 60,088 71,026 Development Fee Revenue $ 17,878 15,280 3,043 3,126 3,859 3,073 12,213 15,139 5,326 5,156 Net Revenue $ 79,669 80,756 62,589 66,585 58,844 58,572 76,790 79,314 65,414 76,182 Special Assessment Bonds Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) Special Assessment Collections $ 1,825 895 821 765 733 719 591 - Debt Service Principal $ 848 846 845 757 757 755 755 - Debt Service Interest $ 235 197 158 121 86 52 17 - Highway User Revenue Bonds Debt Service Principal $ 3,475 3,640 3,660 3,115 3,220 3,380 3,115 3,240 2,940 3,055 Debt Service Interest $ 2,997 2,582 2,507 2,351 2,199 2,056 1,891 1,738 1,599 1,487 Coverage 12.31 12.98 10.15 12.18 10.86 10.77 15.34 15.93 14.41 16.77 Scottsdale Preserve Authority Bonds (2) Coverage 1.69 0.86 0.82 0.87 0.87 0.89 0.77 N/A N/A N/A 0.2 % and 0.15% Sales (3) Tax $ 37,281 35,604 29,121 26,416 27,199 28,809 30,376 32,655 34,429 36,029 Debt Service Principal $ 2,965 3,110 3,260 3,365 3,470 3,655 3,800 3,960 4,140 4,340 Debt Service Interest $ 3,843 3,676 3,502 3,374 2,471 2,835 2,680 2,508 2,330 2,143 Coverage 5.48 5.25 4.31 3.92 4.58 4.44 4.69 5.05 5.32 5.56 Highway User Tax Revenue $ 16,778 16,123 14,083 13,342 13,396 10,885 11,903 12,268 13,461 14,060 Debt Service Principal $ 2,990 - Debt Service Interest $ 165 - Municipal Property Corporation Bonds Excise (4)(5)(6) Tax $ 218,205 216,066 185,801 170,638 155,515 157,645 170,227 183,376 195,037 194,560 Debt Service (7) Principal $ 5,305 5,584 7,570 9,715 9,785 11,841 12,355 18,200 16,950 20,215 Debt Service (7) Interest $ 10,057 13,988 19,482 18,415 22,185 21,141 21,480 22,994 22,299 23,220 Includes investment income. (2) Coverage ratio is less than 1.0 due to prepayment of amounts that were 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) In fiscal year 2010, 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. Starting in fiscal year 2011, Transient Occupancy taxes are no longer pledged revenues for MPC bonds issued on or after July 1, 2010 and are excluded from this table from that date forward. (5) (6) A de minimis amount (less than 2%) of the Excise Taxes are pledged to specific purposes per various resolutions adopted by the City Council of the City. Prior to 2016, such amounts were included in the table above but are not pledged to the payments due from the City to the MPC. (7) Includes debt service payments paid out of revenue from the Water and Sewer Fund and the Tourism Fund. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Coverage 5.32 N/A N/A N/A N/A N/A N/A N/A N/A N/A Coverage 14.20 11.04 6.87 6.07 4.86 4.78 5.03 4.45 4.97 4.48 City of Scottsdale, Arizona Demographic and Economic Statistics Last Ten Fiscal Years City of Scottsdale, Arizona 194 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Population(1) 220,907 221,031 220,410 218,888 217,365 217,965 222,200 224,800 228,300 231,200 Personal Income(2) (in thousands) $ 9,611,884 10,428,464 9,573,949 10,715,662 10,542,637 11,135,832 11,393,527 11,358,020 11,536,227 11,921,597 Per Capita Personal Income(3) $ 43,511 47,181 43,437 48,955 48,502 51,090 51,276 50,525 50,531 51,564 Median Age(4) 41.0 41.0 41.0 45.4 45.4 45.4 45.4 45.1 45.4 46.1 Table XVIII Charter and Public School Enrollment(5) 26,653 26,567 27,029 27,093 27,116 28,177 27,816 27,191 26,233 26,233 Year-End Average Unemployment Rate(6) 2.6% 2.4% 4.0% 6.8% 6.5% 6.8% 5.7% 5.4% 4.7% 4.3% 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) 2007-2010; U.S. Census, American Community Survey, 5-Year Estimates used for FY 2011-2016 estimates. (4) U.S. Census; 2007-2009 based on Census 2000; 2010-2012 based on Census 2010, 2013-2016 based on U.S. Census, American Community Survey, 5-Year Estimates. (5) Arizona Department of Education. For 2015, Arizona Department of Education Oct. 1, 2014 total enrollment for 8 charter and 29 public schools located within Scottsdale city boundaries. At the time of reporting updated information for Oct. 1, 2015 is not available. (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 ("LAUS"). For calendar year that ended within the fiscal year. For example, FY 2016 is for Calendar Year 2015. All unemployment figures have been updated based on data available on LAUS Data Query Tool as of Aug. 1, 2016. City of Scottsdale, Arizona Principal Employers Current Year and Nine Years Ago 2016 City of Scottsdale, Arizona 195 Employer HonorHealth (2) CVS Health (3) Scottsdale Unified School District (4) Vanguard City of Scottsdale General Dynamics C4 Systems Mayo Clinic Nationwide Specialty (5) McKesson Corporation Yelp Troon Golf LLC Go Daddy Group Scottsdale Fairmont Princess Resort Total Employees 6,382 2,800 2,583 2,500 2,148 1,945 1,851 1,800 1,350 1,000 Rank 1 2 3 4 5 6 7 8 9 10 24,359 Percentage of Total City Employment(1) 5.01% 2.20% 2.03% 1.96% 1.69% 1.53% 1.45% 1.41% 1.06% 0.79% 19.13% Table XIX 2007 Employees 5,928 1,636 3,500 Rank 1 6 4 Percentage of Total City Employment(1) 3.50% 1.00% 2.10% 2,708 4,000 3,995 1,195 5 2 3 10 1.60% 2.40% 2.40% 0.07% 1,539 1,227 1,200 26,928 7 8 9 0.09% 0.07% 0.07% 13.30% Source: City of Scottsdale, Economic Development Department communications with employers, July 2016. (1) Annual Employment according to the Arizona Office of Employment and Population Statistics was 127,319 in December 2015, and was reported in the FY 2006/07 CAFR as 167,129. (2) Scottsdale Healthcare was renamed HonorHealth in 2015. (3) CVS Caremark was renamed CVS Health in 2014. (4) Scottsdale Unified School District has administrative offices and some schools outside of Scottsdale city limits. 2016 numbers only report Scottsdale-based employees. 2007 included all employees. (5) Scottsdale Insurance was renamed Nationwide Specialty in 2015. City of Scottsdale, Arizona Full-time Equivalent City Government Employees by Function Last Ten Fiscal Years City of Scottsdale, Arizona 196 Function Administrative Services Aviation Citizen and Neighborhood Resources City Treasurer Communications and Public Affairs Community and Economic Development Community Services Economic Vitality Financial Services General Government Human Resources(2) Information Technology(2) Municipal Services Planning and Development Planning/Neighborhood/Transportation Public Safety (4) Public Safety - Fire Public Safety - Police Public Works Solid Waste Transportation Water Resources Total 2007 15.0 40.0 2008 15.0 2009 38.5 16.0 Table XX 2010(1) 35.0 14.0 2011 35.0 14.0 2012(3) 138.8 14.0 2013 124.6 14.0 2014 127.4 14.0 2015 120.9 14.5 2016 123.6 14.5 92.5 95.5 83.5 93.0 93.0 89.7 89.8 214.5 487.6 188.5 459.5 175.5 454.2 176.5 454.2 173.0 448.3 185.1 469.6 140.4 142.2 278.0 664.7 205.8 90.8 211.3 2,475.4 14.7 580.3 40.0 151.0 172.6 36.5 83.8 170.5 167.0 546.1 77.0 134.0 172.6 53.5 91.8 543.1 54.0 110.5 167.1 35.5 81.8 489.3 47.0 155.0 30.0 78.8 153.0 30.5 75.8 141.0 140.0 140.0 205.2 999.6 224.0 981.6 167.5 953.6 957.6 933.6 924.6 934.6 268.0 705.6 85.3 30.0 162.0 2,722.3 248.5 85.8 233.0 89.0 197.0 89.0 206.0 89.0 205.0 89.0 204.0 89.0 204.0 90.0 266.0 664.6 205.0 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 2,437.7 205.0 2,417.4 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 City Treasurer to Water Resources. (4) In FY2015, Public Safety was restated to reflect the creation of separate Police and Fire Divisions. City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years 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 of Scottsdale, Arizona 197 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) Table XXI 2007 2008 2009 2010(2) 2011 2012 2013 2014 2015 2016 34% 35% 34% 32% 40% 37% 37% 34% 39% 39% 10 11 13 16 17 14 14 14 16 13 1,138 90 1,173 90 1,158 71 1,301 87 1,241 66 1,185 63 1,124 63 1,080 65 1,005 57 1,000 61 201,866 / 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 96,741/ 91,200 100,920/ 92,993 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 32,491 196,549 31,648 190,422 90% No Survey No Survey No Survey 94% No Survey No Survey 98% No Survey No Survey 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 N/A $34,863 N/A N/A 251 648 25 399 2,001 4,419 6,400 2,365 0 0 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% 7.8% 1.4% 9.6% 1.1% 654,100 1,200,000 2,200,000 2,100,000 1,775,000 1,870,000 1,588,935 1,335,869 1,395,338 2,686,000 30.0 80.0 147.8 170.0 266.0 266.0 167.3 45.8 51.4 58.6 9,460 8,224 6,234 5,748 5,310 5,018 4,678 5,019 5,064 5,078 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 7,322,719 22,832,327 6,457,925 22,913,730 City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Division City of Scottsdale, Arizona 198 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(4) Transportation Total citywide transit ridership Actions to improve safety and efficiency of traffic flow (signal timing changes and traffic control and speed limit studies)(7) Economic Development Targeted job creation - number of companies / number of jobs(8) 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)(9) Scottsdale Valley Average Achieve the standard of six minutes or less for response to emergency calls for service (includes medical and accident related calls) Provide initial contact to 100% of citizen traffic concerns within seven days Fire Total incidents Responses per capita Travel time (en-route to on-scene) (continued) Table XXI 2007 2008 2009 2010(2) 2011 2012 2013 2014 2015 2016 20 20 7 7 6 6 12 15 12 12 100% 99% 16,900 5% 100% 99% 15,570 5% 100% 100% 20,568 -56% 100% 100% 16,452 5% 100% 100% 16,000 5% 100% 100% 16,500 5% 100% 100% 15,603 5% 100% 100% 14,222 2% 100% 100% 15,514 0% 95% 98% 13,781 5% 90% No Survey No Survey No Survey 91% No Survey No Survey 93% No Survey No Survey 2,365,204 2,584,837 3,472,828 3,103,185 2,539,744 2,499,000 2,599,557 2,589,218 2,635,739 2,297,323 375 475 N/A 8,578 10,397 10,500 5,043 3,687 4,252 6,638 7 / 1,800 5 / 1,374 7 / 394 10 / 731 7 / 450 8 / 1,595 36 / 1,593 16 / 1,069 13 / 1,180 9 / 1183 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 67.8% 12% 325 67.9% 1% 277 185,241 201,958 169,972 156,896 136,089 146,058 137,333 148,971 153,285 162,535 43 44 31 28 20 20 27 24 52 51 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 25.5 N/A 25.6 N/A 6:06 5:07 5:07 5:01 4:57 5:11 4:54 5:04 5:25 5:12 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 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 32,425 0.14 4:33 35,098 0.15 4:32 City of Scottsdale, Arizona Operating Indicators by Division(1) Last Ten Fiscal Years Division (continued) 199 City of Scottsdale, Arizona Public Works and Water Resources Public Works Facility inventory maintained (square feet)(10) # 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) Table XXI 2007 2008 2009 2010(2) 2011 2012 2013 2014 2015 2016 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 3,348,774 120 80,785 2,925,697 155 81,187 2,100 2,200 1,923 1,497 2,573 2,591 2,691 2,905 2,362 3,345 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 88,905 63.9 9.2 79,588 21.2 1,066,385 89,596 67.5 9.1 80,202 20.5 1,078,500 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 2016 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. (3) Effective December 2009, the City Council approved placing Financial Management under the control of the City Treasurer, moving Payroll and Risk Management from Human Resources to the City Treasurer, 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. (5) Effective FY 2012 established more appropriate performance measures for Office of Communication activities and products (ad value equivalency). City ceased tracking this statistic effective FY 2016. (6) During FY 2009, the Neighborhood Watch program was reviewed; participants that were no longer eligible for the program were removed, thus reducing the numbers. (7) 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 2010 changing signal timing was a manual process. Starting June 2009, the process was automated through the Traffic Management Center. (8) Effective FY 2014, only jobs verified through employer to be created or retained within the first 12 months were counted in annual metrics; total announced job creation is significantly higher. (9) 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. (10) 3.4 million square feet from FY 2015 was calculated manually. The City hired a consultant who completed a building inventory in FY 2016. Square footage was recalculated based on actual measurements. (11) The statistic for "# of citizens serviced annually by Household Hazardous Waste Collection program" number of events was restored in FY 2011. During FY 2009 and FY 2010 the number of events was reduced as a budget savings initiative. (12) Effective FY 2012, the City Council approved placing Meter Reading under the control of the Water Resources Division. City of Scottsdale, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years Function Public Safety Police Stations Police Vehicles Fire Stations 2007 2008 2009 2010 2011 Table XXII 2012 2013 2014 2015 2016 3 375 13 3 383 13 4 363 14 4 357 14 4 352 15 4 352 15 4 351 15 4 359 15 4 347 15 4 344 15 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 20,827,420 2,958 304 21,036,767 2,877 307 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 42 975 4 55 6 42 975 4 55 6 Water Water Mains (miles) Fire Hydrants 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 2,079 10,941 2,094 11,052 Sewer Sanitary Sewers (miles) Storm Sewers (miles) 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 1,441.0 275.0 1,452.0 285.0 Highways and Streets Square Yards of Pavement Equivalent 12' Wide Lane Miles Traffic Signals City of Scottsdale, Arizona 200 Culture and Recreation Parks Parks Acreage Swimming Pools Tennis Courts Community Centers Source: City of Scottsdale, Arizona divisions. City of Scottsdale, Arizona City Treasurer’s Office (480) 312-2437 Visit our website www.ScottsdaleAZ.gov/Finance