' - " ( 4 5 " ' '  " 3 * ; 0 / "  *OWFTUJOH JOUIF2VBMJUZ PG'MBHTUBGGT 'VUVSF $JUZPG'MBHTUBGG $PNQSFIFOTJWF"OOVBM 'JOBODJBM3FQPSU ' J T D B M  :F B S  & O E F E   +VOF  Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2006 City of Flagstaff, Arizona Prepared By: Management Services Department Finance and Budget Division City of Flagstaff Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal .........................................................................................................................................iii GFOA Certificate of Achievement ......................................................................................................................xi Organizational Chart........................................................................................................................................xii List of Elected and Appointed Officials ............................................................................................................xiii FINANCIAL SECTION Independent Auditor’s Report ........................................................................................................................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS........................................................................................................... 3 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Assets ..................................................................................................................... 17 Statement of Activities ....................................................................................................................... 18 Fund Financial Statements: Balance Sheet – Governmental Funds.................................................................................................. 20 Reconciliation of the Balance Sheet to the Statement of Net Assets - Governmental Activities............ 22 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ............ 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................... 26 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 27 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 28 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 29 BBB Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 30 Statement of Net Assets – Proprietary Funds ...................................................................................... 32 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds ............................................................................................ 34 Statement of Cash Flows – Proprietary Funds ..................................................................................... 36 Statement of Fiduciary Net Assets – Fiduciary Funds .......................................................................... 40 Statement of Changes in Fiduciary Net Assets – Fiduciary Funds ........................................................ 41 Notes to the Financial Statements............................................................................................................. 43 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds: Special Revenue Funds ....................................................................................................................... 79 Debt Service Funds............................................................................................................................. 79 Permanent Fund ................................................................................................................................. 79 i Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ............................................................. 80 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ........................................................................ 82 SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity ...................................................................................................... 86 Schedule of Changes By Function and Activity .................................................................................... 88 Budgetary Comparison Schedules – Other Major Governmental Funds Capital Projects Fund ......................................................................................................................... 89 General Obligation Bond Fund............................................................................................................ 90 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ....................................................................................................................................... 91 Real Estate Proceeds Fund .................................................................................................................. 92 Community Redevelopment Fund....................................................................................................... 93 Metropolitan Planning Organization Fund .......................................................................................... 94 Special Assessment Bond Fund........................................................................................................... 95 Secondary Property Tax Revenue Fund ............................................................................................... 96 STATISTICAL SECTION Net Assets by Component ........................................................................................................................ 98 Changes in Net Assets ............................................................................................................................ 100 Fund Balances, Governmental Funds....................................................................................................... 102 Changes in Fund Balances, Governmental Funds .................................................................................... 103 Tax Revenue by Source, Governmental Funds ......................................................................................... 104 Intergovernmental Revenue by Source, Governmental Funds .................................................................. 105 Full Cash Value of Taxable Property........................................................................................................ 106 Direct and Overlapping Property Tax Rates............................................................................................. 107 Principal Property Tax Payers.................................................................................................................. 108 Property Tax Levies and Collections........................................................................................................ 109 Direct and Overlapping Sales Tax Rates .................................................................................................. 110 Ratios of Outstanding Debt by Type ....................................................................................................... 111 Ratios of General Bonded Debt Outstanding ........................................................................................... 112 Direct and Overlapping Governmental Activities Debt............................................................................. 113 Legal Debt Margin Information ............................................................................................................... 114 Pledged Revenue Coverage ..................................................................................................................... 116 Demographic and Economic Statistics..................................................................................................... 118 Principal Employers ................................................................................................................................ 119 Full-time Equivalent City Government by Function/Program................................................................... 120 Operating Indicators by Function/Program ............................................................................................. 121 Capital Asset Statistics by Function/Program.......................................................................................... 122 Insurance Summary ................................................................................................................................ 123 ii City of Flagstaff December 22, 2006 The Honorable Mayor, City Council and Citizens of the City of Flagstaff, Arizona I am pleased to submit the Comprehensive Annual Financial Report (CAFR) for the City of Flagstaff, Arizona (City) for the fiscal year ended June 30, 2006, as required by Article VI, Section 5 of the City Charter. The report was prepared by the City’s Finance Division in accordance with U.S. generally accepted accounting principles (GAAP) and audited in accordance with U.S. generally accepted auditing standards by a firm of licensed certified public accountants. This report consists of management’s representations concerning the finances of the City of Flagstaff. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Flagstaff has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City of Flagstaff’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Flagstaff’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Nordstrom & Associates, PC, a firm of licensed certified public accountants have audited the City of Flagstaff’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Flagstaff for the fiscal year ended June 30, 2006, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Flagstaff’s financial statements for the fiscal year ended June 30, 2006, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. 211 West Aspen Avenue, Flagstaff, Arizona 86001 Main & TDD (928) 774-5281, Arizona Relay 7-1-1, Fax (928) 779-7696 The independent audit of the financial statements of the City of Flagstaff was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Flagstaff’s separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Flagstaff’s MD&A can be found immediately following the report of the independent auditors. CITY OF FLAGSTAFF PROFILE Flagstaff is located in Coconino County, Arizona at the intersection of Interstate 17 and Interstate 40. Flagstaff is the largest city in Northern Arizona and is the regional center and county seat for Coconino County, the second largest county in the 48 contiguous states. The current population as of the 2003 census is approximately 61,030. The City of Flagstaff became a town in 1894, incorporated as a city in 1928 and its boundaries currently encompass an area of just over 64 square miles. Flagstaff is nestled at the base of the San Francisco Peaks and is surrounded by one of the largest ponderosa pine forests on earth. Flagstaff drew its name from a very tall pine tree made into a flagpole in 1876 to celebrate our nations centennial. At nearly 7,000 feet, Flagstaff is one of the highest elevation cities in the United States. Flagstaff operates under a council-manager form of government as provided by its Charter. The Mayor is elected at large on a non-partisan ballot for a two-year term and six City Council members are elected at large on a non-partisan ballot for a four-year term. The City Council appoints the City Manager, who has full responsibility for carrying out Council policies and administering City operations. The City manager, in turn, appoints City employees and department heads under service procedures specified by Charter. City service departments provide a full range of services including General Government, police and fire protection, Environmental Services, Transportation, Library, Parks and Recreation, Airport, Water and Sewer, and Stormwater Services. The annual budget serves as the foundation for Flagstaff’s financial planning and control. The City Council formally adopts the budget and legally allocates, or appropriates, available monies for all funds and entities related to the City. All of these funds and entities are included in the basic financial statements. The City Manager submits to the Council each spring a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them. Two public hearings are held prior to the budget’s final adoption in order to obtain taxpayer comments. The budget is legally enacted through the passage of an ordinance. The ordinance sets the limit for expenditures during the fiscal year. The legal level of control for the budget is the department level. Additional expenditures may be authorized for unanticipated and/or inadequately budgeted events threatening the public health or safety as prescribed in the State Constitution, Article 9, Section 20. iv FACTORS AFFECTING THE CITY’S FINANCIAL CONDITIONS Local economy The City’s employment base continues to be heavily government based. Although this provides stability to the economy during declines, it is subject to other factors. This year the Arizona state retirement system again increased employee mandated contributions which effectively reduced local disposable incomes for individuals working for the City, County, Community College, Flagstaff Unified School District and to some extent Northern Arizona University. The City continues to see further development as a second home market to the residents of Phoenix and its surrounding areas. The City anticipates land development to slow as there are less residential lots available for construction and commercial land is at premium. However, despite these factors, we have seen 6.2 % growth in our retail sales, excluding BBB. BBB maintained its rebound which represents approximately, 17% of receipts. Receipts grew by 7% as a result of strong tourism in the region due growth in population in Phoenix. increased 4.1%. Auto sales had a slight increase of 1.4% and commercial rentals The Council goals have also provided for the expansion of the local Mall, which is a regional shopping center. The Mall expansion includes the construction of an Auto mall. Construction has started with completion anticipated in 2007. This project is a real boon to the local economy. It is a known fact that there is a significant loss of sales tax revenues to the Phoenix area for many retail items. This is exemplified when a new retailer such as Home Depot opened its first store in town and we experienced real retail growth of 35% in the building materials category. The mall will be adding approximately 485,000 square feet of additional retail space and several new auto dealers with additional manufacturers to the market. Sales tax receipts will be benefited both in the of construction dollars spent at the mall and in additional retail sales. LONG-TERM FINANCIAL PLANNING The City’s responsiveness to emerging economic challenges and its careful long-range planning have been key factors in Flagstaff’s fiscal health. STRATEGIC FINANCIAL PLAN Flagstaff’s financial plan requires many elements working in concert with one another. Some of these financial plan elements are financial resource planning, multi-year budget planning, strategic capital improvement project planning and debt management, all of which are further identified below. Currently, due to the tenuous economic recovery, Flagstaff’s financial forecast includes very modest revenue growth, potential for State reductions of revenue sharing, and continued increases in demand for city services such as police, fire, transportation and social services. Financial Services management role will be to maintain and enhance the continued financial stability for the City of Flagstaff. Financial Resource Planning – Strategic financial planning begins with determining the City’s fiscal capacity based upon long-term financial forecasts of recurring available revenues. Financial forecasts coupled with financial trend analysis help preserve the fiscal well being of Flagstaff. Strategic financial capacity planning is a critical element to reach long-term financial stability goals and to determine special financial needs for critical objectives of the City Council. Multi-Year Budget Planning – Multi-year budget planning encompasses long-range operating expenditure plans (including the operating impacts of capital projects), which are linked to the community expectations v and broad goals of the City Council. The multi-year approach provides a better opportunity for staff to change its financial paradigm from what do we need this year to how do we accomplish our service objectives over-time, given our financial capacity. While the City is required to adopt an annual budget to meet State statutory requirements, Flagstaff builds a financial plan for the next five years to help anticipate future impacts and ensure achievement of City objectives. Strategic Capital Improvement Project Planning – Flagstaff Capital Improvement Projects are planned for five or more years and analyzed using City specific prioritization criteria. The operating cost impacts of projects are also planned and considered in developing future operating budget plans. Projects with significant operating impacts are carefully timed to avoid contingent liabilities, which future operating resources cannot meet. Pay- as-you-go funding sources are also conservatively estimated to avoid over-committing to capital construction using revenues that are not certain. To the extent debt financing is used and/or required capital project plans are sized to conform to existing debt management policies. CASH MANAGEMENT POLICIES AND PRACTICES The City’s investment policy is to invest all temporarily idle cash in investments authorized by City resolution or State statute at the highest available interest rate while emphasizing safety of principal and liquidity. Excess funds are invested in the State Treasurer’s Local Government Investment Pool (LGIP) and in obligations of the U.S. Treasury and its agencies, demand deposits and repurchase agreements. The maturities of the investments range from one day to 6 years. The average yield on investments was 3.8%. RISK MANAGEMENT The City maintains a self-insurance program for liability claims, unemployment compensation, health and workers’ compensation. In addition, the City’s Risk Management Division employs various risk control techniques, such as employee accident prevention training and inspection of City property and facilities, to minimize accident-related losses. Additional information on the City of Flagstaff risk management activity can be found in Notes.V.A in the notes to the financial statements. PENSION AND OTHER POST-EMPLOYMENT BENEFITS All full-time employees of the City are covered by one of three pension plans. The State Retirement System is for the benefit of the employees of the state and certain other governmental jurisdictions. All full-time City employees, except fire and police personnel, are included in the plan that is a multiple-employer, cost- sharing defined benefit pension plan. All police and fire personnel participate in the Public Safety Retirement System that is an agent multiple-employer plan. In addition, the Mayor and Council members contribute to the State’s Elected Officials plan that is also a multiple-employer cost-sharing pension plan. Additional information on the City of Flagstaff pension arrangements can be found in Note V.C. in the notes to the financial statements. vi MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2005-2006, Flagstaff continued work to maintain basic services while also fulfilling the City Council goals. These goals provide for strategies that move the community closer to economic viability and sustainable community objectives. The outcomes of these strategies have been many and in certain cases require sustained efforts over a period of time. The following are the some of the goals of the Council and the City’s’ accomplishments in FY2005-2006. Economic Development/Redevelopment The City continues to coordinate closely on economic development activities with the Greater Flagstaff Economic Council (GFEC). An additional 41-fulltime jobs at or above the county median wages were created; 61,160 square feet of commercial space was added to existing industry with a capital investment value of $430,000. In addition, 335 existing jobs in our community will receive Arizona Department of Commerce job training grant funding, totaling over $470,000. The City, with Northern Arizona Council of Governments (NACOG) as partner, undertook a large federal Economic Development Agency (EDA) grant agreement process at NAU’s request. This grant ($3.2 million), along with City funding, will build a 10,000 square foot business incubator building on the McMillan Mesa and operate a business start-up program. The incubator facility will focus on technology and science start-up companies, and a program operator has been selected through an RFP process – The Northern Arizona Technology and Business Incubator (NATBI). The building will be located between the U.S. Geological Survey campus and the planned Science and Technology Park. Through an RFP process, The Plaza Companies was selected as developer for the Science and Technology Park. Tourism continues as a mainstay industry in the community. Efforts included a publicity campaign to better inform tourist of conditions during fire and snow seasons and correct winter driving conditions through the “Clear the Road to Flagstaff” campaign. The industry saw a 5.2% increase in revenues. On the redevelopment front, many projects are in progress. The Flagstaff Mall expansion and Auto Mall construction are under way with completion of the first phase in Fall 2007. The Sawmill development will begin construction in early 2007 including a new flagship store for New Frontiers grocer. The Southside 2005 Master Plan’s first project, traffic calming along Beaver and San Francisco Streets, is under way. Implementation of this master-plan is a multi-year project involving many community members. Downtown is in the middle of developing a comprehensive parking plan and the 44 acre in-fill project, Sawmill, is in final design phase. Fiscal Health The City was successful in adopting and publishing their five-year capital improvement plan. The City presented to the voters over $155.1 million in new capital projects to be bond funded in 2004 and received overwhelming approval. The projects include the relocation for four fire stations, construction of a new fire training center and fire tower, a new aquatic facility, land for new parks, a renovated or new multi generational recreation facility, water rights acquisition, additional water wells, renovation of the City wildcat wastewater treatment plant, and expansion of the USGS campus. vii Public Safety The City Council recognizes that the role of public safety encompasses a broad array of interrelated activities. Public order and quality of life issues must be addressed on a broad front through a partnership of shared responsibility and trust between Police, Fire, other city departments, civic organizations and the community. Community safety and well-being must be built from within each neighborhood and cannot be imposed from the outside. The City and the Police department conducted numerous community activities that strengthen neighborhoods. These included 120 block watch meetings, youth celebrations and formal gang and drug education in the schools, and two citizen police academies.. Activities also include our community partners. The City funds an after school program activities at various school district sites and works with United Way, whom supports numerous agencies in the community to promote the basic skills children need and other services. Affordable Housing The goals are manifold to address affordable housing in a community with such a severe deficiency. The Council’s two workforce housing task forces presented the results of their studies of regulatory and a house trust. Staff has been examining each recommendation for both work program implementation and legality. Success of the studies encompasses a comprehensive approach over many years. Affordable housing includes the needs of the community from rentals, to first time home buyers, homeless and general affordability issues across all entire workforce. There is no one tool that will solve this issue but must be dealt with for the entire city. Capital Improvements Programmed capital infrastructure expenditures facilitate planned growth, economic development and protects existing community investments. Allocating resources through a coordinated planning and engineering process, with high levels of public involvement, assures our community is shaped in alliance with citizen support. The Capital Division worked on numerous projects through the year and continues to refine the process. Elements that were implemented included a schedule based work program, comprehensive 5year CIP program, team chartering, project review process, and monthly financial reporting. Customer Service A positive customer service culture will enhance the delivery of service both externally and internally. Training was provided on customer service to all employees. Job description and employee evaluations were changed to incorporate customer service as a key element of job duties. Planning for Growth With a finite supply of land, we have to provide for the region’s growth in a manner that balances growth and conservation. A major amendment to the City’s general plan was forthcoming in December after much discussion about the planned development, Villagio Montano. The community struggles with the goals higher density and more compact development, that simulates traditional neighborhood designs, as described by the voter authorized GMG, with the impacts this type of development will bring to the City. Traffic impacts, schools, parks and other infrastructure requirements are far reaching as are the realities that this form of dense development will change the community character. viii Collaboration Strengthens the community by strengthening partnerships with sovereign nations, public, non-profit and private agencies and developing collaborative goals at all levels. The City continues its role with the alliance group that is comprised of Coconino County, Northern Arizona University, Coconino Community College, and the Flagstaff Unified School District. The alliance group continued its support of education with a unified statement to the state legislature supporting the funding of education as a primary goal to the success of the state, community and the vitality of economic development. Quality of Life Consideration is given to quality of life preservation and enhancement in all City actions and appropriations. This is a diverse objective with many outcomes. This year brought about a year of implementation for the many projects that will add value and character to our community. With the passage of the a successful bond program, staff has engaged the public for input and started design for new fire stations, open space, and new and improved parks and recreation facilities. With escalating construction costs in both material and labor, projects have been revaluated and provided supplemental funding to ensure the projects can be delivered as promised. The City was successful in purchasing a ranch in the vicinity of Flagstaff that will supply a water source for future citizens in Flagstaff. The Ranch has several active wells however the City will need to develop the infrastructure to transmit the water to the Community. Succession Planning - Similar to other organizations, the City anticipates losing 25% of their senior staff in the next ten years. In anticipation of this loss the City as started and training program to provide employees with the skills needed to promote and lead the organization into the next decade. The first group in the City has completed the Long term development program, a training program that provides classes in the competencies needed to promote within the organization. Several key positions where vacated in the City by retirement, Police Chief, Public Works Director and Assistant Fire Chief. Although a national search was conducted for all of these positions, only the Assistant Fire Chief was filled externally, internal staff were selected over the outside candidates for the Police Chief and Public Works Director. Forest Health Flagstaff resides in the middle of the largest stand of Ponderosa pine in the world. This provides a key element to the City situated at the base of the San Francisco Peaks at 7,000 elevation a cool mountain environment. Unfortunately with this amenity comes the risk of catastrophic wildfire. The City continues to be proactive in the implementation of a major forest health initiative. In fact, the City is recognized nationally for its successful program. The program includes active thinning on City property within the City, community outreach to educate and assist the private sector in good health management, assistance with other governmental agencies in forest management and collaboration with the Forest Service and environmental groups in a forest management plan for the areas in and around City property. The outcome of the program has been an aggressive thinning of the forest and excellent public education resulting in private sector management of their trees. The Greater Flagstaff Forest Partnership, with collaboration of public, private and environmental groups, has successfully initiate major thinning projects in the Federal land that meets all parties’ objectives. ix AWARDS AND ACKNOWLEGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Flagstaff for its comprehensive annual financial report for the fiscal year ended June 30, 2005. This was the 12th consecutive year that the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to GFOA to determine its eligibility. The City also received the GFOA’s award for Distinguished Budget Presentation for our 2006-2007 annual budget. In order to qualify for the Distinguished Budget Presentation award, the City’s budget document was judged to be proficient in all categories, a Policy Document, a Financial Plan, an Operation Guide, and as a Communication Device. A special word of appreciation is due to Barbara Goodrich, Finance Budget Manager and to the entire finance staff who prepared this CAFR. As an organization we would be remiss to not also personally recognize Maryellen Pugh, CPA for her tireless efforts in directing the statement drafting and coordination. Acknowledgment should also be made for the interest and support received from members of the Mayor and Council, the office of the City Manager, and the willing cooperation of the other operating and staff departments of the City. The cooperative assistance of our independent auditor, Nordstrom and Associates, also contributed significantly to this report. Respectfully Submitted, Mary Jo Jenkins Management Services Director x City of Flagstaff Citizens of Flagstaff City Council Special Committees City Magistrates Board and Commissions City Attorney City Manager Legal City Court Deputy City Mgr External Affairs Deputy City Manager Operations Convention and Visitors Bureau Visitors Center Fire Department Police Department Community Development Department General Admin Department Public Works Department Utilities Department Management Services Department xii City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2006 Elected Officials Mayor Joseph C. Donaldson Vice Mayor Scott Overton Councilmember Karen K. Cooper Councilmember Joseph P. Haughey Councilmember Kara M. Kelty Councilmember Rick Swanson Councilmember Al White Appointed Officials City Manager David W. Wilcox City Attorney Patricia Boomsma City Treasurer Mary Jo Jenkins City Clerk Margie Brown xiii xiv MANAGEMENT DISCUSSION AND ANALYSIS As management of the City of Flagstaff (the City), we offer readers of the City’s financials statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2006. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii -x of this report. FINANCIAL HIGHLIGHTS x The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $402.8 million (net assets). Of this amount $31.3 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors. x The government’s total net assets increased by $49.7 million during the fiscal year. This increase is related to capital improvement activity both internally funded and funded through contributions from private development. Private development contributions totaled $31.5 million in for the year ended June 30, 2006. The majority of projects are related to large residential developments including The Estates at Pine Canyon ($4.4 million), Mt. Elden Foothills, ($3.4 million), Pinnacle Pines Unit One ($2.2 million), and Presidio in the Pines ($11.8 million). The remaining $9.6 million are contributions from 27 separate projects. x As of June 30, 2006, the City’s governmental funds reported combined ending fund balances of $82.4 million, an increase of $17.8 million in comparison with the prior fiscal year. Approximately 63.1% of this total amount ($52.1 million) is unreserved fund balance available for spending at the government’s discretion. x As of June 30, 2006, total unreserved fund balance for the general fund was $29.2 million, or 68.5% of total general fund expenditures ($42.6 million). x As of June 30, 2006, the City’s proprietary funds reported combined total net assets of $252.7 million, and total unrestricted net assets of $20.6 million. $15.0 million of the unrestricted net assets are in the Water and Wastewater Fund. x The beginning fund balance for governmental activities in the Statement of Activities and the Statement of Revenue, Expenditure, and Changes in Fund Balance has been restated due to a change in accounting estimate as related to compensated absences. Detail information can be found on page 57 within the footnotes. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some 3 items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes and earned but unused vacation leave. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government 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 Police, Fire, Community Development, Parks and Recreation, City Council, City Manager, City Attorney, Municipal Courts, Human Resources, Risk Management, Information Services, Financial Services, Library, and Economic Development. The business-type activities of the City include Water and Wastewater, Airport, Environmental Services, and Stormwater operations. The government-wide financial statements include not only the City itself (known as the primary government), but also for the Municipal Property Corporation (MPC). The MPC, although also legally separate, functions for all practical purposes as a department of the City, and therefore has been included as an integral part of the primary government as a blended component unit. The government-wide financial statements can be found on pages 17 - 19 of this report. Fund financial statements The fund financial statements are designed to report information about groupings of related accounts that are 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 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 funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains several individual government funds organized according to their type (special revenue and debt service). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, Highway User Revenue fund, Transportation fund, and the BBB fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. 4 The City adopts an annual appropriated budget for its General fund, Special Revenue funds, Debt Service funds, and Enterprise funds. A budgetary comparison statement has been provided for the General and other major governmental funds to demonstrate compliance with the respective budgets. The basic governmental fund financial statements can be found on pages 20 - 30 of this report. Proprietary funds: Proprietary funds are generally used to account for services for which the City charges customers – either outside customers, or departments of the City. Proprietary funds provide the same type of information shown in the government-wide financial statements, only in more detail. The City maintains the following two types of proprietary funds: x Enterprise funds are used to report the same function presented as business-type activities in the government-wide financial statements. The City used enterprise funds to account for Water and Wastewater, the Airport, Environmental Services which includes solid waste collection, and Stormwater. Water and Wastewater, the Airport, and Environmental Services are considered to be major funds of the City. x Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses an internal service fund to account for its workers compensation, health insurance, other risk related activity including claims adjustment, and general liability and property insurance. Because these services predominantly benefit governmental rather that business- type functions, they have been included within governmental activities in the government-wide financial statements. The internal service fund is combined into a single, aggregated presentation in the proprietary fund statements. Individual fund data for the internal service fund is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 32-39 of this report. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. 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 40-41 of this report. Notes to the Financial Statements The notes to the financial statement provide additional information that is essential to 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 43-77 of this report. Combining statements The combining statements referred to earlier in connection with non-major governmental funds are presented on pages 80-83. 5 Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s capital asset activity. Required supplementary information can be found on page 86-88 of this report. GOVERNMENT WIDE STATEMENTS FINANCIAL ANALYSIS Analysis of Net Assets As noted earlier, net assets may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $402.8 million as of June 30, 2006. Of the City’s net assets, 80.3% reflects its investment of $323.6 million in capital assets (e.g. land, buildings, and equipment), less any outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. Net Assets June 30, 2006 and 2005 (in thousands of dollars) Governmental Activities 2006 Business-type Activities 2005 2006 Total 2005 2006 (as restated) Current and other assets $ Capital assets Total assets 104,872 $ 82,721 $ 37,064 $ 42,313 $ 141,936 2005 (as restated) $ 125,034 137,246 104,441 257,103 230,766 394,349 335,207 242,118 187,162 294,167 273,079 536,285 460,241 Long-term liabilities 74,655 49,064 29,703 33,239 104,358 82,303 Other liabilities 17,360 13,638 11,733 11,140 29,093 24,778 92,015 62,702 41,436 44,379 133,451 107,081 247,311 Total liabilities Invested in capital assets, 93,515 46,760 230,035 200,551 323,550 Restricted net of related debt 45,561 20,670 2,393 3,201 47,954 23,871 Unrestricted 11,027 57,030 20,303 24,949 31,330 81,979 Total net assets $ 150,103 $ 124,460 $ 252,731 $ 228,701 $ 402,834 $ 353,161 A portion of the City’s net assets, $47.9 million (11.9%) represents resources that are subject to external restriction on how they may be used. The remaining balance of unrestricted net assets, $31.3 million (7.8%) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets for the government as a whole, as well as for the business-type activities. Current assets for governmental activities increased by 26.8% ($22.1 million). This is due to unspent bond proceeds. Bonds totaling $31.5 million were issued to fund a portion of the May 2004 voter approved capital plan, including fire stations and equipment, Flagstaff Urban Trail System (FUTS) and park acquisitions, and the Aquatic Multigenerational Center. Capital assets of the governmental activities, funded through debt proceeds, grants, and 6 contributions, increased by 31.4% ($32.8 million) due to the 4th Street project, and infrastructure additions ($12.1 million and $14.2 million, respectively). Long-term liabilities increased by 52.2% ($25.6 million) due to the additional debt related to capital plan as previously discussed. Other liabilities increased by 27.3% ($3.7 million) also due to increased debt liability of the City. Overall business-type net assets increased by 10.5% ($24.0 million) also due primarily to capital asset additions from private development donations. Private developments donations specific to enterprise funds totaled $19.4 million. Of the $19.4 million in private development donations, 96.3% ($18.7 million) is from residential developments. Analysis of Change in Net Assets The City’s overall net assets increased by $49.6 million during the current fiscal year. These increases are explained in the government and business-type activities discussion to follow. Changes in Net Assets For the Years Ended June 30, 2006 and 2005 (in thousands of dollars) Governmental Activities 2006 Business-type Activities 2005 2006 Total 2005 2006 2005 (as restated) (as restated) Revenues Program Revenues: Charges for services $ Operating grants and contributions Capital grants and contributions 7,898 $ 6,327 3,792 4,148 21,567 15,180 $ 28,664 $ - 27,465 $ 36,562 $ 33,792 575 3,792 4,723 23,450 8,165 45,017 23,345 General Revenues: 9,051 8,462 - - 9,051 8,462 Sales taxes Property taxes 30,015 27,054 - - 30,015 27,054 State shared taxes 14,384 12,838 - 14,384 12,838 2,385 1,704 1,182 936 3,567 2,640 639 678 327 514 966 1,192 89,731 76,391 53,623 37,655 143,354 114,046 Unrestricted investment earnings Other Total revenues - Expenses General government Public safety 7,459 5,335 - - 7,459 5,335 22,525 20,662 - - 22,525 20,662 Public works 1,455 1,292 - - 1,455 1,292 Economic and physical development 7,843 6,746 - - 7,843 6,746 Culture and recreation 8,329 9,378 - - 8,329 9,378 12,043 9,975 - - 12,043 9,975 2,167 2,043 - - 2,167 2,043 Water and wastewater - - 18,452 17,297 18,452 17,297 Environmental - - 9,096 8,549 9,096 8,549 Airport - - 3,520 3,750 3,520 3,750 Stormwater - - 792 480 792 480 Total expenses 61,821 55,431 31,860 30,076 93,681 85,507 Increase in net assets before transfers 27,910 20,960 21,763 7,579 49,673 28,539 2,267 7,005 - - 24,030 14,584 49,673 28,539 Highways and streets Interest on long-term debt Transfers (2,267) Change in net assets Net assets at beginning of year, as restated Net assets at end of year (7,005) 25,643 $ 124,460 150,103 13,955 $ 110,505 124,460 7 $ 228,701 252,731 $ 214,117 228,701 $ 353,161 402,834 $ 324,622 353,161 Governmental activities Governmental activities increased the City’s net assets by $25.6 million, accounting for 51.6% of the total growth in the net assets of the City. The key factors for this increase are as follows: x Charges for service have increased primarily due to the building plan review and permitting for several large residential and commercial projects. Increases in building revenues are generally not considered as permanent base revenue increases as construction fluctuates from year to year. x Capital grants and contributions have increased due to increased expenditures for Homeland Security and private development infrastructure contributions ($12.0 million). x Property tax increases are due both to increases in housing inventory on the property tax roles along with community-wide housing price increases. x Sales tax revenues continued to increase at both local and state levels. State sales tax levels had decreased significantly in the post-9/11 environment and have finally surpassed revenue levels achieved five years ago Bed, Board, and Booze (BBB) taxes continue to exceed prior levels after two years of declining revenues. Historically, City sales tax has maintained a constant level of growth and this trend continues. x The City’s portion of state shared taxes has grown slightly as the City’s proportionate census share as grown relative to the overall state population. x Unrestricted investment earnings are also normalizing with rates increasing to an average of over 4.0%. x Expenses have increased due to the capital activity previously discussed. Business-type activities Business type activity had net asset growth of $24.0 million, accounting for 48.4% of the total growth in the net assets to the City. The key factors for this increase include: x The majority of this growth is related to private development contributions totaling $19.4 million. Expenses and Program Revenues – Governmental Activities Expenses $25,000,000 Program Revenues $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Public saf et y Public works Econ & phys development 8 Cult ure & recreat ion Highways & st reet s Interest on long-t erm debt Revenues by Source – Governmental Activities Investment earnings 2.66% Miscellaneous 0.71% Charges for services 8.80% Operating grants and contributions 4.23% State shared tax 16.03% Sales tax 33.45% Property taxes 10.09% Capital grants and contributions 24.03% The previous two charts illustrate the City's governmental expenses and revenues by function and its revenues by source. As shown, Public safety is the largest function in expense (36.4%), followed by Highways & streets (19.5%), Culture and recreation (13.5%), and Economic and physical development (12.7%). General revenues such as sales taxes, state shared taxes, and property taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, sales taxes are the largest single source of funds (33.4%), followed by capital grants and contributions (24.0%), and state shared taxes (16.0%). For the most part increases in expenses from the previous year compared to the fiscal year ended June 30, 2006 paralleled inflation and growth in the demand for services. However, several areas had higher expense increases than what could be attributed to anticipated inflation and growth; General Government (39.8%), Highways and streets (20.7%), and Economic and physical development (16.3%). General government increases are directly related to the energy improvements completed for various City departments. Highway and street increases are due to the additional work to the 4th Street Overpass, and the Economic and physical development increases are related to increased staffing and spending to manage the greater building and capital activity of the City, as well as the management of Community Development Block Grants and the Metropolitan Planning Organization. 9 Expenses and Program Revenues – Business Type Activities Expenses Program Revenues 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - Water and wastewater Environmental Airport Stormwater Revenues by Source – Business-type activities Other 0.6% Capital grants and contributions 43.7% Charges for services 53.5% Investment earnings 2.2% As shown in the previous chart, Water and Wastewater has expenses of $18.5 million for the fiscal year, followed by Environmental Services with $9.1 million, the Airport with $3.5 million and Stormwater with $0.8 million. For the fiscal year, revenues exceeded expense for Water and wastewater, Environmental Services and Stormwater. Airport expenses exceeded revenues due to planned usage of net assets for the completion of capital projects. Environmental Services, Airport, and Stormwater funds received the majority of their program revenues through charges for services (100.0%, 56.3% and 51.5%, respectively). The Water and Wastewater fund receives 43.8% of support through charges for service and the other 56.2% through grants and contributions. Charges for services provided the largest share of revenues (55.0%) for all of the business-type activities, followed by capital grants and contributions (45.0%). The proportionate share of revenue from charges for service (55.0%) and capital grants and contributions (45.0%) represents a significant shift from the prior year of 75.9 % and 22.6% respectively. This shift is the direct result of the increase in capital grants and contributions from $8.2 million to $23.4 million for the fiscal year ended June 30, 2006. 10 Stormwater expenses increased by 65.1% ($0.3 million) in comparison with FY 2005. The Stormwater program is still relatively new to the City as it completed its third year. The expense increase is the result of attaining full staffing and the ability to proceed on drainage improvements. The Water and Wastewater fund realized an 82.8% ($17.6 million) revenue increase that is directly attributable to capital grants and contributions, which has been previously detailed. Specific only to the Water and Wastewaeter fund, the City received donated capital for several large residential projects including Presidio in the Pines ($7.0 million), the Estates at Pine Canyon Phase I and II ($3.2 million) Pinnacle Pines Unit One ($1.9 million), and Mt. Elden Foothills ($1.6 million). Financial Analysis of the City’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. requirements. Such information is useful in assessing the City’s financing In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Types of Governmental funds reported by the City include the General fund, Special Revenue funds, and Debt Service funds. At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $82.4 million, an increase of $17.8 million in comparison with the prior year, as restated. Approximately $52.1 million of the total ending fund balance constitutes unreserved fund balance, which is available for spending at the City’s discretion. The remainder of fund balance is reserved to indicate that is it not available for new spending because it has already been committed (1) to pay debt service ($1.9 million), (2) for capital projects ($28.1 million), (3) for inventory reserve ($232,190), and perpetual care ($69,502). Revenues for governmental functions overall totaled $77.4 million in the fiscal year ended June 30, 2006 which represents an increase of 8.8% or $6.3 million from the fiscal year ended June 30, 2005. Tax revenues which include the general sales tax, the transportation tax, BBB tax, general property tax, secondary property tax and franchise taxes increased by 10.1% ($3.6 million) Sales tax growth was due to the continued economic rebound at both the state and city levels coupled with all-time high tourist levels. Intergovernmental revenues decreased by 2.1% ($372,270). While there were increased state receipts for the local share of state sales tax, state income tax, and Highway User Revenue (HURF), the City also experienced a funding decrease as the City had received one time funding ($2.0 million) in FY2005 from the Arizona Department of Transportation for street turnbacks. Grant and entitlement revenues increased 13.8% ($1.3 million) primarily due to increased homeland security funding for public safety vehicles. Expenditures for governmental functions, totaling $89.0 million, increased by 21.2% ($15.6 million) from the fiscal year ended June 30, 2005, as restated. The expenditure increase was driven by a $2.0 million increase in debt service related to the $31.5 million dollar bond issuance for the voter-approved projects including new fire stations and the Aquatic/Multi-generational center. Capital projects costs increased by $8.0 million to a total of $25.1 million and which include expenditures for energy saving improvements throughout all City facilities ($2.9 million), street improvement projects ($4.0 million), the 4th Street Overpass ($10.3 million), recreation improvements including Thorpe Park and the BMX park ($3.2 million) and bond projects ($2.4 million). 11 In the fiscal year ended June 30, 2006 expenditures for governmental functions exceeded revenues by approximately $11.7 million. As previously noted, the higher level of expenditures is due to planned increases in both the debt service payments and the capital project expenditures of the city. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unreserved fund balance of the General Fund was $29.2 million. As a measure of liquidity, it may be useful to compare both total unreserved, undesignated fund balance and total fund balance to total fund expenditures. The unreserved, undesignated fund balance and total fund balance represent 68.5% and 69.0%, respectively, of General Fund expenditures. The fund balance in the City’s General Fund decreased by $510,835 during the fiscal year mainly due to planned expenditures for capital projects that have been accumulating in the General Fund balance. Overall, the General Fund’s performance resulted in revenues in excess of expenditures in the fiscal year ended June 30, 2006 of $2.9 million. This is a decrease of approximately $1.2 million over the comparable figure from the prior year of $4.1 million. The Highway User Revenue Fund increased by $773,771 million during the fiscal year due to increased state funding receipts and uncompleted capital projects. The Transportation Fund and the BBB Fund decreased by $10.2 million and $0.9 million, respectively, which represents a planned usage of fund balance for capital projects. Proprietary funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the fiscal year, the unrestricted net assets had positive balances for Water and Wastewater, Environmental Services, and Stormwater. The internal service fund, which is used to account for risk management and health insurance activities, had unrestricted net assets of $4.8 million. The total growth in net assets for the proprietary funds was $24.0 million. Factors concerning the finances of these funds have been addressed previously in the discussion of the City’s business-type activities. Fiduciary funds The City maintains fiduciary funds for the assets of the Firemen’s Pension Trust Fund. As of June 30, 2006, the net assets had decreased by $369. Budget Highlights The City’s final budget differs from the original budget for certain divisions within the General fund even though the overall original budget remained the same. Council approved transfers from the contingency funds for the following divisions: General fund contingency transfer: $ 35,000 60,000 Community Improvements – labor reallocation Public Works Administration – retirement payout $ 95,000 12 Capital Assets and Debt Administration Capital Assets The City’s capital assets (net of accumulated depreciation) for its governmental and business-type activities as of June 30, 2006 amount to $394.3 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current year was 17.6% ($59.1 million). The following table reflects the capital assets at the end of the fiscal year: Capital Assets, Net of Depreciation June 30, 2006 and 2005 (in thousands of dollars) Land Governmental Activities Business-Type Activities 2006 2006 $ Buildings 9,171 2005 $ 9,037 $ Total 2005 10,301 $ 2006 2,357 $ 19,472 2005 $ 11,394 25,413 25,801 50,930 46,448 76,343 72,249 9,690 6,721 173,221 158,361 182,911 165,082 16,782 Improvements Machinery and equipment 8,779 8,219 9,498 8,563 18,277 Infrastructure 37,477 23,243 - - 37,477 23,243 Construction in progress 46,716 31,420 13,153 15,037 59,869 46,457 Total $ 137,246 $ 104,441 $ 257,103 $ 230,766 $ 394,349 $ 335,207 Major capital asset events during the current fiscal year included a 70.9% ($8.1 million) increase in land which is primarily the Red Gap Ranch purchase (water rights development). Improvements increased by 10.8% ($17.8 million) which include the Sunnyside area, Wildcat Hill Wastewater Treatment Plant, and the Butler waterline project. infrastructure increased by 61.2% ($14.2 million) due to the donated assets contributed throughout the year. Construction in progress increased by 28.9% ($13.4 million) primary due to the 4th Street Overpass. For government-wide financial statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Please refer to Note IV C on pages 62-64 of the Notes to the Financial Statements for further information regarding capital assets. Long Term Debt At the end of the current fiscal year, the City had total long-term debt outstanding of $99.3 million. Of this amount, $49.2 million is general obligation bonds backed by the full faith and credit of the City, $15.4 million is revenue bonds, $0.3 million is improvement district bonds, $25.6 million is for the Municipal Facility Corporation, and $8.8 million are outstanding leases or loans for the airport, water/wastewater, and city-wide energy conservation improvements. 13 Outstanding Debt June 30, 2006 and 2005 (in thousands of dollars) General obligation bonds $ Special assessment bonds Revenue bonds Other debt Lease/Loans Total debt payable $ Governmental Activities Business-type Activities 2006 2006 2005 32,875 $ 4,285 340 415 9,665 11,555 25,610 26,895 3,455 3,800 71,945 $ 46,950 $ $ Total 2005 16,294 $ 2006 18,880 - - 5,770 $ 2005 49,169 $ 23,165 340 415 6,035 15,435 17,590 - - 25,610 26,895 5,323 5,763 27,387 $ 30,678 $ 8,778 99,332 $ 9,563 77,628 During fiscal year 2006, the City’s total bonded debt increased by approximately $21.7 million. The City issued $31.5 million in new general obligation debt to fund specific voter authorized projects including some of the fire stations and related equipment, and FUTS and park acquisitions. The debt retirement exceeded the debt obligation in all other bond categories. The State constitution imposes certain debt limitations on the City of six percent (6%) and twenty percent (20%) of the outstanding assessed valuation of the City. The City’s available debt margin at June 30, 2006 is $23.3 million in the 6% category and $89.6 million in the 20% capacity. Additional information on the debt limitations and capacities may be found in Schedule 15 in the statistical section of this report. During the year, the City maintained the following bond ratings: City of Flagstaff Bonded Debt Ratings As of June 30, 2006 Moody's Investors Service General Obligation AAa3 Standard & Poor's A+ Water and Sewer Revenue A-1 A Street and Highway Revenue A-1 A+ Additional information on the City’s long-term debt can be found in Section IV F of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2006/2007 budget preparation was influenced by the following factors: x Legislative changes reduced the ceiling for property tax assessment, decreasing the City’s capacity for future assessments by approximately $5 million dollars. x The Arizona legislature enacted a 10% income tax reduction. The impact of this change will be to the City FY 2009 budget. x Commercial development including enhancements to the Flagstaff Mall, the inception of an automall, the development of the conference center at Northern Arizona University, and the addition of a Super Walmart will permanently increase sales tax revenues. x x Other revenue resources are anticipated to exhibit limited growth Creation of a Housing Land trust and permitting several large housing developments are anticipated to be completed over the next 10 years creating a positive economic impact by reducing overall housing costs. 14 x The City pay structure had fallen behind the state average by approximately 6%. The entire pay plan was shifted by 9% to keep Flagstaff competitive in the employment market x The cost of providing retirement and health benefits continue to escalate beyond available budgeted resources. The City continues to look for ways to manage the entire employee compensation package. x This goal is balanced with the need to minimize take home impacts to the employee who also experiences increased deductions due to benefit changes. x x The addition of positions that meet the current and future needs as defined by Council The City responded to the economic downturn during the first half of this decade by reducing and/or eliminating amounts spent on facility maintenance. The City is restoring those funds and working toward long term plans to assure long facility life x x Maintenance of level expenditures while minimizing the impact to health and/or safety services Assessment and funding of long range capital needs and their associated operational impacts Requests for Information The financial report is designed to provide a general overview of the City’s finances for all of those with an interest in the government’s finances. contact: If you have questions about this report or need additional financial information, City of Flagstaff Management Services Department Finance and Budget Division 211 W. Aspen Flagstaff, AZ 86001 Main and TDD (928) 774-5281 Arizona Relay 7-1-1 15 16 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets June 30, 2006 Primary Government Business-type Activities Governmental Activities Total ASSETS Cash and cash equivalents $ 50,641,332 Cash with fiscal agents 7,385,221 Investments Accounts receivables, net Interest receivable Intergovernmental receivable Bond proceeds receivable Special assessments receivable $ 20,768,242 3,372,920 $ 71,409,574 10,758,141 31,110,440 50,000 31,160,440 9,590,048 2,954,343 12,544,391 585,986 236,998 822,984 2,415,818 819,331 3,235,149 99,569 - 99,569 3,934 - 3,934 Internal balance 418,913 (418,913) Inventory 253,461 198,085 451,546 - Deferred bond issuance costs, net 668,561 434,933 1,103,494 1,698,025 8,647,990 10,346,015 Restricted assets: Temporarily restricted: Cash and cash equivalents Capital assets: Non-depreciable 55,887,646 23,454,143 79,341,789 Depreciable, net 81,358,785 233,649,104 315,007,889 242,117,739 294,167,176 536,284,915 Accounts payable 4,007,451 585,088 4,592,539 Accrued payroll 1,253,247 241,923 1,495,170 Interest payable 1,301,682 525,744 1,827,426 645,727 285,462 931,189 Deposits payable 1,452,154 490,937 1,943,091 Matured bonds and lease payable 6,085,000 3,090,788 9,175,788 Unamortized bond premium 1,182,895 115,775 1,298,670 Liabilities payable from restricted assets 1,432,120 6,397,099 7,829,219 Compensated absences Special assessment bonds 1,192,746 203,188 1,395,934 76,000 - 76,000 Bonds, notes and leases payable 5,237,221 3,717,272 8,954,493 1,517,427 248,590 1,766,017 - 1,863,856 1,863,856 264,000 - 264,000 66,367,330 23,670,003 90,037,333 92,015,000 41,435,725 133,450,725 93,515,204 230,035,130 323,550,334 43,398,843 2,392,858 45,791,701 1,977,225 - 1,977,225 111,549 - 111,549 Total assets LIABILITIES Unearned revenue Noncurrent liabilities: Due within one year: Due in more than one year: Compensated absences Landfill closure and postclosure care costs Special assessment bonds Bonds, notes and leases payable Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Capital projects Debt service Grant purposes Perpetual care: Expendable Nonexpendable Unrestricted Total net assets $ 3,271 - 3,271 69,502 - 69,502 11,027,145 20,303,463 31,330,608 150,102,739 $ 252,731,451 $ 402,834,190 The notes to the financial statements are an integral part of this statement 17 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2006 Program Revenues Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Primary government Governmental activities: General government $ Public safety 7,458,583 $ 4,886,354 22,525,292 815,167 Public Works 1,454,731 Economic and physical development 7,842,985 Culture and recreation 8,328,945 Highways and streets Interest on long-term debt Total governmental activities $ 102,517 $ 41,805 405,363 882,489 1,180,097 - - 332,356 1,103,826 - 683,906 2,141,577 978,971 12,043,242 - 38,243 19,663,284 2,167,626 - - - 61,821,404 7,897,880 3,791,526 21,566,549 21,875,480 Business-type activities: Water and wastewater 18,452,368 17,047,831 369 Environmental 9,096,420 9,723,652 - - Airport 3,519,749 1,261,594 - 979,611 Stormwater Total business-type activities Total primary government $ 791,791 630,962 - 594,878 31,860,328 28,664,039 369 23,449,969 93,681,732 $ 36,561,919 $ 3,791,895 $ General revenues: Property taxes, levied for general purposes Property tax, levied for debt service Sales taxes State shared sales taxes - unrestricted Grants and contributions not restricted to specific programs Investment earnings Miscellaneous Gain on sale of capital assets Contributions to permanent fund Transfers in (out) Total general revenues, contributions and transfers Change in net assets Net assets - beginning, as restated Net assets - ending The notes to the financial statements are an integral part of this statement 18 45,016,518 Net (Expenses) Revenues and Changes in Net Assets Primary Government Governmental Activities $ Business-type Activities (2,427,907) $ (20,422,273) - $ - (2,427,907) (20,422,273) (274,634) - (274,634) (6,406,803) - (6,406,803) (4,524,491) - (4,524,491) 7,658,285 - 7,658,285 (2,167,626) - (2,167,626) (28,565,449) - (28,565,449) - 20,471,312 - 627,232 - 20,471,312 627,232 (1,278,544) (1,278,544) - 434,049 434,049 - 20,254,049 20,254,049 20,254,049 (8,311,400) (28,565,449) 4,196,021 - 4,855,137 - 4,855,137 30,014,975 - 30,014,975 14,384,055 - 14,384,055 377,502 889 378,391 2,385,099 1,181,836 3,566,935 4,196,021 204,678 - 204,678 33,417 326,540 359,957 - 24,630 24,630 (2,267,551) 54,207,963 $ Total 2,267,551 - 3,776,816 57,984,779 25,642,514 24,030,865 49,673,379 124,460,225 228,700,586 353,160,811 150,102,739 $ 252,731,451 $ 402,834,190 19 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2006 Highway User Revenue Fund General Fund Transportation Fund ASSETS Cash and cash equivalents $ Cash with fiscal agents 19,591,855 $ 383,918 Investments Accounts receivable, net Interest receivable 6,231,826 $ 2,153,143 5,329,801 1,493,590 - - - 4,188,319 3,491,270 891,092 184,181 70,103 41,567 Intergovernmental receivables 1,585,799 203,447 174,738 Interfund receivable 7,265,000 - - 99,569 - - Bond proceeds receivable Special assessments receivable Inventory Restricted cash and cash equivalents Total assets - - - 232,189 - - 1,623,886 $ - 3,726 35,154,716 $ 12,149,789 $ 7,934,514 1,901,976 $ 156,355 $ 323,498 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences Interest payable Current bonds payable 1,221,990 51,384 - 87,799 263,143 493,550 285,000 1,890,000 1,000,000 Interfund payable - - 4,000,000 Deferred revenue 122,687 - - Unearned revenue 633,218 8,575 - Guaranty and other deposits Liabilities payable from restricted assets Total liabilities 1,452,154 - - 63,852 - - 5,768,676 2,369,457 5,817,048 - - - Fund balances: Reserved for: Debt service Capital projects Inventory Perpetual care - - - 232,190 - - - - - Unreserved, undesignated, reported in: General fund Special revenue funds Permanent fund Total fund balances Total liabilities and fund balances $ 29,153,850 - - - 9,780,332 2,117,466 - - - 29,386,040 9,780,332 2,117,466 35,154,716 The notes to the financial statements are an integral part of this statement 20 $ 12,149,789 $ 7,934,514 Capital Projects Bond Construction BBB Fund $ 5,582,304 $ 2,238 General Obligation Bond Fund $ 360,364 Other Governmental Funds $ 8,431,848 Total Governmental Funds $ 45,530,236 - - 3,347,465 7,105 7,385,221 - 31,110,440 - - 31,110,440 554,767 - - 69,798 9,195,246 40,593 149,774 - 65,997 552,215 - - - 451,834 2,415,818 - - - - 7,265,000 - - - - 99,569 - - - 3,934 3,934 21,272 - - - 253,461 69,502 1,698,025 $ 6,198,936 $ 31,262,452 $ 3,708,740 $ 9,100,018 $ 105,509,165 $ 606,854 $ 271,301 $ - $ 192,178 $ - 911 $ 3,452,162 22,347 - - 66,083 - - 448,585 - 1,361,804 1,293,077 - - 2,910,000 8,605 6,093,605 - 2,930,000 - 335,000 7,265,000 - - - - 122,687 - - - 3,934 645,727 - - - - 1,452,154 - - - 1,368,268 1,432,120 629,201 3,201,301 3,358,585 1,974,068 23,118,336 - - 350,155 1,627,070 1,977,225 - 28,061,151 - - 28,061,151 - - - - 232,190 - - - 69,502 69,502 - - - - 29,153,850 5,569,735 - - 5,426,107 22,893,640 - - - 3,271 3,271 5,569,735 28,061,151 350,155 7,125,950 82,390,829 9,100,018 $ 105,509,165 6,198,936 $ 31,262,452 $ 3,708,740 21 $ CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES JUNE 30, 2006 Fund balances - total governmental funds balance sheet $ 82,390,829 Amounts reported for governmental activities in the statements of net assets are different because (also see note 2): Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less: accumulated depreciation 173,499,594 (36,253,163) 137,246,431 Other assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Deferred bond issue costs Fines and forfeitures 668,561 321,692 990,253 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Governmental bonds payable Bond premium Compensated absences 71,944,551 1,182,895 2,601,616 (75,729,062) Certain revenues are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. Special assessments Property tax 3,934 118,753 122,687 The internal service fund is used by management to charge the cost of self insurance programs to individual funds. The assets and liabilities of the internal service funds that are reported with governmental activities. Net assets of governmental activities - statement of net assets 22 5,081,601 $ 150,102,739 23 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2006 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental 20,998,113 $ - $ 8,602,159 14,384,055 - - Grants and entitlements 1,882,928 8,285,355 55,665 Charges for services 1,882,830 - - Special assessments - - - 2,834,506 - - Licenses and permits Fines and forfeitures 1,394,174 - Rents 1,180,097 - - 860,144 273,406 376,074 Investment earnings Contributions 7,200 - - Miscellaneous 48,506 78,687 - 45,472,553 8,637,448 9,033,898 Total revenues EXPENDITURES: Current: General governmental Public safety 6,621,976 - - 21,626,547 - - Public works 1,168,424 - - Economic and physical development 4,030,152 - - Culture and recreation 3,303,764 - - - 7,409,273 3,290,923 Principal retirement 630,448 1,890,000 1,000,000 Interest and other charges 304,449 526,933 989,600 4,893,543 3,987,636 10,265,886 42,579,303 13,813,842 15,546,409 Highways and streets Debt service: Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 2,893,250 (5,176,394) (6,512,511) OTHER FINANCING SOURCES (USES): Capital-related debt issued - - Premium on capital-related debt - - - 31,893 5,916 - Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year, as restated Fund balances, end of year 3,967,748 7,079,650 (7,403,726) (1,135,401) (3,732,717) (3,404,085) 5,950,165 (3,732,717) (510,835) 773,771 (10,245,228) 29,896,875 $ - - 9,006,561 29,386,040 $ The notes to the financial statements are an integral part of this statement 24 9,780,332 12,362,694 $ 2,117,466 Capital Projects Bond Construction BBB Fund $ 4,623,308 $ $ - $ 4,881,323 $ 39,104,903 - - - 2,789,361 17,173,416 272,647 - - 384,197 10,880,792 55,945 - - 261,044 2,199,819 - - - 30,016 30,016 - - - - 2,834,506 - - - - 1,394,174 15,367 - - - 1,195,464 184,270 244,824 - 299,567 2,238,285 13,100 - - 109,630 129,930 43,859 - - 33,626 204,678 5,208,496 244,824 - 8,788,764 77,385,983 - - - - 6,621,976 - - - - 21,626,547 - - - - 1,168,424 1,875,558 11,073 - 1,723,530 7,640,313 443,469 - - 3,430,796 7,178,029 - - - - 10,700,196 - 220,086 2,689,914 75,001 6,505,449 - 264,892 446,997 19,145 2,552,016 3,329,597 2,437,703 - 139,808 25,054,173 5,648,624 2,933,754 3,136,911 5,388,280 89,047,123 (2,688,930) (3,136,911) 3,400,484 (11,661,140) (440,128) - 31,500,000 - - 31,500,000 - 220,086 - - 220,086 62 - - 21 37,892 1,063,650 - 3,451,375 1,754,710 17,317,133 (1,498,933) - - (5,813,907) (19,584,684) (435,221) 31,720,086 3,451,375 (4,059,176) 29,490,427 (875,349) 29,031,156 314,464 (658,692) 17,829,287 6,445,084 $ - Total Governmental Funds Other Governmental Funds General Obligation Bond Fund 5,569,735 (970,005) $ 28,061,151 35,691 $ 7,784,642 350,155 $ 25 7,125,950 64,561,542 $ 82,390,829 CITY OF FLAGSTAFF RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 Net change in fund balances - total governmental funds $ 17,829,287 Amounts reported for governmental activities in the statements of activities are different because: Government funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Expenditures for capital assets 25,054,173 Less current year depreciation (4,204,458) 20,849,715 Some items reported in the governmental funds are sources and uses of current financial resources and therefore are not reported as revenues or expenses in the statement of activities. These items include: Capital-related debt issued (31,500,000) Premium on debt issued (220,086) Donated capital 11,960,124 Compensated absences (489,482) Principal payments on debt 6,505,449 Bond premium 119,724 (13,624,271) Bond issuance costs are recognized as debt service expenditures in the governmental funds, however these costs are capitalized on the statement and activities and amortized in the statement of activities. Issuance costs on debt issued 264,666 Issuance costs (69,277) 195,389 The sale of capital assets in the governmental funds reflect proceeds. However, in the statement of activities the sale of capital assets reflect the net gain (loss). (4,475) Certain revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. However, other revenues that are deferred in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Special assessments (30,016) Property tax (38,770) Fines and forfeitures 273,917 205,131 Internal service funds are used by management to charge the costs of certain activities, such as the City's self-insurance program to individual funds. The following activities of the internal service fund is reported with governmental activities. Operating loss 44,924 Investment income 146,814 Change in net assets of governmental activities - statement of activities 191,738 $ 26 25,642,514 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Taxes $ Intergovernmental 18,991,769 $ 18,991,769 $ 20,815,147 $ 1,823,378 13,837,661 13,837,661 14,384,055 Grants and entitlements 1,571,200 1,571,200 1,882,928 311,728 Charges for services 1,518,942 1,518,942 1,882,830 363,888 Licenses and permits 2,135,239 2,135,239 2,834,506 699,267 Fines and forfeitures 1,163,746 1,163,746 1,394,174 230,428 Rents 855,358 855,358 1,180,097 324,739 Investment earnings 500,000 500,000 1,039,207 539,207 Contributions - - 7,200 Miscellaneous 199,999 199,999 48,506 40,773,914 40,773,914 45,468,650 4,694,736 General administration 5,200,940 5,200,940 4,927,279 273,661 Management Services 3,503,470 3,503,470 3,346,831 156,639 Community development 4,105,404 4,140,404 3,741,647 398,757 Fire 8,655,551 8,655,551 9,554,999 (899,448) 14,297,667 14,297,667 13,802,613 495,054 6,775,498 6,835,498 6,265,653 569,845 28,757 28,757 28,757 - 1,935,270 1,935,270 858,198 1,077,072 Total revenues 546,394 7,200 (151,493) EXPENDITURES: Police Public works Utilities Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over expenditures 530,000 435,000 53,326 381,674 45,032,557 45,032,557 42,579,303 2,453,254 2,889,347 7,147,990 31,893 26,372 (4,258,643) (4,258,643) OTHER FINANCING SOURCES (USES): Sale of capital assets 5,521 Transfers in 4,234,955 Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year 5,521 $ 4,234,955 3,967,748 (267,207) (14,272,963) (14,272,963) (7,403,726) 6,869,237 (10,032,487) (10,032,487) (3,404,085) 6,628,402 (14,291,130) (14,291,130) (514,738) 13,776,392 22,526,372 22,526,372 8,235,242 $ 8,235,242 Adjustment from budetary basis to GAAP basis net change in fund balances 22,526,372 $ $ 22,011,634 (514,738) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 3,903 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 27 (510,835) $ 13,776,392 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Investment earnings 9,072,486 $ 41,000 Miscellaneous 9,072,486 $ 41,000 8,285,355 $ 273,406 (787,131) 232,406 3,451,347 3,451,347 78,687 (3,372,660) 12,564,833 12,564,833 8,637,448 (3,927,385) General administration 247,091 247,091 247,091 - Management Services 246,583 246,583 246,583 - Total revenues EXPENDITURES: Current: Community development Public works Utilities Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over expenditures 890,966 890,966 890,966 - 24,134,851 24,134,851 12,197,021 11,937,830 3,289 3,289 3,289 - 228,892 228,892 228,892 - 100,000 40,000 - 40,000 25,851,672 25,791,672 13,813,842 11,977,830 (13,286,839) (13,226,839) (5,176,394) 8,050,445 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ - - 10,097,836 10,097,836 5,916 7,079,650 (1,135,401) (1,135,401) (1,135,401) 8,962,435 8,962,435 5,950,165 (4,324,404) (4,264,404) 7,431,091 7,431,091 3,106,687 $ The notes to the financial statements are an integral part of this statement 28 3,166,687 5,916 $ (3,018,186) (3,012,270) 773,771 5,038,175 7,431,091 - 8,204,862 $ 5,038,175 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Taxes $ Grants and entitlements 8,123,048 $ - Investment earnings 8,123,048 $ - 8,545,062 $ 55,665 422,014 55,665 231,000 231,000 376,074 145,074 8,354,048 8,354,048 8,976,801 622,753 2,630,156 2,690,156 3,290,923 (600,767) Community development 12,113,285 12,113,285 12,255,486 (142,201) Total expenditures 14,743,441 14,803,441 15,546,409 (742,968) Total revenues EXPENDITURES: Current: Non-department Excess (deficiency) of revenues over expenditures (6,389,393) (6,449,393) (6,569,608) (120,215) OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 6,000,000 6,000,000 (6,500,051) (6,500,051) (3,732,717) 2,767,334 (500,051) (500,051) (3,732,717) (3,232,666) (6,889,444) (6,949,444) (10,302,325) (3,352,881) 9,276,586 9,276,586 2,387,142 $ Adjustment from budetary basis to GAAP basis net change in fund balances 2,327,142 - 9,276,586 $ $ (1,025,739) (10,302,325) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 57,097 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 29 (6,000,000) (10,245,228) - $ (3,352,881) CITY OF FLAGSTAFF, ARIZONA BBB Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Final Actual Amounts Budgetary Basis 4,316,892 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Grants and entitlements 4,316,892 $ 4,605,274 $ 288,382 2,973,512 2,973,512 272,647 40,000 40,000 55,945 15,945 - - 15,367 15,367 140,360 140,360 158,782 18,422 Contributions 13,100 13,100 13,100 - Miscellaneous 40,895 40,895 43,859 2,964 7,524,759 7,524,759 5,164,974 General administration 2,091,013 2,091,013 1,851,536 239,477 Community development 5,544,432 5,544,432 1,314,702 4,229,730 Public works 3,415,552 3,415,552 2,076,722 1,338,830 474,400 474,400 405,664 68,736 95,000 95,000 - 95,000 11,620,397 11,620,397 5,648,624 5,971,773 Charges for services Rents Investment earnings Total revenues (2,700,865) (2,359,785) EXPENDITURES: Current: Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over expenditures (4,095,638) (4,095,638) (483,650) - - 62 1,134,461 1,134,461 1,063,650 3,611,988 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 62 (70,811) (2,351,603) (2,351,603) (1,498,933) 852,670 (1,217,142) (1,217,142) (435,221) 781,921 (5,312,780) (5,312,780) (918,871) 4,393,909 6,488,780 6,488,780 1,176,000 $ Adjustment from budetary basis to GAAP basis net change in fund balances 1,176,000 6,488,780 $ $ 5,569,909 (918,871) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 43,522 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 30 (875,349) $ 4,393,909 31 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets Proprietary Funds June 30, 2006 Business-type Activities - Enterprise Funds Water and Environmental Wastewater Fund Services Fund ASSETS Current assets: Cash and cash equivalents $ 13,508,176 $ 5,832,472 Cash with fiscal agents 3,035,151 - Restricted cash and cash equivalents 1,593,915 6,261,063 Investments Accounts receivable, net Interest receivable Restricted Interest receivable Interfund receivables Intergovernmental receivables 50,000 - 2,016,332 817,117 141,063 39,546 - 45,744 502,000 - 23,720 - Inventory 198,085 - Deferred bond issuance costs, net 434,933 - 21,503,375 12,995,942 Total current assets Noncurrent assets: Capital assets, non-depreciable 13,602,432 1,913,455 Capital assets, depreciable, net 195,028,603 6,205,191 Total non-current assets Total assets 208,631,035 8,118,646 230,134,410 21,114,588 LIABILITIES Current liabilities: Accounts payable 172,598 52,471 Accrued payroll and compensated absences 261,620 139,519 Unearned revenue 121,675 - Unamortized bond premium 108,489 - Interfund payable - - Lease and notes payable - - 3,278,763 6,306,807 Liabilities payable from restricted assets Deposits payable Total current liabilities 438,382 17,340 4,381,527 6,516,137 Noncurrent liabilities: Compensated absences Landfill closure and postclosure care costs Bonds and notes payable 60,988 - 1,863,856 23,464,923 - 23,638,331 1,924,844 28,019,858 8,440,981 185,481,556 8,118,646 Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt 173,408 Restricted: Capital projects Unrestricted Total net assets $ 1,593,915 - 15,039,081 4,554,961 202,114,552 $ Some amounts reported for business-type activities in the statement of net assets are different because certain internal service fund assets and liabilities are included with business-type activities. The notes to the financial statements are an integral part of this statement 32 12,673,607 Business-type Activities - Enterprise Funds Airport Fund $ Stormwater Fund 11,359 $ Total 1,416,235 $ Internal Service Fund 20,768,242 $ 5,111,096 337,769 - 3,372,920 - 793,012 - 8,647,990 - - - 50,000 - 67,863 53,031 2,954,343 73,110 6,841 3,804 191,254 33,771 - - 45,744 - - - 502,000 94,897 795,611 - 819,331 - - - 198,085 - - - 434,933 - 2,012,455 1,473,070 37,984,842 5,312,874 823,932 7,114,324 23,454,143 - 30,982,158 1,433,152 233,649,104 - 31,806,090 8,547,476 257,103,247 - 33,818,545 10,020,546 295,088,089 5,312,874 325,601 34,418 585,088 555,289 27,609 16,363 445,111 - 163,787 - 285,462 - 7,286 - 115,775 - 596,897 - 596,897 - 116,104 - 116,104 - 337,769 - 9,923,339 - 35,215 - 490,937 - 1,610,268 50,781 12,558,713 555,289 9,207 4,987 248,590 - - - 1,863,856 - 3,896,540 - 27,361,463 - 3,905,747 4,987 29,473,909 - 5,516,015 55,768 42,032,622 555,289 27,913,264 8,547,476 230,060,942 - 798,943 (409,677) $ Governmental Activities 28,302,530 $ - 2,392,858 - 1,417,302 20,601,667 4,757,585 9,964,778 $ 253,055,467 $ 252,731,451 (324,016) Net assets of business-type activities 33 $ 4,757,585 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Year Ended June 30, 2006 Business-type Activities - Enterprise Funds Water and Environmental Wastewater Fund Services Fund OPERATING REVENUES: Charges for services $ Miscellaneous Total operating revenues 17,043,207 $ 9,675,382 4,624 48,270 17,047,831 9,723,652 OPERATING EXPENSES: Personal services 4,525,175 3,123,480 Contractual services, materials and supplies 7,266,720 5,264,466 Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) - - 5,628,635 714,893 17,420,530 9,102,839 (372,699) 620,813 707,207 424,439 NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements 10,801 426 Gain on sale of capital asset 24,313 300,200 Interest expense Total non-operating revenues (expenses) Income (loss) before capital contributions and transfers Capital contributions - (301,623) 725,065 (674,322) 1,345,878 21,865,511 Transfers in - 2,416,933 Transfers out - (2,574,727) Change in net assets Total net assets, beginning of year Total net assets, end of year (1,043,944) $ The notes to the financial statements are an integral part of this statement 34 (19,488) 21,033,395 1,326,390 181,081,157 11,347,217 202,114,552 $ 12,673,607 Business-type Activities - Enterprise Funds Airport Fund $ Stormwater Fund 1,197,506 $ Total 630,962 $ Internal Service Fund 28,547,057 $ 6,370,318 64,088 - 116,982 203,239 1,261,594 630,962 28,664,039 6,573,557 564,481 433,523 8,646,659 - 898,659 346,188 13,776,033 6,507,042 - - - 1,827,546 12,439 8,183,513 - 3,290,686 792,150 30,606,205 6,507,042 (2,029,092) (161,188) (1,942,166) 66,515 35,212 14,978 1,181,836 146,814 979,611 1,393 992,231 - 2,027 - 326,540 (231,770) - 785,080 - (1,275,714) 16,371 (1,244,012) - 1,224,893 (144,817) 146,814 (717,273) 213,329 - 593,485 22,458,996 - 430,863 2,276,204 5,124,000 - (127,234) (135,000) (940,383) 28,302,530 (2,856,449) 2,589,872 29,242,913 $ Governmental Activities - 24,009,274 213,329 7,374,906 $ 4,544,256 9,964,778 $ Some amounts reported for business-type activities on the statement of activities are different because the net revenue (expense) of certain internal service funds is reported with business-type activities. 21,591 Change in net assets of business-type activites $ 35 24,030,865 4,757,585 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2006 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund Cash flows from operating activities: Receipts from customers $ Interfund services provided 16,727,395 $ 280,355 Other receipts 109,322 4,624 Payments to suppliers 9,537,120 48,270 (7,582,233) (4,770,725) Interfund services used (21,040) Payments to employees (4,531,259) (3,125,845) 4,877,842 1,798,142 Net cash provided (used) by operating activities - Cash flows from noncapital financing activities: Transfer from other funds 2,416,933 Transfer to other funds - (2,574,727) Interfund loans paid (19,488) (502,000) Interfund loans received - - Net cash provided (used) by noncapital financing activities - (659,794) (19,488) Cash flows from capital and related financing activities: Receipts from grantors Capital Contributions Acquisition and construction of capital assets 13,559 - 3,058,121 123,765 (10,886,311) Reclassification of capital debt (1,534,801) (11,000) - Principal payments on capital debt (2,268,840) - Interest paid on capital debt (1,525,483) Proceeds from sales of capital assets Net cash provided (used) by capital and related financing - 39,690 activities 7,200 (11,580,264) (1,403,836) Cash flows from investing activities: Interest received on investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents 701,784 389,938 701,784 389,938 (6,660,432) Cash and cash equivalents at beginning of year 764,756 24,847,674 Cash and cash equivalents at end of year 11,328,779 $ 18,187,242 $ 12,093,535 $ 13,508,176 $ 5,832,472 Classified as: Cash and cash equivalents Investments 50,000 Restricted cash with fiscal agents Restricted cash and cash equivalents Totals $ The notes to the financial statements are an integral part of this statement (continued) 36 - 3,035,151 - 1,593,915 6,261,063 18,187,242 $ 12,093,535 Governmental Activities Business-type Activities - Enterprise Funds Airport Fund $ Stormwater Fund 1,362,044 $ Total 611,092 $ Internal Service Fund 28,237,651 $ 6,365,131 - 18,240 407,917 - 64,088 - 116,982 203,239 (787,736) (372,387) (17,692) (13,513,081) - (566,068) 54,636 430,863 - (426,255) (8,649,427) - (169,310) 6,561,310 2,276,204 (127,234) (6,222,390) (38,732) (135,000) 345,980 5,124,000 - (2,856,449) - - - (502,000) - 502,000 - 502,000 - 805,629 2,141,204 2,267,551 - 517,719 1,393 532,671 - - 8 3,181,894 (1,207,226) (1,214,235) 11,000 - (14,842,573) - - - - (323,526) - (2,592,366) - (264,498) - (1,789,981) - 2,027 - (1,264,504) 48,917 (1,212,834) - (15,461,438) - 34,819 17,034 1,143,575 139,695 34,819 17,034 1,143,575 139,695 (369,420) 776,094 1,511,560 (5,489,002) 640,141 485,675 38,328,154 4,625,421 $ 1,142,140 $ 1,416,235 $ 32,839,152 $ 5,111,096 $ 11,359 $ 1,416,235 $ 20,768,242 $ 5,111,096 $ - - 50,000 - 337,769 - 3,372,920 - 793,012 - 8,647,990 1,142,140 $ 1,416,235 $ 32,839,152 (continued) 37 $ 5,111,096 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2006 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ (372,699) $ 620,813 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Landfill closure and postclosure costs 5,628,635 714,893 - 562,288 (Increase) decrease in assets: Accounts receivable 81,813 Allowance for doubtful accounts (26,598) (40,000) Inventories (1,529) 76,430 - Increase (decrease) in liabilities: Accounts payable Accrued payroll and compensated absences Deposits payable (412,983) (68,547) (6,084) (2,365) (111,456) Deferred revenue - 34,186 Total Adjustments (813) 5,250,541 Net cash provided (used) by operating activities 1,177,329 $ 4,877,842 $ 1,798,142 $ 18,807,390 $ - $ 18,807,390 $ - Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Total noncash investing, capital and financing activities The notes to the financial statements are an integral part of this statement 38 Governmental Activities Airport Fund $ Stormwater Fund (2,029,092) $ Total (161,188) $ Internal Service Fund (1,942,166) $ 66,515 1,827,546 12,439 8,183,513 - - - 562,288 - (5,143) (1,630) 48,442 (5,187) (41,529) - - 93,231 - (1,587) (26,199) 163,787 - 2,083,728 54,636 (8,122) $ (169,310) - (388,299) 7,268 5,894 $ 76,430 $ 284,652 (2,768) - (131,761) - 197,160 - 8,503,476 279,465 6,561,310 $ 345,980 $ - $ 593,477 $ 19,400,867 $ - $ - $ 593,477 $ 19,400,867 $ (concluded) 39 CITY OF FLAGSTAFF, ARIZONA Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2006 Firemen's Pension Fund ASSETS Cash and cash equivalents $ Interest receivable 215,780 1,457 Total assets 217,237 LIABILITIES Other liabilities - Total liabilities - NET ASSETS Held in trust for pension benefits and other purposes $ The notes to the financial statements are an integral part of this statement 40 217,237 CITY OF FLAGSTAFF, ARIZONA Statement of Changes in Fiduciary Net Assets Fiduciary Funds Year Ended June 30, 2006 Firemen's Pension Fund ADDITIONS: Investment earnings $ Total additions 6,831 6,831 DEDUCTIONS: Retirement payments 7,200 Total deductions 7,200 Change in net assets (369) Net assets - beginning of year 217,606 Net assets - end of year $ The notes to the financial statements are an integral part of this statement 41 217,237 42 CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2006 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. FINANCIAL REPORTING ENTITY The City of Flagstaff (the City) was incorporated as a town in 1894 and as a city in 1928. The current City Charter was approved June 29, 1998. The Charter provides for the Council-Mayor form of government and the authority to provide municipal services, as limited by the State Constitution. The accounting policies of the City of Flagstaff conform to United States of America generally accepted accounting principles (GAAP) as applicable to Governmental Units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. During the year ended June 30, 2006, the city implemented the provisions of GASB Statement No. 44, Economic Condition Reporting: The Statistical Section. GASB Statement No. 44 allows for the presentation of detailed information in 10-year trends, when available. The statistical section is to assist users in utilizing the basic financial statements, notes to the basic financial statements, and required supplementary information to assess the economic condition of a government. The City of Flagstaff is a municipal corporation governed by an elected Mayor and six-member council. The accompanying financial statements include the City and all of its component entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. Discretely presented component units are reported in a separate column in the Government Wide Statement of Net Assets and Activities to emphasize they are legally separate from the government. The City of Flagstaff has no discretely presented component units. Blended Component Unit: The Municipal Facilities Corporation (MFC) is a non-profit corporation created by the City for the purpose of constructing, acquiring and equipping municipal facilities. For Financial reporting purposes, transactions of the MFC are included as if it were part of the City’s operations. In fiscal year 2001 the MFC issued $4.7 million in bonds for construction on additional facilities owned by the City and currently leased to the United States Geological Survey (USGS). These bonds will be repaid through USGS lease proceeds. MFC issued $25 million in bonds for construction of the Fourth Street Overpass. In fiscal year 2004 the The voters approved this debt financing in the May 2000 General Election. These bonds will be repaid with the transportation sales tax that was also approved in the May 2000 Election. Related Organizations: The City of Flagstaff officials are also responsible for appointing board members of other organizations. However, as the City’s control is limited to making the appointments and there is not a significant operational nor a significant financial relationship between these organizations and the City, they are not included as part of these financial statements. 43 B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (statement of net assets and statement of activities) report on the City and its component units as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely a significant extent on fees and charges for support. All activities, both governmental and business type, are reported in the government-wide financial statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets and receivables as well as long-term debt and obligations. The government-wide financial statements focus more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. Generally, the effect of interfund activity has been removed from the government-wide financial statement. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Interdepartmental services performed by one department for another are credited to the performing department and charged to the receiving department to reflect the accurate costs of programs. These indirect costs have been included as part of the program expenses reported for the various functional activities. The rates used are intended to reflect full costs in accordance with generally accepted cost accounting principles. The government-wide statement of net assets reports all financial and capital resources of the government (excluding fiduciary funds). It is displayed in a format of assets less liabilities equals’ net assets, with the assets and liabilities shown in order of their relative liquidity. Net assets are required to be displayed in three components: 1) invested in capital assets, net of related debt, 2) restricted, and 3) unrestricted. Invested in capital assets, net of related debt is capital assets net of accumulated depreciation and reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net assets are those with constraints placed on their use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or law or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net assets not otherwise classified as restricted, are shown as unrestricted. Generally, the City would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Reservations or designations of net assets imposed by the reporting government, whether by administrative policy or legislative actions of the reporting government, are not shown on the government-wide financial statements. The government-wide statement of activities demonstrates the degree to which the direct expenses of the various functions and segments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Interest on general long-term debt and depreciation expense on assets shared by multiple functions are not allocated to the various functions. Program revenues include: 1) charges to customers or users who purchase, use or directly benefit from goods, services or privileges provided by a particular 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, investment income and other revenues not identifiable with particular functions or segments are included as general revenues. The general revenues support the net costs of the functions and segments not covered by program revenues. Also part of the basic financial statements are fund financial statements for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Although the reporting model sets forth minimum criteria for determination of major funds (a percentage of assets, liabilities, revenues, or 44 expenditures/expenses of fund category and of the governmental and enterprise funds combined), it also gives governments the option of displaying other funds as major funds. The City has opted to add the Bed, Board, and Booze (BBB) Fund as major fund because of community focus. Other non-major funds are combined in a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic financial statements. GASB Statement 34 requires reporting of infrastructure such as roads, bridges, canal systems, ditches, water systems, sewer systems, and recreational assets on a prospective basis effective July 1, 2002 and retrospectively for all major infrastructure assets acquired or constructed since 1980. This reporting is required to be in place by fiscal year 2007. Accordingly, infrastructure assets acquired or constructed beginning in 1980 through June 30, 2002 are not included in the government-wide 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 fiduciary 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 recorded as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are prepared on a current financial resources measurement focus and modified accrual basis of accounting. This is the traditional basis of accounting for governmental funds. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses of liquid resources, and 3) demonstrate how the City’s actual revenues, and expenditures conform to the annual budget. Since the governmental fund financial statements are presented on a different basis than the governmental activities column of the governmental-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements. The proprietary fund and fiduciary fund financial statements are prepared on the same basis (economic resources measurement focus and accrual basis of accounting) as the government-wide financial statements. Therefore, most lines for the total enterprise funds on the proprietary fund financial statements will directly reconcile to the business-type activities column on the government-wide financial statements. Because the enterprise funds are combined into a single business-type activities column on the government-wide financial statements, certain interfund activities between these funds may be eliminated in the consolidation for the government-wide financial statements, but are included in the fund columns in the proprietary fund financial statements. The net costs/income of the internal service fund is also partially allocated to the business-type activities column on the government-wide financial statements. A reconciliation of the total enterprise funds on the fund financial statements to the businesstype activities column on the government-wide financial statements is provided on the face of the fund statements. On the proprietary fund financial statements, operating revenues are those that flow directly from the operations of that activity, i.e. charges to customers or users who purchase or use the goods or services of that activity. Operating expenses are those that are incurred to provide those goods or services. Non-operating revenues and expenses are items like investment income and interest expense that are not a result of the direct operations of the activity. The City uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. 45 A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. The City uses the following fund categories: GOVERNMENTAL FUND TYPES Governmental funds are those through which most of the governmental functions of the City are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. General Fund is the primary operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The General fund will always be considered a major fund in the basic financial statements. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments or major capital projects) that are legally restricted to expenditures for specified purposes. There are three special revenue funds that are presented as major funds in the basic financial statements. They are the: x Highway User Revenue Fund, which receives and expends the City’s allocation of the Highway User Revenue money. Monies allocated to this fund must be used for Street construction, reconstruction and maintenance. x Transportation Tax Fund that accounts for the receipt and expenditures of the Transportation Tax money. These monies are restricted to financing improvements in the Areas of the 4th Street overpass project, Safe to School/Pedestrian and Bike projects, Traffic Flow and Safety improvements, and Transit Service operations and enhancements. x Bed, Board and Booze Tax Fund that accounts for the Bed, Board and Booze tax revenues and expenditures. These monies are restricted for use in the areas of Beautification, Economic Development, Tourism, Arts & Science, and Recreation. Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long- term obligation principal and interest. Capital Projects Fund is used to account for major capital acquisition and construction separate from ongoing operating activities. x The Capital Project Bond Construction Fund is a major fund and accounts for the activity related to the General Bonding Obligations and associated capital construction for capital projects as approved by voters in May 2004. Permanent Funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. x The Perpetual Care Fund accounts for the perpetual care of the City’s cemetery. PROPRIETARY FUND TYPES Proprietary Funds are used to account for the City’s ongoing organizations and activities, which are similar to those found in the private sector and where cost recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net assets, financial position, and cash flows. 46 Enterprise Funds are used to account for operations that provide services to the general public for a fee. Under GASB Statement No. 34, enterprise funds are also required for any activity whose principal revenue sources meet any of the following criteria: 1) any activity that has issued debt backed solely by the fees and charges of the activity, 2) if the cost of providing services for an activity, including capital costs such as depreciation or debt service, must legally be recovered through fees and charges, or 3) it is the policy of the City to establish activity fees or charges to recover the cost of providing services, including capital costs. The City has four enterprise funds all of which are presented as major funds in the basic financial statements. These include the City’s water and wastewater system, environmental services, airport, and stormwater. Internal Service Fund accounts for the operations that provide services to other departments of the government on a cost-reimbursement basis, thus the internal service fund is presented with the proprietary fund financial statements. The internal service fund represents the self-insurance services provided to other departments and accounts for the risk management function of the City as well as maintaining the costs of the City’s liability insurance and any claims paid under the City’s self-insurance program. These costs are allocated to all operational activities of the City. Private Sector Standards Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and enterprise fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. FIDUCIARY FUND TYPES Fiduciary Funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and other funds. The reporting focus is on net assets and changes in net assets and employs accounting principles similar to proprietary funds. Fiduciary funds are not included in the government-wide financial statements since they are not assets of the City available to support City programs. Firemen’s Pension Fund is a pension trust fund that is used to account for the activity of the City’s single-employer retirement system. This fund is accounted for on the same basis as a proprietary fund, using the same measurement focus and basis of accounting. Non-Current Governmental Assets/Liabilities GASB Statement No. 34 eliminates the presentation of account groups (formerly the general fixed asset account group and the general long-term debt account group). The governmental long-term assets and liabilities continue to be maintained in the account groups for tracking purposes, but are presented with the governmental activities in the government-wide statement of net assets. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds are accounted for using a current financial resources measurement focus whereby only current assets and current liabilities are generally included on the balance sheet. Operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Enterprise funds and pension trust funds are accounted for on a flow of economic resources measurement focus whereby all assets and liabilities associated with the operation of these funds are included on the balance sheet. Operating statements present increases (i.e., revenues) and decreases (i.e., expenses) in net total assets. 47 The modified accrual basis of accounting is used by governmental funds. Revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers revenues to be available if they are collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Revenues susceptible to accrual include property tax, privilege license tax, highway user tax, state shared sales tax, vehicle license tax, and interest earned on investments. Licenses and permits, charges for services, fines and forfeitures, parks and recreation charges and miscellaneous revenues are recorded when received in cash since they are generally not measurable until actually received. The accrual basis of accounting is followed for all enterprise funds and the pension trust fund, whereby revenues are recognized in the accounting period in which they are earned and become measurable, and expenses are recognized when incurred. Enterprise funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund’s principal ongoing operations. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating items. Budgets and Budgetary Accounting The City uses the following procedures in establishing the budgetary data reflected in the accompanying financial statements. x The maximum legal expenditure permitted for the year is the total budget as adopted. The expenditure appropriations in the adopted budget are maintained in the City’s financial system by department within individual funds. Department appropriations may be amended during the year, within administrative guidelines and adopted Council policies. x The initial budget for the fiscal year may be amended during the year in a legally permissible manner. x The City Manager is generally authorized to transfer budgeted amounts within any specific department’s expenditure appropriation. Any budget revisions requiring a transfer between departments must be approved by the City Council. Additionally, budget revisions involving personnel or capital asset expenditures/expenses must be approved by the City Council. x All unencumbered expenditure appropriations expire at the end of the fiscal year. x Encumbered amounts are re-budgeted in the following year as deemed appropriate and necessary after review by the Budget Committee. Budgetary carry forwards are approved by the City Council as part of the budget adoption process. 48 • All funds of the City have legally adopted budgets with the exception of the Internal Service Fund and Perpetual Care Fund. Formal integration of these budgets into the City’s financial systems is employed as a management control device during the year for all funds. The City prepares its annual budget on a modified cash basis, which differs from GAAP, GASB Statement #34 requires that budgetary comparison statements for the General Fund and major special revenue funds be presented in the annual financial statements. These statements must display original budget, amended budget and actual results on a budgetary basis at the legal level of budgetary control. The City’s legal level of budgetary control is at the department level; however the City’s financial statements are presented at the functional level of detail. Budgetary comparisons provided in the basic financial section are presented for the General Fund and major special revenue funds at the department level; these are presented as statements. The supplemental section provides budgetary comparisons for non-major special revenue funds, capital projects funds and debt service funds at the same functional level of detail used in financial statements presentation; these are presented as schedules. D. ASSETS, LIABILITIES, AND NET ASSETS Pooled Cash and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the government to invest in the State’s Local Government Investment Pool, in obligations of the U.S. Treasury, commercial paper and repurchase agreements. Investment Income from pooled cash and investments is allocated monthly based on the percentage of a fund’s average daily equity in pooled cash and investments to the total average daily-pooled equity in pooled cash and investments. Investments are stated at fair value. For purposes of the statement of cash flows, the City considers cash and cash equivalents, including restricted cash and cash equivalents, to be currency on hand, demand deposits with banks, amounts included in pooled cash and investment accounts and liquid investments with a maturity of three months or less when purchased. Cash and cash equivalents are included in both unrestricted as well as restricted assets. Receivables and Payables Accounts receivable and taxes receivable, are shown net of an allowance for uncollectible accounts. 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 Coconino County Assessor. September 1 and March 1. Levies are due and payable in two installments on First half installments become delinquent on November 1; second half installments become delinquent on May 1. Interest at the rate of 12% per annum accrues following delinquent dates. Coconino County bills and collects all property taxes, at no charge to the taxing entities. A lien against property assessed attaches on the first day of January preceding assessment and levy thereon. Under Arizona tax laws, there are two property tax levies, primary and secondary. Primary property taxes are not restricted as to use and are used to finance the general operations of the City. Secondary property taxes are restricted for general obligation bonded debt service. The secondary property tax levy is recorded as revenue in a debt service fund and transferred to the Water and Wastewater Enterprise Fund, the BBB Fund, the Airport Enterprise Fund and the General Obligation Bond Fund. General Obligation bonds are serviced by each of these funds. For fiscal year 2005-2006, primary and secondary property tax collections amounted to $4,208,605 and $4,881,323 respectively. 49 Inventory Inventory is valued at cost, which approximates market, using the weighted average cost method. Inventory consists of expendable supplies held for consumption and is charged to expenditure accounts as consumed. Restricted Assets Certain debt proceeds of the City’s bonds, as well as certain resources set aside for their repayment, are classified as restricted on the balance sheet, or statement of net assets, because they are maintained in trust accounts and their use is limited by applicable debt covenants. Grant Revenue The City, a recipient of grant revenues, recognizes revenues (net of estimated uncollectible amounts, if any), when all applicable eligibility requirements, including time requirements, are met. Resources transmitted to the City before the eligibility requirements are met are reported as deferred revenues. Some grants and contributions consist of capital assets or resources that are restricted for capital purposes – to purchase, construct, or renovate capital assets associated with a specific program. These are reported separately from grants and contributions that may be used either for operating expenses or for capital expenditures of the program at the discretion of the City. Capital Assets Prior to GASB Statement No. 34, capital assets for governmental funds were recorded in the General Fixed Assets Account Group and were not depreciated. The new reporting model requires that all capital assets, whether owned by governmental activities or business-type activities, be recorded and depreciated (unless the modified approach is used) in the government-wide financial statements. The City has chosen not to apply the modified approach to any networks or subsystems of infrastructure assets. No long-term assets or depreciation are shown in the governmental fund financial statements. Capital assets, including public domain infrastructure (i.e., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and other assets that are immovable and of value only to the City) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $5,000 ($25,000 for capital improvement projects and infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life, are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related fixed assets. Major capital 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, if material. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives (land and construction-in-progress are not depreciated): Assets Useful life (years) Buildings 20-50 Improvements 10-20 Machinery and Equipment 5-20 Infrastructure 10-50 50 Outstanding Contracts At June 30, 2006 there were major uncompleted construction contracts as follows: Airport Fund HURF Transportation Fund General Fund Stormwater Fund BBB Recreation Fund Capital Projects Fund Water and Wastewater Fund $ 986,896 299,179 9,478,094 66,768 1,541,486 4,248,761 2,210,922 813,824 $ 19,645,930 On December 1, 2004, the City entered into a development agreement with Railhead Associates, LLC to redevelop and expand the Flagstaff Mall and general improvements in traffic flow, utilities and detention in the East Flagstaff Gateway Redevelopment area with the collateral benefit of creating additional development, including, but not limited to, an auto park for automobile sales and mixed use developments. As part of the agreement, the City is contributing $10 million to this redevelopment project. Payments are being made on a percentage of completion basis. On June 30, 2006 the outstanding balance on this contract was $9 million. The agreement will terminate on the date that the developer has completed 100% of the improvements as outlined in the development agreement and the City has made the final payment of $1million. Compensated Absences Vacation and sick leave is granted to all regular and part-time permanent employees. The annual amount of vacation time accrued varies depending on classification and years of service. Accumulated vacation leave vests and the City is obligated to make payment if the employee terminates. For the governmental fund financial statements, the current payroll and current portion of the compensated absences are recorded as a current liability of the applicable funds. Long-term liabilities of governmental funds are not shown on the fund financial statements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the accrued liabilities for compensated absences are recorded as a liability. Sick leave accrues at rates based on the classification of each employee and years of service. Vested (at least 20 years of service) sick leave is payable upon retirement, disability or death of up to 50 percent (not more than 520 hours) of accumulated sick leave. These amounts are also accumulated in the government and business-type fund statements as well as the government-wide statements. Long-Term Obligations In the government-wide financial statements, and enterprise fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net assets. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs in the period in which the bonds are issued. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuance 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. 51 Interfund Transactions Interfund transactions, consisting of services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as a reimbursement reducing expenditures in the fund performing the services. Exceptions include water sales, sewer charges, and environmental service charges that are recorded as revenue in the enterprise funds and expenses or expenditures in the department receiving the service. In addition, operating transfers are made between funds to shift resources from a fund legally authorized to receive revenue to a fund authorized to expend the revenue. Fund Equity In the fund financial statements, reserved fund equity is defined as that portion of fund equity that has legally been segregated for specific purposes. Designated fund equity is defined as that portion of fund equity for which the City has made tentative plans for future use of financial resources. Unreserved/Undesignated fund equity is defined as that portion of fund equity, which is available for use in a future period. Statement of Cash Flows The City considers all highly liquid investments (including restricted assets) with an original maturity of three months or less to be cash equivalents. In a statement of cash flows, cash receipts and payments are classified according to whether they stem from operating, non-capital financing, capital and related financing, or investing activities. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Arbitrage Arbitrage is generated when the a local government temporarily reinvests bond proceeds (generally during construction periods) and interest earnings are generated in excess of the interest due and payable on the bond. While there are certain exceptions in which the local government may keep the excess earnings, most instances require that the local government remit these excess earnings to the federal government. Rebatable amounts are recorded at such time they are actually due and payable to the federal government. The City of Flagstaff is currently having all debt issues reviewed for arbitrage liability. No liability has been anticipated at fiscal year end. II. Reconciliation of government-wide and fund financial statements A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliation’s briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each fund financial statement. 52 Reconciliation of Governmental Funds Balance Sheet and the government-wide Statement of Net Assets: Internal Reclass Statement of Governmental Total Capital Long-Term Service and Net Assets Funds Assets (1) Liabilities (2) Fund (3) Eliminations Totals Assets Cash and cash equivalents $ Cash with fiscal agents Investments Accounts receivable, net Interest receivable Intergovernmental receivables Bond proceeds receivable Special assessments receivable Interfund receivable 45,530,236 $ 5,111,096 $ - 7,385,221 - - - - 7,385,221 31,110,440 - - - - 31,110,440 9,195,246 - 73,110 - 9,590,048 552,215 - - 33,771 - 585,986 2,415,818 - - - - 2,415,818 99,569 - - - - 99,569 3,934 - - - - 7,265,000 - - Unamortized issuance costs - Prepaid items Inventory Restricted cash and cash equivalents $ - $ 321,692 418,913 50,641,332 3,934 (7,265,000) 418,913 - - - - - - - - 253,461 1,698,025 - - - - 1,698,025 - - 137,246,431 $ 105,509,165 $ $ 668,561 $ 253,461 Capital assets Total Assets - 137,246,431 - 137,246,431 $ 990,253 $ 668,561 5,636,890 $ (7,265,000) $ 242,117,739 Liabilities and Net Assets 3,452,162 $ - Accrued payroll and compensated absences Accounts payable 1,361,804 - - - (108,557) 1,253,247 Interest payable 1,293,077 - - - 8,605 1,301,682 Interfund payable 7,265,000 - - - (7,265,000) Unearned revenue 645,727 - - - - 122,687 - - - - 1,452,154 - - - 1,452,154 Deferred revenue Guaranty and other deposits Unamortized bond premium Liabilities payable from restricted assets Compensated absences - - Current bonds/contracts payable 6,093,605 Fund balance/Net Assets Total liabilities and net assets 1,432,120 82,390,829 $ 105,509,165 $ $ $ (122,687) 1,182,895 - 555,289 $ - $ 4,007,451 645,727 - - 1,182,895 - - 1,432,120 - 2,601,616 - 108,557 2,710,173 - 71,944,551 - (8,605) 78,029,551 - 150,102,739 137,246,431 137,246,431 $ 53 - (74,616,122) 990,253 $ 5,081,601 5,636,890 $ (7,265,000) $ 242,117,739 (1) 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, and thus a reduction in fund balance. However, the statement of net assets includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation $ $ 173,474,461 (36,228,030) 137,246,431 (2) Bond issuance costs are expensed when incurred in governmental funds, but are deferred and amortized over the life of the bonds in the statement of net assets. Unamortized bond issue costs $ 668,561 Certain receivables are not recognized in the govermental funds, but are earned in the statement of net assets. Deferred court receivables $ 321,692 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 fund statement. All liabilities, both current and longterm are reported in the statement of net assets. Bonds payable Compensated absences Unamortized bond premium Subtotal Less: current portion compensated absences current portion of bonds and leases $ $ 78,029,551 2,710,173 1,182,895 81,922,619 108,557 6,085,000 75,729,062 Deferred revenue for the long-term special assessment receivables and property tax shown on the governmental fund statements is not deferred on the statements of net assets. Deferred special assessment Deferred property tax $ $ 3,934 118,753 122,687 (3) Internal service funds are used by management to charge the costs self insurance to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets, but are not included on the governmental fund balance sheet. $ 54 5,081,601 B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities Reconciliation of Governmental Funds Statements of Revenues, Expenditures and Changes in Fund Balance and the government-wide Statement of Activities: Total Governmental Funds Revenues and Other Sources Taxes Intergovernmental Grants and entitlements Charges for services Special assessments Licenses and permits Fines and forfeitures Rent Investment earnings Contributions Miscellaneous Total revenue $ Capital Related Items (1) Long-Term Revenues/ Expenses (2) 39,104,903 $ 17,173,416 10,880,792 2,199,819 30,016 2,834,506 1,394,174 1,195,464 2,238,285 129,930 204,678 77,385,983 $ 11,960,124 11,960,124 Expenditures/Expenses General governmental Public safety Public works Economic and physical development Culture and recreation Highways and streets Principal retirement Interest and other charges Capital outlay Total expenditures/expenses 6,621,976 21,626,547 1,168,424 7,640,313 7,178,029 10,700,196 6,505,449 2,552,016 25,054,173 89,047,123 695,750 752,445 267,209 125,185 1,084,974 1,278,895 (25,054,173) (20,849,715) OTHER FINANCING SOURCES (USES): Bond proceeds Bond (discount) premium Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change for the year 31,500,000 220,086 37,892 17,317,133 (19,584,684) 29,490,427 17,829,287 $ (31,500,000) (220,086) (4,475) (4,475) (31,720,086) 32,805,364 $ (25,183,875) $ $ 55 (38,770) $ (30,016) 273,917 205,131 146,438 163,275 20,195 83,400 72,221 73,230 (6,505,449) (384,390) (6,331,080) Internal Service Fund (3) Adjustments and Eliminations Statement of Activities Totals $ 146,814 146,814 - $ (5,581) (16,975) (1,097) (5,913) (6,279) (9,079) (44,924) - 7,458,583 22,525,292 1,454,731 7,842,985 8,328,945 12,043,242 2,167,626 61,821,404 191,738 $ - 33,417 17,317,133 (19,584,684) (2,234,134) 25,642,514 $ 39,066,133 17,173,416 10,880,792 2,199,819 2,834,506 1,668,091 1,195,464 2,385,099 12,090,054 204,678 89,698,052 (1) When capital assets that are to be used in the 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 useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year. Capital outlay Depreciation expense Gain (loss) on sale of capital assets Donated capital assets $ $ 25,054,173 (4,204,458) (4,475) 11,960,124 32,805,364 (2) Special assessment principal payments received are reported as revenue on the governmental fund statements, but are reductions to the outstanding special assessment debt for government-wide reporting. Property tax revenue not received within 30 days of year end are deferred for governmental fund reporting, but are not deferred for government-wide reporting. Special assessment received Property tax Court revenue $ $ (30,016) (38,770) 273,917 205,131 The costs of issuing bonds are reported as an expenditure in governmental funds in the year of bond issuance. For the City as a whole, however, the bond issuance costs are deferred and amortized (expensed) over the life of the bonds. Amortization of bond issuance costs $ (69,277) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrual of long-term compensated absences $ (489,482) Prepayment of bond principal is reported as an expenditure in governmental funds and thus has the effect of reducing fund balance because current financial resources have been used. For the City as a whole, however, the principal payments reduce the long-term liabilities in the statement of net assets and do not result in an expense in the stement of activities Principal bond payments Bond issuance Bond premium Bond issuance costs Amortization of bond premium $ $ 6,505,449 (31,500,000) (220,086) 264,666 119,724 (24,830,247) (3) Internal service funds are used by management to charge the costs of self insurance to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. Revenue Expenditures $ $ 56 146,814 44,924 191,738 C. FUND BALANCE – NET ASSET RESTATEMENT Change in Accounting Estimate After a review of the presentation of compensated absences the City discovered an accounting error in estimating its’ governmental compensated absences. This resulted in a prior period adjustment to net assets and fund balance. The net effect of these movements is shown as an adjustment to beginning fund balance and net assets. Governmental Fund Balance at June 30, 2005 Fund Balance Restatement General Fund Highway User Revenue Fund Transportation BBB Fund Transportation Other Governmental Funds Total fund balances Net Asset Restatement Governmental Activities - Total Net Assets $ $ $ 29,325,196 8,970,870 12,362,694 6,438,044 (970,005) 7,797,529 63,924,328 123,823,011 Change in accounting estimate for compensated absences $ Governmental Fund Balance at July 1, 2005 $ $ 571,679 35,691 7,040 22,804 637,214 $ 637,214 $ $ 29,896,875 9,006,561 12,362,694 6,445,084 (970,005) 7,820,333 64,561,542 124,460,225 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. BUDGETARY INFORMATION Budget Basis of Accounting The City's accounting records for General Government operations (General, Special Revenue, and Debt Service Funds) are maintained on a basis consistent with Generally Accepted Accounting Principles (GAAP) with measurable revenues recorded when they become available to finance expenditures in the current fiscal year. "Available" is defined as: collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures, other than principal and interest on debt, are recognized in the accounting period in which the liability arises. State statute allows for encumbrances to be recognized for a 60-day period following the end of the prior fiscal year as uses of prior year appropriations. To ensure that appropriations do not lapse, departments are directed to re-budget for all items delivered after June 30. For the Enterprise Funds, the annual budget is prepared on a basis that differs from GAAP because state law requires capital purchases and debt service payments to be budgeted as expenses, and bond proceeds and grants that are to be utilized are to be budgeted as revenues. The accounting and budgeting systems for the City are in accordance with Generally Accepted Accounting Principles (GAAP) format, with minimal variances between the two systems. Budget basis for enterprise funds differ primarily due to state laws. The major differences are as follows: x Encumbrances (contractual commitments) are considered the equivalent of expenditures. Encumbrances at year-end for goods or services, which are not received prior to the end of the fiscal year, are cancelled. 57 x Fund balances reserved to inventory and bonded debt are not included in the budget. x Certain expenditures, such as depreciation and landfill closure and post closure accrual, are not included in the budget. x Enterprise funds budget capital expenditures and debt service payments as expenses. x Enterprise funds budget bond proceeds and grants as revenues. The City will utilize a number of different fund types to segregate the financial activity within the City either due to regulatory reasons or as designated internally. The fund classifications are Governmental funds, Proprietary funds and Fiduciary funds. Review and Approval Issues presented during the review and approval period include discussion topics of the Council fall and spring retreats. The fall and spring retreats were held in October and March respectively, to give City staff the opportunity to present major discussion points to Council and the public. The goal is for Council to make policy decisions and direct staff in preparing the budget. This provides adequate time for the Council to gather input on major budget issues prior to preparation of the budget. The City Council holds Study Sessions in May. The Council reviews and discusses the issue papers included in the Budget Review Book as well as all personnel recommendations, capital equipment recommendations, and the capital improvement plan. The Council arrives at a consensus for all decisions needed. The Study Sessions provide the opportunity for City management, departments and the public to offer information and recommendations to the City Council. The proposed budget is presented to Council for tentative adoption on or before the third Monday in July. Two public hearings are held on the content of the budget. State law requires the operating budget to be all-inclusive. Therefore, the budget includes provisions for contingent revenues, e.g., Passengers Facility Charges, and expenditures that cannot be accurately determined when the budget is adopted, e.g., grants. The Resolution adopting the annual budget requires Council authorization for any expenditure from contingencies, as well as transfer of budget authority between departments. The City operates under the State Expenditure Limitation with a one-time adjustment to the base. The adjustment provided for an increase to the base limit to allow for the expenditure of funds resulting from the addition of a 2% Bed, Board, & Booze Tax. Flagstaff is not a Home Rule city. Alternative [Home Rule] Expenditure Control municipalities require voter approval every four years. The Adopted Budget reflects the total funds appropriated. Certain exclusions are allowed by the state [e.g., bond proceeds, debt service, grants] in computing the Expenditure Limitation and this total cannot be exceeded. Budget authority can be transferred between line items within a Division. At year-end, Department budgets are reviewed and budget authority is transferred from contingencies by Resolution as necessary. Additionally, any interfund transfer of appropriations requires Council approval. Council can also amend total appropriations for a fund during the year by Resolution as long as there is a corresponding increase/decrease in another fund so that the expenditure limitation is not exceeded. 58 B. Excess of Expenditures over Appropriations For the year ended June 30, 2006, the General Fund and Transportation Fund witnessed excess expenditures within their funds, however total City budget appropriation was not exceeded. General Fund expenditures exceeded appropriations in the Fire line by $899,448; these over expenditures were funded by reduced spending in other expenditures lines. The Transportation program revenues fell short of projections by $6 million due to a delayed real estate transaction, while expenditures exceeded appropriations in the Community Development and Nondepartmental lines by $142,201 and $600,767, respectively. These over-expenditures were funded by reduced spending in other expenditures lines. IV. DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The City maintains a cash and investment pool that is available for use by all funds except the Fireman’s Pension Fund, which have investments held separately by a trustee. Each fund type’s portion of this pool is displayed on the government-wide Statement of Net Assets as “Cash and cash equivalents,” “Cash with fiscal agents,” “Investments,” and “Restricted cash and cash equivalents.” Deposits At June 30, 2006, the carrying amount of the City’s deposits was $12,762,715 and the bank balance was $15,515,168. The $2,752,453 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2006. Custodial Credit Risk - Deposits Custodial credit risk is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. Statutes require collateral for demand deposits, certificates of deposit, and repurchase agreements at 102 percent of all deposits covered by federal depository insurance. As of June 30, 2006, the City deposits held by Wells Fargo and those held by fiscal agents were covered by federal depository insurance or by collateral held by the City’s agent in the City’s name. However, $1.6 million held by Banc of America Leasing Corporation for capital lease improvements was not collateralized. These funds will be drawn down through out fiscal year 2007 as funded improvements are completed. GASB Statement No. 40 requires that the following disclosure be made with respect to custodial credit risks relating to deposits and investments: $32,342 of the City’s investments in certificates of deposit with financial institutions is in excess of federal depository insurance limits and thus is uncollateralized. Concentration of Credit Risk To lessen the risk of loss attributed to the magnitude of a government’s investment in a single issuer the City diversifies its investment portfolio to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, or specific class of securities. Certificates of deposits and municipal bonds represent 5.6 percent of the City’s total investments. Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy matches maturities with cash flow dates, unless matched to a specific requirement the City may not invest more than 25 percent of the portfolio for a period greater than three years or any portion of the portfolio for a period greater than 10 years. 59 Credit Risk City resolution and State Statutes authorized the City to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, repurchase agreements, money market accounts, certificates of deposit and the State of Arizona Local Government Investment Pool (LGIP). The LGIP is a part of the State Treasurer’s office. The State Board of Deposit provides oversight for the State Treasurer’s pools, and the LGIP Advisory Committee provides consultation and advice to the Treasurer. Investments in the State of Arizona LGIP are stated at fair value, which also approximates the value of the investment upon withdrawal. The credit quality ratings of investments as described by nationally recognized Standard and Poor’s rating service as of June 30, 2006 is as follows: Investment Type Federal agency securities Certificates of Deposit: State investment pool (LGIP) Municipal Securities Held by trustee: Investment contracts Money market funds Total Fair Value $ 62,922,445 6,181,037 40,074,399 50,000 1,627,612 55,962 Minimum Legal Rating N/A Collateralized N/A A Not Required To Be Rated N/A N/A $ - $ 110,911,455 AAA 62,922,445 - Rating as of Year End A+ $ $ 50,000 - - $ 62,922,445 $ 50,000 Unrated 6,181,037 40,074,399 1,627,612 55,962 $ 47,939,010 Investments At June 30, 2006, the City’s investments included the following: Investment Type U.S. Government Securities Certificate of Deposit Local Government Securities Municipal Securities Mutual fund-money market State of Arizona Investment Pool Total fair value of investments $ $ Portfolio weighted average maturity Fair Value 62,922,445 6,048,695 132,342 50,000 1,683,574 40,074,399 110,911,455 Weighted Average Maturity (in years) 1.639 1.482 0.277 4.000 0.003 0.005 1.015 60 Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $ Pooled cash and cash equivalents - unrestricted Investments - unrestricted Restricted cash with fiscal agent Restricted cash and cash equivalents Total pooled cash and investments $ $ $ 110,911,455 12,762,715 123,674,170 71,409,574 31,160,440 10,758,141 10,346,015 123,674,170 Cash and cash equivalents at June 30, 2006 consisted of the following: Investments included in cash and cash equivalents Carrying amount of city deposits Cash on hand Total cash and cash equivalents Less: cash and cash equivalents of Fiduciary funds Total cash and cash equivalents per statement of net assets $ $ 58,850,314 12,762,715 12,325 71,625,354 (215,780) 71,409,574 Investment income comprises the following for the year ended June 30, 2006: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income Less: net investment income of Fiduciary funds Total net investment income per statement of activities $ $ 4,050,599 (477,014) 3,573,585 (6,650) 3,566,935 The net decrease in the fair value of investments during fiscal year 2005-2006 was $477,014. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. The unrealized gain (loss) on investments held at June 30, 2006 was $(1,264,699). In previous years, the City reported a decrease in fair value of $1,473,712 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool. The State and numerous other bondholders filed suit against the principals, underwriters, trustees, accountants and other in May 2003. The case is presently pending in federal court in Ohio. No reliable assessment of the litigation outcome is available; however, the City has received $404,893 during the fiscal year plus interest of $2,272 as a partial recovery with total to date recovery of $573,566. 61 B. RECEIVABLES Receivables as of June 30, 2006, including allowances for uncollectible accounts, are as follows: Fund Interest Intergovernmental $ 184,181 70,103 41,567 40,593 149,774 65,997 - $ 1,585,799 203,447 174,738 451,834 - 9,516,938 73,110 552,215 33,771 2,415,818 - 99,569 - 3,934 - 12,588,474 106,881 9,590,048 585,986 2,415,818 99,569 3,934 12,695,355 2,056,332 832,117 72,863 53,031 (60,000) 141,063 85,290 6,841 3,804 - 23,720 795,611 - - - 2,221,115 917,407 875,315 56,835 (60,000) 2,954,343 236,998 819,331 - - 4,010,672 12,544,391 $ 822,984 $ 3,235,149 Accounts Governmental Activities General Highway User Revenue Transportation BBB Capital Projects Bond Construction Other Governmental Funds Less: Allowance for Uncollectibles $ Total Government Funds Internal Services Funds Total Governmental Activities Business-Type Activities Water and Wastewater Environmental Services Airport Stormwater Less: Allowance for Uncollectibles Total Business-Type Activities Total activities $ 5,758,736 3,491,270 891,092 554,767 69,798 (1,248,725) Bond Proceeds $ $ 99,569 - 99,569 Special Assessments $ $ 3,934 - 3,934 Total Receivables $ $ 7,628,285 3,764,820 1,107,397 595,360 149,774 591,563 (1,248,725) 16,706,027 C. CAPITAL ASSETS The City has not completed its evaluation of the City’s entire infrastructure as of June 30, 2006, and therefore, is considered to be in a transition period. This period represents the timing between the adoption of the general provisions of GASB Statement No. 34 and when the City begins to report its retroactive major general infrastructure assets. Infrastructure assets currently reported represent assets placed in service since the inception of GASB Statement No. 34, which became instrumental as of June 30, 2003. No infrastructure prior to this date has been accounted for. The City will complete the infrastructure evaluation prior to June 30, 2007. 62 A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2006 is as follows: Balance July 1, 2005 Governmental activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets $ Depreciable assets: Buildings Improvements Machinery and equipment Infrastructure Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Infrastructure Total accumulated depreciation Governmental activities capital assets, net $ 9,037,225 31,420,232 40,457,457 $ $ Depreciable assets: Buildings Improvements Machinery and equipment Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Total accumulated depreciation Business-type activities capital assets, net $ 139,808 17,711,308 17,851,116 $ - Transfers In (out) $ (5,735) (2,415,192) (2,420,927) Balances June 30, 2006 $ 9,171,298 46,716,348 55,887,646 36,575,691 13,568,399 21,858,149 24,263,731 96,265,970 449,930 3,764,825 2,131,212 12,817,215 19,163,182 (263,264) (263,264) 56,388 25,133 2,364,539 2,446,060 37,025,621 17,389,612 23,751,230 39,445,485 117,611,948 (10,775,144) (6,847,511) (13,639,475) (1,020,230) (32,282,360) (837,634) (851,338) (1,566,791) (948,696) (4,204,459) 258,789 258,789 (25,133) (25,133) (11,612,778) (7,698,849) (14,972,610) (1,968,926) (36,253,163) 104,441,067 $ Balances July 01, 2005 Business-type activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets Deletions and Retirements Additions 2,357,360 15,036,835 17,394,195 32,809,839 $ 7,943,437 3,966,260 11,909,697 $ Deletions and Retirements Additions $ (4,475) $ - - $ Transfers In (out) $ (5,849,749) (5,849,749) 137,246,431 Balances June 30, 2006 $ 10,300,797 13,153,346 23,454,143 73,000,437 232,756,918 19,714,931 325,472,286 693,716 20,032,110 1,900,915 22,626,741 (830,152) (830,152) 5,525,420 324,329 (25,133) 5,824,616 79,219,573 253,113,357 20,760,561 353,093,491 (26,552,195) (74,396,401) (11,152,187) (112,100,783) (1,737,464) (5,496,257) (949,792) (8,183,513) 814,776 814,776 25,133 25,133 (28,289,659) (79,892,658) (11,262,070) (119,444,387) 230,765,698 $ 26,352,925 63 $ (15,376) $ - $ 257,103,247 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Governmental Activities: General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total depreciation expense - governmental activities $ 695,750 752,445 267,209 125,186 1,084,973 1,278,896 4,204,459 $ D. INTERFUND RECEIVABLES, PAYABLES, and TRANSFERS Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $418,913 are included in the government-wide financial statements at June 30, 2006. The interfund balances at June 30, 2006 are short-term loans to cover temporary cash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbursements. With the exception of the $94,897 between the Airport and Internal Service Fund, all interfund balances outstanding at June 30, 2006 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2006: Interfund Receivables Fund Governmental Funds: General Highway User Revenue Transportation Capital Projects Bond Construction Other governmental funds Internal Service Total governmental funds $ 7,265,000 94,897 7,359,897 Business-Type Funds: Water and wastewater Airport Total enterprise funds Total governmental and enterprise funds 502,000 502,000 $ 7,861,897 Interfund Payables $ 4,000,000 2,930,000 335,000 7,265,000 596,897 596,897 $ 7,861,897 Transfers The net transfers of $2,267,551 from governmental activities to business-type activities on the government-wide statement of activities are primarily debt service and operational subsidies from the General Fund. There were no significant transfers during fiscal year 2006 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. The following transfers are reflected in the fund financial statements for the year ended June 30, 2006: 64 Fund Governmental Funds: General Highway User Revenue Transportation BBB Other governmental funds Total governmental funds Business-Type Funds: Water and Wastewater Environmental Services Airport Stormwater Total enterprise funds Total governmental and enterprise funds Transfers out $ $ 7,403,726 1,135,401 3,732,717 1,498,933 5,813,907 19,584,684 2,574,727 19,488 127,234 135,000 2,856,449 22,441,133 Transfers In $ $ 3,967,748 7,079,650 1,063,650 5,206,085 17,317,133 2,416,933 430,863 2,276,204 5,124,000 22,441,133 E. LEASES Operating Leases Expenditures The City leases library space under a non-cancelable operating lease. The lease is for the East Flagstaff Library. The terms of the contract is for a period of 10 years with adjustments on July 1st to the lease amount based on the prior year change in the Consumer Price Index for the prior year. Fiscal Year 2006 lease expense for the library was $75,268. The schedule below for future minimum lease expenses reflects the change in the rental rate as of July 1, 2006. Fiscal Year East Flagstaff Ending June 30 2007 Library $ 77,839 2008 77,839 2009 77,839 2010 77,839 2011 77,839 2012-2013 Total 129,732 $ 518,927 The City has entered into several operating lease agreements, with cancellation provisions, for the purpose of leasing office space and land. Lease expenditures for these items for the period ending June 30, 2006 were $139,551. Operating Lease Revenues The City leases several City-owned buildings under cancelable and non-cancelable agreements. The carrying value of the leased assets is $5,083,525 (cost of $5,730,896 less accumulated depreciation of $647,371) with current depreciation of $185,614. Certain leases contain provisions for future rate increases based on changes in the Consumer Price Index. Total revenue for fiscal year 2006 was $1,113,646. The City currently has one lease with non-cancelable terms that is for USGS building #6, which is guaranteed through August 2013. The following table represents the future minimum lease receivable from the lease with non-cancelable terms. The amounts shown include revenue related to the asset and the operational expenses. 65 Fiscal Year USGS Ending June 30 2007 Building #6 $ 774,100 2008 774,624 2009 774,624 2010 774,624 2011 774,624 2012-2013 903,728 Total $ 4,776,324 In addition, the Airport Fund has several leases under cancelable agreements. The leases are for terminal space, hangars, shades, tiedowns, and ground leases. Lease revenue in the Airport fund for fiscal year 2006 was $929,502. The carrying value of the leased assets is $6,186,522 (cost of $9,062,372 less accumulated depreciation of $2,875,850) with current year depreciation of $158,256. F. LONG-TERM DEBT General Obligation Bonds The City of Flagstaff issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for both governmental and business-type activities. The original amount of general obligations bonds issued in prior years was $40,844,240. During the year the City of Flagstaff issued general obligation bonds for capital projects in the amount of $31,500,000 and $90,292 of accretion had been added to Water and Wastewater General Obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The Water and Wastewater General Obligation Bonds are backed by the ultimate taxing power and general revenues of the City; however, these bonds are carried as a liability of the Water and Wastewater Fund to reflect the intention of the City to retire those bonds from resources in the Water and Wastewater Fund. General obligation bonds outstanding at June 30, 2006: Purpose Governmental activities Governmental activities – refunding Business type activities Business type activities - refunding Amount $ 32,155,000 720,000 2,089,726 14,205,000 $ 49,169,726 66 General obligation bonds payable at June 30, 2006 consist of the following individual issues: Governmental Activities: $720,000 Parks and Recreation Refunding Bonds, Series 2003 due in annual installments of $255,000 to $465,000 through July 1, 2008; interest rate at 3.0% - 3.25%. $ 720,000 $3,100,000 Parks and Recreation Bonds, Series 2001 due in annual installments of $385,000 to $505,000 through July 1, 2014; interest rate at 4.375% to 4.75%. 3,100,000 $31,500,000 Capital Projects, Series 2006 due in annual installments of $1,180,000 to $2,445,000 through July 1, 2023; interest rate at 3.25% to 5.25%. 29,055,000 Total Governmental Activities 32,875,000 Business-type activities: Water and Wastewater: $924,240 Wastewater Improvement Project of 1991 Capital Appreciation Bonds due in three installments: $595,827 due July 1, 1997, plus interest at 5.8%; $124,349 due July 1, 2002, plus interest at 6.3%; $204,064 due July 1, 2007, plus 409,726 interest at 6.75%. Shown at combined accreted value. $8,000,000 Water Improvement Project Bonds, Series 1997, principal payment of $1,680,000 due July 1, 2013; interest at 4.5%. Fiscal years 2007-2012 refunded in December 2003. 1,680,000 $13,845,000 Water and Wastewater Refunding Bonds Series 2001, due in annual installments of $1,605,000 to $2,355,000 through July 1, 2009; interest at 3% to 5%. 6,203,000 $8,230,000 Water Refunding Bond, Series 2003, due in annual installments of $190,000 to $1,960,000 through July 1, 2013; interest at 3.0% - 3.25%. 7,075,000 Total Water and Wastewater 15,367,726 Airport: $2,025,000 Airport Refunding Bonds, Series 2001 due in annual installments of $235,000 to $345,000 through July 1, 2009; interest at 3% to 5%. 927,000 Total Business-type Activities 16,294,726 Total General Obligation Bonds $ 67 49,169,726 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending Governmental Activities June 30 Principal Business-type Activities Interest Principal 2007 $ 1,645,000 $ 1,464,206 2008 1,880,000 1,391,257 2,795,000 545,100 2009 1,705,000 1,310,326 3,055,000 409,988 2010 1,780,000 1,236,851 1,770,000 263,450 2011 1,850,000 1,161,833 1,860,000 205,926 2012-2016 9,585,000 4,436,737 3,830,000 227,252 2017-2021 10,350,000 2,111,738 2022-2023 4,080,000 Total $ 32,875,000 $ 2,984,726 Interest $ 697,026 206,574 $ 13,319,522 $ 16,294,726 $ 2,348,742 Special Assessment Bonds Proceeds from special assessment bonds are used for improvements such as paving, sidewalks, and sewers. Payments made by the assessed property owners are pledged as collateral. In the event of default by a property owner, the lien created by the assessment is sold at public auction and the proceeds are used to offset the defaulted assessment. If there is no purchase at the public auction, the City is required to buy the property with funds appropriated from the General Fund. Special assessment bonds outstanding at June 30, 2006: Purpose Amount Governmental Activities $340,000 Special assessment bonds payable at June 30, 2006 consist of the following individual issues: Governmental Activities $720,000 Improvement District Bonds, Series 1999 due in annual installments of $43,000 to $94,000, through January 1, 2010; interest at 4.9%. $ 340,000 Total Special Assessment Bonds $ 340,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending Governmental Activities June 30 2007 Principal $ 76,000 Interest $ 14,798 2008 82,000 10,877 2009 88,000 6,712 2010 94,000 Total $ 340,000 2,303 $ 34,690 68 Revenue Bonds Highway User Revenue Fund bonds (HURF) are issued specifically for the purpose of constructing street and highway projects. These bonds are repaid out of the HURF fund by gas tax revenues collected by the State of Arizona and distributed to cities and towns based on a formula of population and gas sales within each county. Water & Sewer Revenue bonds are issued as authorized by the voters for the construction, acquisition, furnishing, and/or equipping of water and sewer facilities and related systems. The Water & Sewer Revenue bonds are collateralized by revenue in excess of operating and maintenance expenses of the City’s water & sewer utility system, and are repaid via user charges or fees for service. Revenue bonds outstanding at June 30, 2006: Purpose Governmental activities Amount $ 5,580,000 Governmental activities – refunding 4,085,000 Business type activities 5,770,075 $15,435,075 Revenue bonds at June 30, 2005 consist of the following individual issues: Governmental Activities: Street Construction: $5,580,000 Junior Lien Street and Highway User Revenue Bonds, Series 1992 serial bonds due in installments of $350,000 to $ $1,725,000 through July 1, 2012; interest at 6.12%. 5,580,000 $9,375,000 Street and Highway Revenue Refunding Bonds, Series 2003 serial bonds due in installments of $165,000 to $1,940,000 through July 1, 2009; interest at 2% to 3.5% 4,085,000 Total Governmental Activities 9,665,000 Business-type Activities: Water & Sewer: $6,775,760 Water and Wastewater Revenue Bonds, Series 2003 due in annual installments of $238,431 to $462,398 through July 1, 2022; interest at 3.548%. 5,770,075 Total Revenue Bonds $ 69 15,435,075 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending Governmental Activities June 30 2007 Principal $ Business-type Activities Interest 1,940,000 $ Principal 469,585 $ 274,108 Interest $ 204,693 2008 1,400,000 411,385 283,832 194,969 2009 1,460,000 344,010 293,900 184,901 2010 1,520,000 280,135 304,327 174,474 2011 1,620,000 190,455 315,123 163,678 2012-2016 1,725,000 94,875 1,751,444 642,562 2017-2021 Total $ - - 9,665,000 $ 1,790,445 2,547,341 $ 5,770,075 325,467 $ 1,890,744 Other Debt Municipal Facility Corporation Bonds The Municipal Facilities Corporation (MFC) is a non-profit corporation created by the City for the purpose of constructing, acquiring and equipping municipal facilities. In fiscal year 2001 the MFC issued $4.7 million in bonds for the construction of a new United States Geological Survey (USGS) facility on land owned by the City. In fiscal year 2004, the MFC issued $25 million in bonds for the construction of the Fourth Street Overpass on land owned by the City. The City will make lease payments equal to the debt service on both issues and will obtain legal title upon payment in full of the bonds. The City has collateralized the contracts payable to the MFC by a pledge of the City’s State Shared Revenues which comprise sales and income taxes imposed and collected by the State and distributed to counties and municipal governments pursuant to law and State revenue-sharing which the City presently or in the future receives from the State and which are not earmarked by the State for a contrary or inconsistent purpose. Municipal facility corporation bonds outstanding at June 30, 2006: Purpose Amount Governmental Activities $25,610,000 Municipal facility corporation bonds are comprised of the following issue: $4,700,000 USGS Project Bonds Series 12 (2001) due in annual installments of $255,000 to $440,000 through August 1, 2016; $ interest at 4% to 4.75%. 3,620,000 $25,000,000 Fourth Street Municipal Facility Corporation Revenue Bonds, Series 2003 due in annual installments of $1,000,000 to 21,990,000 $2,145,000 through July 1, 2010; interest at 2% to 5,25%. Total Other Debt $ 70 25,610,000 Year Ending Governmental Activities June 30 2007 2008 Principal $ 2009 1,315,000 $ 1,375,000 2010 925,071 10,130,000 2017-2020 3,472,065 7,965,000 $ 25,610,000 1,094,499 985,814 1,795,000 2012-2016 1,128,799 1,031,384 1,735,000 2011 Total 1,295,000 Interest 1,072,049 $ 9,709,681 Loans Payable In July 1992 the City of Flagstaff entered into a loan agreement with the Wastewater Infrastructure Finance Authority of Arizona for the purpose of constructing reclaimed water lines for the new reclaimed water plant. The $6,000,000 loan is scheduled to be paid in annual installments over twenty years with an interest rate of 3.402%. The unpaid principal of the loan at June 30, 2006 is $2,236,830. In September 1999 the City of Flagstaff entered into a loan agreement with Arizona Department of Transportation Aeronautics Division for the purpose of constructing a 14 unit T hangar. The $600,000 loan is scheduled to be paid in quarterly installments over 17 years with an annual interest rate of 5.6%. The unpaid principal amount of the loan at June 30, 2006 is $433,993. Obligations under Capital Leases The City has entered into capital lease agreements for energy saving equipment and construction of Hangars at Pulliam Airport, with total assets of $2,871,201 and $2,832,877, respectively. These lease agreements generally require annual payments and the lease terms vary from 10 to 30 years. The lease agreements qualify as capital leases for accounting purposes and, therefore have been recorded at the present value of their future minimum lease payments as of the date of inception. Fiscal Year Ending June 30, 2006 2007 2008 2009 2010 2011 2012-2016 2017-2021 2022-2025 Total future minimum lease payments Less: imputed interest costs Present value of future minimum lease payments Governmental Activities $ 470,993 470,993 470,993 470,993 470,993 1,648,475 4,003,440 (548,889) $ 3,454,551 71 Business Type Activities $ 231,736 231,736 231,736 231,736 231,736 1,158,680 1,158,680 811,076 4,287,116 (1,635,465) $ 2,651,651 Changes in long-term liabilities Liquidation of compensated absences for governmental funds have been made out of the General, HURF, BBB, Library, and MPO funds. Non-current liability activity for the year ended June 30, 2006, was as follows: Beginning Balance Additions Reductions Ending Balance 4,285,000 415,000 11,555,000 26,895,000 43,150,000 $ 31,500,000 31,500,000 $ (2,910,000) (75,000) (1,890,000) (1,285,000) (6,160,000) $ 32,875,000 340,000 9,665,000 25,610,000 68,490,000 Capital leases Compensated absences Governmental activity long-term liabilty 3,800,000 2,750,651 $ 49,700,651 1,015,576 $ 32,515,576 (345,449) (1,056,054) $ (7,561,503) 3,454,551 2,710,173 $ 74,654,724 Business-type activities: Bonds payable: General obligation bonds Water & sewer revenue bonds Total bonds payable $ 18,880,018 6,034,792 24,914,810 $ (2,585,292) (264,717) (2,850,009) $ 16,294,726 5,770,075 22,064,801 Water & sewer loan payable Airport loan payable Capital leases Compensated absences Landfill closure/postclosure Business-type activity long-term liability 2,567,902 463,595 2,731,915 480,247 2,081,006 $ 33,239,475 (331,072) (29,602) (80,264) (193,167) (779,438) $ (4,263,552) 2,236,830 433,993 2,651,651 451,778 1,863,856 $ 29,702,909 Governmental activities: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corp bonds Total bonds payable $ 164,698 562,288 726,986 $ Due Within One Year $ $ $ $ 1,645,000 76,000 1,940,000 1,295,000 4,956,000 357,221 1,192,746 6,505,967 2,984,725 274,108 3,258,833 342,335 31,295 84,809 203,188 3,920,460 V. OTHER INFORMATION A. Risk management The City is exposed to various risks of loss related to torts and public officials’ errors and omissions. The City purchases commercial insurance to cover these losses. However, $50,000 of each claim resulting in a loss is retained by the City. The City provides for the self-insurance retention in the internal service fund. Outstanding claims as of June 30, 2006 have potential exposure to the City of approximately $493,221 based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City uses an application of historical experience to determine claims payable. However, due to the preliminary status of the claims, no determination can be made as to the likelihood, if any, of an unfavorable outcome. The net assets of the Internal Service Fund are designated for future losses related to the self-insurance retention. Settled claims have not exceeded commercial coverage in the last three fiscal years. 72 Current Year Claims and Fiscal Year 2003-04 $ Beginning of Changes in Year Liability Estimates 411,200 $ 8,352 $ Claim End of Payments Year Liability 224,875 $ 194,677 2004-05 194,677 69,326 33,787 230,216 2005-06 230,216 322,146 59,141 493,221 The City of Flagstaff participates in a risk sharing pool for employee health care, through the Northern Arizona Public Employees Trust, a public entity risk pool. Members do not bear any risk of loss. The overall experience rating of the trust determines premium charges. B. Contingent liabilities The City is aware of existing environmental contamination at various sites and facilities. The City has annually budgeted monies for these purposes and includes remediation activities in its annual work program. The City has a compliance agreement for Americans with Disability Act with the Department of Justice (DOJ) and until all items are completed to the satisfaction of the DOJ, there remains a minimal amount of liability. C. Retirement and pension plans Plan Descriptions - The City contributes to the four plans described below. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer defined benefit pension plan that covers general employees of the City. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, and Article 2. The Public Safety Personnel Retirement System (PSPRS) is an agent multiple-employer defined benefit pension plan that covers public safety personnel who are regularly assigned hazardous duty as employees of the State of Arizona or one of its political subdivisions. The PSPRS, acting as a common investment and administrative agent, is governed by a five-member board, known as The Fund Manager, and the participating local boards according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. The Elected Officials Retirement Plan (EORP) is a cost-sharing multiple-employer defined benefit pension plan that covers elected officials and judges of certain state and local governments. The EORP is governed by The Fund Manager of PSPRS according to the provisions of A.S.R. Title 38, Chapter 5, and Article 3. 73 Each plan issues a publicly available financial report that includes its financial statements and required supplementary information. A report may be obtained by writing or calling the applicable plan. ASRS PSPRS and EORP 3300 N. Central Ave. 3010 E. Camelback Rd., Suite 200 P.O. Box 33910 Phoenix, AZ 85016-4416 Phoenix, AZ 85067-3910 (602) 240-2200/(800) 621-3778 (602) 255-5575 Funding Policy - The Arizona State Legislature establishes and may amend active plan members' and the City's contribution rates. Cost Sharing Plans - For the year ended June 30, 2006, active ASRS members and the City were each required by statute to contribute at the actuarially determined rate of 7.40% (6.90% retirement and 0.50% long-term disability) of the members' annual covered payroll. The City's contributions to ASRS for the years ended June 30, 2006, 2005, and 2004 were $1,765,599, $1,239,656, and $1,170,656 respectively, which were equal to the required contributions for the year. In addition, active EORP members were required by statute to contribute 7.00% of the members' annual covered payroll. The City was required to contribute 20.54% of the members' annual covered payroll, as determined by actuarial valuation. The City's contributions to EORP for the years ended June 30, 2006, 2005, and 2004 were $11,877, $8,728 and $3,804 respectively, which were equal to the required contributions for the year. In addition, a payment of $4,220 was made in each year as an installment due for its unfunded accrued liability. Agent Plan - For the year ended June 30, 2006, active PSPRS members were required by statute to contribute 7.65% of the members' annual covered payroll, and the City was required to contribute at the actuarially determined rate of 14.39% and 13.81% for Police and Fire respectively. Annual Pension Cost - The City's pension cost for the agent plan for the year ended June 30, 2004, the date of the most recent actuarial valuation, and related information follow. Contribution rates: PSPRS City – Police 14.39% City – Fire 13.81% Plan members 7.65% Annual pension cost $ 921,120 Contributions made $ 921,120 Actuarial valuation date 6/30/04 Actuarial cost method Individual entry age Actuarial assumptions: Investment rate of return 8.75% Projected salary increases 6.25% - 9.25% Includes inflation at 5.25% Amortization method Level percentage open Remaining amortization period from 7-1-00 20 years Asset valuation method Smoothed market value 74 Trend Information - Information for the agent plan as of most recent actuarial valuations follows. Contributions Required and Contributions Made Plan Annual Pension Cost (APS) Percentage of APC Contributed Net Pension Obligation PSRS 2006 Police Fire $ 740,130 535,828 100% 100% $ -0-0- PSRS 2005 Police Fire $ 570,046 351,094 100% 100% $ -0-0- PSRS 2004 Police Fire $ 443,928 192,873 100% 100% $ -0-0- Funding Progress - An analysis of funding progress for each of the agent plans as of the most recent actuarial valuations, June 30, 2004 is what determine the note for our F/Y 2006. (1) Actuarial Value of Assets PSRS 2005 Police Fire $ PSRS 2004 Police Fire PSRS 2003 Police Fire $ (2) Actuarial Accrued Liability (AAL) Entry Age (3) Percent Funded (1) / (2) (4) Unfunded AAL (2) - (1) (5) Annual Covered Payroll (6) Unfunded AAL as a Percentage of Covered Payroll (4) / (5) 23,170,401 $ 33,339,528 31,277,136 38,630,337 74.1% $ 86.3% 8,106,735 $ 5,290,809 5,143,360 3,880,002 157.6% 136.4% 23,305,327 32,966,185 27,287,891 34,472,797 85.4% 95.6% 3,982,564 1,506,612 4,839,097 3,879,272 82.3% 38.8% 23,684,969 33,430,859 25,745,977 31,576,303 92.0% 105.9% 2,061,008 (1,854,556) 2,061,008 4,086,288 100.0% -45.4% 75 VOLUNTEER FIREMEN'S RELIEF AND PENSION FUND The Volunteer Firemen's Relief and Pension Fund ("Fund") is a single-employer defined benefit pension trust fund administered by the City. A fireman having served as a member of the City's Fire Department prior to 1978, and who is not a paid member of a fire department or a member of the Public Safety Retirement System, is eligible to receive benefits. The fund does not issue a stand-alone report or is included in any other report than the City’s. A fireman who has served for 25 years or more, or who has reached sixty years of age, and served twenty years or more, shall be paid a monthly pension not to exceed $250 per month based on the benefits available to members of the fire department as determined by the board of trustees. Such pension may be increased or decreased in amount, or discontinued at the discretion of the Fund's board of trustees. The Fund's funding provisions and all other requirements are established by state statute. At June 30, 2006, the number of firemen covered by the Fund was classified as follows: Retirees and beneficiaries currently receiving benefits Active employees: 3 Non-vested 3 Total covered firemen 6 Funding Status and Progress: Per state statute there is no requirement that an actuarial valuation be performed to determine that the Volunteer Firemen's Relief and Pension Fund is fully funded. If the funds provided in the Fund are insufficient to pay fully the pensions authorized pursuant to the statute, the fund shall be prorated among those entitled thereto. Contributions: State statute requires a 5% contribution of annual compensation each from the City and the employee. Because no compensation was paid by the City to volunteer firemen, no contribution was made during the current fiscal year. No member or City contributions have been made to this fund since fiscal year ended June 30, 1979. Trend Information: Trend information for ten years is presented below: Revenues Expenses Net Assets Available Fiscal (not cash) Year for Employee Employer Investment Other Benefit June 30 Benefits Contributions Contributions Income Income Payments - - 1997 213,721 11,922 201 9,600 1998 216,843 - - 12,332 390 9,600 1999 218,401 - - 11,068 89 9,600 2000 221,678 - - 12,877 - 9,600 2001 226,593 - - 13,620 96 8,800 2002 226,632 - - 7,125 114 7,200 2003 221,730 - - 2,176 122 7,200 2004 219,214 - - 4,367 317 7,200 2005 217,606 - - 5,296 296 7,200 2006 217,237 - - 6,650 181 7,200 76 D. Landfill closure and postclosure care cost State and federal laws and regulations require the City to place a final cover on its Cinderlake landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and postclosure care costs that will be incurred near or after the date the landfill no longer accepts waste. The City reports a portion of these closures and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The estimated liability for landfill closure and postclosure care costs has a balance of $8,170,663 as of June 30, 2006, which is based on 56 percent usage of the landfill. The remaining $6,339,174 will be accrued over the remaining life of the landfill, which is currently estimated to be 15 years. The accrual for these closure and postclosure care costs for fiscal year 2006 was $562,288. Based on current estimates for landfill closure and postclosure care costs, the City is setting aside legally restricted funds to insure sufficient funds will be available to meet these requirements. The City makes annual contributions to finance closure and postclosure care costs; at June 30, 2006 the balance of the investments held for those purposes is $6,306,807, which includes $45,744 of accrued interest. The investments are reported as restricted cash and investments in the City’s Environmental Service Fund, and are held by the State of Arizona Local Government Investment Pool. The estimated total current cost of the landfill closure and postclosure care, $14,509,837, is based on the amount that would be paid if all equipment, facilities, and services required to care, monitor and maintain the landfill were acquired as of June 30, 2006. However, the actual cost of closure and postclosure care may be higher or lower due to other factors such as; inflation, changes in technology, or changes in landfill laws and regulations. According to state and federal laws and regulations, the City must comply with the local government financial test requirements that assure the City can meet the cost of landfill closure, post-closure and corrective action when needed. The City, which has pledged its full faith and credit to meet state financial responsibility requirements, is in compliance with these requirements. In March of 1999, the City purchased 343.9 acres of land from the Forest Service. This land is adjacent to the existing landfill and will be used to open additional cells as needed. As these cells are utilized, additional liabilities for closure and postclosure care requirements will be accrued. The City applied existing policy to the Environmental Services Fund increasing its’ expenditures as City residential and commercial collection programs are now charged for landfill fees. 77 78 NON-MAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues derived from specific taxes or other earmarked revenue sources. activities. They are usually required by statute, charter provision or ordinance to finance particular functions or Library Fund The City Library is financed through City sales tax allocations, State and County grants and individual contributions. Funds provided must be used for library activities such as cultural and educational programs and technical services. Real Estate Proceeds Fund This fund was established by the City Council by resolution in fiscal year 1985-86 to account for the proceeds received from the sale of excess real estate. Community Redevelopment This fund was established in fiscal year 1997 to account for the funding received for the Community Development Block Grant program and affordable housing activities. Metropolitan Planning Organization This fund was established in fiscal year 1997 to account for funding derived from the City’s status as a Metropolitan Planning Organization. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and the payment of, general longterm debt principal, interest and related costs. Special Assessment Bond Fund This fund accounts for the accumulation of resources for and the payment of principal, interest and related costs for all improvement district bonds issued by the City. Secondary Property Tax Revenue Fund This fund is used to account for secondary property tax revenues. Monies received by this fund are legally restricted to payment of general obligation debt. Permanent Fund Permanent funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs. Perpetual Care This fund accounts for the perpetual care of the City’s cemetery. 79 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2006 Special Revenue Funds Metropolitan Planning Organization Fund Library Fund Real Estate Proceeds Fund Community Redevelopment Fund $ 1,948,918 $ 2,685,889 $ - - - - Accounts receivable, net 68,477 863 228 - Interest receivable 10,036 17,638 13,024 - - - 96,444 355,390 ASSETS Cash and cash equivalents Cash with fiscal agents Intergovernmental receivables 2,188,739 $ 927 Special assessments receivable - - - - Restricted cash and cash equivalents - - - - $ 2,027,431 $ 2,704,390 $ 2,298,435 $ $ $ $ 173,354 $ Total assets 356,317 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 14,919 - 2,842 60,068 - - Interest payable - - - - Interfund payable - - - 335,000 Unearned revenue Liabilities payable from restricted assets Total liabilities 6,015 - - - - 1,368,268 - - - 1,443,255 - 173,354 343,857 Fund balances: Reserved for: Debt service - - - - Perpetual care - - - - 584,176 2,704,390 2,125,081 12,460 - - - - 584,176 2,704,390 2,125,081 12,460 $ 2,027,431 $ 2,704,390 Unreserved, undesignated, reported in: Special revenue funds Permanent fund Total fund balances Total liabilities and fund balances 80 $ 2,298,435 $ 356,317 Debt Service Funds Special Assessment Bond Fund $ Permanent Fund Secondary Property Tax Revenue Fund Total Other Governmental Funds Perpetual Care 434,498 $ 1,170,282 7,105 - - 7,105 - - 230 69,798 3,049 21,804 446 65,997 - - - 451,834 3,934 - - 3,934 - - 69,502 69,502 $ 448,586 $ 1,192,086 $ 72,773 $ 9,100,018 $ 1,063 $ $ - $ 192,178 $ - $ 2,595 $ 8,431,848 - - - 8,605 - - 8,605 - - - 335,000 3,934 - - 3,934 - - - 1,368,268 13,602 - - 1,974,068 434,984 1,192,086 - 1,627,070 - - 69,502 69,502 - - - 5,426,107 - - 3,271 3,271 434,984 1,192,086 72,773 7,125,950 448,586 $ 1,192,086 $ 72,773 66,083 $ 81 9,100,018 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2006 Special Revenue Funds Real Estate Proceeds Fund Library Fund Metropolitan Planning Organization Fund Community Redevelopment Fund REVENUES: Taxes $ Intergovernmental Grants and entitlements - $ - $ - $ - 2,040,924 - 748,437 - 28,808 - - 355,389 - Charges for services - - 261,044 Special assessments - - - - Investment earnings 44,261 89,473 64,645 - Contributions 85,000 - - - Miscellaneous 33,468 - - - 2,232,461 89,473 1,074,126 355,389 Total revenues EXPENDITURES: Current: Economic and physical development - 6,007 1,349,594 367,929 3,430,796 - - - Principal retirement - - - - Interest and other charges - - - - - - 139,808 - 3,430,796 6,007 1,489,402 367,929 Culture and recreation Debt service: Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures (1,198,335) 83,466 (415,276) (12,540) OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out - - - 150,000 375,400 25,000 (78,391) Total other financing sources (uses) 1,125,940 Net change in fund balances (72,395) Fund balances, beginning of year, as restated Fund balances, end of year 21 1,204,310 584,176 - - 375,400 25,000 233,466 656,571 $ 150,000 (39,876) 2,470,924 $ 82 2,704,390 12,460 2,164,957 $ 2,125,081 $ 12,460 Permanent Fund Debt Service Funds Special Assessment Bond Fund $ - Secondary Property Tax Revenue Fund $ Perpetual Care $ - $ 4,881,323 - - - 2,789,361 - - - 384,197 - - - 261,044 30,016 - - 30,016 18,643 80,700 1,845 299,567 109,630 - - 24,630 158 - - 33,626 48,817 4,962,023 26,475 8,788,764 - - - 1,723,530 - - - 3,430,796 75,001 - - 75,001 19,145 - - 19,145 - - - 139,808 94,146 - - 5,388,280 4,962,023 26,475 3,400,484 - - - 21 - - - 1,754,710 (45,329) - (5,735,516) - (5,813,907) - (5,735,516) - (4,059,176) (773,493) 26,475 (658,692) (45,329) 480,313 $ 4,881,323 Total Other Governmental Funds 434,984 1,965,579 $ 1,192,086 46,298 $ 72,773 83 7,784,642 $ 7,125,950 84 Other Supplementary Information Page Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity Schedule of Changes By Function and Activity 86 88 Budgetary Comparison Schedules - Other Major Governmental Funds Capital Projects Fund General Obligation Bond Fund 89 90 Budgetary Comparison Schedules - Non-Major Governmental Funds Library Fund Real Estate Proceeds Fund Community Redevelopment Fund Metropolitan Planning Organization Fund Special Assessment Bond Fund Secondary Property Tax Revenue Fund 91 92 93 94 95 96 85 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2006 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Land $ Subtotal Less: accumulated depreciation Total governmental funds capital assets Buildings 3,283,582 265,259 1,432,726 3,471,256 718,475 $ 9,171,298 $ 9,171,298 86 $ 13,502,132 12,075,075 5,924,036 2,790,900 2,631,168 102,310 Improvements $ 1,495,798 61,303 192,887 24,309 13,595,429 2,019,887 37,025,621 17,389,613 (11,612,778) (7,698,850) 25,412,843 $ 9,690,763 Machinery and Equipment $ $ 3,457,610 8,227,476 1,042,694 994,138 3,403,380 6,625,932 $ 2,511,133 36,934,352 23,751,230 39,445,485 (14,972,610) (1,968,926) 8,778,620 Construction In Progress Infrastructure $ 37,476,559 $ 141,800 3,284,318 51,826 2,285,592 40,952,812 46,716,348 - $ 46,716,348 87 Total $ 21,880,922 23,913,431 7,159,617 5,293,899 27,897,958 87,353,768 173,499,595 (36,253,164) 137,246,431 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2006 Balance July 1, 2005 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total $ 19,815,290 20,582,413 7,121,260 4,976,098 22,548,611 61,679,755 136,723,427 Additions $ 2,095,877 3,464,708 64,424 326,449 5,372,243 25,715,731 37,039,432 88 Retirements $ (30,245) (133,690) (26,067) (8,648) (8,456) (56,158) (263,264) Transfers In (out) Balance June 30, 2006 (14,440) 14,440 - $ 21,880,922 23,913,431 7,159,617 5,293,899 27,897,958 87,353,768 173,499,595 CITY OF FLAGSTAFF, ARIZONA Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Investment earnings $ Total revenues Actual Amounts Budgetary Basis Final - $ Variance with Final Budget Positive (Negative) - $ 244,824 $ 244,824 - - 244,824 244,824 Economic and physical development - - 11,073 (11,073) Principal retirement - - 220,086 (220,086) EXPENDITURES: Current: Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures - - 226 10,692,520 10,692,520 2,437,703 8,254,817 (226) 10,692,520 10,692,520 2,669,088 8,023,432 (10,692,520) (10,692,520) (2,424,264) 8,268,256 31,505,477 31,505,477 OTHER FINANCING SOURCES (USES): Bonds issued Bond premium Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year - - - 31,505,477 31,505,477 31,500,000 20,812,957 20,812,957 29,075,736 (972,439) $ 31,500,000 (972,439) 19,840,518 $ Adjustment from budetary basis to GAAP basis net change in fund balances 19,840,518 $ $ 28,103,297 29,075,736 modified accrual basis. 220,086 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis (264,666) $ 89 (5,477) 8,262,779 (972,439) The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis (5,477) 29,031,156 - $ 8,262,779 CITY OF FLAGSTAFF, ARIZONA General Obiligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Investment earnings $ Total revenues 300 $ 300 $ - $ (300) 300 300 - (300) 3,132,321 3,132,321 2,689,914 319,440 319,440 446,997 3,451,761 3,451,761 3,136,911 314,850 (3,451,461) (3,451,461) (3,136,911) 314,550 3,451,761 3,451,761 3,451,375 (386) 3,451,761 3,451,761 3,451,375 (386) 300 300 314,464 314,164 12,524 12,524 12,524 - EXPENDITURES: Current: Debt service: Principal retirement Interest and other charges Total expenditures Excess (deficiency) of revenues over expenditures 442,407 (127,557) OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 12,824 $ 90 12,824 $ 326,988 $ 314,164 CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Intergovernmental $ Grants and entitlements 2,993,396 $ 25,000 Investment earnings 2,993,396 $ 25,000 2,040,924 $ 28,808 (952,472) 3,808 21,000 21,000 44,261 Contributions 325,000 325,000 85,000 Miscellaneous 29,000 29,000 33,468 3,393,396 3,393,396 2,232,461 4,239,339 4,239,339 3,430,796 808,543 325,000 325,000 - 325,000 Total revenues 23,261 (240,000) 4,468 (1,160,935) EXPENDITURES: Current: Culture and recreation Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over expenditures 100,000 100,000 - 100,000 4,664,339 4,664,339 3,430,796 1,233,543 (1,270,943) (1,270,943) (1,198,335) 72,608 OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ - - 21 21 1,204,310 1,204,310 1,204,310 - (328,391) (328,391) 875,919 875,919 (395,024) (395,024) 853,588 853,588 458,564 $ 91 458,564 (78,391) 250,000 1,125,940 250,021 (72,395) 322,629 853,588 $ 781,193 $ 322,629 CITY OF FLAGSTAFF, ARIZONA Real Estate Proceeds Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Investment earnings $ Total revenues 47,350 $ 47,350 $ 89,473 $ 42,123 47,350 47,350 89,473 42,123 2,501,900 2,501,900 6,007 2,495,893 2,501,900 2,501,900 6,007 2,495,893 (2,454,550) (2,454,550) 83,466 2,538,016 EXPENDITURES: Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 150,000 150,000 150,000 - 150,000 150,000 150,000 - 233,466 2,538,016 2,458,157 - (2,304,550) (2,304,550) 2,458,157 2,458,157 153,607 $ 92 153,607 $ 2,691,623 $ 2,538,016 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Intergovernmental $ Charges for services 2,313,648 $ - Investment earnings Total revenues 2,313,648 $ - 748,437 $ 261,044 (1,565,211) 261,044 - - 64,645 2,313,648 2,313,648 1,074,126 (1,239,522) 64,645 4,806,625 4,806,625 1,349,594 3,457,031 - - 139,808 4,806,625 4,806,625 1,489,402 (2,492,977) (2,492,977) EXPENDITURES: Current: Economic and physical development Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures (139,808) 3,317,223 (415,276) 2,077,701 OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 375,400 375,400 375,400 - 375,400 375,400 375,400 - (2,117,577) (2,117,577) 2,235,600 2,235,600 118,023 $ 93 118,023 (39,876) 2,077,701 2,235,600 $ 2,195,724 $ 2,077,701 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Total revenues 634,666 $ 634,666 $ 355,389 $ (279,277) 634,666 634,666 355,389 (279,277) 559,666 559,666 367,929 191,737 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over expenditures 100,000 100,000 - 100,000 659,666 659,666 367,929 291,737 (25,000) (25,000) (12,540) 12,460 25,000 25,000 25,000 - 25,000 25,000 25,000 - Net change in fund balances - - 12,460 12,460 Budgetary fund balances, beginning of year - - - - OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Budgetary fund balances, end of year $ - $ 94 - $ 12,460 $ 12,460 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Special assessments $ Investment earnings Miscellaneous Total revenues 29,118 $ 29,118 $ 30,016 $ 898 18,880 18,880 18,643 (237) - - 158 158 47,998 47,998 48,817 819 EXPENDITURES: Current: Debt service: Principal retirement 75,000 75,000 75,001 Interest and other charges 19,545 19,545 19,145 400 Total expenditures 94,545 94,545 94,146 399 (46,547) (46,547) (45,329) Excess (deficiency) of revenues over expenditures Budgetary fund balances, beginning of year Budgetary fund balances, end of year 469,960 $ 469,960 423,413 $ 95 423,413 (1) 1,218 469,960 $ 424,631 $ 1,218 CITY OF FLAGSTAFF, ARIZONA Secondary Property Tax Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2006 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Taxes $ Investment earnings Total revenues 4,879,862 $ 4,879,862 $ 4,881,323 $ 1,461 38,800 38,800 80,700 41,900 4,918,662 4,918,662 4,962,023 43,361 OTHER FINANCING SOURCES (USES): Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year (5,751,422) (5,751,422) (5,735,516) 15,906 (5,751,422) (5,751,422) (5,735,516) 15,906 (832,760) (832,760) (773,493) 59,267 1,963,400 $ 1,963,400 1,130,640 $ 96 1,130,640 1,963,400 $ 1,189,907 - $ 59,267 Statistical Section Table Net Assets by Component Changes in Net Assets Fund Balances, Governmental Funds Changes in Fund Balances, Governmental Funds Tax Revenue by Source, Governmental Funds Intergovernmental Revenue by Source, Governmental Funds Full Cash Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Tax Payers Property Tax Levies and Collections Direct and Overlapping Sales Tax Rates Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Pledged Revenue Coverage Demographic and Economic Statistics Principal Employers Full-time Equivalent City Government by Function/Program Operating Indicators by Function/Program Capital Asset Statistics by Function/Program Insurance Summary 97 I II III IV V VI VII VIII IX X XI XII XIII XIV XV XVI XVII XVIII XIX XX XXI XXII Page 98 100 102 103 104 105 106 107 108 109 110 111 112 113 114 116 118 119 120 121 122 123 98 $ 293,607,992 $ $ $ $ $ $ 324,621,844 57,587,021 40,504,599 226,530,224 214,117,224 24,092,049 5,161,363 184,863,812 110,504,620 33,494,972 35,343,236 $ $ $ $ $ $ Fiscal Year 41,666,412 2004 352,523,597 81,341,713 23,870,778 247,311,106 228,700,586 24,948,848 3,200,521 200,551,217 123,823,011 56,392,865 20,670,257 46,759,889 2005 (3) The decrease from the prior period was caused by a substantial increase in capital asset contributions. (2) The increase from the prior period was caused by a substantial increase in unspent bond proceeds. (1) The increase from the prior period was caused by a substantial increase in capital projects, completed and in process. Total primary government net assets 55,036,232 Unrestricted 218,779,775 199,241,125 20,858,057 5,013,627 173,369,441 94,366,867 19,791,985 $ $ $ $ Restricted Invested in capital assets, net of related debt Primary government Total business-type activities and net assets Unrestricted Restricted Invested in capital assets, net of related debt Business-type activities Total governmental activities net assets 34,178,175 Unrestricted 45,410,334 14,778,358 $ 2003 Restricted Invested in capital assets, net of related debt Governmental activities (accrual basis of accounting) Last Four Fiscal Years Net Assets by Component City of Flagstaff Schedule 1 $ $ $ $ $ $ 31,330,608 402,834,190 47,953,248 323,550,334 252,731,451 20,303,463 2,392,858 230,035,130 150,102,739 11,027,145 45,560,390 93,515,204 2006 (3) (2) (1) 99 100 $ 222,008 733,159 Economic and physical development Culture and recreation 11,757,330 9,646,122 20,481,689 Capital grants and contributions Total governmental activities program revenues 19,860,371 2,678,653 - 722,236 16,164 976,793 451,802 3,257,393 80,241,288 28,401,426 460,936 3,370,447 7,319,602 17,250,441 51,839,862 8,693,714 3,428,440 Operating grants and contributions 119,854 830,885 Public works Highways and streets 743,738 4,757,483 Public safety General government Charges for services: Governmental activities: $ 74,695,348 Total primary government expense Program Revenues 27,110,257 Total business-type activities expense - 3,411,603 Airport Stormwater 7,556,614 16,142,040 Environmental Water and wastewater Business-type activities: $ 1,923,325 1,380,182 Total governmental activities expense 47,585,091 6,184,553 Interest on long-term debt 8,886,947 8,467,575 Culture and recreation Highways and streets 6,473,290 1,169,302 7,272,115 1,178,137 5,891,617 18,792,832 $ $ $ $ Fiscal Year 18,270,468 4,840,896 2004 Public works $ $ 2003 Economic and physical development Public safety General government Governmental activities: Expenses (accrual basis of accounting) Last Four Fiscal Years Changes in Net Assets City of Flagstaff Schedule 2 25,654,682 15,180,401 4,147,529 - 680,755 321,915 1,213,714 498,506 3,611,862 86,143,316 30,075,101 479,700 3,749,669 8,548,715 17,297,017 56,068,215 2,042,555 10,011,231 9,426,600 6,807,311 1,320,459 21,018,114 5,441,945 2005 $ $ $ 33,255,955 21,566,549 3,791,526 - 683,906 332,356 1,180,097 815,167 4,886,354 93,681,732 31,860,328 791,791 3,519,749 9,096,420 18,452,368 61,821,404 2,167,626 12,043,242 8,328,945 7,842,985 1,454,731 22,525,292 7,458,583 2006 101 Total primary government Business-type activities Governmental activities Change in Net Assets $ $ 26,127,375 8,482,695 17,644,680 45,354,794 606,712 23,675 106,733 Total business-type activities Total primary government $ $ $ (369,358) 25,818,897 9,846,479 15,972,418 49,057,592 1,105,683 369,358 17,302 719,023 47,951,909 (476,304) 44,748,082 14,717 7,435 634,411 905,717 492 944,381 218,520 383,111 810,739 12,122,563 - 12,073,108 7,931,626 (23,238,695) 8,740,796 (31,979,491) 37,142,222 57,002,593 25,682,974 $ $ $ $ 10,482,991 286,919 546,807 944,983 8,201,566 16,678,956 23,805,566 8,010,293 (19,227,419) 7,875,983 (27,103,402) 34,986,240 55,467,929 476,304 $ $ $ $ $ 9,460,796 382,239 - 926,406 7,682,458 16,534,341 Transers in (out) Gain on sale of capital assets Investment earnings Grants and contributions not restricted to specific programs Business-type activties: Total governmental activities Transers in (out) Contributions to permanent fund Gain on sale of capital assets Miscellaneous Investment earnings Grants and contributions not restricted to specific programs State shared sales taxes Sales taxes Property taxes Taxes Governmental activities: General Revenues and Other Changes in Net Assets Total primary government net expense Business-type activities Governmental activities Net (Expense)/Revenue Total primary government program revenues Total business-type activities program revenues Capital grants and contributions Operating grants and contributions Stormwater Airport Environmental Water and wastewater Charges for services: Business-type activities: (accrual basis of accounting) Last Four Fiscal Years Changes in Net Assets City of Flagstaff Schedule 2 (continued) $ $ $ $ $ $ $ 27,901,753 14,583,362 13,318,391 52,186,000 8,454,076 7,004,365 513,738 935,973 - 43,731,924 (7,004,365) 17,765 382,387 277,972 1,703,861 - 12,837,838 27,054,164 8,462,302 (24,284,247) 6,129,286 (30,413,533) 36,204,387 61,859,069 8,164,775 574,376 694,161 1,176,866 9,370,561 16,223,648 $ $ $ $ $ $ $ 49,673,379 24,030,865 25,642,514 57,984,779 3,776,816 2,267,551 326,540 1,181,836 889 54,207,963 (2,267,551) 24,630 33,417 204,678 2,385,099 377,502 14,384,055 30,014,975 9,051,158 (8,311,400) 20,254,049 (28,565,449) 52,114,377 85,370,332 23,449,969 369 630,962 1,261,594 9,723,652 17,047,831 102 19,723,609 - Total all other governmental funds - Capital project funds Permanent fund 13,777,410 5,946,199 9,538,404 124,702 9,413,702 - $ $ $ $ 1997 Debt service funds Special revenue funds Unreserved, reported in: Reserved All Other Governmental Funds Total general fund Unreserved Reserved General Fund (modified accrual basis of accounting) Last Ten Fiscal Years Fund Balances, Governmental Funds City of Flagstaff Schedule 3 $ $ $ $ 21,363,758 - - - 15,733,412 5,630,346 8,252,539 8,120,997 131,542 1998 $ $ $ $ 20,071,305 - - - 16,107,637 3,963,668 13,587,935 13,454,402 133,533 1999 $ $ $ $ 19,044,353 - - - 17,263,742 1,780,611 17,553,766 17,366,998 186,768 2000 $ $ $ $ 29,577,901 - - - 24,317,465 5,260,436 19,420,953 19,208,574 212,379 2001 $ $ $ $ Fiscal Year 27,583,489 - - - 26,476,529 1,106,960 18,493,931 18,318,999 174,932 2002 $ $ $ $ 22,672,624 217 - - 21,713,198 959,209 21,959,733 21,782,895 176,838 2003 $ $ $ $ 39,154,872 567 - - 37,476,678 1,677,627 23,112,032 22,891,253 220,779 2004 $ $ $ $ 34,599,132 1,426 - - 33,041,256 1,556,450 29,325,196 29,124,795 200,401 2005 $ $ $ $ 53,004,789 3,271 - 22,893,640 30,107,878 29,386,040 29,153,850 232,190 2006 103 8,372,755 5,894,807 Net change in fund balances 12,766,043 9,129,154 (10,338,807) Total other financing sources (uses) Transfers out $ - Bond premium Sale of capital assets 9,502,210 - - Lease Proceeds Improvement District - Proceeds Transfers in - - 354,194 (139,291) (13,228,564) 13,089,273 - - - Loan Proceeds Payment to bond refunding escrow agent - 9,965,751 493,485 43,610,081 691,627 1,843,607 2,265,000 8,312,245 9,225,421 4,944,639 - Bonds issued Refunding bonds issued OTHER FINANCING SOURCES (USES): 3,636,889 38,110,976 127,245 1,650,000 1,584,752 Principal retirement Interest and other charges Excess of revenues over (under) expenditures 3,364,864 44,103,566 2,327,133 - - - 783,854 1,246,090 170,026 794,953 Culture and recreation Total expenditures 920,566 782,335 Highways and streets Capital outlay 19,576,193 19,079,704 12,167,725 4,739,143 Debt service: $ 1998 12,001,887 2,958,052 41,747,865 2,200,448 Economic and physical development Public works Public safety General governmental EXPENDITURES: Total revenues Miscellaneous - Investment earnings Contributions 782,451 Fines and forfeitures - 1,279,410 Licenses and permits Rents 132,847 Special assessments - 17,704,496 18,776,929 871,284 $ $ 1997 Charges for services Grants and entitlements Intergovernmental Taxes REVENUES: (modified accrual basis of accounting) Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds City of Flagstaff Schedule 4 $ $ 4,043,033 516,493 (10,313,380) 9,876,521 - - 55,352 898,000 - - - - 3,526,540 45,156,409 2,006,000 1,718,604 2,380,000 5,536,908 8,584,084 6,632,815 752,777 13,299,094 4,246,127 48,682,949 2,310,761 - - - 838,306 1,335,184 157,640 837,373 - 22,621,143 20,582,542 1999 $ $ 2,938,879 (365,145) (11,947,847) 11,582,702 - - - - - - - - 3,304,024 54,107,289 8,756,365 1,616,866 2,265,000 7,042,108 9,582,477 6,826,950 727,764 13,533,876 3,755,883 57,411,313 4,347,916 720,000 - - 837,695 1,324,340 175,863 1,030,249 - 26,778,117 22,197,133 2000 $ $ 12,713,968 3,785,219 (11,931,179) 11,241,055 - - - - - - - 4,475,343 8,928,749 52,523,698 2,165,989 1,498,920 2,708,000 7,735,150 9,325,540 8,009,996 1,066,174 15,480,047 4,533,882 61,452,447 3,300,386 - - - 993,585 1,318,450 269,794 1,025,625 - 26,203,650 $ $ 12,994,104 - - - - - - - 3,100,000 (5,721,127) 68,918,699 5,788,006 1,443,074 2,979,000 15,648,877 10,030,055 10,187,883 950,242 16,057,019 5,834,543 63,197,572 3,169,599 - - - 991,131 2,014,357 350,894 1,676,615 - 24,008,885 30,986,091 2002 (3,234,667) 2,486,460 (13,607,644) Fiscal Year 28,340,957 2001 $ $ (1,347,639) 605,215 (13,184,784) 12,708,480 946,236 190,240 - - (9,429,957) - - 9,375,000 (1,952,854) 66,304,475 18,304,161 1,380,182 3,679,000 5,676,050 7,599,703 7,060,275 948,944 17,202,980 4,453,180 64,351,621 781,496 334,235 274,472 845,443 1,303,069 2,378,728 360,158 1,729,275 13,074,562 11,746,308 31,523,875 2003 $ $ 17,469,212 26,326,147 (13,365,892) 12,996,534 634,411 1,059,221 - - (718,127) - 25,000,000 720,000 (8,856,935) 72,726,564 19,348,708 2,428,026 4,614,000 8,003,110 7,724,481 6,289,966 966,546 18,015,837 5,335,890 63,869,629 905,717 21,917 115,433 985,907 1,144,562 2,111,033 291,684 1,459,837 10,940,934 12,156,451 33,736,154 2004 $ $ 1,657,424 4,645,277 (16,582,052) 15,312,931 2,114,398 - - - - 3,800,000 - - (2,987,853) 74,103,302 17,053,841 2,148,734 4,880,000 8,951,097 8,341,105 6,424,057 1,005,745 19,140,415 6,158,308 71,115,449 277,972 22,229 1,589,293 1,220,007 1,250,494 2,063,718 218,500 1,834,067 9,564,110 17,545,686 35,529,373 2005 $ $ 17,829,287 29,490,427 (19,584,684) 17,317,133 37,892 220,086 - - - - 31,500,000 - (11,661,140) 89,047,123 25,054,173 2,552,016 6,505,449 10,700,196 7,178,029 7,640,313 1,168,424 21,626,547 6,621,976 77,385,983 204,678 129,930 2,238,285 1,195,464 1,394,174 2,834,506 30,016 2,199,819 10,880,792 17,173,416 39,104,903 2006 104 2,759 2,853 3,070 3,427 3,425 3,619 4,209 2000 2001 2002 2003 2004 2005 2006 1997 - 2006 87.57% 2,578 1999 Change 2,406 2,244 1997 1998 Property Tax Year $ General Fiscal $ (modified accrual basis of accounting) (dollars in thousands) Last Ten Fiscal Years 43.43% 4,881 4,856 4,628 4,415 4,198 3,896 3,777 3,538 3,356 3,403 Property Tax Secondary Tax Revenue by Source, Governmental Funds City of Flagstaff Schedule 5 $ 53.39% 2,083 1,943 2,262 1,783 1,791 1,690 1,506 1,561 1,512 1,358 Other Taxes Franchise and $ 73.19% 14,707 13,148 12,055 11,469 11,783 10,811 10,510 9,369 8,966 8,492 Sales Tax City $ 40.95% 4,623 4,331 4,063 3,827 3,817 3,748 3,645 3,537 3,336 3,280 Tax and Booze Bed, Board $ - - - - 100.00% 8,602 7,632 7,303 6,603 6,327 5,343 Tax Transportation $ 108.26% 39,105 35,529 33,736 31,524 30,986 28,341 22,197 20,583 19,576 18,777 Total 105 4,136,724 4,449,982 4,900,117 5,652,335 2004 2005 2006 4,919,575 2001 2003 4,785,424 2000 4,076,034 4,353,556 1999 2002 4,061,346 3,845,330 1997 1998 Sales Tax Year $ State Fiscal $ 5,655,641 4,918,476 4,777,145 5,557,918 5,526,159 6,432,879 6,062,290 5,489,912 4,725,837 4,170,641 Income Tax State (modified accrual basis of accounting) Last Ten Fiscal Years $ 2,655,653 2,461,425 2,427,367 2,378,466 1,803,900 1,913,662 1,902,188 1,847,142 1,533,501 1,504,060 In-Lieu Tax County Auto Intergovernmental Revenue by Source, Governmental Funds City of Flagstaff Schedule 6 $ 7,540,081 7,171,383 6,975,351 7,408,116 7,771,416 7,969,703 7,427,210 7,207,158 5,371,446 5,852,957 User Tax Highway $ Local 304,341 313,843 313,868 315,026 300,246 360,806 367,461 367,911 394,318 366,453 Assistance Transportation $ State - - - - 47,598 142,793 312,249 - - - HB 2565 $ 2,386,011 1,772,181 1,160,966 1,743,613 2,348,793 1,731,823 1,474,751 1,763,054 1,448,951 694,916 Grants Federal $ State Grants 1,398,796 2,868,033 454,212 823,701 437,543 317,059 370,391 272,297 553,963 380,042 & Other State $ County 420,426 628,198 468,069 - - - - - - - LEAF IGA $ County Library 2,040,924 2,036,500 1,921,433 1,607,306 1,423,105 1,835,109 1,068,817 1,101,729 955,342 890,097 District Funding $ - 39,640 148,992 850,000 274,091 580,241 3,007,336 218,384 35,000 - Other $ 28,054,208 27,109,796 23,097,385 24,820,870 24,008,885 26,203,650 26,778,117 22,621,143 19,079,704 17,704,496 Total 106 35,621,681 29,405,068 27,328,709 27,532,435 2003 2004 2005 2006 $ 237,795,313 221,179,062 211,870,593 194,944,521 197,065,506 192,395,566 190,494,910 173,940,245 162,168,726 154,803,738 Property Commercial $ Vacant, 100,985,606 82,683,618 65,128,715 62,099,966 60,199,456 51,001,338 49,352,556 48,929,326 44,354,467 45,676,982 Property and Government Agricultural, $ 315,182,546 276,187,028 242,190,760 215,320,769 201,111,291 189,936,966 180,667,749 170,882,075 161,906,739 145,436,287 Property Residential $ Less: 57,296,001 50,697,830 46,939,696 43,729,051 42,767,442 35,535,505 34,550,373 30,236,121 27,643,689 27,336,262 Property Tax-exempt (1) The Legal Classes changed in 2001 from prior years values are equal to actual value. Tax rates are per $100 of assessed value. Note: A portion of city property is reassessed every year. Property is assessed at actual value, therefore, the assessed Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll 33,068,867 2002 31,232,035 21,765,191 2000 (1) 22,050,677 1999 2001 21,839,314 22,683,523 1997 1998 Valued Property Year $ Centrally Fiscal (modified accrual basis of accounting) Last Ten Fiscal Years Full Cash Value of Taxable Property City of Flagstaff Schedule 7 $ 624,199,899 556,680,587 501,655,440 464,257,886 448,677,678 429,030,400 407,730,033 385,566,202 362,625,557 341,264,268 Value Assessed Total Taxable $ 1.6627 1.7127 1.7127 1.7127 1.7127 1.7127 1.7127 1.7127 1.7127 1.8283 Tax Rate Total Direct 107 1.7127 1.7127 1.7127 1.7127 1.7127 1.7127 1.6627 2000 2001 2002 2003 2004 2005 2006 $ 6.0786 5.7236 6.3679 6.7590 6.6741 6.6885 6.5585 6.5477 6.6634 6.5237 Note: Tax rates are per $100 assessed valuation. 1.7127 1999 1.8283 1.7127 $ 1998 1997 School District Year City Fiscal (rate per $100 of assessed value) Last Ten Fiscal Years Direct and Overlapping Property Tax Rates, City of Flagstaff Schedule 8 $ 0.5525 0.5660 0.5775 0.5809 0.5717 0.5724 0.5947 0.3952 0.3869 0.3784 College Community $ 1.2010 1.2212 1.2369 1.1941 1.0951 1.1336 1.1444 1.1094 1.1168 1.1386 County $ 9.4948 9.2235 9.8950 10.2467 10.0536 10.1072 10.0103 9.7650 9.8798 9.8690 Total 108 3,729,503 3,470,890 3,196,125 2,831,882 Little America Refining Co. Cone Company George & Thomas DBA Flagstaff Medical Center Inc UniSource Energy Corporation $ Total Assessed Source: Arizona Department of Revenue, Central Information Services Total Principal Taxpayers 55,992,535 2,657,380 13,322,061 2,001,095 5,284,207 2,528,340 2,655,093 3,503,358 6,863,664 13,153,223 Value Coconino County RSA Ltd Partnership 10.42% 0.51% 0.57% 0.62% 0.67% 0.71% 0.77% 0.79% 1.47% 1.98% 2.33% Assessed Valuation Secondary 7 5 1 10 4 9 8 6 3 2 Rank 18.25% 0.87% 1.31% 4.34% 0.65% 1.72% 0.82% 0.87% 1.14% 2.24% 4.29% Assessed Valuation Secondary As a Percentage of the City Total As a Percentage 1997 of the City Total 4,024,114 10 9 8 7 6 5 4 3 2 1 Rank 2006 Northern Arizona Gas Division US West Communications 58,008,964 3,938,375 Flagstaff Mall Associated Ltd. Partnership $ 4,259,944 Walgreen Arizona Drug Co. Woodlands Plaza Hotel LTD Partnership 4,396,489 Nestle Purina Petcare Company 11,048,603 12,962,238 8,174,915 $ Value Total Assessed Qwest Corporation W L Gore & Associates Inc. Arizona Public Service Company Taxpayer Current Year and Nine Years Ago Principal Property Tax Payers City of Flagstaff Schedule 9 109 7,271,109 7,613,349 7,897,298 8,494,694 9,075,322 2002 2003 2004 2005 2006 6,526,010 2000 6,936,955 6,138,071 1999 2001 5,754,253 5,638,222 1998 $ $ June 30, 1997 Fiscal Year Ended 8,958,733 8,330,157 7,791,735 7,625,852 7,194,162 6,658,250 6,443,879 6,036,950 5,651,170 5,566,676 Amount for the Year 98.7% 98.1% 98.7% 100.2% 98.9% 96.0% 98.7% 98.4% 98.2% 98.7% of Levy Percentage Collected within the Fiscal Year of the Levy Taxes Levied Fiscal Last Ten Fiscal Years Property Tax Levies and Collections City of Flagstaff Schedule 10 $ Collections 131,194 145,051 261,445 92,457 74,106 90,944 92,342 78,594 110,323 79,945 Years in Subsequent $ 9,089,927 8,475,208 8,053,180 7,718,309 7,268,268 6,749,194 6,536,221 6,115,544 5,761,493 5,646,621 Amount 100.0% 100.0% 102.0% 101.0% 100.0% 97.3% 100.2% 99.6% 100.1% 100.1% of Levy Percentage Total Collections to Date 110 1.0000% 2003 1.0000% 1.0000% 2002 2006 1.0000% 2001 1.0000% 1.0000% 2000 2005 1.0000% 1999 1.0000% 1.0000% 1998 2004 1.0000% Sales Tax General 1997 Year Fiscal Last Ten Fiscal Years 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% & Beverage City Bed, Board Direct and Overlapping Sales Tax Rates, City of Flagstaff Schedule 11 0.6010% 0.6010% 0.6010% 0.5745% 0.5745% 0.5745% 0.0000% 0.0000% 0.0000% 0.0000% Transportation 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.0000% 5.0000% 5.0000% 5.0000% Arizona State of 0.9250% 0.9250% 0.9250% 0.9250% 0.8000% 0.8000% 0.8000% 0.8000% 0.5000% 0.5000% County Coconino 10.1260% 10.1260% 10.1260% 10.0995% 9.9745% 9.9745% 8.8000% 8.8000% 8.5000% 8.5000% Total 111 5,795 4,285 32,875 2004 2005 2006 $ Special 340 415 685 944 1,188 Bonds Assessment $ 9,665 11,555 13,380 14,790 16,520 Bonds Revenue Governmental Activities $ 25,610 26,895 28,170 4,445 4,700 Bonds Corporation Facility Municipal $ 3,455 3,800 - - - Leases Capital These amounts are presented on the accrual basis of accounting. Prior Statements have not been restated to comply with the new requirements. The City implemented GASB 34 for the fiscal year ended June 30, 2003. See Schedule 17 for personal income and population data. New bond issues include $31.5 million in general obligation bonds. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 7,485 8,935 2003 $ Bonds Year 2002 Obligation Fiscal General (dollars in thousands, except per capita) Last Five Fiscal Years Ratios of Outstanding Debt by Type, City of Flagstaff Schedule 12 $ General 16,294 18,880 21,253 22,958 25,050 Bonds Obligation $ 5,770 6,035 6,290 6,537 - Bonds Revenue $ 2,671 3,031 3,380 3,716 4,048 Payable Loan Term Business-Type Activities $ 2,652 2,732 - - - Leases Capital $ Total 99,332 77,628 78,953 60,875 60,441 Government Primary Percentage Income 3.1% 2.4% 2.4% 2.0% 2.1% $ of Personal Per 1,592.60 1,244.62 1,288.61 997.46 1,021.65 Capita 112 16,419 18,880 21,253 22,958 25,050 Bonds 49,294 23,165 27,048 30,443 33,985 Total 7.9% 4.2% 5.4% 6.6% 7.6% Property Value of Taxable of Actual Percentage a Per 790.34 371.41 441.46 498.82 574.46 Capita These amounts are presented on the accrual basis of accounting. Prior Statements have not been restated to comply with the new requirements. The City implemented GASB 34 for the fiscal year ended June 30, 2003. b: Population data can be found in Schedule 17 a: See Schedule 7 for property value data Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 32,875 2006 5,795 2004 4,285 7,485 2003 2005 8,935 2002 Bonds Year Obligation General General Obligation Activities Activities Fiscal Business-Type Governmental General Bonded Debt Outstanding (dollars in thousands, except per capita) Last Five Fiscal Years Ratios of General Bonded Debt Outstanding City of Flagstaff Schedule 13 b 113 $ Debt 18,180 24,248 Outstanding 47.00% $ 65.00% $ Applicable* Percentage Estimated * For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. 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 Flagstaff. This process recognizes that, when considering the City'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. 24356.0 50 24,306 8,545 15,761 Debt Overlapping Share of Estimated Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. Total direct and overlapping debt City direct debt Subtotal, overlapping debt Coconino County General Obligation Debt Flagstaff Unified School District Debt repaid with property taxes Governmental Unit (dollars in thousands, except per capita) Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt City of Flagstaff Schedule 14 114 as a percentage of debt limit Total net debt applicable to the 6% limit Legal debt margin (Available borrowing capacity) Total net debt applicable to 6% limit Debt limit equal to 6% of assessed valuation 6% Debt Limit as a percentage of debt limit Total net debt applicable to the 20% limit $ $ $ 86.54% 10,960 $ 9,485 20,445 1997 141.71% 28,195 $ $ $ Legal debt margin (Available borrowing capacity) 68,149 39,954 $ 1997 Total net debt applicable to 20% limit Debt limit equal to 20% of assessed valuation 20% Debt Limit (dollars in thousands) Last Ten Fiscal Years Legal Debt Margin Information City of Flagstaff Schedule 15 $ $ 69.41% 12,866 $ 8,930 21,796 1998 100.23% 36,285 $ 36,370 72,655 1998 $ $ 62.28% 13,408 $ 8,350 21,758 1999 81.29% 40,006 $ 32,519 72,525 1999 $ $ 50.08% 15,414 $ 7,720 23,134 2000 59.54% 48,334 $ 28,779 77,113 2000 $ $ 37.53% 17,826 $ 6,690 24,516 2001 Fiscal Year 49.46% 54,676 $ 27,043 81,719 2001 Fiscal Year $ $ 27.55% 20,182 $ 5,560 25,742 2002 49.54% 57,381 $ 28,425 85,806 2002 $ $ 17.56% 23,695 $ 4,160 27,855 2003 39.48% 66,569 $ 26,283 92,852 2003 $ $ 9.28% 27,544 $ 2,555 30,099 2004 32.30% 75,838 $ 24,493 100,331 2004 $ $ 3.81% 32,176 $ 1,225 33,401 2005 24.13% 89,692 $ 21,644 111,336 2005 61.08% 23,250 14,202 37,452 2006 39.31% 89,613 35,227 124,840 2006 115 Legal 6% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: Debt Limit of 6% of Assessed Value 6% Limitation Legal 20% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: Debt Limit of 20% of Assessed Value 20% Limitation Net Secondary Assessed Value as of June 30, 2006 Legal Debt Margin Calculation for Fiscal Year 2006 (dollars in thousands) Legal Debt Margin Information City of Flagstaff Schedule 15 (continued) $ $ $ $ $ 23,249,694 14,202,300 37,451,994 89,613,216 35,226,764 124,839,980 624,199,899 116 16,773,884 17,606,349 18,337,310 17,637,708 16,769,463 17,227,848 16,851,956 17,755,038 1999 2000 2001 2002 2003 2004 2005 2006 16,767,650 16,515,478 1997 1998 Revenues Year $ Gross Fiscal (dollars in thousands) Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 16 $ 11,791,895 10,693,901 10,645,073 9,865,571 9,587,743 9,757,448 8,311,186 7,700,535 7,916,657 7,973,540 Expenses $ 5,963,143 6,158,055 6,582,775 6,903,892 8,049,965 8,579,862 9,295,163 9,073,349 8,850,993 8,541,938 Service for Debt Available Revenue Net $ 264,717 255,648 246,890 238,431 - - - - - - Principal $ - - - - - - 214,084 223,153 231,034 17,741 Interest $ Debt Service Requirements Water and Sewer Revenue Bonds - - - - - - 478,801 478,801 477,924 256,172 Total $ 12.45 12.86 13.77 26.95 - - - - - - Coverage 117 5,371,446 7,207,158 7,427,210 7,969,703 7,771,416 7,408,116 6,975,351 7,171,383 7,540,081 1999 2000 2001 2002 2003 2004 2005 2006 5,852,957 1998 $ Revenue Year 1997 User Tax Fiscal Highway (dollars in thousands) Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 16 (continued) $ 1,890,000 1,825,000 1,410,000 1,730,000 1,490,000 1,420,000 1,375,000 1,290,000 1,230,000 1,165,000 Principal $ 526,285 571,910 607,160 668,260 900,492 960,133 1,016,507 1,082,148 1,147,592 1,214,965 Interest $ Debt Service Requirements 2,416,285 2,396,910 2,017,160 2,398,260 2,390,492 2,380,133 2,391,507 2,372,148 2,377,592 2,379,965 Total Highway User Revenue Bonds 3.12 2.99 3.46 3.09 3.25 3.35 3.11 3.04 2.26 2.46 Coverage 118 62,371 2006 (thousands 3,234,303 3,234,303 3,234,303 3,011,724 2,908,992 2,787,863 2,661,712 2,448,155 2,319,364 2,161,021 $ 26,362 26,362 26,362 24,871 24,259 23,716 22,815 21,232 20,191 18,883 Income Personal Income of dollars) Per Capita Personal 26.8 26.8 26.8 26.8 26.8 26.8 26.8 NA NA NA Age Median Education NA NA NA 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% Grad or Higher High School Level - Percent Education 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% School Unemployment - Arizona Department of Economic Security School enrollment - Arizona Department of Education and National Center for Education Statistics Education level - 2000 US Census Median age - 2000 US Census Per Capita Income - 2005 - 2006 Arizona Department of Economic Security, Workforce Development Statistics, estimate form 2004 Per Capita Income - 1997 - 2004 Arizona Department of Economic Security, Workforce Development Statistics 13,389 13,389 13,176 12,905 13,566 13,969 12,682 12,880 13,249 12,679 Enrollment Personal Income - 2005 - 2006 Arizona Department of Economic Security, Workforce Development Statistics, estimate form 2004 Personal Income - 1997 - 2004 Arizona Department of Economic Security, Workforce Development Statistics NA NA NA or Higher Bachelor's Degree Level - Percent Population - Arizona Department of Economic Security, except for 2000 which is the official census number Sources: 61,270 62,371 2004 61,030 2003 2005 57,700 59,160 2001 2002 59,945 52,894 1999 58,145 1998 2000 55,885 $ Population 1997 Year Last Ten Fiscal Years Demographic and Economic Statistics City of Flagstaff Schedule 17 * Rate 5.00% 5.10% 5.20% 5.80% 5.10% 4.80% 5.20% 6.60% 6.60% 6.50% Unemployment 119 38.59% 11.01% 6.49% 5.52% 4.22% 3.49% 3.08% 1.30% 1.30% 1.30% 0.91% Percentage of Total City Employment Historical information not available. Trended comparisons will be presented in future years. 1 2 3 4 5 6 7 8 9 10 Rank 2006 Source: Arizona Department of Economic Security, Workforce Arizona Statistics June 2006 Estimtated number of workers = 30,822 11894 Total 2000 U.S. Census Labor Force 3,393 1,999 1,700 1,300 1,075 948 400 400 400 279 Employees Northern Arizona University Flagstaff Medical Center Flagstaff United School District W.L. Gore & Associates Coconino County City of Flagstaff Walgreens Distribution Center Grand Canyon Railway Coconino Community College SCA Tissue Employer Current Year Principal Employers City of Flagstaff Schedule 18 120 Total General Government Management services Capital management City Court Public Safety Police Fire Public Works Economic and physical development Building Planning Tourism Culture and recreation Library Parks, recreation, and beautificatioin Highways and Streets Water and wastewater Environmental services Airport Stormwater Function/Program Last Ten Fiscal Years 53.50 16.25 6.00 35.25 65.25 36.00 71.00 27.00 9.50 - 53.50 13.00 5.00 34.00 60.00 33.50 69.00 25.50 9.50 642.25 130.50 81.25 30.25 122.25 80.00 28.75 612.25 62.25 18.25 1998 60.00 18.25 1997 Full-time Equivalent City Government by Function/Program City of Flagstaff Schedule 19 657.75 35.75 68.00 35.25 72.00 27.00 9.50 - 55.00 17.00 6.00 132.75 84.00 30.25 65.00 20.25 1999 685.25 37.00 73.25 35.25 72.00 39.75 9.50 - 57.40 17.10 6.00 138.25 84.50 25.75 69.25 20.25 700.00 37.50 74.00 35.25 71.75 40.00 9.50 - 57.00 17.00 6.00 147.50 84.50 26.75 72.00 21.25 746.25 38.75 79.25 35.25 74.75 45.00 9.50 - 48.00 17.25 6.00 148.25 97.25 26.75 77.00 19.00 24.25 741.25 39.50 74.50 36.25 74.50 45.00 9.50 - 49.00 17.25 6.00 148.25 96.75 27.00 74.00 18.50 25.25 Full-time Equivalent Employees as of June 30 2000 2001 2002 2003 739.00 39.50 67.75 36.25 73.00 45.75 9.50 5.75 43.75 17.25 11.75 150.00 96.75 27.00 73.00 15.50 26.50 2004 743.45 40.00 63.95 36.25 74.50 52.25 9.50 5.00 43.00 17.25 13.75 151.00 96.75 25.00 74.25 14.50 26.50 2005 768.03 40.00 67.53 36.25 76.50 54.00 9.50 6.50 49.25 15.25 13.75 160.00 97.75 26.00 75.75 13.50 26.50 2006 121 (1) (1) 48.33 NA NA 59,963,201 29,051,528 110684 7886 713,193 36,057 NA NA NA NA 45.36 NA NA 78,719,935 12,843,323 128153 9126 698,227 34,984 NA NA NA NA NA NA NA NA NA 1,516 759 882 917 3,658 216 1,205 NA NA 11,068 10,613 622 2003 47.95 564,065 781,893 67,214,811 18,123,934 109608 9213 673,786 38,387 NA NA NA NA NA NA NA NA NA 2,020 408 521 709 5,616 265 2,023 2,212 1,340 10,236 10,388 682 2004 52.90 582,726 776,180 87,180,707 12,324,654 140233 9816 653,743 42,483 2,988 73,559 11,266 9,435 4,979 12,378 1,464 8,818 3,616 1,065 311 792 834 6,722 228 1,905 2,006 1,348 9,227 11,253 673 2005 59.48 625,103 758,468 154321 9866 705,638 39,646 1,962 77,239 11,741 9,175 5,337 13,381 1,598 9,136 3,313 585 662 694 557 7,684 351 1,323 1,966 1,280 9,705 10,575 616 2006 (1) This informaition is gathered and reported on a calendar year basis versus a fiscal year basis for all other measurements Sources: Various city departments Tourism RevPar Library Visits Circulation Community Development Residential Permit Valuation Commercial Permit Valuation Refuse collection Refuse collected (Landfill tonnage) Recyclables collected (total tons) Airport Fuel Flowage (Gallons Sold) Enplanements Streets Potholes repaired Calls dispatched to Police/Sheriff Calls dispatched to Fire Calls dispatched to Medical NA NA NA NA NA Police Felony reports Misdemeanor reports Domestive violence incidents Non-crime reports Accident reports 3,386 352 2,094 NA NA NA NA NA NA Emergency responses Fires response Other calls Inspections assigned Plan Reviews 11,005 10,431 575 2002 Fuel Management Plan Assessment (Acres) Site Marking (Acres) Site Thinning (Acres) Prescription Burn (Acres) Fire Court Criminal Filings Traffic filings Domestic Violence/Other filings Function/Program Last Five Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 20 122 Airport Fixed base operators Locally based aircraft Tiedowns Enclosed hangars Open hangars Environmental services Average number of residential collection accounts Check with Rebecca Water and wastewater Miles of sewer Number of manholes Total active water accounts Average gallon water usage per household per month Highways and Streets Miles of streets, alleys, and sidewalks Number of street lights Culture and recreation Number of developed parks Number of undeveloped parks Park acreage Flagstaff Urban Trail System - Miles Total number of recreation facilities Economic and physical development Number of residential permits processed Number of commercial permits processed Public Safety Police - Number of calls for Service Police patrol units Number of fire hydrants Numer of fire stations Function/Program Last Ten Fiscal Years Capital Asset Statistics by Function/Program City of Flagstaff Schedule 21 1 112 49 33 38 213 Unavail 14,196 7,600 308 2,460 29 Unavail 602 18 60 55,131 27 Unavail 5 1997 1 110 49 33 38 227 Unavail 14,690 6,911 321 2,708 31 Unavail 602 19 60 55,853 28 Unavail 5 1998 1 110 49 33 38 231 Unavail 14,961 6,576 324 2,740 31 Unavail 602 19 60 54,852 28 Unavail 6 1999 1 130 49 47 38 237 Unavail 15,230 6,546 324 2,768 31 Unavail 602 19 83 53,620 31 Unavail 6 2000 1 130 49 47 38 243 Unavail 15,600 6,848 330 2,777 26 3 578 21 88 53,445 32 Unavail 6 1 130 49 42 38 250 5,857 15,802 6,897 350 2,853 27 3 586 22 90 58,754 32 2,382 6 Fiscal Year 2001 2002 1 130 49 42 38 271 5,979 16,356 6,727 350 2,898 27 3 586 22 92 55,801 32 2,435 6 2003 1 130 49 42 38 275 6,097 16,948 6,070 365 2,921 28 4 704 28 124 55,625 26 2,478 6 2004 1 130 29 42 38 275 6,097 18,039 6,096 365 2,921 27 4 702 32 122 55,709 26 2,478 6 2005 1 130 18 61 48 293 6,496 17,872 5,488 386 3,037 27 4 702 34 122 55,464 26 2,598 6 2006 123 $ Auto Liability* $ $ 3,000,000 1,000,000 Statutory 1,000,000 / disease policy limit 1,000,000 / disease employee $ $ 1,000,000 / each accident $ / aggregate 20,000,000 / each event/ Wrongful Act $ employment related practices, nuclear) (Excluding discrimination, asbestos, terrorism, / aggregate 5,000,000 / each occurrence/ Wrongful Act $ Excess Liability #2 Following Form Over Excess Liability # 1 Asbestos, Lead, Condemnation, Sexual Abuse) (Excludes Employment Practices, Failure to supply Services, Mold, Terrorism, Public Entity Management, Employee Benefits Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employment Liability Worker's Compensation Employer's Liability aggregate each wrongful act 5,000,000 / aggregate 5,000,000 / each wrongful act 1,000,000 / aggregate 1,000,000 / each wrongful act 1,000,000 / each accident 1,000,000 / aggregate 1,000,000 / each wrongful act 2,000,000 / aggregate 2,000,000 / each event 2,000,000 / aggregate 1,000,000 / per occurrence * Liability Claims are Subject to a $50,000 Self Insurance Retention $ (Claims Made) Employee Benefits Liability* $ (Claims Made Retro Date 6-1-95) $ Employment Practices Liability* (Claims Made Retro Date 6-1-95) $ Public Entity Management Errors and Omissions* $ $ $ $ $ $ Limit of Liability Law Enforcement Liability* ERP Healthcare (EMT) Liability (Includes 2 Skateboard Parks) General Liability* Liability Insurance: Coverage In Effect June 1, 2006 to May 31 , 2007 Insurance Summary City of Flagstaff Schedule 22 Lab Equipment $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Computer Fraud Hangar Keepers Liability Contractual, Construction & Demolition Products/Completed Operations Liability, Aviation: (Inside and Outside) Theft, Disappearance, & Destruction $ $ $ $ $ $ 116,900 / contents 30,000,000 / aggregate 30,000,000 / each occurrence 30,000,000 / each aircraft 30,000,000 / each occurrence 5,000 / $500 deductible 250,000 / $5,000 deductible 1,000,000 / $5,000 deductible $1,000 deductible 25,000,000 / $5,000 deductible 25,000 / each location 24,000 / $1,000 deductible 248,500 / $1,000 deductible 500,000 / $1,000 deductible 1,190,000 / $1,000 deductible 35,000 / $1,000 deductible 11,300 / $1,000 deductible 3,944,410 / $5,000 deductible ($5,000 deductible) 500,000 / contents each 500,000 / each building 220,000 / building / $5000/collision deductible 17,603,939 / $1000/comprehensive 7,000,000 / 24 hours 15,000,000 / $25,000 deductible 10,000,000 / $50,000 deductible 109,353,579 / $25,000 deductible Limit of Liability Dishonesty Bond Including Faithful Performance of Duty Blanket Public Employees and Treasurer Crime: Boiler and Machinery City Hall, Visitor Center, Airport Terminal Fine Arts Exhibition Floater Scheduled Fine Arts Replacement Cost Coverage Laptops and Portables - Computer Data and Media Computer Equipment and Peripherals Employee Hand Tools Contractors Equipment (actual cash value) City Hall, Library Municipal Court Flood Zone A Properties Auto Physical Damage Business Income/Extra Expense Earthquakes Flood Zones B and C including traffic signals Blanket Buildings and Personal Property Property Insurance: Coverage 124 City of Flagstaff 211 W e s t A s p e n A v e n u e Fl a g s t a f f, A r i z o n a 8 6 0 01 w w w. f l ag s t af f. a z . g ov