Enhancing Flagstaff’s Quality of Life Through Recreation 09 F L A G S T A F F, A R I Z O N A 2009 Cit y of Flagstaf f Comprehensive Annual Financial Repor t Fiscal Year Ended June 30, 2009 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2009 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, 2009 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal ......................................................................................................................................... iii GFOA Certificate of Achievement .....................................................................................................................xii Organizational Chart ....................................................................................................................................... xiii List of Elected and Appointed Officials ............................................................................................................ xiv FINANCIAL SECTION Independent Auditor’s Report ........................................................................................................................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ........................................................................................................... 3 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Assets ..................................................................................................................... 15 Statement of Activities ....................................................................................................................... 16 Fund Financial Statements: Balance Sheet – Governmental Funds.................................................................................................. 18 Reconciliation of the Balance Sheet to the Statement of Net Assets - Governmental Activities ............ 20 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ............ 22 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................... 24 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 26 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 27 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 28 BBB Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 29 Statement of Net Assets – Proprietary Funds ...................................................................................... 30 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds ............................................................................................ 32 Statement of Cash Flows – Proprietary Funds ..................................................................................... 34 Notes to the Financial Statements ............................................................................................................. 38 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds: Special Revenue Funds ....................................................................................................................... 81 Debt Service Funds ............................................................................................................................. 81 Permanent Fund ................................................................................................................................. 81 i Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ............................................................. 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ........................................................................ 84 SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity ...................................................................................................... 88 Schedule of Changes By Function and Activity .................................................................................... 90 Budgetary Comparison Schedules – Other Major Governmental Funds Capital Projects Fund ......................................................................................................................... 91 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ....................................................................................................................................... 92 Real Estate Proceeds Fund .................................................................................................................. 93 Community Redevelopment Fund ....................................................................................................... 94 Metropolitan Planning Organization Fund .......................................................................................... 95 General Obligation Bond Fund ............................................................................................................ 96 Secondary Property Tax Revenue Fund ............................................................................................... 97 Special Assessment Bond Fund........................................................................................................... 98 STATISTICAL SECTION Net Assets by Component ...................................................................................................................... 100 Changes in Net Assets ............................................................................................................................ 102 Fund Balances, Governmental Funds ....................................................................................................... 104 Changes in Fund Balances, Governmental Funds .................................................................................... 105 Tax Revenue by Source, Governmental Funds ......................................................................................... 106 Intergovernmental Revenue by Source, Governmental Funds .................................................................. 107 Full Cash Value of Taxable Property........................................................................................................ 108 City Tax Revenue by Classification.......................................................................................................... 109 Direct and Overlapping Property Tax Rates ............................................................................................. 110 Principal Property Tax Payers .................................................................................................................. 111 Property Tax Levies and Collections........................................................................................................ 112 Direct and Overlapping Sales Tax Rates .................................................................................................. 113 Ratios of Outstanding Debt by Type ....................................................................................................... 114 Ratios of General Bonded Debt Outstanding ........................................................................................... 115 Direct and Overlapping Governmental Activities Debt ............................................................................. 116 Legal Debt Margin Information ............................................................................................................... 118 Pledged Revenue Coverage ..................................................................................................................... 120 Demographic and Economic Statistics..................................................................................................... 124 Principal Employers ................................................................................................................................ 125 Full-time Equivalent City Government by Function/Program ................................................................... 126 Operating Indicators by Function/Program ............................................................................................. 128 Capital Asset Statistics by Function/Program .......................................................................................... 130 Insurance Summary ................................................................................................................................ 131 ii City of Flagstaff December 23, 2009 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, 2009, 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. Eide Bailly, LLP 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, 2009, 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, 2009, 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 requires 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 the MD&A and should be read in conjunction with it. Flagstaff’s MD&A can be found immediately following the report of the independent auditors. The City of 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 2009 estimate by the Arizona Department of Economic Security is approximately 64,693. 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 division 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 of Flagstaff has had negative economic indicators since approximately December 2007. All local and state shared sales tax, construction revenues, state shared income tax, and highway user (gas tax) revenues have decreased. Housing sales have decreased and the median home price has decreased moderately. Our community partners in both the public, private, and governmental sectors have experienced closure, staffing layoffs or furloughs, and declining revenues. A number of new projects anticipated to build the retail sector have been delayed or canceled due to the lack of available capital. The economic analysts for our local and state region give mixed messages on when the recovery may start. The City collects three different retail sales taxes: The first is a 1% tax on all general sales, except for food. This is a general purpose tax that benefits the General Fund. The City of Flagstaff is the only city left in the State of Arizona that has a sunset clause on the general sales tax. This tax must go before the voters every ten years to be validated and this tax next expires in 2014. Currently, the City anticipates having the sales tax extension to 2024 on the May 18, 2010 ballot. Local sales tax declines have been realized every month since December 2007 in comparison to the same month in the prior year except for April 2008. Overall city sales tax receipts have decreased 10.9%. While most local sales tax sectors have experienced reductions, the two industries with the greatest impact are construction with a 29.4% decrease and auto sales with a 35.0% decrease. Construction and auto sales represent 20% and 8% respectively of all sales tax receipts. Overall local sales tax estimates are more than $5 million dollars less for Fiscal Year 2009-2010 than what had been projected for the same fiscal year a year ago. The second is a 0.721% sales tax on the same types of general sales; however the tax is restricted in use to certain transportation projects. Improvements, 4th The four components of this tax include Safety Improvements, Street Street Overpass, and Transit. The transportation tax components expire in 2020. As this funding shifts from construction to maintenance, the City will pursue a permanent component to this tax. As similar sales are taxed with this source, revenue declines follow the same trends as the general sales tax. The third tax is a Bed, Board, and Beverage (BBB) tax that collect an additional 2% for motel rooms/campgrounds, restaurants, and bars restricted in use to certain economic, arts, beautification, recreation or tourism activities. The BBB tax expires in 2013 and the City is working cooperatively with the local hoteliers and restaurateurs to evaluate the continuation of this tax to best meet City needs. Tourism is a major industry for our sector and overall sales have been consistently decreasing on a monthly basis since approximately July 2008 when the gas prices were peaking. In FY 2009, BBB tax revenues declined 2.6% and an additional 2% to 8% is indicated for Fiscal Year 2010. State shared revenue consists of both a distribution of sales tax and income tax. These distributions are made based on a city or towns’ relative share of population in comparison with all other cities and towns. Except during census years, Flagstaff’s population is determined by the Arizona Department of Economic Security based on a number of factors including new homes and student enrollment. Flagstaff’s greatest challenge is that while population is growing, it is growing at a slower rate than some of the other communities in the state. This has translated into a decreased proportionate share in the past. Currently the City is holding a steady population percentage in relationship to the rest of the state at approximately 1.25%. v The State has experienced similar or greater revenue declines as the City. Construction, tourism, and auto sales are the three hardest hit industries. For State Shared sales tax, the City received 13.4% less in FY 2009 than it did in FY2008 which is the second consecutive year of revenue decrease. In addition to sales tax declines, the distribution of personal income tax is not meeting stated projections. While revenue increased in FY2009 because the allocation base was legislatively set, declines of approximately 14% were budgeted for FY2010 and decreases will be even greater for FY2011. Highway user revenue (gas tax) funds (HURF) ended FY2009 at 13.6% ($1.0 million) less than FY2008. HURF revenues have experience three consecutive years of decreases with a cumulative reduction of $1.5 million or 19.36%. These revenues are distributed based on a fairly complex Arizona Department of Transportation formula, based on part on the amount of fuel purchased in our region. As fuel prices have decreased from their peak of $4 plus per gallon, we anticipate Flagstaff tourism to increase as we are a popular drive destination for Las Vegas, Los Angeles, and Phoenix, however that trend is not yet evident in our monthly receipts. Primary property tax revenues continue to see slight increases even though property tax valuation has decreased. This occurs as there is an approximate 18 – 24 month lag in home valuation and property tax assessment payment. The City anticipates reduced property tax valuation to occur in FY2011. As the State of Arizona legislatively caps the primary property tax increases on an annual basis, homeowners realized a 4.9% mil rate decrease from $0.7153 to $0.6803 for FY2009. A combination of all the revenue declines noted caused the General Fund to look at mid year reductions of approximately $4.5 million dollars. Positions were frozen, travel was decreased, benefits were reduced, and all spending was curtailed for the fiscal year. Other funds also had to curb spending to meet anticipated revenue reductions, particularly Water and Wastewater as service fees have not met projections due to the decreased construction activity and successful conservation efforts. 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. The City continues to plan in a five to ten year horizon as economic conditions change. 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 economic downturn, Flagstaff’s financial forecast generally includes decreases in sales tax, income tax, and building related revenues. Many user fees have been static or have decreased. Financial Services management role will be to maintain and enhance the continued financial stability for the City of Flagstaff. vi 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 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 4.05%. 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 Note 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 vii 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. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2008-2009, 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 FY2008-2009. Public Safety The City shall increase the visibility and availability of public safety services through best practices and maximizing resources to prevent crime and fires. Public safety accomplishments include:  Evaluated effectiveness and continued operation of specialty courts to meet the needs of defendants with cases in the court including a DUI/Drug Court, Mental Health Court, and Homeless Court   Opened Fire Station #5 July 2008, continued design and construction of fire stations #2 and #3. Marked 224 acre for future forest clearing; thinned 761 forest acres; held prescribed burns on 1,190 acres to continue Fuel Management/Forest Management efforts in our community and in conjunction with our partners  Four officers were assigned to the Sunnyside detail  Continued development of the CompStat “Intelligence-led Policing” program  Demonstrated a 9% reduction in Part 1 Crimes from 2007 to 2008  Began field testing of the Electronic Citation Project  Implemented the Citrix enhanced officer field report writing capability Affordable Housing The City shall facilitate an environment where housing opportunities, both in acquiring and sustaining, match the income diversity of our community. Affordable housing accomplishments include:  In partnership with the Arizona Rural Policy Institute and a community working group, completed a 10-year plan to end chronic homelessness  Awarded a contract to an agency to construct, operate and manage a homeless shelter on City property  Created and implemented a Housing Incentive Policy  Established a Community Land Trust Advisory Committee  Providing housing incentives to 3 projects resulting in 73 units and 3 lots  Assisted in securing 56 units of Low Income Housing Tax Credit development  Provided down payment and closing cost assistance to 13 clients through the Community Homebuyer Assistance Program  Continued planning efforts with developers to incorporate workforce housing units into upcoming developments of the City of Flagstaff where appropriate viii   Facilitated the sale of 6 units in the Rio Homes development Completed a development agreement that resulted in 61 permanently affordable apartments (20%) in the Woods at Clear Creek development  Finalized the partnership with the Habitat for Humanity Flagstaff to integrate 3 homes into the Community Land Trust Program  Completed a development agreement resulting in 12 permanently affordable units (10%) in the Crestview development  Established a partnership with The Village at University Heights to utilize an affordability covenant providing 10 units of permanently affordable housing Family, Youth, and Community The City shall improve opportunities for all members of our community to actively participate, invest, and feel a part of a high quality of life community. Family, youth, and community accomplishments include:   Opened the Aquaplex in August 2008 The Flagstaff Public Library partnered with America Reads to give patrons the opportunity to receive tutoring in the Library  Provided several adult lecture programs through the Arizona Humanities Council  Partnered with the Flagstaff Symphony, Theatrikos, Coconino Center for the Arts, and the Coconino Literacy Volunteers to provide a free series of seven Sunday adult/family program of musical storytelling  Collaborated with the Arizona Humanities Center on the Navajo Code Talkers of Work War II program  Facilitated the Youth Town Hall at the Flagstaff Recreation Center  An estimated 22,000 people attended special community events put on by Recreation to include Soar into Spring, Concerts in the Park, Halloween Harvest, Children’s Music and Art Festival, and Winter Wonderland   Created two new community events – “Flagstaff Rising Star” and the “Children’s Music and Art Festival” Enhanced Historic Tours program through the purchase of period costumes, increased frequency of tours and the addition of a Route 66 self guided tour. Community Sustainability The City shall encourage the community and operate the government in a manner that sustains economic vitality, environmental protection, and social inclusion so that current and future residents and visitors may enjoy the same or better quality of life. Community sustainability accomplishments include:  Dedicated the Northern Arizona Center for Emerging Technologies September 2008  Continued work in coordination with the U.S. Army Corps of Engineers on the Rio de Flag project  Began the Regional Land use and Transportation Plan update process  The Hazardous Products (drop-off) Center experienced a 19% increase in customers and a 25% increase in waste processed.   Completed the first annual City of Flagstaff Sustainability Report Completed municipal sustainability policies regarding Sustainable Fleet, Sustainable Purchasing, Paper Use Efficiency, and Anti-idling  Initiated successful education and outreach campaigns to promote community sustainability and climate management  Achieved a 32% increase in household glass recycled ix  Visited more than 50 local companies to gauge economic health of the community and to assist in maintaining a sustainable business climate  Created the University to Business Connection program  In partnership with Coconino Community College, offered a free workforce readiness workshop  Completed a Regional Land Use change for 32 acres at the Air Park to allow business park development  Developed WorkInFlagstaff.com in cooperation with the Arizona Department of Commerce REDI program to assist resident and local employers with job matching and to help in the trailing spouse issue  Continued community outreach and education concerning identification of brownfield sites  Reached agreement with Horizon Air to provide a second airline and commercial air service between Flagstaff and Los Angeles (LAX)  Installation and preliminary testing of a co-generator using methane produced on site at the Wildcat Wastewater Treatment Plant to reduce energy costs and the use of non-renewable energy resources Facilities and Basic Services The City shall identify and provide the desired or current service levels and accompanying facilities of basic municipal services. Facilities and basic services accomplishments include:  Added 36 lane miles to the existing de-icer routes which included the East Flagstaff Traffic Interchange   Completed the Facility Space Needs study Facilities completed over 25 major improvements and repairs to address prior deferred maintenance concerns  Cleaned most of the open drainage channels within the City of Flagstaff  Constructed a detention basin to catch runoff from McMillan Mesa in an effort to prevent flooding at Coconino High School  Completed the Wildcat Hill Wastewater Treatment Plan improvements enabling the plant to provide grade A+ reclaimed water  Drilled one new well and equipped two wells increasing water production capacity by approximately 2.2 million gallons per day Fiscal Health The City shall maintain good fiscal health through sound financial management and fiscal integrity. Fiscal accomplishments include:  Created an internal document for the City to use as required by the Fair and Accurate Credit Transactions Act of 2003 to deter identity theft  Developed and implemented a more comprehensive payment application form used for construction projects that allow for more internal control of payments to building contractors.  Implemented new performance dashboard for City Management  Leveraged $5.5 million dollars in grants for City projects and programs  Responsively prepared five and ten year plans in conjunction with deteriorating economic conditions  Partnered with other local governmental agencies to determine facilitate ballot question timing  Partnered with other local governmental agencies to educate the business community on the financial issues facing governmental agencies and proposals to partner through the recession x 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, 2008. This was the 15th 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 award for Distinguished Budget Presentation for our 2008-2009 annual budget (15 years in a row) with special performance measures recognition (2 years in a row). 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 Maryellen Pugh, Finance Manager and to the entire finance staff who prepared this CAFR. 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 auditors, Eide Bailly LLP, also contributed significantly to this report. Respectfully Submitted, Barbara Goodrich Management Services Director xi xii City of Flagstaff Citizens of Flagstaff City Council Special Committees City Magistrates Board and Commissions City Manager City Attorney City Court Legal Deputy City Manager Operations Deputy City Mgr External Affairs Convention and Visitors Bureau Visitors Center Fire Department Police Department Community Development Department General Admin Department Public Works Department Utilities Department Management Services Department xiii City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2009 Elected Officials Mayor Sara Presler Vice Mayor Al White Councilmember Karla Brewster Councilmember Coral Evans Councilmember Joseph P. Haughey Councilmember Scott Overton Councilmember Rick Swanson Appointed Officials City Manager Kevin Burke City Attorney Patricia Boomsma City Treasurer Barbara Goodrich City Clerk Margie Brown xiv INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the City Council City of Flagstaff, Arizona Flagstaff, Arizona We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information and the budgetary comparison of the general fund and major special revenue funds of the City of Flagstaff, Arizona as of and for the year ended June 30, 2009, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Flagstaff, Arizona management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information and the respective budgetary comparison for the general fund and the special revenues funds of the City of Flagstaff, Arizona at June 30, 2009, and the respective changes in financial position and cash flows, where applicable, for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The Management’s Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 877 West Main St., Ste. 800 Boise, Idaho 83702-5858 Phone 208.344.7150 Fax 208.344.7435 EOE Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Flagstaff, Arizona’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and the statistical section are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Phoenix, Arizona December 22, 2009 2 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, 2009. 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 –xi of this report. FINANCIAL HIGHLIGHTS  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $560.1 million (net assets). Of this amount $43.2 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net assets decreased by $2.9 million during the fiscal year. This is a result of a decrease in net assets in the governmental activities of $13.1 million and an increase in net assets in the business type activities of $10.2 million.  As of June 30, 2009, the City’s governmental funds reported combined ending fund balances of $36.1 million, a decrease of $28.1 million in comparison with the prior fiscal year. This decrease is due to lower than expected revenues and the use of reserved fund balance for capital projects. Approximately 86.5% of this total amount ($31.2 million) is unreserved fund balance available for spending at the government’s discretion.  As of June 30, 2009, total unreserved fund balance for the general fund was $22.2 million, or 42.1% of total general fund expenditures ($52.7 million).  As of June 30, 2009, the City’s proprietary funds reported combined total net assets of $304.8 million, and total unrestricted net assets of $12 million. $7.7 million of the unrestricted net assets are in the Water and Wastewater Fund. 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. information in addition to the basic financial statements themselves. This report also contains other supplementary 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 items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes or expenses pertaining to 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 3 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 the Municipal Facilities Corporation (MFC). The MFC, 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 15 - 17 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, BBB fund, and the Capital Projects Bond Construction funds which are all considered to be major funds. combined into a single aggregated presentation. Data from the remaining governmental funds are Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General fund, Special Revenue funds, Capital Projects funds, Debt Service funds, and Enterprise funds. A budgetary comparison statement has been provided for the General and special revenue major governmental funds to demonstrate compliance with the respective budgets. The basic governmental fund financial statements can be found on pages 18 - 29 of this report. 4 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:  Enterprise funds are used to report the same function presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for Water and Wastewater, the Airport, Environmental Services which includes solid waste collection, and Stormwater. All are considered to be major funds of the City.  Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses 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 30-37 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 38-79 of this report. Combining statements The combining statements referred to earlier in connection with non-major governmental funds are presented on pages 82-85. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain other supplementary information concerning the City’s capital asset activity. Other supplementary information can be found on page 88-90 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 $560.1 million as of June 30, 2009. Of the City’s net assets, 90.6% reflects its investment of $507.4 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. 5 Net Assets June 30, 2009 and 2008 (in thousands of dollars) Governmental Activities 2009 Current and other assets Capital assets $ Total assets 61,831 295,544 Business-type Activities 2008 $ 357,375 92,134 283,113 2009 $ 27,179 350,271 2008 $ 33,875 330,791 2009 $ 89,010 645,815 $ 2009 126,009 613,904 375,247 377,450 364,666 734,825 739,913 146,770 Long-term liabilities 80,538 84,527 64,042 62,243 144,580 Other liabilities 21,574 22,327 8,558 7,796 30,132 Total liabilities Total 30,123 102,112 106,854 72,600 70,039 174,712 176,893 215,673 214,268 291,708 276,783 507,381 491,051 31,690 39,248 11,547 16,250 43,237 55,498 Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 7,900 $ 255,263 14,876 $ 268,392 1,594 $ 304,849 1,594 $ 294,627 9,494 $ 560,112 16,470 $ 563,019 Total assets decreased due to change in receivables and investments. Total liabilities decreased due to the application of debt principal payments. A portion of the City’s net assets, $9.5 million (1.7%) represents resources that are subject to external restriction on how they may be used. The remaining balance of unrestricted net assets, $43.2 million (7.7%) 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 have decreased by 32.9% ($30.3 million). The largest decreases are in investments ($15.1 million) and restricted cash and investments ($16.0 million) while the largest increase was in cash and cash equivalents ($6.5 million). The overall decrease is due to spending both unrestricted and restricted cash and investments for the planned completion of a number of capital projects. Capital assets of the governmental activities, funded through debt proceeds, grants, and contributions, increased by 4.4% ($12.4 million) due largely to Aspen Place at Sawmill ($9.9 million), Business Incubator ($1.3 million), fire stations ($3.4 million), Huntington Drive improvements ($2.6 million), and Lake Mary Road improvements ($1.4 million). Governmental activities long-term liabilities decreased by 4.7% ($4.0 million) due to no new bonded debt issues, only the retirement of principal for existing debt. Other liabilities decreased by 3.4% ($0.8 million) primarily due to decreases in accounts payable ($1.4 million) offset by increases in unearned revenues ($0.8 million). Overall business-type net assets increased by 3.5% ($10.2 million) primarily to capital asset additions. Investment in capital assets, net of related debt, increased by $14.9 million. development donations. Of this, 36.9% ($5.5 million) is from private The primary capital additions for business-type activities are the Wildcat Wastewater Treatment plant expansion at $6.8 million, well development at $3.5 million, and airport terminal security enhancements at $1.5 million. 6 Analysis of Change in Net Assets The City’s overall net assets decreased by $2.9 million during the current fiscal year. These decreases are explained in the government and business-type activities discussion to follow. Changes in Net Assets For the Years Ended June 30, 2009 and 2008 (in thousands of dollars) Governmental Activities 2009 Business-type Activities 2008 2009 Total 2008 2009 2008 Revenues Program Revenues: Charges for services $ Operating grants and contributions 7,680 $ 2,347 Capital grants and contributions 7,536 $ 31,309 3,321 $ 11 31,106 $ 68 38,989 $ 2,358 38,642 3,389 9,881 16,325 8,744 12,242 18,625 28,567 General Revenues: Property taxes Sales taxes 31,420 16,068 13,665 - - 16,068 13,665 State shared taxes 16,629 16,992 3,904 - 206 - 964 16,629 16,992 396 2,996 286 206 682 3,202 Investment earnings 33,129 1,459 Other Total revenues - - 85,880 97,868 40,556 44,586 General government 10,913 11,271 - Public safety 29,115 27,030 - Economic and physical development 10,347 10,556 Highways and streets 19,298 Water and wastewater 31,420 33,129 1,665 4,868 126,436 142,454 - 10,913 11,271 - 29,115 27,030 - - - 10,347 10,556 13,925 11,607 15,516 - - 19,298 15,516 - - 22,802 23,430 22,802 23,430 Airport - - 4,198 3,608 4,198 3,608 Stormwater - - 1,203 1,161 1,203 Expenses Public works 2,109 Culture and recreation 1,894 13,925 Interest on long-term debt 11,607 3,651 Environmental 89,358 80,791 Increase in net assets before transfers (3,478) 17,077 (13,129) 13,487 (9,651) Change in net assets Net assets at beginning of year Net assets at end of year $ 268,392 255,263 - - Total expenses 254,905 268,392 2,917 11,783 39,622 570 1,894 3,651 11,423 39,986 $ 2,109 - 11,783 11,423 1,161 129,344 120,413 9,651 3,590 4,964 (2,908) 22,041 10,221 8,554 (2,908) 22,041 (3,590) $ - - 2,917 - Transfers - 294,628 304,849 $ 286,074 294,628 - $ 563,020 560,112 - $ 540,979 563,020 Governmental activities Governmental activities decreased the City’s net assets by $13.1 million. The key factors for this decrease are as follows:  Combined operating grants, capital grants and contributions have decreased by 37.8% ($7.4 million) as a result of less capital programs in the current year.   Property tax increases are due to increases in assessed valuation. City sales tax revenues decreased by 17.6% ($1.7 million). While sales taxes decreased $2.4 million comparing year to year, actual revenues compared to budgeted revenues were below in the city general sales tax, the Bed, Board, and Booze sales taxes, and the transportation taxes by $4.9 million, $0.5 million, and $3.3 million respectively.  Other revenues have decreased due to prior year’s recorded gain on sale of capital assets.  Expenses have increased primarily due to staffing increases and other compensation increases. authorized an additional 22 positions for the fiscal year. increased. 7 The City Health insurance and dental insurance rates also Business-type activities Business type activity had net asset increase of $10.2 million. The key factors for this increase include:  Charges for service increased by .7% ($0.2 million) due to rate increases in environmental services and stormwater. Water and wastewater charges for services decreased $0.7 million due to less consumption by customers.  Capital grants and contributions decreased by 28.6% ($3.5 million) due to significant grants received in the prior year for the runway extension work at the airport.  Investment earnings are down 78.6% ($0.8 million) due to decreased cash and investment balances spent toward capital improvements and lower interest rates.  Expenses have increased slightly over prior year (.9%, $.4 million). Additional expenses were incurred due to staffing increases and overall personnel cost increases. The City authorized an additional 8 positions for the fiscal year. A 1% market adjustment was given in addition to merit increases. Health insurance and dental insurance rates also increased. The following 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 as measured by expense (32.6%) followed by Highways & streets (21.6%), Culture and recreation (15.6%), and General Government (12.2%). Expenses and Program Revenues – Governmental Activities Expenses $30,000,000 Program Revenues $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 General government Public saf ety Public works Econ & phys development 8 Culture & recreation Highways & st reet s Int erest on long-term debt Revenues by Source – Governmental Activities Investment State shared tax 19.4% Miscellaneous earnings 0.5% 1.7% Charges for services 8.9% Operating grants and contributions 2.7% Sales tax Capital grants 36.6% and contributions Property taxes 11.5% 18.7% 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 (36.6%), followed by state shared taxes (19.4%) and property taxes (18.7%). Last year, capital grants and contributions were ranked third and property taxes ranked fourth. During the fiscal year the city realized revenues were declining and unlikely to reach budgeted estimates. Program expenses were reevaluated mid year for potential cuts. The comparison of expenses to prior year shows several areas not keeping pace with inflation and normal growth expectations. Part of the reductions came from positions being held open over extended timeframes. In the approved budget, twenty two full time equivalent positions were added to support library services (6.6 FTE’s), public safety (7.0 FTE’s), downtown management (4.0 FTE’s), courts (2.0 FTE’s), and a variety of other direct or support activities (2.4 FTE’s). By year end approximately 80 positions were held open. As shown in the following two charts, Water and Wastewater has expenses of $22.8 million for the fiscal year, followed by Environmental Services with $11.8 million, the Airport with $4.2 million and Stormwater with $1.2 million. For the fiscal year, program revenue exceeded expense for the Stormwater Fund. Water & Wastewater, Environmental Services, and Stormwater received the majority of their program revenues through charges for services (78.0% and 99.4% respectively). The Airport and Stormwater funds receive the majority of support through Capital Grants and Contributions (65.2% and 55.6%). The Water and Wastewater fund receives 22.0% of support through grants and contributions. Charges for services provided the largest share of revenues (77.2%) for all of the business-type activities, followed by capital grants and contributions (21.6%). The proportionate share of revenue from charges for service and capital grants and contributions varied from the prior year split of 69.8% and 27.4% respectively. The shift is primarily due to the slight increase in charges for services compared to decreases in investment earnings and private contributions. The operating expenses for the business type activities increased slightly (0.9%, $363,152) which is normalized increases in line with personnel, contractual, and commodity cost increases. 9 Water and wastewater, environmental services, and stormwater all increased user fees. Environmental services and stormwater realized increased charge for service revenue at 6.8% and 9.7% respectively. Water and wastewater charges for services decreased 3.4% due to lower water consumption and wastewater collection. Expenses and Program Revenues – Business Type Activities Expenses $25,000,000 Program Revenues $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Water and Environmental Airport Stormwater wastewater Revenues by Source – Business-type activities Capital grants and Investment earnings Operating grants contributions 0.51% 21.56% and contributions Other 0.03% 0.70% Charges for services 77.20% 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. 10 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, Capital Project funds, and Debt Service funds. At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $36.1 million, a decrease of $28.1 million in comparison with the prior year. Approximately $31.2 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 it is not available for new spending because it has already been committed (1) to pay debt service ($2.8 million), (2) for capital projects ($1.5 million), (3) for inventory reserve ($366,856), (4) for grant purposes ($106,144) and (5) for perpetual care ($103,166). Revenues for governmental functions overall totaled $85.3 million in the fiscal year ended June 30, 2009 which represents a decrease of 6.5% or $5.9 million from the prior fiscal year. Four revenue categories show increases over prior year. These include charges for services (22.9%, $620,505), intergovernmental (4.6%, 939,651), fines and forfeitures (13.6%, $181,412), and contributions (1.5%, 19,586). decreased by 0.9% ($408,929). Taxes that include city and state revenues All other revenue categories experienced decreases including grants and entitlements (29.1%, $3.9 million) and investments (63.36%, $2.4 million). Investment decreases are attributed to a lower amount of cash available for investing and a lower rate of return on investments. Expenditures for governmental functions, totaling $111.8 million, decreased by 7.8% ($9.4 million) from the prior fiscal year. The expenditure increase was driven by capital outlays totaling $30.8 million, a 33.8% ($15.7 million) decrease over the prior year. Major project improvements have been discussed in prior sections. In the fiscal year ended June 30, 2009 expenditures for governmental functions exceeded revenues by approximately $26.5 million. The revenues have not kept pace with operating expenditures in addition to planned usage of fund balance for ongoing 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 $22.2 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 42.2% and 42.9%, respectively, of General Fund expenditures. The fund balance in the City’s General Fund decreased by $5.2 million during the fiscal year as expenditure had positive growth of 5.9% and revenues had negative growth of 5.3%. Overall, the General Fund’s performance resulted in expenditures in excess of revenues in the fiscal year ended June 30, 2009 of $4.4 million. This is a decrease of approximately $5.6 million over the comparable figure from the prior year which resulted in revenues in excess of expenditures of $1.2 million. The Highway User Revenue Fund and Transportation Fund balances decreased by $6.0 million and $1.6 million respectively in part due to declining sales tax revenues. The Capital Project Bond Construction Fund balance decreased by $15.5 million primarily related to unissued bond debt related to capital projects. The BBB Fund balance increased $355,010 because revenues exceeding planned annual expenditures toward capital projects. 11 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, Airport, and Stormwater. The internal service fund, which is used to account for risk management and health insurance activities, had unrestricted net assets of $3.4 million. The total growth in net assets for the proprietary funds was $10.2 million. The Water and Wastewater fund, Environmental Services fund, and Stormwater fund had positive growth in their net assets for the fiscal year ended June 30, 2009 while the Airport fund deceased slightly. The major part of the increase is related to capital contributions in the Water and Wastewater fund ($8.5 million) Stormwater fund ($4.7 million). Budget Highlights The City’s final budget differs from the original budget for certain divisions within the General fund as Council approved certain appropriation transfers from the General fund to the following funds: General fund appropriation transfer: $ 1,126,000 Real Estate Proceeds Fund The General fund was under final budgeted total revenues by 12.6% ($6.9) million primarily due to decreases in city and state shared sales tax collections and decreased building permitting and inspection revenues. Expenditures are under budget in every category due to advanced planning for revenue shortfalls and not spending appropriation on several large budgeted projects, both capital and non-capital. Both transfers in and transfers out are less than budgeted as many transfers are based on the actual year end expenditure, most significant of which is the budgeted transfer from the General Fund to the Stormwater Fund of $6.8 million for the Rio de Flag flood control project of which only $0.7 million actually transferred at year end. 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, 2009 amount to $645.8 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 5.2% ($31.9 million). The following table reflects the capital assets at the end of the fiscal year: Capital Assets, Net of Depreciation June 30, 2009 and 2008 (in thousands of dollars) Governmental Activities 2009 Land Buildings $ Improvements Machinery and equipment Total 52,734 $ $ 139,791 131,906 36,183 $ 27,822 12,172 295,544 2009 42,295 11,142 12,342 Infrastructure Construction in progress 43,352 Business-Type Activities 2008 $ 231,190 12,185 $ 10,301 47,796 $ 12 50,244 350,271 $ 8,707 - 56,732 10,301 47,930 2009 215,317 10,740 283,112 Total 2008 48,536 330,791 $ $ 52,596 75,752 242,332 227,489 139,791 131,906 23,082 - $ 53,653 100,530 2009 86,427 645,815 20,892 $ 105,268 613,903 Construction in progress had a net decrease of 17.9% ($18.8 million). Major completed construction in progress includes the Aquaplex ($15.7 million), fire stations ($3.8 million), business incubator building ($4.3 million), and East Flagstaff Gateway ($3.6 million). Major additions to construction in progress include Wildcat Wastewater Treatment Plant ($6.8 million), Aspen Place at Sawmill ($9.9 million), Lake Mary road improvements ($1.4 million), and fire stations ($3.8 million). The increase to buildings 32.7% ($24.8 million) is mainly related to the completed Aquaplex, fire stations, and business incubator buildings. 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 57-58 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 $129.1 million. Of this amount, $35.1 million is general obligation bonds backed by the full faith and credit of the City, $19.2 million is improvement district bonds, $9.8 million is revenue bonds, $21.6 million is for the Municipal Facility Corporation, and $43.4 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. Outstanding Debt June 30, 2009 and 2008 (in thousands of dollars) General obligation bonds $ Special assessment bonds Revenue bonds Other debt Lease/Loans Total debt payable $ Governmental Activities Business-type Activities 2009 2009 27,645 2008 $ 29,350 19,169 19,257 4,865 $ Total 2008 7,460 $ 2009 10,515 $ 35,105 - - 21,625 6,325 23,000 4,918 5,212 - 21,625 2,430 2,728 40,967 36,502 43,397 75,734 $ 80,660 - $ 53,345 $ 52,229 $ 2008 $ 39,865 19,169 19,257 9,783 11,537 129,079 23,000 $ 39,230 132,889 During the year, the City maintained the following bond ratings: City of Flagstaff Bonded Debt Ratings As of June 30, 2009 Moody's Investors Service Standard & Poor's General Obligation Aa3 AA Municipal Facilities Corporation A1 AA During fiscal year 2009, the City’s total bonded debt decreased by approximately $8.0 million. The City issued $6.6 million in loans for water and wastewater projects to provide drilling and equipping additional water wells and $109,532 in capital leases for energy conservation improvements for the fiscal year ended June 30, 2009. 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, 2009 is $55.0 million in 13 the 6% category and $148.2 million in the 20% capacity. Additional information on the debt limitations and capacities may be found in Schedule 16 in the statistical section of this report. Additional information on the City’s long-term debt can be found in Section IV F on pages 61-71 of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2009/2010 budget preparation was influenced by the following factors:  Reductions in every major operating fund due to revenue declines in city sales taxes, state shared tax revenues, highway user (gas tax) revenues, and building revenues  The City reduced budgeted staffing 10% (87.8 positions) and correspondingly reduced service levels in every City division  Considerations of the impact of the continued local market downturn and the safeguards needed to deal with continued declines  The pursuit of federal stimulus and other grant dollars to enhance the local economy  Realignment of core services within reduced budget parameters that maintain Council goals  The continued implementation of electronic information sharing to facilitate transparency in service provision  The development of a more strategic economic model and plan  The impact of a formation of a downtown parking district  Planning efforts for the renewal through a citywide election of the 1% transaction privilege tax and the 2% Arizona Public Service (electric utility) franchise fee   Assessment and funding of long range capital needs and their associated operational impacts Completion of projects approved through the 2004 bond election including completion of the fourth fire station and continued open space and/or Flagstaff Urban Trail System purchases  Planning efforts for a capital bond program election  Assessment of future water resource needs 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. If you have questions about this report or need additional financial information, contact: 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 14 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets June 30, 2009 Primary Government Governmental Activities Business-type Activities Total ASSETS Cash and cash equivalents $ Cash with fiscal agents Investments Accounts receivables, net Interest receivable Intergovernmental receivable Bond proceeds receivable Special assessments receivable 17,170,362 $ 10,712,114 $ 27,882,476 5,248,901 509,081 5,757,982 16,668,363 14,000 16,682,363 6,705,265 5,065,564 11,770,829 164,475 63,837 228,312 3,629,474 140,059 3,769,533 127,674 - 127,674 1,527 - 1,527 Internal balance 648,497 (648,497) Inventory 366,856 234,771 601,627 Deferred bond issuance costs, net 485,481 248,533 734,014 Property held for resale 500,000 - 500,000 10,113,468 10,839,293 20,952,761 Restricted cash and investments - Capital assets: Non-depreciable 79,534,965 60,544,805 140,079,770 Depreciable, net 216,009,226 289,726,333 505,735,559 357,374,534 377,449,893 734,824,427 Accounts payable 6,912,041 1,293,491 8,205,532 Accrued payroll 2,147,749 436,924 2,584,673 Interest payable 1,822,037 938,297 2,760,334 Unearned revenue 3,764,718 238,441 4,003,159 Deposits payable 1,481,719 433,057 1,914,776 Matured bonds and lease payable 4,540,000 5,185,093 9,725,093 905,180 33,527 938,707 1,530,685 317,430 1,848,115 554,000 - 554,000 5,461,522 4,287,516 9,749,038 1,947,959 323,778 2,271,737 - 9,877,798 9,877,798 875,578 177,835 1,053,413 Total assets LIABILITIES Unamortized bond premium Due within one year: Compensated absences Special assessment bonds Bonds, notes and leases payable Due in more than one year: Compensated absences Landfill closure and postclosure care costs Net OPEB obligation Arbitrage rebate Special assessment bonds Bonds, notes and leases payable 449,927 - 449,927 18,615,000 - 18,615,000 51,103,771 49,057,189 100,160,960 102,111,886 72,600,376 174,712,262 215,672,933 291,707,813 507,380,746 Capital projects 4,894,648 1,593,915 6,488,563 Debt service 2,768,032 - 2,768,032 106,144 - 106,144 Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Grant and contributions purposes Perpetual care: Expendable Nonexpendable Unrestricted Total net assets $ 27,232 - 27,232 103,166 - 103,166 31,690,493 11,547,789 43,238,282 255,262,648 $ 304,849,517 $ 560,112,165 The notes to the financial statements are an integral part of this statement 15 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2009 Program Revenues Expenses Capital Grants and Contributions Operating Grants and Contributions Charges for Services Primary government Governmental activities: General government $ 10,913,187 $ 3,099,884 $ 1,046,083 $ - Public safety 29,114,546 1,299,703 734,653 353,060 Public works 2,109,221 1,350,832 - - Economic and physical development 10,346,982 369,987 555,942 1,844,474 Culture and recreation 13,924,853 1,559,617 10,622 143,765 Highways and streets 19,297,615 - - 7,539,463 3,651,521 - - - 89,357,925 7,680,023 2,347,300 9,880,762 Water and wastewater 22,802,316 17,328,927 10,966 4,890,499 Environmental 11,782,540 11,545,472 - 69,448 Airport 4,197,447 1,187,105 - 2,220,901 Stormwater 1,203,436 1,247,878 - 1,563,368 39,985,739 31,309,382 10,966 8,744,216 Interest on long-term debt Total governmental activities Business-type activities: Total business-type activities Total primary government $ 129,343,664 $ 38,989,405 $ 2,358,266 General revenues: Property taxes, levied for general purposes Property tax, levied for debt service Property tax, levied for special district Sales taxes State shared sales taxes - unrestricted 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 Net assets - ending The notes to the financial statements are an integral part of this statement 16 $ 18,624,978 Net (Expenses) Revenues and Changes in Net Assets Primary Government Governmental Activities $ Business-type Activities (6,767,220) $ (6,767,220) - (26,727,130) (758,389) - (758,389) (7,576,579) - (7,576,579) (12,210,849) - (12,210,849) (11,758,152) - (11,758,152) (3,651,521) - (3,651,521) (69,449,840) - (69,449,840) - (571,924) (571,924) - (167,620) (167,620) - (789,441) (69,449,840) (789,441) 1,607,810 - 1,607,810 78,825 $ 78,825 78,825 $ (69,371,015) 4,925,312 - 4,925,312 7,336,873 - 7,336,873 3,805,955 - 3,805,955 31,420,047 - 31,420,047 16,628,652 - 16,628,652 1,459,389 206,154 1,665,543 381,984 166,158 548,142 - 119,366 119,366 13,325 - 13,325 9,651,500 - 56,320,037 10,143,178 66,463,215 (13,129,803) 10,222,003 (9,651,500) $ $ (26,727,130) $ - Total 268,392,451 294,627,514 255,262,648 $ 304,849,517 (2,907,800) 563,019,965 $ 560,112,165 17 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2009 Highway User Revenue Fund General Fund Transportation Fund ASSETS Cash and investments $ Cash with fiscal agents Accounts receivable, net Interest receivable Intergovernmental receivables Interfund receivable Bond proceeds receivable 15,451,547 2,532 3,973,986 712,908 927,025 70,326 14,475 9,679 908,821 - 2,051,628 8,567,000 - - 127,674 - - - - - 280,376 - - - 500,000 - Restricted cash and investments $ $ 1,500,925 Property held for resale Total assets 273,418 519,211 Special assessments receivable Inventory $ 389,767 - 340 29,769,497 $ 2,020,012 $ 4,492,129 2,112,024 $ 621,486 $ 6,293 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences Current bonds payable Interest payable 1,899,676 78,252 - 320,000 1,460,000 1,055,000 69,767 172,005 445,925 Interfund payable - - 2,560,000 Deferred revenue 1,296,027 - - Guaranty and other deposits 1,481,719 - - 7,179,213 2,331,743 4,067,218 - - - Capital projects - - - Grant purposes 106,144 - - Inventory 280,376 - - - - - 22,203,764 - - Total liabilities Fund balances: Reserved for: Debt service Perpetual care Unreserved, undesignated, reported in: General fund Special revenue funds - Permanent fund - Total fund balances Total liabilities and fund balances (311,731) 22,590,284 $ 29,769,497 The notes to the financial statements are an integral part of this statement 18 424,911 - - (311,731) $ 2,020,012 424,911 $ 4,492,129 BBB Fund $ 5,633,765 $ 8,748 $ 8,414,951 $ 29,784,961 - 476,875 2,362,123 5,248,901 513,858 25,090 153,279 6,306,146 16,995 7,693 28,662 147,830 59,351 - 609,674 3,629,474 - - - 8,567,000 - - - 127,674 - - 1,527 1,527 86,480 - - 366,856 - - - 500,000 - 10,009,962 103,166 $ 6,310,449 $ 10,528,368 $ $ 287,832 $ 2,942,629 $ 10,113,468 11,673,382 $ 102,664 $ 64,793,837 6,072,928 49,452 446 119,923 2,147,749 - - 1,705,000 4,540,000 - 476,875 657,465 1,822,037 - 5,577,000 430,000 8,567,000 1,631 - 2,803,028 4,100,686 - - - 1,481,719 338,915 8,996,950 5,818,080 28,732,119 - - 2,768,032 2,768,032 - 1,531,418 - 1,531,418 - - - 106,144 86,480 - - 366,856 - - 103,166 103,166 - - - 22,203,764 5,885,054 - 2,956,872 8,955,106 - - 27,232 27,232 5,971,534 $ Total Governmental Funds Other Governmental Funds Capital Projects Bond Construction 6,310,449 1,531,418 $ 10,528,368 5,855,302 $ 11,673,382 19 36,061,718 $ 64,793,837 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES JUNE 30, 2009 Fund balances - total governmental funds balance sheet $ 36,061,718 Amounts reported for governmental activities in the statements of net assets are different because (also see note II. A.): 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 Transfer of capital assets to business-type activities 440,193,526 (137,857,100) (6,792,235) 295,544,191 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 485,481 361,640 847,121 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 Other postemployment benefits Arbitrage rebate Compensated absences 75,734,293 905,180 875,578 449,927 3,478,644 (81,443,622) Certain revenues are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. Property tax 335,968 335,968 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 The notes to the financial statements are an integral part of this statement 20 3,917,272 $ 255,262,648 21 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2009 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental 21,359,089 $ - $ 9,959,194 17,558,784 - - Grants and entitlements 1,203,623 6,663,865 - Charges for services 3,025,791 - - - - - Licenses and permits Special assessments 1,377,430 - - Fines and forfeitures 1,517,558 - - Rents 1,350,832 - - 483,884 64,143 101,735 - - - Investment earnings Contributions Miscellaneous Total revenues 332,243 - - 48,209,234 6,728,008 10,060,929 EXPENDITURES: Current: General governmental Public safety 9,707,971 - - 27,373,189 - - Public works 1,640,193 - - Economic and physical development 5,394,937 - - Culture and recreation 6,269,352 - - - 8,175,786 3,011,616 726,991 1,460,000 1,055,000 Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 233,377 345,294 894,350 1,315,100 10,936,562 - 52,661,110 20,917,642 4,960,966 (14,189,634) 5,099,963 (4,451,876) OTHER FINANCING SOURCES (USES): Issuance of capital debt Sale of capital assets Transfers in Transfers out 109,352 - - 36,109 10,480 17,283 4,880,311 8,601,511 (5,785,445) Total other financing sources (uses) (759,673) Net change in fund balances (5,211,549) Fund balances, beginning of year 27,801,833 Fund balances, end of year $ 22,590,284 The notes to the financial statements are an integral part of this statement 22 - (377,103) $ (6,733,640) 8,234,888 (6,716,357) (5,954,746) (1,616,394) 5,643,015 2,041,305 (311,731) $ 424,911 Capital Projects Bond Construction BBB Fund $ 4,983,318 $ $ 7,253,787 Total Governmental Funds $ 43,555,388 - - 3,805,955 21,364,739 591,699 - 1,150,351 9,609,538 67,424 - 231,623 3,324,838 - - 2,382 2,382 150 - - 1,377,580 - - - 1,517,558 70,940 - - 1,421,772 93,298 465,902 157,969 1,366,931 - 1,304,536 23,988 1,328,524 20,759 - 28,982 381,984 5,827,588 1,770,438 12,655,037 85,251,234 - 2,000 138,311 9,848,282 - 894 - 27,374,083 - 5,510 - 1,645,703 2,899,505 - 1,697,485 9,991,927 485,482 294,709 5,108,544 12,158,087 - - - 11,187,402 - - 1,793,000 5,034,991 - 956,250 1,321,386 3,750,657 2,012,679 16,336,616 195,115 30,796,072 5,397,666 17,595,979 10,253,841 111,787,204 429,922 (15,825,541) 2,401,196 (26,535,970) - - - 109,352 22 - - 63,894 1,643,258 700,000 5,801,228 21,626,308 (1,718,192) (370,650) (8,374,543) (23,359,573) 329,350 (2,573,315) (1,560,019) (172,119) (28,095,989) (74,912) 355,010 (15,496,191) 5,616,524 $ - Other Governmental Funds 5,971,534 17,027,609 $ 1,531,418 6,027,421 $ 23 5,855,302 64,157,707 $ 36,061,718 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, 2009 Net change in fund balances - total governmental funds $ (28,095,989) Amounts reported for governmental activities in the statements of activities are different because (also see note II. B.): 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 Less current year depreciation 30,796,072 (11,144,241) 19,651,831 371,818 (109,352) 12,498 (875,578) 5,034,991 (73,802) 99,136 4,459,711 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: Donated capital Capital-related debt issued Compensated absences Other postemployment benefits Principal payments on debt Arbitrage rebate Bond premium 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. Amortization of issuance costs (55,926) (55,926) (799,690) (6,792,235) (7,591,925) 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). Sale of capital assets Transfer of capital assets to business-type activities (continued) The notes to the financial statements are an integral part of this statement 24 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, 2009 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. Property tax Special assessments Fines and forfeitures 126,844 (1,007) 38,275 164,112 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 Investment income (1,754,075) 92,458 Change in net assets of governmental activities - statement of activities The notes to the financial statements are an integral part of this statement 25 (1,661,617) $ (13,129,803) (concluded) CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Taxes $ Intergovernmental 26,303,828 $ 26,303,828 $ 21,512,115 $ (4,791,713) 18,267,421 18,267,421 17,558,784 Grants and entitlements 1,265,288 1,265,288 1,203,623 (708,637) (61,665) Charges for services 3,263,581 3,263,581 3,023,676 (239,905) Licenses and permits 2,180,255 2,180,255 1,377,430 (802,825) Fines and forfeitures 1,168,353 1,168,353 1,517,558 349,205 Rents 1,460,096 1,460,096 1,350,832 (109,264) Investment earnings 973,750 973,750 498,482 (475,268) Miscellaneous 450,120 450,120 332,243 (117,877) 55,332,692 55,332,692 48,374,743 (6,957,949) General administration 6,514,573 6,514,573 6,074,916 Management Services 4,609,985 4,609,985 4,175,572 434,413 Community development 6,021,399 6,021,399 5,205,527 815,872 Fire 11,020,114 11,020,114 10,272,153 747,961 Police 17,934,449 17,934,449 17,604,754 329,695 Public works 11,182,579 11,182,579 9,460,992 1,721,587 26,125 26,125 26,125 4,930,013 4,930,013 Total revenues EXPENDITURES: Current: Utilities Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 439,657 - (159,640) 5,089,653 600,000 600,000 711 599,289 62,839,237 62,839,237 52,661,110 10,178,127 (7,506,545) (7,506,545) (4,286,367) 3,220,178 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 $ 36,475 36,475 36,109 (366) 4,004,311 5,130,311 4,880,311 (250,000) (12,682,979) (12,921,979) (5,785,445) 7,136,534 (8,642,193) (7,755,193) (869,025) 6,886,168 (16,148,738) (15,261,738) (5,155,392) 10,106,346 24,888,804 24,888,804 8,740,066 $ Adjustment from budetary basis to GAAP basis net change in fund balances 9,627,066 24,888,804 $ 19,733,412 $ (5,155,392) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (56,157) Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 26 (5,211,549) $ 10,106,346 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Actual Amounts Budgetary Basis 8,563,461 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ Investment earnings 8,563,461 $ 95,000 Miscellaneous 95,000 6,663,865 $ 68,011 (1,899,596) (26,989) 4,792,636 4,792,636 - (4,792,636) 13,451,097 13,451,097 6,731,876 (6,719,221) General administration 193,821 193,821 193,821 - Management services 187,242 187,242 187,242 - Total revenues EXPENDITURES: Current: Community development Public works Utilities Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 3,526,450 3,526,450 1,331,517 2,194,933 21,907,438 21,907,438 18,942,767 2,964,671 1,723 1,723 1,723 - 260,572 260,572 260,572 - 100,000 100,000 - 100,000 26,177,246 26,177,246 20,917,642 5,259,604 (12,726,149) (12,726,149) (14,185,766) (1,459,617) OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in Transfers out - 10,480 12,519,670 8,601,511 (377,103) Total other financing sources (uses) (377,103) 12,142,567 Net change in fund balances (583,582) 3,785,483 $ 3,785,483 3,201,901 $ Adjustment from budetary basis to GAAP basis net change in fund balances 3,201,901 (3,907,679) (5,950,878) (5,367,296) 3,785,483 $ (2,165,395) $ (5,950,878) modified accrual basis. (3,868) $ The notes to the financial statements are an integral part of this statement 27 - 8,234,888 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis 10,480 (3,918,159) (377,103) 12,142,567 (583,582) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 12,519,670 (5,954,746) $ (5,367,296) CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Taxes $ Investment earnings Total revenues 13,295,320 $ 13,295,320 $ 10,034,637 $ (3,260,683) 162,000 162,000 122,650 (39,350) 13,457,320 13,457,320 10,157,287 (3,300,033) 2,076,108 2,076,108 2,046,771 EXPENDITURES: Current: Community development Non-departmental Total expenditures Excess (deficiency) of revenues over (under) expenditures 29,337 3,721,110 3,721,110 2,914,195 806,915 5,797,218 5,797,218 4,960,966 836,252 7,660,102 7,660,102 5,196,321 (2,463,781) 5,000,000 5,000,000 17,283 (4,982,717) 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 $ (10,566,272) (10,566,272) (6,733,640) 3,832,632 (5,566,272) (5,566,272) (6,716,357) (1,150,085) 2,093,830 2,093,830 (1,520,036) (3,613,866) 920,732 920,732 3,014,562 $ Adjustment from budetary basis to GAAP basis net change in fund balances 3,014,562 920,732 $ (599,304) $ (1,520,036) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (96,358) Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 28 (1,616,394) $ (3,613,866) CITY OF FLAGSTAFF, ARIZONA BBB Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Actual Amounts Budgetary Basis 5,514,830 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Grants and entitlements Charges for services Licenses and permits Rents Investment earnings Miscellaneous Total revenues 5,514,830 $ 5,051,705 $ (463,125) 1,555,880 1,555,880 591,699 (964,181) 75,000 75,000 67,424 (7,576) - - 150 150 70,940 - - 70,940 114,249 114,249 107,712 (6,537) 127,856 127,856 20,759 (107,097) 7,387,815 7,387,815 5,910,389 (1,477,426) 2,756,537 2,756,537 2,533,952 222,585 EXPENDITURES: Current: General administration Community development 7,567,548 7,567,548 2,234,041 5,333,507 Non-departmental 1,081,886 1,081,886 629,673 452,213 Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 145,000 145,000 - 145,000 11,550,971 11,550,971 5,397,666 6,153,305 (4,163,156) 512,723 4,675,879 - 22 22 (4,163,156) 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 $ 1,404,702 1,643,702 1,643,258 (1,718,192) (1,718,192) (1,718,192) (313,490) (74,490) (74,912) (4,476,646) (4,237,646) 5,276,130 5,276,130 799,484 $ Adjustment from budetary basis to GAAP basis net change in fund balances 1,038,484 4,675,457 5,276,130 - $ 5,713,941 $ 437,811 modified accrual basis. (82,801) $ The notes to the financial statements are an integral part of this statement 29 (422) 437,811 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis (444) 355,010 $ 4,675,457 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets Proprietary Funds June 30, 2009 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund ASSETS Current assets: Cash and investments $ Cash with fiscal agents Receivable, net Inventory Total current assets 5,826,085 $ 3,576,575 509,081 - 3,784,315 1,122,453 234,771 - 10,354,252 4,699,028 1,835,669 9,003,624 - 23,320 Noncurrent assets: Restricted cash and investments Restricted receivable Deferred bond issuance costs, net 248,533 - Capital assets, non-depreciable 47,979,604 1,849,428 Capital assets, depreciable, net 215,098,664 8,184,783 265,162,470 19,061,155 275,516,722 23,760,183 908,634 27,405 Accrued payroll and compensated absences 443,791 242,350 Interest payable 929,522 - Unearned revenue 130,584 - 33,527 - Total non-current assets Total assets LIABILITIES Current liabilities: Accounts payable Unamortized bond premium Interfund payable Bonds and notes payable Deposits payable Total current liabilities - - 8,984,585 - 367,300 33,880 11,797,943 303,635 189,531 115,192 Noncurrent liabilities: Compensated absences Net OPEB obligation Landfill closure and postclosure care costs Capital lease payable Bonds and notes payable Total noncurrent liabilities Total liabilities 94,350 63,901 - 9,877,798 1,396,671 - 45,080,363 - 46,760,915 10,056,891 58,558,858 10,360,526 207,583,121 10,034,211 NET ASSETS Invested in capital assets, net of related debt Restricted: Capital projects 1,593,915 - Unrestricted 7,780,828 3,365,446 Total net assets $ The notes to the financial statements are an integral part of this statement 30 216,957,864 $ 13,399,657 Business-type Activities - Enterprise Funds Airport Fund $ $ Governmental Activities Stormwater Fund 466,508 $ Total 856,946 $ Internal Service Fund 10,726,114 $ 4,053,764 - - 509,081 - 219,480 119,892 5,246,140 149,021 - - 234,771 - 685,988 976,838 16,716,106 4,202,785 - - - 10,839,293 - - 23,320 - - - 248,533 - 113,365 10,602,408 60,544,805 - 47,043,846 19,399,040 289,726,333 47,157,211 30,001,448 361,382,284 - 47,843,199 30,978,286 378,098,390 4,202,785 21,901 335,551 1,293,491 839,113 38,709 29,504 754,354 - 8,775 - 938,297 - 107,857 - 238,441 - - - 33,527 - 94,897 - 94,897 - 488,024 - 9,472,609 - 31,877 - 433,057 - 792,040 365,055 13,258,673 839,113 11,459 7,596 323,778 - 10,540 9,044 177,835 - - - 9,877,798 - 2,282,494 - 3,679,165 - 297,661 - 45,378,024 - 2,602,154 16,640 59,436,600 - 3,394,194 381,695 72,695,273 839,113 44,089,030 30,001,448 291,707,810 - - - 1,593,915 - 359,975 595,143 12,101,392 3,363,672 44,449,005 $ 30,596,591 $ 305,403,117 $ 304,849,517 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 Net assets of business-type activities 31 (553,600) $ 3,363,672 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Year Ended June 30, 2009 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund OPERATING REVENUES: Charges for services $ Miscellaneous 17,328,927 $ 11,544,542 - 930 17,328,927 11,545,472 Personal services 5,590,327 4,089,200 Contractual services, materials and supplies 9,043,659 6,606,372 - - 6,198,843 999,869 20,832,829 11,695,441 Total operating revenues OPERATING EXPENSES: Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) (3,503,902) (149,969) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain on sale of capital asset Passenger facility charges 130,178 63,354 13,716 69,448 2,790 126,180 - Interest expense Total non-operating revenues (expenses) Income (loss) before capital contributions and transfers Capital contributions - (1,800,923) - (1,654,239) 258,982 (5,158,141) 109,013 8,513,235 Transfers in Transfers out Change in net assets Total net assets, beginning of year Total net assets, end of year $ The notes to the financial statements are an integral part of this statement 32 - 3,807,478 91,950 (1,965,272) (19,488) 5,197,300 181,475 211,760,564 13,218,182 216,957,864 $ 13,399,657 Business-type Activities - Enterprise Funds Airport Fund $ Stormwater Fund 1,187,105 $ Total 1,247,792 $ Internal Service Fund 31,308,366 $ 7,337,473 - 86 1,016 5,500 1,187,105 1,247,878 31,309,382 7,342,973 629,386 510,050 10,818,963 - 797,310 308,239 16,755,580 - - - - 8,266,613 2,589,834 354,020 10,142,566 - 4,016,530 1,172,309 37,717,109 8,266,613 (2,829,425) 75,569 (6,407,727) (923,640) 7,659 4,963 206,154 92,458 2,220,901 - 2,304,065 - - 119,366 - (9,604) 166,158 - (172,142) - 2,212,972 (33,567) (154,372) 44,603,377 $ 92,458 (5,585,049) 4,730,117 495,648 - 822,678 80,532 - 44,449,005 166,158 (1,973,065) 4,963 (616,453) $ Governmental Activities (831,182) 13,243,352 - 721,989 5,117,065 (239,473) (2,257,800) (1,126,000) 5,293,165 10,517,568 (1,957,182) 25,303,426 294,885,549 30,596,591 $ 305,403,117 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 (295,565) Change in net assets of business-type activities $ 33 10,222,003 - 5,320,854 $ 3,363,672 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2009 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund Cash flows from operating activities: Receipts from customers $ Interfund services provided 28,787,780 $ 319,250 Other receipts 66,064 - Payments to suppliers 930 (9,007,369) Inerfund services used Payments to employees Net cash provided (used) by operating activities 11,380,397 (6,218,784) (53,296) (4,243) (5,496,989) (4,040,318) 14,549,376 1,184,046 Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds Interfund loans paid Net cash provided (used) by noncapital financing activities 3,807,478 91,950 (1,965,272) (19,488) - - 1,842,206 72,462 15,009 59,234 Cash flows from capital and related financing activities: Receipts from grantors Capital Contributions Acquisition and construction of capital assets 937,009 - (13,950,248) (787,231) Principal payments on capital debt (5,006,688) Interest paid on capital debt (1,763,777) - 6,602,689 6 602 689 - 2,790 126,180 Proceeds P d from f capital it l debt d bt Proceeds from sales of capital assets Net cash provided (used) by capital and related financing activities - (13,163,216) (601,817) Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 176,928 88,568 176,928 88,568 3,405,294 743,259 4,765,541 11,836,940 $ 8,170,835 $ 12,580,199 $ 5,826,085 $ 3,576,575 Classified as: Cash, cash equivalents, and investments Restricted cash with fiscal agents Restricted cash and cash equivalents Totals $ The notes to the financial statements are an integral part of this statement 34 509,081 - 1,835,669 9,003,624 8,170,835 $ 12,580,199 Governmental Activities Business-type Activities - Enterprise Funds Airport Fund $ Stormwater Fund 1,151,808 $ Total 1,203,271 $ Internal Service Fund 42,523,256 $ 7,387,705 - 41,175 426,489 - 166,158 86 167,174 5,500 (1,636,274) (54,806) (22,463) (16,917,233) - - (611,328) (502,826) (10,651,461) (952,099) 686,900 15,468,223 495,648 (33,567) (7,864,717) (80,002) 721,989 5,117,065 (239,473) (2,257,800) (471,512) (1,126,000) - - - 3,300,000 462,081 482,516 2,859,265 2,174,000 2,910,880 - 2,985,123 - - - 937,009 (1,850,596) (757,885) - (17,345,960) - (480,664) - (5,487,352) - (174,572) - (1,938,349) - - - 6 6,602,689 602 689 - 19,900 - 148,870 - 424,948 (757,885) (14,097,970) - 9,599 4,192 279,287 106,318 9,599 4,192 279,287 106,318 (55,471) 521,979 415,723 4,508,805 1,808,806 441,223 17,565,683 2,244,958 $ 466,508 $ 856,946 $ 22,074,488 $ 4,053,764 $ 466,508 $ 856,946 $ 10,726,114 $ 4,053,764 $ - - 509,081 - - 10,839,293 466,508 $ 856,946 $ 22,074,488 (continued) 35 $ 4,053,764 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2009 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) $ (3,503,902) $ (149,969) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 6,198,843 999,869 Landfill closure and postclosure costs - 512,308 Other receipts - - (Increase) decrease in assets: Accounts receivable 11,838,919 Allowance for doubtful accounts Inventories (168,274) - 66,000 69,803 - Increase (decrease) in liabilities: Accounts payable (86,809) Accrued payroll, compensated absences and OPEB (128,963) 93,338 Deposits payable 48,882 (49,580) Deferred revenue 4,193 (11,236) Total Adjustments - 18,053,278 Net cash provided (used) by operating activities 1,334,015 $ 14,549,376 $ $ 3,950,741 $ 1,184,046 Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Capital assets acquired through contributions from general fund Total noncash investing, capital and financing activities 3,625,485 $ The notes to the financial statements are an integral part of this statement 36 7,576,226 - $ - Governmental Activities Airport Fund $ Stormwater Fund (2,829,425) $ (6,407,727) $ (923,640) 354,020 10,142,566 - 512,308 - 166,158 - 166,158 - (3,346) - 11,656,168 50,232 - - 66,000 - - - 69,803 - 253,433 18,058 (18,643) - - (50,910) - - (29,879) 611,331 - 21,875,950 452,128 $ 686,900 $ 15,468,223 $ $ 1,563,368 $ 5,514,109 $ - 401,896 167,502 - 1,877,326 (952,099) (823,766) 7,224 (5,523) $ $ - (861,427) $ 75,569 Internal Service Fund 2,589,834 (11,131) $ Total 3,166,749 $ 6,792,234 4,730,117 $ (concluded) 37 12,306,343 (471,512) - $ - CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2009 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 accounting principles generally accepted in the United States of America (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. For the year ended June 30, 2009, the City implemented the provisions of GASB Statement No. 45, Statement No. Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. 45 establishes standards for the measurement recognition, and display of GASB OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports. 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. 38 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 are supported by fees and charges for services. 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. 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. 39 Also part of the basic financial statements are fund financial statements for governmental funds, and proprietary funds. 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 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 a major governmental fund on the basis of community focus and the Stormwater Fund as major proprietary fund due to it’s relation with other proprietary funds. 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. 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 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. 40 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 represent items like investment income, interest expense, and other items that do not fit in any other category and 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. 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:  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.  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.  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. None of the debt service funds are reported as major in the current year. Capital Projects Fund is used to account for major capital acquisition and construction separate from ongoing operating activities. The city reports it one capital project fund as major.  The Capital Project Bond Construction Fund 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. 41 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. 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.  Water and Wastewater Utility accounts for the City water pumping, treatment and distribution systems and the City wastewater collection, and treatment systems.  Environmental Services Fund accounts for the operations of City refuse and management of the City landfill. A recycling collection services as well as the management of sustainability programs.   Airport Fund that accounts for the construction, operations and maintenance of the City airport. Stormwater Utility accounts for the construction, operations and maintenance activities of the City stormwater system. 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. 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. 42 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 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. 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. 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. 43 Budgets and Budgetary Accounting The City uses the following procedures in establishing the budgetary data reflected in the accompanying financial statements.  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.  The initial budget for the fiscal year may be amended during the year in a legally permissible manner.  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.  All unencumbered expenditure appropriations expire at the end of the fiscal year.  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.  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 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 (LGIP), 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. The City also has an investment policy. Details of the City’s investment policy can be found in Note IV.A. 44 The LGIP is a part of the State of Arizona 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. 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. 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 Fund, the BBB Fund, the Airport Fund and the General Obligation Bond Fund. General Obligation bonds are serviced by each of these funds. For fiscal year 2008-2009, primary and secondary property tax collections amounted to $4,881,554 and $7,253,787 respectively. 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. Typically, restricted assets are used prior to using unrestricted assets when both are available for the same purpose. 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 45 networks or subsystems of infrastructure assets. governmental fund financial statements. No long-term assets or depreciation are shown in the Capital assets, including public domain infrastructure (i.e., roads, bridges, curbs and gutters, streets and sidewalks, 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 five years. Such assets are recorded at historical cost or estimated historical cost if actual amounts are unknown. 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 Infrastructure 10-50 Machinery and Equipment 5-20 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. Sick leave accrues at rates based on the full time equivalency status of each employee. 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. 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. 46 Other Postemployment Benefits Retirees are allowed to participate in the same healthcare plan as active employees and pay the same premium for this benefit which causes an implicit rate subsidy. Even though the City makes no direct payments on behalf of the retirees the City is required to report this implicit cost for active employees who will be able to continue to purchase health insurance once they retire. To recognize the cost of other postemployment benefits (OPEB) for healthcare over the active service life of the employee rather than on a pay-as-you-go basis, the net OPEB obligation represents the amortized future cost of the unfunded actuarial accrued liability. In the government-wide statements, and proprietary fund types in the fund financial statements, the net OPEB obligations are reported as long-term liabilities in the statement of net assets. Long-Term Obligations In the government-wide financial statements, and proprietary 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 as well as issuance costs are deferred and amortized over the life of the bonds. 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. 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 balance is defined as that portion of fund balance that has legally been segregated for specific purposes. Designated fund balance 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 balance is defined as that portion of fund balance, which is available for use in a future period. 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. 47 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. 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 (4) Totals Assets Cash and cash equivalents $ 29,784,961 $ - Cash with fiscal agents 5,248,901 - Accounts receivable, net 6,306,146 - 147,830 - 3,629,474 Interest receivable Intergovernmental receivables Bond proceeds receivable Special assessments receivable Interfund receivable Restricted cash and cash equivalents Property held for sale - 4,053,764 $ - $ 33,838,725 5,248,901 37,479 - 6,705,265 - 16,645 - 164,475 - - - - 3,629,474 127,674 - - - - 127,674 1,527 - - - - 8,567,000 - - 361,640 648,497 648,497 - - - - - - - - 366,856 10,113,468 - - - - 10,113,468 - - - - - - 485,481 1,527 (8,567,000) 366,856 500,000 $ $ - Capital assets Total Assets - - Deferred issuance costs - Prepaid items Inventory $ 302,336,426 64,793,837 $ 6,072,928 $ 302,336,426 $ 847,121 485,481 - 500,000 (6,792,235) $ 4,756,385 $ $ 839,113 $ 295,544,191 (15,359,235) $ 357,374,534 Liabilities and Net Assets Accounts payable $ - $ - - $ 6,912,041 Accrued payroll & compensated absences 2,147,749 - - - - 2,147,749 Interest payable 1,822,037 - - - - 1,822,037 Interfund payable 8,567,000 - - - (8,567,000) Unearned revenue - - - - 3,764,718 - (3,764,718) Deferred revenue 4,100,686 - Guaranty and other deposits 1,481,719 - Arbitrage rebate - Current bonds/contracts payable - - 4,540,000 Unamortized bond premium (335,968) 449,927 - - - 3,764,718 - - - 1,481,719 - - 449,927 - - 4,540,000 - 905,180 - - 905,180 Compensated absences - - 3,478,644 - - 3,478,644 Other postemployment benefits - - 875,578 - - 875,578 Unmatured long-term debt - - 75,734,293 - - 75,734,293 Fund balance/Net Assets Total liabilities and net assets 36,061,718 $ 64,793,837 302,336,426 $ 302,336,426 48 (80,260,533) $ 847,121 3,917,272 $ 4,756,385 (6,792,235) $ (15,359,235) $ 255,262,648 357,374,534 (1) Capital assets (land, buildings, equipment, etc.) used in governmental activities are purchased or constructed with the costs of those assets are reported as expenditures in governmental funds, and thus a reduction in fund balance. Howe ver, the statem ent of net assets includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation $ $ 440,193,526 (137,857,100) 302,336,426 (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 $ 485,481 Certain receivables are not recognized in the govermental funds, but are earned in the statement of net assets. Defe rre d court receivables $ 361,640 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 gove rnmental fund statement. All liabilities, both current and longterm are reported in the state ment of net assets. Bonds payable Compensated absences Arbitrage rebate Unamortized bond premium Subtotal Less: current portion of bonds and leases $ $ 80,274,293 5,009,329 449,927 905,180 86,638,729 4,540,000 82,098,729 Deferred revenue for the long-term special assessment receivable s and property tax shown on the governmental fund statements is not deferred on the statements of net assets. Defe rre d property tax $ $ 335,968 335,968 (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 gove rnmental activities in the statement of net assets, but are not include d on the governmental fund balance she et. ISF net assets (4) $ 3,917,272 Certain interfund transactions between governmental activities and between business-type activties are eliminated in the consolidation of those activities for the statement of net assets. Interfund receivables Interfund payables $ $ 49 8,567,000 (8,567,000) - 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 Capital Long-Term Internal Adjustments Statement of Governmental Funds Related Items (1) Revenues/ Expenses (2) Service Fund (3) and Eliminations (4) Activities Totals Revenues and Other Sources Taxes Intergovernmental $ 43,555,388 $ - $ 126,844 $ - $ - $ 43,682,232 21,364,739 - - - (930,132) 20,434,607 Grants and entitlements 9,609,538 - - - 930,132 10,539,670 Charges for services 3,324,838 - - - - Special assessments 2,382 - (2,382) - - Licenses and permits 1,377,580 - - - - Fines and forfeitures 1,517,558 - 38,275 - - 1,555,833 Rent 1,421,772 - - - - 1,421,772 - 92,458 - 1,459,389 1,375 - - 1,701,717 - - 381,984 92,458 - 85,879,622 Investment earnings 1,366,931 Contributions 1,328,524 Miscellaneous Total revenue 371,818 381,984 85,251,234 - - 3,324,838 1,377,580 371,818 164,112 9,848,282 653,762 314,218 80,541 - 10,896,803 27,374,083 1,148,544 361,356 215,116 - 29,099,099 Expenditures/Expenses General governmental Public safety Public works 1,645,703 388,155 59,753 15,610 - 2,109,221 Economic and physical development 9,991,927 207,802 70,776 76,477 - 10,346,982 Culture and recreation 12,158,087 1,532,260 131,021 102,893 - 13,924,261 Highways and streets 11,187,402 7,213,718 55,684 137,438 - 18,594,242 Principal retirement 5,034,991 - (5,034,991) - - Interest and other charges 3,750,657 - (99,136) - - - - Capital outlay Total expenditures/expenses 30,796,072 (30,796,072) 111,787,204 (19,651,831) (4,141,319) 628,075 - 3,651,521 88,622,129 OTHER FINANCING SOURCES (USES): Bond proceeds Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change for the year 109,352 63,894 (799,690) (109,352) - 21,626,308 - - (23,359,573) - - (1,560,019) $ (28,095,989) $ (799,690) 19,223,959 $ 50 - - - - (1,126,000) (6,792,235) (109,352) (1,126,000) (6,792,235) 4,196,079 $ (1,661,617) $ (6,792,235) $ (735,796) 21,626,308 (31,277,808) (10,387,296) (13,129,803) Capital outlay Depreciation expense Gain (loss) on sale of capital assets Donated capital assets $ $ 30,796,072 (11,144,241) (799,690) 371,818 19,223,959 (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 governmentwide reporting. Special assessment received Property tax Court revenue $ $ (1,007) 126,844 38,275 164,112 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 Arbitrage rebate $ $ (55,926) (73,802) (129,728) 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 Accrual of postemployment benefits $ $ 12,498 (875,578) (863,080) 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 Capital debt issued Amortization of bond premium $ $ 5,034,991 (109,352) 99,136 5,024,775 (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 $ $ 92,458 (1,754,075) (1,661,617) (4) Certain interfund transactions between governmental activities and between business-type activties are eliminated in the consolidation of those activities for the statement of net assets. Transfer of capital assets to enterprise fund 51 $ (6,792,235) C. Negative Fund Balance The Highway User Revenue Fund ended the year ending June 30, 2009 with a negative fund balance of $311,731. This was caused by capital expenditures being incurred for debt funded project prior to the debt being issued. The debt was issued in the following fiscal year. 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:  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.   Fund balances reserved to inventory and bonded debt are not included in the budget. Certain expenditures, such as depreciation, compensated absences and landfill closure and post closure accrual, are not included in the budget.   Enterprise funds budget capital expenditures and debt service payments as expenses. 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 during the fall and spring retreats. The fall and spring retreats were held in November and February 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 April. 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 52 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 June. 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. municipalities require voter approval every four years. Alternative Home Rule Expenditure Control 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 inter- fund 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. 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. 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 investments.” Deposits At June 30, 2009, the carrying amount of the City’s deposits was $6,016,008 and the bank balance was $7,238,603. The $1,222,595 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2009. Custodial Credit Risk 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 and the City’s investment policy 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, 2009, all City deposits 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. All investments are either registered in the City’s name or are held by a third party in the City’s name except for $5,393,337 of the City’s repurchase sweep agreement which is held by the financial institution, not in the name of the City. 53 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. At June 30, 2009, the City’s investments included the following Investment Type U.S. agency securities - implicit Municipal securities Repurchase sweep agreement Mutual fund - money market State Investment Pool Total fair value of investments $ $ Fair Value 16,668,365 14,000 5,393,337 4,314,170 38,869,702 65,259,574 Weighted Average Maturity (in years) 3.769 1.000 0.003 0.003 0.087 Portfolio weighted average maturity 1.015 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 credit quality ratings of investments as described by nationally recognized Moody’s rating service as of June 30, 2009 is as follows: Investment Type U.S. agency securities - implicit State investment pool (LGIP) Mutual fund - money market Municipal securities Total Fair Value $ 22,061,702 38,869,702 4,314,170 14,000 $ Minimum Legal Rating N/A N/A $ A 65,259,574 $ AAA 22,061,702 38,869,702 60,931,404 Rating as of Year End A+ $ $ 14,000 $ 14,000 $ Unrated 4,314,170 4,314,170 Concentration of Credit Risk The City’s investment policy establishes that 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 shall not exceed the following. Fully insured or collateralized CD’s no more than 25%, US agency securities 100%, State, county, school district and other district municipal bonds or debt with an A rating or better no more than 25%, repurchase agreements 100%, and local government investment pool 100%. State of Arizona Investment Pool represents 60 percent of the City’s total investments. In addition, Federal Home Loan Bank and Federal National Mortgage Association represent 12 percent and 15 percent, respectively, of the City’s total investment. 54 At June 30, 2009, the City’s cash and investments included the following: 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 investments Total pooled cash and investments $ $ $ 65,259,574 6,016,008 71,275,582 27,882,476 16,682,363 5,757,982 20,952,761 71,275,582 Cash and cash equivalents at June 30, 2009 consisted of the following: Investments included in cash and cash equivalents Cash on hand Total cash and cash equivalents per statement of net assets $ $ 27,866,551 15,925 27,882,476 Investment income comprises the following for the year ended June 30, 2009: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income per statement of activities $ $ 1,979,506 (313,963) 1,665,543 The net decrease in the fair value of investments during fiscal year 2008-2009 was $41,178. 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, 2009 was $166,488. In previous years, the City recognized 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 others in May 2003. The case is presently pending litigation. There have been several distributions since June 2006. The distributions include payments from the trustee and settlement proceeds received from pending litigation. The City did not receive distributions this year but total recovery to date is $777,005. During this year, the City recognized a decrease in fair value of $272,785 consisting of the City’s share of a loss on an investment within the Local Government Investment Pool relating to Lehman Brothers Chapter 11 filing. The State has file claims on behalf of the LGIP investors. No distributions have been made to date. 55 B. Receivables Receivables as of June 30, 2009, including allowances for uncollectible accounts, are as follows: Fund Accounts Governmental Activities General fund Highway user revenue fund Transportation fund BBB fund 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 $ 5,699,003 712,908 927,025 513,858 25,090 153,279 (1,363,377) Intergovernmental Interest $ 70,326 14,475 9,679 16,995 7,693 28,662 - $ 908,821 2,051,628 59,351 609,674 - Bond Proceeds $ Special Assessments 127,674 - $ 1,527 - Total Receivables $ 6,805,824 727,383 2,988,332 590,204 32,783 793,142 (1,363,377) 6,667,786 37,479 147,830 16,645 3,629,474 - 127,674 - 1,527 - 10,574,291 54,124 6,705,265 164,475 3,629,474 127,674 1,527 10,628,415 3,798,131 1,168,477 105,835 120,121 (127,000) 26,184 35,153 1,729 771 - 23,143 116,916 - - - 3,824,315 1,226,773 224,480 120,892 (127,000) 5,065,564 63,837 140,059 - - 5,269,460 $ 11,770,829 $ 228,312 $ 3,769,533 $ 127,674 $ 1,527 $ 15,897,875 The only receivable not expected to be collected within one year include $71,000 of environmental services fund and $88,000 of the general fund. 56 C. Capital Assets A summary of capital asset activity, for the government-wide financial statements, as of June 30, 2009 is as follows: Balance Governmental activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets July 1, 2008 $ 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 $ 42,295,191 56,732,220 99,027,411 Deletions and Retirements Additions $ 18,122,834 18,122,834 $ 40,534,737 21,517,091 28,832,343 220,831,786 311,715,957 2,299,254 41,154 2,038,818 8,665,829 13,045,055 (513,347) (1,012,554) (1,525,901) (12,712,498) (9,345,515) (16,647,592) (88,925,295) (127,630,900) (1,137,291) (1,124,495) (1,877,656) (7,004,799) (11,144,241) 509,644 408,397 918,041 283,112,468 $ 20,023,648 $ Balance Business-type activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets July 1, 2008 $ 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 $ (191,830) (191,830) 10,300,797 48,536,661 58,837,458 10,222,264 10,222,264 $ - 79,774,088 310,521,463 21,207,116 411,502,667 1,125,480 9,599,872 1,912,453 12,637,805 (1,069,820) (1,069,820) (31,844,257) (95,204,437) (12,500,527) (139,549,221) (1,843,246) (6,834,789) (1,464,531) (10,142,566) 1,040,316 1,040,316 330,790,904 $ 12,717,503 57 $ $ (29,504) 1,056,438 (38,479,888) (37,423,450) Balances June 30, 2009 $ 23,749,630 53,808 6,827,777 30,631,215 $ (6,792,235) (13,849,789) (10,470,010) (18,015,604) (95,521,697) (137,857,100) $ Transfers In (out) $ (8,514,917) (8,514,917) $ 10,300,797 50,244,008 60,544,805 81,483,758 333,229,280 23,664,766 438,377,804 6,792,235 295,544,191 Balances June 30, 2009 584,190 13,107,945 1,615,017 15,307,152 $ 43,351,629 36,183,336 79,534,965 66,583,621 21,612,053 30,357,814 235,312,838 353,866,326 - Deletions and Retirements Additions $ (799,690) Transfers In (out) (33,687,503) (102,039,226) (12,924,742) (148,651,471) $ 350,271,138 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 58 $ $ 652,346 1,148,544 222,144 207,802 1,544,000 7,369,405 11,144,241 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $648,497 are included in the government-wide financial statements at June 30, 2009. The interfund balances at June 30, 2009 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, 2009 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2009: Fund Governmental Funds: General Transportation Capital projects bond construction Other governmental funds Internal service Total governmental funds Business-Type Funds: Airport Total enterprise funds Total governmental and enterprise funds Interfund Receivables $ $ Less: fund eliminations Adjustment for internal service fund elimination Total government-wide statement of net assets 8,567,000 94,897 8,661,897 8,661,897 (8,567,000) 553,600 $ 648,497 59 Interfund Payables $ $ 2,560,000 5,577,000 430,000 8,567,000 94,897 94,897 8,661,897 Transfers The net transfers of $9,651,500 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 three transfers during fiscal year 2009 that required a budget adjustment, Tourism fund received a transfer of $250,000 from the general fund as part of a local stimulus package, and $1,000,000 transfer between the other governmental funds and the water and wastewater fund for assistance with general obligation bond debt repayment; both are considered routine in nature. The third transfer represents an inability to sell City property at the Koch location; $1,126,000 was transferred from the internal service fund to other governmental funds, to general fund and is considered inconsistent with the activities of the internal service fund. As per resolution, when the property is sold the proceeds up to $1,126,000 will be transferred back to the internal service fund. The following transfers are reflected in the fund financial statements for the year ended June 30, 2009: At year end a resolution was brought forward to City Council to approve the budget adjustment related to transfers. Fund Governmental Activities: General fund Highway user revenue fund Transportation fund BBB fund Capital projects bond construction fund Other governmental funds Internal service Total governmental activities Business-Type Activities: Water and wastewater fund Environmental services fund Airport fund Stormwater fund Total enterprise activities Total governmental and business-type activities Transfers out $ $ Less: fund eliminations Add: capital assets transfer 5,785,445 377,103 6,733,640 1,718,192 370,650 8,374,543 1,126,000 24,485,573 1,965,272 19,488 33,567 239,473 2,257,800 26,743,373 Transfers In $ $ 4,880,311 8,601,511 1,643,258 700,000 5,801,228 21,626,308 3,807,478 91,950 495,648 721,989 5,117,065 26,743,373 (23,884,108) 6,792,235 Total government-wide statement of activities $ 9,651,500 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 2009 lease expense for the library was $78,859. The schedule below for future minimum lease expenses reflects the change in the rental rate as of July 1, 2009. 60 Year Ending June 30 2010 2011 2012 2013 Total East Flagstaff Library $ $ 78,859 78,859 78,859 52,573 289,150 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, 2009 were $161,513. Operating Lease Revenues The City leases several City-owned buildings under cancelable and non-cancelable agreements. The carrying value of the leased assets is $4,597,791 (cost of $5,446,368 less accumulated depreciation of $848,577) with current depreciation of $132,927. Certain leases contain provisions for future rate increases based on changes in the Consumer Price Index. Total revenue for fiscal year 2009 was $1,350,833. The City currently has one lease with non-cancelable terms that is for USGS building #6, which is guaranteed through August 2018. 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. Year Ending June 30 2010 2011 2012 2013 2014 2015-2018 Total USGS Building #6 $ $ $ $ $ $ 787,720 787,720 787,720 787,720 787,720 2,428,803 6,367,403 In addition, the Airport Fund has several leases under cancelable agreements. The leases are for terminal space, hangars, shades, tiedowns, and ground leases. $1,011,539. Lease revenue in the Airport fund for fiscal year 2009 was The carrying value of the leased assets is $5,616,834 (cost of $7,983,707 less accumulated depreciation of $2,366,873) with current year depreciation of $187,928. 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 $71,624,064. originally authorized, $15.9 million remains unissued. 61 Of the total amount 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, 2009: Purpose Governmental activities Business-type activities Business-type activities - refunding Total general obligation bonds outstanding $ $ Amount 27,645,000 1,680,000 5,780,000 35,105,000 General obligation bonds payable at June 30, 2009 consist of the following individual issues: Governmental Activities: $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%. $ 2,310,000 $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%. 25,335,000 Total Governmental Activities 27,645,000 Business-type activities: Water and Wastewater: $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 $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%. 5,780,000 Total Water and Wastewater 7,460,000 Total Business-type Activities 7,460,000 Total General Obligation Bonds $ 62 35,105,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2010 2011 2012 2013 2014 Govermental Activities Principal Interest $ 2015-2019 2020-2023 Total $ 1,780,000 1,850,000 1,930,000 2,020,000 2,125,000 9,450,000 8,490,000 27,645,000 $ $ Business-type Activities Principal Interest 1,236,852 1,161,833 1,083,870 989,670 890,350 3,009,489 781,673 9,153,737 $ $ 1,770,000 1,860,000 1,960,000 1,870,000 7,460,000 $ 263,450 205,926 145,476 81,776 696,628 $ 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, 2009: Purpose Governmental activities $ Amount 19,169,000 Special assessment bonds payable at June 30, 2009 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%. $ 94,000 $19,075,000 Improvement District Bonds, due in annual installments of $460,000 to $1,345,000, through January 1, 2032; interest at 5.0%. 19,075,000 Total Special Assessment Bonds $ 63 19,169,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2032 Total Govermental Activities Principal Interest $ $ 554,000 485,000 505,000 535,000 560,000 3,250,000 4,140,000 5,290,000 3,850,000 19,169,000 $ $ 944,553 918,625 893,875 867,875 840,500 3,742,000 2,822,750 1,650,000 295,000 12,975,178 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, 2009: Purpose Governmental activities Business-type activities Total general obligation bonds outstanding $ $ Amount 4,865,000 4,918,234 9,783,234 Revenue bonds at June 30, 2009 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%. Total Governmental Activities $ 4,865,000 4,865,000 64 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%. 4,918,234 Total Revenue Bonds $ 9,783,234 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2010 2011 2012 2013 2014 2015-2019 2020-2022 Total Govermental Activities Principal Interest $ $ 1,520,000 1,620,000 1,725,000 4,865,000 $ $ Business-type Activities Principal Interest 280,135 190,455 94,875 565,465 $ $ 304,326 315,123 326,302 337,877 349,863 1,944,532 1,340,211 4,918,234 $ $ 174,474 163,678 152,499 140,924 128,938 449,474 96,194 1,306,180 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, 2009: Purpose Governmental activities $ 65 Amount 21,625,000 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%. $ 2,695,000 $25,000,000 Fourth Street Municipal Facility Corporation Revenue Bonds, Series 2003 due in annual installments of $1,000,000 to $2,145,000 through July 1, 2010; interest at 2% to 5,25%. Total Other Debt $ Annual debt service requirements to maturity for other debt are as follows: Year Ending June 30 2010 2011 2012 2013 2014 2015-2019 2020 Total Govermental Activities Principal Interest $ $ 1,735,000 1,795,000 1,865,000 1,945,000 2,020,000 10,120,000 2,145,000 21,625,000 18,930,000 $ $ 985,814 925,071 854,959 778,169 697,963 2,100,413 112,613 6,455,000 66 21,625,000 The following is a summary of debt service requirements, including interest requirements, to maturity for long-term debt at June 30, 2009: Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Less interest General Obligation Bonds $ 5,050,300 5,077,759 5,119,346 4,961,446 3,015,350 2,491,313 2,491,538 2,487,038 2,494,350 2,495,250 2,492,100 2,493,000 2,495,187 1,791,388 $ (9,850,365) 35,105,000 Special Assessment Bonds $ 1,498,553 1,403,625 1,398,875 1,402,875 1,400,500 1,401,750 1,396,625 1,400,000 1,396,750 1,396,875 1,395,250 1,391,875 1,391,625 1,394,250 1,389,750 1,388,125 1,389,125 1,387,625 1,388,500 1,386,625 1,382,000 1,384,375 1,378,625 (12,975,178) $ 19,169,000 Revenue Bonds $ 2,278,936 2,289,256 2,298,676 478,801 478,801 478,801 478,802 478,801 478,801 478,801 478,801 478,801 478,801 $ 67 (1,871,645) 9,783,234 Municipal Facility Corporation Bonds $ 2,720,814 2,720,071 2,719,959 2,723,169 2,717,963 2,719,163 2,721,813 2,258,163 2,261,563 2,259,713 2,257,609 (6,455,000) $ 21,625,000 Total $ 11,548,603 11,490,711 11,536,856 9,566,291 7,612,614 7,091,027 7,088,778 6,624,002 6,631,464 6,630,639 6,623,760 4,363,676 4,365,613 3,185,638 1,389,750 1,388,125 1,389,125 1,387,625 1,388,500 1,386,625 1,382,000 1,384,375 1,378,625 (31,152,188) $ 85,682,234 Loans Payable The City of Flagstaff has various loan agreements with the Water and Wastewater Infrastructure Finance Authority of Arizona Revolving Fund Loan Program for the acquisition and construction of water and wastewater facilities and obtaining water rights. The Department of Transportation provides financing for the construction of 14 T hangars at the City Airport. Loans outstanding as of June 30, 2009: Business-type activities $ 37,006,648 Loan payables at June 30, 2009 consist of the following individual financing options: Business-type Activities Water and wastewater: $6,000,000 Wastewater infrastructure finance authority due in annual installments of $214,312 to $404,665 through July 1, 2012; interest at 3.402%. $ 1,174,492 $7,900,000 Water infrastructure finance authority due in annual installments of $295,000 to $525,000 through July 1, 2026; interest at 3.28%. 6,960,000 $23,100,000 Wastewater infrastructure finance authority due in annual installment of $815,834 to $1,571,901 through July 1, 22,224,597 2027; interest at 3.512%. $8,500,000 Water infrastructure finance authority due in annual installment of $344,052 to $628,065 through July 1, 2027; interest at 3.75%. Amount issued to-date $6,602,689. Remaining 6,312,923 available $1,897,311. Total water and wastewater loan payable $ 36,672,012 $ 334,636 Airport: $600,000 Arizona Department of Transportation due in quarterly installments of $5,337 to $13,548 through January 1,2016; interest at 5.6%. Total Business-type Activities loan payable $ 68 37,006,648 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 Business-type Activities Principal Interest 2010 2011 2012 2013 2014 2015-2019 1,932,534 2,005,951 2,076,491 1,730,800 1,791,590 9,826,901 1,049,880 994,889 937,759 878,593 831,563 3,399,445 2020-2024 2025-2028 Total 11,536,394 6,105,987 37,006,648 2,014,036 464,137 10,570,303 $ $ Obligations under Capital Leases The City has entered into capital lease agreements for energy saving equipment, cardio equipment and the construction of a co-generator at Wildcat Wastewater Treatment Plant, with total assets of $2,871,201, $109,352 and $627,188, 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, 2009 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025-2026 Total future minimum lease payments Less: imputed interest costs Present value of future minimum lease payments Governmental Activities $ 506,273 506,273 490,670 470,993 470,993 235,496 2,680,698 (250,405) $ 2,430,293 Business Type Activities $ 482,692 482,692 482,692 482,692 482,692 1,786,070 1,158,678 115,870 5,474,078 (1,514,255) $ 3,959,823 Arbitrage Under U.S. Treasury Department regulations, all government tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. In general the requirements stipulate that the earnings from investments of tax-exempt bond proceeds that exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City has evaluated each of its financing options subject to the arbitrage rebate requirements. At June 30, 2009 the City has recognized $449,927 in arbitrage liability. 69 Pledged Revenues The City has pledged future water utility and wastewater utility revenues to repay $50,378,449 in Water Infrastructure Financing Authority Bonds issued during the period of 1992-2009. The various bonds were issued for the purchase or construction of various water or wastewater infrastructure including wells, water distribution lines, wastewater collection lines, and treatment plant improvements. At June 30, 2009, $43,167,526 remains outstanding to be repaid by future water and wastewater revenues. For the fiscal year ended June 30, 2009, net revenue available for service of this debt was $2,825,119. The debt principal and interest paid in fiscal year 2009 was $3,671,018 (130% of available pledged net revenues). For additional information on pledged revenues for revenue bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $25,000,000 in Municipal Facility Corporation bonds issued in 2004. The bonds were issued to construct transportation infrastructure. The bonds have a senior lien on the 0.16% transportation sales tax and a secondary lien on the excise taxes and state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2009, $18,930,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2009, net revenues available for service of the debt were $38,586,144. The debt principal and interest paid in fiscal year 2009 was $1,946,850 (5.05% of available pledged net revenues). For additional information on pledged revenues for MFC transportation bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $4,700,000 in Municipal Facility Corporation bonds issued in 2001 for the construction of a multipurpose office facility. The bonds are secured by a pledge of the City’s state shared revenues not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2009, $2,695,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2009, net revenues available for service of this debt were $13,557,828. The debt principal and interest paid in fiscal year 2009 was $459,534 (3.39% of available pledged net revenues). For additional information on pledged revenues for MFC other than transportation bonds, refer to Schedule 17 in the Statistical Section of this report. The City has pledged certain revenues for the repayment of $5,580,000 Junior Lien Street and Highway User Revenue bonds issued in 1992 for street construction and $9,375,000 Series 2003 Refunding issued in 2003 for street and highway construction. The bonds are secured by a pledge of the City’s highway user revenue not specifically reserved by law or other regulation to be expended for other purposes. At June 30, 2009, $4,865,000 remains outstanding on the Junior Lien Street and Highway User Revenue bonds to be repaid by future revenues, the Series 2003 refunding has no remaining outstanding as of June 30, 2009. For the fiscal year ended June 30, 2009, net revenues available for service of this debt were $6,412,329. The debt principal and interest paid in fiscal year 2009 was $1,804,010 (28.13% of available pledged net revenues). For additional information on pledged revenues for highway user revenue bonds, refer to Schedule 17 in the Statistical Section of this report. 70 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, 2009 was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corporate bonds Total bonds payable Capital leases Compensated absences Other postemployment benefits Arbitrage rebate Governmental activity long-term liabilty Business-type activities: Bonds payable: General obligation bonds Water & sewer revenue bonds Total bonds payable Beginning Balance $ $ $ Water & sewer loan payable Airport loan payable Capital lease payable Total loan and leases payable Compensated absences Other postemployment benefits Landfill closure/postclosure Business-type activity long-term liability $ 29,350,000 19,257,000 6,325,000 23,000,000 77,932,000 2,727,932 3,491,142 376,125 84,527,199 Additions $ $ 10,515,000 5,212,135 15,727,135 109,352 1,518,187 875,578 73,802 2,576,919 - Ending Balance Reductions $ $ $ (1,705,000) (88,000) (1,460,000) (1,375,000) (4,628,000) (406,991) (1,530,685) (6,565,676) (3,055,000) (293,901) (3,348,901) $ $ $ 27,645,000 19,169,000 4,865,000 21,625,000 73,304,000 2,430,293 3,478,644 875,578 449,927 80,538,442 7,460,000 4,918,234 12,378,234 Due Within One Year $ $ $ 1,780,000 554,000 1,520,000 1,735,000 5,589,000 426,522 1,530,685 7,546,207 1,770,000 304,326 2,074,326 31,905,515 369,613 4,227,105 36,502,233 6,602,689 6,602,689 (1,836,192) (34,977) (267,282) (2,138,451) 36,672,012 334,636 3,959,823 40,966,471 1,895,558 36,976 280,656 2,213,190 648,248 9,365,490 62,243,106 310,390 512,308 7,425,387 (317,430) (5,804,782) 641,208 177,835 9,877,798 64,041,546 317,430 4,604,946 $ $ $ $ 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, 2009 have potential exposure to the City of approximately $836,955 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 71 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. Beginning of Year Liability Fiscal Year 2006-07 $ 493,221 $ Current Year Claims and Changes in Estimates Claim Payments 2,771 $ End of Year Liability 81,600 $ 414,392 2007-08 414,392 224,304 259,686 379,010 2008-09 379,010 744,543 286,598 836,955 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. Commitments and contingent liabilities Outstanding Contracts At June 30, 2009 there were major outstanding contracts as follows: Governmental Activities: General fund Highway users revenue fund BBB fund Capital projects fund Total governmental activities $ 1,824,797 175,977 148,834 650,814 2,800,422 Business - Type Activities: Water and wastewater fund Airport fund Stormwater fund Total business-type activities Total governmental and business-type activities 854,123 21,074 335,551 1,210,748 4,011,170 $ 72 The City entered into a Development Incentive Agreement (DA) with Butler & Lone Tree LLC on June 1, 2007. The project known as “Aspen Place at the Sawmill” will be a mixed-use development consisting of 155,000 square feet of retail uses and approximately 265 single-family residential and town home dwelling units. The terms and conditions of the DA is to require the owner of the property to construct and install certain improvements such as streets, drainage retention facilities, public walkways and a raised median on Butler Avenue. In order to finance these improvements, an Improvement District (ID) has been formed. The City issued special assessment bonds in the amount of $19,075,000 in fiscal year 2007. These bonds will be repaid from assessments imposed on the real property included within the ID. The City believes the development will generate substantial transaction privilege tax revenues and the City has agreed to rebate the Landowner a portion of the transaction privilege taxes generated from the property. 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. C. Retirement and pension plans All full-time employees of the City are covered by one of three pension plans. The Arizona State Retirement system is for the benefit of the employees of the state and certain other governmental jurisdictions. All full-time City employees, except sworn fire and police personnel, are included in the Arizona State Retirement System. Sworn police and fire personnel participate in the Public Safety Retirement System. In addition, the Mayor and City Council members are covered by the State’s Elected Officials Plan. Plan Descriptions - The City contributes to the three 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 and an agent multiple-employer defined benefit health insurance premium 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 and a cost-sharing, multiple-employer defined benefit health insurance premium 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. The health insurance premium plan benefit of the EORP is not established as a formal trust; the EORP is reported in accordance with GASB Statement No. 45 as an agent multiple-employer defined benefit plan. Accordingly, the disclosures that follow reflect the EORP as if it were an agent multiple-employer defined benefit plan. 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 www.psprs.com 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, 2009, active ASRS members were required by statute to contribute at the actuarially determined rate of 9.45% (8.95% retirement and 0.50% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 9.45% (7.99% retirement, .96% for health insurance premium, and 0.50% long-term disability) of the members’ annual covered payroll. The City's contributions to ASRS for the years ended June 30, 2009, 2008, and 2007 were $2,808,113, $2,668,338, and $2,285,178 respectively. The pension systems implemented GASB Statement No. 45 in fiscal year 2008, so information is not available for years prior to 2008. The City contribution for the current and two proceeding years, all of which were equal to the required contributions, were as follows: 6/30/2009 6/30/2008 6/30/2007 Retirement 2,374,267 2,237,513 2,159,618 Health Insurance 285,269 291,849 (1) Long-term Disability 148,577 138,976 125,560 (1) Information not available In addition, active EORP members were required by statute to contribute 7% of the members' annual covered payroll. The City was required to contribute 28.00% of the members' annual covered payroll, the aggregate of which is determined by actuarial valuation. The health insurance premium portion of the contribution rate for normal cost was actuarially set a .91% of covered payroll. The City's contributions to EORP for the years ended June 30, 2009, 2008, and 2007 were $35,490, $17,221, and $15,527 respectively, which equal the required contributions for each year. Agent Plan - For the year ended June 30, 2009, 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 21.63% and 25.78% for Police and Fire respectively. Police personnel contributed $567,887; Fire personnel contributed $384,543 during fiscal year 2008-2009. The City annual pension cost of $1,605,673 for police and $1,295,885 for fire was equal to the City’s annual required contribution and actual contributions. Benefit and contribution provisions are established by state law and may be amended only by the State of Arizona Legislature (A.R.S. Section 38-843). 74 Annual Pension Cost - The City's pension cost for the agent plan for the year ended June 30, 2009, the date of the most recent actuarial valuation, and related information follow. PSPRS Police Contribtuion rates FY08-2009: City Plan members Fire 21.63% 7.65% EORP 25.78% 7.65% 28.00% 7.00% Annual pension costs Pension contribtuions made $ $ 1,676,837 1,676,837 $ $ 1,343,724 1,343,724 $ $ 34,337 34,337 Annual OPEB costs - Health Insurance OPEB contribtuions made $ $ 50,016 50,016 $ $ 78,731 78,731 $ $ 1,153 1,153 As of actuarial valuation date: 6/30/2009 6/30/2009 6/30/2008 Actuarial cost method Project unit credit Project unit credit Project unit credit Amortization method Level percent-ofpay closed Level percent-ofpay closed Level percentage closed Remaining amortization period-UAL Remaining amortization period-excess 27 years 20 years 27 years 20 years 28 years 20 years 7-year smoothed market 7-year smoothed market smooth market value Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases* * includes inflation at 8.50% 5.50% - 8.50% 5.50% 75 8.50% 5.50% - 8.50% 5.50% 8.50% 5.00% 5.00% Three Year Trend Information for PSPRS - Information for the agent plan as of most recent actuarial valuations follows. Contributions Required and Contributions Made Annual Pension Cost (APC) Plan PSRS - Police - Pension 6/30/2009 $ 6/30/2008 6/30/2007 PSRS - Police - Health Insurance 6/30/2009 $ 6/30/2008 6/30/2007 PSRS - Fire - Pension 6/30/2009 6/30/2008 6/30/2007 $ PSRS - Fire - Health Insurance 6/30/2009 $ 6/30/2008 6/30/2007 EORP - Pension 6/30/2009 6/30/2008 6/30/2007 $ EORP - Health Insurance 6/30/2009 $ 6/30/2008 6/30/2007 Percentage of APC Contributed Net Pension Obligation 1,676,837 1,055,645 947,163 100% $ 100% 100% -0-0-0- 50,016 57,046 (1) 100% $ 100% -0-0N/A 1,343,724 1,018,372 913,305 100% $ 100% 100% -0-0-0- 78,731 78,386 (1) 100% $ 100% -0-0N/A 34,337 15,527 11,877 100% $ 100% 100% -0-0-0- 1,153 895 100% $ 100% -0-0N/A (1) N/A N/A N/A (1) Information not available Schedule of Funding Progress - An analysis of funding progress for each of the agent plans as of the most recent actuarial valuations; June 30, 2007 reporting period determines the rates for fiscal year 2009. For this valuation, which was prior to the implementation of GASB Statement Nos. 43 and 45, the pension and health insurance benefit amounts were aggregated. In future years when GASB Statement Nos. 43 and 45 measurements are made and reported, these benefits will be disaggregated and reported separately. The EORP, by statue, is a cost-sharing plan. However, because of its statutory construction, in accordance with GASB Statement No. 43, paragraphs 5 and 41, the valuation for the EORP on its statutory basis as a cost-sharing plan and, therefore, actuarial information for the City, as a participating government, is not available. 76 (2) Actuarial Accrued Liability (AAL) Entry Age (1) Actuarial Value of Assets PSRS - Police Pension 6/30/2009 $ 6/30/2008 6/30/2007 22,931,628 $ 21,772,844 20,971,750 (5) Annual Covered Payroll (6) Unfunded AAL as a Percentage of Covered Payroll (4) / (5) 57.9% $ 57.9% 55.5% 16,655,473 $ 15,810,202 16,806,966 7,423,926 7,437,160 7,313,938 224.3% 212.6% 229.8% $ 925,492 1,043,332 1,119,303 0.0% $ 0.0% 0.0% 925,492 $ 1,043,332 1,119,303 7,423,926 7,437,160 7,313,938 12.5% 14.0% 15.3% 33,539,698 $ 31,635,600 30,870,852 46,998,109 45,387,695 44,899,916 71.4% $ 69.7% 68.8% 13,458,411 $ 13,752,095 14,029,064 5,460,875 5,176,064 5,214,846 246.5% 265.7% 269.0% 1,359,414 1,633,210 1,562,436 0.0% $ 0.0% 0.0% 1,359,414 $ 1,633,210 1,562,436 5,460,875 5,176,064 5,214,846 24.9% 31.6% 30.0% PSRS - Fire Health Insurance 6/30/2009 $ 6/30/2008 6/30/2007 D. (4) Unfunded AAL (2) - (1) 39,587,101 37,583,046 37,778,716 PSRS - Police Health Insurance 6/30/2009 $ 6/30/2008 6/30/2007 PSRS - Fire Pension 6/30/2009 $ 6/30/2008 6/30/2007 (3) Percent Funded (1) / (2) - $ Other Post Employment Benefits (OPEB) Plan Postemployment Healthcare Plan Plan description. The City of Flagstaff provides post-retirement healthcare insurance benefits for its retirees as an agent multiple-employer plan which is administered through, Northern Arizona Public Employee Benefit Trust (NAPEBT). NAPEBT provides benefits to eligible retirees through the same plan as active city employees and their beneficiaries up to the age of 65; the implicit rate subsidy exists through the duration of the coverage. Substantially, all of the City’s employees may become eligible for those benefits when they qualify for retirement. To be eligible a retiree must qualify to receive retirement benefits from the Arizona State Retirement System and elect coverage at date of retirement. NAPEBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on their website: www.napebt.com/community_docs. As of June 30, 2009, there were 78 retirees who elected coverage. Funding Policy. The contribution requirements of plan members and the city are established and may be amended by the NAPEBT board. Eligible retirees up to the age of 65 have the option to participate in the healthcare plan that is currently offered to active employees and must pay 100% of the premium less any reimbursement from the Arizona State Retirement System, currently, a monthly stipend of $150 for single coverage and $260 for family coverage. The city has elected to not fund the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial 77 liabilities over a period not to exceed thirty years. The City’s implicit subsidy rate to covered payroll is actuarially determined at 21.2%. Annual OPEB Cost and Net OPEB Obligation. For 2009, the city’s annual OPEB cost (expense) of $1,053,413 was equal to the ARC. The city’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2009 and two preceding years were as follows: Fiscal Year Ended 6/30/2009 $ 6/30/2008 6/30/2007 Annual OPEB Cost Actual Contributions 1,053,413 $ (1) (1) - Percentage of Annual OPEB Cost Contributed Net OPEB Obliligation 0.0% $ 1,053,413 (1) (1) (1) (1) (1) (1) (1) Information not available Funded Status and Funding Progress. The funded status of the plan as of June 30, 2009, was as follows: Actuarial Valuation Date 6/30/2009 $ 6/30/2008 6/30/2007 (2) Actuarial Accrued Liability (AAL) (1) Actuarial Value of Assets (1) (1) - $ 8,946,294 (1) (1) (3) Percent Funded (1) / (2) 0.0% (1) (1) (4) Unfunded AAL (2) - (1) $ 8,946,294 $ (1) (1) (5) Annual Covered Payroll (6) Unfunded AAL as a Percentage of Covered Payroll (4) / (5) 42,292,297 (1) (1) (1) (1) 21.2% (1) Information not available Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2008, actuarial valuation, the entry age normal actuarial cost method was used. assumptions included a 4.5 percent investment rate of return. The actuarial Healthcare cost trend rate of 9 percent initially, reduced by decrements to an ultimate rate of five percent. The remaining amortization period at July 1, 2008, was 30 years. 78 E. 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 $9,877,798 as of June 30, 2009, which is based on 62.82 percent usage of the landfill. The remaining $5,846,833 will be accrued over the remaining life of the landfill, which is currently estimated to be 14 years. The accrual for the closure and postclosure care costs for fiscal year 2009 was $512,308. Based on current estimates for landfill closure and postclosure care costs, the City is setting aside legally restricted funds to ensure sufficient funds will be available to meet these requirements. The City makes annual contributions to finance closure and postclosure care costs; at June 30, 2009 the balance of the investments held for those purposes is $8,501,286, which includes $23,320 of accrued interest. During the fiscal year the investment account recognized a loss of $101,531 related to the share of investment in Lehman Brothers. 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, $15,724,631, 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, 2009. 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. F. Subsequent Event In July 2009, the City incurred additional debt totaling $4.9 million for governmental activities, issued as a qualified tax-exempt obligation, certificate of participation, Series 2009 for the use of roadway overlay improvements and to finance a Fire Engine. Also, in July the City was approved to obtain debt by the Water Infrastructure Finance Authority of Arizona (WIFA) to improve the City’s water infrastructure. These loans will provide for future water rights related to the Red Gap Pipeline feasibility study, $2,100,000 and the construction of the Sinagua Well pipeline, $232,500. 79 80 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. General Obligation Bond Fund This fund accounts for the accumulation of resources for, and the payments of, general long-term obligation principal and interest. 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. 81 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2009 Special Revenue Funds Real Estate Proceeds Fund Library Fund Community Redevelopment Fund Metropolitan Planning Organization Fund ASSETS Cash and investments $ 3,412,833 Cash with fiscal agents Accounts receivable, net Interest receivable $ 537,486 $ 1,682,319 $ 1,959 - - - - 152,176 863 100 - 8,515 1,614 4,556 - Intergovernmental receivables - - 153,960 455,714 Special assessments receivable - - - - Restricted cash and investments Total assets - - - - $ 3,573,524 $ 539,963 $ 1,840,935 $ $ $ 42,443 $ 15,723 $ 457,673 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 44,257 241 106,416 - 3,144 10,363 Current bonds payable - - - - Interest payable - - - - Interfund payable - - - 430,000 Deferred revenue 2,802,636 - - - Total liabilities 2,953,309 42,443 18,867 440,604 Debt service - - - - Perpetual care - - - - 620,215 497,520 1,822,068 17,069 - - - - 620,215 497,520 1,822,068 17,069 Fund balances: Reserved for: Unreserved, undesignated, reported in: Special revenue funds Permanent fund Total fund balances Total liabilities and fund balances $ 3,573,524 82 $ 539,963 $ 1,840,935 $ 457,673 Debt Service Funds General Obligation Bond Fund $ Secondary Property Tax Revenue Fund Permanent Fund Special Assessment Bond Fund $ 193,732 Total Other Governmental Funds Perpetual Care 348,355 $ 2,211,549 $ 26,718 2,360,163 - 1,960 - 2,362,123 - - - 140 153,279 - 12,945 658 374 28,662 - - - - 609,674 - - 1,527 - 1,527 - $ 2,224,494 $ 197,877 $ 130,398 $ 11,673,382 $ $ $ - $ - $ 102,664 - 103,166 8,414,951 $ 2,708,518 - - $ 103,166 - - - - 119,923 1,705,000 - - - 1,705,000 655,162 - 2,303 - 657,465 - - - - 430,000 - - 392 - 2,803,028 2,360,162 - 2,695 - 5,818,080 348,356 2,224,494 195,182 - 2,768,032 - - - 103,166 103,166 - - - - 2,956,872 - - - 27,232 27,232 348,356 2,224,494 $ 2,708,518 $ 2,224,494 195,182 $ 197,877 130,398 $ 130,398 83 5,855,302 $ 11,673,382 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2009 Special Revenue Funds Real Estate Proceeds Fund Library Fund Community Redevelopment Fund REVENUES: Taxes $ Intergovernmental - $ - $ - 3,805,955 - - 59,041 - 606,897 Charges for services - - 231,623 Special assessments - - - Investment earnings 50,668 18,152 25,446 Contributions 10,663 - - Miscellaneous 28,379 - - 3,954,706 18,152 863,966 General governmental - 138,311 - Economic and physical development - - 1,194,560 5,108,544 - - Principal retirement - - - Interest and other charges - - - Grants and entitlements Total revenues EXPENDITURES: Current: Culture and recreation Debt service: Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures - - 195,115 5,108,544 138,311 1,389,675 (1,153,838) (120,159) (525,709) OTHER FINANCING SOURCES (USES): Transfers in 1,225,802 Transfers out 1,151,000 (78,391) Total other financing sources (uses) (1,126,000) 1,147,411 Net change in fund balances (6,427) Fund balances, beginning of year 626,642 Fund balances, end of year $ 84 620,215 375,400 - 25,000 375,400 (95,159) (150,309) 592,679 $ 497,520 1,972,377 $ 1,822,068 Debt Service Funds Metropolitan Planning Organization Fund $ $ General Obligation Bond Fund - $ - Permanent Fund Special Assessment Bond Fund Secondary Property Tax Revenue Fund $ 7,253,787 $ Total Other Governmental Funds Perpetual Care - $ - $ 7,253,787 - - - - - 3,805,955 484,413 - - - - 1,150,351 - - - - - 231,623 - - - 2,382 - 2,382 - - 56,633 5,075 1,995 157,969 - - - - 13,325 23,988 - - - 603 - 28,982 484,413 - 7,310,420 8,060 15,320 12,655,037 - - - - - 138,311 502,925 - - - - 1,697,485 - - - - - 5,108,544 - 1,705,000 - 88,000 - 1,793,000 - 1,314,026 - 7,360 - 1,321,386 - - - - - 195,115 502,925 3,019,026 - 95,360 - 10,253,841 15,320 2,401,196 - 5,801,228 (18,512) (3,019,026) 30,000 3,019,026 7,310,420 (87,300) - - - - (7,170,152) - - (8,374,543) 30,000 3,019,026 (7,170,152) - - (2,573,315) 11,488 - 140,268 15,320 (172,119) 5,581 348,356 2,084,226 17,069 $ 348,356 $ 2,224,494 (87,300) 282,482 $ 85 195,182 115,078 $ 130,398 6,027,421 $ 5,855,302 86 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 88 90 Budgetary Comparison Schedules - Other Major Governmental Funds Capital Projects Fund 91 Budgetary Comparison Schedules - Non-Major Governmental Funds Library Fund Real Estate Proceeds Fund Community Redevelopment Fund Metropolitan Planning Organization Fund General Obligation Bond Fund Secondary Property Tax Revenue Fund Special Assessment Bond Fund 92 93 94 95 96 97 98 87 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2009 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 3,627,273 1,345,606 1,780,775 3,444,543 33,153,432 $ 43,351,629 $ 43,351,629 88 $ 13,502,132 35,228,138 5,433,860 3,292,451 9,024,730 102,310 Improvements $ 1,894,249 61,303 198,275 24,309 17,140,783 2,293,135 66,583,621 21,612,054 (13,849,790) (10,470,009) 52,733,831 $ 11,142,045 Machinery and Equipment $ 3,769,920 11,364,770 1,270,787 1,298,503 4,289,045 8,364,789 Construction In Progress $ 30,357,814 12,342,211 23,393,464 (11,224,971) 250,007 4,501,292 11,125,322 8,138,222 $ 36,183,336 (18,015,603) $ Infrastructure 36,183,336 $ 235,312,837 $ 508,685 87,208 5,570,043 229,146,901 Total 433,401,291 (95,521,697) $ 139,791,140 89 46,695,723 36,774,846 7,152,929 10,984,538 50,594,466 281,198,789 (137,857,100) $ 295,544,191 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2009 Balance July 1, 2008 Program General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total Additions Transfers In (out) Retirements Balance June 30, 2009 $ 40,734,183 32,208,462 7,131,913 5,715,717 48,971,038 275,982,056 $ 10,425,029 4,937,009 21,016 1,594,951 1,624,020 12,565,863 $ (22,489) (370,626) (592) (1,324,025) $ (4,441,000) 3,673,870 (6,025,105) $ $ 410,743,369 $ 31,167,889 $ (1,717,731) $ (6,792,235) $ 433,401,291 90 46,695,723 36,774,846 7,152,929 10,984,538 50,594,466 281,198,789 CITY OF FLAGSTAFF, ARIZONA Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Investment earnings Contributions Total revenues 170,000 $ 170,000 $ - $ (170,000) 610,000 610,000 475,770 (134,230) 3,000,000 3,000,000 1,304,536 (1,695,464) 3,780,000 3,780,000 1,780,306 (1,999,694) EXPENDITURES: Current: General governmental Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures - - 30 30 27,625,412 27,625,412 17,595,949 (10,029,463) 27,625,412 27,625,412 17,595,979 (10,029,433) (23,845,412) (23,845,412) (15,815,673) (12,029,127) 15,900,000 15,900,000 - (15,900,000) 1,300,000 1,300,000 - (1,300,000) 700,000 700,000 700,000 - (370,650) (370,650) (370,650) - OTHER FINANCING SOURCES (USES): Bonds issued Sale of capital assets Transfers in Transfers out Total other financing sources (uses) 17,529,350 Net change in fund balances (6,316,062) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 17,529,350 (6,316,062) 15,446,353 $ 329,350 (15,486,323) 15,446,353 9,130,291 $ Adjustment from budetary basis to GAAP basis net change in fund balances The City budgets certain revenues on the cash basis, rather than on the 9,130,291 $ (39,970) $ (15,486,323) (9,868) $ 91 (29,229,127) 15,446,353 modified accrual basis. Adjusted net change in fund balance - GAAP basis (17,200,000) (15,496,191) $ (29,229,127) CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Actual Amounts Budgetary Basis 4,053,121 $ Variance with Final Budget Positive (Negative) REVENUES: Intergovernmental $ 4,053,121 $ 3,805,955 $ (247,166) Grants and entitlements 25,000 25,000 59,041 34,041 Investment earnings 50,000 50,000 56,428 6,428 10,663 Contributions - - 10,663 Miscellaneous 29,000 29,000 28,379 (621) 4,157,121 4,157,121 3,960,466 (196,655) 7,106,364 7,106,364 5,108,544 Total revenues EXPENDITURES: Current: Culture and recreation Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 1,997,820 100,000 100,000 - 100,000 7,206,364 7,206,364 5,108,544 2,097,820 (3,049,243) (3,049,243) (1,148,078) 1,901,165 1,758,653 1,758,653 1,225,802 OTHER FINANCING SOURCES (USES): Transfers in Transfers out (328,391) Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ (328,391) 1,430,262 1,430,262 (1,618,981) (1,618,981) 1,869,964 1,869,964 250,983 $ Adjustment from budetary basis to GAAP basis net change in fund balances 250,983 (78,391) 1,618,314 1,869,964 - 1,869,297 $ (667) (5,760) $ (282,851) (667) $ modified accrual basis. 92 250,000 1,147,411 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis (532,851) (6,427) $ 1,618,314 CITY OF FLAGSTAFF, ARIZONA Real Estate Proceeds Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Investment earnings $ Total revenues 17,350 $ 17,350 $ 19,232 $ 1,882 17,350 17,350 19,232 1,882 - - 138,311 500,000 500,000 - 500,000 500,000 500,000 138,311 361,689 (482,650) (482,650) (119,079) 363,571 EXPENDITURES: General governmental Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures (138,311) OTHER FINANCING SOURCES (USES): Transfers in 25,000 Transfers out - Total other financing sources (uses) 25,000 Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 1,151,000 1,151,000 - (1,126,000) (1,126,000) - 25,000 (457,650) (457,650) 474,046 474,046 16,396 $ Adjustment from budetary basis to GAAP basis net change in fund balances 16,396 25,000 (94,079) $ $ modified accrual basis. 379,967 (94,079) (1,080) $ 93 363,571 474,046 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis - (95,159) $ 363,571 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Actual Amounts Budgetary Basis 1,844,316 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ 1,844,316 $ 606,897 $ (1,237,419) Charges for services - - 227,015 227,015 Investment earnings - - 34,662 34,662 1,844,316 1,844,316 868,574 4,051,771 4,051,771 1,204,951 - - 184,724 4,051,771 4,051,771 1,389,675 (2,207,455) (2,207,455) Total revenues (975,742) EXPENDITURES: Current: Economic and physical development Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 2,846,820 (184,724) 2,662,096 (521,101) 1,686,354 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 - (1,832,055) (1,832,055) 1,969,435 1,969,435 137,380 $ Adjustment from budetary basis to GAAP basis net change in fund balances 137,380 (145,701) 1,969,435 $ $ 1,823,734 (145,701) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (4,608) Adjusted net change in fund balance - GAAP basis $ 94 1,686,354 (150,309) $ 1,686,354 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Total revenues 542,404 $ 542,404 $ 484,413 $ (57,991) 542,404 542,404 484,413 (57,991) 472,404 472,404 502,925 (30,521) 100,000 100,000 - 100,000 572,404 572,404 502,925 69,479 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures (30,000) (30,000) (18,512) 11,488 OTHER FINANCING SOURCES (USES): Transfers in 30,000 30,000 30,000 - 30,000 30,000 30,000 - Net change in fund balances - - 11,488 11,488 Budgetary fund balances, beginning of year - - - - Total other financing sources (uses) Budgetary fund balances, end of year $ - $ 95 - $ 11,488 $ 11,488 CITY OF FLAGSTAFF, ARIZONA General Obiligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Final Actual Amounts Budgetary Basis 1,705,000 $ Variance with Final Budget Positive (Negative) EXPENDITURES: Debt service: Principal retirement $ 1,705,000 $ 1,705,000 $ - Interest and other charges 1,615,142 1,615,142 1,314,026 301,116 Total expenditures 3,320,142 3,320,142 3,019,026 301,116 (3,320,142) (3,320,142) (3,019,026) 301,116 3,320,142 3,320,142 3,019,026 (301,116) 3,320,142 3,320,142 3,019,026 (301,116) - - - - 348,355 348,355 348,355 - Excess (deficiency) of revenues over (under) 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 $ 348,355 $ 96 348,355 $ 348,355 $ - 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, 2009 Budget Original Final Actual Amounts Budgetary Basis 7,351,889 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Investment earnings Total revenues 7,351,889 $ 7,253,787 $ (98,102) 77,000 77,000 61,085 (15,915) 7,428,889 7,428,889 7,314,872 (114,017) (6,464,627) (7,464,627) (7,170,152) 294,475 (6,464,627) (7,464,627) (7,170,152) 294,475 OTHER FINANCING SOURCES (USES): Transfers out Total other financing sources (uses) Net change in fund balances 964,262 Budgetary fund balances, beginning of year Budgetary fund balances, end of year (35,738) 2,089,934 $ 2,089,934 3,054,196 $ Adjustment from budetary basis to GAAP basis net change in fund balances 2,054,196 144,720 180,458 2,089,934 - $ 2,234,654 $ 144,720 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (4,452) Adjusted net change in fund balance - GAAP basis $ 97 140,268 $ 180,458 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2009 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Special assessments $ Investment earnings 2,022 $ 7,502 Miscellaneous Total revenues 2,022 $ 7,502 2,382 $ 5,855 - - 603 9,524 9,524 8,840 88,000 88,000 88,000 360 (1,647) 603 (684) EXPENDITURES: Debt service: Principal retirement Interest and other charges - 8,712 8,712 7,360 1,352 96,712 96,712 95,360 1,352 Excess (deficiency) of revenues over (under) expenditures (87,188) (87,188) (86,520) 668 Net change in fund balances (87,188) (87,188) (86,520) 668 Total expenditures Budgetary fund balances, beginning of year Budgetary fund balances, end of year 282,908 $ 282,908 195,720 $ Adjustment from budetary basis to GAAP basis net change in fund balances 195,720 282,908 $ $ 196,388 (86,520) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (780) Adjusted net change in fund balance - GAAP basis $ 98 (87,300) $ 668 Statistical Section This part of the City of Flagstaff's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city's overall financial health. Contents Page Financial Treads 100 These schedules contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. Revenue Capacity 108 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 114 These schedules present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place. 124 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the City's provides and the activities it performs. 126 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2003; schedules presenting government-wide information include information beginning in that year. 99 100 $ 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 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 $ $ $ $ $ $ 493,334,773 30,751,613 47,953,248 414,629,912 252,731,451 20,303,463 2,392,858 230,035,130 240,603,322 10,448,150 45,560,390 184,594,782 2006 Fiscal Year Prior statements have not been restated to comply with the new requirements, so the City is not able to report a full ten years of historical information. The City implemented GASB-34 for the year ended June 30, 2003 (3) FY 2008: change in calculations within categories due to calculation error. No net change to total net assets. (2) FY 2007: as restated for retroactive reporting due to an accounting error discovered in FY2007 (1) FY2007: as restated for retroactive reporting of infrastructure 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 Seven Fiscal Years Net Assets by Component City of Flagstaff Schedule 1 (2) $ $ $ $ $ (1) $ 540,979,392 55,782,138 16,220,550 468,976,704 286,073,806 19,267,461 2,424,615 264,381,730 254,905,586 36,514,677 13,795,935 204,594,974 2007 $ $ $ $ (3) $ $ 563,019,965 55,498,587 16,469,767 491,051,611 294,627,514 16,250,436 1,593,915 276,783,163 268,392,451 39,248,151 14,875,852 214,268,448 2008 $ $ $ $ $ $ 560,112,165 43,238,285 9,493,137 507,380,743 304,849,517 11,547,792 1,593,915 291,707,810 255,262,648 31,690,493 7,899,222 215,672,933 2009 101 102 $ 1,923,325 Total governmental activities program revenues Capital grants and contributions Operating grants and contributions 19,860,371 11,757,330 9,646,122 20,481,689 2,678,653 - 722,236 16,164 3,428,440 119,854 733,159 Culture and recreation Highways and streets 830,885 222,008 Public works 976,793 3,257,393 451,802 $ 80,241,288 28,401,426 743,738 4,757,483 Economic and physical development Public safety General government Charges for services: Governmental activities: $ 74,695,348 Total primary government expense Program Revenues 27,110,257 460,936 3,370,447 3,411,603 - 7,319,602 17,250,441 51,839,862 8,693,714 7,556,614 16,142,040 Total business-type activities expense Stormwater Airport Environmental Water and wastewater Business-type activities: 47,585,091 1,380,182 Total governmental activities expense Interest on long-term debt 8,886,947 8,467,575 6,184,553 Culture and recreation Highways and streets 6,473,290 1,169,302 7,272,115 1,178,137 5,891,617 18,792,832 $ 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 Seven 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 Fiscal Year $ $ $ 29,054,937 19,356,271 2,062,329 - 742,088 562,135 1,455,461 704,800 4,171,853 106,358,761 34,200,858 1,019,248 3,162,391 10,073,853 19,945,366 72,157,903 3,090,140 14,557,140 10,089,469 9,508,406 1,882,489 23,994,991 9,035,268 2007 27,181,541 16,324,928 3,320,597 - 762,410 315,462 1,483,275 1,227,979 3,746,890 $ 120,403,137 $ 39,612,372 1,160,604 3,608,322 11,423,164 23,420,282 80,790,765 2,916,380 15,515,643 11,607,116 10,556,175 1,894,089 27,030,331 11,271,031 $ 2008 7,680,023 1,559,617 369,987 1,350,832 1,299,703 3,099,884 128,607,838 39,985,739 1,203,436 4,197,447 11,782,540 22,802,316 88,622,099 3,651,521 18,594,242 13,924,261 10,346,982 2,109,221 29,099,099 10,896,773 2009 103 $ $ 26,127,375 8,482,695 17,644,680 $ $ 25,818,897 9,846,479 15,972,418 49,057,592 1,105,683 369,358 17,302 - 719,023 47,951,909 (369,358) 14,717 634,411 $ $ $ $ $ $ $ 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 Prior statements have not been restated to comply with the new requirements, so the City is not able to report a full ten years of historical information. The City implemented GASB-34 for the year ended June 30, 2003 (1) FY 2007: as restated for retroactive reporting due to an accounting error discovered in FY2007 Total primary government Business-type activities Governmental activities Change in Net Assets 45,354,794 606,712 Total business-type activities 23,675 - 106,733 44,748,082 (476,304) 7,435 944,381 905,717 810,739 12,122,563 25,682,974 7,931,626 (23,238,695) 8,740,796 (31,979,491) 492 $ $ $ $ 37,142,222 57,002,593 218,520 476,304 Total primary government $ 286,919 10,482,991 383,111 - Transers in (out) Gain on sale of capital assets Miscellaneous 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 12,073,108 8,010,293 (19,227,419) 7,875,983 (27,103,402) 34,986,240 55,467,929 State shared sales taxes $ 382,239 9,460,796 23,805,566 $ $ $ $ 944,983 546,807 926,406 - 8,201,566 16,678,956 7,682,458 16,534,341 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 Seven Fiscal Years Changes in Net Assets City of Flagstaff Schedule 2 (continued) $ $ $ $ $ $ $ 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 $ $ $ (1) $ $ $ $ 47,644,619 33,342,355 14,302,264 68,217,508 10,812,278 9,123,196 31,354 110,835 1,546,893 - 57,405,230 (9,123,196) 19,460 242,167 1,377,552 4,108,861 - 16,276,354 32,334,785 12,169,247 (20,572,889) 22,530,077 (43,102,966) 56,730,935 85,785,872 27,369,058 19,500 1,042,701 1,122,274 9,839,486 17,337,916 $ $ $ $ $ $ $ 17,947,605 22,050,787 $ 8,563,922 13,486,865 $ 71,856,150 $ 4,760,061 3,590,153 78,248 127,423 964,237 - 67,096,089 (3,590,153) 16,200 2,160,339 819,325 3,903,839 - 16,992,017 33,129,731 13,664,791 $ (49,805,363) $ 3,803,861 (53,609,224) $ 43,416,233 70,597,774 $ 12,242,567 67,651 1,137,402 1,207,831 10,813,177 17,328,927 10,222,003 (15,135,832) (25,357,835) 65,727,419 10,143,178 9,651,500 119,366 166,158 206,154 - 55,584,241 (9,651,500) 13,325 (735,796) 381,984 1,459,389 - 16,628,652 31,420,047 16,068,140 78,825 (80,863,251) (80,942,076) 40,064,564 47,744,587 8,744,216 10,966 1,247,878 1,187,105 11,545,472 19,044,353 $ $ $ $ 29,577,901 - - 24,317,465 5,260,436 19,420,953 19,208,574 212,379 2001 $ $ $ $ (1) FY2007 : as restated for accounting error related to the accural of state shared revenues. Total all other governmental funds - Permanent fund 17,263,742 1,780,611 17,553,766 186,768 17,366,998 - $ $ $ $ 2000 Capital project 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 3 104 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 28,807,045 28,574,855 232,190 2006 $ $ (1) $ $ 63,689,857 6,567 - 16,332,830 47,350,460 31,220,471 29,960,235 1,260,236 2007 $ $ $ $ 36,355,874 9,916 (763,744) 16,498,123 20,611,579 27,801,832 27,492,853 308,979 2008 $ $ $ $ 13,751,810 27,232 - 9,058,272 4,666,306 22,590,284 22,203,764 386,520 2009 105 4,347,916 Miscellaneous 9,582,477 7,042,108 Culture and recreation non capital expenditures Debt service as a percentage of Net change in fund balances Total other financing sources (uses) 8.56% 2,938,879 (365,145) 11,582,702 (11,947,847) Transfers out - Sale of capital assets Transfers in - Bond premium $ - - - Payment to bond refunding escrow agent Lease issued - Loan issued Improvement District Debt - - 8.35% 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 $ 7.00% (3,234,667) 2,486,460 (13,607,644) 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 - Bonds issuance 3,304,024 54,107,289 $ 2002 - - 993,585 1,318,450 Refunding bonds issued OTHER FINANCING SOURCES (USES): Excess of revenues over (under) expenditures Total expenditures 8,756,365 1,616,866 Interest and other charges Capital outlay 2,265,000 Principal retirement Debt service: Highways and streets 727,764 6,826,950 Economic and physical development Public works 3,755,883 13,533,876 Public safety General governmental EXPENDITURES: 57,411,313 720,000 - Contributions - Investment earnings 837,695 Rents 175,863 1,324,340 269,794 - 26,203,650 28,340,957 1,025,625 Licenses and permits Total revenues $ 2001 1,030,249 - 26,778,117 22,197,133 Special assessments $ $ 2000 Fines and forfeitures 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 $ $ 10.54% (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 $ $ Fiscal Year 31,523,875 2003 13.19% 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 $ $ 12.32% 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 $ $ 14.15% 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 $ $ 12.69% 13,098,494 17,642,417 (19,488,466) 17,756,847 252,329 46,707 - - - - 19,075,000 - (4,543,923) 93,583,397 26,403,203 3,210,879 5,313,222 7,859,004 8,648,628 9,344,676 1,615,049 22,994,522 8,194,214 89,039,474 1,377,552 2,981,982 3,920,473 1,480,686 1,290,667 2,438,599 2,927 2,605,880 12,185,406 18,779,168 41,976,134 2007 $ $ 10.80% (30,752,621) (727,425) (20,085,809) 17,181,576 2,176,808 - - - - - - - (30,025,196) 121,185,508 46,465,549 3,020,927 5,046,398 8,505,722 10,267,649 10,335,964 1,617,311 25,696,174 10,229,814 91,160,312 819,325 1,308,938 3,731,116 1,496,858 1,336,146 1,815,062 2,449 2,704,333 13,556,680 20,425,088 43,964,317 2008 $ $ 10.85% (28,095,989) (1,560,019) (23,359,573) 21,626,308 63,894 - - 109,352 - - - - (26,535,970) 111,787,174 30,796,072 3,750,657 5,034,991 11,187,402 12,158,087 9,991,927 1,645,703 27,374,083 9,848,252 85,251,204 381,984 1,328,524 1,366,931 1,421,772 1,517,558 1,377,580 2,382 3,324,838 9,609,508 21,364,739 43,555,388 2009 106 $ 2000 3,427 3,425 3,619 4,209 4,453 4,616 4,882 76.95% 2004 2005 2006 2007 2008 2009 Change 2000-2009 3,070 2002 2003 2,853 2001 2,759 General Property Tax Fiscal Year $ 92.06% 7,254 6,219 5,188 4,881 4,856 4,628 4,415 4,198 3,896 3,777 $ 49.14% 2,246 2,189 1,838 2,083 1,943 2,262 1,783 1,791 1,690 1,506 Secondary Franchise and Property Tax Other Taxes (modified accrual basis of accounting) (dollars in thousands) Schedule 5 City of Flagstaff Tax Revenue by Source, Governmental Funds Last Ten Fiscal Years $ 36.86% 14,384 16,150 16,071 14,707 13,148 12,055 11,469 11,783 10,811 10,510 City Sales Tax $ 38.60% 5,052 5,187 4,992 4,623 4,331 4,063 3,827 3,817 3,748 3,645 Bed, Board and Booze Tax $ 100.00% 10,035 9,605 9,434 8,602 7,632 7,303 6,603 6,327 5,343 - Transportation Tax $ 97.56% 43,853 43,966 41,976 39,105 35,529 33,736 31,524 30,986 28,341 22,197 Total 107 State Sales Tax 4,785,424 4,919,575 4,076,034 4,136,724 4,449,982 4,900,117 5,652,335 5,815,473 5 623 144 5,623,144 4,868,072 Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 9,149,290 8 610 567 8,610,567 6,946,680 5,655,641 4,918,476 4,777,145 5,557,918 5,526,159 6,432,879 6,062,290 Income Tax State (modified accrual basis of accounting) Last Ten Fiscal Years 2,611,289 2 758 307 2,758,307 2,792,404 2,655,653 2,461,425 2,427,367 2,378,466 1,803,900 1,913,662 1,902,188 In-Lieu Tax County Auto Intergovernmental Revenue by Source, Governmental Funds City of Flagstaff Schedule 6 6,412,329 7 422 359 7,422,359 7,855,427 7,942,771 7,171,383 6,975,351 7,408,116 7,771,416 7,969,703 7,427,210 User Tax Highway Local 251,536 225 965 225,965 293,502 304,341 313,843 313,868 315,026 300,246 360,806 367,461 Assistance Transportation State - 58 782 58,782 - 55,665 - - - 47,598 142,793 312,249 HB 2565 1,711,609 4 868 431 4,868,431 2,822,315 2,386,011 1,772,181 1,160,966 1,743,613 2,348,793 1,731,823 1,474,751 Grants Federal State Grants 1,234,065 981 142 981,142 1,214,162 940,441 2,868,033 454,212 823,701 437,543 317,059 370,391 & Other State County 897,337 668 153 668,153 721,797 420,426 628,198 468,069 - - - - LEAF IGA County Library - 3,805,955 2 764 918 2,764,918 2,502,814 2,040,924 2,036,500 1,921,433 1,607,306 1,423,105 1,835,109 1,068,817 District Funding 32,795 - - - 39,640 148,992 850,000 274,091 580,241 3,007,336 Other 30,974,277 33 981 768 33,981,768 30,964,574 28,054,208 27,109,796 23,097,385 24,820,870 24,008,885 26,203,650 26,778,117 Total 108 27,532,435 28,051,846 28,940,765 27,478,520 2006 2007 2008 2009 286,101,952 281,348,845 261,009,908 237,795,313 221,179,062 211,870,593 194,944,521 151,630,088 140,117,313 125,377,258 100,985,606 82,683,618 65,128,715 62,099,966 60,199,456 51,001,338 49,352,556 Vacant, Agricultural, and Government Property 529,950,871 500,150,890 398,783,838 315,182,546 276,187,028 242,190,760 215,320,769 201,111,291 189,936,966 180,667,749 Residential Property 78,819,714 71,775,990 62,684,483 57,296,001 50,697,830 46,939,696 43,729,051 42,767,442 35,535,505 34,550,373 Less: Tax-exempt Property (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 27,328,709 2003 2005 35,621,681 2002 29,405,068 33,068,867 2001 2004 192,395,566 (1) 31,232,035 2000 197,065,506 190,494,910 21,765,191 Fiscal Year Commercial Property Centrally Valued Property (modified accrual basis of accounting) Schedule 7 City of Flagstaff Full Cash Value of Taxable Property Last Ten Fiscal Years 916,341,717 878,781,823 750,538,367 624,199,899 556,680,587 501,655,440 464,257,886 448,677,678 429,030,400 407,730,033 Total Taxable Assessed Value 1.5519 1.5519 1.5519 1.6627 1.7127 1.7127 1.7127 1.7127 1.7127 1.7127 Total Direct Tax Rate 109 1,015,121 TOTAL 113,050 Other - 466,902 Retail Utilities 183,267 Restaurants and Bars 40,067 101,032 110,803 $ $ 2000 Auto Sales Building Materials: Construction: (dollars in thousands) Last Ten Fiscal Years City Tax Revenue for Major Categories City of Flagstaff Schedule 8 $ $ 1,049,846 - 116,040 492,316 188,001 99,222 54,410 99,857 2001 $ $ 1,119,089 - 115,666 497,753 191,258 119,210 61,118 134,084 2002 $ $ 1,146,361 - 118,333 502,235 191,883 118,640 63,618 151,652 2003 $ $ 1,211,127 53 125,687 529,705 202,966 124,147 70,063 158,506 2004 $ $ 1,270,570 199 134,824 556,165 215,624 127,760 72,152 163,846 2005 $ $ 1,414,626 4,892 144,635 586,841 232,359 129,671 82,481 233,747 2006 $ $ 1,582,291 68,840 154,183 637,225 248,819 133,497 79,703 260,024 2007 $ $ 1,567,306 71,299 163,463 619,805 255,578 118,282 75,493 263,386 2008 $ $ 1,383,657 69,175 155,193 582,029 250,555 78,819 66,641 181,245 2009 110 1.7127 1.6627 1.5929 1.5519 1.5519 2005 2006 2007 2008 2009 4.8334 4.7713 5.9009 6.0786 5.7236 6.3679 6.7590 6.6741 6.6885 6.5585 Note: Tax rates are per $100 assessed valuation. 1.7127 2004 1.7127 2002 1.7127 1.7127 2001 2003 1.7127 2000 District Year City School Fiscal (rate per $100 of assessed value) Last Ten Fiscal Years Direct and Overlapping Property Tax Rates, City of Flagstaff Schedule 9 0.4643 0.4865 0.5269 0.5525 0.5660 0.5775 0.5809 0.5717 0.5724 0.5947 College Community 0.7603 0.7588 0.7521 1.2010 1.2212 1.2369 1.1941 1.0951 1.1336 1.1444 County 7.6099 7.5685 8.7728 9.4948 9.2235 9.8950 10.2467 10.0536 10.1072 10.0103 Total 111 $ Source: Arizona Dept. of Revenue, Central Information Services Unit 6.81% $ 63,059,680 2,673,081 Woodlands Plaza Hotel LTD Partnership 62,343,769 2,824,799 Walgreen Arizona Drug Co. Total Principal Taxpayers 3,057,160 Consolidated Investments, Inc. 0.30% 8,244,966 10 0.31% 4,608,283 2,874,011 6,379,950 13,614,490 12,151,377 Value Total Assessed Northern Arizona Gas Division 2,769,838 Ortholand LLC 9 0.28% 0.40% 0.47% 0.56% 0.54% 0.81% 1.52% 1.62% Assessed Valuation Secondary As a Percentage of the City Total 6,631,563 2,848,466 SACO Management Inc. 8 7 6 5 4 3 2 1 Rank 2009 US West Communications 2,578,254 Hopi Tribe Economic Development Corp 4,344,604 Flagstaff Mall Associated Ltd. Partnership 3,626,255 5,102,144 Lone Tree Investments, LLC. Little America Refining Co. 4,976,928 Nestle Purina Petcare Company 13,908,787 14,799,541 7,388,952 $ 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 10 10 9 7 3 4 6 8 5 1 2 Rank 2000 16.38% 0.69% 0.73% 0.79% 2.14% 1.72% 1.20% 0.75% 1.66% 3.54% 3.16% Assessed Valuation Secondary As a Percentage of the City Total 112 $ 7,271,109 7,613,349 7,897,298 8,494,694 9,075,322 9,615,015 10,935,835 12,253,760 2003 2004 2005 2006 2007 2008 2009 6,936,955 6,526,010 2002 2001 2000 for the Fiscal Year Ended June 30, $ 11,934,997 10,728,465 9,495,935 8,958,733 8,330,157 7,791,735 7,625,852 7,194,162 6,658,250 6,443,879 Amount 97.4% 98.1% 98.8% 98.7% 98.1% 98.7% 100.2% 98.9% 96.0% 98.7% of Levy Percentage Fiscal Year of the Levy Year Taxes Levied Collected within the Fiscal Last Ten Fiscal Years Property Tax Levies and Collections City of Flagstaff Schedule 11 $ 200,344 106,120 145,415 131,194 145,051 261,445 92,457 74,106 90,944 92,342 Years in Subsequent Collections $ 12,135,341 10,834,585 9,641,350 9,089,927 8,475,208 8,053,180 7,718,309 7,268,268 6,749,194 6,536,221 Amount 99.0% 99.0% 100.0% 100.0% 100.0% 102.0% 101.0% 100.0% 97.3% 100.2% of Levy Percentage Total Collections to Date 113 1.0000% 2009 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% City Bed, Board & Beverage City of Flagstaff www.flagstaff.az.gov (Sales Tax/Business Licenses Division) 1.0000% 2008 Source: 1.0000% 2007 1.0000% 2004 1.0000% 1.0000% 2003 2006 1.0000% 2002 1.0000% 1.0000% 2001 2005 1.0000% General Sales Tax 2000 Fiscal Year Schedule 12 City of Flagstaff Direct and Overlapping Sales Tax Rates, Last Ten Fiscal Years 0.6010% 0.6010% 0.6010% 0.6010% 0.6010% 0.6010% 0.5745% 0.5745% 0.5745% 0.0000% Transportation 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.0000% State of Arizona 1.1250% 1.1250% 1.1250% 0.9250% 0.9250% 0.9250% 0.9250% 0.8000% 0.8000% 0.8000% Coconino County 10.3260% 10.3260% 10.3260% 10.1260% 10.1260% 10.1260% 10.0995% 9.9745% 9.9745% 8.8000% Total 114 4,285 32,875 31,230 29,350 27,645 2005 2006 2007 2008 2009 $ Special 340 415 685 944 19,169 19,257 19,339 Bonds Assessment $ 4,865 6,325 7,725 9,665 11,555 13,380 14,790 Bonds Revenue $ Governmental Activities 21,625 23,000 24,315 25,610 26,895 28,170 4,445 Bonds Corporation Facility Municipal $ 2,430 2,728 3,097 3,455 3,800 - - Leases Capital $ General 7,460 10,515 13,310 16,294 18,880 21,253 22,958 Bonds Obligation $ 4,918 5,212 5,496 5,770 6,035 6,290 6,537 Bonds Revenue $ These amounts are presented on the accrual basis of accounting. 37,006 32,275 32,957 2,671 3,031 3,380 3,716 Payable Loan Term Business-Type Activities Prior statements have not been restated to comply with the new requirements, so the City is not able to report a full ten years of historical information. The City implemented GASB-34 for the fiscal year ended June 30, 2003. See Schedule 17 for personal income and population data. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 5,795 7,485 2004 $ Bonds Year 2003 Obligation Fiscal General (dollars in thousands, except per capita) Last Seven Fiscal Years Ratios of Outstanding Debt by Type, City of Flagstaff Schedule 13 $ 3,960 4,227 4,482 2,652 2,732 - - Leases Capital $ Total 129,078 132,889 141,951 99,332 77,628 78,953 60,875 Government Primary Percentage Income 3.4% 3.8% 4.1% 2.9% 2.2% 2.4% 2.0% of Personal Per 1,995.24 2,142.33 2,288.42 1,601.35 1,268.74 1,288.61 997.46 Capita 115 5,795 4,285 32,875 31,230 29,350 27,645 2004 2005 2006 2007 2008 2009 7,460 10,515 13,310 16,294 18,880 21,253 22,958 Bonds 35,105 39,865 44,540 49,169 23,165 27,048 30,443 Total 3.8% 5.3% 5.9% 7.9% 4.2% 5.4% 6.6% Property Value of Taxable of Actual Percentage (a) 542.64 642.67 718.04 792.66 378.61 441.46 498.82 (b) These amounts are presented on the accrual basis of accounting. Prior statements have not been restated to comply with the new requirements, so the City is not able to report a full ten years of historical information. 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 Per Capita Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 7,485 2003 Bonds Year Obligation General General Obligation Activities Activities Fiscal Business-Type Governmental General Bonded Debt Outstanding (dollars in thousands, except per capita) Last Seven Fiscal Years Ratios of General Bonded Debt Outstanding City of Flagstaff Schedule 14 116 87,489 Total direct and overlapping debt * 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. This approach was also used for Coconino County's revenue bonds and certificates of participation. 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. Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. 75,734 City direct debt $ 11,755 - 3,562 Paid Off 8,193 Debt Overlapping Share of Estimated Subtotal, overlapping debt 0.00% 42.71% 8,340 2,364 Coconino County Revenue Bonds 62.14% $ Coconino County Special Assessments 13,185 Applicable* Percentage 42.71% $ Outstanding Debt Estimated Paid Off Coconino County Certificates of Participation Other debt Flagstaff Unified School District Debt repaid with property taxes Governmental Unit (dollars in thousands, except per capita) Direct and Overlapping Governmental Activities Debt City of Flagstaff Schedule 15 117 118 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 l ti 6% Debt Limit as a percentage of debt limit Total net debt applicable to the 20% limit $ $ $ 50.08% 15,414 $ 7,720 23,134 23 134 2000 59.54% 48,334 $ $ $ Legal debt margin (Available borrowing capacity) 77,113 28,779 $ 2000 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 16 $ $ 37.53% 17,826 $ 6,690 24,516 24 516 2001 49.46% 54,676 $ 27,043 81,719 2001 $ $ 27.55% 20,182 $ 5,560 25,742 25 742 2002 49.54% 57,381 $ 28,425 85,806 2002 $ $ 17.56% 23,695 $ 4,160 27,855 27 855 2003 39.48% 66,569 $ 26,283 92,852 2003 $ $ 9.28% 27,544 $ 2,555 30,099 30 099 2004 32.30% 75,838 $ 24,493 100,331 2004 $ $ 3.81% 32,176 $ 1,225 33,401 33 401 2005 24.13% 89,692 $ 21,644 111,336 2005 $ $ 61.08% 23,250 $ 14,202 37,452 37 452 2006 39.31% 89,613 $ 35,227 124,840 2006 $ $ 1.53% 44,352 $ 680 45,032 45 032 2007 41.28% 106,248 $ 43,860 150,108 2007 $ $ 0.67% 52,376 $ 351 52,727 52 727 2008 29.00% 136,242 $ 39,514 175,756 2008 0.00% 54,981 - 54,981 54 981 2009 23.69% 148,163 35,105 183,268 2009 119 $ Debt Limit of 20% of Assessed Value 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: 20% Limitation $ Net Secondary Assessed Value as of June 30, 2009 Legal Debt Margin Calculation for Fiscal Year 2009 Legal Debt Margin Information City of Flagstaff Schedule 16 (continued) 54,980,503 - 54,980,503 148,163,343 35,105,000 183,268,343 916,341,717 120 17,637,708 16,769,463 17,227,848 16,851,956 17,755,038 18,235,171 18,380,351 17,459,105 2002 2003 2004 2005 2006 2007 2008 2009 $ 14,633,986 16,229,816 12,892,795 11,791,895 10,693,901 10,645,073 9,865,571 9,587,743 9,757,448 8,311,186 Expenses (2) $ 2,825,119 2,150,535 5,342,376 5,963,143 6,158,055 6,582,775 6,903,892 8,049,965 8,579,862 9,295,163 Service for Debt Available Revenue Net $ 2,302,688 283,832 274,108 264,717 255,648 246,890 238,431 - - - Principal (3) 1,368,330 194,969 204,693 214,084 223,153 231,034 146,694 - - - $ bond issuance costs that are included in interest expense on the statement of revenues, expenses, and changes in net assets. - - - 3,671,018 478,801 478,801 478,801 478,801 477,924 385,125 Total (4) Bond interest payments only. Does not include amortization of loss on refunding, capitalized interest, agent fees or amortization of (3) Includes principal for water and sewer revenue bonds, water infrastructure finance authority (WIFA), and capital lease. (2) Includes total operating expenses of the water and wastewater fund less depreciation. $ Interest (4) Debt Service Requirements Water and Sewer Revenue Bonds (1) Includes total operating revenues and investment income of the water and wastewaste fund. 18,337,310 17,606,349 2001 $ Year 2000 Gross Revenues (1) Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 0.77 4.49 11.16 12.45 12.86 13.77 17.93 - - - Coverage 121 7,969,703 7,771,416 7,408,116 6,975,351 7,171,383 7,540,081 7,855,427 7,422,359 6,412,329 2001 2002 2003 2004 2005 2006 2007 2008 2009 1,460,000 1,400,000 1,940,000 1,890,000 1,825,000 1,410,000 1,730,000 1,490,000 1,420,000 1,375,000 Principal (1) 344,010 411,385 469,585 526,285 571,910 607,160 668,260 900,492 960,133 1,016,507 Interest (2) Debt Service Requirements 1,804,010 1,811,385 2,409,585 2,416,285 2,396,910 2,017,160 2,398,260 2,390,492 2,380,133 2,391,507 Total Highway User Revenue Bonds 3.55 4.10 3.26 3.12 2.99 3.46 3.09 3.25 3.35 3.11 Coverage and changes in fund balances. (2) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (1) Includes 1992 Jr. Lien and Series 2003 Refunding. 7,427,210 Revenue Year 2000 User Tax Fiscal Highway Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 122 13,771,313 13,557,828 2008 2009 320,000 310,000 295,000 285,000 275,000 265,000 255,000 - Principal (3) 459,534 462,398 459,198 460,598 461,598 462,198 462,398 224,682 29.50 29.78 26.79 23.55 20.27 18.96 19.97 41.74 Coverage and changes in fund balances. (4) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (3) MFC 1992 Refunding series 12 2001 - USGS projects. (2) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. 139,534 152,398 164,198 175,598 186,598 197,198 207,398 224,682 Interest (4) Total MFC Debt other than Transportation Municipal Facitliy Corporation Bonds Debt Service Requirements (1) Trend information not available prior to fiscal year 2002. 12,302,955 9,356,995 2005 2007 8,764,929 2004 10,847,378 9,232,244 2003 2006 9,377,511 Revenue (2) 2002 Year (1) Fiscal Last Eight Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 123 31,085,459 35,725,917 39,681,382 41,483,415 38,586,144 2005 2006 2007 2008 2009 1,055,000 1,005,000 1,000,000 1,000,000 1,000,000 1,010,000 Principal (3) 1,946,850 1,947,100 1,964,600 1,987,100 2,037,100 1,849,966 19.82 21.31 20.20 17.98 15.26 16.14 Coverage (3) MFC revenue bond series 2003 Fourth Street. requirements for transportation MFC bonds. lincenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service (2) Pledges revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, franchise sales tax, 891,850 942,100 964,600 987,100 1,037,100 839,966 Interest Total Transportation MFC Debt Municipal Facitliy Corporation Bonds Debt Service Requirements (1) Trend information not available prior to fiscal year 2004. 29,860,760 Revenue (2) 2004 Year (1) Fiscal Last Six Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 124 61,270 61,185 62,030 62,030 64,200 64,693 2004 2005 2006 2007 2008 2009 (thousands 3,767,194 3,767,194 3,472,652 3,472,652 3,472,652 3,226,683 2,999,350 2,908,992 2,787,863 2,661,712 $ 29,879 29,879 28,045 28,045 28,045 26,328 24,795 24,259 23,716 22,815 Income Personal Income of dollars) Per Capita Personal 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 26.8 Age Median Education 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% Grad or Higher High School Level - Percent Education Level - Percent Unemployment - Arizona Department of Economic Security, August 2009 School enrollment - Arizona Department of Education and National Center for Education Statistics Education level - 2000 US Census Median age - 2000 US Census School 12,910 13,040 13,453 13,171 13,389 13,176 12,905 13,566 13,969 12,682 Enrollment Per Capita Income - 2006 - 2009 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 Per Capita Income - 1998 - 2005 Arizona Department of Economic Security, Workforce Development Statistics Personal Income - 2006 - 2007 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% or Higher Bachelor's Degree Personal Income - 1998 - 2005 Arizona Department of Economic Security, Workforce Development Statistics Population - Arizona Department of Commerce, except for 2000 which is the official census number Sources: 59,160 61,030 2002 57,700 2001 2003 52,894 $ Population 2000 Year Last Ten Fiscal Years Demographic and Economic Statistics City of Flagstaff Schedule 18 Rate 7.50% 4.60% 3.40% 5.00% 5.10% 5.20% 5.80% 5.10% 4.80% 5.20% Unemployment 125 11,595 30,822 Total 2000 U.S. Census Labor Force 1 2 3 4 5 6 7 8 9 10 Rank 2009 37.62% 7.51% 6.49% 6.20% 5.38% 3.91% 2.47% 1.95% 1.42% 1.31% 0.98% Percentage of Total City Employment 30,822 11,663 2,497 2,104 1,800 1,436 1,294 876 400 468 450 338 Employees Long-term historical information not available. Source: (1) Greater Flagstaff Economic Council (GFEC) (2) GFEC is no longer operational and could not be used as a resource. The City independently researched this information It is believed employees were counted outside of the City for both the Grand Canyon Railway and SCA Tissue. (3) Data for FY-2009 not available. Estimate only. -- 2,316 2,000 1,910 1,659 1,204 762 600 438 405 301 Employees Northern Arizona University Flagstaff Medical Center W.L. Gore & Associates Flagstaff United School District Coconino County City of Flagstaff Coconino Community College Walgreens & Distribution Center Grand Canyon Railway (3) Walmart SCA Tissue Employer Current Year and Nine Years Ago Principal Employers City of Flagstaff Schedule 19 1 2 3 4 5 6 7 8 9 10 Rank 2000 (1) (2) 36.74% 8.10% 6.83% 5.84% 4.66% 4.20% 2.84% 1.30% 1.52% 1.46% 0.00% 0.00% Percentage of Total City Employment 126 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 Parks, recreation, and beautificatioin Highways and Streets Water and wastewater Environmental services Airport Stormwater Function/Program Last Ten Fiscal Years 700.00 37.50 74.00 74 00 35.25 71.75 40.00 9.50 - 37.00 73 25 73.25 35.25 72.00 39.75 9.50 685.25 57.00 17.00 6.00 147.50 84.50 26.75 138.25 84.50 25.75 57.40 17.10 6.00 72.00 21.25 2001 69.25 20.25 2000 Full-time Equivalent City Government by Function/Program City of Flagstaff Schedule 20 746.25 38.75 79.25 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 2002 741.25 39.50 74.50 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 25.25 739.00 39.50 67.75 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 26.50 743.45 40.00 63.95 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 26.50 768.03 40.00 67.53 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 Full-time Equivalent Employees as of June 30 2003 2004 2005 2006 811.69 43.13 68.82 68 82 37.25 79.00 62.60 10.00 6.50 52.25 21.75 15.75 164.00 100.75 27.00 82.89 13.50 26.50 2007 876.18 47.14 98.23 98 23 40.56 80.25 61.60 10.50 6.50 58.50 20.88 16.75 174.00 101.75 31.00 87.39 13.50 27.63 2008 906.52 53.77 99.69 99 69 41.06 81.75 68.10 10.50 6.50 57.50 24.88 16.75 181.00 101.75 31.00 89.14 13.50 29.63 2009 127 128 Calls dispatched to Police/Sheriff Calls dispatched to Fire Calls dispatched to Medical NA NA NA 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 Eight Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 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 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 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 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 Fiscal Year 2005 2006 75,791 12,364 9,960 4,973 13,123 1,625 8,913 3,374 764 1,173 1,210 8,227 314 1,472 1,984 1,314 9,553 8,951 530 2007 73,364 11,907 - 3,978 13,413 1,573 11,043 3,322 400 178 902 1,070 7,616 267 1,573 1,981 1,284 11,659 10,665 744 2008 70,908 12,527 - 3,661 12,939 1,470 10,996 2,917 224 761 1,190 7,550 263 2,151 1,794 1,250 9,330 10,639 445 2009 129 (1) (1) 48.33 NA NA 59,963,201 29,051,528 NA 45.36 NA NA 78,719,935 12,843,323 128,153 9,126 698,227 34,984 2003 NA 47.95 564,065 781,893 67,214,811 18,123,934 109,608 9,213 673,786 38,387 2004 52.90 582,726 776,180 87,180,707 12,324,654 140,233 9,816 653,743 42,483 2,988 61.47 625,103 758,468 97,895,269 26,130,677 154,321 9,866 705,638 39,646 1,962 Fiscal Year 2005 2006 These accumulation of these statistics began in FY2002 so 10 years historical information is not available. (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 Revenue Per Available Room (RevPar) Library Visits Circulation Community Development Residential Permit Valuation Commercial Permit Valuation 110,684 7,886 Refuse collection Refuse collected (Landfill tonnage) Recyclables collected (total tons) NA 713,193 36,057 2002 Airport Fuel Flowage (Gallons Sold) Enplanements Streets Potholes repaired Function/Program Last Eight Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 (continued) 66.86 643,174 789,621 38,895,496 37,962,373 153,121 10,356 642,643 44,598 2,443 2007 60.52 680,253 782,908 25,278,055 27,199,698 157,792 10,472 651,814 44,088 4,032 2008 43.21 738,603 887,887 (1) (1) 142,409 9,842 627,202 65,418 4,373 2009 130 1 In Fiscal Year 2008, transition made from street miles to lane miles. This will more accurately reflect the level of service required to maintain the surfaces. 2 Database Correction Airport Fixed base operators Locally based aircraft Tiedowns Enclosed hangars Open hangars Water and wastewater Miles of sewer (2) Number of manholes Total active water accounts Average gallon water usage per household per month 1 110 49 33 38 231 Unavail 14,961 6,576 324 2,740 31 Unavail 602 19 6 Culture and recreation Number of developed parks Number of undeveloped parks Park acreage Flagstaff Urban Trail System - Miles Recreational Buildings Highways and Streets Miles of streets, alleys, and sidewalks (1) Number of street lights 28 Unavail 6 1999 Public Safety Police patrol units (Includes Motorcycle 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 22 1 130 49 47 38 237 Unavail 15,230 6,546 324 2,768 31 Unavail 602 19 6 31 Unavail 6 2000 1 130 49 47 38 243 Unavail 15,600 6,848 330 2,777 26 3 578 21 6 32 Unavail 6 2001 1 130 49 42 38 250 5,857 15,802 6,897 350 2,853 27 3 586 22 6 32 2,382 6 2002 1 130 49 42 38 271 5,979 16,356 6,727 350 2,898 27 3 586 22 6 32 2,435 6 2003 1 130 49 42 38 275 6,097 16,948 6,070 365 2,921 28 4 704 28 5 26 2,478 6 Fiscal Year 2004 1 130 29 42 38 275 6,097 18,039 6,096 365 2,921 27 4 702 32 5 26 2,478 6 2005 1 130 18 61 48 293 6,496 17,872 5,488 386 3,037 27 4 702 34 5 26 2,598 6 2006 1 134 11 61 48 309 6,906 18,758 5,600 403 3,107 27 4 705 34 5 31 2,743 6 2007 1 134 11 61 48 265 7,107 18,849 5,456 690 3,201 26 4 712 48 6 34 3,148 6 2008 1 134 11 61 48 270 7,261 18,371 5,010 695 3,220 26 4 712 51 6 34 3,150 7 2009 131 $ $ (Claims Made) $ 3,000,000 / total limit 1,000,000 / each wrongful act 5,000,000 / total limit 5,000,000 / each wrongful act 1,000,000 / total limit 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 1,000,000 / per occurrence Statutory 1,000,000 / disease policy limit 1,000,000 / disease employee $ $ 1,000,000 / each accident 1,000,000 / total limit 1,000,000 / each wrongful act $ $ $ / general total limit 20,000,000 / each event/each wrongful Act $ Hangar Keepers Liability Personal Injury, Advertising & Malpractice Products/Completed Operations General Liability Aviation: terrorism, nuclear) (Excluding asbestos, discrimination, $ $ $ $ $ $ $ 40,000,000 / each occurrence 40,000,000 / each aircraft aggregate 40,000,000 / aggregate 40,000,000 40,000,000 / each occurrence 5,000,000 / general aggregate 5,000,000 / each occurrence/ Excess Liability #2 Following Form Over Excess Liability # 1 Supply Services, Mold, Terrorism, Asbestos, Lead, Condemnation, Sexual Abuse) (Excludes Airport, Housing Authority, Employment related practices, Failure to Public Entity Management, Employee Benefits Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employer's Liability Worker's Compensation Employer's Liability ($5,000 deductible each wrongful act) (Claims Made Retro Date 6-1-09) Public Entity Cyber Liability * Liability Claims are Subject to a $50,000 Self Insurance Retention Employee Benefits Liability* $ (Claims Made Retro Date 6-1-95) $ Employment Practices Liability* (Claims Made Retro Date 6-1-95) $ $ $ $ $ $ Limit of Liability Public Entity Management Errors and Omissions* Auto Liability* Law Enforcement Liability* freestyle park, EMT's) (Includes 2 skateboard parks, bike General Liability* Liability Insurance: Coverage In Effect June 1, 2009 to June 1, 2010 Insurance Summary City of Flagstaff Schedule 23 Contractors Equipment (actual cash value) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ International Travel - Executive Assistance Depositors Forgery or Alteration (Inside and Outside) Theft, Disappearance, & Destruction Computer & Funds Transfer Fraud $ $ $ $ $ 116,900 / contents 250,000 Accidental death 1,000,000 / Medical Assistance 5,000 / $500 deductible 250,000 / $5,000 deductible 250,000 / $5,000 deductible 1,000,000 / $5,000 deductible $1,000 deductible 25,000 / each location 53,700 / $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 238,582 / $1000 deductible 5,783,560 / $5,000 deductible ($5,000 deductible) 500,000 / contents each 500,000 / each building 220,000 / building / $5000/collision deductible 18,850,061 / $1000/comprehensive 7,000,000 / 24 hours 15,000,000 / $25,000 deductible 10,000,000 / $50,000 deductible 158,996,803 / $25,000 deductible Limit of Liability Dishonesty Bond Including Faithful Performance of Duty Blanket Public Employees and Treasurer Crime: City Hall, Visitor Center, Airport Terminal Fine Arts Exhibition Floater Scheduled Fine Arts - Max $25,000 per item Replacement Cost Coverage Laptops and Portables - Computer Data and Media Computer Equipment and Peripherals Employee Hand Tools Lab Equipment Bookmobile book collection Inland Marine: City Hall, Library Municipal Court Flood Zone A Properties Auto Physical Damage Business Income/Extra Expense Earthquakes Flood Zones B and C Boiler and Machinery included Blanket Buildings and Personal Property Property Insurance: Coverage 132 Cit y of Flagstaf f 211 West Aspen Avenue Flagstaf f, Arizona 86001 w w w.flagstaf f. az .gov