Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2011 City of Flagstaff, Arizona Prepared By: Management Services Division Finance and Budget Section City of Flagstaff Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2011 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal ......................................................................................................................................... iii GFOA Certificate of Achievement ......................................................................................................................xi Organizational Chart ........................................................................................................................................xii List of Elected and Appointed Officials ............................................................................................................ xiii FINANCIAL SECTION Independent Auditor’s Report ........................................................................................................................... 1 MANAGEMENT’S DISCUSSION AND ANALYSIS ........................................................................................................... 3 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Assets ..................................................................................................................... 16 Statement of Activities ....................................................................................................................... 17 Fund Financial Statements: Balance Sheet – Governmental Funds.................................................................................................. 19 Reconciliation of the Balance Sheet to the Statement of Net Assets - Governmental Activities ............ 21 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ............ 23 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................... 25 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 27 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 28 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 29 BBB Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 30 Statement of Net Assets – Proprietary Funds ...................................................................................... 31 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds ............................................................................................ 33 Statement of Cash Flows – Proprietary Funds ..................................................................................... 35 Notes to the Financial Statements ............................................................................................................. 39 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds ........................................................................................ 85 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ............................................................. 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ........................................................................ 88 i SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: Schedule By Function and Activity ...................................................................................................... 91 Schedule of Changes By Function and Activity .................................................................................... 93 Budgetary Comparison Schedules – Other Major Governmental Funds Special Assessment Bond Fund........................................................................................................... 94 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ....................................................................................................................................... 95 Community Redevelopment Fund ....................................................................................................... 96 Metropolitan Planning Organization Fund .......................................................................................... 97 General Obligation Bond Fund ............................................................................................................ 98 Secondary Property Tax Revenue Fund ............................................................................................... 99 Capital Projects Fund ....................................................................................................................... 100 Financial Data Submission Schedules Net Asset Accounts .......................................................................................................................... 101 Revenue, Expenses, and Changes in Fund Net Asset Accounts ......................................................... 103 Revenue, Expenses, and Changes in Fund Net Asset Accounts-Public Housing-Consolidated .......... 106 STATISTICAL SECTION Net Assets by Component ...................................................................................................................... 110 Changes in Net Assets ............................................................................................................................ 112 Fund Balances, Governmental Funds ....................................................................................................... 114 Changes in Fund Balances, Governmental Funds .................................................................................... 115 Tax Revenue by Source, Governmental Funds ......................................................................................... 116 Intergovernmental Revenue by Source, Governmental Funds .................................................................. 117 Full Cash Value of Taxable Property........................................................................................................ 118 City Tax Revenue for Major Categories ................................................................................................... 119 Direct and Overlapping Property Tax Rates ............................................................................................. 120 Principal Property Tax Payers .................................................................................................................. 121 Property Tax Levies and Collections........................................................................................................ 122 Direct and Overlapping Sales Tax Rates .................................................................................................. 123 Ratios of Outstanding Debt by Type ....................................................................................................... 124 Ratios of General Bonded Debt Outstanding ........................................................................................... 125 Direct and Overlapping Governmental Activities Debt ............................................................................. 126 Legal Debt Margin Information ............................................................................................................... 128 Pledged Revenue Coverage ..................................................................................................................... 130 Demographic and Economic Statistics..................................................................................................... 135 Principal Employers ................................................................................................................................ 136 Full-time Equivalent City Government by Function/Program ................................................................... 137 Operating Indicators by Function/Program ............................................................................................. 138 Capital Asset Statistics by Function/Program .......................................................................................... 140 Insurance Summary ................................................................................................................................ 141 ii City of Flagstaff December 23, 2011 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, 2011, 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, 2011, 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, 2011, 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. Arizona Relay Service 7-1-1 211 West Aspen Avenue, Flagstaff, Arizona 86001 Main & TDD (928) 774-5281  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 per the 2010 United States Census is 65,870. The City of Flagstaff became a town in 1894, incorporated as a city in 1928 and its boundaries currently encompass an area of approximately 65 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, Housing Authority, 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, with some slight signs of recovery shown in FY 2011. At the local level, construction, auto sales, and tourism based industry reflected small increases while retail and utilities continued a downward trend resulting in overall revenue increases. State shared sales tax revenues also increased slightly (5%) while the state income tax and highway user (gas tax) revenues have decreased (25% and 2% respectively). 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. The education sector has been hit particularly hard. 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 has recently been extended until November 2024. Local sales tax declines had been realized almost every month since December 2007 in comparison to the same month in the prior year. Occasional categorical increases occurred but they were not sustained. Overall, the 1% general city sales tax receipts have increased 2% from the prior fiscal year but are still cumulatively 14% less in comparison to FY2008. Construction and auto sales continue to be the two most volatile sales tax categories. In the last year, construction sales tax revenue increased by 11.1% and auto sales increased by 16.3% driving the increased revenue. However the construction and auto sales tax revenues are still below their peak years (36.6% and 25.3% respectively). collected, down from 16.8% three years ago. Construction now only represents 12.4% of all sales tax 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. The four components of this tax include Safety Improvements, Street Improvements, 4th Street Overpass, and Transit. The transportation tax components expire in 2020. As the use of this funding shift from construction to maintenance, the City will pursue a permanent component to this tax. As similar sales are taxed with this source, revenue trends are the same 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 was also recently renewed and currently expires in 2028. Tourism is a major industry to our local economy. Overall sales decreased in FY2009 when gas prices were peaking but have since rebounded and FY11 reflects the greatest amount collected in the history of the tax at $5.24 million. 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. Historically, Flagstaff’s greatest v challenge was that while population was growing, it was growing at a slower rate than some of the other communities in the state. In the past, this has translated into a decreased proportionate revenue share; however the 2010 census resulted in the City’s proportionate population share increasing from 1.25% to 1.31% resulting in an approximate increase in state shared revenues to the City of approximately $500,000 in the FY2012 budget. The State has experienced similar or greater revenue declines than the City. Construction, tourism, and auto sales were the three hardest hit industries, however there is recovery occurring at the state level also. For State shared sales tax, the City received 4.9% more in FY 2011 than it did in FY2010 which breaks a three year downward spiral. The distribution of personal income tax continued its’ decline for the second year in a row, decreasing by 24.6% in FY2011, with a cumulative decrease of 34.9% since FY 2009. Highway user revenue (gas tax) funds (HURF) ended FY2011 slightly below FY2010 (2% decrease), which is a 20.7% total decrease from FY2008. HURF revenues that are available for distribution have experienced five consecutive years of decreases. These revenues are distributed based on a fairly complex Arizona Department of Transportation formula, based in part on the amount of fuel purchased in our region. The revenue decrease initially was due to the increased gas pricing resulted in lower sales. In the last three years, however, the decreases are due to the State shifting revenues ‘off the top’ to fund other public safety and motor vehicle needs. As evidenced by the increase in BBB taxes and other statistical data, we are still a popular drive destination from Las Vegas, Los Angeles, and Phoenix, however those revenues are not being distributed back to our City at this time. Primary property tax revenues continued to see slight increases even though property tax valuation had decreased. This occurs as there is an approximate 18 – 24 month lag in home valuation and the property tax payment; however FY2011 was the last year for this to occur. The gap that had existed between full cash value and net assessed value is now gone. The State of Arizona legislatively caps the primary property tax levy on an annual basis to a 2% increase so homeowners realized a 1.0% mil rate decrease from $0.6547 to $0.6479 for FY2011. The rate for secondary property taxes was left the same at a mil rate of $0.8366 which resulted in a 5.7% levy decrease due to the reduction in assessed valuation. While the revenues continue to fluctuate for the City in some areas, the City was able to budget revenue relatively flat for FY2012 due to some sectors of the stabilizing economy and the growth in the City’s proportionate population share. The City of Flagstaff reduced its’ overall staffing count by another 17 positions bringing total staff reductions to 121 full time equivalencies (FTE’s) since FY2009. 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. conditions change. The City continues to plan in a five to ten year horizon as economic 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 financial policy impacts all of which are further identified below. 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 within limited or decreasing resources. 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. Financial Policy Planning – The City of Flagstaff financial policies dictate minimum fund balance levels for the General, Special Revenue, and Enterprise Funds. The General Fund is required to maintain a fund balance of 15% of ongoing revenues and special revenue and enterprise funds are to maintain a 10% fund balance, as calculated against ongoing revenues. As the recession began, the City Council provided a temporary waiver to the General Fund balance requirement reducing it from 15% to 12% for FY2010. This provided approximately $1.5 million dollars in one-time funding that was spread over three fiscal years: FY’s 2010, 2011, and 2012. While this eased some of the financial shortfall the City was experiencing, it did contribute toward a structural deficit as some ongoing services were funded with this one-time money. As part of the FY2012 budget process, this structural deficit was eliminated and the General Fund balance was restored to 15%. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2010-2011, 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 FY2010-2011. 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:  Successful passage of the 2010 bond question to upgrade the public safety and emergency vii communication system for the City at $4.72 million dollars  Evaluated effectiveness and feasibility of continued operation of specialty courts (DUI/Drug Court, Mental Health Court, and Homeless Court) to meet the needs of defendants with current court cases  Completed thinning of 469 acres in surrounding forest  Completed 342 acres of broadcast burning  Adopted a ‘no alcohol without permit’ policy in two city parks in order to reduce the occurrence of alcohol related offenses  Implemented an on-line web based crime reporting service 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:  Completed three new Izabel Homes  Twelve housing rehabilitation projects completed  Assumed the overall oversight of the Flagstaff Housing Authority within the City division structure and now report their financial statements as part of the City of Flagstaff 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:  Successful reconstruction and opening of the Jay Lively Ice Rink following the prior year snow related roof cave in and building destruction  Increased adult programming at the Flagstaff Library Downtown Branch  Upgraded both bookmobiles to wireless service for internet connections  Partnered with Northern Arizona University on the Flagstaff Reads Initiative  Partnered with the Flagstaff Medical Center to host the National Senior Health & Fitness Day at the Aquaplex with over 500 senior citizens in attendance. 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:  Developed a power purchase agreement  Implemented Residential Energy Efficiency Initiatives which include Residential Energy Retrofits, Energy Efficient Kits, LED Holiday Light Swap, and CFL installations that have reduced 937,288 kilowatt hours of energy use and 1,443,424 pounds of carbon dioxide equivalents from being released into the atmosphere  Implemented a community wide ‘trailing partner’ program tying employers and employment resources through a city sponsored website  Improved relationships within the statewide alliance for targeted business attraction Facilities and Basic Services The City shall identify and provide the desired or current service levels and accompanying facilities of basic viii municipal services. Facilities and basic services accomplishments include:   Brought the Fort Tuthill well on line Successful passage of the 2010 Street and Utility replacement program bond for $16.5 million dollars Fiscal Health The City shall maintain good fiscal health through sound financial management and fiscal integrity. Fiscal accomplishments include:  Established a Citizens Budget Task Force to provide recommendations to Council on budget allocations  Conducted and participated in numerous joint bidding opportunities with other public sector agencies throughout Arizona to leverage purchases to obtain more competitive pricing  Worked cooperatively with the Federal Emergency Management Agency (FEMA) and the Arizona Department of Emergency Management (ADEM) on disaster recovery efforts for winter storm, fire, and flooding events  Worked with Flagstaff Housing Authority to align policies, processes and reporting 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, 2010. This was the 17th 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 2010-2011 annual budget (17 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. ix x xi City of Flagstaff Citizens of Flagstaff City Council Special Committees City Magistrates City Court Board and Commissions City Attorney City Manager Deputy City Manager Utilities, Service and Safety Deputy City Manager Community Enhancement Community Development Division Utilities General Administration Division Management Services Division Public Works Division IT Division Economic Vitality Division Human Resources Division Community Enrichment Division Police Department Fire Department xii Legal City of Flagstaff, Arizona List of Elected and Appointed Officials June 30, 2011 Elected Officials Mayor Sara Presler Vice Mayor Celia Barotz Councilmember Art Babbott Councilmember Karla Brewster Councilmember Coral Evans Councilmember Scott Overton Councilmember Al White Appointed Officials City Manager Kevin Burke City Attorney Rosemary Rosales City Treasurer Barbara Goodrich City Clerk Margie Brown xiii 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 (the City) as of and for the year ended June 30, 2011, 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’s 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 at June 30, 2011, 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. As discussed in Note II.E to the financial statements, the City applied an adjustment to beginning fund balances and net assets to include the Flagstaff Housing Authority as a fund operating within the City financial system. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis as noted in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial w ww .ei de bai ll y .com 877 W. Main St., Ste. 800 | Boise, ID 83702-5858 | T 208.344.7150 | F 208.344.7435 | EOE statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and the statistical section, as noted in the table of contents 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 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Phoenix, Arizona December 23, 2011 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, 2011. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iii –x of this report. FINANCIAL HIGHLIGHTS  The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $608.0 million (net assets). Of this amount $60.1 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net assets increased by $10.7 million during the fiscal year. This is a result of an increase in net assets in the governmental activities of $3.3 million and an increase in net assets in the business type activities of $7.4 million.  As of June 30, 2011, the City’s governmental funds reported combined ending fund balances of $43.7 million, a decrease of $2.3 million in comparison with the prior fiscal year. Approximately 28.1% of this total amount ($12.3 million) is unassigned fund balance available for spending at the government’s discretion.  As of June 30, 2011, total unassigned fund balance for the general fund was $15.2 million, or 33.3% of total general fund expenditures ($45.5 million).  In fiscal year 2011 the City added a new proprietary fund, Housing Authority, to the fiscal operations of the City. This was adopted by ordinance in June 2010 and became effective July 2010. This ordinance clearly defined the Housing Authority as a section of the City. Total net assets of the Housing Authority at June 30, 2010 was $6.2 million and will be reflected in the change to beginning net assets in proprietary funds for fiscal year 2011.  As of June 30, 2011, the City’s proprietary funds reported combined total net assets of $323.3 million, and total unrestricted net assets of $17.2 million. Unrestricted net assets in the Water and Wastewater Fund are $7.0 million and Environmental Services Fund are $4.1 million. 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. 3 Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include Police, Fire, Community Development, Parks and Recreation, City Council, City Manager, City Attorney, Municipal Courts, Human Resources, Risk Management, Information Services, Financial Services, Library, and Economic Development. The business-type activities of the City include Water and Wastewater, Airport, Environmental Services, and Stormwater operations. The government-wide financial statements include not only the City itself (known as the primary government), but also 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 17 - 19 of this report. Fund financial statements The fund financial statements are designed to report information about groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary 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. 4 The basic governmental fund financial statements can be found on pages 20-31 of this report. Proprietary funds: Proprietary funds are generally used to account for services for which the City charges customers – either outside customers, or departments of the City. Proprietary funds provide the same type of information shown in the government-wide financial statements, only in more detail. The City maintains the following two types of proprietary funds:  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, Stormwater and the Housing Authority. 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 32-39 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 40-85 of this report. Combining statements The combining statements referred to earlier in connection with non-major governmental funds are presented on pages 87-91. 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 pages 93-111 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 $608.0 million as of June 30, 2011. Of the City’s net assets, 85.7% reflects its investment of $521.0 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 5 in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. Net A s s ets Ju n e 30, 2011 an d 2010 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2011 Current and other assets Capital assets $ 83,602 Bu s in es s -ty p e A c tiv ities 2010 $ 85,845 2011 $ 36,546 To tal 2010 $ 2011 26,658 $ 120,148 2010 $ 112,503 294,085 295,289 356,534 357,105 650,619 652,394 377,687 381,134 393,080 383,763 770,767 764,897 Long-term liabilities 77,514 83,866 60,887 61,298 138,401 145,164 Other liabilities 15,457 15,828 8,887 6,576 24,344 22,404 92,971 99,694 69,774 67,874 162,745 167,568 Total assets Total liabilities Invested in capital assets, 217,880 213,763 303,113 302,784 520,993 516,547 Restricted net of related debt 23,972 18,213 3,003 2,209 26,975 20,422 Unrestricted 42,864 49,464 17,190 10,896 60,054 281,440 $ 323,306 Total net assets $ 284,716 $ $ 315,889 $ 608,022 60,360 $ 597,329 Total assets increased due to change in cash and receivable balances in the business-type activities. Total liabilities decreased due to the application of debt principal payments. A portion of the City’s net assets, $27.0 million (4.4%) represents resources that are subject to external restriction on how they may be used. The remaining balance of unrestricted net assets, $60.1 million (9.9%) 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 2.6% ($2.2 million). The largest decreases are in investments ($6.9 million), restricted cash and investments ($1.4 million) and deposits ($0.6 million) while the largest increases were in cash and cash equivalents ($6.9 million) and cash with fiscal agents ($0.6 million). Capital assets of the governmental activities, funded through operations, debt proceeds, grants, and contributions, decreased by 0.4% ($1.2 million) due to current year depreciation in excess of the net of asset additions and deletions. Major capital outlays include fire station construction ($3.4 million), street construction and improvements ($3.5 million), ice rink reconstruction ($1.7 million), and streetscape improvements ($1.3 million). Governmental activities long-term liabilities decreased by 7.6% ($6.4 million) primarily due to payments on existing debt issues. Other liabilities decreased by 2.3% ($0.4 million) primarily due to decreases in accounts payable ($0.4 million). Total assets for business-type activities have increased by 2.4% ($9.3 million). The largest increases are related to the inclusion of the Housing Authority in this year’s statements and accounts for $7.2 million in total assets. Other increases are cash and cash equivalents ($6.4 million), investments ($1.4 million), and restricted cash and investments ($0.7 million) while the largest decrease (excluding the addition of Housing Authority assets) was in capital assets ($6.3 million) related to accumulated depreciation in excess of current year additions. 6 Total liabilities for business type activities increased by 2.8% ($1.9 million). The inclusion the Housing Authority increased liabilities by $0.4 million. Major changes include increases in unearned revenue ($1.1 million) and accounts payable ($0.7 million) and a decrease in debt payable ($1.5 million) Overall business-type net assets have increased by 2.3% ($7.4 million) primarily due to the inclusion of the Housing Authority ($6.8 million). Analysis of Change in Net Assets The City’s overall net assets have increased by $10.7 million during the current fiscal year. These increases are explained in the government and business-type activities discussion to follow. C h an g es in Net A s s ets Fo r th e Year s En d ed Ju n e 30, 2011 an d 2010 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2011 Bu s in es s -ty pe A c tiv ities 2010 2011 To tal 2010 2011 2010 Rev enu es Program Revenues: Charges for services $ 6,934 $ 7,752 $ 35,075 $ 31,587 $ 42,009 $ 39,339 Operating grants and contributions 7,965 6,655 5,090 120 13,055 6,775 Capital grants and contributions 9,227 36,950 4,221 6,791 13,448 43,741 12,798 General Revenues: Property taxes 12,646 12,798 - - 12,646 Sales taxes 31,356 30,430 - - 31,356 30,430 State shared taxes 13,148 14,880 - - 13,148 14,880 Investment earnings Other Total revenues 246 449 108 111 354 560 2,511 3,080 198 273 2,709 3,353 84,033 112,994 44,692 38,882 128,725 151,876 Ex pens es General government 7,851 8,238 - - 7,851 8,238 25,987 26,593 - - 25,987 26,593 Public works 1,754 1,503 - - 1,754 1,503 Economic and physical development 8,475 8,827 - - 8,475 8,827 Culture and recreation 12,855 12,508 - - 12,855 12,508 Highways and streets 19,275 17,856 - - 19,275 17,856 3,371 3,918 - - 3,371 3,918 - - 21,491 21,738 21,491 21,738 Environmental - - 11,610 11,096 11,610 11,096 Airport - - 4,585 4,275 4,585 4,275 Housing Authority - - 5,812 Public safety Interest on long-term debt Water and wastewater Stormwater Total expenses Increase in net assets before transfers Transfers Change in net assets Net assets at beginning of year, as restated Net assets at end of year - - 79,568 79,443 5,812 1,122 1,259 1,122 1,259 44,620 38,368 124,188 117,811 4,537 34,065 4,465 33,551 72 514 (1,190) (10,525) 1,190 10,525 - - 3,275 23,026 1,262 11,039 4,537 34,065 281,441 $ 284,716 $ 258,415 322,045 281,441 $ 323,307 $ 304,850 603,486 315,889 $ 608,023 563,265 $ 597,330 Governmental activities Governmental activities increased the City’s net assets by $3.3 million. The key factors for this increase are as follows:  Combined operating grants, capital grants and contributions have decreased by 60.6% ($26.4 million) as a result of federal and local stimulus capital projects in the prior year.  Property tax had a slight decrease due to increased delinquent accounts net of increases in assessed valuation. 7  City sales tax revenues increased by 3.0% ($0.9 million). Comparing actual revenues to budgeted revenues the city exceeded the estimates by $1.5 million. The increase in the city general sales tax, the Bed, Board, and Beverage sales taxes, and the transportation taxes are $504,052, $236,926, and $185,063 respectively.  The state shared revenues decreased by 11.6% ($1.7 million) below prior year actual. This is a result of lower income tax sharing ($1.9 million) related to economic impact on employment.  Expenses have increased slightly (0.2%, $124,819) as the economy had stabilized. Also some of the expenditures are considered one-time funding as the organization attempts to manage its expenditures in line with revenue. Business-type activities Business type activity had net asset increase of $7.4 million. The key factors for this increase include:  The Housing Authority is incorporated in this year’s financial statement which had beginning net assets of $6.2 million.  Charges for service increased by 11.0% ($3.5 million). charges for services. The Housing Authority provided $1.4 million in new All other funds have shown increases. Water and wastewater increased $1.2 million, environmental services increased $681,218, airport increased $29,047, and stormwater increased $98,456.   Operating grants and contributions increased by $5.0 million which is all due to the Housing Authority. Capital grants and contributions decreased by 37.8% ($2.6 million) due to a lower level of contributed capital from private development and general government projects.  Investment earnings and other revenues are down slightly from the prior year, $0.1 million.  Expenses have increased over prior year by 16.3% ($6.3 million). The majority of the increase is related to the inclusion of the housing authority this year ($5.8 million). The water and wastewater fund has shown the only decrease by a slight amount, $0.2 million. All other funds had slight increases, less than $0.6 million. The following two charts illustrate the City's governmental expenses by function and its revenues by source. 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 safety Public works 8 Econ & phys development Culture & recreation Highways & streets Interest on long-term debt Revenues by Source – Governmental Activities State shared tax 15.6% Investment earnings 0.3% Miscellaneous 3.0% Charges for services 8.3% Operating grants and contributions 9.5% Sales tax 37.3% Capital grants and contributions 11.0% Property taxes 15.0% As shown, public safety is the largest function as measured by expense (32.7%) followed by highways & streets (24.2%), culture and recreation (16.2%), and economic and physical development (10.7%). 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 tax is the largest single source of funds (37.3%), followed by state shared tax (15.6%) and property taxes (15.0%). Last year, capital grants and contributions was ranked first, sales tax was ranked second, and state shared tax was ranked third. The following two charts illustrate the City's business type expenses by function and its revenues by source. Expenses and Program Revenues – Business Type Activities $25,000,000 Expenses Program Revenues $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Water and wastewater Environmental 9 Airport Housing Authority Stormwater Revenues by Source – Business-type activities Investment Operating grants earnings and contributions 0.2% 11.4% Capital grants and contributions 9.4% Other Charges for 0.5% services 78.5% As shown Water and Wastewater has expenses of $21.5 million for the fiscal year, followed by Environmental Services with $11.6 million, Housing Authority with $5.8 million, the Airport with $4.6 million and Stormwater with $1.1 million. For the fiscal year, program revenue exceeded expense for the Water and Wastewater Fund, Environmental Services Fund, Housing Authority Fund, and Stormwater Fund. The Airport Fund program expenditures exceeded revenues mainly due to depreciation of capital assets. Water & Wastewater, Environmental Services, Airport, and Stormwater received the majority of their program revenues through charges for services (89.6%, 97.9%, 63.6%, and 82.0% respectively). The Housing Authority receives the majority of its program revenue through operating grants and contributions (65.5%). Charges for services provided the largest share of revenues (78.5%) for all of the business-type activities, followed by operating grants and contributions (11.4%). The shift from prior year is related to the Housing Authority having $4.2 million in operating grants and contributions. The operating expenses for the business type activities increased (16.3%, $6.3 million) which new expenditures of $5.8 million from the Housing Authority, an increase in Environmental Services expense (4.6%, $513,956), an increases in Airport (7.3%, $310,187) and decreases in Water and Wastewater (1.1%, $246,774) and Stormwater (10.9%, $137,285). Environmental services and water and wastewater increased user fees rates in fiscal year 2011. Water and wastewater, environmental services, airport and stormwater realized increased charge for service revenue at 7.1%, 6.0%, 2.1% and 7.2% respectively. Housing Authority provided $1.4 million in new changes for services. 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 $43.7 million, an decrease of $2.3 million in comparison with the prior year. Approximately $13.0 million of the total ending fund balance constitutes unassigned fund balance, which is available for spending at the City’s discretion. The remainder of fund balance is (1) non spendable ($641,600) for inventory and perpetual care, (2) restricted ($23.8 million) for special revenue funds, debt service, court improvements and operations, grant purposes, and capital projects, (3) committed ($85,119 million) for library services, development fee projects, and perpetual care, (4) assigned ($6.9 million) for library and court services, capital reserves, and real estate. Revenues for governmental functions overall totaled $81.6 million in the fiscal year ended June 30, 2011 which represents a decrease of 3.1% or $2.6 million from the prior fiscal year. Three revenue categories show increases over prior year. These include taxes (1.4%, $0.6 million), fines and forfeitures (2.3%, $37,149), rents (1.9%, 29,698), and miscellaneous revenues (651.0%, $1.5 million). The large increase in miscellaneous revenue is primarily due to a $1.2 million contribution for the share of street improvements and $490,096 for sale of properties for city housing projects. All other revenue categories experienced decreases including intergovernmental (10.1%, $2.0 million), grants and entitlements (5.3%, $589,379), charges for services (4.3%, $131,186), special assessments (53.6%, $0.8 million), license and permits (48.7%, $0.7 million), investment earnings (45.8%, $189,231), and contributions (69.4%, $377,976). Expenditures for governmental functions ($84.5 million) decreased by 1.2% ($1.0 million) from the prior fiscal year. The expenditure decreases continue to be driven by decreases in ongoing revenues. The City’s budget direction for the fiscal year was an initial 6.5% cut to operational budgets. In addition, capital programs and set asides have been reduced. Major project improvements have been discussed in prior sections. In the fiscal year ended June 30, 2011 expenditures for governmental functions exceeded revenues by approximately $2.8 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 unassigned fund balance of the General Fund was $15.2 million. As a measure of liquidity, it may be useful to compare total unassigned fund balance and total fund balance to total fund expenditures. The unassigned fund balance represents 33.9% of General Fund expenditures. The fund balance in the City’s General Fund increased by $1.7 million during the fiscal year as expenditure had positive growth of 5.2% and revenues had negative growth of 3.4%. Overall, the General Fund’s performance resulted in expenditures in excess of revenues in the fiscal year ended June 30, 2011 of $0.8 million. This is a decrease of approximately $0.9 million over the comparable figure from the prior year which resulted in expenditures in excess of revenues of $1.7 million. The Highway User Revenue fund balance decreased by $413,964 mainly due to a transfer out to support a beautification project, $500,000. Transportation Fund balances increased by $1.3 million due to moderate growth in revenues and expenditure along with timing of capital projects. The BBB Fund balance increased $437,518 partially due to the transfer from the Highway User Revenue fund and timing of capital projects. 11 The Special Assessment Bond Fund balance decreased $0.7 million due to a delay in receiving the assessment payments from the City owned parcel which was sold in June and closed in July. 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, Housing Authority, and Stormwater. The internal service fund, which is used to account for risk management and health insurance activities, had unrestricted net assets of $4.2 million. The total growth in net assets for the proprietary funds was $7.4 million. All funds except the Airport had positive growth in their net assets for the fiscal year ended June 30, 2011. The Airport fund deceased $2.2 million due to depreciation. The major part of the increase is related the inclusion of the Housing Authority in the City operations beginning July 1, 2010 with beginning net assets of $6.2 million. Budget Highlights The City’s final budget matches the original budget which was approved by Council in June 2010. There may have been a few sections that were over budget, however we look at the budget to actual at the division level and no division exceeded their appropriation. There were two revenue transfers that were not budgeted for. A transfer was made from the capital projects fund to economic development ($17,236) for excess bond proceeds to be used to pay the same debt service. The other transfer was from the general fund to the capital projects fund ($71,200) to pay for environmental testing at the Sawmill property prior to sale. The General fund was under final budgeted total revenues by 9.6% ($4.7) million primarily due to budgeting for insurance recoveries under miscellaneous ($3.5 million) and for an anticipated increase rents from the USGS campus ($1.4 million). Expenditures are under budget in every category due to controlled spending and carryover or cancellation of some capital projects. Both transfers in and transfers out are less than budgeted (except for the two transfers mentioned in the previous paragraph) 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 $4.6 million for the Rio de Flag flood control project of which only $1.0 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, 2011 amount to $650.6 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total decrease in the City’s capital assets for the current year was 0.3% ($1.8 million). The following table reflects the capital assets at the end of the fiscal year: 12 C ap ital A s s ets , Net o f Dep r ec iatio n Ju ne 30, 2011 an d 2010 ( in th o u s ands o f do llar s ) Go v er n m en tal A c tiv ities 2011 Land $ Buildings 47,950 Bu s in es s -Ty p e A c tiv ities 2010 $ 2011 43,652 $ 11,855 To tal 2010 $ 10,301 2011 $ 59,805 2010 $ 53,953 56,301 54,866 60,369 60,696 116,670 115,562 Improvements 9,042 10,073 240,868 242,322 249,910 252,395 Machinery and equipment 9,764 11,123 26,536 27,993 36,300 39,116 161,982 160,066 - - 161,982 160,066 Infrastructure Construction in progress Total 9,006 15,509 16,905 15,793 25,911 31,302 $ 294,045 $ 295,289 $ 356,533 $ 357,105 $ 650,578 $ 652,394 Construction in progress had a net decrease of 17.2% ($5.4 million). Major completed construction in progress includes the purchase of land for Beulah Blvd extension ($3.1 million), transportation and streets projects ($6.8 million), ice rink reconstruction ($3.1 million), streetscapes ($1.9 million), urban trails ($1.2 million), and waterline improvements ($0.8 million). Major construction in progress at June 30 includes fire stations ($3.4 million), open space acquisition ($1.2 million), Red Gap pipeline and water rights ($2.6 million), and Rio de Flag drainage project ($13.7). The increase to land ($5.8 million) is mainly related to the completed purchase of land for Beulah Blvd extension ($3.1 million) and the inclusion of the Housing Authority ($1.4 million). The increase to buildings ($1.1 million) is mainly for the completion of the ice rink renovation net of the removal of the previous asset. Decreases in improvements and machinery and equipment are due to higher depreciation than capital additions Infrastructure increase is related to completion of street and streetscape improvements and contributed capital in excess of depreciation. 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 61-62 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 $120.2 million. Of this amount, $27.8 million is general obligation bonds backed by the full faith and credit of the City, $18.1 million is improvement district bonds, $9.2 million is revenue bonds, $18.1 million is for the Municipal Facility Corporation, $4.5 is for certificates of participation, and $42.4 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. 13 O u ts tan din g Debt Ju n e 30, 2011 an d 2010 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 20 11 General obligation bonds $ Special assessment bonds Revenue bonds Lease/Loans Total debt payable 201 0 24,015 $ 18,130 Other debt $ Bu s in es s -ty p e A c tiv ities 25,865 $ 4,930 6,665 24,850 1,542 2,004 $ 77,999 20 10 3,830 18,615 22,620 71,237 201 1 $ To tal $ 201 1 5,690 $ 27,845 2 010 $ 31,555 - - 4,299 4,614 - - 22,620 24,850 40,875 39,936 42,417 41,940 49,004 $ 50,240 $ 18,130 18,615 9,229 11,279 120,241 $ 128,239 During fiscal year 2011, the City’s total bonded debt decreased by $8.5 million. The City issued $3.5 million in loans for water and wastewater projects to provide drilling and equipping additional water wells and development of future water rights for the fiscal year ended June 30, 2011. 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, 2011 is $47.5 million in the 6% category and $130.4 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. During the year, the City maintained the following bond ratings: C ity o f F lag s taff Bo n ded Debt Ratin g s A s o f Ju n e 30, 2011 Mo o dy ' s In v es to r s Stan dar d & S er v ic e Po o r ' s General Obligation Aa2 AA Municipal Facilities Corporation Aa3 AA Additional information on the City’s long-term debt can be found in Section IV F on pages 66-76 of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2011/2012 budget preparation was influenced by the following factors:  The City’s General Fund budget was approved with no structural deficit in ongoing expenditures exceeding ongoing revenues  Unrestricted fund balance in the General Fund will be restored to the fiscal policy of 15% of operating revenues  Financial resources have stabilized and are being budgeted at similar levels as the Fiscal Year 2010/2011 estimates  The 2010 Census information has shown that Flagstaff’s share of population as a comparison to the State population has increased. This gave the City an increase in its proportion of state shared revenues.  Continued focus on maintaining public safety and recreation operation levels with lower budgetary impacts 14  The City funded 2.92 positions on a one year basis and will reconsider these in the Fiscal Year 2011/2012 budget process compared to 17.88 in Fiscal Year 2010/2011  The total authorized positions decreased by 16.62 positions which was primarily one-time funded positions  Put triggers in place for considering an adjustment to the pay plan by up to 1.2% based on sales tax collections  City staff worked with the Budget Task Force Committee to provide public input and concerns to the City Council  Continue to monitor State legislature to be aware of potential budget impacts on cities  Property assessments continue to decline this year by 4.5% on limited property value and 8.4% on full cash value  Budgeted for repair of the Inner Basin waterline that was impaired during a 2010 flood  Sold property for Aspen Sawmill development that went bankrupt in 2010  The continued pursuit of federal and state grant dollars to enhance the local economy  The continued implementation of electronic information sharing to facilitate transparency in service provision  The development of a more strategic fiscal policies  Utility rate increases approved for the next four years to help support ongoing operational services and restore operation capital and the capital improvement plan to assist with aging infrastructure Requests for Information The financial report is designed to provide a general overview of the City’s finances for all of those with an interest in the government’s finances. contact: If you have questions about this report or need additional financial information, City of Flagstaff Finance and Budget Division 211 W. Aspen Flagstaff, AZ 86001 Main and TDD (928) 774-5281 Arizona Relay 7-1-1 15 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets June 30, 2011 Primary Government Governmental Activities Business-type Activities Total ASSETS Cash and cash equivalents $ Cash with fiscal agents Investments Accounts receivables, net 24,422,871 Bond proceeds receivable Special assessments receivable Internal balance 15,499,688 $ 39,922,559 1,962,963 7,931,303 16,574,640 - 16,574,640 6,785,430 4,679,928 11,465,358 36,512 17,728 54,240 4,489,592 247,921 4,737,513 127,674 - 127,674 18,334,079 - 18,334,079 Interest receivable Intergovernmental receivable $ 5,968,340 434,252 Deposits (434,252) 57,794 Prepaid items 2,248,390 2,306,184 - 60,643 60,643 479,029 230,561 709,590 Deferred bond issuance costs, net 558,758 124,267 683,025 Property held for resale 500,000 - 500,000 4,873,003 11,909,726 16,782,729 Inventory Restricted cash and investments Capital assets: Non-depreciable 56,955,431 28,760,684 85,716,115 Depreciable, net 237,089,464 327,772,694 564,862,158 377,686,869 393,080,941 770,767,810 Accounts payable 4,445,683 1,333,510 5,779,193 Accrued payroll 2,247,705 416,973 2,664,678 Interest payable 1,659,899 889,196 2,549,095 297,351 1,353,188 1,650,539 Deposits payable 1,426,673 492,747 1,919,420 Matured bonds and lease payable 5,380,000 4,398,765 9,778,765 1,548,484 304,616 1,853,100 505,000 - 505,000 6,588,185 4,846,374 11,434,559 Total assets LIABILITIES Unearned revenue Due within one year: Compensated absences Special assessment debt, government commitment Bonds, notes and leases payable, net Due in more than one year: Compensated absences 2,089,122 509,305 2,598,427 - 10,660,662 10,660,662 Landfill closure and postclosure care costs Net OPEB obligation 1,835,037 394,046 2,229,083 Special assessment debt, government commitment 17,625,000 - 17,625,000 Bonds, notes and leases payable, net 47,323,182 44,174,837 91,498,019 92,971,321 69,774,219 162,745,540 217,879,986 303,113,402 520,993,388 Capital projects 9,378,661 2,579,281 11,957,942 Debt service 5,801,812 - 5,801,812 Specific programming 8,614,634 - 8,614,634 - 423,848 423,848 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 14,192 - 14,192 162,571 - 162,571 42,863,692 $ 284,715,548 The notes to the financial statements are an integral part of this statement 16 $ 17,190,191 60,053,883 323,306,722 $ 608,022,270 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2011 Program Revenues Expenses Capital Grants and Contributions Operating Grants and Contributions Charges for Services Primary government Governmental activities: General government $ 7,850,954 $ 2,646,424 $ 1,093,594 $ 469,349 Public safety 25,987,193 1,144,636 1,615,515 176,424 Public works 1,754,033 1,537,188 794 - Economic and physical development 8,474,776 162,715 1,347,600 - Culture and recreation 12,854,824 1,442,901 3,651,663 298,355 Highways and streets 19,275,381 - 256,308 8,282,650 3,370,918 - - - 79,568,079 6,933,864 7,965,474 9,226,778 Water and wastewater 21,491,239 18,781,751 16,413 2,873,538 Environmental 11,610,370 12,010,554 298,424 - Airport 4,584,733 1,388,076 555,239 240,881 Housing authority 5,811,922 1,437,841 4,220,399 787,499 Stormwater 1,121,555 1,456,894 - 318,790 Interest on long-term debt Total governmental activities Business-type activities: Total business-type activities Total primary government 44,619,819 35,075,116 $ 124,187,898 $ 42,008,980 5,090,475 $ 13,055,949 General revenues: Property tax, levied for general purposes Property tax, levied for debt service Sales taxes State shared sales taxes - unrestricted Investment earnings Miscellaneous Gain on disposal of capital assets Contributions to permanent fund Transfers in (out) Total general revenues, contributions and transfers Change in net assets Net assets - beginning, as restated Net assets - ending The notes to the financial statements are an integral part of this statement 17 4,220,708 $ 13,447,486 Net (Expenses) Revenues and Changes in Net Assets Primary Government Governmental Activities $ Business-type Activities (3,641,587) $ (3,641,587) - (23,050,618) (216,051) - (216,051) (6,964,461) - (6,964,461) (7,461,905) - (7,461,905) (10,736,423) - (10,736,423) (3,370,918) - (3,370,918) (55,441,963) - (55,441,963) - 180,463 180,463 - 698,608 698,608 (2,400,537) (2,400,537) - 633,817 633,817 - 654,129 654,129 - $ $ (23,050,618) - $ - Total (55,441,963) (233,520) $ (233,520) (233,520) $ (55,675,483) 5,352,698 - 5,352,698 7,293,019 - 7,293,019 31,355,882 - 31,355,882 13,148,252 - 13,148,252 246,093 107,543 353,636 1,741,338 150,129 1,891,467 744,957 47,818 792,775 24,950 - 24,950 (1,189,964) 1,189,964 - 58,717,225 1,495,454 60,212,679 3,275,262 1,261,934 4,537,196 281,440,286 322,044,788 284,715,548 $ 323,306,722 603,485,074 $ 608,022,270 18 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2011 Highway User Revenue Fund General Fund Transportation Fund ASSETS Cash and investments $ 18,215,495 Cash with fiscal agents $ 1,476,154 $ 1,657,138 - 1,715,228 1,852,350 4,028,861 763,475 1,027,563 15,967 70 5,485 Intergovernmental receivables 1,857,024 - 1,473,795 Interfund receivable 4,400,000 - - 127,674 - - - - - Deposits - 57,794 - Inventory 427,267 - - - 500,000 - 38,703 - - Accounts receivable, net Interest receivable Bond proceeds receivable Special assessments receivable Property held for resale Restricted cash and investments Total assets $ 29,110,991 $ 4,512,721 $ 6,016,331 1,213,905 $ 378,455 $ 1,189,303 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable $ Accrued payroll and compensated absences Current bonds payable Interest payable 1,996,827 76,623 - 350,000 1,620,000 1,445,000 55,186 95,228 407,350 Interfund payable - - - Deferred revenue 566,506 - - Unearned revenue 149,707 - - 1,426,673 - - 5,758,804 2,170,306 3,041,653 Nonspendable 427,267 - - Restricted 796,345 2,342,415 2,974,678 85,119 - - 6,882,947 - - 15,160,509 - - Guaranty and other deposits Total liabilities Fund balances: Committed Assigned Unassigned Total fund balances Total liabilities and fund balances 23,352,187 $ 29,110,991 The notes to the financial statements are an integral part of this statement 19 2,342,415 $ 4,512,721 2,974,678 $ 6,016,331 BBB Fund $ 5,674,573 $ - Total Governmental Funds Other Governmental Funds Special Assessment Bond Fund 7,599 $ 453,250 9,464,567 $ 5,968,340 562,698 - 5,365 6,387,962 3,874 128 8,381 33,905 605,344 - 553,429 4,489,592 - - - 4,400,000 - - - 127,674 - 18,334,079 - 18,334,079 - - - 57,794 51,762 - - 479,029 - - - 500,000 - - 4,834,300 4,873,003 $ 6,898,251 $ 18,795,056 $ 16,813,554 $ $ 255,327 $ - $ 1,082,432 $ 82,146,904 4,119,422 43,959 - 130,296 2,247,705 115,000 - 1,850,000 5,380,000 67,969 453,250 580,916 1,659,899 - 500,000 3,900,000 4,400,000 18,900,161 - 18,333,655 - 1,733 - 145,911 297,351 - - - 1,426,673 483,988 19,286,905 7,689,555 38,431,211 51,762 - 162,571 641,600 6,362,501 - 11,333,360 23,809,299 - - - 85,119 - - - 6,882,947 - (491,849) 6,414,263 $ 36,495,526 1,947,512 6,898,251 (2,371,932) (491,849) $ 18,795,056 12,296,728 9,123,999 $ 16,813,554 20 43,715,693 $ 82,146,904 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL ACTIVITIES JUNE 30, 2011 Fund balances - total governmental funds balance sheet $ 43,715,693 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 from business-type activities Transfer of capital assets to business-type activities 455,240,055 (160,611,618) 758,000 (1,341,542) 294,044,895 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 558,758 367,135 925,893 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 Compensated absences (71,237,458) (803,909) (1,835,037) (3,637,606) (77,514,010) Certain revenues are not available to pay for current period expenditures and, therefore, are deferred in the governmental funds. Property tax Deferred revenue for long-term special assessments is shown on the governmental fund balance sheet, but is not deferred on the statement of net assets Special assessments 566,506 566,506 18,333,655 18,333,655 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 21 4,642,916 $ 284,715,548 22 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2011 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental 21,491,083 $ - $ 9,864,566 13,951,414 - - Grants and entitlements 2,234,162 6,553,309 - Charges for services 2,844,246 - - Special assessments - - - Licenses and permits 738,594 - - Fines and forfeitures 1,673,306 - - Rents 1,537,188 - - Investment earnings 63,004 2,430 46,114 Contributions 89,914 - - Miscellaneous 46,713 1,124,880 - 44,669,624 7,680,619 9,910,680 Total revenues EXPENDITURES: Current: General governmental Public safety 6,975,866 - - 24,473,320 - - Public works 1,299,027 - - Economic and physical development 4,246,370 - - Culture and recreation 5,500,631 - - - 5,097,184 4,331,953 842,009 2,024,304 1,445,000 817,200 Highways and streets Debt service: Principal retirement Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 177,380 336,215 1,971,631 3,692,869 - 45,486,234 11,150,572 6,594,153 (816,610) (3,469,953) 3,316,527 OTHER FINANCING SOURCES (USES): Sale of capital assets 44,291 Insurance recoveries 1,058,985 - - Transfers in 4,396,093 3,640,922 - Transfers out (4,586,907) Total other financing sources (uses) 23,352,187 The notes to the financial statements are an integral part of this statement 23 (2,032,113) (413,964) 23,256,335 $ (2,032,113) 3,055,989 95,852 Fund balances, beginning of year - (585,401) 912,462 Net change in fund balances Fund balances, end of year 468 1,284,414 2,756,379 $ 2,342,415 1,690,264 $ 2,974,678 Special Assessment Bond Fund BBB Fund $ 5,259,270 $ - $ 7,184,209 Total Governmental Funds $ 43,799,128 - - 3,536,607 17,488,021 501,618 - 1,294,394 10,583,483 52,875 - 29,116 2,926,237 - 701,447 - 701,447 446 - - 739,040 - - - 1,673,306 80,724 - - 1,617,912 35,525 1,685 75,605 224,363 11,788 - 64,715 166,417 19,948 14 528,053 1,719,608 5,962,194 703,146 12,712,699 81,638,962 - - 138,056 7,113,922 - - 3,295 24,476,615 - - - 1,299,027 2,148,716 - 1,806,938 8,202,024 619,822 - 4,662,395 10,782,848 75,530 - 1,107,366 10,612,033 115,000 485,000 1,850,000 6,761,313 136,405 920,576 1,063,796 3,451,572 2,138,682 - 3,982,298 11,785,480 5,234,155 1,405,576 14,614,144 84,484,834 728,039 (702,430) - (1,901,445) - (2,845,872) 896 45,655 - - - 1,058,985 1,335,236 - 4,289,379 13,661,630 (1,625,757) - (5,437,874) (14,268,052) (290,521) - (1,147,599) 437,518 (702,430) 5,976,745 $ Other Governmental Funds 6,414,263 (3,049,044) 210,581 $ (491,849) 498,218 (2,347,654) 12,173,043 $ 24 9,123,999 46,063,347 $ 43,715,693 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, 2011 Net change in fund balances - total governmental funds $ (2,347,654) 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 11,785,480 (12,731,239) (945,759) 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 Compensated absences Other postemployment benefits Principal payments on debt Bond premium 1,165,029 113,459 (885,970) 6,761,313 80,788 7,234,619 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 (55,400) (55,400) Certain transactions related to capital assets in the governmental funds reflect proceeds. However, in the statement of activities these transactions reflect net gain (loss). Capital asset impairment Sale of capital assets Transfer of capital assets to business-type activities Transfer of capital assets from business-type activities The notes to the financial statements are an integral part of this statement 25 (877,652) (1,773) (1,341,542) 758,000 (1,462,967) (continued) 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, 2011 Certain revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. However, other revenues that are deferred in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the statement of activities. Special assessments Property tax Fines and forfeitures (173,378) 202,471 (22,631) 6,462 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 gain Grants and entitlement Investment income 389,796 434,435 21,730 845,961 Change in net assets of governmental activities - statement of activities $ The notes to the financial statements are an integral part of this statement (concluded) 26 3,275,262 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Taxes $ Intergovernmental 20,825,500 $ 13,298,000 20,825,500 $ 13,298,000 21,540,643 $ 13,951,414 715,143 653,414 Grants and entitlements 2,506,821 2,506,821 2,234,162 (272,659) Charges for services 3,471,980 3,471,980 2,844,246 (627,734) (366,056) Licenses and permits 1,104,650 1,104,650 738,594 Fines and forfeitures 1,524,165 1,524,165 1,673,306 Rents 2,591,298 2,591,298 1,537,188 (1,054,110) (100,815) 149,141 Investment earnings 250,000 250,000 149,185 Contributions 150,000 150,000 89,914 (60,086) Miscellaneous 3,694,600 3,694,600 46,713 (3,647,887) 49,417,014 49,417,014 44,805,365 (4,611,649) General administration 8,496,243 8,496,243 7,616,550 Community development 3,802,064 3,802,064 3,748,951 53,113 Management Services 3,070,118 3,070,118 2,900,820 169,298 Fire 9,419,450 9,419,450 9,079,728 339,722 16,251,615 16,251,615 15,548,235 703,380 7,092,127 7,092,127 5,008,616 2,083,511 Total revenues EXPENDITURES: Current: Police Public works Economic vitality Community enrichment Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 879,693 606,095 606,095 421,512 184,583 6,730,159 6,730,159 4,727,484 2,002,675 (2,392,216) (2,392,216) (3,759,719) 1,367,503 1,500,000 1,500,000 194,057 1,305,943 54,575,655 54,575,655 45,486,234 9,089,421 (5,158,641) (5,158,641) (680,869) 4,477,772 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 42,000 42,000 44,291 5,153,014 5,153,014 4,396,093 (8,398,866) (8,398,866) (4,586,907) 3,811,959 (3,203,852) (3,203,852) (146,523) 3,057,329 (8,362,493) (8,362,493) (827,392) 7,535,101 14,019,080 $ 2,291 (756,921) 14,019,080 5,656,587 $ Adjustment of budetary basis to GAAP basis net change in fund balances 5,656,587 14,019,080 $ $ 13,191,688 (827,392) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 923,244 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 27 95,852 $ 7,535,101 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 6,562,309 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ Investment earnings 6,562,309 $ 4,000 Miscellaneous Total revenues 4,000 6,553,309 $ 2,430 (9,000) (1,570) 146,038 146,038 1,124,880 978,842 6,712,347 6,712,347 7,680,619 968,272 162,907 162,907 162,907 - EXPENDITURES: Current: General administration Management services 123,758 123,758 123,758 - Community development 689,931 689,931 689,931 - 12,125,410 12,125,410 10,005,948 2,119,462 36,623 36,623 36,623 - 131,405 131,405 131,405 - 100,000 100,000 - 100,000 13,370,034 13,370,034 11,150,572 2,219,462 Public works Economic vitality Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures (6,657,687) (6,657,687) (3,469,953) 3,187,734 5,490,567 5,490,567 3,640,922 (1,849,645) OTHER FINANCING SOURCES (USES): Transfers in Transfers out (585,401) Total other financing sources (uses) Net change in fund balances budgetary basis Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ (585,401) 4,905,166 4,905,166 (1,752,521) (1,752,521) 2,420,718 2,420,718 668,197 Adjustment of budetary basis to GAAP basis net change in fund balances $ 668,197 (585,401) 3,055,521 $ $ 2,006,286 (414,432) 468 $ 28 1,338,089 2,420,718 modified accrual basis. The notes to the financial statements are an integral part of this statement (1,849,645) (414,432) The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis - (413,964) $ 1,338,089 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 9,235,030 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Investment earnings Total revenues 9,235,030 $ 9,858,148 $ 623,118 44,000 44,000 46,114 2,114 9,279,030 9,279,030 9,904,262 625,232 58,784 58,784 58,784 - 323,165 323,165 323,165 - 38,240 38,240 38,240 - 7,047,444 7,047,444 6,173,964 873,480 7,467,633 7,467,633 6,594,153 873,480 1,811,397 1,811,397 3,310,109 1,498,712 EXPENDITURES: Current: General administration Management services Economic vitality Non-departmental Total expenditures Excess (deficiency) of revenues over (under) expenditures 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 $ 5,000,000 5,000,000 (3,734,405) (3,734,405) (2,032,113) 1,702,292 1,265,595 1,265,595 (2,032,113) (3,297,708) 3,076,992 3,076,992 1,277,996 (1,798,996) 320,620 320,620 320,620 3,397,612 $ Adjustment of budetary basis to GAAP basis net change in fund balances 3,397,612 - $ 1,598,616 $ 1,277,996 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 6,418 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 29 1,284,414 (5,000,000) $ (1,798,996) CITY OF FLAGSTAFF, ARIZONA BBB Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 4,920,203 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Grants and entitlements 4,920,203 $ 5,238,963 $ 318,760 1,784,194 1,784,194 501,618 (1,282,576) 65,047 65,047 52,875 (12,172) - - 446 Rents 92,718 92,718 80,724 (11,994) Investment earnings 44,523 44,523 35,525 (8,998) Charges for services Licenses and permits Miscellaneous 446 14,712 14,712 19,948 6,921,397 6,921,397 5,930,099 Community development 2,493,239 2,493,239 858,933 1,634,306 Economic vitality 6,789,504 6,789,504 4,375,222 2,414,282 95,000 95,000 - 95,000 9,377,743 9,377,743 5,234,155 4,143,588 (2,456,346) (2,456,346) 695,944 3,152,290 Total revenues 5,236 (991,298) EXPENDITURES: Current: Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES): 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 $ 1,636,698 1,636,698 1,335,236 (301,462) (1,986,926) (1,986,926) (1,625,757) 361,169 (350,228) (350,228) (290,521) 59,707 (2,806,574) (2,806,574) 4,331,358 4,331,358 1,524,784 $ Adjustment from budetary basis to GAAP basis net change in fund balances 1,524,784 405,423 3,211,997 4,331,358 - $ 4,736,781 $ 405,423 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 32,095 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 30 437,518 $ 3,211,997 CITY OF FLAGSTAFF, ARIZONA Statement of Net Assets Proprietary Funds June 30, 2011 Business-type Activities - Enterprise Funds ASSETS Current assets: Cash and investments Cash with fiscal agents Receivable, net Interfund receivables Prepaid items Inventory Total current assets Noncurrent assets: Restricted cash and investments Refundable deposit Deferred bond issuance costs, net Capital assets, non-depreciable Capital assets, depreciable, net Total non-current assets Total assets Water and Wastewater Fund $ LIABILITIES Current liabilities: Accounts payable Accrued payroll and compensated absences Bonds and lease payable - mature Interest payable Unearned revenue Unamortized bond premium Interfund payable Deposits payable Bonds and lease payable - current Total current liabilities 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 Environmental Services Fund 7,678,904 1,962,963 3,531,246 2,000,000 230,561 15,403,674 $ 5,236,080 1,059,953 6,296,033 Airport Fund $ 71,720 135,398 207,118 1,593,915 13,640 124,267 11,305,716 251,287,184 264,324,722 279,728,396 10,315,811 1,860,628 7,117,984 19,294,423 25,590,456 2,234,750 310,532 41,789,209 44,334,491 44,541,609 893,383 361,637 4,398,765 889,196 1,218,350 16,763 353,873 4,684,964 12,816,931 288,116 259,338 50,272 35,464 633,190 29,389 41,052 70,571 2,000,000 33,085 153,028 2,327,125 163,265 186,794 1,009,912 40,874,223 42,234,194 55,051,125 134,029 138,331 10,660,662 10,933,022 11,566,212 10,086 23,190 2,065,080 217,241 2,315,597 4,642,722 211,608,273 8,978,612 39,664,392 1,593,915 11,475,083 224,677,271 985,366 4,060,266 14,024,244 234,495 39,898,887 NET ASSETS Invested in capital assets, net of related debt Restricted: Grant and contributions purposes Capital projects Unrestricted Total net assets $ The notes to the financial statements are an integral part of this statement 31 $ $ Governmental Activities Business-type Activities - Enterprise Funds Housing Authority $ $ 1,364,585 58,873 60,643 1,484,101 Stormwater Fund $ 1,148,399 160,107 1,308,506 Total $ 15,499,688 1,962,963 4,945,577 2,000,000 60,643 230,561 24,699,432 Internal Service Fund $ 4,501,985 32,940 4,534,925 1,446,035 4,271,480 5,717,515 7,201,616 13,837,773 23,306,837 37,144,610 38,453,116 11,909,726 2,248,390 124,267 28,760,684 327,772,694 370,815,761 395,515,193 4,534,925 85,731 25,141 13,995 70,325 195,192 36,891 34,421 71,312 1,333,510 721,589 4,398,765 889,196 1,353,188 16,763 2,000,000 492,747 4,837,992 16,043,750 326,261 326,261 191,174 25,979 217,153 412,345 10,751 19,752 30,503 101,815 509,305 394,046 10,660,662 3,074,992 41,091,464 55,730,469 71,774,219 326,261 5,717,515 37,144,610 303,113,402 - 423,848 647,908 6,789,271 1,206,691 38,351,301 423,848 2,579,281 17,624,443 323,740,974 4,208,664 4,208,664 $ $ 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 $ (434,252) 323,306,722 32 $ CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Year Ended June 30, 2011 Business-type Activities - Enterprise Funds Water and Wastewater Fund OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ OPERATING EXPENSES: Personal services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses 18,781,751 18,781,751 Environmental Services Fund $ 4,434,215 7,228,993 8,138,853 19,802,061 12,010,554 12,010,554 Airport Fund $ 4,071,974 6,720,863 876,968 11,669,805 1,387,721 355 1,388,076 626,168 1,197,730 2,642,435 4,466,333 Operating income (loss) (1,020,310) 340,749 (3,078,257) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain on sale of capital asset Passenger facility charges Interest expense Total non-operating revenues (expenses) 42,509 204,213 29,918 (1,799,161) (1,522,521) 53,032 298,424 17,900 369,356 6,676 796,120 150,129 (141,880) 811,045 Income (loss) before capital contributions and transfers (2,542,831) 710,105 (2,267,212) Capital contributions Transfers in Transfers out Change in net assets 4,027,280 1,811,739 (2,727,533) 568,655 10,000 (74,664) 645,441 101,000 (33,567) (2,199,779) Total net assets, beginning of year, as restated Total net assets, end of year 224,108,616 $ 224,677,271 The notes to the financial statements are an integral part of this statement 33 13,378,803 $ 14,024,244 42,098,666 $ 39,898,887 Governmental Activities Business-type Activities - Enterprise Funds Housing Authority $ 1,410,731 27,110 1,437,841 Stormwater Fund $ 1,263,894 4,029,211 518,817 5,811,922 $ 492,508 190,423 444,391 1,127,322 (4,374,081) 35,047,256 27,860 35,075,116 $ 10,888,759 19,367,220 12,621,464 42,877,443 6,950,721 181,677 7,132,398 6,543,937 6,543,937 329,572 (7,802,327) 588,461 5,007,898 5,007,898 5,326 13,699 19,025 107,543 6,320,354 47,818 150,129 (1,941,041) 4,684,803 21,730 434,435 456,165 633,817 348,597 (3,117,524) 1,044,626 4,332,371 2,915,436 (3,067,014) 1,063,269 1,044,626 633,817 305,091 992,697 (231,250) 1,415,135 6,155,454 $ 1,456,499 395 1,456,894 Internal Service Fund Total 6,789,271 $ 36,936,166 322,677,705 38,351,301 $ 323,740,974 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 Change in net assets of business-type activities $ 198,665 1,261,934 34 3,164,038 $ 4,208,664 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2011 Business-type Activities - Enterprise Funds Water and Environmental Wastewater Fund Services Fund Airport Fund Cash flows from operating activities: Receipts from customers Interfund services provided Other receipts Payments to suppliers Interfund services used Interfund reimbursement used Payments to employees Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Transfer from other funds Transfer to other funds Interfund loans paid Interfund loans received Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Receipts from grantors Capital Contributions Acquisition and construction of capital assets Principal payments on capital debt Interest paid on capital debt Proceeds from capital debt Proceeds from sales of capital assets Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received on investments Net cash provided (used) 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 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 35 18,688,965 297,524 27,201 (4,408,189) (49,242) (2,289,737) (4,415,539) 7,850,983 $ 11,850,006 74,103 (4,646,579) (2,932) (1,442,132) (3,970,605) 1,861,861 $ 1,409,814 150,484 (795,506) (23,583) (364,524) (617,175) (240,490) 1,811,739 (2,727,533) 100,000 (815,794) (74,664) 10,000 (64,664) (33,567) 101,000 (100,000) (32,567) 144,603 1,312,521 (919,671) (4,220,128) (1,739,813) 3,257,476 38,599 390,561 (410,747) 17,900 813,075 (197,167) (144,806) (141,880) - (2,126,413) (2,286) 329,222 46,307 46,307 56,522 56,522 1,218 1,218 4,955,083 6,280,699 11,235,782 1,851,433 13,700,458 15,551,891 57,383 14,337 71,720 7,678,904 1,962,963 1,593,915 11,235,782 $ $ $ 5,236,080 10,315,811 15,551,891 $ $ $ 71,720 71,720 Business-type Activities - Enterprise Funds Housing Authority Fund Stormwater Fund $ 1,405,326 27,110 (4,067,090) (1,266,511) (3,901,165) $ - $ $ $ 1,396,503 47,418 395 (46,484) (132,370) (477,037) 788,425 $ Total 34,750,614 419,045 205,190 (13,963,848) (75,757) (4,228,763) (10,746,867) 6,359,614 Governmental Activities Internal Service Fund $ 6,953,878 181,678 (6,671,019) 464,537 (231,250) 992,697 761,447 1,472,258 (1,623,836) 100,000 (100,000) (151,578) - 5,007,898 (787,499) - 1,488 (1,274,895) - 6,357,625 1,312,521 (3,589,979) (4,364,934) (1,881,693) 3,257,476 56,499 434,435 - 4,220,399 (1,273,407) 1,147,515 434,435 - 5,466 5,466 109,513 109,513 24,663 24,663 319,234 1,045,351 1,364,585 281,931 866,468 1,148,399 7,465,064 21,907,313 29,372,377 923,635 3,578,350 4,501,985 1,364,585 1,364,585 $ $ $ 1,148,399 1,148,399 $ $ $ 15,499,688 1,962,963 11,909,726 29,372,377 (continued) 36 $ $ $ 4,501,985 4,501,985 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2011 Business-type Activities - Enterprise Funds Water and Wastewater Fund Environmental Services Fund Airport Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ (1,020,310) $ 340,749 $ (3,078,256) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Landfill closure and postclosure costs Other receipts 8,138,853 876,968 - 456,554 2,642,435 - 27,201 - 150,129 (Increase) decrease in assets: Accounts receivable (89,286) 40,984 Allowance for doubtful accounts (913,917) 30,000 (15,000) - Prepaid items 70,820 - - - - - (60,592) - - 172,666 14,117 Intergovernmental receivable Inventories Increase (decrease) in liabilities: Accounts payable 471,597 Accrued payroll, compensated absences OPEB (73,768) 32,299 92,444 69,070 Deposits payable 290 Deferred revenue 1,088,365 19,467 8,871,293 1,521,112 Total Adjustments Net cash provided (used) by operating activities (2,720) 11,713 (1,626) $ 7,850,983 $ $ 2,322,330 $ (249) (18,643) 2,837,766 1,861,861 $ (240,490) - $ - Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Capital assets transferred to governmental activities (758,000) Capital assets transferred from governmental activities Total noncash investing, capital and financing activities - 1,150,429 $ 2,714,759 The notes to the financial statements are an integral part of this statement 37 - $ - $ - Governmental Business-type Activities - Enterprise Funds Housing Authority Fund $ Stormwater Fund (4,374,081) $ Activities Internal Service Fund Total 329,572 $ (7,802,326) $ 588,462 518,817 444,391 12,621,464 - - - 456,554 - - - 177,330 - (4,136) (12,578) - - (978,933) 15,000 3,157 (26,967) - 43,853 - - - - - - (60,592) - (10,912) 11,569 (2,154) 5,554 (463) 9,917 659,037 (127,082) (40,789) - 182,681 1,125 - (2,394) - 1,086,795 - 458,853 14,161,940 (123,925) 472,916 (460) - $ (3,901,165) $ 788,425 $ 6,359,614 $ 464,537 $ - $ 113,978 $ 2,436,308 $ - $ - - - $ - (758,000) 191,113 $ 305,091 1,341,542 $ 3,019,850 (concluded) 38 CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2011 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. 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. 39 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. 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. Interfund services provided and used are not eliminated in the process of consolidation. The government-wide statement of net assets reports all financial and capital resources of the government. 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. Restrictions 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. 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 Beverage (BBB) Fund as a major governmental fund on the basis of community focus and the Stormwater Fund as major proprietary fund due to its relation with other proprietary funds. 40 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. 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. 41 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. Resources allocated to this fund come mainly from the State and must be used for Street construction, reconstruction and maintenance.  Transportation Tax Fund accounts for the receipt and expenditures of the Transportation Tax money as authorized by voters on May 16, 2000. These resources 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, Transit Service operations and enhancements, and to repay the bonding related to the 4th Street overpass.  Bed, Board and Beverage Tax Fund accounts for the Bed, Board and Beverage tax revenues as approved by voters in the 2010 general election and related expenditures. These resources 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. The Special Assessment Bond Fund is presented as major in the current year.  Special Assessment Bond 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 and repaid by the special assessment district. Capital Projects Fund is used to account for major capital acquisition and construction separate from ongoing operating activities. Resources for capital projects typically result from the issuance of general obligation or other government debt. No Capital Projects Funds are presented as major funds. 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. generated from ongoing plot sales with a portion allocated to perpetuity. Resources are 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 42 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 five 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.  Housing Authority Fund accounts for low income rental assistance along with federal housing programs such as low income public housing and voucher programs that enhance this funds ability to provide services.  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. 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. 43 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 all revenues, except reimbursement grants, to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursement grants are considered available if they are collected within one year of the end of the current fiscal period. Expenditures are generally recorded when the related fund liability is incurred, as under accrual accounting. 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. However, debt service expenditures, as well as, expenditures related to compensated absences, claims and judgments are recorded only to the extent they have matured. 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. Only the portion of special assessment receivables due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. 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. 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. 44  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 division 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 division 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. 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. 45 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 2010-2011, primary and secondary property tax collections amounted to $5,259,037 and $7,184,209 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, committed assets and assigned assets are used prior to using unassigned 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 Capital assets, whether owned by governmental activities or business-type activities, are recorded and depreciated (unless the modified approach is used) in the government-wide financial statements. The City has chosen not to apply the modified approach to any networks or subsystems of infrastructure assets. depreciation are shown in the governmental fund financial statements. No long-term assets or 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 life of the related asset. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, 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): 46 Assets Useful life (years) Buildings 20-50 Improvements 10-20 Infrastructure 10-75 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. 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, transfers are made between funds to shift resources from a fund legally authorized to receive revenue to a fund authorized to expend the revenue. 47 Fund Balance In the fund financial statements, restricted fund balance is defined as that portion of fund balance that can be spent only for the specific purposes stipulated by constitution, external resource or through enabling legislation. Committed fund balance includes amounts constrained to specific purposes determined by a formal action of the City itself, using its highest level of decision-making authority (i.e. City Council). To be reported as committed, amounts cannot be used for any other purpose unless the City takes the same highest level action to remove or change the constraint. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Intent can be expressed by the City Council or by an official or body to which the City Council delegates the authority. Assigned fund balance represents the remaining amount that is not restricted or committed in governmental funds other than the general fund, which is classified as unassigned. Nonspendable fund balance represents amounts that are required to be maintained intact, such as inventories, and nonexpendable portion of permanent funds. 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. 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. 48 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 $ Cash with fiscal agents 36,495,526 $ Accounts receivable, net Intergovernmental receivables Bond proceeds receivable Special assessments receivable Interfund receivable Restricted cash and cash equivalents - - - 6,387,962 - 30,333 - 33,905 - - 2,607 - 36,512 4,489,592 - - - - 4,489,592 367,135 - 24,422,871 - 5,968,340 16,574,640 16,574,640 6,785,430 127,674 - - - - 127,674 18,334,079 - - - - 18,334,079 4,400,000 - - - 479,029 - 4,873,003 57,794 Property held for sale 500,000 Capital assets $ $ 4,501,985 $ (16,574,640) $ - Refundable deposits Total Assets - Deferred issuance costs - Prepaid items Inventory $ - Investments Interest receivable - 5,968,340 - 434,252 558,758 (4,400,000) 434,252 - - 558,758 - - - 479,029 - - - - 4,873,003 - - - - 500,000 - - 57,794 294,628,437 (583,542) 294,044,895 925,893 $ 4,969,177 $ (4,983,542) $ 377,686,869 82,146,904 $ 294,628,437 $ Liabilities and Net Assets 4,119,422 $ - 326,261 $ - Accrued payroll & compensated absences Accounts payable $ 2,247,705 - - - - 2,247,705 Interest payable 1,659,899 - - - - 1,659,899 Interfund payable 4,400,000 - - - - - - - - - - - - 1,426,673 - Unearned revenue 297,351 - Deferred revenue 18,900,161 - Guaranty and other deposits 1,426,673 - Current bonds and lease payable 5,380,000 $ - (18,900,161) (4,400,000) $ 4,445,683 297,351 - - 5,380,000 Compensated absences - - 3,637,606 - - 3,637,606 Other postemployment benefits - - 1,835,037 - - 1,835,037 Unmatured long-term debt - - 71,237,458 - - 71,237,458 Fund balance/Net Assets Total liabilities and net assets $ 43,715,693 - $ 294,628,437 82,146,904 $ 294,628,437 49 (57,687,956) $ 4,642,916 (583,542) 284,715,548 925,893 $ 4,969,177 $ (4,983,542) $ 377,686,869 (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. However, the statement of net assets includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation Transfer of capital assets from business-type activities Transfer of capital assets to business-type activities $ $ 455,240,055 (160,611,618) 758,000 (1,341,542) 294,044,895 (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 $ 558,758 Certain receivables are not recognized in the govermental funds, but are earned in the statement of net assets. Deferred court receivables $ 367,135 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental fund statement. All liabilities, both current and long-term are reported in the statement of net assets. Governmental bonds payable Compensated absences $ Other postemployment benefits Unamortized bond premium Subtotal Less: current portion compensated absences Less: current portion of bonds and leases 76,617,458 5,333,127 1,835,037 803,909 84,589,531 $ 1,695,521 5,380,000 77,514,010 Deferred revenue for the long-term special assessment receivables and property tax shown on the governmental fund statements is not deferred on the statements of net assets. Deferred special assessment Deferred property tax $ $ 18,333,655 566,506 18,900,161 (3) Internal service funds are used by management to charge the costs self insurance to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets, but are not included on the governmental fund balance sheet. ISF net assets (4) $ 4,642,916 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 $ $ 50 4,400,000 (4,400,000) - 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 Related Revenues/ Service and Activities Funds Items (1) Expenses (2) Fund (3) Eliminations (4) Totals Revenues and Other Sources $ 43,799,128 $ - 202,471 $ - Intergovernmental Taxes 17,488,021 - $ - - Grants and entitlements 10,583,483 - - 434,435 - $ - $ 44,001,599 (4,570,140) 12,917,881 4,570,140 15,588,058 Charges for services 2,926,237 - Special assessments 701,447 - Licenses and permits 739,040 - - Fines and forfeitures 1,673,306 - (22,631) - - 1,650,675 Rent 1,617,912 - - - - 1,617,912 - (173,378) - - - - 2,926,237 528,069 - - 739,040 Investment earnings 224,363 - 21,730 - 246,093 Contributions 166,417 1,165,029 - - - 1,331,446 Miscellaneous 1,719,608 21,730 - - - 1,741,338 81,638,962 1,186,759 456,165 - 83,288,348 Total revenue 6,462 Expenditures/Expenses General governmental Public safety 7,113,922 582,924 194,123 (40,015) - 7,850,954 24,476,615 1,280,612 362,958 (132,992) - 25,987,193 Public works 1,299,027 496,477 (32,468) (9,003) - 1,754,033 Economic and physical development 8,202,024 259,711 56,411 (43,370) - 8,474,776 Culture and recreation 10,782,848 1,979,900 157,866 (65,790) - 12,854,824 Highways and streets 10,612,033 8,673,087 88,887 (98,626) - 19,275,381 Principal retirement 6,761,179 - (6,761,179) - - Interest and other charges 3,451,706 - (80,788) - - - - Capital outlay Total expenditures/expenses 11,785,480 (11,785,480) 84,484,834 1,487,231 45,655 (359,683) (6,014,190) (389,796) - 3,370,918 79,568,079 OTHER FINANCING SOURCES (USES): Sale of capital assets - - 1,058,985 1,058,985 - - - (1,058,985) Transfers in 13,661,630 - - - 758,000 14,419,630 Transfers out (14,268,052) - - - (1,341,542) (15,609,594) - - (583,542) Insurance recovery Total other financing sources (uses) Net change for the year 498,218 $ (2,347,654) $ (359,683) (660,155) $ 51 6,020,652 $ 845,961 $ (583,542) $ 744,957 - (445,007) 3,275,262 (1) When capital assets that are to be used in the governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year. Capital outlay $ 11,785,480 Depreciation expense Gain (loss) on sale of capital assets Gain (loss) on impairment of capital assets Donated capital assets $ (12,731,239) (1,773) (877,652) 1,165,029 (660,155) (2) Special assessment principal payments received are reported as revenue on the governmental fund statements, but are reductions to the outstanding special assessment debt for government-wide reporting. Property tax revenue not received within 30 days of year end are deferred for governmental fund reporting, but are not deferred for government-wide reporting. Special assessment received $ (173,378) Property tax Court revenue $ 202,471 (22,631) 6,462 The costs of issuing bonds are reported as an expenditure in governmental funds in the year of bond issuance. However, the bond issuance costs are deferred and amortized (expensed) over the life of the bonds. Amortization of bond issuance costs $ $ (55,400) (55,400) 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 Accural of other postemployment benefits $ $ 113,459 (885,970) (772,511) 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 $ 6,761,313 Amortization of bond premium $ 80,788 6,842,101 (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 $ $ 456,165 389,796 845,961 (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 from enterprise fund Transfer of capital assets to enterprise fund 52 $ $ 758,000 (1,341,542) (583,542) C. Fund Balance Classification Fund balances for governmental funds are reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of nonspendable, restricted, committed, assigned, and unassigned designate the relative strength of the constraints placed on the how the amounts can be spent. Classification of fund balances imposed by the reporting government, whether by administrative policy or legislative action of the City Council, are shown in aggregate on the government fund financial statements, but not on the proprietary statement of net assets. Restricted net assets on the government-wide financial statements reflect restrictions imposed by external sources. Nonspendable fund balance represents amounts that are nonspendable such as inventories and nonexpendable portion of permanent funds. Restricted fund balances represent constraints placed on the use of resources imposed externally by creditors, grantors, contributors, or laws and regulations of other governments. Resources imposed by constitutional provisions of enabling legislation that allows the ability to levy, charge, or mandate payment of resources are also classified as restricted. Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of the City Council, the government’s highest level of decisionmaking authority. A formal action would also be required to modify or rescind an established commitment. Assigned fund balance amounts are intended to be used by the government for specific purposes but do not meet the criteria to be restricted or committed. Assigned fund balance is expressed by the direction of the City Council or budget committee who has the authority to assign amounts used for specific purposes. Unassigned fund balance represents the remaining amount that is not restricted, committed, nonspendable nor assigned in the general fund. Consideration is made that committed amounts are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes which both restricted and unrestricted fund balance is available. Also, committed, assigned, or unassigned amounts are considered to have been spent when expenditure is incurred for purposes for which amounts in unrestricted fund balance classification could be used. Absent of a minimum fund balance policy, the City, through the budgeting process establishes a minimum fund balance level to maintain as part of that process. A minimum balance of 12% is suggested in the general fund and a 10% fund balance is suggested for special revenue and enterprise funds. 53 Governmental fund balances as of June 30, 2011 are as follows: General Fund Highway User Transportation Revenue Fund Fund BBB Fund Special Other Total Assessment Governmental Governmental Bond Fund Funds Funds Fund balances: Nonspendable: Perpetual care $ - Inventory $ - 427,267 $ - - $ - $ - 51,762 - $ - 162,571 - $ 162,571 479,029 Restricted for: Library services - - - - - 764,613 764,613 Library branch services - - - - - 843,727 843,727 2,246,343 Library programs Court improvements and operations Debt services - - - - - 2,246,343 795,983 - - - - - 795,983 - - - - - 5,801,812 5,801,812 Regional planning - - - - - 3,696 3,696 Street improvements - 2,342,415 - - - - 2,342,415 Transit - - 2,096,313 - - - 2,096,313 Economic development - - - 536,750 - - 536,750 Arts and science - - - 376,212 - - 376,212 Culture and recreation - - - 950,997 - - 950,997 Perpetual care Other capital projects - - - - - 14,192 14,192 362 - 878,365 4,498,542 - 1,658,977 7,036,246 85,119 - - - - - 85,119 Committed to: Development fee projects Assigned to: Court services 38,285 - - - - - 38,285 Capital reserve 6,318,782 - - - - - 6,318,782 Real estate 525,880 - - - - - 525,880 Unassigned: 15,160,509 - - - (491,849) (2,371,932) 12,296,728 $ 23,352,187 $ 2,342,415 $ 2,974,678 $ 6,414,263 $ (491,849) $ 9,123,999 $43,715,693 Total fund balances D. Negative Fund Balance The Special Assessment Bond Fund ended the fiscal year, June 30, 2011, with a negative fund balance of $491,849. This was caused by the City forgoing its portion of the special assessment payments for property within the district. The property was reverted to the City due to a default by the developer. During the fiscal year the property was put up for sale and sold in June 2011; with the commitment of the buyer to pay these assessments upon settlement in the next fiscal year. Refer to section F. Subsequent Events. The Capital Projects Fund ended the fiscal year, June 30, 2011, with a negative fund balance of $2,371,932. This was caused by capital expenditures being incurred for debt funded projects prior to the debt being issued. The debt was issued in the following fiscal year as noted in section F. Subsequent Events. E. Change in Beginning Net Assets Reporting Change Due to Inclusion of Flagstaff Housing Authority The City determined that by ordinance, the Flagstaff Housing Authority no longer should be reported as a separate legal entity. As of July 1, 2010, the Flagstaff Housing Authority has become a proprietary fund operating as the Housing Authority within the City financial system. 54 The following discloses the restatement of net assets as of the beginning of the fiscal year: Housing Authority Net assets, beginning of year, as previously stated: Inclusion of Flagstaff Housing Authority Fund per ordinance Net assets, beginning of year, as restated Net asset, beginning of year, as previously stated: Inclusion of Flagstaff Housing Authority (Housing Authority Fund) per ordinance Net asset, beginning of year, as restated: $ $ 6,155,454 6,155,454 Business-type Activities $ 315,889,334 6,155,454 $ 322,044,788 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. 55 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 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, & Beverage 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. 56 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, 2011, the carrying amount of the City’s deposits was $14,323,437 and the bank balance was $15,212,438. The $889,001 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2011. 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 not covered by federal depository insurance. As of June 30, 2011, 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. 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, 2011, the City’s investments included the following Investment Type U.S. agency securities Mutual fund - money market State Investment Pool Total fair value of investments $ $ Portfolio weighted average maturity Fair Value 16,574,640 11,331,696 38,981,458 66,887,794 Weighted Average Maturity (in years) 3.929 0.003 0.005 0.977 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, 2011 is as follows: 57 Investment Type U.S. agency securities State investment pool (LGIP) Mutual fund - money market Total Fair Value $ 16,574,640 Minimum Legal 38,981,458 11,331,696 $ 66,887,794 Rating as of Year End Rating N/A AAA $ 16,574,640 N/A 38,981,458 N/A - $ 55,556,098 $ Unrated - 11,331,696 $ 11,331,696 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. At June 30, 2011, 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 $ 66,887,794 14,323,437 81,211,231 39,922,559 16,574,640 7,931,303 16,782,729 81,211,231 Cash and cash equivalents at June 30, 2011 consisted of the following: Investments included in cash and cash equivalents Cash on hand Total cash and cash equivalents per statement of net assets $ $ 39,906,534 16,025 39,922,559 Investment income comprises the following for the year ended June 30, 2011: Net interest and dividends Net increase (decrease) in the fair value of investments Total net investment income per statement of activities $ $ 439,817 (86,181) 353,636 The net decrease in the fair value of investments during fiscal year 2010-2011 was $86,181. 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, 2011 was $83,181. 58 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. In previous years, 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. B. Receivables Receivables as of June 30, 2011, including allowances for uncollectible accounts, are as follows: Fund Intergov- Bond Special Interest ernmental $ 5,423,667 $ 15,967 $ 1,857,024 1,027,563 5,485 1,473,795 5,365 128 8,381 553,429 - 18,334,079 - 18,334,207 567,175 Total government funds 6,755,097 33,905 4,489,592 127,674 18,334,079 29,740,347 Total governmental activities 6,785,430 36,512 4,489,592 127,674 18,334,079 29,773,287 3,478,253 1,120,618 6,761 4,078 116,232 10,257 - - 3,601,246 1,134,953 686 13,699 - - 162,107 Governmental Activities General fund Highway user revenue fund Transportation fund BBB fund Special assessment fund Other governmental funds Less: allowance for uncollectibles Internal services funds Business-Type Activities Water and wastewater Environmental services Airport 763,475 562,698 (1,027,671) 30,333 26,462 70 Proceeds - 3,874 $ - - 6,203 - - - 2,607 127,674 - 605,344 - Assessments Total Accounts - 107,733 - $ Receivables - $ 7,424,332 - 2,506,843 - - - - - 763,545 1,171,916 (1,027,671) 32,940 140,398 Stormwater 147,722 Less: allowance for uncollectibles (152,000) - - - - (152,000) 4,679,928 17,728 247,921 - - 4,945,577 $11,465,358 $ 54,240 $ 4,737,513 127,674 $ 18,334,079 $ 34,718,864 Flagstaff Housing Authority Total business-type activities Total activities 58,873 $ 58,873 The receivables not expected to be collected within one year include $1,027,671 of the general fund, $70,000 of the Water and Wastewater, $75,000 of the environmental services fund, $5,000 of the airport fund, and $2,000 of the Stormwater fund. 59 C. Capital Assets A summary of capital asset activity, for the government-wide financial statements, as of June 30, 2011 is as follows: Balance July 1, 2010 Governmental activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets Depreciable assets: Buildings Improvements Machinery and equipment Infrastructure Total depreciable assets Accumulated depreciation: $ 43,652,469 15,509,017 59,161,486 30,541,647 (19,418,791) Total accumulated depreciation Governmental activities capital assets, net 5,247,138 7,501,593 (2,312,126) (103,641,562) (8,402,909) 219,270 (10,545,921) (7,113,499) 235,827 - 30,729,282 274,026,367 397,701,082 (16,033,495) - (11,568,938) (20,964,714) - 1,974,173 (112,044,471) - $ (160,611,618) (583,542) 294,044,895 Less: associated debt Less: unamortized premium Plus: unspent capital related debt Invested in capital assets, net of related debt 60 9,005,638 56,955,431 72,334,046 - - 47,949,793 20,611,387 5,072,175 6,529,957 709,133 (879,425) $ 26,346 - $ June 30, 2011 1,431,436 1,029,213 (12,731,239) $ $ 3,432,422 (273,081) (1,781,750) Balances In (out) (950,847) (1,508,508) (149,854,552) - (541,472) (541,472) (1,088,198) (1,038,072) $ 295,288,592 $ 40,644 (11,560,079) Transfers Retirements 460,716 263,707,054 385,981,658 Machinery and equipment 864,902 4,584,014 5,448,916 Deletions and 1,753,095 21,632,595 (15,234,120) Infrastructure $ 70,100,362 Buildings Improvements Additions (76,617,458) $ (803,909) 1,256,458 217,879,986 Balance as restated Business-type activities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets 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 July 1, 2010 $ 11,746,832 15,793,040 27,539,872 Additions $ 101,570,284 359,549,450 44,337,523 866,558 1,955,767 2,822,325 Deletions and Transfers Retirements $ 472,784 1,962,204 768,977 - $ (42,128) (5,613,006) (542,614) 505,457,257 3,203,965 (6,197,748) (39,310,220) (115,339,176) (2,364,449) (7,480,895) 42,128 5,604,321 (15,794,038) (170,443,434) $ 362,553,695 (2,776,120) (12,621,464) $ (6,595,174) (8,685) (758,000) (843,513) (1,601,513) 2,185,055 - 2,185,055 - 542,614 6,189,063 $ Balances In (out) $ 583,542 Less: associated debt Less: unamortized premium Invested in capital assets, net of related debt June 30, 2011 $ 11,855,390 16,905,294 28,760,684 102,000,940 358,083,703 44,563,886 504,648,529 (41,632,541) (117,215,750) (18,027,544) (176,875,835) 356,533,378 (53,403,213) (16,763) $ 303,113,402 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: G ove rnme nta l Activitie s: General government Public safety Public works Economic and physical development Culture and recreation Highway and streets Total depreciation expense - governmental activities 61 $ $ 582,924 1,280,612 211,160 259,711 1,979,900 8,416,932 12,731,239 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $434,252 are included in the government-wide financial statements at June 30, 2011. The interfund balances at June 30, 2011 are short-term loans to cover temporary cash deficits in various funds. This occasionally occurs prior to bond sales or grant reimbursements. All interfund balances outstanding at June 30, 2011 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2011: Interfund Receivables Fund G ove rnme nta l Activitie s: General fund Special assessment bond fund $ 4,400,000 - Other governmental funds Total governmental activities 4,400,000 Busine ss-T yp e Activitie s: Water and wastewater fund Airport fund Total business-type activities Total governmental and business-type activities 2,000,000 2,000,000 $ 6,400,000 Less: fund eliminations Adjustment for internal service fund elimination (6,400,000) 434,252 Total government-wide statement of net assets $ 62 434,252 Transfers The net transfers of $1,189,964 from governmental activities to business-type activities on the government-wide statement of activities are primarily debt service and operational subsidies from the General Fund. There were no significant transfers during fiscal year 2011 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. The following transfers are reflected in the fund financial statements for the year ended June 30, 2011: At year end a resolution was brought forward to City Council to inform the alignment related to transfers, no budget adjustments were necessary. Fund G ove r nme nta l Activitie s: General fund Highway user revenue fund Transfers out $ Transportation fund Other governmental funds B usine ss- T yp e Activitie s: Water and wastewater fund Environmental services fund Stormwater fund 13,661,630 2,727,533 1,811,739 33,567 101,000 3,067,014 $ 17,335,066 4,289,379 10,000 992,697 2,915,436 $ 16,577,066 (16,728,644) Add: net capital assets transfer Total government-wide statement of activities - 14,268,052 231,250 Less: fund eliminations 4,396,093 3,640,922 1,335,236 - 74,664 Airport fund $ 1,625,757 5,437,874 Total governmental activities Total governmental and business-type activities 585,401 2,032,113 BBB fund Special assessment fund Total business-type activities 4,586,907 Transfers In 583,542 $ 1,189,964 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, beginning September 2002 (FY-2003) and ending in September 2012 (FY-2013) 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 2011 lease expense for the library was $78,342. The schedule below for future minimum lease expenses reflects the change in the rental rate as of July 1, 2011. 63 Operating Lease Expenditures Year Ending June 30 2012 2013 Total East Flagstaff Library $ $ 78,342 15,312 93,654 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, 2011 were $126,542.31. Operating Lease Revenues The City leases several City-owned buildings under cancelable and non-cancelable agreements. The carrying value of the leased assets is $4,331,936 (cost of $5,665,896 less accumulated depreciation of $1,333,960.09) 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 2011 was $1,535,253. 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 2012 2013 2014 2015 2016-2018 Total USGS Building #6 $ $ 785,448 785,448 785,448 785,448 1,636,350 4,778,142 In addition, the Airport Fund has several leases under cancelable agreements. The leases are for terminal space, hangars, shades, tiedowns, ground leases and a cafe. Lease revenue in the Airport fund for fiscal year 2011 was $1,218,820. The carrying value of the leased assets is $5,253,220 (cost of $7,983,707 less accumulated depreciation of $2,730,487) with current year depreciation of $187,435. 64 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. 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, 2011: Purpose Governmental activities $ Business-type activities Business-type activities - refunding Total general obligation bonds outstanding $ Amount 24,015,000 1,680,000 2,150,000 27,845,000 General obligation bonds payable at June 30, 2011 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%. $ 1,445,000 $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%. 22,570,000 Total governmental activities 24,015,000 Business-type activities: $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% to 3.25%. 2,150,000 Total business-type activities 3,830,000 Total General Obligation Bonds $ 65 27,845,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending Govermental Activities June 30 2012 Principal $ 2013 2014 1,930,000 2,020,000 2,125,000 2015 $ 1,710,000 2016 2017-2021 2022-2023 Total Principal 1,083,870 $ 989,670 890,350 781,313 1,800,000 691,538 10,350,000 2,111,737 4,080,000 $ 24,015,000 Business-type Activities Interest $ Interest 1,960,000 1,870,000 - $ 145,476 81,776 - - 206,574 6,755,053 $ - - - - - 3,830,000 $ 227,252 Statutory Debt Limitation Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets, and public safety purposes may not exceed 20% of the City of Flagstaff’s net secondary assessed valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of the City’s net secondary assessed valuation. Prior to December 7, 2006 streets, fire, and police were in the six percent limitation category. The City’s computation of legal debt margins available for creation of additional debt at June 30, 2011 was $158,274,388 and $47,482,316 for the 20 percent and 6 percent debt limits, respectively. Also, see Schedule 16 in the Statistical Section. 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, 2011: Purpose Governmental activities $ Amount 18,130,000 Special assessment bonds payable at June 30, 2011 consist of the following individual issues: Governmental activities: $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% $ 18,130,000 Total Special Assessment Bonds $ 18,130,000 66 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 2032 Total Govermental Activities Principal Interest $ 505,000 535,000 560,000 590,000 615,000 3,580,000 4,565,000 5,835,000 1,345,000 $ 18,130,000 $ $ 893,875 867,875 840,500 811,750 781,625 3,400,750 2,387,875 1,094,125 33,625 11,112,000 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. 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. Greater Arizona Development Authority revenue bonds are issued specifically for the purpose of constructing public infrastructure projects. These bonds have state shared revenue pledged as a repayment revenue stream. These bonds funded the Business Incubator building. 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, 2011: Purpose Governmental activities Business-type activities Total revenue bonds outstanding $ $ 67 Amount 4,930,000 4,298,785 9,228,785 Revenue bonds at June 30, 2011 consist of the following individual issues: Governmental activities: $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%. $ $3,370,000 Greater Arizona Development Authority revenue bonds, series 2010A, due in annual installments of $50,000 to 1,725,000 $240,000 through August 1, 2030; interest at 2.0% to 4.625%. 3,205,000 Total Governmental activities 4,930,000 Business-type activities: $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%. 4,298,785 Total Revenue Bonds $ 9,228,785 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2030 Total Govermental Activities Principal Interest $ $ 1,845,000 120,000 125,000 130,000 135,000 755,000 920,000 900,000 4,930,000 $ $ Business-type Activities Principal Interest 228,513 130,038 126,437 122,688 $ 117,487 502,437 332,362 106,376 1,666,338 $ 326,302 337,877 349,863 362,275 375,127 2,084,944 462,397 - 4,298,785 $ $ 152,499 140,924 128,938 116,526 103,675 309,062 16,403 - 968,027 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. Issued by the Municipal Facilities Corporation (MFC), 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 certificates of participation for the construction of a new United States Geological Survey (USGS) facility on land owned by the City. 68 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. Issued by the Municipal Facilities Corporation (MFC), 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 certificates of participation for the construction of a new United States Geological Survey (USGS) facility on land owned by the City. Municipal Facility Corporate bonds outstanding at June 30, 2011: Purpose Governmental activities $ Amount 18,095,000 Municipal facility corporation bonds are comprised of the following issues: Governmental activities: $4,700,000 USGS Project Municipal Facility Corporation bonds, series 12 (2001) due in annual installments of $255,000 to $440,000, through August 1, 2016; interest at 4.0 to 4.75%. $ $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, 2020; interest at 2% to 5.25% Total Municipal Facility Corporation Bonds 2,010,000 16,085,000 $ 18,095,000 Annual debt service requirements to maturity for municipal facility debt are as follows: Year Ending June 30 2012 2013 2014 2015 2016 2017-2020 Total Govermental Activities Principal Interest $ 1,865,000 1,945,000 2,020,000 2,105,000 2,195,000 7,965,000 $ 18,095,000 $ $ 854,959 778,169 697,963 614,163 526,813 1,072,049 4,544,116 Certificates of Participation Capital lease certificates of participation series 2009 were issued to complete various street overlay projects and to finance fire operating equipment. Principal and interest on the bonds are payable from capital lease payments and 69 are not considered general obligations of the City. They are appropriated along with all other expenditures of the general government. Certificates of participation bonds outstanding at June 30, 2011: Purpose Governmental activities $ Amount 4,525,000 Certificates of participation are comprised of the following issues: Governmental activities: $4,690,000 Certificates of participation, series 2009 due in annual installments of $435,000 to $575,000, through October 1, 2019; interest at 3.3137%. $ 4,525,000 Total Certificates of participation $ 4,525,000 Annual debt service requirements to maturity for certificates of participation debt are as follows: Year Ending June 30 2012 2013 2014 2015 2016 2017-2020 Total Govermental Activities Principal Interest $ $ 445,000 455,000 470,000 485,000 500,000 2,170,000 4,525,000 $ $ 142,033 129,645 115,770 101,445 86,670 168,385 743,948 70 The following is a summary of debt service requirements, including interest requirements, to maturity for long-term debt at June 30, 2011: General Fiscal Year 2012 2013 Obligation Bonds $ 5,119,346 4,961,446 2017 2018 2019 2,487,038 2,494,350 2,495,250 2014 2015 2016 3,015,350 2,491,313 2,491,538 2020 2021 2022 2,492,100 2,493,000 2,495,187 2023 2024 2025 1,791,386 2026 2027 2028 2029 Assessment Bonds $ 1,398,875 1,402,875 Revenue Bonds $ 2,552,313 728,839 1,400,000 1,396,750 1,396,875 730,889 730,288 729,489 1,400,500 1,401,750 1,396,625 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 2030 2031 2032 Less interest Special 1,382,000 1,384,375 1,378,625 (6,982,305) $ 27,845,000 (11,112,000) $18,130,000 730,238 731,489 731,289 728,488 732,288 730,277 Municipal Facility Corporation Bonds $ 2,719,959 2,723,169 2,717,963 2,719,163 2,721,813 2,258,163 2,261,563 2,259,713 2,257,610 Cetificates of Participation $ 587,033 584,645 Total $ 12,377,526 10,400,974 585,673 582,900 583,313 7,461,763 7,465,851 7,464,640 585,770 586,445 586,670 586,500 249,250 251,812 248,950 7,459,948 4,617,163 4,617,089 3,434,886 1,641,562 1,637,075 250,875 251,625 251,913 251,737 1,640,000 1,639,250 1,640,413 1,638,362 251,101 (2,634,365) $ 9,228,785 8,449,821 7,930,160 7,927,935 1,633,101 1,384,375 1,378,625 (4,544,116) $ 18,095,000 (743,948) $ 4,525,000 (26,016,734) $ 77,823,785 Authorized and Issued Debt The voters of the City authorize capital projects and the related debt mechanism to finance the projects. Voters approved $8.2M during the bond election of November 5, 1996 to fund park and recreation facilities, as of June 30, 2011, $1.1M is authorized and unissued. May 18, 2004, voters approved $47.4M for various capital projects and $46.6M for future water rights and production, as of June 30, 2011, $15.9M remains unissued for capital projects and $.6M remains unissued for future water rights and production. November 2, 2010 voters approved $21.2M for public safety communication system and various street and utilities improvements, as of June 30, 2011 $21.2M remain unissued. 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. On June 17, 2011 a loan agreement was made with the Water and Wastewater Infrastructure Finance Authority in the amount of $1,833,828, as authorized by voters on May 18, 2004 election; no requests have been drawn against the loan as of June 30, 2011. The Airport has an agreement with the Arizona Department of Transportation which provides financing for the construction of 14 T hangars at the City Airport. 71 Loans outstanding as of June 30, 2011: Purpose Business-type activities $ Amount 37,491,203 Loan payables at June 30, 2011 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%. $ $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%. 404,667 6,325,000 $23,100,000 Wastewater infrastructure finance authority due in annual installment of $815,834, to 1,571,901 through July 1, 2027; interest at 3.512%. 20,380,478 $8,500,000 Water infrastructure finance authority due in annual installment of $344,052 to $628,065 through July 1, 2029; interest at 3.113%. 7,596,760 $2,100,000 Water infrastructure finance authority due in annual installment of $77,263 to $138,320 through July 1, 2029; interest at 3.113%. Amount issued to-date $1,460,666. Remaining available $639,334. 1,303,735 $232,500 Water infrastructure finance authority due in annual installment of $8,737 to $15,054 through July 1, 2029; interest at 2.905%. 214,773 $1,000,000 Water infrastructure finance authority due in annual installment of $39,345 to $62,318 through July 1, 2029; interest at 2.45%. Amount issued to-date $583,827. Remaining available $416,0173. 504,174 $800,000 Water infrastructure finance authority due in annual installment of $31,475 to $49,854 through July 1, 2029; interest at 2.45%. Amount issued to-date $566,771. Remaining available $233,229. Airport: 503,048 Total water and wastewater loan payable $ 37,232,635 $600,000 Arizona Department of Transportation due in quarterly installments of $5,337 to $13,548 through January 1, 2016; interest at 5.60%. $ 258,568 Total $ 37,491,203 72 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 2012 2013 2014 2015 2016 Business-type Activities Principal Interest $ 2017-2021 2022-2026 2027-2029 Total $ 2,242,222 1,901,179 1,966,747 2,034,335 2,109,017 11,430,208 12,967,173 2,840,322 37,491,203 $ 1,350,771 1,272,395 1,205,510 1,136,278 1,064,625 4,185,732 2,062,765 169,250 12,447,325 $ Obligations under Capital Leases The City has entered into a capital lease agreement for energy saving equipment with total governmental asset of $1,432,499. The construction of a co-generator at Wildcat Wastewater Treatment Plant and construction of airport hangars represents total business assets of $1,491,955 and $306,376, 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, 2011 2012 2013 2014 2015 2016 2017-2021 2022-2025 Total future minimum lease payments Less: imputed interest costs Present value of future minimum lease payments Governmental Activities $ 470,993 470,993 470,993 235,496 - 1,648,475 $ 73 (106,017) 1,542,458 Business Type Activities $ 482,692 482,693 482,691 482,692 482,692 1,284,157 811,078 4,508,695 $ (1,124,235) 3,384,460 Pledged Revenues The City has pledged future water utility and wastewater utility revenues to repay $46,211,757 in Water Infrastructure Financing Authority Bonds issued during the period of 1992-2010. 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, 2011, $41,531,420 remains outstanding to be repaid by future water and wastewater revenues, if such revenues prove insufficient, the remainder will be repaid as a general obligation of the City. For the fiscal year ended June 30, 2011, net revenue available for service of this debt was $7,161,052. The debt principal, interest and fees paid in fiscal year 2011 was $3,918,523 (54.72% of available pledged net revenues). For additional information on pledged revenues related to 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, 2011, $16,085,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2011, net revenues available for service of the debt were $33,777,368. The debt principal and interest paid in fiscal year 2011 was $2,259,700 (6.69% 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, 2011 $2,010,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2011, net revenues available for service of this debt were $10,206,755. The debt principal and interest paid in fiscal year 2011 was $460,371 (4.51% 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. 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, 2011, $1,725,000 remains outstanding on the Junior Lien Street and Highway User Revenue bonds to be repaid by future revenues. For the fiscal year ended June 30, 2011, net revenues available for service of this debt were $6,300,885. The debt principal and interest paid in fiscal year 2011 was $2,355,982 (37.39% 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. The City has pledged certain revenues for the repayment of $3,370,000 Greater Arizona Development Authority (GADA) revenue bonds issued in 2011 for the construction of a business incubator facility at the U.S. Geological Survey Campus. 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, 2011, $3,205,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2011, net revenues available for the service of this debt were $7,169,310. The debt principal and interest paid in fiscal year 2011 was $250,938 (1.77% of available pledged net revenues). For additional information on pledged revenues for GADA revenue bonds, refer to Schedule 17 in the Statistical Section of this report. 74 Changes in long-term liabilities Liquidation of compensated absences for governmental funds has been made out of the General, HURF, BBB, Library, and MPO funds. Non-current liability activity for the year ended June 30, 2011 was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corporate bonds Certificates of participation Total bonds payable Beginning Balance As Restated Additions $ 25,865,000 18,615,000 6,665,000 19,890,000 4,960,000 75,995,000 $ Capital leases Bond premium Compensated absences Other postemployment benefits Arbitrage rebate Governmental activity long-term liabilty 2,003,771 884,697 3,751,065 949,067 282,151 $ 83,865,751 1,582,062 885,970 $ 2,468,032 Business-type activities: Bonds payable: General obligation bonds Water & sewer revenue bonds Total bonds payable $ 5,690,000 4,613,908 10,303,908 Water & sewer loan payable Airport loan payable Capital lease payable Total loan and leases payable Bond premium Compensated absences Other postemployment benefits Landfill closure/postclosure Business-type activity long-term liability 35,958,947 - 3,472,581 Reductions Ending Balance Due Within One Year $ (1,850,000) (485,000) (1,735,000) (1,795,000) (435,000) (6,300,000) $ 24,015,000 18,130,000 4,930,000 18,095,000 4,525,000 69,695,000 $ 1,930,000 505,000 1,845,000 1,865,000 445,000 6,590,000 (461,313) (80,788) (1,695,521) (282,151) $ (8,819,773) 1,542,458 803,909 3,637,606 1,835,037 $ 77,514,010 422,397 80,788 1,548,484 $ 8,641,669 $ (1,860,000) (315,123) (2,175,123) $ 3,830,000 4,298,785 8,128,785 $ 1,960,000 326,302 2,286,302 (2,198,893) 37,232,635 2,200,895 297,660 3,679,167 39,935,774 3,472,581 (39,092) (294,707) (2,532,692) 258,568 3,384,460 40,875,663 41,327 309,468 2,551,690 25,145 830,890 218,116 10,204,108 $ 61,517,941 312,698 176,392 456,554 $ 4,418,225 (8,382) (329,667) (462) $ (5,046,326) 16,763 813,921 394,046 10,660,662 $ 60,889,840 8,382 304,616 $ 5,150,990 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, 2011 have potential exposure to the City of approximately $304,742 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 75 estimated. The City uses an application of historical experience to determine claims payable. However, due to the preliminary status of the claims, no determination can be made as to the likelihood, if any, of an unfavorable outcome. The net assets of the Internal Service Fund are designated for future losses related to the self-insurance retention. Settled claims have not exceeded commercial coverage in the last three fiscal years. Fiscal Year 2008-09 Beginning of Year Liability $ 379,010 Current Year Claims and Changes in Estimates $ End of Claim Payments 744,543 $ 286,598 Year Liability $ 836,955 2009-10 836,955 82,521 478,910 440,566 2010-11 440,566 78,889 214,713 304,742 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 The city is involved in litigation arising in the ordinary course of it operations. The City believes that its ultimate liability, if any, in connection with these matters will not have a material adverse effect on the City’s financial position, changes in financial position, or liquidity. See schedule 23 in the statistical section for further information related to the City’s insurance coverage. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The following table presents the City’s commitments as of June 30, 2011: Governmental Activities: General fund $ 90,755 Highway users revenue fund 224,830 BBB fund 434,201 Other government funds Total governmental activities 2,471,408 3,221,194 Business - Type Activities: Water and wastewater fund Environmental services fund 1,808,795 654,986 Airport fund Stormwater fund Total business-type activities Total governmental and business-type activities 978,500 966,872 $ 4,409,153 7,630,347 76 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. During fiscal year 2010, the owners were unable to make the December 2010 special assessment payment and has since deeded over a portion of property to the City of Flagstaff. The City is currently holding property that represents $9.4M of the $19M of the special assessment bonds. The City issued a bid proposal for the property and successfully sold the remaining property. See Note F, Subsequent Events for information related to the sale. 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 77 multiple-employer defined benefit plan. Accordingly, the disclosures that follow reflect the EORP as if it were an agent multiple-employer defined benefit plan. 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, 2011, active ASRS members were required by statute to contribute at the actuarially determined rate of 9.85% (9.60% retirement and 0.25% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 9.85% (9.01% retirement, .59% for health insurance premium, and 0.25% long-term disability) of the members’ annual covered payroll. The City's contributions to ASRS for the years ended June 30, 2011, 2010, and 2009 were $2,642,362, $2,913,238, and $2,904,203 respectively, inclusive of Housing Authority. The City contribution for the current and two preceding years, all of which were equal to the required contributions, were as follows: 6/30/2011 6/30/2010 6/30/2009 $ Retirement 2,417,024 2,584,724 2,455,511 Health Insurance $ 158,273 204,546 295,030 Long-term Disability $ 67,065 123,968 153,662 In addition, active EORP members were required by statute to contribute 7% of the members' annual covered payroll. The City was required to contribute 29.79% 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 .85% of covered payroll. The City's contributions to EORP for the years ended June 30, 2011, 2010, and 2009 were $48,203, $33,327, and $35,490 respectively, which equal the required contributions for each year, and is inclusive of Housing Authority. The City contributions for the current and two preceding years, all of which were equal to the required contributions, were as follow: 6/30/2011 6/30/2010 6/30/2009 $ Retirement 46,423 31,613 33,703 Health Insurance $ 1,375 1,079 1,153 78 Long-term Disability $ 405 635 634 Agent Plan - For the year ended June 30, 2011, 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 22.32% and 25.97% for Police and Fire respectively. Police personnel contributed $520,832; Fire personnel contributed $321,600 during fiscal year 2010-2011. The City annual pension cost of $1,519,603 for police and $1,091,758 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). Annual Pension Cost - The City's pension cost for the agent plan for the year ended June 30, 2011, the date of the most recent actuarial valuation, and related information follow. PSPRS Police Contribtuion rates FY10-2011: City Plan members Fire 22.32% 7.65% EORP 25.97% 7.65% 29.79% 7.00% Annual pension costs Pension contribtuions made $ $ 1,698,848 1,698,848 $ $ 1,380,272 1,380,272 $ $ 32,248 32,248 Annual OPEB costs - Health Insurance OPEB contribtuions made $ $ 49,918 49,918 $ $ 90,626 90,626 $ $ 1,079 1,079 As of actuarial valuation date: 6/30/2011 6/30/2011 6/30/2010 Actuarial cost method Entry age normal Entry age noraml Project unit credit Amortization method Remaining amortization period-UAL Remaining amortization period-excess Level percent-ofpay closed 25 years 20 years Level percent-ofpay closed 25 years 20 years Level percent-ofpay closed 26 years 20 years Asset valuation method 7-year smoothed market 7-year smoothed market 7-year smoothed market Actuarial assumptions: Investment rate of return Projected salary increases* * includes inflation at Cost of living adjustments 8.25% 5.0% - 8.0% None 5.00% 79 8.25% 5.0% - 8.0% None 5.00% 8.50% 5.00% None 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 6/30/2011 6/30/2010 $ 6/30/2009 1,698,848 1,489,864 6/30/2010 6/30/2009 PSRS - Fire - Pension 6/30/2011 6/30/2010 6/30/2009 $ Net Pension Obligation 100% 100% $ 49,918 100% $ 50,016 100% 1,604,408 PSRS - Police - Health Insurance 6/30/2011 $ Percentage of APC Contributed 49,219 100% 100% -0-0-0- -0- -0-0- 1,380,272 1,275,572 1,497,199 100% 100% 100% $ -0-0-0- PSRS - Fire - Health Insurance 6/30/2011 $ 90,626 100% $ -0- EORP - Pension 6/30/2010 6/30/2009 6/30/2008 32,248 34,337 16,326 100% 100% 100% $ -0-0-0- 1,079 1,153 895 100% 100% 100% $ -0-0-0- 6/30/2010 6/30/2009 $ EORP - Health Insurance 6/30/2010 $ 6/30/2009 6/30/2008 85,486 78,731 100% 100% -0-0- Schedule of Funding Progress - An analysis of funding progress for each of the agent plans as of the most recent actuarial valuations; June 30, 2011 reporting period determines the rates for fiscal year 2011. disaggregated and reported separately. The EORP, by statue, is a cost-sharing plan. Benefits are 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. 80 (2) Actuarial (1) Accrued Actuarial Liability Value of (AAL) Entry Assets PSRS - Police Pension 6/30/2011 $ 6/30/2010 6/30/2009 25,208,537 $ 45,968,224 22,931,628 39,587,101 23,962,276 PSRS - Police Health Insurance 6/30/2011 $ - 6/30/2009 - 6/30/2010 PSRS - Fire Pension 6/30/2011 $ 6/30/2010 6/30/2009 - 6/30/2010 6/30/2009 D. $ 41,447,390 1,159,297 953,355 925,492 (4) Percent Unfunded (1) / (2) (2) - (1) Funded AAL 54.8% $ 57.8% 57.9% 0.0% $ 0.0% 0.0% 32,146,592 $ 51,857,015 62.0% $ 33,539,698 46,998,109 71.4% 32,605,835 PSRS - Fire Health Insurance 6/30/2011 $ Age (3) - - $ 48,099,507 1,563,996 1,394,422 1,359,414 67.8% 0.0% $ 0.0% 0.0% (5) (6) Unfunded AAL Annual as a Percentage Payroll Payroll (4) / (5) Covered of Covered 20,759,687 $ 6,801,375 305.2% 16,655,473 7,423,926 224.3% 17,485,114 6,907,462 253.1% 1,159,297 $ 6,801,375 17.0% 925,492 7,423,926 12.5% 953,355 6,907,462 13.8% 19,710,423 $ 4,606,922 427.8% 13,458,411 5,460,875 246.5% 15,493,672 1,563,996 $ 1,394,422 1,359,414 4,671,743 331.6% 4,606,922 4,671,743 5,460,875 33.9% 29.8% 24.9% 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, 2011, there were 81 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 81 liabilities over a period not to exceed thirty years. The City’s implicit subsidy rate to covered payroll is actuarially determined at 23.4%. Plan members receiving benefits contribute $159,002 during fiscal year 2010. Annual OPEB Cost and Net OPEB Obligation. For 2011, the city’s annual OPEB cost (expense) of $1,249,702 was equal to the ARC plus interest on the net OPEB obligation of $50,527. The city’s annual OPEB cost; inclusive of Housing Authority, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2011 and two preceding years were as follows: Fiscal Year Ended Annual OPEB Cost 6/30/2011 $ 1,249,702 $ 6/30/2010 6/30/2009 1,066,839 1,068,154 Fiscal Year Ended Net OPEB Obligation 159,002 12.7% $ 2,229,083 621,538 375,072 58.3% 35.1% 1,138,383 693,082 (1) Annual (2) Interest on Contribution NOO Required 6/30/2011 $ 1,268,105 $ 6/30/2010 1,092,184 6/30/2009 Percentage of Annual OPEB Cost Contributed Actual Contributions 1,076,593 Existing Annual OPEB Adjustment 50,527 $ 31,189 Cost (1) + (2) + (3) (68,930) $ (56,534) - Funded Status and Funding Progress. (4) (3) ARC (8,439) 1,249,702 $ 1,066,839 1,068,154 (6) (5) Actual Net Increase in Amount (4) - (5) End of Year 1,090,700 $ 445,301 2,229,083 1,138,383 Contribution 159,002 $ 621,538 375,072 (7) NOO NOO 693,082 as of 693,082 As of July 1, 2011, the actuarial accrued liability for benefits was $9,808,514, all of which was unfunded. The covered payroll of active employees covered by the plan is $41,941,781, and the ratio of the unfunded actuarial accrued liability to the covered payroll is 23.4 percent. Following is a table of the last three years funding progress as available, inclusive of Housing Authority unless noted. Actuarial Valuation Date (1) (2) Actuarial Accrued Liability Percent Funded Unfunded AAL Annual Covered as a Percentage of Covered Assets (AAL) (1) / (2) (2) - (1) Payroll Payroll (4) / (5) 0.0% 0.0% $ 9,808,514 8,946,294 $ 41,941,781 42,292,297 Actuarial Value of 7/1/2011 $9,808,514 7/1/2008* 8,946,294 (*) Information not available for Housing Authority (3) (4) (5) (6) Unfunded AAL 23.4% 21.2% 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 82 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, 2011, actuarial valuation, the entry age normal, level dollar, actuarial cost method was used. The actuarial assumptions included a 4.5 percent investment rate of return. Healthcare cost trend rate of 9 percent initially, reduced by decrements to an ultimate rate of five percent over eight years. The remaining amortization period at July 1, 2011, was 30 years, open, level dollar amount. The City has elected to perform biennial actuary valuations. 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 $10,660,662 as of June 30, 2011, which is based on 66.57 percent usage of the landfill. The remaining $5,352,827 will be accrued over the remaining life of the landfill, which is currently estimated to be 15 years. The accrual for the closure and postclosure care costs for fiscal year 2011 was $456,554. 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, 2011 the balance of the investments held for those purposes is $9,313,876. 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, $16,013,489, 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, 2011. 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. 83 F. Subsequent Events On September 13, 2011, the City issued General Obligation Bonds Series 2011 in the amount of $12,750,000 as well as Refunding General Obligation Bonds Series 2011 in the amount of $3,140,000. The Series 2011 represent funding for a Fire Fighting Facility of $2,400,000, as authorized by voters on the election of May 18, 2004 and Public Safety Communication System and Street – Utility Improvements of $10,350,000, as authorized by voters on November 2010. On August 15, 2011, the City redeemed $6.4 million of its’ Aspen Place at the Sawmill Improvement District Bonds as part of a refunding defeasance related to the sale of property that was finalized in July 2011. In 2010 Westcor Company Limited Partnership, Flagstaff Mall Associates Limited Partnership, and Railhead Associated L.L. C. (collectively “Westcor) filed a Notice of Claim against the City related to a differing interpretation of a Development Agreement on who was responsible to pay for certain infrastructure improvements. The City and Westcor participated in mediation, however that effort was unsuccessful. The City and Westcor then participated in non-binding arbitration which led to Westcor subsequently filing an approximate $4 million dollar lawsuit. The City and Westcor then entered into negotiations which resulted in a final settlement as accepted by the City of Flagstaff Council on December 20, 2011. The settlement includes the following terms: 1) The City will pay Westcor $400,000, 2) the City will grant Westcor an easement for a monument sign, and 3) the City will grant Westcor an option to purchase certain real property located adjacent to the Flagstaff Mall and Marketplace. 84 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. 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. 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. Capital Projects Fund A capital project fund is established to account for the acquisition and construction of major capital facilities and enhances reporting to ensure that requirements regarding the use of the revenue were fully satisfied. Capital Projects Bond Fund This fund accounts for the receipt of proceeds from bonds and the expenditure of those funds to purchase or construct capital assets for the City. 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. 85 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2010 Special Revenue Funds Library Fund Community Redevelopment Fund Metropolitan Planning Organization Fund ASSETS Cash and investments $ 1,642,076 $ 1,465,126 $ 20,540 Cash with fiscal agents - - - Accounts receivable, net - 160 5,000 2,647 841 - - 212,752 340,677 3,090,070 - - Interest receivable Intergovernmental receivables Restricted cash and investments Total assets $ 4,734,793 $ 1,678,879 $ 366,217 $ $ 16,562 $ 50,615 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 619,149 115,283 3,340 11,673 Current bonds payable - - - Interest payable - - - Interfund payable - - 300,000 Deferred revenue 145,678 - 233 Arbitrage liability - - - Total liabilities 880,110 19,902 362,521 - - - Library services 764,613 - - Library branch services 843,727 Fund balances: Nonspendable: Perpetual care Restricted for: Library programs 2,246,343 - - Debt service - - - Other capital projects - 1,658,977 - Regional planning - - 3,696 Perpetual care - - - - - - Unassigned: Total fund balances Total liabilities and fund balances 3,854,683 $ 4,734,793 86 1,658,977 $ 1,678,879 3,696 $ 366,217 Capital Projects Debt Service Funds General Obligation Bond Fund $ Funds Secondary Property Tax Revenue Fund Permanent Fund Capital Projects Bond Construction $ 5,448,750 1,947,512 - - - 1,947,512 - - - 205 5,365 - 4,707 65 121 8,381 - - - - 553,429 - - 1,581,659 162,571 4,834,300 $ 2,779,271 $ 5,453,457 $ 1,624,174 $ 176,763 $ 16,813,554 $ $ $ 396,106 $ - $ 1,082,432 - 42,450 Perpetual Care 831,759 - $ Total Other Governmental Funds $ 13,866 $ 9,464,567 - - - - 130,296 1,850,000 - - - 1,850,000 580,916 - - - 580,916 - - 3,600,000 - 3,900,000 - - - - 145,911 - - - - - 2,430,916 - 3,996,106 - 7,689,555 - - - 162,571 162,571 - - - - 764,613 843,727 - - - - 2,246,343 348,355 5,453,457 - - 5,801,812 - - - - 1,658,977 - - - - 3,696 - - - 14,192 - - 348,355 5,453,457 $ 2,779,271 $ 5,453,457 (2,371,932) (2,371,932) $ 1,624,174 87 14,192 - (2,371,932) 176,763 $ 176,763 9,123,999 $ 16,813,554 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2011 Special Revenue Funds Metropolitan Planning Organization Fund Community Redevelopment Fund Library Fund REVENUES: Taxes $ Intergovernmental - $ - $ - 3,531,607 - 5,000 80,220 895,739 318,435 Charges for services - 29,116 - Investment earnings 24,404 7,353 - Contributions 29,737 - 10,028 Grants and entitlements Miscellaneous Total revenues 36,997 491,056 - 3,702,965 1,423,264 333,463 - - - EXPENDITURES: Current: General governmental Public safety - - - Economic and physical development - 1,448,400 358,538 4,662,395 - - - - - Principal retirement - - - Interest and other charges - - - - - - 4,662,395 1,448,400 358,538 Culture and recreation Highways and streets Debt service: Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures (959,430) (25,136) (25,075) OTHER FINANCING SOURCES (USES): Sale of capital assets 896 Transfers in 1,178,951 Transfers out (78,391) Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year $ 88 - - 22,720 (14,000) - 1,101,456 (14,000) 22,720 142,026 (39,136) 3,712,657 Fund balances, end of year - 3,854,683 (2,355) 1,698,113 $ 1,658,977 6,051 $ 3,696 Capital Projects Debt Service Funds General Obligation Bond Fund $ - Secondary Property Tax Revenue Fund $ 7,184,209 Permanent Fund Capital Projects Bond Construction $ - Total Other Governmental Funds Perpetual Care $ - $ 7,184,209 - - - - 3,536,607 - - - - 1,294,394 - - - - 29,116 - 37,980 4,831 1,037 75,605 - - - 24,950 64,715 - - - - 528,053 - 7,222,189 4,831 25,987 12,712,699 - - 138,056 - 138,056 - - 3,295 - 3,295 - - - - 1,806,938 - - - - 4,662,395 - - 1,107,366 - 1,107,366 1,850,000 - - - 1,850,000 1,166,508 - - 1,063,796 - - 3,982,298 - 3,982,298 3,016,508 - 5,128,303 - 14,614,144 (3,016,508) (102,712) 7,222,189 - (5,123,472) - 3,016,508 $ Funds 25,987 - - (1,901,445) - 71,200 896 - 4,289,379 - (4,828,247) (517,236) - (5,437,874) 3,016,508 (4,828,247) (446,036) - (1,147,599) 25,987 (3,049,044) - 2,393,942 (5,569,508) 348,355 3,059,515 3,197,576 348,355 $ 5,453,457 $ (2,371,932) 89 150,776 $ 176,763 12,173,043 $ 9,123,999 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 91 93 Budgetary Comparison Schedules - Other Major Governmental Funds Special Assessment Bond Fund 94 Budgetary Comparison Schedules - Non-Major Governmental Funds Library Fund Community Redevelopment Fund Metropolitan Planning Organization Fund General Obligation Bond Fund Secondary Property Tax Revenue Fund Capital Projects Fund 95 96 97 98 99 100 Financial Data Submission Schedules Net Asset Accounts Revenue, Expenses, and Changes in Fund Net Asset Accounts Revenue, Expenses, and Changes in Fund Net Asset AccountsPublic Housing-Consolidated 90 101 103 106 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2011 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 2,445,956 4,084,419 3,304,223 38,115,195 $ 47,949,793 $ 47,949,793 91 $ 13,862,090 23,258,835 5,426,635 7,541,573 22,142,603 102,310 Improvements $ 1,894,249 113,946 198,275 78,116 16,074,820 2,251,981 72,334,046 20,611,387 (16,033,495) (11,568,938) 56,300,551 $ 9,042,449 Machinery and Equipment $ 3,733,912 11,901,184 1,230,370 1,168,053 4,322,061 8,373,702 Construction In Progress $ 30,729,282 9,764,568 396,809 4,994,414 1,703,755 1,910,660 $ 1,117,225 652,947 9,120,292 263,135,903 9,005,638 (20,964,714) $ Infrastructure $ 9,005,638 $ $ 22,333,016 44,352,798 7,972,505 9,440,689 56,667,754 313,889,751 274,026,367 454,656,513 (112,044,471) (160,611,618) 161,981,896 92 Total $ 294,044,895 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2011 Balance Program General government July 1, 2010 $ 23,177,659 Additions $ Retirements 111,454 $ (13,969) $ Transfers Balance In (out) June 30, 2011 (942,128) $ 22,333,016 Public safety 39,656,849 3,704,195 (100,422) 1,092,176 44,352,799 Public works 7,039,449 - (300,412) 1,233,467 7,972,504 Economic and physical development 10,843,865 - - Culture and recreation 54,350,249 3,025,318 (2,164,333) Highway and streets Total 310,075,073 $ 445,143,144 6,109,542 $ 12,950,509 93 (1,403,175) (274,463) $ (2,853,600) 9,440,690 1,456,519 56,667,753 (2,020,402) $ (583,543) 313,889,749 $ 454,656,513 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 1,403,625 $ Variance with Final Budget Positive (Negative) REVENUES: Special assessments $ Investment earnings 1,403,625 $ 2,000 Miscellaneous Total revenues 2,000 701,447 $ 1,685 - - 14 1,405,625 1,405,625 703,146 485,000 485,000 485,000 (702,178) (315) 14 (702,479) EXPENDITURES: Debt service: Principal retirement Interest and other charges - 920,625 920,625 920,576 49 1,405,625 1,405,625 1,405,576 49 Excess (deficiency) of revenues over (under) expenditures - - (702,430) (702,430) Net change in fund balances - - (702,430) (702,430) 99,122 99,122 Total expenditures Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ 99,122 $ 94 99,122 99,122 $ (603,308) $ (702,430) CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 6,351,957 $ Variance with Final Budget Positive (Negative) REVENUES: Intergovernmental $ 6,351,957 $ 3,606,865 $ (2,745,092) Grants and entitlements 74,214 74,214 4,962 (69,252) Investment earnings 26,980 26,980 24,404 (2,576) Miscellaneous Total revenues 20,474 20,474 36,997 6,473,625 6,473,625 3,673,228 (2,800,397) 16,523 7,730,007 7,730,007 4,627,506 3,102,501 - - 34,889 EXPENDITURES: Current: Culture and recreation Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures (34,889) 100,000 100,000 - 100,000 7,830,007 7,830,007 4,662,395 3,167,612 (1,356,382) (1,356,382) 1,178,951 1,178,951 (989,167) 367,215 OTHER FINANCING SOURCES (USES): 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 $ (328,391) (328,391) 850,560 850,560 (505,822) 727,912 222,090 $ Adjustment of budetary basis to GAAP basis net change in fund balances 1,178,951 250,000 (505,822) 111,393 617,215 727,912 727,912 - 222,090 $ 839,305 $ 111,393 modified accrual basis. 30,633 $ 95 250,000 1,100,560 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis - (78,391) 142,026 $ 617,215 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 1,968,644 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ 1,968,644 $ 895,739 $ (1,072,905) Charges for services - - 29,116 29,116 Investment earnings - - 7,353 7,353 Miscellaneous Total revenues - - 491,056 1,968,644 1,968,644 1,423,264 3,513,891 3,513,891 1,444,532 - - 3,868 3,513,891 3,513,891 1,448,400 (1,545,247) (1,545,247) 491,056 (545,380) EXPENDITURES: Current: Economic and physical development Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 2,069,359 (3,868) 2,065,491 (25,136) 1,520,111 OTHER FINANCING SOURCES (USES): Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year $ (14,000) (14,000) (14,000) - (14,000) (14,000) (14,000) - (1,559,247) (1,559,247) (39,136) 1,520,111 1,769,454 1,769,454 210,207 $ 96 210,207 1,769,454 $ 1,730,318 $ 1,520,111 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Total revenues 619,285 $ 619,285 $ 318,435 $ (300,850) 619,285 619,285 318,435 (300,850) 542,005 542,005 358,538 183,467 100,000 100,000 - 100,000 642,005 642,005 358,538 283,467 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures (22,720) (22,720) (40,103) (17,383) OTHER FINANCING SOURCES (USES): Transfers in 22,720 22,720 22,720 - 22,720 22,720 22,720 - Net change in fund balances - - Budgetary fund balances, beginning of year - - Total other financing sources (uses) Budgetary fund balances, end of year $ - $ Adjustment of budetary basis to GAAP basis net change in fund balances - (17,383) $ (17,383) $ (17,383) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 15,028 The City budgets for certain other expenditures on the cash basis, rather than on the modified accrual basis - Adjusted net change in fund balance - GAAP basis $ 97 (17,383) (2,355) $ (17,383) CITY OF FLAGSTAFF, ARIZONA General Obiligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 1,850,000 $ Variance with Final Budget Positive (Negative) EXPENDITURES: Debt service: Principal retirement $ 1,850,000 $ 1,850,000 $ - Interest and other charges 1,667,453 1,667,453 1,166,508 500,945 Total expenditures 3,517,453 3,517,453 3,016,508 500,945 (3,517,453) (3,517,453) (3,016,508) 500,945 3,517,453 3,517,453 3,016,508 (500,945) 3,517,453 3,517,453 3,016,508 (500,945) - - - - 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 $ 98 348,355 $ 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, 2011 Budget Original Final Actual Amounts Budgetary Basis 7,228,554 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Investment earnings 7,228,554 $ 7,184,209 $ (44,345) 30,500 30,500 37,980 7,259,054 7,259,054 7,222,189 (5,329,128) (5,329,128) (4,828,247) 500,881 (5,329,128) (5,329,128) (4,828,247) 500,881 Net change in fund balances 1,929,926 1,929,926 2,393,942 464,016 Budgetary fund balances, beginning of year 2,811,348 2,811,348 2,811,348 - Total revenues 7,480 (36,865) OTHER FINANCING SOURCES (USES): Transfers out Total other financing sources (uses) Budgetary fund balances, end of year $ 4,741,274 $ 99 4,741,274 $ 5,205,290 $ 464,016 CITY OF FLAGSTAFF, ARIZONA Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2011 Budget Original Final Actual Amounts Budgetary Basis 8,700,000 $ Variance with Final Budget Positive (Negative) REVENUES: Miscellaneous $ Investment earnings Total revenues 8,700,000 $ - $ (8,700,000) 98,770 98,770 4,831 (93,939) 8,798,770 8,798,770 4,831 (8,793,939) - - 138,056 (138,056) EXPENDITURES: Current: General governmental Public safety Highways and streets Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 3,295 (3,295) 1,107,366 (1,107,366) - - 19,091,199 19,091,199 3,982,298 (102,712) 15,108,901 102,712 19,091,199 19,091,199 5,128,303 13,962,896 (10,292,429) (10,292,429) (5,123,472) 51,200,000 51,200,000 - (51,200,000) 233,738 233,738 - (233,738) - - 71,200 (500,000) (500,000) 5,168,957 OTHER FINANCING SOURCES (USES): Bonds issued 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 $ 71,200 (517,236) (17,236) 50,933,738 50,933,738 (446,036) (51,379,774) 40,641,309 40,641,309 (5,569,508) (46,210,817) 2,778,255 2,778,255 43,419,564 $ 100 43,419,564 2,778,255 $ (2,791,253) $ (46,210,817) CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Asset Accounts Year Ended June 30, 2011 Public Housing 14.850 Housing Choice Vouchers 14.871 $ 648,690 $ 137,081 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total Assets: Current Assets: Cash: Cash - Unrestricted Cash - Other Restricted Cash - Tenant Security Deposits Total Cash Accounts Receivables: Accounts Receivable - PHA Projects Accounts Receivable - HUD Other Projects Accounts Receivable - Other Government Accounts Receivable - Miscellaneous Accounts Receivable - Tenants Allowance for Doubtful Accounts -Tenants Allowance for Doubtful Accounts - Other Fraud Recovery Allowance for Doubtful Accounts - Fraud Accrued Interest Receivable Total Receivables, Net Current investments Investments - Unrestricted Investments - Restricted Prepaid Expenses and Other Assets Inventories Allowance for Obsolete Inventories Inter Program Due From Assets Held for Sale Total Current Assets 70,325 719,015 425,187 562,268 $ 65,445 $ - $ 17,857 $ - $ 869,073 - - - - - - - - 70,325 - 1,364,585 65,445 - 17,857 425,187 - 7,582 - - - - 7,582 8,369 - - 4,802 - - 13,171 - - - - - - - - - 28,439 - - - - 13,286 - - - - (6,825) - - - (6,825) - - 3,299 - - - 921 - 13,286 - (79) - - - - 3,299 - - - - - - - - - - - - 4,802 - - 22,497 10,881 27,518 20,693 - (79) 58,873 - - - - - - - - - - - - 2,837 2,337 - - - - - - - - - - - - - - - - - - - - - - - - - 55,469 796,981 575,986 26,207 114,682 4,802 17,857 (26,207) (26,207) 60,643 1,484,101 Noncurrent Assets: Capital Assets: 1,446,035 - - - - - 1,446,035 8,606,936 - - - - - 8,606,936 Furniture, Equipment & Machinery - Dwellings 466,275 - - - - - 466,275 Furniture, Equipment & Machinery - Administration 495,026 - - - - 538,515 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Land Buildings Leasehold Improvements Accumulated Depreciation Construction in Progress Total Capital Assets, Net Notes receivable - Noncurrent Other Assets Total Non-Current Assets Total Assets (5,296,757) 5,717,515 5,717,515 6,514,496 43,489 (43,489) 575,986 114,682 (continued) 101 4,802 17,857 (26,207) (5,340,246) 5,717,515 5,717,515 7,201,616 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Asset Accounts Year Ended June 30, 2011 Public Housing 14.850 Housing Choice Vouchers 14.871 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total Liabilities and Net Assets: Liabilities: Current Liabilities: Bank Overdraft Accounts Payable <= 90 Days Accrued Wage/Payroll Taxes Payable Accrued Compensated Absences Accrued Interest Payable Accounts Payable - HUD PHA Programs Account Payable - PHA Projects Accounts Payable - Other Government Tenant Security Deposits Deferred Revenues Current Portion of L-T Debt - Capital Current Portion of L-T Debt - Operating Other Current Liabilities Accrued Liabilities - Other Inter Program - Due To Total Current Liabilities Noncurrent Liabilities Long-term Debt, Net of Current - Capital Long-term Debt, Net of Current - Operating Non-current Liabilities - Other Accrued Compensated Absences Accrued Pension and OPEB Liabilities Total Non-Current Liabilities Total Liabilities Net Assets: Invested In Capital Assets, Net of Related Debt Restricted Net Assets Unrestricted Net Assets Total Equity/Net Assets Total Liabilities and Equity/Net Assets 40 16,881 - - - - - 6,128 3,900 - - - 3,957 404 - - - - - - 10,068 21,242 - - - - - - - - - - - 5,233 - 5,233 74,329 70,325 - - - - - - - - - - - 74,329 972 - - - - 70,325 - - - - 972 - - - - - - - - - - - - - - - - - 13,023 - - - - - - 19,521 1,884 - 4,802 - (26,207) - 194,119 12,941 4,304 4,802 5,233 (26,207) 13,023 195,192 - - - - - - - - - - - - - - - - - - - - 3,634 - - - 151,931 35,609 191,174 21,185 4,485 309 - - - 25,979 173,116 40,094 3,943 - - - 217,153 367,235 53,035 8,247 4,802 5,233 - - - - 5,717,515 - - - - 423,848 5,717,515 - 423,848 (26,207) 412,345 429,746 99,103 106,435 - 12,624 - 647,908 6,147,261 522,951 106,435 - 12,624 - 6,789,271 $6,514,496 $ 575,986 $ 114,682 $ (concluded) 102 4,802 $ 17,857 $ (26,207) $7,201,616 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Year Ended June 30, 2011 Housing Choice Vouchers 14.871 Public Housing 14.850 Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $ 1,127,511 $ Business Activities - $ - Resident Opportunity and Supportive Services 14.870 $ - Moderate Rehabilitation 14.856 $ - Elimination $ - Total $ 1,127,511 12,050 - - - - - 12,050 1,139,561 - - - - - 1,139,561 749,586 - 4,220,400 - - - - - 787,498 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 16,284 281,996 787,498 3,366,007 5,882 10,402 15,907 224,611 - 41,269 36,505 68,302 - 209 - - - - - - - - - - - - - 2,698,434 3,601,020 41,269 397,528 142,219 13,745 7,190 2,505 36,505 68,511 - - - 6,445,739 Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Other Total Administrative Tenant Services Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities - 4,313 - 557,805 878 - 626 - 11,199 4,616 - 4,616 - - - - - - - - - - 763 508 - - - - 1,271 1,094 - 199,862 135 - 99,958 - - 23,534 141,879 49,473 7,416 66,464 25,965 1,254 12,778 10,756 35,940 12,363 2,229 22,642 3,323 5,092 685,184 247,112 30,614 - - - - - - - - - - 24,438 - - 24,438 - - 6,140 2,000 8,140 21,231 - - - 52,532 - - 31,057 - 981,834 21,231 10,784 - - - - 6,914 - - 6,914 123 - - 24,561 - - 52,706 105,184 - 28,268 - 105,184 - - - - - 18,042 - - - - - 18,042 187,053 - - - - - 187,053 67,282 67,282 - - - - - - - - - - - - - - - - - - - - - - 377,561 (continued) 103 377,561 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Year Ended June 30, 2011 Public Housing 14.850 Ordinary Maintenance and Operations Labor Materials and Other Employee Benefit Contributions Garbage & Trash Removal Contacts Heating & Cooling Contracts Landscape & Grounds Contracts Unit Turnaround Contracts Electrical Contracts Plumbing Contracts Extermination Contracts Janitorial Contracts Routine Maintenance Contracts Contracts-Other Total Maintenance Protective Services Protective Services - Other Total Protective Services General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Other Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses Housing Choice Vouchers 14.871 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total 279,320 - - - - - 33,556 - - - - - 33,556 105,269 - - - - - 105,269 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 96,053 - - - - - 96,053 514,198 - - - - - 514,198 - - - - - - - - - - - 44,777 279,320 - - - - - - 44,777 16,072 3,229 - - - - 19,301 10,284 1,891 149 - - 10,042 1,445 309 97 185 - - - 900 1,235 - - - 76,245 (393) 1,108 63,817 11,193 3 - 12,324 - 11,896 74,329 - - - - - 74,329 7,865 - - - - - 7,865 6,825 - - - 6,825 8,703 97 - 254,462 226,793 18,866 3 - - - - - - - - - - - - - - - - - - - - - 1,828,174 265,978 39,317 870,260 3,335,042 1,952 (continued) 104 36,505 - 10,787 - 2,180,761 57,438 - 4,264,692 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Year Ended June 30, 2011 Housing Choice Vouchers 14.871 Business Activities 51,155 - - 3,947 - - - Public Housing 14.850 Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Total Other Expense Total Expenses Other Financing Sources (Uses) Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Beginning Equity Ending Net Assets Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased - 2,786,251 - 213,553 518,817 Depreciation Expense Resident Opportunity and Supportive Services 14.870 - 573,919 2,999,804 2,402,093 3,265,782 Moderate Rehabilitation 14.856 Elimination - - - - - - 3,947 - 2,843,689 57,438 Total 51,155 - - - - 213,553 - - - - 518,817 - - 57,438 - 3,631,161 68,225 - 5,811,922 39,317 36,505 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 286 - 633,817 - 6,155,454 $ - $ 6,789,271 296,341 335,238 1,952 - 5,850,920 187,713 104,483 - $ 6,147,261 $ 522,951 $ $ - $ - $ 99,103 $ $ 423,848 $ 106,435 12,338 $ - $ 12,624 - $ - $ - $ - $ 96,939 - $ - $ - $ - $ 423,848 3,180 3,996 - - 144 - 7,320 3,134 3,828 - - 139 - 7,101 (concluded) 105 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Public Housing - Consolidated Year Ended June 30, 2011 Operating Fund Program Revenues: Net Tenant Rental Revenue Tenant Revenue - Other Total Tenant Revenue HUD PHA Operating Grants Capital Grants Management Fee Asset Management Fee Bookkeeping Fee Front Line Service Fee Other Fees Other Government Grants Investment Income - Unrestricted Mortgage Interest Income Fraud Recovery Other Revenue Gain or Loss on Sale of Capital Assets Investment Income - Restricted Total Revenue $ 1,127,511 Capital Fund Grants $ - Other Project Total $ 1,127,511 12,050 - 12,050 1,139,561 - 1,139,561 613,144 - 136,442 749,586 787,498 787,498 - - - - - - - - - - - - - - - - - - - - - - - 5,882 15,907 - - 5,882 - 15,907 - - - - - 1,774,494 923,940 2,698,434 359,899 37,629 397,528 Expenses: Administrative Administrative Salaries Auditing Fees Management Fee Bookkeeping Fee Advertising and Marketing Employee Benefit - Administrative Office Expenses Legal Expense Travel Allocated Overhead Other Total Administrative Tenant Services Tenant Services - Salaries Relocation Costs Employee Benefit - Tenant Services Tenant Services - Other Total Tenant Services Utilities Water Electricity Gas Sewer Employee Benefit - Utilities Other Utilities Expense Total Utilities 7,190 - 7,190 - - - - - 763 - 763 130,957 10,922 41,409 25,055 12,778 - 29,334 6,606 - - 22,642 - 604,972 80,212 - 141,879 66,464 12,778 35,940 22,642 685,184 - - - - - - - - - 24,438 - 24,438 24,438 - 24,438 105,184 - 105,184 18,042 - 18,042 187,053 - 187,053 - 67,282 67,282 - - - - 377,561 - (continued) 106 377,561 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Public Housing - Consolidated Year Ended June 30, 2011 Operating Fund Program Ordinary Maintenance and Operations Labor Materials and Other Employee Benefit Contributions Garbage & Trash Removal Contacts Heating & Cooling Contracts Landscape & Grounds Contracts Unit Turnaround Contracts Electrical Contracts Plumbing Contracts Extermination Contracts Janitorial Contracts Routine Maintenance Contracts Contracts-Other Total Maintenance Protective Services Protective Services - Other Total Protective Services General Expense Property Insurance Liability Insurance Workmen's Compensation All Other Insurance Other General Expenses Compensated Absences Payments in Lieu of Taxes Bad debt - Tenant Rents Bad debt - Other Total General Expenses Financial Expenses Interest Expense - Mortgage Payable Amortization of Bond Issue Costs Total Financial Expenses Total Operating Expenses Excess of Operating Revenue over Operating Expenses Capital Fund Grants Other Project Total 279,320 - 33,556 - 279,320 33,556 105,269 - 105,269 - - - - - - - - - - - - - - - - - - - - - - - - - - - 95,156 897 96,053 513,301 897 514,198 - - - - - - 44,777 - 44,777 16,072 - 16,072 10,284 - 10,284 10,019 23 10,042 (393) - 63,817 (393) - 63,817 74,329 - 74,329 7,865 - 7,865 - - 226,770 23 226,793 - - - - - - - - - 1,747,042 81,132 1,828,174 27,452 842,808 870,260 (continued) 107 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Asset Accounts Public Housing - Consolidated Year Ended June 30, 2011 Other Expenses Extraordinary Maintenance Casualty Losses - Non-capitalized Housing Assistance Payments HAP Portability-In Depreciation Expense Total Other Expense Total Expenses Transfer of Funds Transfer of Equity Prior Period Adjustments Total Other financing Sources (Uses) Excess (Deficiency) of Total Revenue Over (Under) Total Expenses Operating Fund Program Capital Fund Grants Other Project Total 1,322 49,833 51,155 3,947 - - - - - 518,817 - 3,947 518,817 524,086 49,833 573,919 2,271,128 130,965 2,402,093 - - - - - - - - - - - - (496,634) Beginning Equity 5,850,920 Ending Net Assets 5,354,286 792,975 792,975 (concluded) 108 296,341 5,850,920 6,147,261 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 Trends 110 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 118 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 124 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. 135 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. 137 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. 109 Schedule 1 City of Flagstaff Net Assets by Component Last Nine Fiscal Years (accrual basis of accounting) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 Governmental activities 46,759,889 $ 184,594,782 $ 204,594,974 (1) $ 214,268,448 $ 215,672,933 Restricted Invested in capital assets, net of related debt 14,778,358 35,343,236 20,670,257 45,560,390 13,795,935 14,875,852 7,975,269 18,213,829 Unrestricted 34,178,175 33,494,972 56,392,865 10,448,150 36,514,677 39,248,151 34,766,602 49,463,587 Total governmental activities net assets $ $ 45,410,334 $ 41,666,412 $ 94,366,867 $ 110,504,620 $ 123,823,011 $ 240,603,322 $ 254,905,586 173,369,441 $ (2) $ 268,392,451 (3) $ 258,414,804 $ (4) 213,762,870 $ 217,879,986 23,971,870 42,863,692 $ 281,440,286 $ 284,715,548 $ 302,784,152 $ 303,113,402 Business-type activities Invested in capital assets, net of related debt $ 184,863,812 $ 200,551,217 $ 230,035,130 $ 264,381,730 $ 276,783,163 $ 291,707,810 5,013,627 5,161,363 3,200,521 2,392,858 2,424,615 1,593,915 1,593,915 2,209,327 3,003,129 20,858,057 24,092,049 24,948,848 20,303,463 19,267,461 16,250,436 11,547,792 10,895,855 17,190,191 Restricted Unrestricted Total business-type activities and net assets $ 199,241,125 $ 214,117,224 $ 228,700,586 $ 252,731,451 $ 286,073,806 $ 294,627,514 $ 304,849,517 $ 315,889,334 $ 323,306,722 $ 218,779,775 $ $ 516,547,022 $ 520,993,388 Primary government Invested in capital assets, net of related debt 226,530,224 $ 247,311,106 $ 414,629,912 $ 468,976,704 $ 491,051,611 $ 507,380,743 Restricted 19,791,985 40,504,599 23,870,778 47,953,248 16,220,550 16,469,767 9,569,184 20,423,156 Unrestricted 55,036,232 57,587,021 81,341,713 30,751,613 55,782,138 55,498,587 46,314,394 60,359,442 Total primary government net assets $ 293,607,992 $ 324,621,844 $ 352,523,597 $ 493,334,773 $ 540,979,392 (1) FY 2007 restated for retroactive reporting of infrastructure (2) FY 2007 restated for retroactive reporting due to an accounting error (3) FY 2008 change in calculations within categories due to calculation error. No net change to total net assets. (4) FY 2009 restated for change due to accounting error The City implemented GASB-34 for the year ended June 30, 2003 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. 110 $ 563,019,965 $ 563,264,321 $ 597,329,620 26,974,999 $ 60,053,883 608,022,270 111 Schedule 2 City of Flagstaff Changes in Net Assets Last Nine Fiscal Years (accrual basis of accounting) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 Expenses Governmental activities: General government $ Public safety 4,840,896 $ 5,891,617 $ 5,441,945 $ 7,458,583 $ 9,035,268 18,270,468 18,792,832 21,018,114 22,525,292 23,994,991 Public works 1,169,302 1,178,137 1,320,459 1,454,731 1,882,489 Economic and physical development 7,272,115 6,473,290 6,807,311 7,842,985 9,508,406 Culture and recreation 8,467,575 8,693,714 9,426,600 8,328,945 10,089,469 $ 11,271,031 $ 27,030,331 10,913,187 $ 8,238,178 $ 7,850,954 29,287,433 26,592,968 25,987,193 1,894,089 2,109,221 1,502,626 1,754,033 10,556,175 10,346,982 8,827,578 8,474,776 11,607,116 13,120,917 12,507,679 12,854,824 19,275,381 Highways and streets 6,184,553 8,886,947 10,011,231 12,043,242 14,557,140 15,515,643 19,297,615 17,856,121 Interest on long-term debt 1,380,182 1,923,325 2,042,555 2,167,626 3,090,140 2,916,380 3,651,521 3,918,110 3,370,918 47,585,091 51,839,862 56,068,215 61,821,404 72,157,903 80,790,765 88,726,876 79,443,260 79,568,079 Total governmental activities expense Business-type activities: 16,142,040 17,250,441 17,297,017 18,452,368 19,945,366 23,420,282 22,802,316 21,731,286 21,491,239 Environmental Water and wastewater 7,556,614 7,319,602 8,548,715 9,096,420 10,073,853 11,423,164 11,782,540 11,091,078 11,610,370 Airport 3,411,603 3,370,447 3,749,669 3,519,749 3,162,391 3,608,322 4,197,447 4,273,609 Houising Authority - Stormwater - Total business-type activities expense Total primary government expense - 27,110,257 - - - - - 4,584,733 - 5,811,922 460,936 479,700 791,791 1,019,248 1,160,604 1,203,436 1,258,072 1,121,555 28,401,426 30,075,101 31,860,328 34,200,858 39,612,372 39,985,739 38,354,045 44,619,819 $ 106,358,761 $ 120,403,137 $ 128,712,615 $ 117,797,305 $ 124,187,898 $ $ $ $ $ $ 74,695,348 $ 80,241,288 $ 86,143,316 $ 93,681,732 $ 4,757,483 $ 3,257,393 $ 3,611,862 $ 4,886,354 Program Revenues Governmental activities: Charges for services: General government Public safety 4,171,853 3,746,890 3,099,884 3,285,242 2,646,424 743,738 451,802 498,506 815,167 704,800 1,227,979 1,451,405 1,283,697 1,144,636 1,537,188 Public works 830,885 976,793 1,213,714 1,180,097 1,455,461 1,483,275 1,350,832 1,471,550 Economic and physical development 222,008 16,164 321,915 332,356 562,135 315,462 369,987 291,211 162,715 Culture and recreation 733,159 722,236 680,755 683,906 742,088 762,410 1,559,617 1,420,094 1,442,901 Highways and streets Operating grants and contributions Capital grants and contributions Total governmental activities program revenues 119,854 3,428,440 2,678,653 4,147,529 3,791,526 2,062,329 3,320,597 5,990,756 6,654,978 7,965,474 9,646,122 11,757,330 15,180,401 21,566,549 19,356,271 16,324,928 9,880,762 36,949,681 9,226,778 20,481,689 19,860,371 25,654,682 33,255,955 29,054,937 27,181,541 23,703,243 51,356,453 24,126,116 112 Schedule 2 (continued) City of Flagstaff Changes in Net Assets Last Nine Fiscal Years (accrual basis of accounting) Business-type activities: Charges for services: Water and wastewater Environmental Airport Housing Authority 16,678,956 16,223,648 17,047,831 17,337,916 17,947,605 17,328,927 17,539,873 18,781,751 7,682,458 8,201,566 9,370,561 9,723,652 9,839,486 10,813,177 11,545,472 11,329,336 12,010,554 926,406 944,983 1,176,866 1,261,594 1,122,274 1,207,831 1,187,105 1,359,029 - Stormwater - - Operating grants and contributions 382,239 Capital grants and contributions Total business-type activities program revenues Total primary government program revenues 16,534,341 - - - - - 1,388,076 - 1,437,841 546,807 694,161 630,962 1,042,701 1,137,402 1,247,878 1,358,438 1,456,894 286,919 574,376 369 19,500 67,651 10,966 120,054 5,090,475 9,460,796 10,482,991 8,164,775 23,449,969 27,369,058 12,242,567 8,744,216 6,790,709 4,220,708 34,986,240 37,142,222 36,204,387 52,114,377 56,730,935 43,416,233 40,064,564 38,497,439 44,386,299 $ 55,467,929 $ 57,002,593 $ (27,103,402) $ (31,979,491) $ 61,859,069 $ 85,370,332 $ 85,785,872 $ 70,597,774 $ 63,767,807 $ 89,853,892 $ 68,512,415 $ (43,102,966) $ (53,609,224) $ (65,023,633) $ (28,086,807) $ (55,441,963) (27,943,413) $ (55,675,483) 12,798,495 $ Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense 7,875,983 $ (19,227,419) $ (30,413,533) 8,740,796 $ (23,238,695) $ (28,565,449) 6,129,286 20,254,049 $ (24,284,247) $ $ $ 22,530,077 (8,311,400) $ 9,051,158 $ 3,803,861 (20,572,889) $ 12,169,247 $ 78,825 (49,805,363) $ 13,664,791 $ 143,394 (64,944,808) $ 12,262,185 $ (233,520) General Revenues and Other Changes in Net Assets Governmental activities: Taxes Property taxes $ 8,010,293 $ 7,931,626 8,462,302 12,645,717 Sales taxes 23,805,566 25,682,974 27,054,164 30,014,975 32,334,785 33,129,731 31,420,047 30,429,840 31,355,882 State shared sales taxes - unrestricted 12,073,108 12,122,563 12,837,838 14,384,055 16,276,354 16,992,017 16,628,652 14,880,073 13,148,252 Grants and contributions not restricted to specific programs - Investment earnings Miscellaneous Gain on sale of capital assets Contributions to permanent fund Transers in (out) 810,739 383,111 218,520 377,502 - 1,703,861 2,385,099 4,108,861 - 1,465,731 381,984 492 905,717 277,972 204,678 1,377,552 819,325 634,411 382,387 33,417 242,167 2,160,339 7,435 14,717 17,765 24,630 19,460 16,200 (369,358) 44,748,082 (7,004,365) 47,951,909 (2,267,551) 43,731,924 (9,123,196) 54,207,963 - 3,903,839 944,381 (476,304) Total governmental activities - 13,325 (3,590,153) 57,405,230 - 246,093 228,969 1,741,338 2,831,308 744,957 19,136 (9,651,500) 67,096,089 - 449,394 24,950 (10,524,926) 52,520,424 (1,189,964) 51,112,289 58,717,225 Business-type activties: Grants and contributions not restricted to specific programs - Investment earnings - 106,733 Miscellaneous - 719,023 889 935,973 - 1,181,836 - - 206,154 111,251 107,543 150,129 - - 110,835 127,423 166,158 194,547 17,302 513,738 326,540 31,354 78,248 119,366 79,467 47,818 Transers in (out) 476,304 369,358 7,004,365 2,267,551 9,123,196 3,590,153 9,651,500 10,524,926 1,189,964 Total business-type activities 606,712 1,105,683 8,454,076 3,776,816 10,812,278 4,760,061 10,143,178 10,910,191 1,495,454 Total primary government $ 45,354,794 $ 49,057,592 $ $ 17,644,680 $ 15,972,418 $ - - 964,237 23,675 Gain on sale of capital assets - - 1,546,893 52,186,000 $ 13,318,391 $ 57,984,779 $ 25,642,514 $ 68,217,508 $ 71,856,150 $ 62,663,602 $ 14,302,264 $ 13,486,865 $ (12,503,209) $ 62,022,480 $ 23,025,482 $ 60,212,679 Change in Net Assets Governmental activities Business-type activities Total primary government 8,482,695 $ 26,127,375 9,846,479 $ 25,818,897 14,583,362 $ 27,901,753 24,030,865 $ 49,673,379 The City implemented GASB-34 for the year ended June 30, 2003 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. 113 33,342,355 $ 47,644,619 8,563,922 $ 22,050,787 10,222,003 $ (2,281,206) 11,053,585 $ 34,079,067 3,275,262 1,261,934 $ 4,537,196 Schedule 3 City of Flagstaff Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011 General Fund Reserved $ Unreserved 174,932 $ 18,318,999 176,838 $ 21,782,895 220,779 $ 22,891,253 200,401 $ 29,124,795 232,190 $ 28,574,855 1,260,236 $ 29,960,235 308,979 $ 27,492,853 - $ - - $ - - Nonspendable - - - - - - - 280,376 376,728 427,267 Restricted - - - - - - - 106,144 785,720 796,345 Committed - - - - - - - - 86,568 85,119 Assigned - - - - - - - - 8,595,100 6,882,947 Unassigned Total general fund - - - - - - - $ 18,493,931 $ 21,959,733 $ 23,112,032 $ 29,325,196 $ 28,807,045 (1) $ 31,220,471 $ 27,801,832 $ $ 1,106,960 $ 959,209 $ 1,677,627 $ 1,556,450 $ 30,107,878 47,350,460 $ 20,611,579 $ 22,203,764 22,590,284 $ 13,412,219 23,256,335 $ 15,160,509 23,352,187 All Other Governmental Funds Reserved $ - $ - $ - Unreserved, reported in: Special revenue funds 26,476,529 21,713,198 37,476,678 Capital project funds - - - Permanent fund - 217 567 Nonspendable - - Restricted - Committed - Assigned - Unassigned Total all other governmental funds $ - 27,583,489 $ 33,041,256 16,332,830 16,498,123 - - - - - - - - 1,426 3,271 6,567 9,916 - - - - - 216,878 206,678 214,333 - - - - - - 4,299,450 19,720,079 23,012,954 - - - - - - - - - - - - - 22,672,624 $ - 39,154,872 $ - 34,599,132 FY2010: Implementation of GASB-54 Fund Balance Classification 114 $ - 53,004,789 $ - 63,689,857 (763,744) - - (1) FY2007 : as restated for accounting error related to the accural of state shared revenues. * 22,893,640 - $ - 36,355,874 8,955,106 $ - 13,471,434 $ - 2,228,605 - 651,650 - - 22,807,012 $ (2,863,781) 20,363,506 Schedule 4 City of Flagstaff Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 REVENUES: Taxes $ Intergovernmental 30,986,091 $ 24,008,885 Grants and entitlements - 31,523,875 $ 33,736,154 $ 35,529,373 $ 39,104,903 $ 41,976,134 $ 43,964,317 $ 43,555,388 $ 43,200,268 $ 43,799,128 11,746,308 12,156,451 17,545,686 17,173,416 18,779,168 20,425,088 21,364,739 19,450,213 17,488,021 13,074,562 10,940,934 9,564,110 10,880,792 12,185,406 13,556,680 9,609,508 11,172,862 10,583,483 2,926,237 Charges for services 1,676,615 1,729,275 1,459,837 1,834,067 2,199,819 2,605,880 2,704,333 3,324,838 3,057,423 Special assessments 350,894 360,158 291,684 218,500 30,016 2,927 2,449 2,382 1,510,217 701,447 Licenses and permits 2,014,357 2,378,728 2,111,033 2,063,718 2,834,506 2,438,599 1,815,062 1,377,580 1,441,874 739,040 Fines and forfeitures 991,131 1,303,069 1,144,562 1,250,494 1,394,174 1,290,667 1,336,146 1,517,558 1,636,157 1,673,306 Rents - 845,443 985,907 1,220,007 1,195,464 1,480,686 1,496,858 1,421,772 1,588,214 1,617,912 Investment earnings - 274,472 115,433 1,589,293 2,238,285 3,920,473 3,731,116 1,366,931 413,594 224,363 Contributions - 334,235 21,917 22,229 129,930 2,981,982 1,308,938 1,328,524 544,393 166,417 3,169,599 781,496 905,717 277,972 204,678 1,377,552 819,325 381,984 228,969 1,719,608 63,197,572 64,351,621 63,869,629 71,115,449 77,385,983 89,039,474 91,160,312 85,251,204 84,244,184 81,638,962 Miscellaneous Total revenues EXPENDITURES: General governmental Public safety Public works Economic and physical development 5,834,543 4,453,180 5,335,890 6,158,308 6,621,976 8,194,214 10,229,814 9,848,252 7,926,726 7,113,922 16,057,019 17,202,980 18,015,837 19,140,415 21,626,547 22,994,522 25,696,174 27,374,083 25,159,777 24,476,615 950,242 948,944 966,546 1,005,745 1,168,424 1,615,049 1,617,311 1,645,703 1,360,447 1,299,027 10,187,883 7,060,275 6,289,966 6,424,057 7,640,313 9,344,676 10,335,964 9,991,927 8,601,808 8,202,024 Culture and recreation 10,030,055 7,599,703 7,724,481 8,341,105 7,178,029 8,648,628 10,267,649 12,158,087 10,615,754 10,782,848 Highways and streets 15,648,877 5,676,050 8,003,110 8,951,097 10,700,196 7,859,004 8,505,722 11,187,402 9,313,158 10,612,033 Debt service: Principal retirement 2,979,000 3,679,000 4,614,000 4,880,000 6,505,449 5,313,222 5,046,398 5,034,991 6,065,522 6,761,179 Interest and other charges 1,443,074 1,380,182 2,428,026 2,148,734 2,552,016 3,210,879 3,020,927 3,750,657 3,996,963 3,451,706 Capital outlay Total expenditures Excess of revenues over (under) expenditures 5,788,006 18,304,161 19,348,708 17,053,841 25,054,173 26,403,203 46,465,549 30,796,072 12,446,280 11,785,480 68,918,699 66,304,475 72,726,564 74,103,302 89,047,123 93,583,397 121,185,508 111,787,174 85,486,435 84,484,834 (5,721,127) (1,952,854) (8,856,935) (2,987,853) (11,661,140) (4,543,923) (30,025,196) (26,535,970) (1,242,251) (2,845,872) 3,100,000 9,375,000 OTHER FINANCING SOURCES (USES): Refunding bonds issued Bonds issuance - - Loan issued - - Payment to bond refunding escrow agent - Lease issued - Improvement District Debt - Bond premium - 720,000 - 25,000,000 - - (9,429,957) 3,800,000 (718,127) 190,240 - - 31,500,000 19,075,000 - - - - - - - - - - - - - - - - - - - - - 46,707 - - 1,059,221 - - 220,086 - - 109,352 58,370 Insurance recoveries - 1,920,000 Sale of capital assets - Transfers in Transfers out Total other financing sources (uses) Net change in fund balances - 8,330,000 946,236 634,411 2,114,398 37,892 252,329 2,176,808 63,894 1,084,211 45,655 12,994,104 12,708,480 12,996,534 15,312,931 17,317,133 17,756,847 17,181,576 21,626,308 15,224,243 13,661,630 (13,607,644) (13,184,784) (13,365,892) (16,582,052) (19,584,684) (19,488,466) (20,085,809) (23,359,573) (18,525,100) (14,268,052) 29,490,427 17,642,417 (727,425) (1,560,019) 2,486,460 $ 1,058,985 (3,234,667) 605,215 $ (1,347,639) 26,326,147 $ 17,469,212 4,645,277 $ 1,657,424 $ 17,829,287 $ 13,098,494 $ (30,752,621) $ (28,095,989) 8,091,724 $ 6,849,473 498,218 $ (2,347,654) Debt service as a percentage of non capital expenditures 7.00% 10.54% 13.19% 12.32% 115 14.15% 12.69% 10.80% 10.85% 13.78% 14.05% Schedule 5 City of Flagstaff Tax Revenue by Source, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (dollars in thousands) Bed, Board Fiscal General Secondary Franchise and City and Booze Transportation Year Property Tax Property Tax Other Taxes Sales Tax Tax Tax 2002 $ Total 3,070 $ 4,198 $ 1,791 $ 11,783 $ 3,817 $ 6,327 $ 30,986 2003 3,427 4,415 1,783 11,469 3,827 6,603 31,524 2004 3,425 4,628 2,262 12,055 4,063 7,303 33,736 2005 3,619 4,856 1,943 13,148 4,331 7,632 35,529 2006 4,209 4,881 2,083 14,707 4,623 8,602 39,105 2007 4,453 5,188 1,838 16,071 4,992 9,434 41,976 2008 4,616 6,219 2,189 16,150 5,187 9,605 43,966 2009 4,882 7,254 2,246 14,384 5,052 10,035 43,853 2010 5,150 7,620 2,133 13,595 5,074 9,628 43,200 2011 5,259 7,184 2,339 13,893 5,259 9,865 43,799 71.30% 71.13% 30.60% 17.91% 37.78% 55.92% 41.35% Change 2002-2011 116 Schedule 6 City of Flagstaff Intergovernmental Revenue by Source, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Local Fiscal State State County Auto Highway Transportation State Federal State Grants County County Library Year Sales Tax Income Tax In-Lieu Tax User Tax Assistance HB 2565 Grants & Other State LEAF IGA District Funding * Other 1,423,105 $ 274,091 2002 $ 4,076,034 $ 5,526,159 $ 1,803,900 $ 7,771,416 $ 300,246 $ 47,598 $ 2,348,793 $ 437,543 2003 4,136,724 5,557,918 2,378,466 7,408,116 315,026 - 1,743,613 823,701 2004 4,449,982 4,777,145 2,427,367 6,975,351 313,868 - 1,160,966 454,212 2005 4,900,117 4,918,476 2,461,425 7,171,383 313,843 - 1,772,181 2006 5,652,335 5,655,641 2,655,653 7,942,771 304,341 55,665 2007 5,815,473 6,946,680 2,792,404 7,855,427 293,502 2008 5,623,144 8,610,567 2,758,307 7,422,359 2009 4,868,072 9,149,290 2,611,289 2010 4,490,087 7,899,626 2011 4,711,821 5,955,305 $ - $ 24,008,885 2,564,691 850,000 25,778,255 468,069 1,987,433 148,992 23,163,385 2,868,033 628,198 2,068,947 39,640 27,142,243 2,386,011 940,441 420,426 2,241,811 - 28,255,095 - 2,822,315 1,214,162 721,797 2,559,375 - 31,021,135 225,965 58,782 4,868,431 981,142 668,153 3,559,362 - 34,776,212 6,412,329 251,536 - 1,711,609 1,234,065 897,337 4,125,223 32,795 31,293,545 2,490,360 6,429,355 156,218 - 3,885,697 701,592 757,241 3,762,831 50,068 30,623,075 2,481,126 6,300,885 - 3,181,076 1,101,522 744,070 3,531,607 64,092 28,071,504 - * - As restated due to change in accounting error identified in FY2010 117 - $ Total Schedule 7 City of Flagstaff Full Cash Value of Taxable Property Last Ten Fiscal Years (modified accrual basis of accounting) Vacant, Centrally Less: Total Taxable Total Fiscal Valued Commercial and Government Residential Tax-exempt Assessed Direct Year Property Property Property Property Property Value Tax Rate 33,068,867 $ 197,065,506 $ 60,199,456 $ 201,111,291 $ 42,767,442 $ 448,677,678 1.7127 2003 35,621,681 194,944,521 62,099,966 215,320,769 43,729,051 464,257,886 1.7127 2004 29,405,068 211,870,593 65,128,715 242,190,760 46,939,696 501,655,440 1.7127 2005 27,328,709 221,179,062 82,683,618 276,187,028 50,697,830 556,680,587 1.7127 2006 27,532,435 237,795,313 100,985,606 315,182,546 57,296,001 624,199,899 1.6627 2007 28,051,846 261,009,908 125,377,258 398,783,838 62,684,483 750,538,367 1.5929 2008 28,940,765 281,348,845 140,117,313 500,150,890 71,775,990 878,781,823 1.5519 2009 27,478,520 286,101,952 151,630,088 529,950,871 78,819,714 916,341,717 1.5519 2010 25,750,042 274,992,074 146,079,309 502,351,037 85,132,993 864,039,469 1.5519 2011 26,651,155 265,230,915 133,909,755 447,421,001 81,844,375 791,368,451 1.4845 2002 $ Agricultural, Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll Note: A portion of city property is reassessed every year. Property is assessed at actual value, therefore, the assessed values are equal to actual value. Tax rates are per $100 of assessed value. 118 Schedule 8 City of Flagstaff City Taxable Revenue for Major Categories Last Ten Fiscal Years (dollars in thousands) 2002 Construction $ Building Materials 2003 134,084 $ 2004 151,652 $ 2005 158,506 $ 2006 163,846 $ 233,747 2007 $ 260,024 2008 $ 263,386 2009 $ 181,245 2010 $ 150,239 2011 $ 166,894 61,118 63,618 70,063 72,152 82,481 79,703 75,493 66,641 60,143 61,781 Auto Sales 119,210 118,640 124,147 127,760 129,671 133,497 118,282 78,819 85,806 99,786 Restaurants and Bars 191,258 191,883 202,966 215,624 232,359 248,819 255,578 250,555 251,271 261,384 Retail 497,753 502,235 529,705 556,165 586,841 637,225 619,805 582,029 546,765 544,356 Other 115,666 118,333 125,687 134,824 144,635 154,183 163,463 155,193 152,042 151,461 - - 53 199 4,892 68,840 71,299 69,175 66,392 Utilities TOTAL $ 1,119,089 $ 1,146,361 $ 1,211,127 $ 1,270,570 $ 1,414,626 119 $ 1,582,291 $ 1,567,306 $ 1,383,657 $ 1,312,658 $ 63,784 1,349,446 Schedule 9 City of Flagstaff Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years (rate per $100 of assessed value) Fiscal Year City School Community District College County Total 2002 1.7127 6.6741 0.5717 1.0951 10.0536 2003 1.7127 6.7590 0.5809 1.1941 10.2467 2004 1.7127 6.3679 0.5775 1.2369 9.8950 2005 1.7127 5.7236 0.5660 1.2212 9.2235 2006 1.6627 6.0786 0.5525 1.2010 9.4948 2007 1.5929 5.9009 0.5269 0.7521 8.7728 2008 1.5519 4.7713 0.4865 0.7588 7.5685 2009 1.5519 4.8334 0.4643 0.7603 7.6099 2010 1.4913 3.8860 0.4267 0.7244 6.5284 2011 1.4845 4.6772 0.4308 0.7245 7.3170 Note: Tax rates are per $100 assessed valuation. 120 Schedule 10 City of Flagstaff Principal Property Tax Payers Current Year and Nine Years Ago 2011 Total Assessed Taxpayer * Arizona Public Service Company Value $ Rank 2002 As a Percentage As a Percentage of the City Total of the City Total Secondary Total Assessed Assessed Valuation Value 15,448,320 1 1.95% 14,307,506 2 1.81% Fidelity National Title Ins Agency of Coco Inc Trust 5,843,515 3 0.74% Qwest Corporation 5,250,832 4 0.66% Nestle Purina Petcare Company 4,634,404 5 Flagstaff Mall Associated Ltd. Partnership 3,608,680 Walgreens Drug Company Assessed Valuation 12,690,610 1 3.11% 10,577,757 2 2.59% 0.59% 5,274,488 5 1.29% 6 0.46% 2,996,319 8 0.73% 2,789,765 7 0.35% 2,940,753 9 0.72% Consolidated Investments, Inc. 2,666,072 8 0.34% 3,086,173 7 0.76% Hopi tribe Econnmic Development Corp. 2,385,090 9 0.30% SACO Management, Inc. 2,370,863 10 0.30% 2,498,291 10 0.61% W L Gore & Associates Inc. $ Secondary Rank Northern Arizona Gas Division (Citizens Utilities) - 0.00% 9,194,655 3 2.25% US West Communications - 0.00% 7,081,338 4 1.73% Little America Refining Co - 0.00% 5,149,226 6 1.26% Total Principal Taxpayers $ 59,305,047 7.50% Source: Coconino County Assessor Office 121 $ 61,489,610 15.05% Schedule 11 City of Flagstaff Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Collected within the Year Taxes Levied Ended for the June 30, Fiscal Year 2002 $ Fiscal Year of the Levy Amount Collections Percentage in Subsequent of Levy Years 7,216,410 $ 7,194,162 99.7% 2003 7,609,112 7,621,044 100.0% 2004 7,897,298 7,791,735 2005 8,494,694 2006 Percentage Amount of Levy 74,106 $ 7,268,268 100%* 92,457 7,718,309 99.9%* 98.7% 261,445 8,053,180 99.7%* 8,330,157 98.1% 145,051 8,475,208 99.7%* 9,075,322 8,958,733 98.7% 131,194 9,089,927 99.5%* 2007 9,615,015 9,495,935 98.8% 145,415 9,641,350 99.8%* 2008 10,935,835 10,728,465 98.1% 106,120 10,834,585 99.5% 2009 12,253,760 11,934,997 97.4% 200,344 12,135,341 99.3% 2010 12,750,836 12,477,413 97.9% 293,015 12,770,429 100.0% 2011 12,497,535 12,113,128 96.9% 330,118 12,443,246 96.9% * Percentage of Levy is estimated 122 $ Total Collections to Date Schedule 12 City of Flagstaff Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years City Fiscal General Bed, Board Year Sales Tax & Beverage Transportation State of Coconino Arizona County Total 2002 1.0000% 2.0000% 0.5745% 5.6000% 0.8000% 9.9745% 2003 1.0000% 2.0000% 0.5745% 5.6000% 0.9250% 10.0995% 2004 1.0000% 2.0000% 0.6010% 5.6000% 0.9250% 10.1260% 2005 1.0000% 2.0000% 0.6010% 5.6000% 0.9250% 10.1260% 2006 1.0000% 2.0000% 0.6010% 5.6000% 0.9250% 10.1260% 2007 1.0000% 2.0000% 0.6010% 5.6000% 1.1250% 10.3260% 2008 1.0000% 2.0000% 0.6010% 5.6000% 1.1250% 10.3260% 2009 1.0000% 2.0000% 0.7210% 5.6000% 1.1250% 10.4460% 2010 1.0000% 2.0000% 0.7210% 6.6000% 1.1250% 11.4460% 2011 1.0000% 2.0000% 0.7210% 6.6000% 1.1250% 11.4460% Source: City of Flagstaff www.flagstaff.az.gov (Sales Tax/Business Licenses Division) 123 Schedule 13 City of Flagstaff Ratios of Outstanding Debt by Type Last Nine Fiscal Years (dollars in thousands, except per capita) Governmental Activities Business-Type Activities Municipal General Special Facility COP General Total Percentage Fiscal Obligation Assessment Revenue Corporation Capital Obligation Revenue Loan Capital Primary of Personal Per Year Bonds Bonds Bonds Bonds Leases Bonds Bonds Payable Leases Government Income Capita 2003 $ 7,485 $ 944 $ 14,790 $ 4,445 $ - $ 22,958 Term $ 6,537 $ 3,716 $ - $ 60,875 1.9% 993.55 2004 5,795 685 13,380 28,170 - 21,253 6,290 3,380 - 78,953 2.3% 1,290.40 2005 4,285 415 11,555 26,895 3,800 18,880 6,035 3,031 2,732 77,628 2.2% 1,251.46 2006 32,875 340 9,665 25,610 3,455 16,294 5,770 2,671 2,652 99,332 2.9% 1,601.35 2007 31,230 19,339 7,725 24,315 3,097 13,310 5,496 32,957 4,482 141,951 3.8% 2,211.07 2008 29,350 19,257 6,325 23,000 2,728 10,515 5,212 32,275 4,227 132,889 3.5% 2,069.92 2009 27,645 19,169 4,865 21,625 2,430 7,460 4,918 37,006 3,960 129,078 3.4% 2,010.56 2010 25,865 18,615 6,665 19,890 6,964 5,690 4,614 36,257 3,679 128,239 3.4% 1,997.49 2011 24,015 18,130 4,930 18,095 1,542 3,830 4,299 37,491 3,384 115,716 3.1% 1,766.06 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 18 for personal income and population data. The City implemented GASB-34 for the fiscal year ended June 30, 2003. 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. These amounts are presented on the accrual basis of accounting. 124 Schedule 14 City of Flagstaff Ratios of General Bonded Debt Outstanding Last Nine Fiscal Years (dollars in thousands, except per capita) General Bonded Debt Outstanding Governmental Business-Type Percentage Activities Activities of Actual General General Taxable Fiscal Obligation Obligation Year Bonds Bonds 2003 $ 7,485 $ Value of Total 22,958 $ Property 30,443 6.6% Per (a) Capita $ (b) 498.82 2004 5,795 21,253 27,048 5.4% 441.46 2005 4,285 18,880 23,165 4.2% 378.61 2006 32,875 16,294 49,169 7.9% 792.66 2007 31,230 13,310 44,540 5.9% 718.04 2008 29,350 10,515 39,865 4.5% 620.95 2009 27,645 7,460 35,105 3.8% 542.64 2010 25,865 5,690 31,555 3.7% 491.51 2011 24,015 3,830 27,845 3.5% 424.97 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. a: See Schedule 7 for property value data b: Population data can be found in Schedule 18 The City implemented GASB-34 for the fiscal year ended June 30, 2003. 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. These amounts are presented on the accrual basis of accounting. 125 Schedule 15 City of Flagstaff Direct and Overlapping Governmental Activities Debt (dollars in thousands, except per capita) Estimated Governmental Unit Estimated Share of Debt Percentage Overlapping Outstanding Applicable* Debt Debt repaid with property taxes Flagstaff Unified School District $ 40,650 63.21% $ 25,696 Other debt Coconino County Revenue Bonds 3,855 43.01% Coconino County Special Assessments 1,646 0.00% 1,658 - Subtotal, overlapping debt 27,354 City direct debt 66,712 Total direct and overlapping debt $ 94,066 Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. 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. * 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. 126 127 Schedule 16 City of Flagstaff Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) Fiscal Year 20% Debt Limit 2002 Debt limit equal to 20% of assessed valuation $ Total net debt applicable to 20% limit Legal debt margin (Available borrowing capacity) $ Total net debt applicable to the 20% limit 85,806 2003 $ 92,852 2004 $ 100,331 2005 $ 111,336 2006 $ 2007 124,840 $ 28,425 26,283 24,493 21,644 35,227 57,381 $ 66,569 $ 75,838 $ 89,692 $ 89,613 $ 49.54% 39.48% 32.30% 24.13% 39.31% 150,108 2008 $ 43,860 175,756 2009 $ 39,514 183,268 2010 $ 35,105 172,808 2011 $ 35,105 158,274 27,845 106,248 $ 136,242 $ 148,163 $ 137,703 $ 41.28% 29.00% 23.69% 25.49% 130,429 21.35% as a percentage of debt limit Fiscal Year 6% Debt Limit 2002 Debt limit equal to 6% of assessed valuation $ Total net debt applicable to 6% limit Legal debt margin (Available borrowing capacity) Total net debt applicable to the 6% limit 25,742 2003 $ 5,560 $ 27,855 2004 $ 4,160 20,182 $ 23,695 $ 27.55% 17.56% 30,099 2005 $ 2,555 33,401 2006 $ 1,225 27,544 $ 32,176 $ 9.28% 3.81% as a percentage of debt limit 128 37,452 2007 $ 14,202 23,250 $ 61.08% 45,032 2008 $ 52,727 2009 $ 54,981 2010 $ - 51,842 2011 $ 680 351 - 44,352 $ 52,376 $ 54,981 $ 51,842 $ 1.53% 0.67% 0.00% 0.00% 47,482 - 47,482 0.00% Schedule 16 (continued) City of Flagstaff Legal Debt Margin Information Legal Debt Margin Calculation for Fiscal Year 2011 Net Secondary Assessed Value as of June 30, 2011 $ 791,371,939 $ 158,274,388 20% Limitation Debt Limit of 20% of Assessed Value Debt applicable to limit: 27,845,000 General Obligation Bonds Legal 20% debt margin (Available borrowing capacity) $ 130,429,388 $ 47,482,316 6% Limitation Debt Limit of 6% of Assessed Value Debt applicable to limit: General Obligation Bonds Legal 6% debt margin (Available borrowing capacity) $ 47,482,316 129 Schedule 17 City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years Water and Sewer Revenue Bonds Net Revenue Available Fiscal Gross Year Revenues (1) 2002 $ 17,637,708 Debt Service Requirements for Debt Expenses (2) $ 9,587,743 Service $ 8,049,965 Principal (3) $ - Interest (4) $ - Total $ Coverage - - 2003 16,769,463 9,865,571 6,903,892 238,431 146,694 385,125 17.93 2004 17,227,848 10,645,073 6,582,775 246,890 231,034 477,924 13.77 2005 16,851,956 10,693,901 6,158,055 255,648 223,153 478,801 12.86 2006 17,755,038 11,791,895 5,963,143 264,717 214,084 478,801 12.45 2007 18,235,171 12,892,795 5,342,376 274,108 204,693 478,801 11.16 2008 18,380,351 16,229,816 2,150,535 283,832 194,969 478,801 4.49 2009 17,459,105 14,633,986 2,825,119 2,130,093 1,287,569 3,417,662 0.83 2010 17,585,198 11,758,135 5,827,063 2,356,705 1,483,072 3,839,777 1.52 2011 18,824,260 11,663,208 7,161,052 2,443,196 1,475,327 3,918,523 1.83 (1) Includes total operating revenues and investment income of the water and wastewaste fund. (2) Includes total operating expenses of the water and wastewater fund less depreciation. (3) Includes principal for water and sewer revenue bonds, water infrastructure finance authority (WIFA). (4) Bond interest payments only. Does not include amortization of loss on refunding, capitalized interest, agent fees or amortization of bond issuance costs that are included in interest expense on the statement of revenues, expenses, and changes in net assets. 130 Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years Highway User Revenue Bonds Highway Fiscal User Tax Year Revenue 2002 $ 7,771,416 Debt Service Requirements Principal (1) $ 1,490,000 Interest (2) $ 900,492 Total $ Coverage 2,390,492 3.25 2003 7,408,116 1,730,000 668,260 2,398,260 3.09 2004 6,975,351 1,410,000 607,160 2,017,160 3.46 2005 7,171,383 1,825,000 571,910 2,396,910 2.99 2006 7,540,081 1,890,000 526,285 2,416,285 3.12 2007 7,855,427 1,940,000 469,585 2,409,585 3.26 2008 7,422,359 1,400,000 411,385 1,811,385 4.10 2009 6,412,329 1,460,000 344,010 1,804,010 3.55 2010 6,429,355 1,520,000 377,786 1,897,786 3.39 2011 6,300,885 2,024,304 331,678 2,355,982 2.67 (1) Includes 1992 Jr. Lien and Series 2003 Refunding. (2) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, and changes in fund balances. 131 Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Ten Fiscal Years Municipal Facility Corporation Bonds MFC Debt other than Transportation Debt Service Requirements Fiscal Year (1) 2002 Revenue (2) $ 9,377,511 Principal (3) $ - Interest (4) $ 224,682 Total $ Coverage 224,682 41.74 2003 9,232,244 255,000 207,398 462,398 19.97 2004 8,764,929 265,000 197,198 462,198 18.96 2005 9,356,995 275,000 186,598 461,598 20.27 2006 10,847,378 285,000 175,598 460,598 23.55 2007 12,302,955 295,000 164,198 459,198 26.79 2008 13,771,313 310,000 152,398 462,398 29.78 2009 13,557,828 320,000 139,534 459,534 29.50 2010 11,929,099 335,000 125,614 460,614 25.90 2011 10,206,755 350,000 110,371 460,371 22.17 (1) Trend information not available prior to fiscal year 2002. (2) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. (3) MFC 1992 Refunding series 12 2001 - USGS projects. (4) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, and changes in fund balances. 132 Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Eight Fiscal Years Municipal Facility Corporation Bonds Transportation MFC Debt Debt Service Requirements Fiscal Year (1) 2004 Revenue (2) $ 29,860,760 Principal (3) $ 1,010,000 Interest $ 839,966 Total $ Coverage 1,849,966 16.14 2005 31,085,459 1,000,000 1,037,100 2,037,100 15.26 2006 35,725,917 1,000,000 987,100 1,987,100 17.98 2007 39,681,382 1,000,000 964,600 1,964,600 20.20 2008 41,483,415 1,005,000 942,100 1,947,100 21.31 2009 38,586,144 1,055,000 891,850 1,946,850 19.82 2010 35,708,503 1,400,000 860,200 2,260,200 15.80 2011 33,777,368 1,445,000 814,700 2,259,700 14.95 (1) Trend information not available prior to fiscal year 2004. (2) Pledged revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, francise sales tax, licenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service requirements for transportation MFC bonds. (3) MFC revenue bond series 2003 Fourth Street. 133 Schedule 17 (continued) City of Flagstaff Pledged Revenue Coverage Last Fiscal Year Greater Arizona Development Authority Revenue Bonds Debt Service Requirements Fiscal Year (1) Revenue (2) Principal (3) Interest Total Coverage 2010 9,031,670 50,000 56,297 106,297 84.97 2011 7,169,310 115,000 135,938 250,938 28.57 (1) New Issue no trend information available. (2) Pledges revenues on the Greater Arizona Development Authority Bonds include the state revenue sharing. Less the debt service . (3) GADA revenue bond series 2009C 134 Schedule 18 City of Flagstaff Demographic and Economic Statistics Last Ten Fiscal Years Year Population Personal Per Education Education Income Capita Level - Percent Level - Percent (thousands Personal Median High School Bachelor's Degree School Unemployment of dollars) Income Age Grad or Higher or Higher Enrollment Rate 2002 59,160 $ 2,908,992 $ 24,259 26.8 89.8% 39.4% 13,566 5.10% 2003 61,030 2,999,350 24,795 26.8 89.8% 39.4% 12,905 5.80% 2004 61,270 3,226,683 26,328 26.8 89.8% 39.4% 13,176 5.20% 2005 61,185 3,472,652 28,045 26.8 89.8% 39.4% 13,389 5.10% 2006 62,030 3,472,652 28,045 26.8 89.8% 39.4% 13,171 5.00% 2007 62,030 3,472,652 28,045 26.8 89.8% 39.4% 13,453 3.40% 2008 64,200 3,767,194 29,879 26.8 89.8% 39.4% 13,040 4.60% 2009 64,693 3,767,194 29,879 26.8 89.8% 39.4% 12,910 7.50% 2010 65,522 3,767,194 29,879 26.8 89.8% 39.4% 12,600 7.70% 2011 65,870 4,481,137 34,510 26.6 90.0% 39.2% 11,839 8.90% Sources: Population - Arizona Department of Commerce, except for 2000 which is the official census number Personal 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 Personal Income-2011 Arizona Department of Administration-Office of Employment and Population Statistics, estimate from 2009 Per Capita Income - 1998 - 2005 Arizona Department of Economic Security, Workforce Development Statistics Per Capita Income - 2006 - 2009 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 Per Capita Income-2011 Arizona Department of Administration-Office of Employment and Population Statistics, estimate 2009 Median age - 2000 US Census Education level - 2000 US Census School enrollment - Arizona Department of Education and National Center for Education Statistics Unemployment - Arizona Department of Economic Security, August 2009 135 Schedule 19 City of Flagstaff Principal Employers Current Year and Nine Years Ago 2011 Employer 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 SCA Tissue Nestle Purina Employees 2,497 2,104 1,900 1,436 1,294 872 468 421 279 230 Total 11,501 2010 U.S. Census Labor Force 55,170 Rank 2006 (1) Percentage of Total City Employment 1 2 3 4 5 6 7 8 9 10 Employees 4.53% 3.81% 3.44% 2.60% 2.35% 1.58% 0.00% 0.85% 0.76% 0.51% 0.42% 3,393 1,999 1,300 1,700 1,075 948 400 400 400 279 - 20.85% 11,894 55,170 Source: (1) Arizona Department of Economic Security This is the most historical information available * 2010 Employees is estimated Long-term historical information not available. 136 Rank 1 2 3 4 5 6 7 8 9 10 Percentage of Total City Employment 6.15% 3.62% 2.36% 3.08% 1.95% 1.72% 0.73% 0.73% 0.73% 0.51% 0.00% 21.56% Schedule 20 City of Flagstaff Full-time Equivalent City Government by Function/Program Last Ten Fiscal Years Full-time Equivalent Employees as of June 30 Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011 General Government Management services 77.00 74.00 73.00 74.25 75.75 82.89 87.39 89.14 86.75 86.50 Capital management 19.00 18.50 15.50 14.50 13.50 13.50 13.50 13.50 11.00 11.00 City Court 24.25 25.25 26.50 26.50 26.50 26.50 27.63 29.63 25.88 25.18 148.25 148.25 150.00 151.00 160.00 164.00 174.00 181.00 168.00 168.00 97.25 96.75 96.75 96.75 97.75 100.75 101.75 101.75 99.00 92.00 26.75 27.00 27.00 25.00 26.00 27.00 31.00 31.00 29.00 26.50 Public Safety Police Fire Public Works Economic and physical development Building 48.00 49.00 43.75 43.00 49.25 52.25 58.50 57.50 47.20 41.00 Planning 17.25 17.25 17.25 17.25 15.25 21.75 20.88 24.88 24.38 21.88 Tourism 6.00 6.00 11.75 13.75 13.75 15.75 16.75 16.75 15.75 14.25 Culture and recreation Library 38.75 39.50 39.50 40.00 40.00 43.13 47.14 53.77 50.77 50.77 Parks, recreation, and beautificatioin 79.25 74.50 67.75 63.95 67.53 68.82 98.23 99.69 87.86 86.86 Highways and Streets 35.25 36.25 36.25 36.25 36.25 37.25 40.56 41.06 36.31 36.31 Water and wastewater 74.75 74.50 73.00 74.50 76.50 79.00 80.25 81.75 64.50 62.50 Environmental services 45.00 45.00 45.75 52.25 54.00 62.60 61.60 68.10 65.58 63.58 9.50 9.50 9.50 9.50 9.50 10.00 10.50 10.50 9.50 9.50 5.75 5.00 6.50 6.50 6.50 6.50 6.00 Airport Stormwater - - Flagstaff Housing Authority - - - - - - - - - 746.25 741.25 739.00 743.45 768.03 811.69 876.18 906.52 827.48 Total * City-wide reorganization affected distribution of employees. Customer Service moved from Water/Wastewater to Management Services. 137 6.00 23.50 825.33 Schedule 21 City of Flagstaff Operating Indicators by Function/Program Last Ten Fiscal Years Fiscal Year Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Court Criminal Filings 11,005 11,068 10,236 9,227 9,705 9,553 11,659 9,330 9,326 8,531 Traffic filings 10,431 10,613 10,388 11,253 10,575 8,951 10,665 10,639 13,471 12,010 575 622 682 673 616 530 744 445 468 370 3,386 3,658 5,616 6,722 7,684 8,227 7,616 7,550 6,668 9,827 352 216 265 228 351 314 267 263 247 819 2,094 1,205 2,023 1,905 1,323 1,472 1,573 2,151 1,906 887 Inspections assigned NA NA 2,212 2,006 1,966 1,984 1,981 1,794 572 1,174 Plan Reviews NA NA 1,340 1,348 1,280 1,314 1,284 1,250 401 528 Plan Assessment (Acres) NA 1,516 2,020 1,065 585 - 400 - - Site Marking (Acres) NA 759 408 311 662 764 178 224 294 586 Site Thinning (Acres) NA 882 521 792 694 1,173 902 761 376 809 Prescription Burn (Acres) NA 917 709 834 557 1,210 1,070 1,190 551 342 Domestic Violence/Other filings Fire Emergency responses Fires response Other calls Fuel Management N/A* Police Felony reports NA NA NA 4,979 5,337 4,973 3,978 3,661 3,073 2,973 Misdemeanor reports NA NA NA 12,378 13,381 13,123 13,413 12,939 12,293 11,786 Domestive violence incidents NA NA NA 1,464 1,598 1,625 1,573 1,470 1,953 1,923 Non-crime reports NA NA NA 8,818 9,136 8,913 11,043 10,996 9,480 9,827 Accident reports NA NA NA 3,616 3,313 3,374 3,322 2,917 2,776 2,735 Calls dispatched to Police/Sheriff NA NA NA 73,559 77,239 75,791 73,364 70,908 61,175 57,899 Calls dispatched to Fire NA NA NA 11,266 11,741 12,364 11,907 12,527 11,011 11,130 Calls dispatched to Medical NA NA NA 9,435 9,175 9,960 - - - - 138 Schedule 21 (continued) City of Flagstaff Operating Indicators by Function/Program Last Ten Fiscal Years Fiscal Year 2002 Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 2010 Streets Potholes repaired NA NA NA 2,988 1,962 2,443 4,032 4,373 3,256 1,498 713,193 698,227 673,786 653,743 705,638 642,643 651,814 627,202 651,373 850,327 36,057 34,984 38,387 42,483 39,646 44,598 44,088 65,418 68,296 63,407 110,684 128,153 109,608 140,233 154,321 153,121 157,792 142,409 121,529 138,703 7,886 9,126 9,213 9,816 9,866 10,356 10,472 9,842 10,610 8,869 Airport Fuel Flowage (Gallons Sold) Enplanements Refuse collection Refuse collected (Landfill tonnage) Recyclables collected (total tons) Community Development Residential Permit Valuation (1) $ 59,963,201 $ 78,719,935 $ 67,214,811 $ 87,180,707 $ 97,895,269 $ 38,895,496 $ 25,278,055 $ 31,498,803 $ 9,314,074 (1) Commercial Permit Valuation (1) $ 29,051,528 $ 12,843,323 $ 18,123,934 $ 12,324,654 $ 26,130,677 $ 37,962,373 $ 27,199,698 $ 18,594,665 $ 13,395,325 (1) Library Visits NA NA 564,065 582,726 625,103 643,174 680,253 738,603 743,169 763,928 Circulation NA NA 781,893 776,180 758,468 789,621 782,908 887,887 979,962 1,029,062 Tourism Revenue Per Available Room (RevPar) $ 48.33 $ 45.36 $ 47.95 $ 52.90 $ Sources: Various city departments (1) This informaition is gathered and reported on a calendar year basis versus a fiscal year basis for all other measurements * Records no longer tracked These accumulation of these statistics began in FY2002 so 10 years historical information is not available. 139 61.47 $ 66.86 $ 60.52 $ 43.21 $ 43.05 $ 45.26 Schedule 22 City of Flagstaff Capital Asset Statistics by Function/Program Last Ten Fiscal Years Function/Program 2002 2003 2004 Fiscal Year 2005 2006 2007 2008 2009 2010 2011 Public Safety Police patrol units (Includes Motorcycle units) Number of fire hydrants Numer of fire stations 32 32 26 26 26 31 34 34 35 37 2,382 2,435 2,478 2,478 2,598 2,743 3,148 3,150 3,143 3,176 6 6 6 6 6 6 6 7 7 7 27 27 28 27 27 27 26 26 26 24 3 3 4 4 4 4 4 4 4 5 586 586 704 702 702 705 712 712 712 735 22 22 28 32 34 34 48 51 51 53 6 6 5 5 5 5 6 6 6 4 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 350 350 365 365 386 403 690 695 813 814 2,853 2,898 2,921 2,921 3,037 3,107 3,201 3,220 3,350 3,466 Water and wastewater Miles of sewer (2) Number of manholes Total active water accounts Average gallon water usage per household per month 250 271 275 275 293 309 265 270 270 271 5,857 5,979 6,097 6,097 6,496 6,906 7,107 7,261 7,261 7,308 15,802 16,356 16,948 18,039 17,872 18,758 18,849 18,371 19,042 22,092 6,897 6,727 6,070 6,096 5,488 5,600 5,456 5,010 5,123 5,107 Airport Fixed base operators 1 1 1 1 1 1 1 1 1 1 Locally based aircraft 130 130 130 130 130 134 134 134 120 122 Tiedowns 49 49 49 29 18 11 11 11 14 11 Enclosed hangars 42 42 42 42 61 61 61 61 61 61 Open hangars 38 38 38 38 48 48 48 48 48 48 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 140 Schedule 23 City of Flagstaff Insurance Summary In Effect June 1, 2010 to July 1, 2011 Coverage Limit of Liability Liability Insurance: General Liability* (Includes 2 skateboard parks, bike $ Coverage 1,000,000 / per occurrence Property Insurance: Blanket Buildings and Personal Property $ 189,975,104 / $25,000 deductible Flood Zones B and C $ 10,000,000 / $50,000 deductible Business Income/Extra Expense $ $ 2,000,000 / aggregate Law Enforcement Liability* $ 1,000,000 / each wrongful act Auto Liability* $ 1,000,000 / each accident Auto Physical Damage $ 1,000,000 / total limit Flood Zone A Properties $ 5,000,000 / total limit $ 3,000,000 / total limit freestyle park, EMT's) Public Entity Management Errors and Omissions* (Claims Made Retro Date 6-1-95) Employment Practices Liability* (Claims Made Retro Date 6-1-95) Employee Benefits Liability* (Claims Made) $ $ $ $ 1,000,000 / aggregate 1,000,000 / each wrongful act 5,000,000 / each wrongful act Public Entity Cyber Liability (Claims Made Retro Date 6-1-09) ($5,000 deductible each wrongful act) Employer's Liability Worker's Compensation $ 1,000,000 / each wrongful act $ 1,000,000 / total limit $ 1,000,000 / each accident $ 1,000,000 / disease policy limit $ Boiler and Machinery included Earthquakes Municipal Court 1,000,000 / each wrongful act * Liability Claims are Subject to a $50,000 Self Insurance Retention 1,000,000 / disease employee Statutory Limit of Liability City Hall, Library Inland Marine: $ $ 15,000,000 / $25,000 deductible 7,100,000 / 72 hours 24,986,406 / $1000/comprehensive / $5000/collision deductible $ 242,000 / building $ 500,000 / each building $ $ 122,700 / contents 500,000 / contents each ($5,000 deductible) Contractors Equipment (actual cash value) $ Lab Equipment $ Computer Equipment and Peripherals $ 1,438,500 / $1,000 deductible Fine Arts & exhibition floater - Max $25,000 per ite $ 78,700 / $1,000 deductible Bookmobile book collection Employee Hand Tools Data and Media $ $ $ 6,076,150 / $5,000 deductible 238,582 / $1000 deductible 11,300 / $1,000 deductible 35,000 / $5,000 deductible 500,000 / $1,000 deductible Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employer's Liability Public Entity Management, Employee Benefits $ 20,000,000 / each event/each wrongful Act / general total limit Max $25,000 per item (Excludes Airport, Housing Authority, Employment related practices, Failure to Supply Services, Mold, Terrorism, Asbestos, Lead, Condemnation, Sexual Abuse) Excess Liability #2 Following Form Over Excess Liability # 1 (Excluding asbestos, discrimination, terrorism, nuclear) Aviation: General Liability Products/Completed Operations Personal Injury, Advertising & Malpractice Hangar Keepers Liability $ $ $ 5,000,000 / each occurrence/ 5,000,000 / general aggregate City Hall, Visitor Center, Airport Terminal Crime: Blanket Public Employees and Treasurer $ 1,000,000 / $5,000 deductible Computer & Funds Transfer Fraud $ 1,000,000 / $5,000 deductible Dishonesty Bond Including Faithful Performance of Duty Theft, Disappearance, & Destruction (Inside and Outside) $ 1,000,000 / $5,000 deductible 40,000,000 / each occurrence Depositors Forgery or Alteration $ 1,000,000 / $5,000 deductible $ 40,000,000 Credit, Debit or Charge Card forgery $ 1,000,000 / $5,000 deductible $ 40,000,000 / each occurrence $ 1,000,000 / Medical Assistance $ $ 40,000,000 / aggregate Money Orders & Counterfeit, aggregate 40,000,000 / each aircraft International Travel - Executive Assistance 141 $ $ 1,000,000 / $5,000 deductible 250,000 Accidental death 142