F L AGSTA F F, A R I ZO N A 2013 The Flagstaff Watershed Protection Project: Conserving Flagstaff’s Most Critical Resource City of Flagstaff Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2013 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2013 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, 2013 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 Position ................................................................................................................... 17 Statement of Activities ....................................................................................................................... 18 Fund Financial Statements: Balance Sheet – Governmental Funds.................................................................................................. 20 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Activities ......... 22 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ............ 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ....................................... 26 General Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 28 Highway User Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 29 Transportation Fund - Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual .............................................................................................. 30 Statement of Net Position – Proprietary Funds .................................................................................... 32 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds.......................................................................................... 34 Statement of Cash Flows – Proprietary Funds ..................................................................................... 36 Notes to the Financial Statements ............................................................................................................. 40 COMBINING STATEMENTS Non-Major Funds – Other Governmental Funds ........................................................................................ 87 Combining Statements and Schedules: Combining Balance Sheet – Non-major Governmental Funds ............................................................. 88 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Non-major Governmental Funds ........................................................................ 90 SUPPLEMENTAL INFORMATION Capital Assets Used in the Operations of Governmental Funds: i Schedule By Function and Activity ...................................................................................................... 94 Schedule of Changes By Function and Activity .................................................................................... 96 Budgetary Comparison Schedules – Other Major Governmental Funds Special Assessment Bond Fund........................................................................................................... 97 Capital Projects Fund ......................................................................................................................... 98 Budgetary Comparison Schedules – Non-Major Governmental Funds Library Fund ....................................................................................................................................... 99 BBB Fund .......................................................................................................................................... 100 Community Redevelopment Fund ..................................................................................................... 101 Metropolitan Planning Organization Fund ........................................................................................ 102 General Obligation Bond Fund .......................................................................................................... 103 Secondary Property Tax Revenue Fund ............................................................................................. 104 Financial Data Submission Schedules Net Position Accounts ...................................................................................................................... 105 Revenue, Expenses, and Changes in Fund Net Position Accounts ..................................................... 107 Revenue, Expenses, and Changes in Fund Net Position Accounts-Public Housing-Consolidated ...... 110 STATISTICAL SECTION Net Position by Component .................................................................................................................... 114 Changes in Net Position .......................................................................................................................... 116 Fund Balances, Governmental Funds ....................................................................................................... 118 Changes in Fund Balances, Governmental Funds .................................................................................... 119 Tax Revenue by Source, Governmental Funds ......................................................................................... 120 Intergovernmental Revenue by Source, Governmental Funds .................................................................. 121 Full Cash Value of Taxable Property........................................................................................................ 122 City Tax Revenue for Major Categories ................................................................................................... 123 Direct and Overlapping Property Tax Rates ............................................................................................. 124 Principal Property Tax Payers .................................................................................................................. 125 Property Tax Levies and Collections........................................................................................................ 126 Direct and Overlapping Sales Tax Rates .................................................................................................. 127 Ratios of Outstanding Debt by Type ....................................................................................................... 128 Ratios of General Bonded Debt Outstanding ........................................................................................... 129 Direct and Overlapping Governmental Activities Debt ............................................................................. 130 Legal Debt Margin Information ............................................................................................................... 132 Pledged Revenue Coverage ..................................................................................................................... 134 Demographic and Economic Statistics..................................................................................................... 139 Principal Employers ................................................................................................................................ 140 Full-time Equivalent City Government by Function/Program ................................................................... 141 Operating Indicators by Function/Program ............................................................................................. 142 Capital Asset Statistics by Function/Program .......................................................................................... 144 Insurance Summary ................................................................................................................................ 145 ii City of Flagstaff December 23, 2013 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, 2013, 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, 2013, 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, 2013, 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. The City of Flagstaff’s MD&A can be found immediately following the report of the independent auditors. CITY OF FLAGSTAFF PROFILE Flagstaff is located in Coconino County, Arizona at the intersection of Interstate 17 and Interstate 40. Flagstaff is the largest city in Northern Arizona and is the regional center and county seat for Coconino County, the second largest county in the 48 contiguous states. The current population 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, like many municipalities, is starting to see positive economic growth in our community. Excluding sales tax collected on utilities, the City realized declines in all but four months between November 2007 and August 2010 in comparison to the same month in the prior year. Since September 2010, the City has had increases its sales tax collections 22 out of 29 months when compared to the prior year, same month. In Fiscal Year 2012-2013, all sales tax categories increased when compared to the prior year. The following chart summarizes the categorical changes from the prior fiscal year: Category FY 2013 FY2012 % Change $929,683 $841,855 10.43% 278,702 193,619 43.94% 2,066,174 1,944,120 6.28% 71,371 69,430 2.80% Commercial Property Rental 999,391 971,202 2.90% Personal Property Rentals 420,974 309,393 36.06% Constructions Contracting 1,649,710 1,496,038 10.27% Retail Utilities Telecommunications Restaurants/Bars Amusements 7,791,090 7,463,344 4.39% Hotels/Motels 889,244 834,345 6.58% Other 194,904 160,194 21.67% Total $15,291,2451 $14,283,540 7.06% While construction is showing growth for the first time since FY 2008, this is still the most volatile of sales tax categories shown above. The City continues to follow its’ practice to not allocate 100% of construction related revenues to ongoing budgetary needs. State shared sales tax revenues have increased for the third year in a row at 4.7%. State income tax revenues increased by 21.0% even though the total revenue is still below FY 2007 levels. After six years of declines, the highway user (gas tax) revenues also increased 7.9% in part due to the discontinuance of shifting funds to the Arizona Department of Transportation, Department of Motor Vehicles. Housing sales are recovering and the median home price made some gains, only to decrease again more recently. Our community partners in the public, private, and governmental sectors are also experiencing similar growth. The Flagstaff Unified School District realized an increase in students for the first time in the past ten years. A number of new projects in the multifamily housing and retail sectors that had been delayed or canceled due to the lack of available capital have been constructed or are in development review. While revenue growth is occurring, there is very limited resource available for new or restored services within the community. Fixed costs to provide employee benefits, property insurance, and utilities continues to outpace the revenue gains. The economic analysts for our local and state region continue to give mixed messages on when the recovery will be sustained. 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 and is currently authorized until 1 The sales tax total reflected in this table is activity based and will vary from the City Sales Tax amount reflected in Schedule 5 found in the Statistical Section . v November 2024. As indicated earlier, overall local sales tax increases have been realized for two years in a row. Overall, the 1% general city sales tax receipts have increased 5.8% from the prior fiscal year and are now only 2.4% less in comparison to FY 2008. Construction and auto sales continue to be the two most volatile sales tax categories. The Retail sales tax category has decreased from 52.3% to 50.9% of the total sales tax collected, as construction revenues increase and realize a larger proportionate share of total sales tax collected. 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. This revenue is restricted in use to certain economic, arts, beautification, recreation or tourism activities. The BBB tax also has a sunset clause and it is currently authorized until 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 have set record highs for three years in a row, now at $5.9 million dollars. 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 challenge was that while population was growing, it was growing at a slower pace 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%. Overall state shared revenues grew by 13.2% in FY2013 and the State of Arizona projects continued growth. While recent revenue growth has been experienced, State Shared Sales Tax is still under the peak revenue year (FY 2007) by 7.3% and State Shared Income Tax is under FY2008 peak revenues by 26.5% Highway user revenue (gas tax) funds (HURF) ended FY 2013 above FY 2012 by 7.9%. While this is a considerable increase, it is still 24.4% below FY 2006, the peak revenue year. HURF revenues that are available for distribution had experienced six 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 decreases were initially due to the increased gas pricing resulting in lower sales. Additional decreases were due to the State shifting revenues ‘off the top’ to fund other public safety and motor vehicle department needs. The gross highway user revenues received by the State of Arizona remained flat in FY 2013, however the revenue available for distribution increased (and our local revenue increased) as the State of Arizona no longer funded a portion of the Arizona Department of Transportation, Motor Vehicle Division from these funds. As evidenced by the increase in BBB taxes and other statistical data, the City remains a popular drive destination from Las Vegas, Los Angeles, and Phoenix; however this revenue is estimated to recover very slowly. Even after the value of new construction is added to the total taxable assessed value, property valuations vi decreased by 3.3% for this tax year. Assessed value has decreased a total of 16.5% from its peak year in FY 2010. Even though the City is statutorily allowed to set a primary property tax rate that would allow for 2% annual growth in revenue plus the additional revenue generated from new construction, the Flagstaff City Council has established a policy of flat revenue for existing properties. When the City doesn’t take advantage of the statutorily allowed 2% annual increase, it does not lose the ability to take the increase in the future. Two percent is allowed per year and accumulates (e.g. if the increase is not taken for two years, the City now has future authority to take a 4% levy increase). The millage rate for the primary property tax is adjusted annually to generate a levy equal to the prior year, plus new construction. The millage rate for secondary property taxes remained the same, so as assessed valuation decreased, the revenue also decreased by 4.2% in comparison to the prior fiscal year. While revenues fluctuations continue in some areas, the City increased budgeted revenue in FY 2014 (excluding grants) by 7.9% which reflects increase in local and state revenues. The City of Flagstaff reduced its’ overall staffing count by another 3 positions bringing total staff reductions to 130 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. 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. The City is also developing policy regarding reserving funding generated from one-time resources to address aging infrastructure related to streets, facilities, water, wastewater, parks, and fleet. 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 vii 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 FY 2010. 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 FY2013 budget process, this structural deficit was eliminated and the General Fund balance was restored to 15%. In additional to the restoring fund balance, the City Council also directed to provide a greater cushion against future recessions by directing that the General Fund balance increase by 1% per year to 20%. This goal is being met and the City General Fund balance is budgeted to be 19.4% for FY 2014 and is maintained at a minimum of 17.5% over the next five fiscal years. MAJOR INITIATIVES AND SERVICE EFFORTS AND ACCOMPLISHMENTS During FY 2013, 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 economically 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 accomplishments in FY2013 that address the six goals established by council in the summer of 2010. Public Safety The City shall maintain short response times and encourage expanded health services. Accomplishments include:   The Fire Department placed a new Type 1 Engine in service The Police Department strengthened their peer and formal counseling abilities through the expansion and additional training for the Crisis Incident Stress Management teams Good Neighborhoods The City shall provide good livability through good neighborhoods, affordable housing, and varied recreational opportunities. Accomplishments include:   The Housing Section completed eleven owner occupied housing rehabilitation projects The Housing Section administered development agreements for 91 permanently affordable rental housing units at the Ridge at Clear Creek and Elevation Apartments  The Police Department conducted 85 community support meetings in addition to neighborhood Block Watch meetings viii  Recreation conducted 13 family friendly events including the Easter Eggstravaganza, Concerts in the Park, Children’s Music and Art Festival, and the Halloween Harvest Quality of Life The City shall provide a diversity of arts, culture, and educational opportunities Accomplishments include:  Through a federal grant, the Flagstaff Public Library served as the Job Help Hub coordinating public workshops and one on one work sessions  The Joe C Montoya Center partnered with Flagstaff Medical Center to offer free health screenings to seniors and also partnered with AARP to provide free tax preparation  The City Landfill conducted multiple tours for the elementary, middle schools, high schools, and colleges  The Economic Vitality Division advanced community efforts for workforce development by re- examining curriculums and strengthening relationships with the various public, private, and educational agencies to meet changing industry needs  Public art projects were completed including the ‘Then and Now’ photographic display and the Lumberyard Mural Community Sustainability The City shall encourage a sustainable community through economic vitality, environmental protection, and social inclusion. Accomplishments include:  A total of 862 kilowatts of solar renewable energy was installed at the Wildcat Hill Wastewater Treatment Plant, City Hall, and the Aquaplex   The City acquired 478 acres of conservation (open space) land at Picture Canyon The Economic Vitality Division assisted eight new retailers in locating to Flagstaff Infrastructure The City shall maintain and deliver quality, reliable infrastructure Accomplishments include:   Utility’s added over 800 new radio read devices into the water meter system The City conducted a successful bond election for the Core Services Facility and Forest Health and Water Supply Protection project  The Capital Section continued delivery of the 2010 Street/Utility Bond projects including completion of Cherry Avenue, Dodge Avenue, and Coconino/Elden/Humphreys  The Capital Section continued Rio de Flag project coordination with the Army Corps of Engineers including project phase liason for the Thorpe Road Bridge project  The Utilities Division completed the reconstruction of the Inner Basin Pipeline ahead of schedule and within budget Effective Governance The City shall provide stability to its citizens and employees through the maintenance of good fiscal health.  The Procurement Section formed a task force comprised of local contractors to provide feedback and guidance on qualification based evaluation criteria and value added knowledge and experience as part of the Request for Statement of Qualifications procurement process  The Human Resources Division implemented numerous wellness incentive program enhancements for ix x xi City of Flagstaff Citizens of Flagstaff City Council Special Committees City Manager City Magistrates City Court Board and Commissions City Attorney 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, 2013 Elected Officials Mayor Gerald (Jerry) W. Nabours Vice Mayor Coral Evans Councilmember Celia Barotz Councilmember Karla Brewster Councilmember Jeff Oravits Councilmember Scott Overton Councilmember Mark Woodson Appointed Officials City Manager Kevin Burke City Attorney Michelle D’Andrea City Treasurer Barbara Goodrich City Clerk Elizabeth Burke xiii xiv Independent Auditor’s Report The Honorable Mayor and Members of the City Council City of Flagstaff, Arizona Flagstaff, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Flagstaff, Arizona (the City) as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, the aggregate remaining fund information and the budgetary comparison of the general fund and major special revenue funds of the City as of June 30, 2013, and the respective changes in financial position and, where, applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. www.eidebailly.com 1850 N. Central Ave., Ste. 400 | Phoenix, AZ 85004-4624 | T 602.264.5844 | F 602.277.4845 | EOE Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis as noted on 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 inquires of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s financial statements. The introductory section, combining nonmajor fund financial statements, the capital assets schedule by function and activity, the budgetary comparison of the major debt service fund and nonmajor governmental funds and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The combining nonmajor fund financial statements, the capital assets schedule by function and activity, the budgetary comparison of the major debt service fund and nonmajor governmental funds are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements, the capital assets schedule and the budgetary comparisons schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 23, 2013 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Flagstaff’s internal control over financial reporting. Phoenix, Arizona December 23, 2013 2 MANAGEMENT DISCUSSION AND ANALYSIS As management of the City of Flagstaff (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2013. 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 $635.3 million (net position). Of this amount $61.9 million (unrestricted) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net position increased by $13.0 million during the fiscal year. This is a result of an increase in net position in the governmental activities of $7.7 million and an increase in net position in the business type activities of $5.3 million.  As of June 30, 2013, the City’s governmental funds reported combined ending fund balances of $71.0 million, an increase of $11.4 million in comparison with the prior fiscal year. Approximately 27.3% of this total amount ($19.4 million) is unassigned fund balance available for spending at the government’s discretion.  As of June 30, 2013, total unassigned fund balance for the general fund was $19.4 million, or 41.7% of total general fund expenditures ($46.6 million).  As of June 30, 2012, the City’s proprietary funds reported combined total net position of $336.5 million, and total unrestricted of $29.2 million. Unrestricted component of net position in the Water and Wastewater Fund are $19.3 million and in the Environmental Services Fund are $8.3 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 position presents information on all of the City’s assets, plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes or expenses pertaining to earned but unused vacation leave. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government activities) from other functions that are intended to recover all 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, Recreation, City Council, City Manager, City 3 Attorney, Municipal Courts, Human Resources, Risk Management, Information Services, Financial Services, Library, Streets and Transportation, Facilities Maintenance, Fleet Management, Cemetery, Beautification, Tourism, and Economic Development. The business-type activities of the City include Water and Wastewater, Airport, Environmental Services, Housing Authority, 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 governmental funds organized according to their type (special revenue, capital projects, 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, Special Assessment Bond fund, and Capital Projects Bond Construction fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General fund, Special Revenue funds, Capital Projects funds, Debt Service funds, and Enterprise funds. A budgetary comparison statement has been provided for the General and special revenue major governmental funds to demonstrate compliance with the respective budgets. The basic governmental fund financial statements can be found on pages 20-30 of this report. 4 Proprietary funds: Proprietary funds are generally used to account for services for which the City charges customers – either outside customers, or departments of the City. Proprietary funds provide the same type of information shown in the government-wide financial statements, only in more detail. The City maintains the following two types of proprietary funds:  Enterprise funds are used to report the same function presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for Water and Wastewater, Airport, Environmental Services, 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 40-86 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 93-112 of this report. GOVERNMENT WIDE STATEMENTS FINANCIAL ANALYSIS Analysis of Net Position As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by $635.3 million as of June 30, 2013. Of the City’s net position, 83.0% reflects its investment of $527.3 million in capital assets (e.g. land, buildings, and equipment), less any outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be liquidated for these liabilities. 5 Net Po s itio n Ju n e 3 0, 201 3 an d 2012 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2013 Current and other assets Capital assets $ 101,244 Bu s in es s -ty pe A c tiv ities 2012 $ 2013 92,358 $ 43,855 To tal 2012 $ 40,295 2013 $ 145,099 2012 $ 132,653 299,629 295,652 352,170 355,191 651,799 650,843 400,873 388,010 396,025 395,486 796,898 783,496 Long-term liabilities 80,137 73,456 49,537 50,068 129,674 123,524 Other liabilities 21,901 23,452 10,037 14,226 31,938 37,678 102,038 96,908 59,574 64,294 161,612 161,202 222,691 219,112 304,561 304,418 527,252 523,530 Restricted 43,470 34,680 2,694 2,805 46,164 37,485 Unrestricted 32,674 37,310 29,196 23,969 61,870 291,102 $ 336,451 Total assets Total liabilities Net investment in capital assets Total net position $ 298,835 $ $ 331,192 $ 635,286 61,279 $ 622,294 Total assets increased due to change in restricted cash and investments in the governmental activities. Total liabilities increased slightly due to additional debt issuance. A portion of the City’s net positions, $46.2 million (7.3%) represents resources that are subject to external restriction on how they may be used. The remaining balance of unrestricted component of net position, $61.9 million (9.7%) may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position for the government as a whole, as well as for the business-type activities. Current assets for governmental activities have increased by 9.6% ($8.9 million). The largest increase was in restricted cash and investments ($15.8 million) while the largest decreases are in cash, investments and equivalents ($6.1 million) and intergovernmental receivable ($1.0 million). Capital assets of the governmental activities, funded through operations, debt proceeds, grants, and contributions, increased by 1.3% ($4.0 million) due to capital outlays in excess of current year depreciation and deletions. Major capital outlays include Picture Canyon land ($4.9 million), street/utility bond construction ($4.9 million), West/Arrowhead street improvements, annual street improvement program ($1.1 million), and fire apparatuses ($0.8 million). Governmental activities long-term liabilities increased by 9.1% ($6.7 million) primarily due issuance of new debt offset with payments on existing debt issues. Other liabilities decreased by 6.6% ($1.6 million) primarily due to the decrease in deposits payable ($1.6 million). Total assets for business-type activities have increased slightly by 0.1% ($0.5 million). The largest increases were in cash, investments and equivalents ($6.5 million) and accounts receivable, net ($1.5 million) while the largest decreases were in intergovernmental receivable ($4.3 million) and capital assets ($3.0 million). Total liabilities for business type activities decreased by 7.3% ($4.7 million). Major changes include decreases in bonds, notes and leases payable ($3.2 million) and accounts payable ($1.8 million) while largest increase was landfill closure and post closure care costs ($0.2 million). 6 Overall, the business-type net position has increased by 1.6% ($5.3 million) due an increase in unrestricted net position ($5.2 million) primarily in the water and wastewater fund. Analysis of Change in Net Position The City’s overall net position has increased by $13.0 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 Po s itio n Fo r th e Y ear s En d ed Ju n e 30, 20 1 3 an d 20 1 2 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2013 Bu s in es s -ty p e A c tiv ities 2012 2013 To tal 2012 2013 2012 R ev en u es Program Revenues: Charges for services Operating grants and contributions $ 8,112 $ 8,036 $ 38,566 $ 36,207 $ 46,678 $ 44,243 6,866 7,415 4,884 4,624 11,750 12,039 11,319 12,201 6,622 7,960 17,941 20,161 Property taxes 11,822 11,974 - - 11,822 11,974 Sales taxes 35,189 33,401 - - 35,189 33,401 State shared taxes 14,631 13,190 - - 14,631 13,190 Capital grants and contributions General Revenues: Investment earnings Other Total revenues 322 194 118 1,326 (396) 526 825 174 2,151 (202) 440 700 88,869 87,065 51,091 49,083 139,960 136,148 E x pen s es General government 9,218 8,167 - - 9,218 8,167 27,269 27,176 - - 27,269 27,176 Public works 1,494 1,379 - - 1,494 1,379 Economic and physical development 8,609 8,894 - - 8,609 8,894 Culture and recreation 13,836 12,949 - - 13,836 12,949 Highways and streets 16,990 18,036 - - 16,990 18,036 2,902 2,944 - - 2,902 2,944 - - 22,569 22,709 22,569 22,709 Public safety Interest on long-term debt Water and wastewater Environmental - - 11,671 7,828 11,671 7,828 Airport - - 5,227 4,268 5,227 4,268 Housing Authority - - 5,986 6,165 5,986 6,165 Stormwater - - 1,197 1,362 1,197 1,362 80,318 79,545 46,650 42,332 126,968 121,877 7,520 4,441 6,751 12,992 14,271 818 1,134 - - 5,259 7,885 12,992 14,271 Total expenses Increase in net position before transfers Transfers Change in net position Net position at beginning of year Net position at end of year 8,551 (818) (1,134) 7,733 6,386 291,102 $ 298,835 $ 284,716 331,192 291,102 $ 336,451 $ 323,307 622,294 331,192 $ 635,286 608,023 $ 622,294 Governmental activities Governmental activities increased the City’s net position by $7.7 million. The key factors for this increase are as follows:  Revenues exceeded expenses by $8.6 million as compared to last year of $7.5 million.  Net transfers decreased to a negative $0.8 million versus last year of negative $1.1 million.  Charges for services have increased less than 1% ($0.1 million).  State shared taxes had the largest percentage increase of 10.9% ($1.4 million). This was related to anticipated increases in state shared income tax as these revenues are based on calendar year 2011 returns.  City sales tax revenues increased by 5.4% ($1.8 million). Comparing actual revenues to budgeted revenues the city exceeded the estimates by $2.6 million. The increase in the city general sales tax, the Bed, Board, and 7 Beverage sales taxes, and the transportation taxes are $814,168, $688,384, and $285,344 respectively. The city has seen positive sales tax growth in the last two years.  Property tax had a slight decrease due to decreases in assessed valuation which affects our secondary property tax revenues.  Expenses have increased slightly ($773,576, <1.0%) as the economy had stabilized. There were increases in general government ($1.1 million), public safety ($0.1 million), public works ($0.1 million), and culture and recreation ($0.9 million). Decreases were in economic and physical development ($0.3 million), highways and streets ($1.0 million), and interest on long term debt ($41,186). Some of the expenditures are considered onetime funding as the organization attempts to manage its expenditures in line with revenue. Business-type activities Business type activity had net position increase of $5.3 million. The key factors for this increase include:  Charges for service increased by 6.5% ($2.4 million). stormwater increased $8,803. Water and wastewater increased $2.7 million and Environmental services decreased $30,866, airport decreased $6,312, and housing authority decreased $305,864.  Operating grants and contributions increased $259,895.  Capital grants and contributions decreased by 16.8% ($1.3 million) due to completion of large grant funded projects in the prior year.   Investment earnings are up slightly ($76,059) and other revenues increased by $0.6 million. Expenses have increased over prior year by 10.2% ($4.3 million). There were increases in the environmental services fund ($3.8 million) and airport fund ($1.0 million). There were decreases in the water and wastewater fund ($139,975), housing authority fund ($179,104) and stormwater fund ($165,069). The largest change was related to a prior year recalculating the landfill closure costs. 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 16.5% Investment earnings -0.4% Miscellaneous 1.5% Charges for services 9.1% Operating grants and contributions 7.7% Sales tax 39.6% Property taxes 13.3% Capital grants and contributions 12.7% As shown, public safety is the largest function as measured by expense (34.0%) followed by highways & streets (21.2%), and culture and recreation (17.2%). 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 (39.6%), followed by state shared tax (16.5%) and property taxes (13.3%). Last year sales tax was ranked first, state shared tax was ranked second, and capital grants and contributions were 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 $30,000,000 Expenses $25,000,000 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 0.4% 9.6% Capital grants and contributions 13.0% Other Charges for 1.5% services 75.5% As shown Water and Wastewater has expenses of $22.6 million for the fiscal year, followed by Environmental Services with $11.7 million, Housing Authority with $6.0 million, the Airport with $5.2 million and Stormwater with $1.2 million. For the fiscal year, program revenue exceeded expense for the Water and Wastewater Fund, Environmental Services fund, and Stormwater Fund. The Housing Authority and Airport funds program expenditures exceeded revenues mainly due to depreciation of capital assets. Water & Wastewater, Environmental Services, Airport, and Stormwater funds received the majority of their program revenues through charges for services (82.6%, 99.0%, 56.1% and 58.1% respectively). The Housing Authority receives the majority of its program revenue through operating grants and contributions (79.5%). Charges for services provided the largest share of revenues (75.5%) for all of the business-type activities, followed by capital grants and contributions (13.0%). Last year the ranking was the same. The operating expenses for the business type activities increased (10.2%, $4.3 million) there were increases in Environmental Service (49.1%, $3.8 million) and Airport (22.5%, $1.0 million) offset by decreases in Water and Wastewater (0.6%, $139,975), Housing Authority (2.9%, $179,104) and Stormwater (12.1%, $165,069). Environmental Services’ increase is a result of a prior year recalculating the landfill closure and post closure care funding. Water and wastewater increased user fees rates in fiscal year 2013. Water and wastewater and Stormwater funds increased charge for service revenue at 13.5% and 0.6% respectively. Environmental Services, Airport, and Housing Authority funds saw decreases in charges for services at 0.3%, 0.4% and 23.4% respectively. 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, unassigned 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 fiscal year, the City’s governmental funds reported combined ending fund balances of $71.0 million, an increase of $11.4 million in comparison with the prior year. Approximately $19.4 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 ($638,318) for inventory and perpetual care, (2) restricted ($43.7 million) for special revenue funds, debt service, development fee projects, court improvements and operations, grant purposes, perpetual care, and capital projects, and (3) assigned ($7.3 million) for court services, capital reserves, and real estate. Revenues for governmental functions overall totaled $87.1 million in the fiscal year ended June 30, 2013 which represents an decrease of 3.4% or $3.0 million from the prior fiscal year. Five revenue categories show increases over prior year. These include taxes (3.3%, $1.5 million), intergovernmental (43.5%, $7.5 million), charges for services (0.5%, $17,591), rents (3.9%, $62,396), and miscellaneous revenues (155.9%, $768,536). The increase in intergovernmental is related to growth in state shared income tax ($1.2 million). Grants and entitlements increased primarily related to a state grant to assist in the purchase of Picture Canyon ($2.4 million). All other revenue categories experienced decreases including special assessments (91.3%, $7.6 million), licenses and permits (1.5%, $25,739), fines and forfeitures (3.8%, $60,055), investment earnings (245.0%, $725,897), and contributions (35.3%, $137,876). The large decrease in special assessments is due to a developer paying off debt in advance ($6.4 million). Expenditures for governmental functions ($89.2 million) decreased by 2.7% ($2.4 million) from the prior fiscal year. Operation expenditures show a small increase (1.2%, $769,548). Most of the decrease in expenditures is related to debt service (46.6%, $7.9 million) which was attributed to the early pay off of debt mentioned in the previous paragraph and was offset with increased expenditures related to capital projects (39.4%, $4.7 million). Major capital projects have been discussed in prior sections. In the fiscal year ended June 30, 2013 expenditures for governmental functions exceeded revenues by approximately $2.1 million. 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 $19.4 million. As a measure of liquidity, it may be useful to compare total unassigned fund balance and total fund balance to total fund expenditures. represents 41.7% of General Fund expenditures. The unassigned fund balance The total fund balance in the City’s General Fund increased by $2.6 million during the fiscal year as revenue growth of 2.9% and expenditures increase 5.0%. Overall, the General Fund’s performance resulted in revenues in excess of expenditures in the fiscal year ended June 30, 2013 of $2.0 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 $2.9 million. The Highway User Revenue fund balance increased by $765,023. Revenues increased $316,560 primarily due to increased gas tax revenues. Expenditures decreased by $938,577 for a few reasons. Operating expenditures decreasing $2.0 million related to lower cost allocation, prior year settlement costs, and increase work order charge outs. Capital expenses increased by $2.0 million mainly for the West/Arrowhead street project. Debt service 11 payments decrease $1.8 million due to prior year pay off of bonded debt. Net transfers in decreased by $0.9 million as the city transferred funds in the prior fiscal year to assist in paying debt service. Transportation Fund balances increased by $1.0 million due to moderate growth in revenues offset with an increase in expenditures, increases in expenses to the transit agency, and a decrease in transfer out for transportation projects. The Special Assessment Bond fund balance decreased slightly by $180,047. This is due to normal pay down of debt. Revenues and expenditure changes are related to the prior year early retirement of debt. The Capital Projects Bond Construction fund was not designated as a major fund last year. The fund balance has increased by $4.2 million as a result of issuing capital debt and an increase in grant funded projects. This is offset by an increase in capital expenditures and a reduction in transfers in from other funds. 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 component of net position 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 position of $4.3 million. The total growth in net position for the proprietary funds was $5.3 million. All funds except the Airport and Housing Authority had positive growth in their net position for the fiscal year ended June 30, 2012. The Airport and Housing Authority fund deceased of $2.3 million and $381,877 respectively are mainly due to depreciation. The major part of the increase is related to capital contributions ($7.9 million). Budget Highlights The City’s final budget matches the original budget which was approved by Council in June 2012. 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 three revenue transfers that were not budgeted for. A transfer was made from the general fund to the capital projects fund ($63,270) to reimburse the costs related to the USGS campus. A transfer was made from the capital projects fund to the internal service fund ($7,608) for excess balance remaining on a completed project. And a transfer was made from the capital projects fund to the BBB fund ($4,457) for excess balance remaining on a completed project. 12 The general fund was less than 1% ($265,661) under the final budgeted total revenues primarily due to taxes exceeded budget by $1.4 million offset by grants and entitlements under budget by $1.9 million. Some of the reasons for grants and entitlements being under budget are due to only spending $5,725 of the $1.0 million Brownfield grant and the city did not receive the fire SAFER grant that it applied for ($288,000). Expenditures are under budget in all but one category due to controlled spending and carryover of some capital projects. The only category over budget was related to community development which was over by only $1,723. The reason for being over this year was because the city needed to outsource some of the building plans review as we saw a higher level of submittals this year. The divisions that are under budget by larger amounts are related to capital projects budgeted but not completed. Revenue growth in building fees help to offset these costs. Both transfers in and transfers out are less than budgeted (except for the transfer 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 $4.1 million for the Rio de Flag flood control project of which only $166,493 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, 2013 amount to $651.8 million. Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current year was 0.1% ($1.0 million). The following table reflects the capital assets at the end of the fiscal year: C ap ital A s s ets , Net o f Dep r ec iatio n Ju ne 30, 2013 an d 2012 ( in th o u s ands o f do llar s ) Go v er n m en tal A c tiv ities 2013 Land Buildings Improvements Machinery and equipment Infrastructure Construction in progress Total $ Bu s in es s -Ty pe A c tiv ities 2012 55,762 57,877 $ 2013 49,687 $ 13,966 To tal 2012 $ 12,350 2013 $ 69,728 2012 $ 62,037 59,546 54,816 57,565 112,693 117,111 245,961 7,208 8,124 242,448 237,837 249,656 11,766 12,230 24,405 24,957 36,171 37,187 160,030 160,539 - - 160,030 160,539 6,986 5,526 16,535 22,482 23,521 28,008 $ 299,629 $ 295,652 $ 352,170 $ 355,191 $ 651,799 $ 650,843 Construction in progress had a net decrease of 16.0% ($4.5 million). Major completed construction in progress includes the completion of Picture Canyon ($4.9 million), street and utility bond projects ($2.3 million), West/Arrowhead phase 1 ($2.8 million), Taxiway A reconstruction ($3.2 million), and Inner Basin waterline repair ($3.9 million). Major construction in progress at June 30 includes street and utility bond projects ($3.8 million), Red Gap pipeline ($1.8 million), West/Arrowhead phase 2 ($0.7 million) and Rio de Flag drainage project ($14.0 million). The increase to land ($7.7 million) is related to the purchase of Picture Canyon and donated assets for right of way, easements, drainage, and open space. The decrease to buildings ($4.4 million) is related to depreciation. The increase in improvements ($3.7 million) is related to the Taxiway A reconstruction, Inner Basin waterline repair, contributed. Machinery and equipment increased slightly ($1.0 million). Major additions include fire apparatuses ($754,533), two graders and a dump truck for streets ($682,104), three loaders for solid waste ($658,011), and a compactor for the landfill ($993,480). Infrastructure decrease is related to excess depreciation over the completion of street and streetscape improvements and contributed capital. 13 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 $124.1 million. Of this amount, $48.8 million is general obligation bonds backed by the full faith and credit of the City, $11.0 million is improvement district bonds, $19.1 million is revenue bonds, $1.3 million is for the Municipal Facility Corporation, $3.6 is for certificates of participation, and $40.3 million are outstanding leases or loans for the airport, water and wastewater, and city-wide energy conservation improvements. O u ts tan din g Debt Ju n e 30, 20 13 an d 2 012 ( in th o u s an ds o f do llar s ) Go v er n m en tal A c tiv ities 2013 General obligation bonds $ Bu s in es s -ty pe A c tiv ities 2012 47,036 $ 38,449 2013 $ To tal 2012 1,752 $ 2013 3,125 $ 48,788 2012 $ 41,574 Special assessment bonds 11,020 11,365 - - 11,020 11,365 Revenue bonds 19,130 19,587 15,495 15,615 3,635 3,972 Other debt 4,885 7,285 - - Lease/Loans 1,697 1,120 38,559 38,764 Total debt payable $ 80,133 $ 73,834 $ 43,946 $ 45,861 $ 4,885 7,285 40,256 39,884 124,079 $ 119,695 During fiscal year 2012, the City’s total bonded debt increased by $4.4 million. The City issued $11.5 million in general obligation debt for street and utility improvements ($6.5 million), open space projects ($3.0 million), and forest health and water protection ($2.0 million). The City obtained $91,109 in loans for water and wastewater projects for development of future water rights and an aquifer study for the fiscal year ended June 30, 2013. The special assessment debt and revenue bond debt decreased due to annual payments. The City issued $3.0 million in capital leases commitments related to funding for solar projects. 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, 2013 is $39.7 million in the 6% category and $83.4 million in the 20% capacity. The allowable debt decreased from prior year due to lower assessed valuations and additional debt issued. 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 Flag s taff Bo n ded Debt Ratin g s A s o f Ju n e 30, 2 013 Mo o dy ' s In v es to r s S tan d ar d & S er v ic e Po o r ' s General Obligation Aa2 AA Municipal Facilities Corporation Aa3 AA 14 Additional information on the City’s long-term debt can be found in Section IV F on pages 65-75 of the Notes to the Financial Statements. Economic Factors and Next Year’s Budget and Rates The Fiscal Year 2013/2014 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 continues to be above the fiscal policy of 15% of operating revenues  General sales tax revenues exceeded budget by $1.3 million in FY 2013 and we are expecting continued growth of about $1.1 million in FY 2014   Building permits are increasing as we estimated an additional $315,000 in revenue for FY 2014 The focus of the FY 2014 budget was related to infrastructure and employee compensation o The city used multiple methods to help fund infrastructure and employee compensation. After fixed cost increases, like insurance and retirement expenses, there was $415,000 in new revenues available. The city reduced expenditures in the amount of $950,000. And the city had reallocated $1.6 million in appropriations by shifting eligible expenses to other funds outside the general fund o The larger increases in appropriations were $1.6 million for infrastructure and $1.2 million for compensation   The total authorized positions decreased by 3.96 positions which was primarily one-time funded positions Put three triggers in place to address pay for maintenance workers and equipment operators, a library reorganization, and phase two of the commissioned police pay structure  Continue to monitor State legislature to be aware of potential budget impacts on cities  Property assessments saw some large declines this year by 13.9% on limited property value and 13.6% on full cash value. The City adjusted the tax rate on primary property tax to maintain revenue levels. The decline to secondary property tax assessments will reduce the Cities ability to issue debt while keeping the rate flat.  Due to changes in State legislation, the City Council elections will be moved from May 2014 to November 2014  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 city will continue to work on developing a new Core Maintenance Facility which was approved by voters  The city will complete the street and utility bond projects in FY 2014  The city will work on federal funding and construction in the amount of $5.3 million related to the airport westplex taxiway rehab.  Utility rate increases are approved for the next two 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 Section 211 W. Aspen Ave Flagstaff, AZ 86001 Main (928) 213-2000 Arizona Relay 7-1-1 15 16 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position June 30, 2013 Primary Government Governmental Activities Business-type Activities Total ASSETS Cash, investments and equivalents $ Cash with fiscal agents Accounts receivables, net Interest receivable Intergovernmental receivable Special assessments receivable 54,497,596 $ 25,043,160 $ 79,540,756 2,106,786 - 2,106,786 7,708,934 6,428,663 14,137,597 124,841 42,945 167,786 2,835,711 259,340 3,095,051 - 10,896,251 10,896,251 Internal balance 428,017 Deposits 213,900 Prepaid items (428,017) 13,641 227,541 3,728 83,015 86,743 436,337 148,782 585,119 Bond issuance costs, net 664,939 4,148 669,087 Property held for resale 500,000 - 500,000 20,827,296 12,258,638 33,085,934 Inventory Restricted cash and investments Capital assets: Non-depreciable 62,748,128 30,501,593 93,249,721 Depreciable, net 236,881,086 321,668,859 558,549,945 400,873,550 396,024,767 796,898,317 Total assets LIABILITIES Accounts payable 4,098,100 783,654 4,881,754 Accrued payroll 892,798 186,524 1,079,322 Interest payable 1,356,167 766,125 2,122,292 425,441 877,203 1,302,644 Deposits payable 1,280,255 442,551 1,722,806 Matured bonds and lease payable 4,938,508 3,667,679 8,606,187 Compensated absences 1,578,127 329,950 1,908,077 Claims and judgements 141,333 - 141,333 Special assessment debt, government commitment 360,000 - 360,000 6,831,005 2,982,692 9,813,697 Compensated absences 2,066,062 514,811 2,580,873 Claims and judgements 172,741 - 172,741 - 7,410,396 7,410,396 Unearned revenue Noncurrent liabilities: Due within one year: Bonds, notes and leases payable, net Due in more than one year: Landfill closure and postclosure care costs Net OPEB obligation Special assessment debt, government commitment Bonds, notes and leases payable, net Total liabilities 2,975,694 652,986 3,628,680 10,660,000 - 10,660,000 64,262,058 40,959,184 105,221,242 102,038,289 59,573,755 161,612,044 222,690,985 304,560,897 527,251,882 21,489,722 2,481,605 23,971,327 9,055,904 - 9,055,904 13,091,622 - 13,091,622 - 212,657 212,657 NET POSITION Net investment in capital assets Restricted for: Capital projects Debt service Specific programming Grant and contributions purposes Perpetual care: Expendable Nonexpendable Unrestricted Total net position 17,015 - 17,015 201,981 - 201,981 32,288,032 $ 298,835,261 The notes to the financial statements are an integral part of this statement 17 $ 29,195,853 61,483,885 336,451,012 $ 635,286,273 CITY OF FLAGSTAFF, ARIZONA Statement of Activities Year Ended June 30, 2013 Program Revenues Indirect Expense Allocation Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ $ Primary government Governmental activities: General government $ 10,442,808 $ (1,225,104) $ 3,448,665 366,926 49,235 Public safety 27,269,325 - 1,491,842 2,255,455 Public works 1,718,767 (224,525) 1,611,306 - - Economic and physical development 9,210,500 (601,521) 52,386 933,696 - Culture and recreation 13,342,588 493,299 1,507,855 3,310,202 4,250,406 Highways and streets 15,431,985 1,557,851 - - 7,018,881 2,902,196 - - - - 80,318,169 - 8,112,054 6,866,279 11,318,522 4,689,500 Interest on long-term debt Total governmental activities Business-type activities: Water and wastewater 22,568,661 22,629,862 68,499 Environmental 11,671,366 12,000,124 120,004 - Airport 5,226,977 1,486,247 396,241 769,095 Housing authority 5,986,508 994,123 4,299,385 112,154 Stormwater 1,196,589 1,455,405 - 1,051,394 Total business-type activities Total primary government 46,650,101 38,565,761 $ 126,968,270 $ 46,677,815 4,884,129 $ 11,750,408 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 position Net position - beginning Net position - ending The notes to the financial statements are an integral part of this statement 18 6,622,143 $ 17,940,665 Net (Expenses) Revenues and Changes in Net Position Primary Government Governmental Activities $ Business-type Activities (5,352,878) $ (23,522,028) (5,352,878) (23,522,028) - 117,064 (7,622,897) - (7,622,897) (4,767,424) - (4,767,424) (9,970,955) - (9,970,955) (2,902,196) - (2,902,196) (54,021,314) - (54,021,314) - 4,819,200 - 448,762 - 448,762 (2,575,394) (580,846) - (580,846) 1,310,210 (54,021,314) 4,819,200 (2,575,394) - 1,310,210 3,421,932 $ 3,421,932 3,421,932 $ (50,599,382) 5,398,497 - 6,423,153 - 6,423,153 35,188,913 - 35,188,913 - 14,630,891 14,630,891 (396,124) 5,398,497 194,306 (201,818) 1,285,289 581,015 1,866,304 18,173 243,700 261,873 23,935 - 23,935 (817,761) 61,754,966 $ $ - 117,064 $ - Total 817,761 - 1,836,782 63,591,748 7,733,652 5,258,714 12,992,366 291,101,609 331,192,298 622,293,907 298,835,261 $ 336,451,012 $ 635,286,273 19 CITY OF FLAGSTAFF, ARIZONA Balance Sheet Governmental Funds June 30, 2013 Highway User Revenue Fund General Fund Transportation Fund ASSETS Cash and investments $ 19,913,301 Cash with fiscal agents $ 3,064,579 $ 3,011,773 - - 1,831,286 4,326,115 710,200 1,424,914 50,397 4,419 17,526 Intergovernmental receivables 1,118,980 10,599 1,455,471 Interfund receivable 4,155,000 - - 3,728 - - - - - Deposits - 1,001 212,900 Inventory 390,882 - - - 500,000 - 3,068,479 - - Accounts receivable, net Interest receivable Prepaid expense Special assessments receivable Property held for resale Restricted cash and investments Total assets $ 33,026,882 $ 4,290,798 $ 7,953,870 $ 1,770,196 $ 754,119 $ 37,020 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 791,760 28,208 - Current bonds payable 385,000 - 1,560,000 271,286 Interest payable 38,828 - Interfund payable - - - Unearned revenue 649,563 - - Guaranty and other deposits 1,067,355 - 212,900 4,702,702 782,327 2,081,206 390,882 - - Restricted 1,187,471 3,508,471 5,872,664 Assigned 7,335,230 - - Total liabilities Fund balances: Nonspendable Unassigned Total fund balances Total liabilities and fund balances $ 19,410,597 - - 28,324,180 3,508,471 5,872,664 33,026,882 The notes to the financial statements are an integral part of this statement 20 $ 4,290,798 $ 7,953,870 $ 233,781 $ 275,500 13,831 Total Governmental Funds Other Governmental Funds Capital Projects Bond Construction Special Assessment Bond Fund $ 23,455,078 $ 49,692,343 - - 2,106,786 - - 900,095 7,361,324 442 - 44,155 116,939 - 20,025 230,636 2,835,711 - - - 4,155,000 - - - 3,728 10,896,251 - - 10,896,251 - - - 213,901 - - 45,455 436,337 - - - 500,000 - 14,620,950 3,137,867 20,827,296 $ 11,405,974 $ 14,654,806 $ 27,813,286 $ 99,145,616 $ - $ 399,680 $ 911,340 $ 3,872,355 $ - - 72,830 892,798 - - 2,993,508 4,938,508 275,500 - 770,553 1,356,167 - 4,100,000 55,000 4,155,000 10,895,827 - 66,735 11,612,125 - - - 1,280,255 11,171,327 4,499,680 4,869,966 28,107,208 - - 247,436 638,318 234,647 10,155,126 22,695,884 43,654,263 - - - 7,335,230 - - - 19,410,597 234,647 10,155,126 22,943,320 71,038,408 11,405,974 $ 14,654,806 $ 27,813,286 21 $ 99,145,616 CITY OF FLAGSTAFF RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES JUNE 30, 2013 Fund balances - total governmental funds balance sheet $ 71,038,408 Amounts reported for governmental activities in the statements of net position are different because (also see note II. A.): Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less: accumulated depreciation Transfer of capital assets to business-type activities 482,543,657 (181,677,033) (1,237,410) 299,629,214 Other assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. Bond issue costs Fines and forfeitures 664,939 308,245 973,184 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 (80,133,454) (1,979,609) (2,975,694) (3,644,189) (88,732,946) Certain revenues are not available to pay for current period expenditures and, therefore, are unearned in the governmental funds. Property tax Revenue for long-term special assessments is shown on the governmental fund balance sheet, but is reflected on the statement of net position Special assessments 290,857 290,857 10,895,827 10,895,827 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 position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement 22 4,740,717 $ 298,835,261 23 CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2013 Highway User Revenue Fund General Fund Transportation Fund REVENUES: Taxes $ Intergovernmental Grants and entitlements 23,534,907 $ - $ 11,215,211 15,494,513 - - 1,659,326 6,018,340 Special assessments - - - Charges for services 3,237,728 - - Licenses and permits 1,656,135 - - Fines and forfeitures 1,540,989 - - Rents 1,611,306 - - (739,244) 10,995 89,879 Contributions 159,340 26,013 - Miscellaneous 425,409 2,120 - 48,580,409 6,057,468 11,305,090 Investment earnings Total revenues EXPENDITURES: Current: General governmental Public safety 8,474,220 - - 25,092,004 - - Public works 1,106,896 - - Economic and physical development 3,993,179 - - Culture and recreation 5,987,474 - - - 4,444,997 4,403,018 Highways and streets Debt service: Principal retirement 853,902 422,893 1,560,000 Interest and other charges 124,348 121,891 549,073 918,865 4,458,888 - 46,550,888 9,448,669 6,512,091 2,029,521 (3,391,201) 4,792,999 1,014,557 - - Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES): Issuance of capital debt Bond premium Sale of capital assets Transfers in Transfers out - - 8,375 - 2,261,384 4,233,250 (2,702,301) Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year 40,796 $ - (85,401) (3,808,907) 614,436 4,156,224 2,643,957 765,023 984,092 25,680,223 2,743,448 4,888,572 28,324,180 The notes to the financial statements are an integral part of this statement 24 $ 3,508,471 (3,808,907) $ 5,872,664 Special Assessment Bond Fund $ Capital Projects Bond Construction - $ $ 12,334,328 Total Governmental Funds $ 47,084,446 - - 3,219,133 18,713,646 11,369,392 - 2,409,025 1,282,701 722,733 - - 722,733 - - - 3,237,728 - - - 1,656,135 - - - 1,540,989 - - 56,256 1,667,562 2,696 20,309 185,709 - - 67,024 252,377 - - 833,978 1,261,507 725,429 2,429,334 17,979,129 87,076,859 (429,656) - 5,866 - 8,480,086 - 7,145 - 25,099,149 - 112,428 - 1,219,324 - 56,992 4,246,196 8,296,367 - 40,872 5,264,171 11,292,517 - 109,565 81,452 9,039,032 345,000 - 2,993,508 6,175,303 560,476 - 1,546,408 2,902,196 - 10,018,004 1,260,635 16,656,392 905,476 10,350,872 15,392,370 89,160,366 (180,047) (7,921,538) - 11,460,000 - $ - Other Governmental Funds 2,586,759 (2,083,507) - 12,474,557 542,689 - 542,689 - 579 49,750 175,699 6,200,455 12,870,788 (5,850,073) (12,458,747) (12,065) - 12,166,323 350,961 13,479,037 (180,047) 4,244,785 2,937,720 11,395,530 414,694 5,910,341 20,005,600 59,642,878 234,647 $ 10,155,126 $ 22,943,320 25 $ 71,038,408 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, 2013 Net change in fund balances - total governmental funds $ 11,395,530 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 16,656,392 (13,163,349) 3,493,043 (12,474,557) (542,689) 2,131,679 (16,218) (649,301) 6,175,303 (65,304) 321,388 (5,119,699) Some items reported in the governmental funds are sources and uses of current financial resources and therefore are not reported as revenues or expenses in the statement of activities. These items include: Capital-related debt issued Premium on debt issued Donated capital Compensated absences Other postemployment benefits Principal payments on debt Advance refunding loss Bond premium Bond issuance costs are recognized as debt service expenditures in the governmental funds, however these costs are capitalized on the statement and activities and amortized in the statement of activities. Issuance cost on new bonds Amortization of issuance costs 97,410 (85,362) 12,048 Certain transactions related to capital assets in the governmental funds reflect proceeds. However, in the statement of activities these transactions reflect net gain (loss). Loss on disposal of capital assets Transfer of capital assets to business-type activities The notes to the financial statements are an integral part of this statement 26 (409,995) (1,237,410) (1,647,405) (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, 2013 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 unearned 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 (350,200) (73,883) 13,510 (410,573) 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. Net allocated (loss) assigned to governmental activities Transfers Investment income (30,432) 7,608 33,532 10,708 Change in net position of governmental activities - statement of activities $ The notes to the financial statements are an integral part of this statement (concluded) 27 7,733,652 CITY OF FLAGSTAFF, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Taxes $ Intergovernmental 22,162,925 $ 22,162,925 $ 23,519,671 15,284,300 15,284,300 15,494,513 Grants and entitlements 3,590,221 3,590,221 1,659,326 Charges for services $ 1,356,746 210,213 (1,930,895) 3,028,980 3,028,980 3,237,728 Licenses and permits 790,930 790,930 1,656,135 865,205 Fines and forfeitures 2,015,460 2,015,460 1,540,989 (474,471) Rents 2,128,583 2,128,583 1,611,306 (517,277) 213,350 213,350 230,271 16,921 12,000 12,000 159,340 147,340 Investment earnings Contributions Miscellaneous 208,748 573,600 573,600 425,409 (148,191) 49,800,349 49,800,349 49,534,688 (265,661) General administration 8,395,367 8,395,367 7,645,357 750,010 Management services 3,123,808 3,123,808 3,040,628 83,180 Community development 3,715,394 3,715,394 3,717,117 Fire 10,215,163 10,215,163 9,949,598 Police Total revenues EXPENDITURES: Current: (1,723) 265,565 16,875,477 16,875,477 15,968,273 907,204 Public works 7,400,090 7,400,090 5,113,351 2,286,739 Economic vitality 1,200,701 1,200,701 171,783 1,028,918 Community enrichment 3,222,068 3,222,068 3,206,917 569,928 569,928 Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 15,151 (2,361,062) 2,930,990 1,150,000 1,150,000 98,926 1,051,074 55,867,996 55,867,996 46,550,888 9,317,108 2,983,800 9,051,447 (6,067,647) (6,067,647) OTHER FINANCING SOURCES (USES): Issuance of capital debt Sale of capital assets Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Budgetary fund balances, beginning of year Budgetary fund balances, end of year - - 1,014,557 1,046,000 1,046,000 40,796 (1,005,204) (1,485,014) 3,746,398 3,746,398 2,261,384 (8,068,985) (8,068,985) (2,702,301) (3,276,587) (3,276,587) 614,436 3,891,023 (9,344,234) (9,344,234) 3,598,236 12,942,470 18,392,248 - 18,392,248 $ 1,014,557 18,392,248 9,048,014 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 9,048,014 $ 21,990,484 $ 3,598,236 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (954,279) Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 28 2,643,957 5,366,684 $ 12,942,470 CITY OF FLAGSTAFF, ARIZONA Highway User Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Actual Amounts Budgetary Basis 5,555,000 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ Investment earnings 5,555,000 $ 7,000 Miscellaneous Total revenues 7,000 6,018,340 $ 10,995 463,340 3,995 540,000 540,000 3,295 (536,705) 6,102,000 6,102,000 6,032,630 (69,370) 118,391 118,391 118,391 - EXPENDITURES: Current: General administration Management services Community development Economic vitality Public works Non-departmental Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 73,428 73,428 73,428 - 533,783 533,783 533,783 - 24,888 24,888 24,888 - 13,527,647 13,527,647 8,612,643 4,915,004 85,536 85,536 85,536 - 100,000 100,000 - 100,000 14,463,673 14,463,673 9,448,669 5,015,004 (8,361,673) (8,361,673) (3,416,039) 4,945,634 7,863,965 7,863,965 4,233,250 (3,630,715) OTHER FINANCING SOURCES (USES): Transfers in Transfers out (85,401) Total other financing sources (uses) 7,778,564 Net change in fund balances budgetary basis 1,228,607 Adjustment of budgetary basis to GAAP basis net change in fund balances 1,811,716 $ 1,228,607 1,314,919 1,811,716 - $ 2,543,526 $ 731,810 modified accrual basis. 33,213 $ The notes to the financial statements are an integral part of this statement 29 (3,630,715) 731,810 The City budgets certain revenues on the cash basis, rather than on the Adjusted net change in fund balance - GAAP basis - 4,147,849 (583,109) 1,811,716 $ (85,401) 7,778,564 (583,109) Budgetary fund balances, beginning of year Budgetary fund balances, end of year (85,401) 765,023 $ 1,314,919 CITY OF FLAGSTAFF, ARIZONA Transportation Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Taxes $ Investment earnings 10,223,455 $ 10,223,455 $ 11,210,598 $ 987,143 40,000 40,000 89,879 49,879 10,263,455 10,263,455 11,300,477 1,037,022 52,014 52,014 52,014 - 215,009 215,009 215,009 - 7,789 7,789 7,789 - 7,798,412 7,798,412 6,237,279 1,561,133 8,073,224 8,073,224 6,512,091 1,561,133 2,190,231 2,190,231 4,788,386 2,598,155 Refunding bonds issued - - - - Payment to bond refunding escrow agent - - - - Total revenues EXPENDITURES: Current: General administration Management services Economic vitality Non-departmental Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES): Bond premium 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 - - - 4,500,000 4,500,000 - (7,304,698) (7,304,698) (3,808,907) 3,495,791 (2,804,698) (2,804,698) (3,808,907) (1,004,209) (614,467) (614,467) 3,215,623 $ 3,215,623 2,601,156 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 2,601,156 979,479 1,593,946 3,215,623 - $ 4,195,102 $ 979,479 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 4,613 Adjusted net change in fund balance - GAAP basis $ The notes to the financial statements are an integral part of this statement 30 (4,500,000) 984,092 $ 1,593,946 31 CITY OF FLAGSTAFF, ARIZONA Statement of Net Position Proprietary Funds June 30, 2013 Business-type Activities - Enterprise Funds ASSETS Current assets: Cash and investments Receivable, net Intergovernmental receivables Prepaid items Inventory Total current assets Noncurrent assets: Restricted cash and investments Refundable deposit 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 Claims and judgements Deposits payable Bonds and lease payable, net - current Total current liabilities Noncurrent liabilities: Compensated absences Net OPEB obligation Claims and judgements Landfill closure and postclosure care costs Capital lease payable Bonds and notes payable, net Total noncurrent liabilities Total liabilities Environmental Services Fund 17,274,884 4,676,788 46,683 148,782 22,147,137 $ 5,430,162 1,362,064 6,792,226 Airport Fund $ 174,036 103,392 212,657 490,085 1,593,915 13,640 4,148 12,569,966 245,124,128 259,305,797 281,452,934 10,664,723 1,890,420 8,137,761 20,692,904 27,485,130 113,365 39,984,938 40,098,303 40,588,388 313,156 245,655 3,667,675 766,125 786,345 295,578 2,811,797 8,886,331 216,377 160,408 40,324 41,997 459,106 42,297 29,243 33,284 34,159 170,899 309,882 167,334 295,412 2,499,439 36,510,041 39,472,226 48,358,557 133,988 230,321 7,410,396 7,774,705 8,233,811 15,176 38,445 1,822,343 127,361 2,003,325 2,313,207 212,205,142 10,028,181 37,977,700 1,593,915 19,295,320 233,094,377 887,690 8,335,448 19,251,319 297,481 38,275,181 NET POSITION Net investment in capital assets Restricted: Grant and contributions purposes Capital projects Unrestricted Total net position $ The notes to the financial statements are an integral part of this statement 32 $ $ Governmental Activities Business-type Activities - Enterprise Funds Housing Authority $ $ 1,087,760 139,597 83,015 1,310,372 Stormwater Fund $ 1,076,319 189,767 1,266,086 Total $ 25,043,161 6,471,608 259,340 83,015 148,782 32,005,906 Internal Service Fund $ 4,805,253 47,267 4,852,520 1,446,035 3,775,859 5,221,894 6,532,266 14,481,807 24,646,173 39,127,980 40,394,066 12,258,638 13,640 4,148 30,501,593 321,668,859 364,446,878 396,452,784 4,852,520 156,316 61,996 17,250 70,817 306,379 55,508 19,172 74,680 783,654 516,474 3,667,675 766,125 877,203 442,551 2,982,696 10,036,378 225,745 141,333 367,078 188,577 56,224 244,801 551,180 9,736 32,584 42,320 117,000 514,811 652,986 7,410,396 4,321,782 36,637,402 49,537,377 59,573,755 172,741 172,741 539,819 5,221,894 39,127,980 304,560,897 - 212,657 546,535 5,981,086 1,149,086 40,277,066 212,657 2,481,605 29,623,870 336,879,029 4,312,701 4,312,701 $ $ Some amounts reported for business-type activities in the statement of net position are different because certain internal service fund assets and liabilities are included with business-type activities Net position of business-type activities $ (428,017) 336,451,012 33 $ CITY OF FLAGSTAFF, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2013 Business-type Activities - Enterprise Funds Water and Wastewater Fund OPERATING REVENUES: Charges for services Miscellaneous Total operating revenues $ 22,629,862 107,026 22,736,888 OPERATING EXPENSES: Personal services Contractual services, materials and supplies Insurance claims and expenses Depreciation and amortization Total operating expenses Operating income (loss) NON-OPERATING REVENUES (EXPENSES): Interest and investment income Grants and entitlements Gain (loss) on disposal of capital asset Passenger facility charges Interest expense Total non-operating revenues (expenses) Income (loss) before capital contributions and transfers $ 408,243 (3,249,153) 109,599 68,499 31,100 (1,532,010) (1,322,812) 74,884 120,004 181,700 376,588 1,990 396,241 (333,653) 199,659 (124,968) 139,269 784,831 (3,109,884) 112,428 (319,759) 577,500 769,095 99,000 (33,567) (2,275,356) 233,094,377 The notes to the financial statements are an integral part of this statement 34 1,486,247 1,486,247 1,709,107 227,512,042 $ $ 4,070,421 6,487,004 1,109,355 11,666,780 1,520,370 3,169,130 664,334 (157,794) 5,582,335 Total net position, beginning of year 12,000,124 74,899 12,075,023 Airport Fund 4,449,338 8,360,839 8,217,604 21,027,781 386,295 Capital contributions related to grants Capital contributions from external sources Capital contributions from internal sources Transfers in Transfers out Change in net position Total net position, end of year Environmental Services Fund 620,265 1,345,845 2,769,290 4,735,400 18,673,819 $ 19,251,319 40,550,537 $ 38,275,181 Governmental Activities Business-type Activities - Enterprise Funds Housing Authority $ 994,123 198,969 1,193,092 Stormwater Fund $ 1,068,298 4,506,853 403,099 5,978,250 $ 467,503 261,033 467,584 1,196,120 38,565,761 381,356 38,947,117 $ 10,675,825 20,961,574 12,966,932 44,604,331 6,579,466 6,579,466 6,625,879 6,625,879 (4,785,158) 259,747 (5,657,214) (46,413) 4,299,385 (8,258) 4,291,127 7,833 7,833 194,306 4,884,129 (129,111) 199,659 (1,656,978) 3,492,005 33,532 33,532 (494,031) 267,580 (2,165,209) (12,881) 2,401,619 4,220,524 1,237,410 378,414 (798,063) 5,274,695 7,608 (5,273) 112,154 (381,877) 1,051,394 573,076 166,986 (286,943) 1,772,093 6,362,963 $ 1,455,405 462 1,455,867 Internal Service Fund Total 5,981,086 $ 38,504,973 331,604,334 40,277,066 $ 336,879,029 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 position of business-type activities $ (15,981) 5,258,714 35 4,317,974 $ 4,312,701 City of Flagstaff, Arizona Statement of Cash Flows Proprietary Funds Year Ended June 30, 2013 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 $ Cash and cash equivalents at end of year $ Classified as: Cash, cash equivalents, and investments Restricted cash and cash equivalents $ $ The notes to the financial statements are an integral part of this statement 36 11,639,246 225,275 (4,782,814) (3,465) (1,324,786) (4,014,974) 1,738,482 $ 1,469,678 199,659 (1,178,414) (26,057) (373,329) (604,991) (513,454) (157,794) 2,600,000 112,428 (319,759) - 99,000 (33,567) (2,600,000) - 2,442,206 (207,331) (2,534,567) 1,401,154 2,801,941 (2,710,983) (5,023,164) (1,575,887) 2,027,552 31,101 221,422 (2,056,804) 181,700 3,246,213 769,095 (548,237) (161,718) (124,968) 30,900 (3,048,286) (1,653,682) 3,211,285 107,766 107,766 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Totals 20,889,880 409,797 69,690 (7,987,491) (93,297) (1,937,730) (4,340,483) 7,010,366 6,512,052 12,356,747 18,868,799 17,274,884 1,593,915 18,868,799 77,870 77,870 $ $ $ (44,661) 16,139,546 16,094,885 5,430,162 10,664,723 16,094,885 2,314 2,314 $ $ $ 165,578 8,458 174,036 174,036 174,036 Business-type Activities - Enterprise Funds Housing Authority Fund Stormwater Fund $ 1,069,508 198,969 (4,275,465) (238,901) (1,037,382) (4,283,271) $ $ $ $ 36,443,468 688,920 468,780 (18,348,951) (361,720) (3,754,855) (10,462,934) 4,672,708 $ 6,583,242 (6,355,843) 227,399 - 166,986 (286,943) - 378,414 (798,063) (2,600,000) 2,600,000 7,608 - - (119,957) (419,649) 7,608 4,411,539 (112,154) - 1,189 (794,377) - 9,281,517 3,571,036 (6,222,555) (5,184,882) (1,700,855) 2,027,552 243,701 - 4,299,385 (793,188) 2,015,514 - 196,829 196,829 37,708 37,708 6,465,402 30,836,397 37,301,799 272,715 4,532,538 4,805,253 - $ 1,375,156 53,848 462 (124,767) (119,010) (465,104) 720,585 Total Governmental Activities Internal Service Fund 16,114 1,071,646 1,087,760 1,087,760 1,087,760 8,879 8,879 $ $ $ (183,681) 1,260,000 1,076,319 1,076,319 1,076,319 $ $ $ 25,043,161 12,258,638 37,301,799 (continued) 37 $ $ $ 4,805,253 4,805,253 Statement of Cash Flows Proprietary Funds Year Ended June 30, 2013 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) $ 1,709,107 $ 408,243 $ (3,249,153) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Landfill closure and postclosure costs Other receipts 8,217,604 1,109,355 - 247,184 2,769,290 - 69,690 - 199,659 (Increase) decrease in assets: Accounts receivable (1,327,881) Allowance for doubtful accounts 2,000 Prepaid items Inventories (143,054) 1,033 (34,000) - - - - 52,521 - - Increase (decrease) in liabilities: Accounts payable (1,710,200) 128,755 (231,955) Accrued payroll, compensated absences 47,234 3,563 6,604 OPEB 61,621 51,884 8,670 Deposits payable (34,708) (191) Deferred revenue (76,622) (33,257) Total adjustments Net cash provided (used) by operating activities 5,301,259 1,042 (18,644) 1,330,239 $ 7,010,366 $ $ 1,807,359 $ 2,735,699 1,738,482 $ - $ (513,454) Noncash investing, capital and financing activities: Capital assets acquired through contributions from developers Reduction of principal capital debt by lender (10,507) Capital assets transferred from governmental activities transfer Total noncash investing, capital and financing activities 664,334 $ 2,461,186 The notes to the financial statements are an integral part of this statement 38 $ - - - - - - $ - Governmental Activities Business-type Activities - Enterprise Funds Housing Authority Fund $ Stormwater Fund (4,785,158) $ $ (5,657,214) $ (46,413) 467,584 12,966,932 - - 247,184 - - - 269,349 - (26,401) (1,420,254) - (1,957) (1,957) - (14,812) 3,776 (32,000) - - 52,521 17,256 - (1,810,956) 270,036 16,608 (4,733) 14,308 7,132 1,242 - (32,615) - 7,350 - (121,173) - 501,887 460,838 (4,283,271) - - 143,615 10,329,922 273,812 720,585 $ 4,672,708 $ $ 1,051,394 $ 2,858,753 $ - - 69,276 $ $ 259,747 - - $ Total 403,099 76,049 $ Internal Service Fund (10,507) 573,076 $ 1,624,470 227,399 - 1,237,410 $ 4,085,656 $ (concluded) 39 - CITY OF FLAGSTAFF, ARIZONA Notes to the Financial Statement June 30, 2013 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity The City of Flagstaff (the City) was incorporated as a town in 1894 and as a city in 1928. The current City Charter was approved June 29, 1998. The Charter provides for the Council-Mayor form of government and the authority to provide municipal services, as limited by the State Constitution. The accounting policies of the City of Flagstaff conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to Governmental Units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. For the year ended June 30, 2013, the City implemented the provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statement No. 63 amends the net asset reporting requirements set in Statement No. 34, Basic Financial Statements – and Management’s discussion and Analysis – for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The City implemented the provision of GABS Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The requirements in this statement will improve financial reporting by contributing to the GASB’s efforts to codify all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. It eliminates the need for financial statement prepares and auditors to determine which FASB and AICPA pronouncement provisions apply, thereby resulting in a more consistent application of financial reporting. 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 Position 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. In fiscal year 2004 the MFC issued $25 million in bonds for construction of the Fourth Street Overpass and was partially advance refunded in 2012 . 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. 40 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. B. Government-Wide and Fund Financial Statements The government-wide financial statements (statement of net position 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 eliminated 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 and are part of the fund statements. Interfund services provided and used are eliminated in the process of consolidation. The government-wide statement of net position reports all financial and capital resources of the government. It is displayed in a format of assets plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted, and 3) unrestricted. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in the net position. The portion of unspent related debt proceeds or deferred inflows of resources at the end of the reporting is not included in the calculation of net investment in capital assets; instead that portion of the debt or deferred inflows of resources is included in the same net position component as the unspent amount. Restricted net position is when a constraint 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 position not otherwise classified as restricted, is 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 position is available. 41 Restrictions of net position 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 Stormwater Fund and Housing Authority as major proprietary funds due to their relation with other proprietary funds. Other non-major funds are combined in a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary funds. 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. 42 A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. The City uses the following fund categories: Governmental Fund Types Governmental Funds are those through which most of the governmental functions of the City are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. General Fund is the primary operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The General fund will always be considered a major fund in the basic financial statements. Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments or major capital projects) that are legally restricted to expenditures for specified purposes. There are two 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. 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. 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. Resources are generated from ongoing plot sales with a portion allocated to perpetuity. 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 43 sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, net 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 Fund 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 Fund 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. 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 plus deferred outflows of resources, equals current liabilities plus deferred inflows of resources, plus fund balance. Operating statements present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net change in fund balances. Enterprise funds are accounted for on a flow of economic resources measurement focus whereby all assets plus deferred outflows of resources, less liabilities and deferred inflows of resources associated with the operation of these funds, equals net position, as presented on the statement of net position. increases (i.e., revenues) and decreases (i.e., expenses) in net total position. Operating statements present 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. 44 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 section’s expenditure appropriation. Any budget revisions requiring a transfer between divisions must be approved by the City Council. City manager, human resources, and information technology are example sections of the general administration division.  All unencumbered expenditure appropriations expire at the end of the fiscal year.  Encumbered amounts are re-budgeted in the following year as deemed appropriate and necessary after review by the Budget Committee. Budgetary carry forwards are approved by the City Council as part of the budget adoption process.  All funds of the City have legally adopted budgets with the exception of the internal service fund and perpetual care fund. Formal integration of these budgets into the City’s financial systems is employed as a management control device during the year for all funds. 45 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 Position 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 or less. Cash and cash equivalents are included in both unrestricted as well as restricted assets. Receivables and Payables Accounts receivable and taxes receivable, are shown net of an allowance for uncollectible accounts. The City’s property tax is levied each year on or before the third Monday in August based on the previous January 1, full cash value as determined by the Coconino County Assessor. September 1 and March 1. Levies are due and payable in two installments on First half installments become delinquent on November 1; second half installments become delinquent on May 1. Interest at the rate of 12% per annum accrues following delinquent dates. Coconino County bills and collects all property taxes, at no charge to the taxing entities. A lien against property assessed attaches on the first day of January preceding assessment and levy thereon. Under Arizona tax laws, there are two property tax levies, primary and secondary. Primary property taxes are not restricted as to use and are used to finance the general operations of the City. Secondary property taxes are restricted for general obligation bonded debt service. The secondary property tax levy is recorded as revenue in a debt service fund and transferred to the Water and Wastewater Fund and the General Obligation Bond Fund. General Obligation bonds are serviced by each of these funds. For fiscal year 2012-2013, primary and secondary property tax collections amounted to $5,472,380 and $6,423,153 respectively. 46 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 position, 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. No long-term assets or depreciation are shown in the governmental fund financial statements. Capital assets, including public domain infrastructure (i.e., roads, bridges, curbs and gutters, streets and sidewalks, and other assets that are immovable and of value only to the City) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $5,000 ($25,000 for capital improvement projects and infrastructure assets) and an estimated useful life greater than three years. Such assets are recorded at historical cost 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): Assets Useful life (years) Buildings 10-50 Improvements 10-20 Infrastructure 25-75 Machinery and Equipment 5-25 47 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. Sick leave is vested with 20 years of service. Sick leave is payable upon termination (if vested) or retirement, 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 results in 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 includes 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 position. 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 position. Bond premiums and discounts as well as issuance costs are deferred and amortized over the life of the bonds using the straight line method, though the GAAP preferred method is the effective rate model. 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. 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, 48 amounts cannot be used for any other purpose unless the City takes the same highest level action to remove or change the constraint, this action would represent a city ordinance. 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 the budget committee with final review completed during the annual budget process; the City has no formal policy in place. 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 Position 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. 49 Reconciliation of Governmental Funds Balance Sheet and the government-wide Statement of Net Position: Internal Reclass Statement of Governmental Total Capital Long-Term Service and Net Position Funds Assets (1) Liabilities (2) Fund (3) Eliminations (4) Totals Assets Cash and cash equivalents $ 49,692,343 $ - Cash with fiscal agents 2,106,786 - Accounts receivable, net 7,361,324 - Interest receivable $ - $ 4,805,253 $ 308,245 - $ 54,497,596 - - 2,106,786 39,365 - 7,708,934 116,939 - - 7,902 - 124,841 Intergovernmental receivables 2,835,711 - - - - 2,835,711 Special assessments receivable 10,896,251 - - - - 10,896,251 4,155,000 - 3,728 - 436,337 - 20,827,296 - Interfund receivable Issuance costs - Prepaid items Inventory Restricted cash and cash equivalents Refundable deposits 213,900 Property held for sale 500,000 Capital assets Total Assets $ - 428,017 664,939 (4,155,000) 428,017 - - 668,667 - - - 436,337 - - - 20,827,296 213,900 299,629,214 99,145,615 $ 299,629,214 $ - - - 500,000 - - - 299,629,214 973,184 $ 5,280,537 $ (4,155,000) $ 400,873,550 Liabilities and Net Position Accounts payable $ 225,745 $ - 892,798 - - - - 892,798 Interest payable 1,356,167 - - - - 1,356,167 Interfund payable 4,155,000 - - - Unearned revenue Accrued payroll & compensated absence 3,872,355 $ - $ - (11,186,684) $ (4,155,000) $ 4,098,100 - 11,612,125 - - - 425,441 Guaranty and other deposits 1,280,255 - - - - 1,280,255 Current bonds and lease payable 4,938,508 - - - - 4,938,508 Unamortized bond premium - - 1,979,609 - - 1,979,609 Compensated absences - - 3,644,189 - - 3,644,189 Claims and judgements - - - 314,074 - 314,074 Other postemployment benefits - - 2,975,694 - - 2,975,694 Unmatured long-term debt - - 80,133,454 - - 80,133,454 - 298,835,261 Fund balance/Net Position Total liabilities and net position $ 71,038,408 299,629,214 99,145,616 $ 299,629,214 50 (76,573,078) $ 4,740,717 973,184 $ 5,280,536 $ (4,155,000) $ 400,873,550 (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 position includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation Transfer of capital assets to business-type activities $ $ 482,543,658 (181,677,034) (1,237,410) 299,629,214 (2) Bond issuance costs are expensed when incurred in governmental funds, but are amortized over the life of the bonds in the statement of net position. Unamortized bond issue costs $ 664,939 Certain receivables are not recognized in the governmental funds, but are earned in the statement of net position. Court receivables $ 308,245 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental fund statement. All liabilities, both current and longterm are reported in the statement of net position. Governmental bonds payable Compensated absences Other postemployment benefits Unamortized bond premium Subtotal Less: current portion compensated absences Less: current portion of bonds and leases $ $ 85,071,962 5,222,316 2,975,694 1,979,609 95,249,581 1,578,127 4,938,508 88,732,946 Revenue for the long-term special assessment receivables and property tax shown on the governmental fund statements is not reflected on the statements of net position. Special assessment Property tax $ $ 10,895,827 290,857 11,186,684 (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 position, but are not included on the governmental fund balance sheet. ISF net position (4) $ 4,740,717 Certain interfund transactions between governmental activities and between business-type activities are eliminated in the consolidation of those activities for the statement of net position. Interfund receivables Interfund payables $ $ 51 4,155,000 (4,155,000) - 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 Taxes $ 47,084,446 $ - 24,721,387 - - - (10,090,496) 14,630,891 5,361,651 - - - 10,090,496 15,452,147 Special assessments 722,733 - Charges for services 3,237,728 - Licenses and permits 1,656,135 - Fines and forfeitures 1,540,989 Rent Intergovernmental Grants and entitlements $ (73,883) $ $ - $ 47,010,563 - - 372,533 - - - 3,237,728 - - - 1,656,135 - 13,510 - - 1,554,499 1,663,692 - - - - 1,663,692 Investment earnings (429,656) - - 33,532 - (396,124) Contributions 252,377 - - - 2,384,056 Miscellaneous 2,131,679 1,265,377 Total revenue 87,076,859 2,131,679 (350,200) - (410,573) - 19,912 1,285,289 33,532 19,912 88,851,409 1,225,104 Expenditures/Expenses General governmental Public safety 8,480,086 608,634 125,361 3,623 25,099,149 1,851,513 307,946 10,717 10,442,808 - 27,269,325 Public works 1,219,324 257,048 17,281 589 224,525 1,718,767 Economic and physical development 8,296,367 229,308 79,920 3,384 601,521 9,210,500 Culture and recreation 11,292,517 2,512,536 25,394 5,440 (493,299) 13,342,588 Highways and streets 9,039,032 8,102,640 (158,515) 6,679 (1,557,851) 15,431,985 Principal retirement 6,175,303 - Interest and other charges 2,902,196 - Capital outlay Total expenditures/expenses 16,656,392 (16,656,392) 89,160,366 (3,094,713) (6,175,303) (5,777,916) - - - - - - 30,432 - 2,902,196 80,318,169 OTHER FINANCING SOURCES (USES): Issuance of capital debt Bond (discount) premium Sale of capital assets 12,474,557 - (12,474,557) - - - 542,689 - (542,689) - - - 49,750 (11,665) - - (19,912) - - 7,608 - 12,878,396 - - (13,696,157) 7,608 (19,912) Transfers in 12,870,788 Transfers out (12,458,747) (1,237,410) 13,479,037 (1,249,075) 11,395,530 $ 3,977,317 $ Total other financing sources (uses) Net change for the year $ 52 (13,017,246) (7,649,903) $ 10,708 $ - 18,173 (799,588) $ 7,733,652 53 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 position. Restricted net position 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 adoption of a city ordinance by the City Council, the government’s highest level of decision-making authority. A formal action would also be required to modify or rescind an established commitment as related to the adopted city ordinance. 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 and budget committee as part of the annual budgeting process. Authority to assign amounts used for specific purposes is confirmed as part of the annual budgeting process, the City has no formal policy that establishes this practice. 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. 54 Governmental fund balances as of June 30, 2013 are as follows: General Fund Special Other Total Highway User Transportation Capital Assessment Governmental Governmental Revenue Fund Fund Projects Fund Bond Fund Funds Funds $ $ Fund balances: Nonspendable: Perpetual care $ - Inventory $ - 390,882 $ - - - - - - $ - 201,981 $ 45,455 201,981 436,337 Restricted for: Library services - - - - - 818,932 818,932 Library branch services - - - - - 1,004,065 1,004,065 1,931,821 Library programs board directed - - - - - 1,931,821 756,793 - - - - - 756,793 Debt services - - - - 234,647 8,821,257 9,055,904 Regional planning - - - - - 20,907 20,907 Street improvements - 3,508,471 1,013,002 - - - 4,521,473 Court improvements and operations Transit - - 3,497,000 - - - 3,497,000 Economic development - - - - - 1,151,616 1,151,616 Arts and science - - - - - 460,066 460,066 Culture and recreation - - - - - 2,050,902 2,050,902 Perpetual care Development fee projects Other capital projects - - - - - 17,015 17,015 386,518 - - - - - 386,518 44,160 - 1,362,662 10,155,126 - 6,419,303 17,981,251 Assigned to: Court services 45,028 - - - - - 45,028 Capital reserve 6,735,840 - - - - - 6,735,840 Real estate 554,362 - - - - - 554,362 Unassigned: 19,410,597 - - - - - 19,410,597 $ 28,324,180 $ 3,508,471 $ 5,872,664 $10,155,126 $ 234,647 $22,943,320 $71,038,408 Total fund balances 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. 55 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 as revenues. The City will utilize a number of different fund types to segregate the financial activity within the City either due to regulatory reasons or as designated internally. The fund classifications are Governmental funds, Proprietary funds, and Fiduciary funds. Review and Approval Issues presented during the review and approval period include discussion topics of the Council during the fall and spring retreats. The fall and spring retreats were held in November and February respectively, to give City staff the opportunity to present major discussion points to Council and the public. The goal is for Council to make policy decisions and direct staff in preparing the budget. This provides adequate time for the Council to gather input on major budget issues prior to preparation of the budget. The City Council holds Study Sessions in April. The Council reviews and discusses the issue papers included in the Budget Review Book as well as all personnel recommendations, capital equipment recommendations, and the capital improvement plan. The Council arrives at a 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. Alternative Home Rule Expenditure Control municipalities require voter approval every four years. The adopted budget reflects the total funds appropriated. Certain exclusions are allowed by the state [e.g., bond proceeds, debt service, grants] in computing the Expenditure Limitation and this total cannot be exceeded. Budget authority can be transferred between line items within a section. At year-end, division budgets are reviewed and budget authority is transferred from contingencies by Resolution, if between divisions, as necessary. Council can also amend total appropriations for a division during the year by Resolution as long as there is a corresponding increase/decrease in another division 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 Position as “Cash and cash equivalents,” “Cash with fiscal agents,” “Investments,” and “Restricted cash and investments.” Deposits At June 30, 2013, the carrying amount of the City’s deposits was $15,015,125 and the bank balance was $16,937,787. The $1,922,662 difference represents deposits in transit, outstanding checks, and other reconciling items at June 30, 2013. 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. All investments are either registered in the City’s name or are held by a third party in the City’s name. Beginning January 1, 2013, non-interesting bearing accounts will only be insured for up to $250,000, which is the maximum deposit insurance amount per section 343 of the Dodd-Frank Wall Street reform. As of June 30, 2013, the City had not executed a triparty collateral agreement with Wells Fargo and Bank of New York Mellon Trust Company. As a result, the City’s secure deposits are only insured up to the maximum deposit insurance amount of $250,000. The City is in the process of negotiating the tri-party agreement. 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, 2013, the City’s investments included the following Investment Type Federal Agency Securities Municipal Obligations U.S. Treasuries State Investment Pool Wells Fargo - money market FDIC Guaranteed Certificate of Deposit Total fair value of Investments Portfolio weighted average maturity $ $ 57 Fair Value 34,499,822 1,350,462 18,764,229 44,215,659 167,017 721,162 99,718,351 Weighted Average Maturity (in years) 3.040 4.430 3.100 2.000 1.000 1.000 2.591 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, SEC registered money market accounts, certificates of deposit within the top three ratings by a nationally recognized rating agency, and the State of Arizona Local Government Investment Pool (LGIP). The credit quality ratings of investments as described by nationally recognized Standard and Poor’s and Moody’s rating service as of June 30, 2013 is as follows: Investment Type Fair Value Federal Agency Securities $ 34,499,822 Municipal Obligations 1,350,462 U.S. Treasury 18,764,229 State investment pool (LGIP) Pool 5 42,631,158 State investment pool (LGIP) Pool 7 1,584,501 FDIC Guaranteed Certificates of Deposit 721,162 Wells Fargo - money market 167,017 Total $ 99,718,351 Moody's Rating AAA AA2 AAA N/A N/A N/A N/A S&P Rating AA+ AA AA+ AAAF/S1+ AA+ N/A AAAm % of Investments 0.35 0.01 0.19 0.43 0.02 0.00 0.00 100% 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%. At June 30, 2013, the City’s cash and investments included the following: 58 The net decrease in the fair value of investments during fiscal year 2012-2013 was $969,514. 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, 2013 was ($714,390). 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 receive distributions this year in the amount of $335,562 and the total recovery to date is $1,116,808. In previous years, the City recognized a decrease in fair value of $289,104 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 filed claims on behalf of the LGIP investors. The City received a distribution this year in the amount of $25,546 and the total recovery to date is $42,979. 59 B. Receivables Receivables as of June 30, 2013, including allowances for uncollectible accounts, are as follows: Fund Intergov- Accounts Interest ernmental $ 5,368,033 $ 50,397 $ 1,118,980 1,474,914 17,526 1,455,471 945,095 44,155 20,025 230,636 Total government funds 7,669,569 Total governmental activities Governmental Activities General fund Highway user revenue fund Transportation fund Special assessment fund Capital projects fund Other governmental funds Less: allowance for uncollectibles Internal services funds Business-Type Activities Water and wastewater Environmental services Airport Stormwater Flagstaff housing authority Less: allowance for uncollectibles Total business-type activities Total activities 710,200 - 4,419 $ - - - Total Receivables $ 6,537,410 725,218 2,947,911 - 10,896,251 10,896,693 - - (828,673) 116,939 2,835,711 10,896,251 21,518,470 7,708,934 124,841 2,835,711 10,896,251 21,565,737 4,720,661 28,127 46,683 - 4,795,471 589 212,657 (828,673) 39,365 442 10,599 Special Assessments - 7,902 1,390,568 12,496 192,034 170,055 1,733 (168,458) - - - 20,025 1,219,886 47,267 - - 1,403,064 - - - - - 193,767 170,055 (168,458) 6,428,663 42,945 259,340 - 6,730,948 $14,137,597 $ 167,786 $ 3,095,051 $ 10,896,251 $ 28,296,685 123,803 - 337,049 The receivables not expected to be collected within one year include $733,673 of the general fund, $39,000 of the transportation fund, $72,000 of the water and wastewater, $41,000 of the environmental services fund, $21,000 of the airport fund, $4,000 of the Stormwater fund, and $30,450 of the flagstaff housing authority. 60 C. Capital Assets A summary of capital asset activity, for the government-wide financial statements, as of June 30, 2013 is as follows: Balance Governmental activities: Non-depreciable assets: Land Construction -in-progress July 1, 2012 $ Total non-depreciable assets 5,525,768 $ 55,212,772 Depreciable assets: Buildings Improvements 76,490,638 19,958,582 Machinery and equipment Infrastructure Accumulated depreciation: Buildings Improvements Machinery and equipment $ - (394,386) 9,774,236 (394,386) 18,322 (43,015) (606,172) 409,433,542 9,013,835 (649,187) (16,944,873) (11,834,964) (1,669,172) (973,572) 39,072 (120,400,438) (168,994,417) (8,443,252) (13,163,349) 295,651,897 7,371,307 - (2,077,353) $ Transfers Retirements 1,624,206 (19,814,142) $ 5,168,073 4,606,163 Deletions and 32,044,625 280,939,697 Total depreciable assets Infrastructure Total accumulated depreciation Governmental activities capital assets, net 49,687,004 Additions Balance In (out) $ 907,316 (2,751,810) June 30, 2013 $ 6,985,735 (1,844,494) 62,748,128 43,591 76,490,638 19,977,480 563,493 288,874,497 152,846 33,215,505 759,930 418,558,120 - (18,614,045) (12,769,464) 594,506 (152,846) (152,846) (128,843,690) (181,677,034) (409,995) $ (1,237,410) 299,629,214 Less: associated debt Less: unamortized premium (85,071,960) (2,436,739) Plus: unspent capital related debt, series 2013 Net investment in capital assets 10,113,342 222,690,985 5,624,722 633,578 $ (21,449,835) Plus: unamortized loss on current refunding 61 55,762,393 457,128 $ Business-typ e a ctivities: Non-depreciable assets: Land Construction -in-progress Total non-depreciable assets Balance July 1, 2012 $ Depreciable assets: Buildings Improvements $ 152,462 1,826,525 1,978,987 101,291,482 354,537,629 Machinery and equipment Total depreciable assets Accumulated depreciation: Buildings Improvements Machinery and equipment Total accumulated depreciation Business-type activities capital assets, net 12,349,896 22,481,654 34,831,550 Additions $ 2,348,900 7,102,320 (43,725,544) (2,275,871) 355,191,478 $ 4,753,420 43,852,422 499,681,533 (116,701,093) (18,894,968) (179,321,605) Deletions and Retirements $ (3,885,625) (41,551) (41,551) $ 1,464,037 (7,731,430) (6,267,393) (32,476) (977,094) (473,783) 7,978,586 (1,197,931) (2,207,501) 32,476 (7,789,772) (2,901,289) (12,966,932) 645,834 1,197,931 1,876,241 $ Transfers In (out) (372,811) (152,846) 7,351,957 - 152,846 152,846 $ 1,237,410 Less: associated debt Less: unamortized premium Plus: unamortized loss on current refunding Net investment in capital assets Balance June 30, 2013 $ 13,966,395 16,535,198 30,501,593 100,785,223 366,292,541 44,850,545 511,928,309 (45,968,939) (123,845,031) (20,445,480) (190,259,450) 352,170,452 (47,613,862) (31,527) 35,834 $ 304,560,897 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 540,319 1,861,967 237,774 Economic and physical development 243,172 Culture and recreation 1,923,582 Highway and streets Total depreciation expense - governmental activities 62 $ 8,356,535 13,163,349 D. Interfund Receivables, Payables, and Transfers Interfund receivables and payables Net interfund receivables and payables between governmental activities and business-type activities of $428,017 are included in the government-wide financial statements at June 30, 2013. The interfund balances at June 30, 2013 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, 2013 are expected to be repaid within one year. The following interfund receivables and payables are included in the fund financial statements at June 30, 2013: Interfund Receivables Fund Governmental Activities: General fund Capital projects bond construction Other governmental funds Total governmental activities $ Business-Type Activities: Water and wastewater fund Airport fund Total business-type activities Total governmental and business-type activities $ Less: fund eliminations Adjustment for internal service fund elimination 4,155,000 4,155,000 4,155,000 (4,155,000) 428,017 Total government-wide statement of net position 63 $ 428,017 Interfund Payables $ $ 4,100,000 55,000 4,155,000 4,155,000 Transfers The net transfers of $817,761 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 2013 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, 2013: Fund Governmental Activities: General fund Highway user revenue fund Transportation fund Other governmental funds Total governmental funds Internal service fund Total governmental activities Business-Type Activities: Water and wastewater fund Environmental services fund Airport fund Stormwater fund Total business-type activities Total governmental and business-type activities Transfers out $ $ Less: fund eliminations Add: net capital assets transfer 2,702,301 85,401 3,808,907 5,862,138 12,458,747 12,458,747 157,794 319,759 33,567 286,943 798,063 13,256,810 Transfers In $ $ 2,261,384 4,233,250 6,376,154 12,870,788 7,608 12,878,396 112,428 99,000 166,986 378,414 13,256,810 (13,676,459) 1,237,410 Total government-wide statement of activities $ 817,761 E. Leases Operating Leases Expenditures The City leases library spaces under both non-cancellable and cancellable operating leases. The non-cancellable lease is for the East Flagstaff Library. The initial intergovernmental agreement was dated September 10, 2002, and was amended on September 8, 2008, to reflect an ending date of June 30, 2017. The agreement has automatic renewal for an additional two years, terminating on June 30, 2019, if neither party send a written notice of intent to terminate to the other party at least 60 days prior to the expiration of the initial term. Either party may terminate the lease at any time for any reason or no reason, without penalty, upon 180 days written notice. Fiscal year 2013 lease expense for the library was $81,421. The schedule below for future minimum lease expenses reflects the change in the rental rate as of June 30, 2013. The additional cancellable lease is the Chevelon Butte School District #5 and Coconino county Library District for facility use. It is a four (4) year lease beginning September 1, 2011, and is automatically renewed an additional four years, indefinitely, unless 30 days notice is given by either party. Total lease expense was $6,600 for FY 2013. 64 Operating Lease Expenditures Year Ending June 30 2014 2015 2016 2017 2018 Total East Flagstaff Library $ Chevelon Butte School Dist.#5 81,421 81,421 81,421 81,421 81,421 407,105 $ $ $ 6,600 6,600 6,600 6,600 6,600 33,000 In addition, 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, 2013 were $146,969 (inclusive of the Chevelon Butte School Library). Operating Lease Revenues The City leases several City-owned buildings under cancellable and non-cancellable agreements. Certain leases contain provisions for future rate increases based on changes in the consumer Price Index. Total revenue for fiscal year 2013 was $1,663,714. The City currently has one lease with non-cancellable 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-cancellable terms. operational expenses. Year Ending June 30 2014 2015 2016 2017 2018 Total The amounts shown include revenue related to the asset and the USGS Building #6 $ $ 792,606 792,606 792,606 792,606 66,051 3,236,475 In addition, the Airport Fund has several leases under cancellable agreements. The leases are for terminal space, hangars, shades, tiedowns, ground leases and a cafe. Lease revenue in the airport fund for fiscal year 2013 was $1,337,646. 65 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. On March 20, 2013, the City issued $11,460,000 in GO bonds, series 2013, related to capital projects approved by voters. Open space projects for $3.0M was approved by voters on the May 18, 2004 election. The 2010 election resulted in approval of $6.46M for improvements related to street and utility infrastructure, and on November 6, 2012 voters approved $10M in forest health and water protection funds, in which, $2.0M were issued as part of this series. General obligation bonds outstanding at June 30, 2013: Purpose Governmental activities Governmental activities - current refunding Business-type activities Business-type activities - refunding Total general obligation bonds outstanding $ $ 66 Amount 46,822,927 212,704 1,504,660 247,296 48,787,587 General obligation bonds payable at June 30, 2013 consist of the following individual issues: Governmental activities: $3,015,000 GO Refunding Series 2011 - Parks and recreation portion of $1,394,136, due in annual installments of $212,704 to $964,104 through July 1, 2014; interest rate at 2.0% to 5.0%. Parks improvements. $ 212,704 $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%. Consturction related to recreation facilities, fire facilities and equipment, and open space acquistion. 19,560,000 $12,845,000 Capital projects, series 2011 due in annual installments of $335,000 to $2,320,000 through July 1, 2020; interest rate at 1.0% to 4.0%. Construction related to fire facilities, streets and utility improvements, and public safety communication system. 12,510,000 $3,952,287 Public Safety Communications, series 2011 due in annual installments of $289,956 to $446,582 through July 1, 2021; interest rate at 2.40%. Construction related to public safety communication system. 3,292,927 $11,460,000 Capital projects, series 2013 due in annual installments of $560,000 to $950,000 through July 1, 2028; interest rate at 1.625% to 4.0%. Construction related to forest initiative, streets and utility improvements, and open space/Flagstaff Urban Trail System. 11,460,000 Total governmental activities 47,035,631 Business-type activities: $3,015,000 GO Refunding Series 2011 - Water improvement project bonds as portion of $1,620,864, due in annual installments of $247,296 to $1,120,896 through July 1 2014; interest rate at 2.0% to 5.0% 247,296 $1,633,933 Water infrastructure finance authority, due in annual installments of $61,745 to $107,043 through July 1, 2031; interest at 3.104%. Original amount $1,833,828 less deobligated amount of $199,895. Red Gap Wells. 1,504,660 Total business-type activities 1,751,956 Total General Obligation Bonds $ 67 48,787,587 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2031 Total $ Govermental Activities Principal Interest 4,420,973 1,688,071 4,987,348 1,455,428 5,191,644 1,289,093 4,636,164 1,126,862 4,695,912 990,213 18,663,590 2,539,732 4,440,000 434,199 47,035,631 $ 9,523,598 $ Business-type Activities Principal Interest 310,957 51,651 65,637 44,729 67,675 42,691 69,775 40,591 71,941 38,425 394,622 157,208 459,789 92,042 311,560 19,538 1,751,956 $ 486,875 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, 2013 was $83,425,011 and $39,663,779 for the 20 percent and 6 percent debt limits, respectively. Also, see Schedule 16 in the Statistical Section for related information. 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. 68 Special assessment bonds payable at June 30, 2013 consist of the following individual issues: Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2032 Total $ $ Govermental Activities Principal Interest 360,000 $ 542,000 380,000 523,500 395,000 504,125 420,000 483,750 440,000 462,250 2,540,000 1,951,000 3,250,000 1,230,750 3,235,000 333,625 11,020,000 $ 6,031,000 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. 69 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. Advance Refunding On March 21, 2012, the City issued $12,530,000 in pledged revenue refunding bonds with interest rates ranging between 3.0% and 5.0%. The City issued the bonds to advance refund $13,025,000 of the outstanding series 2003 Fourth Street Municipal Facility Corporation revenue bonds, with an interest rate ranging between 4.0% and 5.25%. The City used the net proceeds along with other resources to purchase U.S. Treasury securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 2003 series bonds. As a result, that portion of the 2003 series bonds is considered defeased, and the City has removed the liability from its accounts. The outstanding principal of the defeased bonds is $13,331,391 at June 30, 2013. Revenue bonds at June 30, 2013 consist of the following individual issues: 70 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2030 Total $ $ Govermental Activities Principal Interest 820,000 $ 606,613 1,925,000 582,013 1,990,000 522,962 2,060,000 448,363 2,155,000 357,762 5,070,000 693,037 1,005,000 250,175 470,000 32,838 15,495,000 $ 3,493,763 $ $ Business-type Activities Principal Interest 349,863 $ 128,938 362,275 116,526 375,127 103,675 388,434 90,367 402,214 76,587 1,756,693 158,511 3,634,606 $ 674,604 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 $4.7M certificates of participation for the construction of a new United States Geological Survey (USGS) facility on land owned by the City. In fiscal year 2004 the MFC issued $25M in bonds for construction of the Fourth Street Overpass, as approved by voters in May 2000 general election. This issue was partially refunded on March 21, 2012 with pledged revenue bonds. Municipal facility corporation bonds are comprised of the following issues: Annual debt service requirements to maturity for municipal facility debt are as follows: Year Ending June 30 2014 2015 2016 Total $ $ Govermental Activities Principal Interest 400,000 $ 59,850 420,000 40,850 440,000 20,900 1,260,000 $ 121,600 71 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 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, 2013: Purpose Governmental activities $ Amount 3,625,000 Certificates of participation are comprised of the following issues: Annual debt service requirements to maturity for certificates of participation debt are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2020 Total $ $ Govermental Activities Principal Interest 470,000 $ 115,770 485,000 101,445 500,000 86,670 515,000 70,673 530,000 52,900 1,125,000 44,812 3,625,000 $ 472,270 72 The following is a summary of debt service requirements, including interest requirements, to maturity for long-term debt at June 30, 2013: Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Less interest General Obligation Bonds 6,471,652 6,553,142 6,591,103 5,873,392 5,796,491 5,733,441 5,538,091 4,032,616 3,577,603 2,873,401 1,085,416 1,087,416 1,083,016 1,081,317 1,088,865 110,366 110,366 110,366 Special Assessment Bonds 902,000 903,500 899,125 903,750 902,250 899,750 901,125 896,375 895,500 898,250 899,500 894,375 897,750 894,500 894,625 893,000 889,625 894,250 891,750 (10,010,473) $ 48,787,587 (6,031,000) $ 11,020,000 Revenue Bonds 1,905,414 2,985,814 2,991,764 2,987,164 2,991,563 2,985,264 2,981,163 732,288 730,277 249,250 251,812 248,950 250,875 251,625 251,913 251,737 251,100 (4,168,367) $ 19,129,606 Municipal Facility Corporation Bonds 459,850 460,850 460,900 $ (121,600) 1,260,000 Cetificates of Participation 585,770 586,445 586,670 585,673 582,900 583,312 586,500 $ (472,270) 3,625,000 Total 10,324,686 11,489,751 11,529,562 10,349,979 10,273,204 10,201,767 10,006,879 5,661,279 5,203,380 4,020,901 2,236,728 2,230,741 2,231,641 2,227,442 2,235,403 1,255,103 1,251,091 1,004,616 891,750 (20,803,710) $ 83,822,193 Authorized and Issued Debt The voters of the City authorize capital projects and the related debt mechanism to finance these capital projects. Voters approved $8.2M during the bond election of November 5, 1996 to fund park and recreation facilities, as of June 30, 2013, $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, 2013, $10.5M remains unissued for capital projects and $.8M 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, 2013 $.36M remains unissued. November 6, 2012 voters approved $14M for a Core Service Maintenance Facility and $10M for Forest Health and Watershed Protection, as of June 30, 2013 $14M and $8M remains unissued, respectively. Loans Payable The City of Flagstaff has various loan agreements with the Water and Wastewater Infrastructure Finance Authority of Arizona Revolving Fund Loan Program for the acquisition and construction of water and wastewater facilities and obtaining water rights. The Airport has an agreement with the Arizona Department of Transportation which provides financing for the construction of 14 T hangars at the City Airport. 73 Loan payables at June 30, 2013 consist of the following individual financing options: 74 Annual debt service requirements to maturity for loan payables are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Total $ $ Business-type Activities Principal Interest 1,961,504 $ 1,199,198 2,028,815 1,130,244 2,103,204 1,058,883 2,147,083 985,065 2,195,836 911,045 12,171,750 3,359,540 11,146,149 1,115,008 118,823 7,285 33,873,164 $ 9,766,268 Obligations under Capital Leases On June 24, 2013, the City entered into a new capital lease agreement for the installation of renewable energy equipment consisting of solar panels at three sites; the Aquaplex, along with the Wildcat and Rio de Flag Wastewater Treatment Plants. Construction is in progress for the installation of the panels. Capital lease agreement for energy saving equipment related to governmental activities has assets of $1,032,824. The construction of a co-generator at Wildcat Wastewater Treatment Plant and construction of airport hangars represents total business assets of $1,372,598 and $409,494, respectively. These lease agreements generally require annual payments and the lease terms vary from 10 to 21 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. 75 Pledged Revenues The City has pledged future water utility and wastewater utility revenues to repay Water Infrastructure Financing Authority Bonds issued during the period of 1992-2013. 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, 2013, $37,334,219 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, 2013, net revenue available for service of this debt was $10,036,310. The debt principal, interest and fees paid in fiscal year 2013 equal $3,674,830 (36.62% 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. On March 21, 2012 a partial advance refunding of $12,530,000 was completed on the 2004 bonds and replaced with pledged revenue refunding bonds series 2012, holding the 2004 bonds senior. At June 30, 2013, $12,530,000 remains outstanding to be repaid by future revenues, of which $1,560,000 is senior. For the fiscal year ended June 30, 2013, net revenues available for service of the debt were $37,962,078. The debt principal and interest paid in fiscal year 2013 was $2,102,575 (5.54% 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, 2013 $1,260,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2013, net revenues available for service of this debt were $11,657,403. The debt principal and interest paid in fiscal year 2013 was $462,656 (3.97% 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 $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, 2013, $2,965,000 remains outstanding to be repaid by future revenues. For the fiscal year ended June 30, 2013, net revenues available for the service of this debt were $9,304,790. The debt principal and interest paid in fiscal year 2013 was $250,038 (2.69% 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. 76 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, 2013 was as follows: Gove rnme nta l a ctivitie s: Bonds payable: General obligation bonds Special assessment bonds Revenue bonds Municipal facility corporate bonds Certificates of participation Total bonds payable Capital leases Bond premium Deferred loss on advance refunding Compensated absences Other postemployment benefits Claims and judgements Governmental activity long-term liabilty Beginning Balance Additions Reductions Balance Ending Due Within $ 38,449,139 $ 11,460,000 $ (2,873,508) $ 47,035,631 $ 4,420,973 (120,000) 15,495,000 820,000 11,365,000 - 15,615,000 - 3,205,000 4,080,000 - 72,714,139 11,460,000 1,120,061 1,014,557 2,215,437 (345,000) (1,945,000) (455,000) 11,020,000 One Year 360,000 1,260,000 3,625,000 400,000 470,000 (5,738,508) 78,435,631 6,470,973 (436,795) 1,697,823 463,948 542,690 (321,390) 3,627,971 2,326,392 1,644,741 649,302 (1,628,523) - 3,644,189 2,975,694 1,578,127 - $ 81,742,682 $ 15,509,493 $ (8,205,155) $ 89,047,020 $ 8,910,465 $ 3,124,597 $ - $ (1,372,641) $ 1,751,956 $ - (1,710,518) 5,386,562 35,471,520 91,109 (1,863,016) 33,699,613 1,915,315 3,074,992 1,936,443 (324,976) 4,686,459 364,677 (522,432) 261,114 - 198,203 65,304 (145,243) 2,436,737 321,388 (457,128) 314,074 (65,304) 141,333 Busine ss-typ e a ctivitie s: Bonds payable: General obligation bonds Water & sewer revenue bonds Total bonds payable Water & sewer loan payable Airport loan payable Capital lease payable Total loan and leases payable Bond premium Deferred loss on current refunding Compensated absences Other postemployment benefits Landfill closure/postclosure Business-type activity long-term liability 3,972,483 - 7,097,080 217,241 38,763,753 - 2,027,552 63,053 (71,669) 808,354 - - 347,162 509,371 143,615 $ 54,333,154 $ 2,765,513 7,163,212 247,184 77 (337,877) (43,690) (2,231,682) (31,527) 35,834 (310,755) - - $ (4,248,648) 3,634,606 173,551 38,559,623 31,526 (35,835) 844,761 652,986 7,410,396 $ 52,850,019 310,957 349,863 660,820 46,189 2,326,181 31,526 (35,835) 329,950 - - $ 3,312,642 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, 2013 have potential exposure to the City of approximately $314,074 based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City uses an application of historical experience to determine claims payable. However, due to the preliminary status of the claims, no determination can be made as to the likelihood, if any, of an unfavorable outcome. The net position of the Internal Service Fund is 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 2010-11 Current Year Claims and Changes in Estimates Beginning of Year Liability $ 440,566 $ 78,889 End of Year Liability Claim Payments $ 214,713 $ 304,742 2011-12 304,742 57,776 101,404 261,114 2012-13 261,114 198,203 145,243 314,074 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. 78 The following table presents the City’s commitments as of June 30, 2013: Governmental Activities: General fund Highway users revenue fund BBB fund Capital projects fund Other governmental funds Total governemental activities $ Business ‐ Type Activities: Water and wastewater fund Environmental services fund Airport fund Stormwater fund Total business‐type activities Total governmental and business‐type activities $ 423,944 3,429,627 464,942 2,437,386 387,934 7,143,833 2,508,304 ‐ 4,998,461 1,046,410 8,553,175 15,697,008 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 79 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, 2013, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.14% (10.90% retirement and 0.24% long-term disability) of the members' annual covered payroll and the City was required by statute to contribute at the actuarially determined rate of 11.14% (10.25% retirement, .65% for health insurance premium, and 0.24% long-term disability) of the members’ annual covered payroll. The City's contributions to ASRS for the years ended June 30, 2013, 2012, and 2011 were $2,999,222, $2,884,449, and $2,642,362 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: 6/30/2013 6/30/2012 6/30/2011 $ Retirement 2,759,607 2,650,792 2,417,024 Health Insurance $ 174,999 169,199 158,273 Long-term Disability $ 64,615 64,457 67,065 In addition, active EORP members were required by statute to contribute 11.50% of the members' annual covered payroll. The City was required to contribute 24.94% 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 at 1.80% of covered payroll. The City's contributions to EORP for the years ended June 30, 2013, 2012, and 2011 were $59,060, $55,498, and $48,203 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: 6/30/2013 6/30/2012 6/30/2011 $ Retirement 54,797 52,487 46,828 Health Insurance $ 4,263 3,011 1,375 Agent Plan - For the year ended June 30, 2013, active PSPRS members were required by statute to contribute 9.55% of the members' annual covered payroll, and the City was required to contribute at the actuarially determined rate of 19.67% and 28.25% for Police and Fire respectively. Police personnel contributed $885,449; Fire personnel contributed $513,626 during fiscal year 2012-2013. The City annual pension and OPEB cost of $1,823,748 for police and $1,519,363 for fire is based on actual payroll costs and may vary to the City’s annual required 80 contribution since the actuary basis is based on estimated payroll costs. 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, 2013, the date of the most recent actuarial valuation, and related information follow. PSPRS Police Contribtuion rates FY12-2013: City Plan members Fire 19.67% 9.55% EORP 28.25% 9.55% 24.94% 11.50% Annual pension costs* Pension contribtuions made $ $ 2,036,851 1,770,763 $ $ 1,721,727 1,432,411 $ $ 54,797 54,797 Annual OPEB costs - Health Insurance OPEB contribtuions made $ $ 52,985 52,985 $ $ 86,952 86,952 $ $ 4,263 4,263 As of actuarial valuation date: Actuarial cost method Amortization method Remaining amortization period-UAL Remaining amortization period-excess Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Inflation Cost of living adjustments 6/30/2013 6/30/2013 6/30/2013 Entry age normal Entry age noraml Entry age noraml Level percent-ofpay closed 23 years 20 years 7-year smoothed market Level percent-ofpay closed 23 years 20 years 7-year smoothed market Level dollar closed 23 years 20 years 7-year smoothed market 7.85% 4.5% - 8.5% 4.50% None 7.85% 4.5% - 8.5% 4.50% None None 7.85% 4.25% 4.00% *Actuary estimates payroll while the City reports on actual payroll Three Year Trend Information for PSPRS - Information for the agent plan as of most recent actuarial valuations follows. 81 Contributions Required and Contributions Made Annual Pension Cost (APC) * Plan PSRS - Police - Pension 6/30/2013 $ 6/30/2012 6/30/2011 Percentage of APC Contributed Net Pension Obligation 1,770,763 1,734,804 1,698,848 100% 100% 100% $ -0-0-0- 52,985 51,929 49,918 100% 100% 100% $ -0-0-0- 1,432,411 1,420,778 1,380,272 100% 100% 100% $ -0-0-0- PSRS - Fire - Health Insurance 6/30/2013 $ 6/30/2012 6/30/2011 86,952 95,474 90,626 100% 100% 100% $ -0-0-0- EORP - Pension 6/30/2013 6/30/2012 6/30/2011 54,797 52,487 46,828 100% 100% 100% $ -0-0-0- 4,263 3,011 1,375 100% 100% 100% $ -0-0-0- PSRS - Police - Health Insurance 6/30/2013 $ 6/30/2012 6/30/2011 PSRS - Fire - Pension 6/30/2013 6/30/2012 6/30/2011 $ $ EORP - Health Insurance 6/30/2013 $ 6/30/2012 6/30/2011 *Actuary estimates payroll while the City reports on actual payroll 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 2013. 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. 82 (2) Actuarial Accrued Liability (AAL) Entry Age (1) Actuarial Value of Assets PSRS - Police Pension 6/30/2013 $ 6/30/2012 6/30/2011 24,004,933 $ 24,405,305 25,208,537 (5) Annual Covered Payroll (6) Unfunded AAL as a Percentage of Covered Payroll (4) / (5) 47.3% $ 48.7% 54.8% 26,731,386 $ 25,672,617 20,759,687 6,928,981 7,083,003 6,801,375 385.8% 362.5% 305.2% $ 1,113,009 1,170,030 1,159,297 0.0% $ 0.0% 0.0% 1,113,009 $ 1,170,030 1,159,297 6,928,981 7,083,003 6,801,375 16.1% 16.5% 17.0% 30,383,466 $ 31,459,483 32,146,592 57,455,404 56,007,099 51,857,015 52.9% $ 56.2% 62.0% 27,071,938 $ 24,547,616 19,710,423 4,613,508 4,546,952 4,606,922 586.8% 539.9% 427.8% 1,531,410 1,553,913 1,563,996 0.0% $ 0.0% 0.0% 1,531,410 $ 1,553,913 1,563,996 4,613,508 4,546,952 4,606,922 33.2% 34.2% 33.9% PSRS - Fire Health Insurance 6/30/2013 $ 6/30/2012 6/30/2011 D. (4) Unfunded AAL (2) - (1) 50,736,319 50,077,922 45,968,224 PSRS - Police Health Insurance 6/30/2013 $ 6/30/2012 6/30/2011 PSRS - Fire Pension 6/30/2013 $ 6/30/2012 6/30/2011 (3) Percent Funded (1) / (2) - $ Other Post Employment Benefits (OPEB) Plan Postemployment Healthcare Plan Plan description. The City of Flagstaff provides post-retirement healthcare insurance benefits for its retirees as an agent multiple-employer plan which is administered through, Northern Arizona Public Employee Benefit Trust (NAPEBT). NAPEBT provides benefits to eligible retirees through the same plan as active city employees and their beneficiaries up to the age of 65; the implicit rate subsidy exists through the duration of the coverage. Substantially, all of the City’s employees may become eligible for those benefits when they qualify for retirement. To be eligible a retiree must qualify to receive retirement benefits from the Arizona State Retirement System and elect coverage at date of retirement. NAPEBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on their website: www.napebt.com/community_docs. As of June 30, 2013, there were 76 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 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 $194,833 during fiscal year 2013. 83 Annual OPEB Cost and Net OPEB Obligation. For 2013, the city’s annual OPEB cost (expense) of $987,749 was equal to the ARC, as adjusted by any ARC adjustments, and interest on the net OPEB obligation of $127,931. On June 30, 2013, the net increase in NOO for governmental activities was $649,301 and for business-type activities was $136,466. 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 2013 and two preceding years were as follows: Fiscal Year Ended Annual OPEB Cost 6/30/2013 $ 6/30/2012 6/30/2011 Fiscal Year Ended 6/30/2013 $ 6/30/2012 6/30/2011 Actual Contributions 987,749 $ 999,061 1,249,702 (1) Annual Required Contribution 1,034,349 $ 1,035,681 1,268,106 Percentage of Annual OPEB Cost Contributed 194,833 392,380 159,002 (2) Interest on Existing NOO (3) ARC Adjustment 127,931 $ 100,534 50,526 Funded Status and Funding Progress. 19.7% 39.3% 12.7% Net OPEB Obligation $ 3,628,680 2,835,764 2,229,083 (4) Annual OPEB Cost (1) + (2) + (3) (174,531) $ (137,154) (68,930) (5) Actual Contribution Amount 987,749 $ 999,061 1,249,702 194,833 $ 392,380 159,002 (6) Net Increase in NOO (4) - (5) (7) NOO as of End of Year 792,916 $ 606,681 1,090,700 3,628,680 2,835,764 2,229,083 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) Actuarial Value of Assets (2) Actuarial Accrued Liability (AAL) 7/1/2011 $ 9,808,514 7/1/2010* 12,234,910 7/1/2008* 8,946,294 (*) Information not available for Housing Authority (3) Percent Funded (1) / (2) 0.0% 0.0% 0.0% (4) Unfunded AAL (2) - (1) $ 9,808,514 12,234,910 8,946,294 (5) Annual Covered Payroll $ 41,941,781 34,486,958 42,292,297 (6) Unfunded AAL as a Percentage of Covered Payroll (4) / (5) 23.4% 35.5% 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 compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents 84 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 with no inflation rate factor and no projected salary increases factor, due to level dollar valuation used. 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 $7,410,396, as of June 30, 2013, which is based on 73.25 percent usage of the landfill. The remaining $2,706,454 will be accrued over the remaining life of the landfill, which is currently estimated to be 13 years. The accrual for the closure and postclosure care costs for fiscal year 2013 is $247,184. 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, 2013 the balance of the investments held for those purposes is $9,783,057. 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, $10,116,850, 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, 2013. However, the actual cost of closure and postclosure care may be higher or lower due to other factors such as; inflation, changes in technology, or changes in landfill laws and regulations. According to state and federal laws and regulations, the City must comply with the local government financial test requirements that assure the City can meet the cost of landfill closure, post-closure and corrective action when needed. The City, which has pledged its full faith and credit to meet state financial responsibility requirements, is in compliance with these requirements. In March of 1999, the City purchased 343.9 acres of land from the U.S. Forest Service. This land is adjacent to the existing landfill and will be used to open additional cells as needed. As these cells are utilized, additional liabilities for closure and postclosure care requirements will be accrued. 85 The City applied existing policy to the Environmental services fund increasing its’ expenditures as City residential and commercial collection programs are now charged for landfill fees. F. Subsequent Events On November 15, 2013, the City redeemed $810,000 of its’ Aspen Place at the Sawmill Improvement District Bonds as part of a refunding defeasance related to the property owner selling to another developer. 86 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. Bed, Board and Beverage Tax Fund This 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. 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. 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. 87 CITY OF FLAGSTAFF, ARIZONA Combining Balance Sheet Non-Major Governmental Funds June 30, 2013 Special Revenue Funds Library Fund Community Redevelopment Fund BBB Fund Metropolitan Planning Organization Fund ASSETS Cash and investments $ 1,396,299 Accounts receivable, net $ 8,749,236 $ 868,454 $ 2,680 93,982 802,480 198 - 7,354 15,667 1,716 - Intergovernmental receivables - 57,853 93,077 79,706 Inventory - 45,455 - - Interest receivable Restricted cash and investments Total assets 2,935,886 - - - $ 4,433,521 $ 9,670,691 $ 963,445 $ 82,386 $ $ 281,142 $ 13,314 $ 1,522 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll and compensated absences 571,414 47,124 20,088 1,231 4,387 Current bonds payable - 120,000 - - Interest payable - 65,019 - - Interfund payable - - - 55,000 Unearned revenue 60,165 6,000 - 570 678,703 492,249 14,545 61,479 Perpetual care - - - - Inventory - 45,455 - - 818,932 - - - Total liabilities Fund balances: Nonspendable: Restricted for: Library services Library branch services 1,004,065 - - - Library programs board directed 1,931,821 - - - Debt service - - - - Economic development - 1,151,616 - - Arts and science - 460,066 - - Culture and recreation - 2,050,902 - - Other capital projects - 5,470,403 948,900 - Regional planning - - - 20,907 Perpetual care Total fund balances Total liabilities and fund balances - - - - 3,754,818 9,178,442 948,900 20,907 $ 4,433,521 88 $ 9,670,691 $ 963,445 $ 82,386 Permanent Fund Debt Service Funds Secondary Property Tax Revenue Fund General Obligation Bond Fund $ 3,622,990 $ Total Other Governmental Funds Perpetual Care 8,802,241 $ 13,178 $ 23,455,078 - - 3,435 900,095 - 19,016 402 44,155 - - - 230,636 - - - 45,455 - - 201,981 3,137,867 $ 3,622,990 $ 8,821,257 $ 218,996 $ 27,813,286 $ 43,948 $ - $ - $ 911,340 - - - 72,830 2,873,508 - - 2,993,508 - - 770,553 - - - 55,000 - - - 66,735 3,622,990 - - 4,869,966 - - 201,981 201,981 - - - 45,455 - - - 818,932 - - - 1,004,065 - - - 1,931,821 - 8,821,257 - 8,821,257 - - - 1,151,616 - - - 460,066 - - - 2,050,902 - - - 6,419,303 - - - 20,907 705,534 $ ` - - 17,015 17,015 - 8,821,257 218,996 22,943,320 3,622,990 $ 8,821,257 89 $ 218,996 $ 27,813,286 CITY OF FLAGSTAFF, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Year Ended June 30, 2013 Special Revenue Funds Library Fund Metropolitan Planning Organization Fund Community Redevelopment Fund BBB Fund REVENUES: Taxes $ Intergovernmental - $ 5,911,175 $ - $ - 3,214,133 - - 5,000 53,882 463,060 509,775 255,984 - Grants and entitlements Rents - 52,386 3,870 Investment earnings 33,993 67,031 7,809 - Contributions 32,588 6,521 - 3,980 Miscellaneous Total revenues 43,360 100,559 690,059 - 3,377,956 6,600,732 1,211,513 264,964 - 2,494,359 1,472,674 279,163 4,622,933 641,238 - - - 81,452 - - - 120,000 - - EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets Debt service: Principal retirement Interest and other charges - 130,505 - - 11,201 1,249,434 - - 4,634,134 4,716,988 1,472,674 279,163 (1,256,178) 1,883,744 Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures (261,161) (14,199) OTHER FINANCING SOURCES (USES): Sale of capital assets Transfers in 579 - - - 1,140,651 1,125,957 - 22,493 (1,846,328) (14,000) - (720,371) (14,000) 22,493 (275,161) 8,294 Transfers out (78,391) Total other financing sources (uses) 1,062,839 Net change in fund balances (193,339) Fund balances, beginning of year Fund balances, end of year 1,163,373 3,948,157 $ 3,754,818 90 8,015,069 $ 9,178,442 1,224,061 $ 948,900 12,613 $ 20,907 Permanent Fund Debt Service Funds General Obligation Bond Fund $ - Secondary Property Tax Revenue Fund $ Perpetual Care 6,423,153 $ - $ 12,334,328 - - - 3,219,133 - - - 1,282,701 - - - 56,256 - 75,132 1,744 185,709 - - 23,935 67,024 - - - 833,978 - 6,498,285 25,679 17,979,129 - - - 4,246,196 - - - 5,264,171 - - - 81,452 2,873,508 - - 2,993,508 1,415,903 - - 1,546,408 - - - 1,260,635 4,289,411 - - 15,392,370 6,498,285 25,679 2,586,759 (4,289,411) $ Total Other Governmental Funds - - - 579 3,911,354 - - 6,200,455 - (3,911,354) - (5,850,073) 3,911,354 (3,911,354) - 350,961 (378,057) 2,586,931 25,679 2,937,720 378,057 6,234,326 193,317 20,005,600 - $ 8,821,257 $ 91 218,996 $ 22,943,320 92 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 94 96 Budgetary Comparison Schedules - Other Major Governmental Funds Special Assessment Bond Fund Capital Projects Fund 97 98 Budgetary Comparison Schedules - Non-Major Governmental Funds 99 Library Fund BBB Fund 100 Community Redevelopment Fund 101 Metropolitan Planning Organization Fund 102 Secondary Property Tax Revenue Fund 104 General Obligation Bond Fund 103 Financial Data Submission Schedules Net Position Accounts 105 Revenue, Expenses, and Changes in Fund Net Position Accounts 107 Revenue, Expenses, and Changes in Fund Net Position AccountsPublic Housing-Consolidated 110 93 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2013 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 2,645,130 4,096,419 10,427,547 38,593,297 $ 55,762,393 $ 55,762,393 94 $ 13,692,410 27,530,153 5,343,042 7,541,573 22,281,151 102,309 Improvements $ 1,919,187 113,946 185,712 95,128 15,384,073 2,279,434 76,490,638 19,977,480 (18,614,045) (12,769,464) 57,876,593 $ 7,208,016 Machinery and Equipment $ 1,621,383 16,540,487 1,401,104 933,346 3,855,449 8,863,736 Construction In Progress $ 33,215,505 11,765,670 356,325 619,765 6,009,645 $ 1,117,225 652,947 9,639,935 277,464,390 6,985,735 (21,449,835) $ Infrastructure $ 6,985,735 $ $ 20,234,435 48,281,005 8,047,083 9,222,994 62,207,920 333,312,811 288,874,497 481,306,248 (128,843,690) (181,677,034) 160,030,807 95 Total $ 299,629,214 City of Flagstaff, Arizona Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity June 30, 2013 Balance Program General government July 1, 2012 $ Public safety 22,137,709 Additions $ 47,285,120 Retirements 357,099 $ 784,507 (2,314,779) Public works 7,828,486 - 218,960 Economic and physical development 9,337,387 - (114,393) 56,080,415 7,660,219 (1,556,217) 321,977,197 9,986,246 2,586,779 Culture and recreation Highway and streets Total $ 464,646,314 $ 18,788,071 96 $ 136,078 $ (1,043,573) Transfers Balance In (out) June 30, 2013 54,406 $ 75,300 (363) 8,047,083 - 9,222,994 23,503 62,207,920 (1,237,410) $ 20,234,435 48,281,005 (1,084,564) 333,312,811 $ 481,306,248 CITY OF FLAGSTAFF, ARIZONA Special Assessment Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis REVENUES: Special assessments $ Investment earnings 904,625 $ 904,625 $ 722,733 $ (181,892) 1,400 1,400 2,696 906,025 906,025 725,429 Principal retirement 345,000 345,000 345,000 - Interest and other charges 563,225 563,225 560,476 2,749 Total expenditures 908,225 908,225 905,476 2,749 Total revenues 1,296 (180,596) EXPENDITURES: Debt service: Excess (deficiency) of revenues over (under) expenditures (2,200) (2,200) (180,047) (177,847) Net change in fund balances (2,200) (2,200) (180,047) (177,847) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 239,090 $ 239,090 236,890 $ 97 236,890 239,090 $ 59,043 $ (177,847) CITY OF FLAGSTAFF, ARIZONA Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original REVENUES: Grants and entitlements $ Miscellaneous $ 3,976,000 Investment earnings Total revenues Actual Amounts Budgetary Basis Final 6,762,500 Variance with Final Budget Positive (Negative) 6,762,500 $ 3,976,000 2,409,025 $ - (4,353,475) (3,976,000) 13,230 13,230 20,309 7,079 10,751,730 10,751,730 2,429,334 (8,322,396) EXPENDITURES: Current: Capital outlay 74,559,305 74,559,305 10,350,872 64,208,433 74,559,305 74,559,305 10,350,872 64,208,433 (63,807,575) (63,807,575) 56,110,000 56,110,000 11,460,000 - - 542,689 Sale of capital assets 8,320,000 8,320,000 - (8,320,000) Transfers in 1,000,000 1,000,000 175,699 (824,301) - - 65,430,000 65,430,000 12,166,323 Net change in fund balances 1,622,425 1,622,425 4,244,785 2,622,360 Budgetary fund balances, beginning of year 5,213,186 5,213,186 5,213,186 - Total expenditures Excess (deficiency) of revenues over (under) expenditures (7,921,538) 55,886,037 OTHER FINANCING SOURCES (USES): Bonds issued Bond premium Transfers out Total other financing sources (uses) Budgetary fund balances, end of year $ 6,835,611 $ 98 6,835,611 (44,650,000) 542,689 (12,065) $ 9,457,971 (12,065) (53,263,677) $ 2,622,360 CITY OF FLAGSTAFF, ARIZONA Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Actual Amounts Budgetary Basis 3,843,535 $ Variance with Final Budget Positive (Negative) REVENUES: Intergovernmental $ 3,843,535 $ 3,214,133 $ (629,402) Grants and entitlements 52,400 52,400 53,882 1,482 Investment earnings 27,250 27,250 33,993 6,743 Miscellaneous Total revenues 2,453,363 2,453,363 43,360 (2,410,003) 6,376,548 6,376,548 3,345,368 (3,031,180) 7,596,016 7,596,016 4,622,675 2,973,341 - - 11,201 EXPENDITURES: Current: Culture and recreation Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures (11,201) 100,000 100,000 258 99,742 7,696,016 7,696,016 4,634,134 3,061,882 (1,319,468) (1,319,468) (1,288,766) 30,702 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 $ - - 579 579 1,140,651 1,140,651 1,140,651 - (328,391) (328,391) 812,260 812,260 (507,208) (507,208) (225,927) 810,264 810,264 810,264 303,056 $ Adjustment of budgetary basis to GAAP basis net change in fund balances 303,056 (78,391) 1,062,839 $ 584,337 $ (225,927) The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 32,588 Adjusted net change in fund balance - GAAP basis $ 99 250,000 (193,339) 250,579 281,281 $ 281,281 CITY OF FLAGSTAFF, ARIZONA BBB Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Actual Amounts Budgetary Basis 5,531,750 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Grants and entitlements 5,531,750 $ 5,912,725 $ 380,975 1,452,471 1,452,471 463,060 (989,411) Rents 290,823 290,823 52,386 (238,437) Investment earnings 244,126 244,126 67,031 (177,095) Contributions - - 5,000 5,000 Miscellaneous 89,875 89,875 100,559 10,684 7,609,045 7,609,045 6,600,761 2,579,204 2,579,204 2,494,359 584,645 584,645 641,238 (56,593) - - 81,452 (81,452) Principal retirement 218,397 218,397 120,000 Interest and other charges 215,756 215,756 130,505 85,251 7,729,049 7,729,049 1,249,434 6,479,615 Total revenues (1,008,284) EXPENDITURES: Current: Economic and physical development Culture and recreation Highways and streets 84,845 Debt service: Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 98,397 335,000 335,000 - 335,000 11,662,051 11,662,051 4,716,988 6,945,063 1,883,773 5,936,779 (4,053,006) (4,053,006) 1,100,000 1,100,000 OTHER FINANCING SOURCES (USES): Bonds issued Transfers in Transfers out Total other financing sources (uses) Budgetary fund balances, beginning of year Budgetary fund balances, end of year 1,121,500 1,121,500 1,125,957 (2,081,342) (2,081,342) (1,846,328) 140,158 Net change in fund balances $ - 140,158 (1,100,000) 4,457 235,014 (720,371) (860,529) (3,912,848) (3,912,848) 1,163,402 5,076,250 7,065,420 7,065,420 7,065,420 - 3,152,572 $ Adjustment from budgetary basis to GAAP basis net change in fund balances 3,152,572 $ 8,228,822 $ 1,163,402 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. (29) Adjusted net change in fund balance - GAAP basis $ 100 1,163,373 $ 5,076,250 CITY OF FLAGSTAFF, ARIZONA Community Redevelopment Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Actual Amounts Budgetary Basis 1,739,731 $ Variance with Final Budget Positive (Negative) REVENUES: Grants and entitlements $ 1,739,731 $ 564,097 $ (1,175,634) Charges for services - - 20,615 20,615 Investment earnings - - 7,809 7,809 Miscellaneous 483,000 483,000 646,314 2,222,731 2,222,731 1,238,835 Economic and physical development 3,432,324 3,432,324 1,499,996 1,932,328 Total expenditures 3,432,324 3,432,324 1,499,996 1,932,328 (1,209,593) (1,209,593) (261,161) 948,432 (14,000) (14,000) (14,000) - (14,000) (14,000) (14,000) - (1,223,593) (1,223,593) (275,161) 948,432 1,533,801 1,533,801 Total revenues 163,314 (983,896) EXPENDITURES: Current: Excess (deficiency) of revenues over (under) expenditures 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 $ 310,208 $ 101 310,208 1,533,801 $ 1,258,640 $ 948,432 CITY OF FLAGSTAFF, ARIZONA Metropolitan Planning Organization Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Variance with Final Budget Positive (Negative) Actual Amounts Budgetary Basis Final REVENUES: Grants and entitlements $ Intergovernmental Total revenues 480,604 $ 480,604 $ 273,244 $ (207,360) 5,000 5,000 5,000 485,604 485,604 278,244 (207,360) - 408,097 408,097 296,423 111,674 EXPENDITURES: Current: Economic and physical development Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures 100,000 100,000 - 100,000 508,097 508,097 296,423 211,674 (22,493) (22,493) (18,179) 4,314 22,493 22,493 22,493 - 22,493 22,493 22,493 - Net change in fund balances - - 4,314 4,314 Budgetary fund balances, beginning of year - - - - OTHER FINANCING SOURCES (USES): Transfers in Total other financing sources (uses) Budgetary fund balances, end of year $ - $ Adjustment of budgetary basis to GAAP basis net change in fund balances - $ 4,314 $ 4,314 The City budgets certain revenues on the cash basis, rather than on the modified accrual basis. 3,980 Adjusted net change in fund balance - GAAP basis $ 102 8,294 $ 4,314 CITY OF FLAGSTAFF, ARIZONA General Obligation Bond Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2013 Budget Original Final Actual Amounts Budgetary Basis 3,030,000 $ Variance with Final Budget Positive (Negative) EXPENDITURES: Debt service: Principal retirement $ Interest and other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures 5,456,156 $ 4,289,411 $ (1,259,411) - 1,915,431 - 1,915,431 5,456,156 4,945,431 4,289,411 656,020 (5,456,156) (4,945,431) (4,289,411) 656,020 5,456,156 4,945,431 3,911,354 (1,034,077) 5,456,156 4,945,431 3,911,354 (1,034,077) - - 348,355 348,355 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 $ 103 348,355 (378,057) (378,057) 348,355 $ (29,702) $ (378,057) 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, 2013 Budget Original Final Actual Amounts Budgetary Basis 6,402,304 $ Variance with Final Budget Positive (Negative) REVENUES: Taxes $ Investment earnings Total revenues 6,402,304 $ 6,423,153 $ 20,849 32,700 32,700 75,132 42,432 6,435,004 6,435,004 6,498,285 63,281 650,000 650,000 - OTHER FINANCING SOURCES (USES): Transfers in Transfers out (650,000) (5,456,156) (5,456,156) (3,911,354) 1,544,802 (4,806,156) (4,806,156) (3,911,354) 894,802 Net change in fund balances 1,628,848 1,628,848 2,586,931 958,083 Budgetary fund balances, beginning of year 5,297,244 5,297,244 5,297,244 - Total other financing sources (uses) Budgetary fund balances, end of year $ 6,926,092 $ 104 6,926,092 $ 7,884,175 $ 958,083 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2013 Housing Choice Vouchers 14.871 Public Housing 14.850 & 14.872 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 $ 639,166 $ 79,472 $ 70,546 $ 11,812 $ 800,996 215,946 215,946 70,817 709,983 86,878 70,817 295,418 70,546 - 11,812 - - - - - - - - 3,552 3,063 - - - - - - - - - - - 2,066 66,548 1,087,759 93,493 68,614 7,416 - - - - - 7,416 (2,622) - - - - - (2,622) (27,304) - - - - - 532 - - - - 532 - (532) - - - - (532) 91,672 - 2,066 (27,304) 39,244 - - - 3,552 3,063 - - - - - - - - - - - - - - - - 58,806 3,872 20,337 139,597 83,015 - - - - - - - - - - - - - - 2,038 - - - - (2,038) - - - - - - - 862,499 301,356 130,127 3,552 14,875 - (2,038) 1,310,371 Noncurrent Assets: Capital Assets: 1,446,035 - - - - - 1,446,035 8,349,012 - - - - - 8,349,012 Furniture, Equipment & Machinery - Dwellings 887,236 - - - - - 887,236 Furniture, Equipment & Machinery - Administration 567,014 - - - - 610,503 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,221,895 (2,038) 6,532,266 Land Buildings Leasehold Improvements Accumulated Depreciation Construction in Progress Total Capital Assets, Net Notes receivable - Noncurrent Other Assets Total Non-Current Assets Total Assets (6,027,402) 5,221,895 5,221,895 6,084,394 43,489 (43,489) 301,356 130,127 (continued) 105 3,552 14,875 (6,070,891) 5,221,895 - CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Net Position Accounts Year Ended June 30, 2013 Public Housing 14.850 & 14.872 Housing Choice Vouchers 14.871 Business Activities Resident Opportunity and Supportive Services 14.870 Moderate Rehabilitation 14.856 Elimination Total Liabilities and Net Position: 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 Position: Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Equity/Net Position Total Liabilities and Equity/Net Position 55,165 - - - 3,857 28,179 402 20,779 4,460 432 1,112 17,537 17,174 503 - - - 2,116 - 89,719 - - - 26,783 - - 35,214 - - - - - - - - - - - - - - - - - - - - - - - - - 66,597 70,817 - - - - - 70,817 10,814 6,436 - - - - 17,250 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,038 - (2,038) 3,552 2,116 (2,038) 66,597 241,709 31,927 29,114 - 306,380 - - - - - - - - - - - - - - - - - - - - 26,219 4,529 - - - 157,829 188,577 46,785 6,809 2,630 - - - 56,224 204,614 33,028 7,159 - - - 244,801 446,323 64,955 36,273 3,552 2,116 (2,038) 551,181 - - - - 5,221,895 - - - - 212,657 5,221,895 - 212,657 416,176 23,744 93,854 - 12,759 - 546,533 5,638,071 236,401 93,854 - 12,759 - 5,981,085 $6,084,394 $ 301,356 $ 130,127 $ (concluded) 106 3,552 $ 14,875 $ (2,038) $6,532,266 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2013 Public Housing 14.850 & 14.872 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 $ 969,709 Housing Choice Vouchers 14.871 $ Business Activities - $ - Resident Opportunity and Supportive Services 14.870 $ - Moderate Rehabilitation 14.856 $ - Elimination $ - Total $ 969,709 24,414 - - - - - 24,414 994,123 - - - - - 994,123 858,964 - 4,299,385 - - - - - 112,154 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,598 112,154 14,252 (8,258) - 3,298,076 7,598 137,525 - 39,594 56,048 86,297 - - - - 191,371 - - - - - (8,258) - - - - - 1,971,235 3,443,199 39,594 471,569 173,728 17,152 8,346 2,908 1,019 56,048 86,297 - - 5,596,373 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 - - 662,449 - 727 - 13,000 9,859 - 9,859 - - - - - - - - - - - 416 277 - 30 - - 723 199,965 140,116 51,493 8,356 73,076 22,631 622 14,339 3,428 37,706 6,562 3,074 11,199 7,518 989 756,767 268,545 - 31,212 - - - - - - - - - 31,443 - - 31,443 - - 1,175 1,801 3,006 39,518 13,027 40 52,585 - - - - 97,504 - - 17,767 - - 49,143 - - 19,706 - 1,070,116 39,518 10,586 - - - - - - 13,027 - - 31,483 - - 84,028 110,404 - 110,404 - - - - - 17,863 - - - - - 17,863 138,679 - - - - - 138,679 58,121 58,121 - - - - - - - - - - - - - - - - - - - - - - 325,067 (continued) 107 325,067 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2013 Public Housing 14.850 & 14.872 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 343,727 - - - - - 343,727 35,420 - - - - - 35,420 99,707 - - - - - 99,707 48,599 - - - - - 48,599 4,126 - - - - - 4,126 - - - - - - - - - - - - - 75 - - - - - 75 2,485 - - - - - 3,356 - - - - - 3,356 19,890 - - - - - 19,890 - - - - - 18,220 - - - - - - 575,605 - - - - - - 2,485 18,220 575,605 . - - - - - - - - - 44,519 - - - - - - - 44,519 16,356 3,413 - - - - 19,769 19,546 3,916 396 372 - - 24,230 12,824 1,554 402 85 - - 27,054 11,825 19,128 158 - - - 31,111 12,120 1,430 445 - - - 13,995 66,597 66,597 - - - - - 1,287 - - - - - 1,287 13,654 - - - 25,237 15,055 457 - - 241,611 11,508 196,583 75 29,516 - - - - - - - - - - - - - - - - - - - - - 1,885,465 298,061 46,267 85,770 3,145,138 (6,673) 56,048 (continued) 108 10,586 - 2,296,427 75,711 - 3,299,946 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Year Ended June 30, 2013 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 Ending Net Position Administrative Fee Equity Housing Assistance Payments Equity Unit Months Available Number of Unit Months Leased Housing Choice Vouchers 14.871 Business Activities - - - - - - - - - - - - - - - 3,081,142 - 120,545 - 403,099 3,201,687 2,288,564 3,499,748 Elimination 75,568 Total - - 3,156,710 - - - - 120,545 - - - - 403,099 - - 75,568 - 3,680,354 86,154 - 5,976,781 46,267 56,048 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 143 - - 12,616 - 6,361,493 $ - $ 5,981,085 (317,329) (56,549) 5,955,400 Beginning Net Position Moderate Rehabilitation 14.856 Public Housing 14.850 & 14.872 403,099 Depreciation Expense Resident Opportunity and Supportive Services 14.870 (6,673) 292,950 236,401 100,527 $ 93,854 $ - $ 12,759 (380,408) $ 5,638,071 $ $ - $ 23,744 $ - $ - $ - $ - $ 96,939 $ - $ 219,852 $ - $ - $ - $ - $ 423,848 3,180 4,296 - - 144 - 7,620 3,136 4,287 - - 139 - 7,563 (concluded) 109 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2013 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 $ 969,709 Capital Fund Grants - $ 24,414 - $ 994,123 - 588,400 - $ Other Project Total 969,709 24,414 994,123 270,564 858,964 112,154 112,154 - - - - - - - - - - - - - - - - - - - - - - - - - - 14,252 - (8,258) - - - 14,252 (8,258) - 1,588,517 382,718 1,971,235 430,067 41,502 471,569 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 8,346 - 8,346 - - - - - 416 - 416 128,859 11,257 50,386 22,690 14,339 20,308 17,398 - - 11,199 663,920 92,847 - 140,116 73,076 14,339 37,706 11,199 756,767 - - - - - - - - - 31,443 - 31,443 31,443 - 31,443 110,404 - 110,404 17,863 - 17,863 138,679 - 138,679 - 58,121 58,121 - - - - 325,067 (continued) 110 325,067 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2013 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 Total insurance Premiums 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 343,727 - 343,727 35,420 - 35,420 99,707 - 99,707 48,599 - 48,599 4,126 - 4,126 - - - - - 75 - 75 2,485 - 2,485 3,356 - 3,356 19,890 - 19,890 - - - - 18,220 - 18,220 575,605 - 575,605 - - - - - - 44,519 - 44,519 16,356 - 16,356 18,802 744 19,546 12,788 36 12,824 92,465 780 93,245 11,826 - 11,825 12,120 - 12,120 66,597 - 66,597 1,287 - 1,287 11,508 - 11,508 195,803 780 196,583 - - - - - - - - - 1,791,838 (203,321) 93,627 1,885,465 289,091 85,770 (continued) 111 CITY OF FLAGSTAFF, ARIZONA Financial Data Submission Summary Revenue, Expense, and Changes in Fund Net Position Accounts Public Housing - Consolidated Year Ended June 30, 2013 Operating Fund Program 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 Capital Fund Grants Other Project Total - - - - - - - - - - - - 403,099 - 403,099 403,099 - 403,099 2,194,937 93,627 176,937 (176,937) 112,154 (112,154) 2,333,082 - - - - - - - (317,329) - (361,847) Beginning Net Position 5,955,400 - 5,955,400 Ending Net Position 5,638,071 - 5,638,071 (concluded) 112 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 114 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 123 These schedules contain information to help the reader assess the city's most significant local revenue source, sales tax. Debt Capacity 128 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. 139 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. 141 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. 113 114 $ 324,621,844 $ $ $ $ $ $ 352,523,597 81,341,713 23,870,778 247,311,106 228,700,586 24,948,848 3,200,521 200,551,217 123,823,011 56,392,865 20,670,257 46,759,889 2005 $ 493,334,773 30,751,613 47,953,248 $ 414,629,912 $ 252,731,451 20,303,463 2,392,858 $ 230,035,130 $ 240,603,322 10,448,150 45,560,390 $ 184,594,782 2006 (4) FY 2009 restated for change due to accounting error (3) FY 2008 change in calculations within categories due to calculation error. No net change to total net position. (2) FY 2007 restated for retroactive reporting due to an accounting error (1) FY 2007 restated for retroactive reporting of infrastructure Total primary government net position 57,587,021 Unrestricted 226,530,224 214,117,224 24,092,049 5,161,363 184,863,812 110,504,620 40,504,599 $ $ $ $ Restricted Net investment in capital assets Primary government Total business-type activities and net position Unrestricted Restricted Net investment in capital assets Business-type activities Total governmental activities net position 33,494,972 Unrestricted 41,666,412 35,343,236 $ 2004 Restricted Net investment in capital assets Governmental activities (accrual basis of accounting) Last Ten Fiscal Years Net Position by Component City of Flagstaff Schedule 1 $ 540,979,392 55,782,138 16,220,550 $ 468,976,704 $ 286,073,806 19,267,461 2,424,615 $ 264,381,730 $ 254,905,586 36,514,677 13,795,935 $ 204,594,974 2007 (2) $ 563,019,965 55,498,587 16,469,767 $ 491,051,611 $ 294,627,514 16,250,436 1,593,915 $ 276,783,163 $ 268,392,451 39,248,151 14,875,852 2009 $ 563,264,321 46,314,394 9,569,184 $ 507,380,743 $ 304,849,517 11,547,792 1,593,915 $ 291,707,810 (3) $ 258,414,804 34,766,602 7,975,269 $ 215,672,933 Fiscal Year (1) $ 214,268,448 2008 (4) $ $ $ $ $ $ 597,329,620 60,359,442 20,423,156 516,547,022 315,889,334 10,895,855 2,209,327 302,784,152 281,440,286 49,463,587 18,213,829 213,762,870 2010 $ $ $ $ $ $ 608,022,270 60,053,883 26,974,999 520,993,388 323,306,722 17,190,191 3,003,129 303,113,402 284,715,548 42,863,692 23,971,870 217,879,986 2011 $ $ $ $ $ $ 622,293,907 61,278,603 37,484,442 523,530,862 331,192,298 23,968,903 2,805,002 304,418,393 291,101,609 37,309,699 34,679,441 219,112,469 2012 $ $ $ $ $ $ 635,286,273 61,483,885 46,550,506 527,251,882 336,451,012 29,195,853 2,694,262 304,560,897 298,835,261 32,288,032 43,856,244 222,690,985 2013 115 116 19,860,371 25,654,682 15,180,401 11,757,330 Capital grants and contributions Total governmental activities program revenues - 680,755 321,915 1,213,714 498,506 3,611,862 86,143,316 4,147,529 - 722,236 $ $ 30,075,101 479,700 - 3,749,669 8,548,715 17,297,017 56,068,215 2,042,555 6,807,311 2,678,653 Operating grants and contributions Highways and streets Culture and recreation 16,164 976,793 Economic and physical development 451,802 Public works 3,257,393 Public safety General government Charges for services: Governmental activities: $ 80,241,288 Total primary government expense Program Revenues 28,401,426 460,936 Total business-type activities expense Stormwater - 3,370,447 Houising Authority 7,319,602 Airport 17,250,441 Environmental Water and wastewater Business-type activities: $ 8,886,947 1,923,325 Highways and streets Interest on long-term debt 51,839,862 10,011,231 8,693,714 Culture and recreation Total governmental activities expense 9,426,600 6,473,290 1,320,459 1,178,137 5,441,945 21,018,114 Economic and physical development $ Public works 5,891,617 2005 18,792,832 $ 2004 Public safety General government Governmental activities: Expenses (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 $ $ $ 33,255,955 21,566,549 3,791,526 - 683,906 332,356 1,180,097 815,167 4,886,354 93,681,732 31,860,328 791,791 - 3,519,749 9,096,420 18,452,368 61,821,404 2,167,626 12,043,242 8,328,945 7,842,985 1,454,731 22,525,292 7,458,583 2006 9,035,268 34,200,858 1,019,248 - 3,162,391 10,073,853 19,945,366 72,157,903 3,090,140 14,557,140 10,089,469 9,508,406 1,882,489 23,994,991 $ 29,054,937 19,356,271 2,062,329 - 742,088 562,135 1,455,461 704,800 4,171,853 $ 106,358,761 $ 2007 39,612,372 1,160,604 - 3,608,322 11,423,164 23,420,282 80,790,765 2,916,380 15,515,643 11,607,116 10,556,175 1,894,089 27,030,331 11,271,031 $ 3,746,890 27,181,541 16,324,928 3,320,597 - 762,410 315,462 1,483,275 1,227,979 39,985,739 1,203,436 - 4,197,447 11,782,540 22,802,316 88,726,876 3,651,521 19,297,615 13,120,917 10,346,982 2,109,221 29,287,433 10,913,187 2009 $ 23,703,243 9,880,762 5,990,756 - 1,559,617 369,987 1,350,832 1,451,405 3,099,884 $ 128,712,615 $ Fiscal Year $ 120,403,137 $ 2008 8,238,178 $ 7,850,954 9,406,406 38,354,045 1,258,072 - 3,285,242 51,356,453 36,949,681 6,654,978 - 1,420,094 291,211 1,471,550 1,283,697 $ 24,126,116 9,226,778 7,965,474 - 1,442,901 27,651,557 12,200,969 7,414,767 - 1,455,067 53,747 162,715 1,611,109 3,364,479 1,551,419 $ $ 121,876,884 42,332,291 1,361,658 6,165,612 4,268,099 1,537,188 1,144,636 2,646,424 $ 124,187,898 44,619,819 1,121,555 5,811,922 4,584,733 7,828,286 4,273,609 22,708,636 79,544,593 2,944,057 16,328,771 12,434,695 9,639,003 1,615,941 27,175,720 11,610,370 $ 21,491,239 79,568,079 3,370,918 19,275,381 12,854,824 8,474,776 1,754,033 25,987,193 2012 11,091,078 $ 2011 21,731,286 79,443,260 3,918,110 17,856,121 12,507,679 8,827,578 1,502,626 26,592,968 $ 117,797,305 $ 2010 10,442,808 46,650,101 1,196,589 5,986,508 5,226,977 11,671,366 22,568,661 80,318,169 2,902,196 15,431,985 13,342,588 9,210,500 1,718,767 27,269,325 $ 26,296,855 11,318,522 6,866,279 - 1,507,855 52,386 1,611,306 1,491,842 3,448,665 $ 126,968,270 $ 2013 117 634,411 Gain on sale of capital assets Total primary government Business-type activities Governmental activities Change in Net Position Total primary government $ $ 25,818,897 9,846,479 15,972,418 49,057,592 $ $ $ 27,901,753 14,583,362 13,318,391 52,186,000 8,454,076 7,004,365 369,358 1,105,683 Transers in (out) Total business-type activities - 935,973 - 43,731,924 (7,004,365) 513,738 - 719,023 - 47,951,909 (369,358) 17,765 382,387 277,972 1,703,861 17,302 Gain on sale of capital assets Miscellaneous Investment earnings Grants and contributions not restricted to specific programs Business-type activties: Total governmental activities Transers in (out) 14,717 218,520 905,717 Miscellaneous - 12,837,838 8,462,302 12,122,563 $ $ (24,284,247) 6,129,286 $ (30,413,533) 61,859,069 27,054,164 Investment earnings Contributions to permanent fund $ 25,682,974 7,931,626 (23,238,695) 8,740,796 (31,979,491) 810,739 $ $ $ $ Grants and contributions not restricted to specific programs State shared sales taxes - unrestricted Sales taxes Property taxes Taxes Governmental activities: General Revenues and Other Changes in Net Position Total primary government net expense Business-type activities Governmental activities Net (Expense)/Revenue 57,002,593 $ Total primary government program revenues 574,376 8,164,775 36,204,387 286,919 10,482,991 37,142,222 694,161 - 1,176,866 9,370,561 16,223,648 546,807 - 944,983 8,201,566 16,678,956 Total business-type activities program revenues Capital grants and contributions Operating grants and contributions Stormwater Housing Authority Airport Environmental Water and wastewater Charges for services: Business-type activities: (accrual basis of accounting) Last Ten Fiscal Years Changes in Net Position City of Flagstaff Schedule 2 (continued) 85,370,332 $ $ $ $ $ 49,673,379 24,030,865 25,642,514 57,984,779 3,776,816 2,267,551 326,540 - 1,181,836 889 54,207,963 (2,267,551) 24,630 33,417 204,678 2,385,099 377,502 14,384,055 30,014,975 9,051,158 (8,311,400) 20,254,049 $ (28,565,449) $ 52,114,377 23,449,969 369 630,962 - 1,261,594 9,723,652 17,047,831 $ $ $ $ $ $ $ 14,302,264 47,644,619 33,342,355 $ $ 22,050,787 8,563,922 13,486,865 71,856,150 4,760,061 68,217,508 3,590,153 9,123,196 78,248 127,423 964,237 - 67,096,089 (3,590,153) 10,812,278 31,354 110,835 1,546,893 - 57,405,230 (9,123,196) 16,200 2,160,339 19,460 242,167 3,903,839 - 16,992,017 33,129,731 13,664,791 (49,805,363) 3,803,861 (53,609,224) 70,597,774 43,416,233 12,242,567 67,651 1,137,402 - 1,207,831 819,325 $ $ $ $ $ 17,947,605 10,813,177 1,377,552 4,108,861 - 16,276,354 32,334,785 12,169,247 (20,572,889) 22,530,077 (43,102,966) 85,785,872 56,730,935 27,369,058 19,500 1,042,701 - 1,122,274 9,839,486 17,337,916 63,767,807 12,262,185 62,663,602 10,143,178 9,651,500 119,366 166,158 206,154 - 52,520,424 (9,651,500) 13,325 - 381,984 1,465,731 - 16,628,652 31,420,047 $ (2,281,206) 10,222,003 $ (12,503,209) $ $ $ (64,944,808) 78,825 $ (65,023,633) $ 40,064,564 8,744,216 10,966 1,247,878 - 1,187,105 11,545,472 17,328,927 $ $ $ $ $ $ $ 34,079,067 11,053,585 23,025,482 62,022,480 10,910,191 10,524,926 79,467 194,547 111,251 - 51,112,289 (10,524,926) 19,136 2,831,308 228,969 449,394 - 14,880,073 30,429,840 12,798,495 (27,943,413) 143,394 (28,086,807) 89,853,892 38,497,439 6,790,709 120,054 1,358,438 - 1,359,029 11,329,336 17,539,873 $ $ $ $ $ $ $ 4,537,196 1,261,934 3,275,262 60,212,679 1,495,454 1,189,964 47,818 150,129 107,543 - 58,717,225 (1,189,964) 24,950 744,957 1,741,338 246,093 - 13,148,252 31,355,882 12,645,717 (55,675,483) (233,520) (55,441,963) 68,512,415 44,386,299 4,220,708 5,090,475 1,456,894 1,437,841 1,388,076 12,010,554 18,781,751 $ $ $ $ $ $ $ 14,271,637 7,885,576 6,386,061 59,705,039 1,425,942 1,134,382 - 173,313 118,247 - 58,279,097 (1,134,382) 15,474 - 510,695 322,126 - 13,189,822 33,401,021 11,974,341 (45,433,402) 6,459,634 (51,893,036) 76,443,482 48,791,925 7,960,357 4,624,234 1,446,602 1,299,987 1,492,559 12,030,990 19,937,196 $ $ $ $ $ $ $ 12,992,366 5,258,714 7,733,652 63,591,748 1,836,782 817,761 243,700 581,015 194,306 - 61,754,966 (817,761) 23,935 18,173 1,285,289 (396,124) - 14,630,891 35,188,913 11,821,650 (50,599,382) 3,421,932 (54,021,314) 76,368,888 50,072,033 6,622,143 4,884,129 1,455,405 994,123 1,486,247 12,000,124 22,629,862 220,779 - Unassigned $ - Unassigned 34,599,132 - $ $ $ $ * FY2010: Implementation of GASB-54 Fund Balance Classification $ 53,004,789 - - - - - 3,271 - 22,893,640 30,107,878 $ $ 28,807,045 (1) $ - - - - - 28,574,855 232,190 2006 (1) FY2007 : as restated for accounting error related to the accural of state shared revenues. 39,154,872 - - Assigned Total all other governmental funds - - - - Committed - 1,426 - 33,041,256 1,556,450 29,325,196 - - - - - Restricted $ 200,401 29,124,795 - 567 Permanent fund $ $ $ 2005 Nonspendable - 37,476,678 1,677,627 Capital project funds Special revenue funds Unreserved, reported in: Reserved All Other Governmental Funds $ - Assigned 23,112,032 - Committed Total general fund - Restricted 22,891,253 - $ $ 2004 Nonspendable Unreserved Reserved General Fund (modified accrual basis of accounting) Last Ten Fiscal Years Fund Balances, Governmental Funds City of Flagstaff Schedule 3 118 63,689,857 - - - - - 6,567 - 16,332,830 47,350,460 31,220,471 - - - - - 29,960,235 1,260,236 2007 $ $ $ $ 36,355,874 - - - - - 9,916 (763,744) 16,498,123 20,611,579 27,801,832 - - - - - 27,492,853 $ $ $ $ Fiscal Year 308,979 2008 - - 13,471,434 - 8,955,106 - 4,299,450 216,878 - - - - 22,590,284 22,203,764 - - 106,144 280,376 2009 $ $ $ $ 22,807,012 - 651,650 2,228,605 19,720,079 206,678 - - - - 23,256,335 13,412,219 8,595,100 86,568 785,720 376,728 - - 2010* $ $ $ $ - - 20,363,506 (2,863,781) - - 23,012,954 214,333 - - - - 23,352,187 15,160,509 6,882,947 85,119 796,345 427,267 2011 $ $ $ $ - - 33,962,655 - - - 33,743,091 219,564 - - - - 25,680,223 17,203,207 7,075,902 282,888 758,303 359,923 2012 $ $ $ $ - - 42,714,228 - - - 42,466,792 247,436 - - - - 28,324,180 19,410,597 7,335,230 386,518 800,953 390,882 2013 119 EXPENDITURES: $ 9,564,110 non capital expenditures Debt service as a percentage of Net change in fund balances Total other financing sources (uses) 13.19% 17,469,212 26,326,147 15,312,931 12.32% 1,657,424 4,645,277 (16,582,052) 12,996,534 (13,365,892) Transfers in Transfers out 2,114,398 - - - - 3,800,000 - - (2,987,853) 74,103,302 17,053,841 2,148,734 4,880,000 8,951,097 8,341,105 6,424,057 1,005,745 19,140,415 6,158,308 71,115,449 277,972 22,229 1,589,293 1,220,007 1,250,494 2,063,718 218,500 1,834,067 634,411 $ 35,529,373 17,545,686 Insurance recoveries 1,059,221 - (718,127) - 25,000,000 720,000 (8,856,935) 72,726,564 $ 2005 Sale of capital assets Bond premium Lease issued Payment to bond refunding escrow agent Loan issued Issuance of capital debt Proceeds of refunding bonds OTHER FINANCING SOURCES (USES): Excess of revenues over (under) expenditures Total expenditures 19,348,708 2,428,026 Interest and other charges Capital outlay 4,614,000 Principal retirement Debt service: 7,724,481 8,003,110 Culture and recreation Highways and streets 966,546 6,289,966 Economic and physical development Public works 5,335,890 18,015,837 Public safety General governmental 63,869,629 905,717 Miscellaneous Total revenues 21,917 Contributions 115,433 1,144,562 Fines and forfeitures Investment earnings 2,111,033 Licenses and permits 985,907 291,684 Special assessments Rents 1,459,837 10,940,934 Charges for services Grants and entitlements 33,736,154 12,156,451 $ 2004 Intergovernmental Taxes REVENUES: (modified accrual basis of accounting) Last Ten Fiscal Years Changes in Fund Balances, Governmental Funds City of Flagstaff Schedule 4 $ $ 14.15% 17,829,287 29,490,427 (19,584,684) 17,317,133 37,892 - 220,086 - - - 31,500,000 - (11,661,140) 89,047,123 25,054,173 2,552,016 6,505,449 10,700,196 7,178,029 7,640,313 1,168,424 21,626,547 6,621,976 77,385,983 204,678 129,930 2,238,285 1,195,464 1,394,174 2,834,506 30,016 2,199,819 10,880,792 17,173,416 39,104,903 2006 $ $ 12.69% 13,098,494 17,642,417 (19,488,466) 17,756,847 252,329 - 46,707 10.80% (30,752,621) (727,425) (20,085,809) 17,181,576 2,176,808 - - - - - - - (30,025,196) 121,185,508 46,465,549 3,020,927 5,046,398 8,505,722 10,267,649 10,335,964 1,617,311 25,696,174 10,229,814 91,160,312 819,325 1,308,938 3,731,116 1,496,858 1,336,146 1,815,062 2,449 2,704,333 13,556,680 20,425,088 43,964,317 $ $ Fiscal Year - $ $ 2008 - - 19,075,000 - (4,543,923) 93,583,397 26,403,203 3,210,879 5,313,222 7,859,004 8,648,628 9,344,676 1,615,049 22,994,522 8,194,214 89,039,474 1,377,552 2,981,982 3,920,473 1,480,686 1,290,667 2,438,599 2,927 2,605,880 12,185,406 18,779,168 41,976,134 2007 10.85% (28,095,989) (1,560,019) (23,359,573) 21,626,308 63,894 - - 109,352 - - - - (26,535,970) 111,787,174 30,796,072 3,750,657 5,034,991 11,187,402 12,158,087 9,991,927 1,645,703 27,374,083 9,848,252 85,251,204 381,984 1,328,524 1,366,931 1,421,772 1,517,558 1,377,580 2,382 3,324,838 9,609,508 21,364,739 43,555,388 2009 $ $ 13.78% 6,849,473 8,091,724 (18,525,100) 15,224,243 1,084,211 1,920,000 58,370 - - - 8,330,000 - (1,242,251) 85,486,435 12,446,280 3,996,963 6,065,522 9,313,158 10,615,754 8,601,808 1,360,447 25,159,777 7,926,726 84,244,184 228,969 544,393 413,594 1,588,214 1,636,157 1,441,874 1,510,217 3,057,423 11,172,862 19,450,213 43,200,268 2010 $ $ 14.05% (2,347,654) 498,218 (14,268,052) 13,661,630 45,655 1,058,985 - - - - - - (2,845,872) 84,484,834 11,785,480 3,451,706 6,761,179 10,612,033 10,782,848 8,202,024 1,299,027 24,476,615 7,113,922 81,638,962 1,719,608 166,417 224,363 1,617,912 1,673,306 739,040 701,447 2,926,237 10,583,483 17,488,021 43,799,128 2011 $ $ 21.34% 15,927,185 17,433,348 (15,074,950) 14,872,935 43,890 - 2,264,386 - (15,394,336) - 16,797,287 13,924,136 (1,506,163) 91,609,695 11,951,834 3,346,253 13,654,681 9,593,074 10,576,877 8,584,826 1,146,692 25,301,495 7,453,963 90,103,532 492,971 390,253 296,241 1,605,166 1,601,044 1,681,874 8,286,453 3,220,137 9,721,569 17,230,696 45,577,128 2012 $ $ 12.52% 11,395,530 13,479,037 (12,458,747) 12,870,788 49,750 - 542,689 - - - 12,474,557 - (2,083,507) 89,160,366 16,656,392 2,902,196 6,175,303 9,039,032 11,292,517 8,296,367 1,219,324 25,099,149 8,480,086 87,076,859 1,261,507 252,377 (429,656) 1,667,562 1,540,989 1,656,135 722,733 3,237,728 11,369,392 18,713,646 47,084,446 2013 120 4,453 4,616 4,882 5,150 5,259 5,473 5,472 2007 2008 2009 2010 2011 2012 2013 2004-2013 59.77% 4,209 2006 Change 3,619 3,425 2005 $ Property Tax Year 2004 General Fiscal (modified accrual basis of accounting) (dollars in thousands) Last Ten Fiscal Years $ 38.79% 6,423 6,703 7,184 7,620 7,254 6,219 5,188 4,881 4,856 4,628 Property Tax Secondary Tax Revenue by Source, Governmental Funds City of Flagstaff Schedule 5 $ 1.81% 2,303 2,348 2,339 2,133 2,246 2,189 1,838 2,083 1,943 2,262 Other Taxes Franchise and $ 30.73% 15,760 14,900 13,893 13,595 14,384 16,150 16,071 14,707 13,148 12,055 Sales Tax City $ 45.48% 5,911 5,626 5,259 5,074 5,052 5,187 4,992 4,623 4,331 4,063 Tax and Booze Bed, Board $ 9,605 9,434 8,602 7,632 7,303 53.57% 11,215 10,527 9,865 9,628 10,035 Tax Transportation $ 39.57% 47,084 45,577 43,799 43,200 43,853 43,966 41,976 39,105 35,529 33,736 Total 121 5,652,335 5,815,473 5,623,144 4,868,072 4,490,087 4,711,821 5,147,101 5,391,580 2006 2007 2008 2009 2010 2011 2012 2013 $ 6,728,479 5,559,476 5,955,305 7,899,626 9,149,290 8,610,567 6,946,680 5,655,641 4,918,476 4,777,145 Income Tax State $ 2,510,832 2,483,245 2,481,126 2,490,360 2,611,289 2,758,307 2,792,404 2,655,653 2,461,425 2,427,367 In-Lieu Tax County Auto * - As restated due to change in accounting error identified in FY2010 4,900,117 4,449,982 2005 $ Sales Tax Year 2004 State Fiscal (modified accrual basis of accounting) Last Ten Fiscal Years Intergovernmental Revenue by Source, Governmental Funds City of Flagstaff Schedule 6 $ 6,007,741 5,569,896 6,300,885 6,429,355 6,412,329 7,422,359 7,855,427 7,942,771 7,171,383 6,975,351 User Tax Highway Local $ - - - 156,218 251,536 225,965 293,502 304,341 313,843 313,868 Assistance Transportation State $ - - - - - 58,782 - 55,665 - - HB 2565 2,105,827 3,544,253 3,181,076 3,885,697 1,711,609 4,868,431 2,822,315 2,386,011 1,772,181 $ 1,160,966 Grants Federal State Grants $ 3,255,824 607,420 1,101,522 701,592 1,234,065 981,142 1,214,162 940,441 2,868,033 454,212 & Other State $ County 791,906 759,606 744,070 757,241 897,337 668,153 721,797 420,426 628,198 468,069 LEAF IGA County Library $ 3,214,133 3,163,052 3,531,607 3,762,831 4,125,223 3,559,362 2,559,375 2,241,811 2,068,947 1,987,433 District Funding * $ 76,716 118,216 64,092 50,068 32,795 - - - 39,640 148,992 Other $ 30,083,038 26,952,265 28,071,504 30,623,075 31,293,545 34,776,212 31,021,135 28,255,095 27,142,243 23,163,385 Total 122 27,328,709 27,532,435 28,051,846 28,940,765 27,478,520 25,750,042 26,651,155 28,837,059 2006 2007 2008 2009 2010 2011 2012 2013 $ 255,823,684 265,230,915 274,992,074 286,101,952 281,348,845 261,009,908 237,795,313 221,179,062 211,870,593 194,944,521 Property Commercial Vacant, $ 124,373,673 133,909,755 146,079,309 151,630,088 140,117,313 125,377,258 100,985,606 82,683,618 65,128,715 62,099,966 Property and Government Agricultural, $ 436,787,954 447,421,001 502,351,037 529,950,871 500,150,890 398,783,838 315,182,546 276,187,028 242,190,760 215,320,769 Property Residential $ Less: 80,555,433 81,844,375 85,132,993 78,819,714 71,775,990 62,684,483 57,296,001 50,697,830 46,939,696 43,729,051 Property Tax-exempt values are equal to actual value. Tax rates are per $100 of assessed value. Note: A portion of city property is reassessed every year. Property is assessed at actual value, therefore, the assessed Source: State of Arizona Department of Revenue, State and County Abstract of the Assessment Roll 29,405,068 35,621,681 2005 $ Property Year 2004 Valued Fiscal Centrally (modified accrual basis of accounting) Last Ten Fiscal Years Full Cash Value of Taxable Property City of Flagstaff Schedule 7 $ 765,266,937 791,368,451 864,039,469 916,341,717 878,781,823 750,538,367 624,199,899 556,680,587 501,655,440 464,257,886 Value Assessed Total Taxable Total 1.5497 1.5283 1.4845 1.4913 1.5519 1.5519 1.5929 1.6627 1.7127 1.7127 Tax Rate Direct 123 $ $ 1,270,570 199 134,824 556,165 - 215,624 127,760 72,152 163,846 2005 $ $ 1,414,626 4,892 144,635 586,841 - 232,359 129,671 82,481 233,747 2006 $ $ 1,582,291 68,840 154,183 637,225 - 248,819 133,497 79,703 260,024 2007 $ $ 1,567,306 71,299 163,463 619,805 - 255,578 118,282 75,493 c) Prior to FY13, Hotel/Motel was included with Restaurant and Bars b) Prior to FY13, Auto Sales included Auto Services which is now included in Retail a) Building Materials is no longer tracked individually, now is tracked as part of Retail $ $ Fiscal Year 263,386 2008 *NOTES: FY13 reflects a change in tax categories reported to proactively reflect possible New State Sales Tax Codes TOTAL 1,211,127 Other 53 125,687 Retail Utilities - 529,705 Hotel/Motel 202,966 Restaurants and Bars 70,063 158,506 124,147 $ $ 2004 Auto Sales Building Materials Construction (dollars in thousands) Last Ten Fiscal Years City Taxable Revenue for Major Categories City of Flagstaff Schedule 8 1,383,657 69,175 155,193 582,029 - 250,555 78,819 66,641 181,245 2009 $ $ 1,312,658 66,392 152,042 546,765 - 251,271 85,806 60,143 150,239 2010 $ $ 1,349,446 63,784 151,461 544,356 - 261,384 99,786 61,781 166,894 2011 $ $ 1,440,928 116,273 154,497 557,375 - 277,954 121,296 62,665 150,868 2012 $ $ 92,968 1,529,123 196,534 715,475 88,924 206,617 63,634 - 164,971 2013* 124 Note: Tax rates are per $100 assessed valuation. 9.2235 9.4948 8.7728 7.5685 7.6099 6.5284 7.3170 7.7131 7.6983 9.8950 0.7656 Total 0.7245 0.1000 0.7244 0.2367 0.7603 0.4734 Fire District Assistance 0.7588 0.4308 0.4480 0.7521 0.4267 General Fund 1.2010 0.4643 Library District 1.2212 0.4865 0.1052 County 1.2369 0.5269 0.3875 0.5525 Bond 0.5660 Maintenance 0.5775 0.4112 Community College 0.1833 Class B Bond 4.9458 0.6126 4.6772 2013 Capital Override 3.8860 1.5283 2012 0.0459 4.8334 1.4845 2011 15% M&O Override 4.7713 1.4913 2010 3.6182 5.9009 1.5519 2009 Maintenance 6.0786 1.5519 2008 Fiscal Year Adjacent Ways 5.7236 1.5929 2007 0.8366 School District 6.3679 1.6627 2006 0.7131 1.7127 2005 Secondary 1.7127 2004 Primary Total City (rate per $100 of assessed value) Last Ten Fiscal Years Direct and Overlapping Property Tax Rates, City of Flagstaff Schedule 9 125 - Consolidated Investment Co. Inc. SACO Management Inc. Source: Coconino County Assessor Office 54,687,301 - Ralston Purina Total Principal Taxpayers - Little America Refining Co 2,226,561 Walgreens Arizona Drug Co - 2,247,343 Ridge at Clear Creek LLC Northern Arizona Gas Division (Citizens Utilities) 2,371,683 BNSF Railway Company 3,235,942 Flagstaff Mall Associated Ltd. Partnership 2,422,510 3,546,846 Wal-Mart Stores Unisource Energy Corporation 4,034,349 Qwest Corporation 12,851,171 17,147,023 4,603,873 $ $ Value Total Assessed Nestle Purina PetCare Company W L Gore & Associates Arizona Public Service Company Taxpayer * Current Year and Ten Years Ago Principal Property Tax Payers City of Flagstaff Schedule 10 10 9 8 7 6 5 4 3 2 1 Rank 2013 6.72% 0.00% 0.00% 0.00% 0.00% 0.00% 0.29% 0.29% 0.31% 0.32% 0.00% 0.46% 0.53% 0.60% 1.68% 2.24% Assessed Valuation Secondary As a Percentage of the City Total $ $ 62,464,341 2,268,475 3,197,108 5,081,044 4,266,517 11,928,523 2,656,145 3,250,000 9,888,282 9,024,038 10,904,209 Value Total Assessed 10 8 5 6 1 9 7 3 4 2 Rank 2003 13.45% 0.49% 0.69% 1.09% 0.92% 2.57% 0.57% 0.70% 2.13% 1.94% 2.35% Assessed Valuation Secondary As a Percentage of the City Total 126 12,750,836 12,497,535 12,015,988 11,828,399 2010 2011 2012 2013 * Percentage of Levy is estimated 12,253,760 9,615,015 2007 2009 9,075,322 2006 10,935,835 8,494,694 2005 2008 7,897,298 June 30, 2004 Fiscal Year Ended 11,553,471 11,635,211 12,113,128 12,477,413 11,934,997 10,728,465 9,495,935 8,958,733 8,330,157 7,791,735 Amount for the Year 97.7% 96.8% 96.9% 97.9% 97.4% 98.1% 98.8% 98.7% 98.1% 98.7% of Levy Percentage Collected within the Fiscal Year of the Levy Taxes Levied Fiscal Last Ten Fiscal Years Property Tax Levies and Collections City of Flagstaff Schedule 11 Collections 332,418 540,896 330,118 293,015 200,344 106,120 145,415 131,194 145,051 261,445 Years in Subsequent 11,885,889 12,176,107 12,443,246 12,770,429 12,135,341 10,834,585 9,641,350 9,089,927 8,475,208 8,053,180 Amount 97.7% 96.8% 96.9% 100.0% 99.3% 99.5% 99.8%* 99.5%* 99.7%* 99.7%* of Levy Percentage Total Collections to Date 127 1.0000% 2013 City 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% 2.0000% & Beverage Bed, Board (Sales Tax/Business Licenses Division) www.flagstaff.az.gov City of Flagstaff 1.0000% 2012 Source: 1.0000% 2011 1.0000% 2008 1.0000% 1.0000% 2007 2010 1.0000% 2006 1.0000% 1.0000% 2005 2009 1.0000% Sales Tax Year 2004 General Fiscal Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates City of Flagstaff Schedule 12 0.7210% 0.7210% 0.7210% 0.7210% 0.7210% 0.6010% 0.6010% 0.6010% 0.6010% 0.6010% Transportation State of 6.6000% 6.6000% 6.6000% 6.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% 5.6000% Arizona 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 1.1250% 0.9250% 0.9250% 0.9250% County Coconino 11.4460% 11.4460% 11.4460% 11.4460% 10.4460% 10.3260% 10.3260% 10.1260% 10.1260% 10.1260% Total 128 25,865 2010 Special 340 415 685 10,985 11,365 18,130 18,615 19,169 19,257 19,339 Bonds Assessment 14,663 15,615 4,930 6,665 4,865 6,325 7,725 9,665 11,555 13,380 Bonds Revenue Governmental Activities 1,260 3,205 18,095 19,890 21,625 23,000 24,315 25,610 26,895 28,170 Bonds Corporation Facility Municipal COP 5,310 5,200 1,542 6,964 2,430 2,728 3,097 3,455 3,800 - Leases Capital These amounts are presented on the accrual basis of accounting. See Schedule 18 for personal income and population data. Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 45,937 27,645 2009 2013 29,350 2008 38,449 31,230 2007 2012 32,875 2006 24,015 4,285 2005 2011 5,795 Bonds Year 2004 Obligation Fiscal General (dollars in thousands, except per capita) Last Ten Fiscal Years Ratios of Outstanding Debt by Type City of Flagstaff Schedule 13 General 1,756 3,125 3,830 5,690 7,460 10,515 13,310 16,294 18,880 21,253 Bonds Obligation 3,634 3,972 4,299 4,614 4,918 5,212 5,496 5,770 6,035 6,290 Bonds Revenue 33,873 35,689 37,491 36,257 37,006 32,275 32,957 2,671 3,031 3,380 Payable Loan Term Business-Type Activities 4,686 3,075 3,384 3,679 3,960 4,227 4,482 2,652 2,732 - Leases Capital Total 122,104 119,695 115,716 128,239 129,078 132,889 141,951 99,332 77,628 78,953 Government Primary Percentage Income 2.7% 3.2% 3.1% 3.4% 3.4% 3.5% 3.8% 2.9% 2.2% 2.3% of Personal Per 1,853.71 1,817.14 1,756.73 1,957.19 1,995.24 2,069.92 2,211.07 1,601.35 1,251.46 1,290.40 Capita 129 4,285 32,875 31,230 29,350 27,645 25,865 24,015 38,449 38,214 2005 2006 2007 2008 2009 2010 2011 2012 2013 1,752 3,125 3,830 5,690 7,460 10,515 13,310 16,294 18,880 21,253 Bonds 39,966 41,574 27,845 31,555 35,105 39,865 44,540 49,169 23,165 27,048 Total 5.2% 5.3% 3.2% 3.4% 4.0% 5.3% 7.1% 8.8% 4.6% 5.8% Property Value of Taxable of Actual Percentage (a) Per 606.74 634.50 433.72 491.51 542.64 620.95 718.04 792.66 378.61 441.46 Capita These amounts are presented on the accrual basis of accounting. b: Population data can be found in Schedule 18 a: See Schedule 7 for property value data Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 5,795 2004 Bonds Year Obligation General General Obligation Activities Activities Fiscal Business-Type Governmental General Bonded Debt Outstanding (dollars in thousands, except per capita) Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding City of Flagstaff Schedule 14 (b) 130 $ - 27,771 Debt 101,605 * For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. This approach was also used for Coconino County's revenue bonds and certificates of participation. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Flagstaff. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. Sources: Assessed value data used to estimate applicable percentages provided by the Coconino Finance Department. Debt oustanding data provided by each governmental unit. Total direct and overlapping debt 73,834 0.00% 63.91% $ Share of Overlapping City direct debt 866 43,450 Applicable* Percentage Estimated 27,771 $ Outstanding Debt Estimated Subtotal, overlapping debt Coconino County Special Assessments Other debt Flagstaff Unified School District Debt repaid with property taxes Governmental Unit (dollars in thousands, except per capita) Direct and Overlapping Governmental Activities Debt City of Flagstaff Schedule 15 131 132 as a percentage of debt limit Total net debt applicable to the 6% limit Legal debt margin (Available borrowing capacity) Total net debt applicable to 6% limit Debt limit equal to 6% of assessed valuation 6% Debt Limit as a percentage of debt limit Total net debt applicable to the 20% limit $ $ $ 9.28% 27,544 $ 2,555 30,099 2004 32.30% 75,838 $ $ $ Legal debt margin (Available borrowing capacity) 100,331 24,493 $ 2004 Total net debt applicable to 20% limit Debt limit equal to 20% of assessed valuation 20% Debt Limit (dollars in thousands) Last Ten Fiscal Years Legal Debt Margin Information City of Flagstaff Schedule 16 $ $ 3.81% 32,176 $ 1,225 33,401 2005 24.13% 89,692 $ 21,644 111,336 2005 $ $ 61.08% 23,250 $ 14,202 37,452 2006 39.31% 89,613 $ 35,227 124,840 2006 $ $ 1.53% 44,352 $ 680 45,032 2007 41.28% 106,248 $ 43,860 150,108 2007 $ $ 0.67% 52,376 $ 351 52,727 2008 Fiscal Year 29.00% 136,242 $ 39,514 175,756 2008 Fiscal Year $ $ 0.00% 54,981 $ - 54,981 2009 23.69% 148,163 $ 35,105 183,268 2009 $ $ 0.00% 51,842 $ - 51,842 2010 25.49% 137,703 $ 35,105 172,808 2010 $ $ 0.00% 47,482 $ - 47,482 2011 21.35% 130,429 $ 27,845 158,274 2011 0.00% 45,917 $ - 45,917 $ 2012 37.62% 111,214 $ 41,841 153,055 2012 0.00% 39,664 - 39,664 2013 58.48% 83,425 48,788 132,213 2013 133 $ Debt Limit of 20% of Assessed Value Legal 6% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: $ $ Debt Limit of 6% of Assessed Value 6% Limitation $ Legal 20% debt margin (Available borrowing capacity) General Obligation Bonds Debt applicable to limit: 20% Limitation $ Net Secondary Assessed Value as of June 30, 2013 Legal Debt Margin Calculation for Fiscal Year 2013 Legal Debt Margin Information City of Flagstaff Schedule 16 (continued) 39,663,779 - 39,663,779 83,425,011 48,787,587 132,212,598 661,062,990 134 17,585,198 18,824,260 19,996,116 22,846,487 2010 2011 2012 2013 $ 12,810,177 12,655,773 11,663,208 11,758,135 14,633,986 16,229,816 12,892,795 11,791,895 10,693,901 10,645,073 Expenses (2) $ 10,036,310 7,340,343 7,161,052 5,827,063 2,825,119 2,150,535 5,342,376 5,963,143 6,158,055 6,582,775 Service for Debt Available Revenue Net $ 2,252,132 2,540,658 2,443,196 2,356,705 2,130,093 283,832 274,108 264,717 255,648 246,890 Principal (3) 807,256 1,449,842 1,475,327 1,483,072 1,287,569 194,969 204,693 214,084 223,153 231,034 $ 3,059,388 3,990,500 3,918,523 3,839,777 3,417,662 478,801 478,801 478,801 478,801 477,924 Total bond issuance costs that are included in interest expense on the statement of revenues, expenses, and changes in net position. (4) Bond interest payments only. Does not include amortization of loss on refunding, capitalized interest, agent fees or amortization of (3) Includes principal for water and sewer revenue bonds, water infrastructure finance authority (WIFA). (2) Includes total operating expenses of the water and wastewater fund less depreciation. $ Interest (4) Debt Service Requirements Water and Sewer Revenue Bonds (1) Includes total operating revenues and investment income of the water and wastewaste fund. 17,459,105 2009 18,235,171 2007 18,380,351 17,755,038 2006 2008 16,851,956 17,227,848 2005 $ Year 2004 Gross Revenues (1) Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 3.28 1.84 1.83 1.52 0.83 4.49 11.16 12.45 12.86 13.77 Coverage 135 6,300,885 5,569,896 6,007,741 2011 2012 2013 $ - 1,725,000 1,620,000 1,520,000 1,460,000 1,400,000 1,940,000 1,890,000 1,825,000 1,410,000 Principal (1) $ - 94,875 190,455 280,135 344,010 411,385 469,585 526,285 571,910 607,160 Interest (2) $ Debt Service Requirements - 1,819,875 1,810,455 1,800,135 1,804,010 1,811,385 2,409,585 2,416,285 2,396,910 2,017,160 Total Highway User Revenue Bonds - 3.06 3.48 3.57 3.55 4.10 3.26 3.12 2.99 3.46 Coverage and changes in fund balances. (2) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (1) Includes 1992 Jr. Lien and Series 2003 Refunding. 6,429,355 7,422,359 2008 2010 7,855,427 2007 6,412,329 7,540,081 2006 2009 7,171,383 6,975,351 2005 $ Revenue Year 2004 User Tax Fiscal Highway Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 136 13,557,828 11,929,099 10,206,755 10,247,131 11,657,403 2009 2010 2011 2012 2013 $ 385,000 365,000 350,000 335,000 320,000 310,000 295,000 285,000 275,000 265,000 Principal (2) $ 77,656 94,446 110,371 125,614 139,534 152,398 164,198 175,598 186,598 197,198 Interest (3) $ Debt Service Requirements 462,656 459,446 460,371 460,614 459,534 462,398 459,198 460,598 461,598 462,198 Total MFC Debt other than Transportation Municipal Facility Corporation Bonds and changes in fund balances. (3) Bond interest payments only. Does not include agent fees that are included in interest expense on the statement of revenues, expenses, (2) MFC 1992 Refunding series 12 2001 - USGS projects. 25.20 22.30 22.17 25.90 29.50 29.78 26.79 23.55 20.27 18.96 Coverage (1) State sales tax, state income tax less debt service requirements for MFC debt other than transportation. 13,771,313 12,302,955 2007 2008 10,847,378 2006 8,764,929 9,356,995 $ Revenue (1) 2005 2004 Year Fiscal Last Ten Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 137 39,681,382 41,483,415 38,586,144 35,708,503 33,777,368 36,547,598 37,962,078 2007 2008 2009 2010 2011 2012 2013 $ 1,560,000 1,500,000 1,445,000 1,400,000 1,055,000 1,005,000 1,000,000 1,000,000 1,000,000 1,010,000 Principal (3) $ $ 2,102,575 2,074,838 2,259,700 2,260,200 1,946,850 1,947,100 1,964,600 1,987,100 2,037,100 1,849,966 Total 18.06 17.61 14.95 15.80 19.82 21.31 20.20 17.98 15.26 16.14 Coverage (3) MFC revenue bond series 2004 Fourth Street, partial advance refunding pledged revenue series 2012 requirements for transportation MFC bonds. licenses and permits, charges for services, fine and forfeits, other revenue, state sales tax, and state revenue sharing. Less the debt service (2) Pledged revenues on the Municipal Facility Corporation Bonds include the city base rate sales tax, transportation sales tax, francise sales tax, 542,575 574,838 814,700 860,200 891,850 942,100 964,600 987,100 1,037,100 839,966 Interest Debt Service Requirements Transportation MFC Debt Municipal Facility Corporation Bonds As Parital Refunded with Pledged Revenue Bonds (1) Trend information not available prior to fiscal year 2004. 35,725,917 2006 29,860,760 31,085,459 $ Revenue (2) 2005 2004 Year (1) Fiscal Last Nine Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 138 9,340,790 2013 $ 120,000 120,000 115,000 50,000 Principal (3) $ 130,037 133,638 135,938 56,297 Interest Debt Service Requirements (3) GADA infrastructure revenue bond series 2010A state revenue sharing. Less the debt service . (2) Pledges revenues on the Greater Arizona Development Authority Bonds include the $ 250,037 253,638 250,938 106,297 Total Revenue Bonds Greater Arizona Development Authority (1) New Issue no trend information available, prior to fiscal year 2010 7,657,621 2012 9,031,670 7,169,310 $ Revenue (2) 2011 2010 Year (1) Fiscal Last Three Fiscal Years Pledged Revenue Coverage City of Flagstaff Schedule 17 (continued) 37.36 30.19 28.57 84.97 Coverage 139 65,870 2013 (thousands 4,620,811 4,481,137 4,481,137 3,767,194 3,767,194 3,767,194 3,472,652 3,472,652 3,472,652 3,226,683 34,353 34,999 34,510 29,879 29,879 29,879 28,045 28,045 28,045 26,328 Income Personal Income of dollars) Per Capita Personal 26.6 26.6 26.6 26.8 26.8 26.8 26.8 26.8 26.8 26.8 Age Median Education 90.4% 90.6% 90.0% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% 89.8% Grad or Higher High School Level - Percent Education Level - Percent Unemployment - Arizona Department of Economic Security, August 2009 School enrollment - Arizona Department of Education and National Center for Education Statistics Education level - 2000 US Census Median age - 2000 US Census Per Capita Income-2011 Arizona Department of Administration-Office of Employment and Population Statistics, estimate 2009 School 10,623 10,623 11,839 12,600 12,910 13,040 13,453 13,171 13,389 13,176 Enrollment Per Capita Income - 2006 - 2009 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 Per Capita Income - 1998 - 2005 Arizona Department of Economic Security, Workforce Development Statistics Personal Income-2011 Arizona Department of Administration-Office of Employment and Population Statistics, estimate from 2009 Personal Income - 2006 - 2007 Arizona Department of Economic Security, Workforce Development Statistics, estimate from 2008 42.0% 39.9% 39.2% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% 39.4% or Higher Bachelor's Degree Personal Income - 1998 - 2005 Arizona Department of Economic Security, Workforce Development Statistics Population - Arizona Department of Commerce, except for 2000 which is the official census number Sources: 65,870 65,522 2010 65,870 64,693 2012 64,200 2008 2009 2011 62,030 62,030 61,185 2005 2006 61,270 2004 2007 Population Year Last Ten Fiscal Years Demographic and Economic Statistics City of Flagstaff Schedule 18 Rate 8.10% 9.20% 8.90% 7.70% 7.50% 4.60% 3.40% 5.00% 5.10% 5.20% Unemployment 140 55,170 2010 U.S. Census Labor Force Source: (1) Arizona Department of Economic Security This is the most historical information available (2) Flagstaff Chamber of Commerce as of March 2013 11,485 2,571 2,200 1,950 1,375 1,200 657 630 407 255 240 Employees Total Northern Arizona University Flagstaff Medical Center W.L. Gore & Associates Flagstaff United School District Coconino County City of Flagstaff Coconino Community College Walmart Walgreens & Distribution Center Grand Canyon Railway SCA Tissue Nestle Purina Employer Current Year and Nine Years Ago Principal Employers City of Flagstaff Schedule 19 9 10 7 8 1 2 3 4 5 6 Rank 2013 (2) 20.82% 4.66% 3.99% 3.53% 2.49% 2.18% 1.19% 0.00% 1.14% 0.74% 0.00% 0.46% 0.44% Percentage of Total City Employment 55,170 11,894 3,393 1,999 1,300 1,700 1,075 948 400 400 400 279 - Employees 8 9 10 1 2 3 4 5 6 7 Rank 2006 (1) 21.56% 6.15% 3.62% 2.36% 3.08% 1.95% 1.72% 0.73% 0.00% 0.73% 0.73% 0.51% 0.00% Percentage of Total City Employment 141 26.50 City Court 27.00 Public Works 17.25 11.75 Planning Tourism 739.00 743.45 - 5.00 9.50 52.25 74.50 36.25 63.95 40.00 13.75 17.25 43.00 25.00 96.75 151.00 26.50 14.50 74.25 2005 768.03 - 6.50 9.50 54.00 76.50 36.25 67.53 40.00 13.75 15.25 49.25 26.00 97.75 160.00 26.50 13.50 75.75 2006 811.69 - 6.50 10.00 62.60 79.00 37.25 68.82 43.13 15.75 21.75 52.25 27.00 100.75 164.00 26.50 13.50 82.89 876.18 - 6.50 10.50 61.60 80.25 40.56 98.23 47.14 16.75 20.88 58.50 31.00 101.75 174.00 27.63 13.50 87.39 906.52 - 6.50 10.50 68.10 81.75 41.06 99.69 53.77 16.75 24.88 57.50 31.00 101.75 181.00 29.63 13.50 89.14 827.48 - 6.00 9.50 65.58 64.50 36.31 87.86 50.77 15.75 24.38 47.20 29.00 99.00 168.00 25.88 11.00 86.75 Full-time Equivalent Employees as of June 30 2010 (1) 2007 2008 2009 (2) In fiscal year 2011, the city began reporting the Housing Authority in the financial statements. (2) 825.33 23.50 6.00 9.50 63.58 62.50 36.31 86.86 50.77 13.25 22.88 41.00 26.50 92.00 168.00 25.18 11.00 86.50 2011 (1) City-wide reorganization affected distribution of employees. Customer Service moved from Water/Wastewater to Management Services. Total Flagstaff Housing Authority 5.75 Stormwater Environmental services 9.50 45.75 Water and wastewater Airport 36.25 73.00 Highways and Streets 39.50 67.75 Library Parks, recreation, and beautificatioin Culture and recreation 43.75 Building Economic and physical development 96.75 Fire Police 150.00 15.50 Public Safety 73.00 Capital management 2004 Management services General Government Function/Program Last Ten Fiscal Years Full-time Equivalent City Government by Function/Program City of Flagstaff Schedule 20 812.42 23.50 6.00 9.50 59.60 61.50 36.31 88.81 51.40 12.49 22.88 39.20 26.50 85.00 172.00 25.18 8.00 84.55 2012 802.50 6.00 24.00 9.50 58.50 61.50 34.97 84.88 51.40 12.49 21.88 39.20 26.00 85.00 171.00 24.18 7.00 85.00 2013 142 2,212 1,340 Inspections assigned Plan Reviews 521 709 Site Thinning (Acres) Prescription Burn (Acres) 4,979 11,266 9,435 NA NA NA NA Accident reports Calls dispatched to Police/Sheriff Calls dispatched to Fire Calls dispatched to Medical 1,464 73,559 3,616 8,818 NA NA 12,378 Non-crime reports NA 834 792 311 1,065 1,348 2,006 1,905 228 6,722 673 11,253 9,227 2005 Domestive violence incidents NA Felony reports Misdemeanor reports Police 408 Site Marking (Acres) Plan Assessment (Acres) 2,020 2,023 265 5,616 682 Other calls Fires response Emergency responses Fuel Management Fire Domestic Violence/Other filings 10,236 10,388 Traffic filings 2004 Criminal Filings Court Function/Program Last Ten Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 9,175 11,741 77,239 3,313 9,136 1,598 13,381 5,337 557 694 662 585 1,280 1,966 1,323 351 7,684 616 10,575 9,705 2006 9,960 12,364 75,791 3,374 8,913 1,625 13,123 4,973 1,210 1,173 - 11,907 73,364 3,322 11,043 1,573 13,413 3,978 1,070 902 400 178 - 1,284 1,981 1,573 267 7,616 744 10,665 - 12,527 70,908 2,917 10,996 1,470 12,939 3,661 1,190 761 224 - 1,250 1,794 2,151 263 7,550 445 10,639 9,330 2009 Fiscal Year 11,659 2008 764 1,314 1,984 1,472 314 8,227 530 8,951 9,553 2007 - 11,011 61,175 2,776 9,480 1,953 12,293 3,073 551 376 294 - 401 572 1,906 247 6,668 468 13,471 9,326 2010 342 809 586 - 11,130 57,899 2,735 9,827 1,923 11,786 2,973 N/A* 528 1,174 2,378 175 7,274 370 12,010 8,531 2011 697 197 128 - 13,320 57,188 2,574 9,886 1,961 11,253 2,940 N/A* 535 1,468 2,226 213 7,438 547 9,217 8,857 2012 284 540 276 - 11,497 60,003 2,568 9,841 2,023 11,040 2,910 N/A* 559 1,411 2,298 185 8,023 477 8,340 8,695 2013 143 (1) Commercial Permit Valuation NA 47.95 $ 52.90 776,180 582,726 $ 12,324,654 $ 87,180,707 9,816 140,233 42,483 653,743 2,988 2005 $ 61.47 758,468 625,103 $ 26,130,677 $ 97,895,269 9,866 154,321 39,646 705,638 1,962 2006 $ 66.86 789,621 643,174 $ 37,962,373 $ 38,895,496 10,356 153,121 44,598 642,643 2,443 2007 $ * Records no longer tracked (2) 2012 data is as of 12/19/2012 and subject to update 60.52 782,908 680,253 $ 27,199,698 $ 25,278,055 10,472 157,792 44,088 651,814 $ 43.21 887,887 738,603 $ 18,594,665 $ 31,498,803 9,842 142,409 65,418 627,202 4,373 2009 Fiscal Year 4,032 2008 (1) This informaition is gathered and reported on a calendar year basis versus a fiscal year basis for all other measurements Sources: Various city departments Revenue Per Available Room (RevPar) Tourism 564,065 781,893 Circulation $ $ 18,123,934 $ 67,214,811 9,213 109,608 38,387 673,786 2004 Visits Library (1) Residential Permit Valuation Community Development Recyclables collected (total tons) Refuse collected (Landfill tonnage) Refuse collection Enplanements Fuel Flowage (Gallons Sold) Airport Potholes repaired Streets Function/Program Last Ten Fiscal Years Operating Indicators by Function/Program City of Flagstaff Schedule 21 (continued) $ $ $ 43.05 979,962 743,169 13,395,325 9,314,074 10,610 121,529 68,296 651,373 3,256 2010 $ $ $ 45.26 1,029,062 763,928 17,703,762 8,472,938 8,869 138,703 63,407 850,327 1,498 2011 $ 48.81 1,182,956 739,706 (1) (1) 8,101 137,815 62,872 526,406 1,877 2012 $ 53.52 1,164,789 715,033 (1) (1) 8,388 145,793 60,190 490,401 2,054 2013 144 42 38 Enclosed hangars Open hangars (2) Database Correction (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. 49 Tiedowns 1 130 Locally based aircraft 6,070 16,948 6,097 275 2,921 365 5 28 704 4 28 6 2,478 26 2004 Fixed base operators Airport Average gallon water usage per household per month Total active water accounts Number of manholes Miles of sewer (2) Water and wastewater Number of street lights Miles of streets, alleys, and sidewalks (1) Highways and Streets Recreational Buildings Flagstaff Urban Trail System - Miles Park acreage Number of undeveloped parks Number of developed parks Culture and recreation Numer of fire stations Number of fire hydrants Police patrol units (Includes Motorcycle units) Public Safety Function/Program Last Ten Fiscal Years Capital Asset Statistics by Function/Program City of Flagstaff Schedule 22 26 38 42 29 130 1 6,096 18,039 6,097 275 2,921 365 5 32 702 4 27 6 2,478 2005 48 61 18 130 1 5,488 17,872 6,496 293 3,037 386 5 34 702 4 27 6 2,598 26 2006 48 61 11 134 1 5,600 18,758 6,906 309 3,107 403 5 34 705 4 27 6 2,743 31 2007 34 34 48 61 11 134 1 5,456 18,849 48 61 11 134 1 5,010 18,371 270 7,261 265 3,220 695 6 51 712 4 26 7 3,150 7,107 3,201 690 6 48 712 4 26 6 3,148 2009 Fiscal Year 2008 48 61 14 120 1 5,123 19,042 7,261 270 3,350 813 6 51 712 4 26 7 3,143 35 2010 48 61 11 122 1 5,107 22,092 7,308 271 3,466 814 4 53 735 5 24 7 3,176 37 2011 48 61 11 125 1 5,339 19,020 7,308 271 3,466 814 4 53 680 4 23 7 3,179 37 2012 48 61 11 209 1 6,326 20,107 7,403 274 3,466 814 4 55 710 4 23 6 3,242 37 2013 145 1,000,000 / aggregate $ $ 1,000,000 / each wrongful act 1,000,000 / disease employee 1,000,000 / disease policy limit $ $ Statutory 1,000,000 / each accident 1,000,000 / aggregate $ $ 20,000,000 / each occurrence 20,000,000 / general aggregate $ $ 40,000,000 / each occurrence $ aggregate 40,000,000 / each aircraft 40,000,000 40,000,000 / aggregate 40,000,000 / each occurrence 5,000,000 / general aggregate 5,000,000 / each occurrence/ $ $ Hangar Keepers Liability $ Personal Injury, Advertising & Malpractice $ $ $ Products/Completed Operations General Liability Aviation: terrorism, nuclear) (Excluding asbestos, discrimination, Excess Liability #2 Following Form Over Excess Liability # 1 Supply Services, Mold, Terrorism, Asbestos, Lead, Condemnation, Sexual Abuse) (Excludes Airport, Housing Authority, Employment related practices, Failure to 10,000 retained limit (ded) Public Entity Management, Employee Benefits Umbrella/Excess #1 - GL, Auto, Law Enforcement, Employer's Liability Worker's Compensation Employer's Liability ($5,000 deductible each wrongful act) (Claims Made Retro Date 6-1-09) Public Entity Cyber Liability * Liability Claims are Subject to a $50,000 Self Insurance Retention 1,000,000 / each offense $ Limited Abuse or Molestation Liability 3,000,000 / aggregate 1,000,000 / each employee 5,000,000 / aggregate 5,000,000 / each wrongful act 1,000,000 / aggregate $ $ $ $ $ 1,000,000 / each wrongful act (Claims Made) Employee Benefits Liability* (Claims Made Retro Date 6-1-95) Employment Practices Liability* (Claims Made Retro Date 6-1-95) $ Public Entity Management Errors and Omissions* 1,000,000 / aggregate 1,000,000 / each accident $ $ 1,000,000 / each wrongful act 2,000,000 / aggregate 1,000,000 / per occurrence $ $ $ Limit of Liability Auto Liability* Law Enforcement Liability* freestyle park, EMT's) (Includes 2 skateboard parks, bike General Liability* Liability Insurance: Coverage In effect July 1, 2012 to June 30, 2013 Insurance Summary City of Flagstaff Schedule 23 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Kidnap and Extortion Worldwide International Travel - Executive Assistance Credit, Debit or Charge Card forgery $ $ $ $ $ $ Money Orders & Counterfeit, $ Depositors Forgery or Alteration $ (Inside and Outside) Theft, Disappearance, & Destruction Computer & Funds Transfer Fraud Dishonesty Bond Including Faithful Performance of Duty Blanket Public Employees and Treasurer Crime: City Hall, Visitor Center, Airport Terminal Max $25,000 per item 100,000 250,000 Each Loss Accidental death 1,000,000 / Medical Assistance 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 1,000,000 / $5,000 deductible 78,700 / $1,000 deductible 500,000 / $1,000 deductible 1,438,500 / $1,000 deductible 35,000 / $5,000 deductible 11,300 / $1,000 deductible 238,582 / $1000 deductible 7,391,884 / $5,000 deductible ($5,000 deductible) 500,000 / contents each 500,000 / each building 122,700 / contents 242,000 / building / $5000/collision deductible 25,367,353 / $1000/comprehensive 7,000,000 / 72 hours 15,000,000 / $25,000 deductible 10,000,000 / $50,000 deductible 2,500,000 / $50,000 deductible 203,538,782 / $25,000 deductible Limit of Liability Fine Arts & exhibition floater - Max $25,000 per ite $ Data and Media Computer Equipment and Peripherals Employee Hand Tools Lab Equipment Bookmobile book collection Contractors Equipment (actual cash value) Inland Marine: City Hall, Library Municipal Court Flood Zone A Properties Auto Physical Damage Business Income/Extra Expense Earthquakes Flood Zones B and C Flood Zones high risk Boiler and Machinery included Blanket Buildings and Personal Property Property Insurance: Coverage The Flagstaff Watershed Protection Project is made possible through the following partnerships: U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE THE STATE OF ARIZONA COCONINO COUNTY GREATER FLAGSTAFF FORESTS PARTNERSHIP NORTHERN ARIZONA UNIVERSITY Cit y of Flagstaf f 211 West Aspen Avenue Flagstaf f, Arizona 860 01 f lagstaf f. az .gov