TABLE OF CONTENTS INSTRUCTIONS FOR NAVIGATING IN THE “COMPREHENSIVE ANNUAL FINANCIAL REPORT” PDF Files ¾ Bookmarks for major sections are provided in the navigation pane on the left. Click on the bookmark to jump directly to that section. ¾ If a “+” sign is at the left of a bookmark, click on the “+” to bring up subheadings. ¾ All pages are linked to the Table of Contents. To jump to a specific page or subsection from the Table of Contents, put the pointer finger on the title or page number within and click the mouse. ¾ Click the “Table of Contents” text located in the top right hand corner of any page or click the Table of Contents bookmark on the left. TABLE OF CONTENTS TABLE OF CONTENTS Comprehensive Annual Financial Report Year Ended June 30, 2012 John W. Lewis, Mayor John Sentz, Vice Mayor Eddie Cook, Council Member Ben Cooper, Council Member Jenn Daniels, Council Member Victor Petersen, Council Member Jordan Ray, Council Member Patrick Banger, Manager Prepared by the Finance Department Cindi Mattheisen, Finance Director i TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2012 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal Advisory Organization Chart Organization Reporting Chart v xi xii FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis (required supplementary information) 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities 15 16 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Streets Special Revenue Fund Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets - Fiduciary Funds Statement of Changes in Fiduciary Net Assets - Fiduciary Funds Notes to the Financial Statements 18 21 22 25 26 27 28 30 32 34 35 37 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Schedules of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual: Grants Special Revenue Fund Other Special Revenue Funds CDBG/HOME Special Revenue Fund Street Light Improvement District Special Revenue Fund Parkway Maintenance District Special Revenue Fund General Debt Obligations Debt Service Fund Special Assessments Debt Service Fund Streets and Transportation Capital Projects Fund Traffic Control Capital Projects Fund ii 70 72 76 77 78 79 80 81 82 83 84 TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2012 TABLE OF CONTENTS Page Municipal Facilities Capital Projects Fund Parks, Open Space and Recreation Capital Projects Fund Special Assessments Capital Projects Fund Redevelopment Capital Projects Fund Schedules of Revenues, Expenses and Changes in Net Assets Budget and Actual: Water Enterprise Fund Wastewater Enterprise Fund Solid Waste Enterprise Fund Combining Statement of Net Assets - Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds Schedules of Revenues, Expenses and Changes in Net Assets Budget and Actual: Equipment Maintenance Internal Service Fund Copier Services Internal Service Fund Employee Benefit Self-Insurance Internal Service Fund Agency Funds Combining Statement of Changes in Assets and Liabilities 85 86 87 88 89 90 91 94 95 96 97 98 99 103 103 STATISTICAL SECTION Financial Trends Net Assets by Component - Last Ten Fiscal Years Changes in Net Assets - Last Ten Fiscal Years Program Revenues by Function - Last Ten Fiscal Years Fund Balances of Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years Revenue Capacity Taxable Sales by Category - Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt - As of June 30, 2012 Legal Debt Margin Information - Last Ten Fiscal Years Pledged-Revenue Coverage - Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Ago Operating Information Full-time Equivalent Employees by Function - Last Ten Fiscal Years Operating Indicators by Function - Last Ten Fiscal Years Capital Asset Statistics by Function - Last Ten Fiscal Years Other information Property Value, Construction and Bank Deposits - Last Ten Fiscal Years System Development Fees - Fiscal Year 2012 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2012 iii 107 108 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 TABLE OF CONTENTS iv TABLE OF CONTENTS Introductory Section ________________________________ Letter of Transmittal Advisory Organization Chart Organization Reporting Chart TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS Advisory Organization Chart CITIZENS OF GILBERT MAYOR AND COUNCIL Town Clerk Town Manager Municipal Court Town Attorney ADVISORY BOARDS AND COMMISSIONS Human Relations, Culture & Art Promotion Commission Utilities Board of the Town of Gilbert Health Insurance Trust Industrial Development Authority Design Review Board Mayor’s Youth Advisory Committee Environmental and Energy Conservation Advisory Board Parks, Recreation, and Library Services Advisory Board Fire Public Safety Retirement Pension Board Planning Commission Gilbert Educational Access Governing Board Police Public Safety Retirement Pension Board Water Resources Municipal Property Corporation Public Facilities Municipal Property Corporation Redevelopment Commission xi TABLE OF CONTENTS Organization Report Chart TOWN MANAGER Assistant Town Manager Assistant Town Manager Public Works Support Services Administration Facilities Maintenance Fleet Maintenance Water Human Resources Wastewater Technology Services Solid Waste Streets Finance Development Services Accounting Budget Customer Service Tax Compliance Permit and Plan Review Purchasing Inspection and Compliance Utility Billing & Customer Service Planning and Development Business Development Legal Engineering Services Prosecutor Public Safety Community Services Police Parks and Open Space Fire Recreation Program Support xii TABLE OF CONTENTS Financial Section ________________________________ Independent Auditor’s Report Management’s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Combining and Individual Fund Statements and Schedules TABLE OF CONTENTS 10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718 INDEPENDENT AUDITORS’ REPORT Honorable Mayor and Members of the Town Council Town of Gilbert, Arizona We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of the Town of Gilbert, Arizona (the “Town”) as of and for the year ended June 30, 2012, which collectively comprise the Town’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of the Town of Gilbert, Arizona, as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the General Fund and the Streets Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2012, on our consideration of the Town’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 and should be considered in assessing the results of our audit. TUCSON • PHOENIX • FLAGSTAFF • ALBUQUERQUE www.heinfeldmeech.com TABLE OF CONTENTS Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 13 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s financial statements as a whole. The accompanying supplementary information such as the Introductory Section, Combining and Individual Fund Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the financial statements. The Combining and Individual Fund Statements and Schedules, as listed in the table of contents, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 11, 2012 2 TABLE OF CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the Town of Gilbert (Gilbert), we offer this narrative overview and analysis of Gilbert’s financial activities for the fiscal year ended June 30, 2012. We encourage readers to consider the information presented here in conjunction with information provided in the transmittal letter. Financial Highlights • • • • • • Gilbert’s assets exceeded its liabilities at the end of the fiscal year by $1.5 billion. Included in this amount defined as net assets is $319 million of unrestricted net assets, of which $144 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $175 million which may be used to fund ongoing operations in future years. Net assets includes a $696 million net investment in capital assets such as streets, park land, and municipal buildings and a $316 million net investment in water, wastewater and solid waste infrastructure and equipment. The combined fund balance for all governmental funds is $182 million, of which $58 million is unrestricted. The General Fund unrestricted fund balance is $55 million, of which $10.8 million has been assigned for capital replacement. The remaining General Fund unassigned balance of $44 million is approximately 45% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $485 million, as compared to $544 million at the end of fiscal year 2011. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to Gilbert’s basic financial statements which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the finances of Gilbert as a whole, in a manner similar to a private-sector business. The statement of net assets presents information on all of Gilbert’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether Gilbert’s financial position is improving or declining. The statement of activities presents the changes in net assets from the previous year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of Gilbert that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover a majority or all of their costs through user fees and charges (business-type activities). The governmental activities of Gilbert include general government, public safety, highways and streets, culture and recreation, redevelopment and transportation. The business-type activities include water, wastewater, solid waste, and irrigation operations. The government-wide financial statements also include the Industrial Development Authority as a component unit of Gilbert. The Authority provides financing for eligible private sector entities to acquire and construct facilities deemed to be in the public interest. The financial information for the Authority is presented separately in the statements. 3 TABLE OF CONTENTS The government-wide financial statements can be found on pages 15-17 of this report. Fund financial statements A fund is a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives. Gilbert, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of Gilbert’s funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at fiscal year end. This information may be useful in evaluating a government’s near-term financing ability. 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 Gilbert’s near-term financing decisions. To facilitate this comparison, reconciliations are provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 18-27. Proprietary Funds Gilbert maintains two different types of proprietary funds. Enterprise Funds report the same functions presented as business-type activities in the government-wide financial statements, which include water, wastewater, and solid waste. Internal Service Funds accumulate and allocate costs internally among the various functions. Gilbert uses internal service funds to account for maintenance of its fleet of vehicles, copy service operations, and employee health and dental self-insurance. The assets and liabilities of the internal service funds are included in the governmental activities column of the government-wide statement of net assets. Costs of internal service funds are allocated to the various user functions on the government-wide statement of activities. Enterprise funds provide the same information as the government-wide financial statements, only with more detail. Internal service funds are combined into a single column on the proprietary funds statements. Additional detail for the internal service funds can be found on pages 93-99. The proprietary fund statements can be found on pages 28-33. Fiduciary Funds Fiduciary funds account for resources held for the benefit of parties outside the government. These funds are not included in the government-wide statements as these funds are not available to support Gilbert’s operations. The fiduciary fund statements can be found on pages 34-35. Notes to the financial statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. The notes to the financial statements can be found on pages 37-67. 4 TABLE OF CONTENTS Government-wide Financial Analysis Net assets serve as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Assets as of June 30, 2012 and 2011. Town of Gilbert Condensed Statement of Net Assets Current and other assets Capital assets Total assets Long-term liabilities Other liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Governmental Activities 2012 2011 $ 238,239,389 $ 252,415,829 971,493,653 982,750,500 1,209,733,042 1,235,166,329 341,629,298 36,628,891 378,258,189 Business-type Activities 2012 2011 $ 322,483,617 $ 303,763,671 448,330,984 451,437,195 770,814,601 755,200,866 364,026,397 49,466,153 413,492,550 705,986,213 695,984,256 52,217,239 38,404,141 83,273,358 77,283,425 $ 831,474,853 $ 821,673,779 135,318,490 11,754,773 147,073,263 162,643,002 11,857,295 174,500,297 316,268,041 294,516,202 71,375,688 76,504,052 209,680,315 236,097,609 $ 623,741,338 $ 580,700,569 Total 2012 2011 $ 560,723,006 $ 556,179,500 1,419,824,637 1,434,187,695 1,980,547,643 1,990,367,195 476,947,788 48,383,664 525,331,452 526,669,399 61,323,448 587,992,847 1,012,252,297 1,000,502,415 123,592,927 114,908,193 319,370,967 286,963,740 $ 1,455,216,191 $ 1,402,374,348 Net assets consist of three components. The largest portion of Gilbert’s net assets (70%) is its investment in capital assets (land, buildings, equipment, infrastructure, etc.), less depreciation and any related debt used to acquire those assets that is still outstanding. Gilbert uses these capital assets to provide services to citizens; consequently, these assets are not available for appropriation. Although Gilbert’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt are provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Gilbert’s net assets (8%) represents resources that are subject to external restrictions on how they may be used. The remaining $319 million of unrestricted net assets (22%) includes $144 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $175 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. Governmental Activities Governmental activities in fiscal year 2012 increased Gilbert’s net assets by $10 million, accounting for 18.5% of the total growth in net assets. Taxes and program revenues (charges for services and grants and contributions that are clearly identifiable to operating functions) were Gilbert’s most significant revenue sources comprising 95.5% of total revenues for governmental activities. Taxes (local and stateshared) were $114 million, an increase of $4 million (3.5%) from the prior year. Program revenues were $64 million, an increase of $2 million from the prior year which was due to the increase in charges for services. It should be noted that $2 million of the total program revenues represent capital contributions from developers of street related infrastructure; and, therefore, were not cash revenues available to cover operating expenses. The other component of the change in net assets is expenses. The largest expense functions were public safety which represented 37%, and highways and streets which represented 25% of total governmental activities expenses. Total expenses increased $4.8 million (3%) over the prior fiscal year. A portion of this increase was due to a $1.7 million increase in depreciation for the highways and streets function. 5 TABLE OF CONTENTS The following table details the changes in net assets for governmental and business-type activities. Changes in Net Assets Business-type Activities Governmental Activities 2012 2011 2012 Total 2011 2012 2011 Revenues Program revenues: Charges for services $ 17,013,296 $ 12,537,148 $ 77,355,779 $ 74,837,971 $ 94,369,075 $ 87,375,119 Operating grants and contributions 21,044,646 21,167,633 - - 21,044,646 21,167,633 Capital grants and contributions 26,060,002 28,002,037 37,221,712 18,324,573 63,281,714 46,326,610 Sales taxes 54,513,265 49,248,759 - - 54,513,265 49,248,759 Property taxes 21,502,322 25,796,000 - - 21,502,322 25,796,000 State-shared sales taxes 16,288,580 13,787,266 - - 16,288,580 13,787,266 State-shared income taxes 17,593,587 17,280,849 - - 17,593,587 17,280,849 3,793,777 3,752,492 - - 3,793,777 3,752,492 General revenues: Other taxes Grants and contributions not restricted to specific programs 1,349,124 863,570 - - 1,349,124 863,570 Unrestricted investment earnings 1,909,629 2,137,352 1,244,149 1,011,691 3,153,778 3,149,043 Other 4,922,205 355,415 1,803,403 2,380,172 6,725,608 2,735,587 185,990,433 174,928,521 117,625,043 96,554,407 303,615,476 271,482,928 Management and policy 2,982,636 3,109,759 - - 2,982,636 3,109,759 Support services 8,632,288 8,503,492 - - 8,632,288 8,503,492 Financial services 1,216,418 1,286,659 - - 1,216,418 1,286,659 Legal and court 5,409,709 5,126,039 - - 5,409,709 5,126,039 Development services 8,551,083 8,201,314 - - 8,551,083 8,201,314 Police 40,466,828 38,868,835 - - 40,466,828 38,868,835 Fire 24,906,506 24,473,377 - - 24,906,506 24,473,377 Highways and streets 43,437,623 40,440,136 - - 43,437,623 40,440,136 Community services 19,931,592 19,763,971 - - 19,931,592 19,763,971 Transportation 1,268,998 1,009,897 - - 1,268,998 1,009,897 Non departmental 2,910,114 2,194,132 - - 2,910,114 2,194,132 Total revenues Expenses Interest and fiscal charges 15,785,320 17,674,873 - - 15,785,320 17,674,873 Water on long-term debt - - 37,694,869 36,863,531 37,694,869 36,863,531 Wastewater - - 22,661,900 23,038,634 22,661,900 23,038,634 Solid waste - - 14,917,749 14,254,817 14,917,749 14,254,817 175,499,115 170,652,484 75,274,518 74,156,982 250,773,633 244,809,466 10,491,318 4,276,037 42,350,525 22,397,425 52,841,843 26,673,462 537,225 690,244 - - 9,801,074 4,813,262 43,040,769 21,860,200 52,841,843 26,673,462 821,673,779 816,860,517 580,700,569 558,840,369 1,402,374,348 1,375,700,886 831,474,853 $ 821,673,779 $ 623,741,338 $ 580,700,569 $ 1,455,216,191 $ 1,402,374,348 Total expenses Increase in net assets before transfers Transfers (690,244) Increase in net assets Net assets, beginning of year Net assets, end of year $ 6 (537,225) TABLE OF CONTENTS Business-type Activities Development related growth increased Gilbert’s net assets for business-type activities in fiscal year 2012 by $43 million including $33 million in system development fee collections and $4.5 million in water and wastewater infrastructure contributed by developers. The revenues for business-type activities increased $21 million from the prior year mainly due to the increase in capital contributions of $19 million. Expenses increased $1 million (1.5%) from the prior year. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds: • • • • • • • General Fund Streets Special Revenue Fund General Debt Service Fund Special Assessments Debt Service Fund Streets and Transportation Capital Projects Fund Municipal Facilities Capital Projects Fund Parks, Open Space and Recreation Capital Projects Fund All nonmajor funds are combined for reporting purposes captioned “Other Governmental Funds”. As of the end of fiscal year 2012, the governmental funds reported combined ending unrestricted fund balances of $58 million, an increase of $6 million in comparison with the prior fiscal year. Town of Gilbert Governmental Funds - Fund Balances As of June 30, 2012 General Streets Special Revenue General Debt Service Special Assessments Debt Service Streets and Transportation Capital Projects Municipal Facilities Capital Projects Parks, Open Space and Recreation Capital Projects Other Governmental Funds Total Fund Balances 7 Restricted $ 10,700,623 9,335,818 64,017 46,753,842 6,867,888 14,646,416 12,203,351 $ 100,571,955 Unrestricted Total $ 55,047,204 $ 55,047,204 4,752,017 15,452,640 853,801 10,189,619 64,017 66,966,393 20,212,551 (23,114,131) (16,246,243) 14,646,416 256,064 12,459,415 $ 58,007,506 $ 158,579,461 TABLE OF CONTENTS General Fund The General Fund is the primary operating fund. At the end of fiscal year 2012, the fund balance of the General Fund was $78.3 million, an increase of $11.7 million from the prior year mainly due to the increase in local sales tax and intergovernmental revenue. The unrestricted portion of the fund balance was $55 million, of which $10.8 million has been assigned for capital replacement. As a measure of the General Fund’s liquidity, it may be useful to compare its available fund balance to total fund expenditures. The General Fund’s unassigned fund balance represents 45% of total General Fund expenditures for the current year. Key elements of General Fund sources and uses are as follows: • • • • • • Overall, revenues exceeded expenditures in the General Fund by $12.9 million; however, transfers to other funds (net) were $1.2 million resulting in an increase in fund balance of $11.7 million. The transfers out included $5.7 million for general debt obligations. Local sales tax and intergovernmental revenues are the largest revenue sources for the General Fund accounting for 83% of the total revenues. Local sales tax, which accounts for almost half of total General Fund revenues, increased $5.2 million (10.5%) from the prior fiscal year due to the economic recovery. Intergovernmental revenue increased $2.6 million (8%) from the prior fiscal year mainly due to increased state shared income tax revenue. Public safety expenditures which comprise over half of the total General Fund expenditures increased $2.4 million (4.5%) over the prior fiscal year mainly due to filling vacant positions. Development services, financial services and community services expenditures all slightly increased in total by $1.2 million over the prior fiscal year mostly due to an increase in personnel costs. General Fund Sources $115.1 Million Sales Tax 47% All Other 5% Transfers In 4% Franchise Fees 2% Charges for Services 6% Intergovernmental 32% Licenses and Permits 4% General Fund Uses $103.4 Million All Other 10% Community Services 11% Support Services 9% Fire 21% Police 33% Legal and Court 4% Development Management Financial Services 6% and Policy Services 2% 4% 8 TABLE OF CONTENTS Streets Special Revenue Fund The Streets Fund revenues include state shared revenues which are highway user revenues, vehicle license taxes and lottery funds. The gasoline taxes and lottery funds are required by state statute to be used for transportation purposes. The vehicle license tax has been designated by Council to fund the preventive maintenance activities of the Streets Fund. Total revenues decreased $430 thousand (2%) from the prior year. This was primarily due to decreased county intergovernmental revenue of $1.6 million and was offset by increased auto lieu taxes revenue of $834 thousand. Total expenditures increased by $299 thousand (3%) due to increased capital outlay expenditures. In total, revenues exceeded expenditures by $6.5 million; however, there were $3.6 million in transfers to other funds including $3 million to the Debt Service Fund, resulting in a $3 million (23%) increase in fund balance. Other Major Governmental Funds General Debt Service. The fund balance increased by $3.3 million during the year due. This was primarily due to the current year property tax revenues of $21.6 million and transfers in from other funds of $19.7 million offset by the debt service requirements of $38.5 million. The remaining fund balance of $10.2 million will be used to fund future debt service payments on voter approved general obligation bonds. Special Assessments Debt Service. The fund balance of $64 thousand is all restricted to pay future debt service requirements on special assessment bonds. Streets and Transportation Capital Projects. The fund balance decreased by $20.7 million to $67 million. Current year expenditures exceeded revenues by $20.9 million but this deficit was covered by existing fund balance. Municipal Facilities Capital Projects. The fund balance decreased by $2.3 million during the year from a deficit of $13.8 million to a deficit of $16.2 million. The deficit will be covered by future collections of system development fees. Parks, Open Space and Recreation Capital Projects. The fund balance increased by $6.4 million to $14.6 million. Current year revenues of $12.6 million exceeded expenditures of $378 thousand; however, there were $5.9 million in transfers to other funds which included $5.3 million to the General Debt Service Fund. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. The combined fund balance of these funds decreased $1.4 million (10%) to a balance at year end of $12.5 million. Nonmajor funds represent 6.9% of the total governmental fund balance. Proprietary Funds Gilbert’s proprietary funds statements are prepared on the same basis (accrual) as the government-wide financial statements. Gilbert operates and separately reports the following proprietary funds: • • • Water Fund Wastewater Fund Solid Waste Fund 9 TABLE OF CONTENTS Water Fund The Water Fund is responsible for producing and distributing potable water that meets all county, state and federal drinking water standards. The water system is sized and pressured to provide adequate fire suppression to the entire Town and operates two surface water treatment facilities capable of producing 57 million gallons per day (mgd) and 19 ground water wells capable of producing 43.5 mgd. Net assets increased by $22.3 million to $329.7 million due primarily to capital contributions of $20.2 million, including $17.5 million in system development fees and $2.7 million in distribution lines contributed by developers. Operating income was $7.7 million. Wastewater Fund The Wastewater Fund provides collection, treatment, and recharge services to residents and businesses in Gilbert. The services also include the storage and distribution of effluent (treated wastewater). Net assets increased $17.7 million to $267.7 million due primarily to capital contributions of $17 million, including $15.2 million in system development fees and $1.8 million in collection lines contributed by developers. Operating income was $1 million. Solid Waste Fund Gilbert operates the Solid Waste Fund to provide residential and commercial refuse collection and residential recycling services. Residential services are provided exclusively by Gilbert, while the commercial service competes with the private sector for customers. Net assets increased by $3.4 million to $25.5 million primarily from operating income. The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Solid Waste Funds. Proprietary Funds Operating Revenues and Expenses $50 Millions $40 $30 Revenues $20 Expenses $10 $- Water Wastewater Solid Waste General Fund Budgetary Highlights Differences between the original adopted budget and the final amended budget were less than 1% reflecting an increase of $516 thousand. The final amended budget projected that expenditures would exceed revenues by $2 million and included $5.2 million in net transfers to other funds resulting in a $7.1 million reduction to fund balance per the budget. During the year actual revenues exceeded the budgeted amount by $11.1 million (11%) mainly due to higher than expected local sales taxes. Actual expenditures were less than budgeted by $3.7 million (4%) mainly due to lower than expected public safety and capital outlay expenditures. This resulted in an excess of revenues over expenditures of $14.9 million more than budgeted, resulting in the actual net change in fund balance being $18.8 million more than budgeted. 10 TABLE OF CONTENTS Capital Asset and Debt Administration Capital Assets. As of June 30, 2012, Gilbert had invested $1.4 billion in capital assets. Major capital assets completed during the fiscal year included the following: Governmental Activities • • • Streets and traffic signal projects totaling $38 million. New fire station totaling $4 million. Developer contributions of street related infrastructure valued at $2 million. Business-type Activities • • Developer contributions of water and wastewater infrastructure valued at $4.5 million. Completed water system improvements totaling $8.8 million and wastewater system improvements totaling $376 thousand. The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2012 and 2011. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Business-type Activities 2011 $ 173,438,077 $ 171,914,361 18,101,080 31,286,075 3,044,140 3,513,610 21,145,220 34,799,685 157,411,702 161,991,163 - - 157,411,702 161,991,163 Improvements 40,639,819 42,864,775 - - 40,639,819 42,864,775 Plant, Machinery & Equip 15,607,655 18,761,468 84,114,653 89,882,320 99,722,308 108,643,788 Land Construction-in-progress Buildings 2012 $ 2011 50,703,249 $ 2012 Total 2012 45,923,688 $ 224,141,326 $ 2011 217,838,049 Water Rights - - 7,552,162 7,650,454 7,552,162 7,650,454 Infrastructure 566,295,320 555,932,658 302,916,780 304,467,122 869,212,100 860,399,780 Total Capital Assets $ 971,493,653 $ 982,750,500 $ 448,330,984 $ 451,437,194 $ 1,419,824,637 $ 1,434,187,694 Total governmental capital assets decreased $11 million and business-type capital assets decreased $3 million. The majority of the decrease can be attributable to increased depreciation as assets get older, less capital projects being started and the removal of obsolete or auctioned machinery and equipment assets. See Note 6 on pages 50-52 for further information regarding capital assets. Long-term Debt. At June 30, 2012, Gilbert had total bonded debt obligations of $320 million related to governmental activities and $138.2 million in business-type activities; $151.4 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $11 million is special assessment bonds secured by a lien against the land of the benefited property owners in Improvement Districts #19 and #20; and all other outstanding debt is secured by pledges of specific revenue sources. The Arizona Constitution and State Statutes limit a municipality’s bonded debt capacity to certain percentages of its secondary assessed valuation and by the type of project to be constructed with GO bonds. For projects involving water, wastewater, artificial lighting, parks, open space, recreational facility improvements, streets, public safety, and fire and emergency facilities, Gilbert can issue GO bonds up to 20% of its secondary assessed valuation. For any other general-purpose improvements, Gilbert may issue bonds up to 6% of its secondary assessed valuation. Gilbert’s available debt margin at June 30, 2012 was $100.5 million in the 6% capacity and $171.7 million in the 20% capacity. 11 TABLE OF CONTENTS See Note 8 on pages 53-59 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2012 and 2011. Town of Gilbert Outstanding Debt 2012 Governmental Activities $ 147,565,000 Special Assessment 11,015,000 Street and Highway User 19,470,000 Utility Revenue Municipal Property Corporation 141,990,000 Totals $ 320,040,000 General Obligation 2011 $ 170,385,000 11,415,000 22,875,000 152,015,000 $ 356,690,000 2012 $ Business-type Activities 3,870,000 15,410,000 118,895,000 $ 138,175,000 Total 2011 2012 5,530,000 16,795,000 143,270,000 $ 165,595,000 $ 151,435,000 11,015,000 19,470,000 15,410,000 260,885,000 $ 458,215,000 $ 2011 $ 175,915,000 11,415,000 22,875,000 16,795,000 295,285,000 $ 522,285,000 Gilbert’s bonds are rated by leading rating agencies that assess the risk of default based on Gilbert’s financial condition. The following schedule shows Gilbert’s bond ratings as of June 30, 2012. General Obligation Street and Highway User Revenue Water and Wastewater Revenue Refunding Public Facilities Municipal Property Corporation* Water Resources Municipal Property Corporation Improvement Districts Moody's Investor Service Standard and Poors Ratings Group Fitch Ratings Aa1 Aa3 Aa3 Aa2 Not Rated Aa3 AA AA AA+ AA AAA Not Rated AA Not Rated AA AANot Rated * These bonds are insured Economic Factors and Next Year’s Budget Gilbert’s historic display of responsible financial practices provided a good foundation to weather the great recession of recent years. But the Town is maturing from a small-town, high-growth community to a stable, thriving, and sophisticated one. Demands for service are different than they were only five years ago. Even during the recession, Gilbert’s population increased by over 27,000 people, and the Town began to see its dreams of bio-medical economic development become reality. Technology is different, providing opportunities to work more efficiently and effectively. Infrastructure needs are different now too, as we transition our efforts from those that build and expand to those that will ensure that our existing infrastructure remains sustainable and serviceable to our community. Because the needs and resources are now different, the process was different this year as well. The approach was collaborative. Staff members throughout the Town inventoried and analyzed costs of providing services and identified service levels. Current year budgets were not rolled forward; instead, each functional area analyzed and projected what specific costs would be needed in FY 2012-13 to meet those service delivery needs. In doing so, some once-relevant budget lines were determined to be no longer necessary; that funding could instead be reallocated to meet more critical needs. Because departments budgeted for “most likely” and not for contingent situations, contingency appropriation has been established at a Town-wide level. This will ensure that the Town is positioned to respond not only to emergent situations, but incredible opportunities as well. 12 TABLE OF CONTENTS The base for the FY 2012-13 budget was built from zero. Staff looked at actual costs then factored in mandatory cost increases, such as those for utility rates and certain contracts, and costs to provide service to new customers. This positioned the Town to leverage a lean, effective budget with recovering revenues to begin deliberately and strategically planning for the future, targeting key components of the Council’s strategic initiatives. The Town’s Executive Leadership Team worked together to recommend a budget that specifically accomplished Council direction. The budget includes recommended increases, not only to restore certain specific reductions, but also to very deliberately accomplish certain key elements of the Council’s Strategic Initiatives. During the recession, Town revenues were substantially reduced, but the Town reduced its expenses in kind. Some expenses were deferred for a time, such as training or replacement of vehicles, and now will be addressed. In many cases, however, departments found even more efficient ways to deliver necessary public service. Our revenue and expense levels are just now headed back toward 2007 levels, and yet we are able to provide exceptional service to 27,000 new customers. Even so, we would be remiss if we did not acknowledge that there are still business needs that remain unmet. As the Executive Team reviewed the current service levels and Strategic Initiatives, it became very clear that there are many more needs than available resources, and simply spreading available resources would not set us up to accomplish our goals with excellence. Budget Highlights for Fiscal Year 2013 The recommended budget presents a focused approach to FY 2012-13, emphasizing the following areas: • • • • Economic Development o Growing us out of the issues we face today Personnel o Recruitment and Retention o Developing stellar performers - preparing them for success in service to the community Technology o Mitigate current risks o Advance as a technology leader Maintain service levels The budget reflects the Town’s commitment to these areas through the respective allocation of resources. Additional highlights include: • • • • • Total budget of approximately $447.8 million Restructuring of the organization o Positions were both added and eliminated to meet the current needs of the community No change to the local sales or property tax rates Permit activity, which had dropped below 50 residential permits per month in FY 2011, reached as high as 295 permits in May 2012 Reserve amounts in excessive of policy requirements budgeted as contingency Financial Contact This financial report is designed to provide a general overview of Gilbert’s finances and to demonstrate accountability for the use of public funds. This report is also available on Gilbert’s website at www.gilbertaz.gov. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Gilbert Finance Department 50 E Civic Center Drive Gilbert, AZ 85296 (480) 503-6752 13 TABLE OF CONTENTS 14 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Assets June 30, 2012 Primary Government ASSETS Pooled cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Internal balances Prepaid items Inventories Restricted assets: Cash and investments Accrued interest Deferred charges Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total assets LIABILITIES Accounts payable Accrued liabilities Accrued interest Claims payable Deposits held for others Utility deposits Bond interest payable Unearned revenue Noncurrent liabilities: Due within one year: Current portion of compensated absences Current portion of bonds payable Due in more than one year: Compensated absences Bonds payable Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Debt service Capital projects System repair & maintenance Highways and streets Grant programs Court/police programs Special districts Other purposes Unrestricted Total net assets Governmental Activities Business-type Activities $ 188,940,690 $ 4,349,322 11,307,172 468,827 15,910,317 4,310,694 (9,241,362) 4,771 469,707 90,162,399 Component Unit Industrial Development Authority Total $ 279,103,089 $ 4,728 222,496 5,740,027 415,924 9,241,362 267,488 4,349,322 11,307,172 691,323 21,650,344 4,726,618 4,771 737,195 - 19,906,881 114 1,455,913 356,343 70,945,961 89,992 1,356,345 144,041,623 90,852,842 90,106 2,812,258 144,397,966 - 191,539,157 779,954,496 1,209,733,042 53,747,389 394,583,595 770,814,601 245,286,546 1,174,538,091 1,980,547,643 4,728 8,313,754 9,882,809 1,244,571 161,690 3,603,682 15,154 2,366,183 258,411 1,451,378 3,272,209 - 10,679,937 10,141,220 1,451,378 1,244,571 161,690 3,272,209 3,603,682 15,154 - 3,637,231 24,195,000 706,592 3,700,000 4,343,823 27,895,000 - 6,141,647 321,062,651 378,258,189 1,122,070 134,196,420 147,073,263 7,263,717 455,259,071 525,331,452 - 695,983,103 316,268,041 1,012,251,144 - 20,696,791 15,163,511 10,289,564 3,697,856 1,741,941 436,729 192,000 83,273,358 $ 831,474,853 22,645,139 36,590,593 12,139,956 236,097,609 $ 623,741,338 43,341,930 51,754,104 12,139,956 10,289,564 3,697,856 1,741,941 436,729 192,000 319,370,967 $ 1,455,216,191 4,728 4,728 The notes to the financial statements are an integral part of this statement. 15 $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2012 Program Revenues Charges for Services Expenses Functions/Programs Primary government Governmental activities: General government Management and policy Support services Financial services Legal and court Development services Public safety Police Fire Highways and streets Community services Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities Business-type activities: Water Wastewater Solid waste Total business-type activities Total primary government Component unit Industrial development authority $ 2,982,636 8,632,288 1,216,418 5,409,709 8,551,083 $ 1,145 207,508 11,173 639,895 5,346,632 Operating Grants and Contributions Capital Grants and Contributions $ $ 14,617 30,000 864,026 34,219 680,639 40,466,828 24,906,506 43,437,623 19,931,592 1,268,998 2,910,114 5,584,595 128,955 1,497,069 3,594,859 1,465 241,438 1,176,705 18,074,699 511,063 11,885 120,213 1,863,016 5,585,947 6,062,016 11,208,232 612,220 13,713 15,785,320 175,499,115 17,013,296 21,044,646 26,060,002 37,694,869 22,661,900 14,917,749 75,274,518 $ 250,773,633 $ 36,692,434 22,739,462 17,923,883 77,355,779 94,369,075 $ 21,044,646 $ 20,212,017 16,995,982 13,713 37,221,712 63,281,714 $ $ 1,500 $ - $ - 10 General revenues: Sales taxes Property taxes, levied for debt service In-Lieu property taxes Franchise taxes Unrestricted state shared sales taxes Unrestricted state shared income taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets, July 1, 2011 Net assets, June 30, 2012 16 TABLE OF CONTENTS Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Activities Business-type Activities $ $ (2,966,874) (8,390,561) (1,205,245) (4,739,814) (1,659,786) - Component Unit Industrial Development Authority Total $ (2,966,874) (8,390,561) (1,205,245) (4,739,814) (1,659,786) $ - (32,777,779) (18,014,899) (17,803,839) (4,617,438) (644,893) (2,774,723) - (32,777,779) (18,014,899) (17,803,839) (4,617,438) (644,893) (2,774,723) - (15,785,320) (111,381,171) - (15,785,320) (111,381,171) - (111,381,171) 19,209,582 17,073,544 3,019,847 39,302,973 39,302,973 19,209,582 17,073,544 3,019,847 39,302,973 (72,078,198) 1,490 54,513,265 - 54,513,265 - 21,502,322 - 21,502,322 - 1,331,051 - 1,331,051 - 2,462,726 - 2,462,726 - 16,288,580 - 16,288,580 - 17,593,587 - 17,593,587 - 1,349,124 - 1,349,124 - 1,909,629 1,244,149 3,153,778 1 177,899 38,279 216,178 - 4,744,306 1,765,124 6,509,430 - 690,244 - - 3,737,796 124,920,041 1 (690,244) 121,182,245 9,801,074 43,040,769 52,841,843 1,491 821,673,779 580,700,569 1,402,374,348 3,237 $ 831,474,853 $ 623,741,338 $ 1,455,216,191 $ 4,728 The notes to the financial statements are an integral part of this statement. 17 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2012 Streets Special Revenue General ASSETS Pooled cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Due from other funds Prepaid items Inventories Advances to other funds Restricted assets: Cash and investments Accrued interest Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Deposits held for others Due to other funds Bonds payable Interest payable Advances from other funds Deferred revenue: Special assessments Other Total liabilities Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances $ $ $ $ 55,376,673 $ 14,548,110 Special Assessments Debt Service General Debt Service $ 9,593,902 $ 53,590 4,121,059 144,415 14,273,767 271,482 489,782 4,771 23,208,408 36,690 1,264,516 - 202,972 36,998 355,688 - 11,307,172 211 - 97,890,357 15,849,316 12,938,684 58 23,128,302 11,360,973 4,382,390 9,773,934 106,750 - $ $ 340,218 54,106 2,352 - $ $ 9,335,000 3,603,683 - $ $ - 5,366,901 19,629,975 396,676 12,938,683 11,296,956 11,296,956 23,213,179 10,797,540 44,249,663 78,260,382 97,890,357 10,700,623 4,752,017 15,452,640 15,849,316 9,335,818 853,801 10,189,619 23,128,302 64,017 64,017 11,360,973 18 $ $ $ TABLE OF CONTENTS Streets and Transportation Capital Projects Municipal Facilities Capital Projects Parks, Open Space and Recreation Capital Projects $ $ $ $ $ $ 68,799,728 569,301 14,597,651 Other Governmental Funds $ 10,794,055 Total Governmental Funds $ 174,333,010 175,465 1,175,336 250,000 - 4,629 702 - 35,154 17,852 - 25,291 31,013 52,113 2,524,696 1,666 - 4,349,322 11,307,172 464,575 15,875,458 4,310,694 489,782 4,771 1,666 23,208,408 70,400,529 6,968,197 56 7,542,885 14,650,657 13,428,834 19,906,881 114 254,251,853 2,201,336 5,572 52,588 - $ $ 580,720 23,208,408 1,174,640 3,434,136 23,789,128 46,753,842 20,212,551 66,966,393 70,400,529 6,867,888 (23,114,131) (16,246,243) 7,542,885 $ $ $ 4,241 - $ $ 437,928 25,443 489,782 - 4,241 $ 14,646,416 14,646,416 14,650,657 $ $ 14,600 967,753 $ 1,666 12,203,351 341,236 (85,172) 12,461,081 13,428,834 The notes to the financial statement are an integral part of this statement. 19 7,946,833 9,859,055 161,690 489,782 9,335,000 3,603,683 23,208,408 11,296,956 6,556,141 72,457,548 $ 23,214,845 100,571,955 36,957,145 21,050,360 181,794,305 254,251,853 TABLE OF CONTENTS 20 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Assets June 30, 2012 Fund balances - total governmental funds $ 181,794,305 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. Governmental capital assets Accumulated depreciation 1,460,475,571 (489,217,462) 971,258,109 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds 356,343 Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current-period expenditures. Those assets (for example, receivables) are offset by deferred revenues in the governmental funds and thus are not included in fund balance. Deferred special assessment revenue Deferred court revenue Deferred other entities participation revenue Deferred sales tax revenue 11,296,956 4,852,072 1,174,640 514,275 17,837,943 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, copy services, and self-insurance to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets, but are not included on the governmental fund balance sheet. 4,319,384 Long-term liabilities applicable to the Town'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. Bonds payable Compensated absences (331,940,000) (9,624,495) (341,564,495) Bond issuance costs, discounts and premiums are reported as expenditures, other financing uses and other financing sources, respectively, in the governmental funds when paid, but are deferred and amortized over the life of the bonds in the statement of net assets. Bond issuance costs/discounts/premiums Net assets of governmental activities - statement of net assets The notes to the financial statements are an integral part of this statement. 21 (2,526,736) $ 831,474,853 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2012 Revenues Taxes: Sales Property Franchise Licenses and permits Intergovernmental Special assessments Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues General $ Expenditures Current: General government: Management and policy Support services Financial services Legal and court Development services Public safety: Police Fire Highways and streets Community services Transportation Non departmental Debt service: Principal Interest Bond issuance costs Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 54,502,627 2,462,726 3,995,370 36,784,416 6,714,370 4,297 19,518 3,987,115 708,826 1,259,502 110,438,767 Streets Special Revenue $ 17,132,260 56,728 15,493 5,601 105,748 307,718 17,623,548 General Debt Service $ 21,502,322 90,286 21,592,608 Special Assessments Debt Service $ 878,981 1,295 880,276 3,675,664 9,159,579 1,721,856 4,312,781 6,582,668 - - - 34,631,396 21,293,740 11,590,089 1,247,091 2,776,188 8,371,522 - - - 567,666 97,558,718 2,797,035 11,168,557 22,655,000 15,417,091 402,163 1,534 38,475,788 400,000 574,655 1,073 975,728 12,880,049 6,454,991 (16,883,180) (95,452) Other financing sources (uses) Transfers in Transfers out Refunding bonds issued Premium on refunding bonds Payment to refunded bond escrow agent Total other financing sources and uses 4,688,928 (5,876,144) (1,187,216) 50,000 (3,570,110) (3,520,110) 19,736,738 37,925,000 4,110,575 (41,626,798) 20,145,515 305,836 (202,978) 102,858 Net change in fund balances 11,692,833 2,934,881 3,262,335 7,406 Fund balances at beginning of year Fund balances at end of year 66,567,549 78,260,382 12,517,759 15,452,640 6,927,284 10,189,619 56,611 64,017 $ 22 $ $ $ TABLE OF CONTENTS Streets and Transportation Capital Projects Municipal Facilities Capital Projects Parks, Open Space and Recreation Capital Projects $ $ $ 634,918 1,278,413 773,594 1,779,024 4,465,949 11,010,594 95,905 1,520,389 12,626,888 $ 2,542,937 4,060,571 1,392,593 2,370 1,269,395 166,253 449,156 97,366 80,282 10,060,923 Total Governmental Funds $ 54,502,627 24,045,259 2,462,726 3,995,370 61,468,511 878,981 8,163,691 1,300,573 17,957,172 185,771 4,441,872 1,888,868 4,946,915 186,238,336 1,559 64,078 - 43 304,686 865,498 3,675,707 9,159,579 1,721,856 4,617,467 7,513,803 20,852 - 285,690 133,183 - 49,414 - 1,466,965 124,966 2,422,821 1,048,662 21,907 133,926 36,384,051 21,551,889 10,815,195 12,688,165 1,268,998 2,910,114 25,389,756 25,412,167 6,582 4,551,246 5,040,779 328,166 377,580 866,006 7,255,480 23,055,000 15,991,746 402,163 9,189 34,499,875 186,264,797 (20,946,218) 3,508,598 12,249,308 2,805,443 103,177 (6,107,067) (6,003,890) (5,862,305) (5,862,305) 23,730 (4,266,918) (4,243,188) 286,869 286,869 $ 2,856,346 5,677,183 15,848 8,549,377 Other Governmental Funds (20,659,349) (2,495,292) 6,387,003 (1,437,745) 87,625,742 66,966,393 (13,750,951) (16,246,243) 8,259,413 14,646,416 13,898,826 12,461,081 $ $ $ The notes to the financial statements are an integral part of this statement. 23 (26,461) 25,195,278 (25,885,522) 37,925,000 4,110,575 (41,626,798) (281,467) (307,928) $ 182,102,233 181,794,305 TABLE OF CONTENTS 24 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2012 Net change in fund balances - total governmental funds $ (307,928) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlay Depreciation expense 34,499,875 (47,895,443) (13,395,568) (37,925,000) (4,110,575) 41,626,798 (408,777) Issuance of debt, applicable premium and payment to refunded bond escrow agent are reported as a financing source in the governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net assets and does not affect the statement of activities. Bond premium is deferred and amortized in the statement of activities. Refunding bonds Premium on refunding bonds Payment to refunded bond escrow agent Repayment of bond principal and bond issuance costs are reported as expenditures in governmental funds and thus have the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the long-term liabilities in the statement of net assets and do not result in an expense in the statement of activities. Bond issuance costs, charge on refunding bonds, and bond premium are deferred and amortized over the life of the bonds. Principal payments Bond issuance costs Amortization of bond issuance costs Amortization of deferred charge on refunding bonds Amortization of bond premium 23,055,000 402,163 (91,725) (66,072) 373,412 23,672,778 (1,121,166) 20,760 (24,711) (1,125,117) Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance and copy services, to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal services funds' costs for the year. Operating loss Investment earnings Loss on sale of capital assets Capital assets contributed by developers are not shown on the governmental fund statements, but are included in the assets of the Town. On the statement of activities, these donations are shown as capital contributions. Capital contributions 2,191,470 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds. Compensated absences (772,965) Certain revenues are deferred in the governmental funds because they do not provide current financial resources due to unavailability but are recognized as revenue in the statement of activities. However, other 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. Court revenue Sales tax Special assessments Change in net assets of governmental activities - statement of activities The notes to the financial statements are an integral part of this statement. 25 252,031 10,638 (315,488) (52,819) $ 9,801,074 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Intergovernmental Charges for services Other entities' participation Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Management and policy Support services Financial services Legal and court Development services Public safety: Police Fire Community services Transportation Non departmental Capital outlay Total expenditures 49,409,700 2,444,210 2,122,320 34,028,800 6,694,180 31,000 4,056,100 317,000 203,150 99,306,460 Actual Amounts Final $ 49,409,700 2,444,210 2,122,320 34,028,800 6,694,180 31,000 4,056,100 317,000 203,150 99,306,460 $ 54,502,627 2,462,726 3,995,370 36,784,416 6,714,370 4,297 19,518 3,987,115 708,826 1,259,502 110,438,767 Final Budget Positive (Negative) $ 5,092,927 18,516 1,873,050 2,755,616 20,190 4,297 (11,482) (68,985) 391,826 1,056,352 11,132,307 3,523,080 9,437,720 1,818,090 4,275,920 6,508,600 3,662,290 9,586,166 1,818,090 4,285,640 6,541,590 3,675,664 9,159,579 1,721,856 4,312,781 6,582,668 (13,374) 426,587 96,234 (27,141) (41,078) 36,344,550 20,891,490 11,618,570 1,194,100 1,737,290 3,430,180 100,779,590 35,885,350 21,184,970 11,618,570 1,194,100 1,737,290 3,781,930 101,295,986 34,631,396 21,293,740 11,590,089 1,247,091 2,776,188 567,666 97,558,718 1,253,954 (108,770) 28,481 (52,991) (1,038,898) 3,214,264 3,737,268 Excess (deficiency) of revenues over (under) expenditures (1,473,130) (1,989,526) 12,880,049 14,869,575 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 3,541,260 (8,574,060) (5,032,800) 3,416,260 (8,574,060) (5,157,800) 4,688,928 (5,876,144) (1,187,216) 1,272,668 2,697,916 3,970,584 Net change in fund balances $ (6,505,930) $ (7,147,326) 11,692,833 Fund balance at beginning of year 66,567,549 Fund balance at end of year $ The notes to the financial statements are an integral part of this statement. 26 78,260,382 $ 18,840,159 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Streets Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Other entities' participation Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 16,664,710 15,400 45,000 16,725,110 Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures $ 16,664,710 15,400 45,000 16,725,110 $ 17,132,260 56,728 15,493 5,601 105,748 307,718 17,623,548 $ 467,550 56,728 15,493 5,601 90,348 262,718 898,438 8,985,110 3,607,360 367,000 12,959,470 8,985,110 3,607,360 367,000 12,959,470 8,371,522 2,797,035 11,168,557 613,588 810,325 367,000 1,790,913 3,765,640 3,765,640 6,454,991 2,689,351 50,000 (4,083,440) (4,033,440) 50,000 (4,083,440) (4,033,440) 50,000 (3,570,110) (3,520,110) Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances Actual Amounts Final Final Budget Positive (Negative) $ (267,800) $ (267,800) 2,934,881 Fund balance at beginning of year 12,517,759 Fund balance at end of year $ The notes to the financial statements are an integral part of this statement. 27 15,452,640 513,330 513,330 $ 3,202,681 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Assets Proprietary Funds June 30, 2012 Business-type Activities - Enterprise Funds Water ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Due from other governments Inventories $ 61,368,187 Wastewater $ 17,069,606 Solid Waste $ Total 20,104,894 $ 98,542,687 142,699 3,151,164 132,719 267,488 32,139 1,633,674 283,205 - 47,658 955,189 - 222,496 5,740,027 415,924 267,488 65,062,257 19,018,624 21,107,741 105,188,622 64,568,274 83,381 1,126,285 74,783,441 6,377,687 6,611 230,060 69,258,182 - 70,945,961 89,992 1,356,345 144,041,623 42,023,384 223,062,244 11,724,005 166,176,252 5,345,099 53,747,389 394,583,595 405,647,009 253,772,797 5,345,099 664,764,905 470,709,266 272,791,421 26,452,840 769,953,527 1,112,151 126,244 349,673 1,451,378 3,700,000 3,245,564 903,317 50,470 153,897 - 350,715 81,697 203,022 26,645 2,366,183 258,411 706,592 1,451,378 3,700,000 3,272,209 9,985,010 1,107,684 662,079 11,754,773 Noncurrent liabilities: General obligation bonds payable Utility revenue bonds payable Accrued compensated absences 3,877,755 126,618,244 550,802 3,700,421 287,674 283,594 3,877,755 130,318,665 1,122,070 Total noncurrent liabilities 131,046,801 3,988,095 283,594 135,318,490 141,031,811 5,095,779 945,673 147,073,263 136,723,106 21,947,133 36,590,593 7,211,212 127,205,411 $ 329,677,455 174,199,836 698,006 4,928,744 87,869,056 $ 267,695,642 5,345,099 20,162,068 25,507,167 316,268,041 22,645,139 36,590,593 12,139,956 235,236,535 $ 622,880,264 Total current assets Noncurrent assets: Restricted assets: Cash and investments Accrued interest Deferred charges Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Accrued interest Bonds payable Utility deposits Total current liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for debt service Restricted for capital projects Restricted for system repair & maintenance Unrestricted Total net assets $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 861,074 Net assets of business-type activities $ 623,741,338 28 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 6,227,392 4,252 34,859 468,041 6,734,544 235,544 235,544 6,970,088 366,921 23,755 64,110 1,244,571 1,699,357 90,273 90,273 1,789,630 $ 235,544 4,944,914 5,180,458 The notes to the financial statements are an integral part of this statement. 29 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2012 Business-type Activities - Enterprise Funds Water Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Claims Incurred Depreciation Allocation of indirect expenses Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Interest expense Investment earnings Amortization of bond issuance costs Gain (loss) on sale of capital assets Total nonoperating revenues (expenses) Income (loss) before capital contributions and transfers Wastewater 36,692,434 1,646,827 38,339,261 $ 22,739,462 8,467 22,747,929 Solid Waste $ 17,923,883 109,830 18,033,713 927,851 5,408,602 6,243,114 1,674,985 584,653 14,839,205 2,812,392 15,943,693 26,531,049 19,547,012 2,382,604 67,216,750 7,671,709 1,037,936 3,194,508 11,904,153 (6,764,676) 895,168 (111,369) 4,168 (5,976,709) (376,895) 211,306 (521,345) 2,652 (684,282) 1,695,000 353,654 137,675 31,459 169,134 Change in net assets 22,288,344 17,658,553 3,377,355 307,389,111 250,037,089 22,129,812 329,677,455 $ 267,695,642 (7,141,571) 1,244,149 (632,714) 38,279 (6,491,857) 3,363,642 16,995,982 492,290 (183,373) $ 77,355,779 1,765,124 79,120,903 810,667 3,623,629 8,245,112 8,381,788 648,797 21,709,993 20,212,017 1,050,840 (669,513) Total net assets, end of year $ 1,073,874 6,911,462 12,042,823 9,490,239 1,149,154 30,667,552 Capital contributions Transfers in Transfers out Total net assets, beginning of year Total 5,412,296 13,713 - $ 37,221,712 1,543,130 (852,886) 43,324,252 25,507,167 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net assets of business-type activities 30 $ (283,483) 43,040,769 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 20,204,159 52,080 20,256,239 938,378 1,414,035 5,760,982 13,506,651 40,842 21,660,888 (1,404,649) 20,760 (24,711) (3,951) (1,408,600) (1,408,600) 6,589,058 $ 5,180,458 The notes to the financial statements are an integral part of this statement. 31 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2012 Business-type Activities - Enterprise Funds Water Cash flows from operating activities: Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash receipts from deposits Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments to other funds for services Net cash provided by (used in) operating activities $ 36,679,843 1,646,827 741,288 (13,728,949) (6,683,108) (1,149,154) 17,506,747 Cash flows from noncapital financing activities: Changes in advances from other funds Changes in advances to other funds Transfers from other funds Transfers to other funds Net cash provided by (used in) noncapital financing activities Cash flows from capital and related financing activities: Acquisition and construction of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Disposal of capital assets Net cash used in capital and related financing activities Cash and cash equivalents at end of year includes: Equity in pooled cash and investments Restricted cash and investments Total cash and cash equivalents Reconciliation of operating income (loss) to net cash provided by (used in) operations: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation Provision for uncollectible accounts Changes in assets and liabilities: Decrease in accounts receivable Decrease in prepaid items Increase in inventories Increase (decrease) in accounts payable Increase in claims payable Increase in deposits Increase in accrued expenses Total adjustments Net cash provided by (used in) operating activities Supplemental disclosures of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment $ 22,669,485 8,467 (9,284,953) (3,524,224) (648,797) 9,219,978 1,139,854 1,050,840 (669,513) 1,521,181 (1,139,854) 492,290 (183,373) (830,937) (8,579,652) 17,509,478 (6,864,204) (11,326,341) 4,168 (9,256,551) (154,538) 15,154,154 (568,240) (16,093,659) 2,652 (1,659,631) Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Wastewater Solid Waste $ Total 17,658,776 109,830 1,875 (7,293,721) (5,368,907) (584,653) 4,523,200 $ - 77,008,104 1,765,124 743,163 (30,307,623) (15,576,239) (2,382,604) 31,249,925 (1,139,854) 1,139,854 1,543,130 (852,886) 690,244 (149,158) 31,459 (117,699) (8,883,348) 32,663,632 (7,432,444) (27,420,000) 38,279 (11,033,881) 779,220 779,220 178,138 178,138 107,533 107,533 1,064,891 1,064,891 10,550,597 115,385,864 $ 125,936,461 $ 6,907,548 16,539,745 23,447,293 4,513,034 15,591,860 20,104,894 21,971,179 147,517,469 $ 169,488,648 $ 61,368,187 64,568,274 $ 125,936,461 $ $ $ 7,671,709 $ $ $ 17,069,606 6,377,687 23,447,293 $ 20,104,894 20,104,894 $ 1,037,936 $ 3,194,508 98,542,687 70,945,961 $ 169,488,648 $ 11,904,153 9,490,239 (395,339) 8,381,788 (307,526) 1,674,985 (277,734) 19,547,012 (980,599) 382,748 (89,440) (522,812) 741,288 228,354 9,835,038 237,548 (229,174) 99,406 8,182,042 12,626 (122,755) 1,875 39,695 1,328,692 632,922 (89,440) (874,741) 743,163 367,455 19,345,772 $ 17,506,747 $ 9,219,978 $ 4,523,200 $ 31,249,925 $ $ 2,702,539 2,702,539 $ $ 1,841,828 1,841,828 $ $ - $ $ 4,544,367 4,544,367 32 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 52,669 20,245,502 (19,968,246) (1,367,150) (1,037,225) - (159,336) (159,336) 20,153 20,153 $ $ (1,176,408) 7,403,800 6,227,392 $ 6,227,392 6,227,392 $ (1,404,649) 40,842 41,932 7,266 (37,614) 103,983 164,130 46,885 367,424 $ $ $ (1,037,225) - The notes to the financial statements are an integral part of this statement. 33 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2012 Firemen's Pension Trust Agency Funds ASSETS Restricted cash and investments Restricted accrued interest $ Total assets 99,625 - $ 159,856 306 99,625 $ 160,162 - $ 137,206 9,092 13,864 - $ 160,162 LIABILITIES Guaranty and other deposits Medical benefits payable Dependent care benefits payable Total liabilities NET ASSETS Held in trust for pension benefits $ The notes to the financial statements are an integral part of this statement. 34 99,625 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Assets Fiduciary Fund For the Year Ended June 30, 2012 Firemen's Pension Trust Additions Interest on investments $ Total additions 74 74 Deductions Benefits Administration 2,400 100 Total deductions 2,500 Change in net assets (2,426) Net assets - beginning of the year 102,051 Net assets - end of the year $ The notes to the financial statements are an integral part of this statement. 35 99,625 TABLE OF CONTENTS 36 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the Council-Manager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 - Summary of Significant Accounting Policies Gilbert’s accounting policies 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. A. Reporting Entity Gilbert’s operations include public safety (police, fire, and animal control), community services (parks, recreation, library, culture and arts, and social services), development services (planning, code enforcement, and engineering), and general administration in support of operations. Gilbert also operates three enterprise funds to provide water, wastewater, and solid waste, and three internal service funds that provide equipment and fleet maintenance, copy services, and employee self-insurance for medical and dental claims. The accompanying financial statements present the activities of Gilbert (the primary government) and its component units. Component units are legally separate entities for which Gilbert is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of Gilbert’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize they are legally separate from the Town of Gilbert. Each blended and discretely presented component unit discussed below has a June 30 year-end. Blended Component Units - The Water Resources Municipal Property Corporation (Water MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing the construction or acquisition of water and wastewater capital improvement projects. The Public Facilities Municipal Property Corporation (Public Facilities MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing construction of municipal facilities. Each is considered a blended component unit because the Council appoints the five-member board of directors of the MPC, the Council must approve any amendments to the articles of incorporation of the MPC, the Council must approve any debt issues of the MPC, and the MPC provides services solely to the Town of Gilbert. At June 30, 2012, the Water MPC bonded debt is reported within the water fund and the Public Facilities MPC bonded debt is reported within the debt service fund (current portion only) and within the governmental activities in the government-wide statement of net assets. Discretely Presented Component Unit - The Industrial Development Authority (IDA) issues industrial revenue bonds to provide financial assistance to private sector entities for the acquisition and construction of eligible industrial and commercial facilities deemed to be in the public interest. The IDA is considered a component unit because the Council appoints the board of directors of the IDA, the Council must approve any amendments to the articles of incorporation of the IDA, and the Council must approve any debt issues of the IDA. The IDA is discretely presented in these combined financial statements because the IDA does not provide services solely to Gilbert. Separate financial statements for the IDA have not been prepared. 37 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 B. Jointly Governed Organizations Williams Gateway Airport Authority (WGAA) is a non-profit corporation established and funded by the Towns of Gilbert and Queen Creek, the Cities of Mesa and Phoenix, and the Gila River Indian Community. The purpose of the entity is the redevelopment of Williams Air Force Base, which was closed in September 1993 and became Phoenix/Mesa Gateway Airport (formerly known as Williams Gateway Airport). The airport has three runways, a newly remodeled passenger terminal and is positioned to be a reliever airport to Phoenix’s Sky Harbor International Airport. The Board of Directors consists of the mayors of the respective communities and the governor of the tribal community. Gilbert contributed $350,000 in fiscal year 2012 (life to date $6,824,250) to the WGAA operating and capital budget. Regional Public Transportation Authority (RPTA) is a voluntary association of local governments, including Maricopa County, Mesa, Tempe, Scottsdale, Glendale, Phoenix, and Gilbert. Its purpose is to create a regional public transportation plan for Maricopa County. The Board of Directors consists of the mayors of those municipalities and a member of the County Board of Supervisors. C. Government-wide and Fund Financial Statements The government-wide financial statements (Statement of Net Assets and Statement of Activities) report on Gilbert and its component units as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from businesstype activities, which rely to a significant extent on fees and charges for support. The government-wide Statement of Net Assets reports all financial and capital resources of the government (excluding fiduciary funds). It is displayed in a format of assets less liabilities equals net assets, with the assets and liabilities shown in order of their relative liquidity. Net assets are required to be displayed in three components: 1) invested in capital assets, net of related debt, 2) restricted and 3) unrestricted. Invested in capital assets, net of related debt is capital assets net of accumulated depreciation and reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net assets are those with constraints placed on their use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net assets not otherwise classified as restricted, are shown as unrestricted. The government-wide Statement of Activities demonstrates the degree to which the direct expenses of the various functions or departments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or department. Interest and fiscal charges on long-term debt are not allocated to the various functions. Program revenues include charges for services, fines and forfeitures, licenses and permit fees, special assessment fees, certain system development fees, intergovernmental grants and other entities participation. Taxes, investment earnings and other revenues not identifiable with a particular function or department are included as general revenues. The general revenues support the net costs of the functions and departments not covered by program revenues. For the most part, the effect of internal activity has been removed from the government-wide financial statements. Net internal activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Certain charges between the enterprise funds’ utility systems and the various functional activities are not eliminated as this would distort the direct costs and program revenues reported for the various functions concerned. 38 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Separate financial statements are provided for the governmental funds, proprietary funds and fiduciary funds. The focus of the fund financial statements is on major funds. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Other nonmajor governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in the combining statements included as supplementary information. As stated above, the fiduciary funds are presented in the fund financial statements and not included in the government-wide statements. By definition these assets are being held for the benefit of a third party and cannot be used to address Gilbert’s activities or obligations. The internal service funds, which provide services to the other funds of the government, are presented in a single combined column in the proprietary fund financial statements. Because the principal users of the internal service funds are the governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental activities column of the government-wide Statement of Net Assets. The costs of the internal service fund services are spread to the appropriate function or department on the government-wide Statement of Activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect from these revenues and expenses. D. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Agency fund financial statements have no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue 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 grantor or provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, revenues are considered available if they are collected within 60 days of the end of the current fiscal period. Principal revenue sources considered to be susceptible to accrual are property taxes, sales taxes, franchise taxes, licenses and permits, intergovernmental revenue and investment earnings associated with the current fiscal period. Charges for services, fines and forfeitures, and miscellaneous revenues are recorded as revenue when received as cash because they are generally not measurable until actually received. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented on the page following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide presentation. 39 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 The proprietary funds and the pension trust fund are reported using the economic resources measurement focus and the accrual basis of accounting (same basis as the government-wide financial statements). Gilbert’s business-type activities and enterprise funds follow Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. Gilbert has elected not to implement FASB Statements and Interpretations issued after November 30, 1989. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of Gilbert’s internal service funds are charges to user departments for services provided. The principal operating revenue of Gilbert’s enterprise funds are user fees and charges to customers for water, wastewater, and solid waste services. Operating expenses for these funds include the cost of sales and services, administrative and payroll expenses, and depreciation. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. E. Fund Accounting Gilbert uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. Gilbert uses the following fund categories, further divided by fund type: Governmental Funds Governmental funds are those through which most of the governmental functions are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. Gilbert reports the following major governmental funds: General Fund - The general fund is the primary operating fund and 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. Streets Special Revenue Fund – The streets fund accounts for Gilbert’s portion of the Arizona Highway User Revenue Tax, Local Transportation Assistance Funds, and Vehicle License Taxes. The revenue is used exclusively for the maintenance and improvement of highways and streets. General Debt Service Fund – The general debt service fund accounts for the principal and interest requirements of general obligation, highway user revenue and municipal property corporation revenue bonds not recorded in proprietary funds. Financing is provided from the levy of secondary property taxes and revenue-supported transfers. Special Assessments Debt Service Fund – The special assessments fund accounts for the principal and interest requirements of special assessment bonds not recorded in proprietary funds. Financing is provided by special assessment levies against benefited property owners. 40 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Streets and Transportation Capital Projects Fund – The streets and transportation fund accounts for the construction of roadway improvements. Municipal Facilities Capital Projects Fund – The municipal facilities fund accounts for the acquisition and construction of municipal facilities such as municipal buildings, libraries and fire stations. Parks, Open Space and Recreation Capital Projects Fund – The parks, open space and recreation fund accounts for the acquisition and construction of parks and recreation facilities. Proprietary Funds Proprietary funds are used to account for Gilbert's ongoing activities which are similar to those found in the private sector and where cost recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net assets, financial position and cash flows. Gilbert reports the following major proprietary funds: Water Fund – The water fund accounts for the revenues and expenses from the operation and maintenance of the domestic water system. Wastewater Fund – The wastewater fund accounts for the revenues and expenses from the operation of the sanitary wastewater collection and treatment and reclaimed water distribution system. Solid Waste Fund – The solid waste fund accounts for the revenues and expenses of operating the solid waste collection system. Additionally, Gilbert reports the following fund types: Internal Service Funds – The internal service funds account for operations that provide services to other departments on a cost-reimbursement basis. These services include maintenance of Gilbert’s motorized equipment, operation of centrally located copiers and self-insurance for employee benefit programs. Pension Trust Fund - The pension trust fund accounts for assets held by the government in a trustee capacity. The fund includes the assets and pension payments to retired volunteer firefighters and survivors. Agency Funds – The agency funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Gilbert currently maintains an agency fund to account for monies collected from employees to pay medical and dependent care claims and monies collected from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. 41 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 F. Budgetary Data In January of each year, the Budget Division prepares a revenue estimate based upon local and stateshared revenue forecasts, historic trends, economic indicators, anticipated growth, and year-to-date revenue performance to develop guidelines for departments to follow in preparing budget requests. The Council is briefed on this information and asked to approve boundaries and priorities for consideration in the preparation of departmental requests. Simultaneously, departments develop operating budget requests and submit them to the Budget Division. Departments work with the Capital Improvement Program (CIP) Division to finalize project estimates for the CIP, and submit them to the Budget Division for funding. Estimates for trust and agency, debt service, maintenance improvement districts, and internal service funds are prepared by the Budget Division and submitted for review. In March, the Council is presented with a working budget request for preliminary review and discussion, and approves a schedule of hearings and dates for approval of the budget. A public hearing is held in May, in anticipation of the adoption of the final budget. Prior to June 30 of each year, the Council adopts a preliminary budget as the maximum legal expenditure limit for the upcoming year. Council establishes dates for the final public hearing, the final adoption of the budget, and the setting of tax levies. The Council adopts the final tax levy and reports the levy amounts to Maricopa County for collection not later than the third Monday in August. The Council adopts the budget at the fund level as a total amount of expenditures. Financial control is administered by fund, with budgetary control for operating performance regulated at the departmental level within each fund. Grants and restricted appropriations are administered on a line item basis by department. By policy, the Manager is authorized to administer a budget adjustment process within a fund. Council action is required to approve any interfund adjustments and any contingency transactions. There were no supplemental appropriations during fiscal year 2012. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget. For fiscal year 2012, the Town adopted annual budgets for all governmental funds, except for the flood control and storm water capital projects fund. Gilbert prepares its budget on a basis generally consistent with GAAP, with certain exceptions as explained in Note 2. In addition, the financial statements present the budget and actual information for the departments at a summary level by function. G. Pooled Cash and Investments Gilbert maintains pooled cash and investment accounts for funds that are not legally required to be maintained separately. Each fund's equity in pooled cash and investments represents that fund's position in the consolidated accounts and determines that fund's allocation of interest earned in the pool. The Arizona Revised Statutes regulate the investment of surplus cash. Gilbert limits its investments to the Local Government Investment Pool (managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, and money market accounts. Investments are stated at fair value based on quoted market prices and cash equivalents are stated at amortized cost. 42 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 H. Inventories Inventories are recorded in the parkway maintenance district fund, the equipment maintenance internal service fund, and the water enterprise fund. Inventories are recorded as assets when purchased and expensed when consumed. These inventories are stated at cost using the weighted average method. I. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted on the balance sheet, or statement of net assets, because they are maintained in trust accounts and their use is limited by applicable debt covenants. J. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and similar assets), are defined as assets with an initial, individual cost of more than $10,000 and an estimated useful life greater than one year. All infrastructure, including infrastructure acquired prior to June 30, 1980, is reported. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets (including streets, water and wastewater lines installed by developers) are recorded at the estimated fair market value at the date of donation. Gain or loss is recognized when assets are retired from service or otherwise disposed. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. 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. Capital assets are depreciated using the straight-line method based on the following estimated useful lives (land and construction-in-progress are not depreciated): Buildings Improvements Machinery and equipment Infrastructure Water rights 25 to 50 years 25 to 50 years 3 to 10 years 15 to 50 years 100 years K. Compensated Absences Annual leave is based on a graduated scale of years of employment and is credited to each employee as it accrues. Maximum annual leave hours varies according to years of employment and job class, and is either taken as time off from work or paid to employees upon separation or retirement. Sick leave accumulated in excess of 520 hours (728 hours for fire personnel) is convertible annually to a partial cash benefit. Sick leave is convertible to a cash benefit upon retirement or death of the employee (at 100%) or upon resignation (at 50%) when the employee has ten or more years of service (calculated at a 5 year average hourly rate). 43 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 For the governmental funds, a liability for compensated absences is reported only if they have matured, for example, as a result of employee resignations and retirements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the outstanding compensated absences are recorded as a liability. L. 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 governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The debt service funds are specifically established to account for and service the long-term obligations for the governmental funds and special assessment debt. Each enterprise fund individually accounts for and services the applicable bonds that benefit these funds. Long-term obligations are recognized as a liability of a governmental fund when due, or when resources have been accumulated for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. M. Transactions Between Funds Transactions that would be recorded as revenues and expenditures/expenses if they involved entities external to the governmental unit are recorded as revenues and expenditures/expenses in the respective funds. Transactions constituting a reimbursement of a fund for expenditures/expenses originally recorded in that fund, but properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund, and as reductions of the expenditures/expenses in the fund which is reimbursed, excluding indirect administrative costs which are recorded as revenues and expenditures/expenses in the related funds. Indirect administrative expenses represent overhead costs which have been allocated to the enterprise funds based upon a formula approved with the budget. All other interfund transactions are reported as transfers. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. See Note 5 for further discussion of the interfund receivables/payables at June 30. 44 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 N. Property Tax Gilbert's property tax is adopted by the Council each year on or before the third Monday of August, based on the previous year's full cash value as of the lien date (January 1). Maricopa County, at no charge, levies and collects all property taxes. Levies are due and payable in two installments on September 1 and March 1 and become delinquent on November 1 and May 1, respectively. Public auctions of properties that have delinquent real estate taxes are held in February following the May 1 delinquency of the second installment. The purchaser is given a certificate of purchase, issued by the County Treasurer. Five years from the date of sale, the holder of a certificate of purchase, which has not been redeemed, may demand of the County Treasurer, a County Treasurer's Deed. Gilbert does not levy property taxes for general operations (primary tax). Secondary property taxes are levied solely for the purpose of retiring the principal, interest, and servicing fees on voter approved general obligation bonded indebtedness. Gilbert may levy the amount deemed necessary to meet its bonded debt service requirements. By Council policy, Gilbert will not issue debt that would require a tax rate of more than $1.15 per $100 of assessed valuation. O. Fund Balance Classifications GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, was implemented during fiscal year 2011. This statement established new fund balance classifications for governmental funds. It changed the previous terminology of Reserved and Unreserved to five new classifications, which are Nonspendable, Restricted, Committed, Assigned, and Unassigned. These new classifications comprise a hierarchy based primarily on the extent to which Gilbert is bound to observe constraints imposed upon the use of the resources reported in the governmental funds. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned and Unassigned represent the unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form such as inventory or (b) legally or contractually required to be maintained intact. Restricted fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed internally by formal action of the Council. Formal action by Council through resolution is required to establish, modify or rescind committed fund balance. Assigned fund balance includes amounts that are limited to specific purposes by management. Council authorized the Finance Director to assign fund balance amounts to a specific purpose. Unassigned fund balance represents the residual net resources in excess of the other classifications. The general fund is the only fund that can report a positive unassigned fund balance and any other governmental fund can report a negative unassigned fund balance. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, as a general rule, restricted resources are considered spent before unrestricted. Within unrestricted, committed amounts would be reduced first, followed by assigned amounts (if available) and then unassigned amounts. 45 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 As of June 30, 2012, the fund balance details by classification are listed below: Streets General Special Fund Revenue Fund balances: Major Major Debt Service Funds Capital Projects Funds Special General Municipal Assmnts Streets Other Facilities Parks Gov’t Total Nonspendable: Advances $23,208,408 - - - - - - - $23,208,408 - - - - - - - $1,666 1,666 4,771 - - - - - - - 4,771 Capital projects - - - - $46,753,842 $6,867,888 $14,646,416 6,132,825 74,400,971 Court/public safety programs - - - - - - - 1,812,303 1,812,303 Debt service - - $9,335,818 $64,017 - - - - 9,399,835 Grants - - - - - - - 3,701,522 3,701,522 Highways and streets - $10,700,623 - - - - - - 10,700,623 Special districts - - - - - - - 435,063 435,063 Other purposes - - - - - - - 121,638 121,638 Inventory Prepaid items Restricted for: Assigned to: Capital replacement 10,031,620 4,752,017 - - - - - - 14,783,637 Capital projects - - - - - - - 127,916 127,916 Debt service - - 853,801 - - - - - 853,801 Highways and streets - - - - 20,212,551 - - - 20,212,551 Other purposes Unassigned: Total fund balances 765,920 - - - - - - 213,320 979,240 44,249,663 - - - - (23,114,131) - (85,172) 21,050,360 $78,260,382 $15,452,640 $10,189,619 $64,017 $66,966,393 ($16,246,243) $14,646,416 $12,461,081 $181,794,305 P. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. For purposes of the statement of cash flows, all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased are considered cash equivalents. Q. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statement of net assets/balance sheet and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 46 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 2 - Budgetary Basis of Accounting Budgetary comparison statements for the general fund and major special revenue funds are presented in the basic financial statements. These statements display original budget, amended budget and actual results. Budgetary comparison schedules are also included as supplementary schedules for the other governmental funds. The budgets for the proprietary funds are adopted on a basis other than GAAP. For these funds, the budgetary schedules include a reconciliation of the adjustments required to convert budgetary revenues and expenses to GAAP revenues and expenses. The primary differences between the GAAP and budget basis statements for the proprietary funds are: 1. Obligations for compensated absences and rebatable arbitrage are accrued on the GAAP basis but are not recognized on the budget basis. 2. Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. 3. Debt service principal payments are not recorded as expenses on the GAAP basis but are recognized as expenses on the budget basis. 4. Depreciation and amortization of bond issuance costs are expensed on the GAAP basis but are not recognized on the budget basis. 5. Capital assets contributed by developers are recognized as revenue on the GAAP basis but are not recognized on the budget basis. Note 3 - Deposits and Investments The investment of public monies is regulated by Title 35 of the Arizona Revised Statutes. Gilbert limits its investments to the Local Government Investment Pool (managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, commercial paper, and money market accounts. Approximately one-third of Gilbert’s investments were in the State Treasurer’s Investment Pool. The State Board of Deposit provides oversight for the State Treasurer’s pools. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares. At June 30, 2012, Gilbert’s investments were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Commercial Paper Municipal Bonds Corporate Notes State Treasurer’s Investment Pool Money Market – U.S. Treasuries: Wells Fargo Bank of NY Mellon Total Fair Value $ 54,884,340 93,980,373 3,328,671 2,018,601 15,243,532 Investment Maturities (in Years) Less than 1 1-4 $ - $ 54,884,340 13,212,805 80,767,568 3,328,671 2,018,601 15,243,532 90,078,129 27,751,842 62,326,287 15,554,503 31,051,549 $306,139,698 15,554,503 31,051,549 $90,899,370 $215,240,328 47 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Interest rate risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting its exposure to fair value losses arising from rising interest rates, Gilbert’s investment policy limits its investment portfolio to maturities of five years or less. Credit risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Gilbert addresses credit risk through its investment policy by restricting the allowable investment instruments. As of June 30, 2012, the investments in the U.S. Government Agencies were rated AA+, the investment in Commercial Paper was rated A-1+, the investment in Municipal Bonds was rated AA, the investments in Corporate Notes ranged from A ratings to AA+ ratings, and the investment in Goldman Sachs Group Inc was rated AAAm. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. Custodial credit risk - deposits – Custodial credit risk is the risk that in the event of a bank failure, the Town’s deposits may not be returned to it. As of June 30, 2012, Gilbert’s bank balance was $66,267,277 of which $11,795,040 was with JP Morgan and $54,472,237 was with Alliance Bank of Arizona. $11,545,040 of JP Morgan’s bank balance was exposed to custodial credit risk because it was uninsured but collateralized with securities held by the pledging financial institution’s trustee. These securities are not in Gilbert’s name, but cannot be released without Gilbert’s authorization. At the end of each day, Gilbert’s bank account balance is transferred to a sweep account. This account is invested in U.S. Treasuries only. All of the Alliance Bank of Arizona bank balance was FDIC-insured through the Transaction Account Guarantee Program. Custodial credit risk - investments – The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g. broker-dealer) to a transaction, Gilbert will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Gilbert’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by Gilbert be conducted on a delivery-versus-payment basis. Securities are to be held by a third party custodian. Gilbert’s investment in the State Treasurer’s Investment Pool represents a proportionate interest in the Pool’s portfolio; however, Gilbert’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of credit risk - Gilbert’s investment policy contains no limitations on the amount that can be invested in any one issuer. As of June 30, 2012, of Gilbert’s investments, 31% are in U.S. Government Agencies, 29% are in the State Treasurer’s Investment Pool and 33% are in U.S. Government Treasuries. Reconciliation of pooled cash and investments as reported on the statement of net assets: Primary government: Carrying amount of cash/deposits Carrying amount of investments Total cash and investments $ 64,075,714 306,139,698 $370,215,412 Pooled cash and investments Restricted cash and investments Total cash and investments (per Statement of Net Assets) Pension trust fund Agency funds Total cash and investments 48 $279,103,089 90,852,842 369,955,931 99,625 159,856 $370,215,412 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 4 - Taxes Receivable and Due from Other Governments The general fund taxes receivable amount at June 30, 2012, includes $1,383,268 in state shared sales tax and $2,737,791 in local sales tax due from the State of Arizona. Amounts due from other governments recorded in the streets special revenue fund include $1,014,085 in highway user revenues and $250,431 in vehicle license tax both due from the State of Arizona. Other governmental funds include $500,403 in federal grants from the U.S. Department of Housing and Urban Development, $926,459 from the U.S. Department of Energy, and $93,435 from the U.S. Department of Homeland Security. The balance of these receivables represents various grants from the state and federal governments. Note 5 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2012, is as follows: Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following funds: Due To Due From General fund $ $489,782 Other governmental funds 489,782 Total $489,782 $489,782 Advances from/to other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: Advance from Advance to General fund $ $23,208,408 Municipal facilities capital projects fund 23,208,408 Total $23,208,408 $23,208,408 49 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 6 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2012, is as follows: July 1, 2011 Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ Additions Deletions June 30, 2012 171,914,361 31,286,075 203,200,436 1,523,716 30,391,053 31,914,769 (43,576,048) (43,576,048) 173,438,077 18,101,080 191,539,157 212,698,533 68,088,459 57,566,155 887,246,242 3,962,046 1,566,380 1,057,360 41,752,231 (4,452,879) - 216,660,579 69,654,839 54,170,636 928,998,473 Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure 1,225,599,389 48,338,017 (4,452,879) 1,269,484,527 (50,707,370) (25,223,684) (38,804,687) (331,313,584) (8,541,507) (3,791,336) (4,098,534) (31,389,569) 4,340,240 - (59,248,877) (29,015,020) (38,562,981) (362,703,153) Total accumulated depreciation (446,049,325) (47,820,946) 4,340,240 (489,530,031) 779,550,064 517,071 (112,639) 779,954,496 982,750,500 32,431,840 (43,688,687) 971,493,653 Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets, net Governmental activities capital assets, net $ Governmental activities construction-in-progress and related construction commitments at June 30, 2012, were composed of the following: Constructionin-progress Commitments Redevelopment Municipal facilities Parks Storm water Traffic control Streets capital projects Total $ $ 864,309 1,704,836 734,464 42,129 872,405 13,882,937 18,101,080 $ $ 466,930 107,746 314,364 14,315 12,869,499 13,772,854 In addition, there were non-construction related commitments at June 30, 2012, as follows: General Streets special revenue Other governmental Total $ $ 50 765,920 229,119 323,255 1,318,294 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Depreciation expense was charged to governmental functions in the government-wide financial statement as follows: Management and policy Support services Legal and court Development services Police Fire Highways and streets Community services Total depreciation expense not including internal service funds Capital assets held by the government’s internal service funds are charged to the various functions based on their usage of the assets $ 66,391 480,487 628,373 892,084 2,991,396 3,066,694 32,482,642 7,172,037 47,780,104 40,842 Total depreciation expense - governmental activities $47,820,946 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2012, is as follows: July 1, 2011 Non-depreciable assets: Land $ Construction-in-progress Total non-depreciable assets Depreciable assets: Plant and equipment Water rights Infrastructure Total depreciable assets Less accumulated depreciation: Plant and equipment Water rights Infrastructure Total accumulated depreciation Total depreciable assets, net Business-type activities capital assets, net $ Additions Deletions June 30, 2012 45,923,688 3,513,610 49,437,298 4,779,561 8,731,038 13,510,599 (9,200,508) (9,200,508) 50,703,249 3,044,140 53,747,389 131,252,470 9,146,281 400,813,517 227,858 8,903,481 (394,452) - 131,085,876 9,146,281 409,716,998 541,212,268 9,131,339 (394,452) 549,949,155 (41,370,150) (1,495,827) (96,346,395) (5,995,525) (98,292) (10,453,823) 394,452 - (46,971,223) (1,594,119) (106,800,218) (139,212,372) 401,999,896 (16,547,640) (7,416,301) 394,452 - (155,365,560) 394,583,595 451,437,194 6,094,298 (9,200,508) 448,330,984 51 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Business-type activities construction-in-progress and related construction commitments at June 30, 2012, are composed of the following: Constructionin-progress Commitments Water system Wastewater system Total $ $ 2,158,346 885,794 3,044,140 $ $ 5,456,610 5,456,610 Note 7 - Risk Management Traditional Commercial Insurance Programs Gilbert operates with traditional commercial insurance programs against major losses in property, plant, equipment, and liability. Administrative responsibility for the safety program, education, and loss prevention resides with the Human Resources Department. Insurance is procured on a competitive quotation basis, using the services of an independent broker as a consultant. Gilbert processes all claims and evaluates their validity to determine if insurance reporting is warranted, or if the claim can be resolved administratively. Claims settled administratively, which are generally less than the deductibles of the appropriate policy, are paid from the funds where the claims occurred. During fiscal year 2012, there was no reduction in insurance coverage from prior years. Additionally, settlements have not exceeded insurance coverage during any of the last three fiscal years. Self-Insurance Gilbert has established an employee benefit self-insurance trust to account for and finance its uninsured risks of loss for medical claims. Gilbert purchases commercial stop loss insurance to limit the claims liability to the employee benefit self-insurance fund. The stop loss insurance provides specific (individual member) coverage for medical claims incurred in excess of $250,000 with an additional $75,000 risk retention. During fiscal year 2012, the plan received recoveries for $2,363 through specific stop loss coverage for prior year claims. The stop loss deductible was not reached for any members for claims incurred in fiscal year 2012, so no recoveries are attributable to the fiscal year 2012 policy. Claim settlements did not exceed insurance coverage during any of the last three fiscal years. Premiums are paid into the employee benefit self-insurance trust by all other funds and are available to pay claims and administrative costs of the program and fund claim reserves. As with any risk retention program, Gilbert is contingently liable with respect to claims beyond those actuarially projected. The claims liability of $1,244,571 reported in the employee benefit self-insurance trust at June 30, 2012, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability be reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The employee benefit self-insurance trust includes medical and dental benefits. For fiscal year 2012, an increase of $157,721 was added for IBNR claims under the medical plan and an increase of $6,409 was added for IBNR claims under the dental plan. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Fiscal year 2012 reflects an increase in claims costs from fiscal year 2011. Of the $2,246,964 increase in claims costs during fiscal year 2012, $2,109,546 was attributable to medical benefits and $137,418 was attributable to dental benefits. 52 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Changes in the fund’s claim liability amount in fiscal years 2011 and 2012 were: Year Ended, June 30 Claim Liability at Beginning of Fiscal Year Fiscal Year Claims and Changes in Estimates Fiscal Year Claim Payments Claim Liability at End of Fiscal Year $ 988,431 $ 1,080,441 11,259,687 13,506,651 11,167,677 13,342,521 $1,080,441 $1,244,571 2011 2012 Note 8 - Long-Term Debt General Obligation Bonds Gilbert 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 Gilbert. General obligation bonds outstanding at June 30, 2012, were as follows (the 7/1/12 principal payment was deducted as fiscal year 2012 resources were dedicated): 2002 General Obligation Refunding Bonds, 3.5% to 5.75%, original amount $20,960,000, annual retirements due July 1, 2003, through July 1, 2015 2005 General Obligation Refunding Bonds, 3.0% to 5.0%, original amount $14,115,000, annual retirements due July 1, 2006, through July 1, 2016 2008 General Obligation Bonds, 3.0% to 5.0%, original amount $187,990,000, annual retirements due July 1, 2009, through July 1, 2023 Total Governmental $ Business-type - $3,870,000 11,715,000 - 147,750,000 - $159,465,000 $3,870,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2013 2014 2015 2016 2017 2018-2022 2023 Total Governmental Activities Principal Interest $ 11,900,000 12,500,000 12,350,000 17,465,000 13,200,000 75,050,000 17,000,000 $159,465,000 $ 7,177,000 6,592,000 5,967,000 5,349,500 4,476,250 12,005,000 510,000 $42,076,750 53 Business-type Activities Principal Interest $1,760,000 1,865,000 245,000 $3,870,000 $ 222,525 121,325 14,088 $ 357,938 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 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 Gilbert's net secondary assessed valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of Gilbert's net secondary assessed valuation. In November 2006, voters amended the constitution to move streets, fire, and police from the six percent bond type to the twenty percent bond type. The following is a summary of legal borrowing capacity at June 30, 2012: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Purposes Bonds All Other General Obligation Bonds Secondary Assessed Valuation $1,675,360,422 Secondary Assessed Valuation $1,675,360,422 20% constitutional limit Less general obligation bonds outstanding Available 20% limitation borrowing capacity 6% constitutional limit Less general obligation bonds outstanding Available 6% limitation borrowing capacity 335,072,084 (163,335,000) $171,737,084 100,521,625 $100,521,625 As of June 30, 2012, Gilbert had authorized, but unissued bonds, approved by the voters as follows: Revenue bonds Water and wastewater Electric $ 1,110,000 27,500,000 Total $28,610,000 General obligation bonds 6% bond type 20% bond type $ 290,000 82,769,000 Total $83,059,000 Bond authorization elections on October 18, 1988, November 6, 2001, March 14, 2006, and November 6, 2007, authorized the 6% bond type and the 20% bond type to be issued as general obligation or revenue debt. Special Assessment Bonds with Governmental Commitment As trustee for the improvement districts, Gilbert is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2012, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, are adequate for the scheduled maturities of the bonds payable and the related interest. Special assessment bonds are collateralized by properties within the districts. In the event of default by the owner, Gilbert may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. Gilbert is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. 54 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Special assessment bonds outstanding at June 30, 2012, were as follows (the 7/1/12 principal bond call was deducted as fiscal year 2012 resources were dedicated): Governmental 2002 Improvement District #19 Bonds, 5.2%, original amount $6,510,000, annual retirements due January 1, 2005 through January 1, 2027 $ 2,640,000 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012 through January 1, 2029 8,375,000 Total $11,015,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2029 Total Governmental Activities Principal Interest $ 435,000 470,000 475,000 500,000 540,000 3,145,000 4,075,000 1,375,000 $11,015,000 $ 553,258 530,065 505,845 480,858 454,205 1,814,842 897,177 70,763 $5,307,013 Street and Highway User Revenue Bonds Street and highway user revenue bonds are issued specifically for the purpose of street and highway construction projects. These bonds are payable solely from the revenues derived from highway user taxes, including motor vehicle fuel taxes and all other taxes; fees and charges relating to registration, operation or use of vehicles on public highways or streets; or to fuels or any other energy source used for the vehicles collected by the State and returned to Gilbert. Street and highway user revenue bonds outstanding at June 30, 2012, were as follows (the 7/1/12 principal payment was deducted as fiscal year 2012 resources were dedicated): Governmental 2003 Street and Highway User Revenue Bonds, 3.75% to 5.00% original amount $35,000,000, annual retirements due July 1, 2004, through July 1, 2013 2012 Street and Highway User Revenue Refunding Bonds, 3.00% to 5.00% original amount $16,945,000, annual retirements due July 1, 2014, through July 1, 2019 Total $ 2,525,000 16,945,000 $19,470,000 55 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Annual debt service requirements to maturity for street and highway user revenue bonds are as follows: Year Ending June 30 2013 2014 2015 2016 2017 2018-2019 Total Governmental Activities Principal Interest $ 2,525,000 2,030,000 2,750,000 2,845,000 2,975,000 6,345,000 $19,470,000 $ 807,400 693,450 632,550 550,050 436,250 479,750 $ 3,599,450 Utility Revenue Bonds Water and wastewater revenue bonds are issued as authorized by the voters to provide funds to acquire and construct certain improvements to the water and wastewater systems and to pay the costs incurred in connection with the issuance of the bonds. These bonds are secured by a pledge of revenues from these enterprises, and do not constitute a general obligation of Gilbert backed by the general taxing authority (see also Note 15). Revenue bonds outstanding at June 30, 2012, were as follows (the 7/1/12 principal payment was deducted as fiscal year 2012 resources were dedicated): 2004 Water and Wastewater Revenue Refunding Bonds, 2.0% to 5.0%, original amount $25,225,000, annual retirements due July 1, 2004 through July 1, 2022 Business-type $15,410,000 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2013 2014 2015 2016 2017 2018-2022 Total Business-type Activities Principal Interest $ 1,430,000 1,500,000 1,585,000 1,660,000 1,745,000 7,490,000 $15,410,000 $ 681,662 610,162 535,163 455,913 372,912 956,688 $3,612,500 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the multipurpose public safety complex (the 2001 issue); the service center facility, a police property facility and a sports complex (the 2006 issue); and the cost of acquisition of certain interests in real property to locate public safety and parks and recreation facilities and the costs of design, construction and outfitting of parks and recreation facilities and a parking facility (the 2009 issue). The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. (See also Note 15 regarding Pledged Revenues.) 56 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Municipal property corporation revenue bonds outstanding at June 30, 2012, were as follows (the 7/1/12 principal payment was deducted as fiscal year 2012 resources were dedicated): Governmental 2001 Public Facilities Municipal Property Corporation Revenue Bonds, 2.375% to 5.0%, original amount $39,715,000, retirements due July 1, 2003, through July 1, 2013 2006 Public Facilities Municipal Property Corporation Revenue Bonds, 3.5% to 5.0%, original amount $73,420,000, retirements due July 1, 2007, through July 1, 2021 2007 Water Resources Municipal Property Corporation, Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds, 4.0% to 5.0%, original amount $146,175,000, retirements due October 1, 2008, through October 1, 2032 $ Business-type 205,000 - 49,595,000 - - 118,895,000 2009 Public Facilities Municipal Property Corporation Revenue Bonds, 3.0% to 5.5%, original amount $80,585,000, retirements due July 1, 2009 through July 1, 2028 71,210,000 - 2011 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 4.75%, original amount $20,980,000, retirements due July 1, 2013 through July 1, 2021 20,980,000 - $141,990,000 $118,895,000 Total Annual debt service requirements to maturity for municipal property corporation revenue bonds are as follows: Year Ending June 30 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 Total Governmental Activities Principal Interest $ 9,695,000 10,080,000 7,515,000 7,950,000 8,950,000 52,085,000 34,515,000 11,200,000 $141,990,000 $ 6,873,353 6,458,288 6,028,788 5,700,138 5,330,088 19,037,073 9,552,500 616,000 $59,596,228 Business-type Activities Principal Interest $ 3,700,000 3,875,000 4,075,000 4,275,000 4,500,000 26,225,000 33,425,000 38,820,000 $118,895,000 $ 5,726,888 5,551,388 5,352,638 5,143,888 4,924,513 20,910,685 13,719,500 4,496,994 $65,826,494 During the fiscal year ended June 30, 2012, Gilbert paid $15,620,000 of the 2004 Water Resources Municipal Property Corporation, Wastewater System Development Fee and Subordinate Lien Wastewater Utility Revenue Bonds and $5,205,000 of the 2007 Water Resources Municipal Property Corporation, Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds. Proceeds collected from the wastewater and water system development fees were deposited in an irrevocable trust with an escrow agent to provide for the future debt service payments of the bonds. Accordingly, the trust account assets and the liability for these bonds are not included in the financial statements. These bonds have been fully defeased. 57 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2012, was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Unamortized bond premium Unamortized charge - refunding bonds Total bonds payable Compensated absences Total long-term liabilities Business-type activities: Bonds payable: General obligation bonds Revenue bonds Unamortized bond discount Unamortized bond premium Unamortized charge - refunding bonds Total bonds payable Compensated absences Total long-term liabilities Balance July 1, 2011 Additions Reductions Balance June 30, 2012 Due Within One Year $178,635,000 - (19,170,000) 159,465,000 11,900,000 11,415,000 186,195,000 3,025,757 37,925,000 4,110,575 (400,000) (53,325,000) (373,412) 11,015,000 170,795,000 6,762,920 435,000 11,860,000 - (839,543) 378,431,214 8,974,374 (2,006,798) 40,028,777 7,448,439 66,072 (73,202,340) (6,643,935) (2,780,269) 345,257,651 9,778,878 24,195,000 3,637,231 $387,405,588 47,477,216 (79,846,275) 355,036,529 27,832,231 5,530,000 160,065,000 (69,696) 529,335 - (1,660,000) (25,760,000) 28,449 (45,509) 3,870,000 134,305,000 (41,247) 483,826 3,700,000 - (786,181) 165,268,458 1,564,366 1,514,428 65,022 (27,372,038) (1,250,132) (721,159) 137,896,420 1,828,662 3,700,000 706,592 $166,832,824 1,514,428 (28,622,170) 139,725,082 4,406,592 $ Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year-end, $154,383 of internal service funds compensated absences are included in the above amounts. Long-term compensated absences of governmental activities are expected to be liquidated by the operating funds (primarily the general fund and the streets special revenue fund) as they come due. Conduit Debt Obligations The Industrial Development Authority, a discretely presented component unit of the Town of Gilbert, has issued Industrial Revenue Bonds to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. Neither Gilbert, Maricopa County nor the State of Arizona shall in any event be liable for payment of principal, premium or interest on these bonds, and accordingly they have not been reported in the accompanying combined financial statements. At June 30, 2012, Industrial Development Authority Revenue Bonds outstanding were $3,569,111. 58 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 9 – Refunding Bonds On July 26, 2011, Gilbert Public Facilities MPC issued $20,980,000 of revenue refunding bonds with a net premium of $1,896,084 to advance refund $21,670,000 of outstanding Series 2001 Public Facilities MPC revenue bonds. The Series 2011 Public Facilities MPC revenue refunding bonds were issued with an average interest rate of 4.22 percent. Gilbert realized net proceeds of $22,757,872, after payment of $118,537 for underwriting fees. These proceeds were provided to an escrow trustee to pay issuance costs of approximately $110,000 with remaining $22,647,547 used to provide cash and purchase United States government securities. The cash and government securities were deposited in an irrevocable trust to provide for all future debt service payments of the Series 2001 refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed. The purpose of the refunding was to take advantage of lower interest rates thereby reducing future debt service payments. The refunding will reduce debt service payments by $1,697,106 over the next 9 years producing an economic gain (difference between present value of old and new debt service payments) of $1,493,115. On June 21, 2012, Gilbert issued $16,945,000 of street and highway user revenue refunding bonds with a net premium of $2,214,491 to advance refund $17,950,000 of outstanding Series 2003 street and highway user revenue bonds. The Series 2012 street and highway user revenue refunding bonds were issued with an average interest rate of 4.36 percent. Gilbert realized net proceeds of $19,106,187, after payment of $55,241 for underwriting fees. These proceeds were provided to an escrow trustee to pay issuance costs of approximately $125,000 with remaining $18,979,251 used to provide cash and purchase United States government securities. The cash and government securities were deposited in an irrevocable trust to provide for all future debt service payments of the Series 2003 refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed. The purpose of the refunding was to take advantage of lower interest rates thereby reducing future debt service payments. The refunding will reduce debt service payments by $1,174,675 over the next 7 years producing an economic gain (difference between present value of old and new debt service payments) of $1,140,937. Note 10 - Retirement and Pension Plans Plan Descriptions and Financial Reports Gilbert contributes to three retirement plans described below. Benefits are established by state statute and generally provide retirement, long-term disability, and health insurance premium benefits including death and survivor benefits. The retirement benefits are generally paid at a percentage, based on years of service, of the retirees’ average compensation. Long-term disability benefits vary by circumstance, but generally pay a percentage of the employee’s monthly compensation. Health insurance premium benefits are generally paid as a flat dollar amount per month towards the retiree’s health care insurance premiums, in amounts based on whether the benefit is for the retiree or for the retiree and dependents. The Arizona State Retirement System (ASRS) administers cost-sharing multiple-employer defined benefit pension, health insurance premium, and long-term disability plans that cover employees of the State of Arizona and participating political subdivisions and school districts. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2. The system issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Arizona State Retirement System, 3300 N. Central Ave., P.O. Box 33910, Phoenix, Arizona, 85067-3910 or by calling (602) 240-2000 or 1 (800) 621-3778. 59 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 The Public Safety Personnel Retirement System (PSPRS) administers agent multiple-employer defined benefit pension and health insurance premium plans that cover 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 PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Public Safety Personnel Retirement System, 3010 East Camelback Road, Suite 200, Phoenix, Arizona 85016-4416, or by calling (602) 255-5575. The Elected Officials’ Retirement Plan (EORP) administers cost-sharing multiple-employer defined benefit pension and health insurance premium plans that cover State of Arizona and County elected officials and judges, and elected officials of participating municipalities. The Fund Manager of the PSPRS is the administrator for the EORP which was established by A.R.S. Title 38, Chapter 5, Article 3. Because the health insurance premium plan benefit of the EORP is not established as a formal trust, it is reported in accordance with GASB Statement No. 45 as an agent multiple-employer plan. Accordingly, the disclosures that follow reflect the EORP as if it were an agent multiple-employer plan. EORP issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Elected Officials’ Retirement Plan, 3010 East Camelback Road, Suite 200, Phoenix, Arizona 85016-4416, or by calling (602) 255-5575. Funding Policy The Arizona State Legislature establishes and may amend active plan members’ and their employers’ contribution rates for all plans of the ASRS, PSPRS, and EORP. Cost-sharing plans - For the year ended June 30, 2012, active ASRS members were required by statute to contribute at the actuarially determined rate of 10.74% (10.5% for retirement and 0.24% for long-term disability) of the members’ annual covered payroll and Gilbert was required by statute to contribute at the actuarially determined rate of 10.74% (9.87% for retirement, 0.63% for health insurance premium, and 0.24% for long-term disability) of the members’ annual covered payroll. Gilbert’s contributions for the current and two preceding years, all of which were equal to the required contributions, were as follows: Fiscal Year Ended 2012 2011 2010 Retirement Fund $ 3,658,186 3,236,934 3,085,526 Health Benefit Supplement Fund $233,501 211,964 244,178 Long-Term Disability Fund $ 96,821 89,656 147,470 Agent plans - For the year ended June 30, 2012, active PSPRS members were required by statute to contribute 8.65% of police member’s annual covered payroll and 7.65% for fire member’s annual covered payroll. Gilbert was required to contribute at the actuarially determined rate of 14.64% for police personnel, of which 0.54% was the health insurance premium portion; and 10.85% for fire personnel, of which 0.48% was the health insurance premium portion. Active EORP members were required by statute to contribute 10% of the members’ annual covered payroll; and Gilbert was required to remit a designated portion of certain court fees plus additional contributions at the actuarially determined rate of 32.99% of the members’ annual covered payroll, of which 1.79% was the health insurance premium portion. 60 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Actuarial methods and assumptionsThe contribution requirements for the year ended June 30, 2012, were established by the June 30, 2010 actuarial valuations, and those actuarial valuations were based on the following actuarial methods and assumptions. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plans and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress presented below provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on 1) the plans as understood by Gilbert and plan members and include the types of benefits in force at the valuation date, and 2) the pattern of sharing benefit costs between Gilbert and plan members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all plans and related benefits (unless noted), and the actuarial methods and assumptions used to establish the fiscal year 2012 contribution requirements, are as follows: Actuarial valuation date June 30, 2010 Actuarial cost method Projected unit credit Amortization method Level percent closed for unfunded actuarial accrued liability, open for excess Remaining amortization period 26 years for underfunded actuarial accrued liability, 20 years for excess Asset valuation method 7-year smoothed market value Actuarial assumptions: Investment rate of return Projected salary increases Payroll growth 8.5% 5.5% - 8.5% for PSPRS and 5.0% for EORP 5.5% for PSPRS and 5.0% for EORP Annual Pension/OPEB Cost – Gilbert’s pension/OPEB cost for the agent plans for the year ended June 30, 2012, and related information follows (actual contributions made were equal to the annual pension/OPEB cost): Pension Health Insurance PSPRS-Police $2,337,045 89,504 PSPRS-Fire $1,391,121 64,391 61 EORP $51,135 2,934 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Trend InformationAnnual pension cost information for the current and two preceding years follows for each of the agent plans. Plan PSPRS-Police Pension Health Insurance PSPRS-Fire Pension Health Insurance EORP Pension Health Insurance Fiscal Year Ended Percentage of Annual Cost Contributed Annual Pension/ OPEB Cost Net Pension/ OPEB Obligation 2012 2011 2010 $ 2,439,689 2,496,320 2,267,067 100.0% 100.0% 100.0% -0-0-0- 2012 2011 2010 97,156 92,055 75,123 100.0% 100.0% 100.0% -0-0-0- 2012 2011 2010 $ 1,297,068 1,422,492 1,427,182 100.0% 100.0% 100.0% -0-0-0- 2012 2011 2010 62,951 57,488 44,283 100.0% 100.0% 100.0% -0-0-0- 2012 2011 2010 $51,135 45,923 41,427 100.0% 100.0% 100.0% -0-0-0- 2012 2011 2,934 2,901 2,999 100.0% 100.0% 100.0% -0-0-0- 2010 Schedule of Funded Status and Funding ProgressFollowing are the schedules of funded status and funding progress of the plans as of the most recent valuation date, June 30, 2012, and the previous two fiscal years. The fiscal year 2012 actuarial methods and assumptions used for the schedules are not significantly different than the fiscal year 2010 actuarial methods and assumptions as described on page 61. The EORP, by statute, is a cost-sharing plan. However, because of its statutory construction, in accordance with GASB Statement No. 43, the EORP is reported for such purposes as an agent multiple-employer plan. The Fund Manager obtains an actuarial valuation for the EORP on its statutory basis as a cost-sharing plan and, therefore, actuarial information for Gilbert, as a participating government, is not available. PSPRS - Police (1) Actuarial Actuarial Valuation Value of Date Plan June 30 Assets Pension 2012 $ 46,823,028 2011 40,140,063 2010 35,764,039 (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ 61,175,480 53,624,989 45,612,797 (14,352,452) (13,484,926) ( 9,848,758) 16,652,610 16,176,077 16,588,316 (86.2)% (83.4)% (59.4)% 62 76.5% 74.9% 78.4% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (1) Actuarial Actuarial Valuation Value of Date Plan June 30 Assets Health Insurance 2012 $ -02011 -02010 -0- PSPRS - Fire (1) Actuarial Valuation Actuarial Date Value of June 30 Assets Pension 2012 $35,417,839 2011 28,233,335 2010 23,869,050 Actuarial Valuation Actuarial Date Value of June 30 Assets Health Insurance 2012 $ -02011 -02010 -0- (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ 1,663,617 1,575,279 1,190,829 (1,663,617) (1,575,279) (1,190,829) 0.0% 0.0% 0.0% 16,652,610 16,176,077 16,588,316 (9.99)% (9.74)% (7.18)% (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll 37,018,127 30,559,021 22,964,310 (1,600,288) (2,325,686) 904,740 Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) 1,097,566 1,027,298 638,239 (1,097,566) (1,027,298) (638,239) 95.7% 92.4% 103.9% Funded Ratio (1)/(2) 0.0% 0.0% 0.0% 13,072,322 12,905,560 12,158,329 Annual Covered Payroll 13,072,322 12,905,560 12,158,329 (12.2)% (18.0)% 7.4 % Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (8.40)% (7.96)% (5.25)% Volunteer Firemen’s Relief and Pension Fund The Volunteer Firemen’s Relief and Pension Fund covers retired volunteer firemen and survivors and was established solely upon the provision for such pension and relief funds in the Arizona Revised Statutes. The Statutes grant discretionary powers to Boards of Trustees of such plans related to payment/nonpayment of benefits to qualified retired or disabled volunteer firemen out of the assets of the Fund. These discretionary powers do not extend, however, to the volunteer firemen’s right to their own contributions to the Fund. Gilbert has no actuarial liability for pension benefits as individual retirement benefits are not defined in the plan. Reserves for pensions, therefore, have not been established as the amounts are not vested and payment of benefits (if any) are at the discretion of the Board of Trustees of the plan. Gilbert no longer operates a Volunteer Fire Department. Accordingly, there were no contributions required or made to this plan nor refunds paid for fiscal year 2012. Administrative costs are financed through investment earnings. There is only one remaining pensioner receiving retirement benefits from the Fund. 63 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 11 - Capital Contributions During the year ended June 30, 2012, the Enterprise funds external capital contributions consisted of the following: Contributions from developers Development fees Total Water Wastewater Total $ 2,702,539 $ 1,841,828 $ 4,544,367 17,509,478 15,154,154 32,663,632 $20,212,017 $16,995,982 $37,207,999 Note 12 – Interfund Transfers As of June 30, 2012, interfund transfers were as follows: Governmental funds: General fund Streets special revenue General debt service Special assessments Streets and transportation Municipal facilities Parks, open space and recreation Other governmental funds Total governmental funds Enterprise funds: Water Wastewater Total enterprise funds Total transfers Transfers-In Transfers-Out $ 4,688,928 50,000 19,736,738 305,836 286,869 103,177 23,730 25,195,278 $ 5,876,144 3,570,110 202,978 6,107,067 5,862,305 4,266,918 25,885,522 1,050,840 492,290 1,543,130 669,513 183,373 852,886 $26,738,408 $26,738,408 The interfund transfers generally fall within one of the following categories: 1) subsidy transfers; 2) transfers to cover debt service payments; 3) transfers for the town match for grants; or 4) transfers to fund capital projects or capital replacement. There were no significant transfers during fiscal year 2012 that were either nonroutine in nature or inconsistent with the activities of the fund making the transfer. 64 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Note 13 - Individual Fund Disclosures Individual funds with deficiencies in fund balance/net assets at June 30, 2012, were as follows: Capital projects funds Municipal facilities $16,246,243 Special revenue funds CDBG/HOME 72,596 The deficiency in the municipal facilities fund of the capital projects funds will be eliminated through the future collection of system development fees. The deficiency in the CDBG/HOME fund of the special revenue funds will be eliminated through reimbursement from the U.S. Department of Housing and Urban Development. Individual funds with an excess of expenditures over appropriations for the year ended June 30, 2012, were as follows: Debt service funds Special assessments 318 Capital projects funds Special assessments 5,710 Internal service funds Employee benefit self-insurance 63,916 The excess of expenditures over appropriations were all funded by available fund balance/net assets. Note 14 – Contingent Liabilities Gilbert is contingently liable with respect to several lawsuits and other claims incidental to its normal operations. Management, with concurrence of the Town's Attorney, is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on Gilbert’s financial condition, results of operations or liquidity. Note 15 – Pledged Revenues Gilbert has pledged future water and wastewater revenues, net of specified operating expenses, to repay $25,225,000 in water and wastewater revenue refunding bonds issued in 2004. Proceeds from the bonds refunded various other revenue bonds which provided financing for the construction of and improvements to the water and wastewater systems. The bonds are payable solely from water and wastewater net revenues and are payable through 2022. Annual principal and interest payments on the bonds are expected to require less than 8 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $19,022,500. Principal and interest paid for the current year was $2,108,213, and total customer net revenues were $26,581,672. 65 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Gilbert has pledged future water and wastewater connection development fees revenue and future water and wastewater revenues, net of specified operating expenses after debt service payments are made for the 2004 water and wastewater revenue refunding bonds, to repay $219,125,000 in utility revenue bonds issued since 2004. Proceeds from the bonds provided financing for the construction of a joint use wastewater treatment plant; and for the acquisition of additional water production and distribution capacity for the combined water and wastewater system. The bonds are payable from water and wastewater connection development fees revenue and water and wastewater net revenues and are payable through 2033. Annual principal and interest payments on the bonds are expected to require less than 18 percent of revenue. The total principal and interest remaining to be paid on the bonds is $184,721,494. Principal and interest paid for the current year was $30,471,337 (of which $20,825,000 in principal was an advance defeasance). Total water and wastewater connection development fees revenue was $28,745,152 and water and wastewater net revenues after debt payments were $24,473,459. Gilbert has pledged future street and highway revenues to repay $35,000,000 in highway user revenue bonds issued in 2003 and $16,945,000 in highway user revenue refunding bonds issued in 2012. Proceeds from the bonds provided financing for the purpose of street and highway construction projects. Proceeds from the 2012 refunding bonds were used to advance refund $17,950,000 of outstanding 2003 highway user revenue bonds (see note 9). The bonds are payable solely from street and highway revenues (see note 8 for the detail of the sources of these revenues) and are payable through 2019. Annual principal and interest payments on the bonds are expected to require less than 28 percent of revenues. The total principal and interest remaining to be paid on the bonds is $23,069,450. Principal and interest paid for the current year was $2,970,375, and the total street and highway revenues were $10,437,844. Gilbert has pledged future excise taxes and state-shared revenues to repay $193,720,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2001 and $20,980,000 in public facilities (MPC) revenue refunding bonds issued in 2011. Proceeds from the bonds provided financing of the multipurpose public safety complex, the service center facility, a police property facility, a sports complex, various other parks and recreation facilities, and a parking facility. Proceeds from the 2011 refunding bonds were used to advance refund $21,670,000 of outstanding 2001 public facilities MPC revenue bonds. The bonds are payable through 2028. Annual principal and interest payments on the bonds are expected to require less than 17 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds is $201,586,228. Principal and interest paid for the current year was $16,484,316, and the total excise taxes and state-shared revenues were $97,342,250. Note 16 - Investment in Joint Venture Construction of a joint water reclamation plant with the City of Mesa and the Town of Queen Creek was completed during fiscal year 2007. Mesa is the lead agent and is responsible for the operation and maintenance of the plant. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment as of June 30, 2012, was: Mesa’s Share Gilbert’s Share Queen Creek’s Share Total $ 66,803,865 69,258,182 27,603,036 $163,665,083 66 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 Construction began in fiscal year 2007 for a joint water treatment plant with the City of Chandler. Gilbert is the lead agent on this project. Construction was completed during fiscal year 2009 and the plant will treat 12 million gallons per day each for Gilbert and Chandler. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment as of June 30, 2012, was: Gilbert’s Share Chandler’s Share Total $ 74,783,441 72,491,242 $147,274,683 In August 2008, Gilbert entered into an Intergovernmental Agreement with the Cities of Mesa and Apache Junction, Apache Junction Fire District (FD), and the Town of Queen Creek (the Parties) to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network – 700/800 MHz Network procured and built by the City of Mesa). The City of Mesa acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network, in addition to providing all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on subscriber units (radio counts). Gilbert’s investment in joint venture is reflected within the governmental activities in the government-wide statement of net assets. Separate financial statements are not prepared. Total investment as of June 30, 2012, was: Mesa’s Share Gilbert’s Share Apache Junction’s Share Apache Junction FD’s Share Queen Creek’s Share Total $1,528,876 356,343 91,108 44,535 20,930 $2,041,792 Note 17 - Subsequent Events Gilbert advance defeased $4,075,000 of Water Resources MPC Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds on October 1, 2012. 67 TABLE OF CONTENTS 68 TABLE OF CONTENTS NONMAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues and expenditures from specific taxes or other earmarked sources. Such funds are usually required by statute or ordinance to finance particular functions or activities. Grants - accounts for miscellaneous grants received from Federal, State and local governments that require segregation of revenues and expenditures. Other Special Revenue - accounts for revenues received from various agencies and sources, including seized funds from law enforcement agencies that are required to be used for specific purposes. Community Development Block Grants (CDBG) – accounts for a series of ongoing entitlements received directly from the U.S. Department of Housing and Urban Development (HUD) and used for affordable housing and redevelopment activities. HOME Program accounts for HUD monies received from Maricopa County for affordable housing activities including housing rehabilitation. Street Light Improvement District - accounts for taxes received from and expenditures of the street light maintenance improvement districts. Parkway Maintenance District - accounts for taxes received from and expenditures of the parkway maintenance improvement districts. Capital Projects Funds Capital Projects Funds are established to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Traffic Control - accounts for the acquisition and installation of traffic signals. Flood Control and Storm Water - accounts for the construction of flood control retention basins and storm drains. Special Assessments – accounts for Gilbert’s capital construction of improvement districts. Redevelopment - accounts for the construction of capital improvements in the Heritage District. 69 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 Special Revenue ASSETS Pooled cash and investments Receivables, net: Taxes Accrued interest Accounts Due from other governments Inventories Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Deferred revenue: Other Total liabilities Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances Grants Other Special Revenue $ 2,834,705 $ 1,432,503 13,445 1,895 1,098,319 $ 3,948,364 3,578 49,803 730,787 $ 2,216,671 $ $ $ $ 244,818 - 48,028 21,382 - 14,600 259,418 69,410 3,688,946 3,688,946 $ 3,948,364 1,933,941 213,320 2,147,261 $ 2,216,671 70 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ 12,304 $ 268,399 $ 187,331 500,403 512,707 $ 12,113 280,512 $ 13,178 18 1,666 202,193 93,274 2,247 489,782 $ 585,303 $ 12,576 (85,172) (72,596) 512,707 $ - $ 44,162 1,814 - - 45,976 280,512 280,512 280,512 1,666 154,551 156,217 202,193 $ TABLE OF CONTENTS Capital Projects Traffic Control $ 2,397,960 Flood Control and Storm Water $ - 5,155 415 $ 2,403,530 $ - $ $ 7,646 - - Special Assessments $ - $ - $ - Redevelopment $ 3,660,853 $ 8,817 195,187 3,864,857 $ - 7,646 - - - 2,380,294 15,590 2,395,884 $ 2,403,530 - - 3,752,531 112,326 3,864,857 3,864,857 $ $ $ 71 Total Nonmajor Governmental Funds $ 10,794,055 $ 25,291 31,013 52,113 2,524,696 1,666 13,428,834 $ 437,928 25,443 489,782 14,600 967,753 $ 1,666 12,203,351 341,236 (85,172) 12,461,081 13,428,834 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2012 Special Revenue Other Special Revenue Grants Revenues Taxes: Property Intergovernmental Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Management and policy Legal and court Development services Public safety: Police Fire Highways and streets Community services Transportation Non departmental Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures $ 2,489,521 40,001 76,982 2,606,504 $ $ $ 1,515,773 48 1,515,821 1,434,740 1,434,740 1,108,197 69 1,108,266 43 304,686 - 836,606 - - 238,468 108,062 942,438 21,907 84,042 467,560 1,891,369 1,228,497 16,904 42,059 49,884 102,617 1,744,690 836,606 1,480,383 1,480,383 1,006,603 1,006,603 715,135 282,640 679,215 (214,516) (214,516) (768,347) (768,347) 68,124 (89,132) (45,643) 101,663 16,536 326,155 54,554 3,975 (2,698,526) (2,694,551) Net change in fund balances (1,979,416) Fund balances at end of year 1,728 1,392,593 2,370 166,253 449,156 15,230 2,027,330 Parkway Maintenance District 28,892 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Fund balances at beginning of year $ CDBG/HOME Street Light Improvement District 5,668,362 2,079,137 $ 3,688,946 $ 2,147,261 72 $ (72,596) (45,643) 101,663 - $ 280,512 - $ 156,217 TABLE OF CONTENTS Capital Projects Flood Control and Storm Water Traffic Control $ 53,549 1,269,395 14,360 1,337,304 $ 446 446 Special Assessments $ 377 377 Redevelopment $ 26,835 3,300 30,135 Total Nonmajor Governmental Funds $ 2,542,937 4,060,571 1,392,593 2,370 1,269,395 166,253 449,156 97,366 80,282 10,060,923 - - - - 43 304,686 865,498 254,633 254,633 - 5,710 5,710 35,486 35,486 1,466,965 124,966 2,422,821 1,048,662 21,907 133,926 866,006 7,255,480 1,082,671 446 (5,333) (5,351) 2,805,443 (248,209) (248,209) (305,836) (305,836) (23,538) (23,538) 23,730 (4,266,918) (4,243,188) 1,094,480 (247,763) (311,169) 1,301,404 247,763 311,169 19,755 (7,946) 11,809 $ 2,395,884 $ - $ - (28,889) (1,437,745) 3,893,746 $ 3,864,857 73 13,898,826 $ 12,461,081 TABLE OF CONTENTS 74 TABLE OF CONTENTS BUDGETARY COMPARISON SCHEDULES 75 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Grants Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Development services Public safety: Police Fire Highways and streets Transportation Non departmental Capital outlay Contingency Total expenditures Net change in fund balances Final 5,000,000 5,000,000 $ $ 2,489,521 40,001 76,982 2,606,504 $ (2,510,479) 40,001 76,982 (2,393,496) - 28,892 (28,892) 5,000,000 5,000,000 5,000,000 5,000,000 238,468 108,062 942,438 21,907 84,042 467,560 1,891,369 (238,468) (108,062) (942,438) (21,907) (84,042) (467,560) 5,000,000 3,108,631 - - 715,135 (2,697,000) (2,697,000) $ 5,000,000 5,000,000 Final Budget Positive (Negative) - Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Actual Amounts (2,697,000) $ (2,697,000) (2,697,000) 3,975 (2,698,526) (2,694,551) (2,697,000) (1,979,416) Fund balance at beginning of year 5,668,362 Fund balance at end of year $ 76 3,688,946 715,135 3,975 (1,526) 2,449 $ 717,584 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Other Special Revenue Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Other entities' participation Gifts and donations Fines and forfeitures Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Support services Legal and court Public safety: Police Fire Community services Non departmental Capital outlay Contingency Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ 1,265,000 225,000 300,890 1,790,890 $ Final Actual Amounts 1,265,000 225,000 300,890 1,790,890 $ 1,728 1,392,593 2,370 166,253 449,156 15,230 2,027,330 1,000 292,230 50 1,000 366,380 43 304,686 1,177,130 13,600 39,900 50,000 33,000 200,000 1,806,860 1,389,380 14,790 42,060 50,000 91,130 1,954,790 1,228,497 16,904 42,059 49,884 102,617 1,744,690 Final Budget Positive (Negative) $ 1,728 127,593 2,370 (58,747) 148,266 15,230 236,440 7 1,000 61,694 160,883 (2,114) 1 116 (11,487) 210,100 (15,970) (163,900) 282,640 446,540 20,890 (185,920) (165,030) 20,890 (202,250) (181,360) (214,516) (214,516) (20,890) (12,266) (33,156) (345,260) 68,124 (181,000) $ Fund balance at beginning of year 2,079,137 Fund balance at end of year $ 77 2,147,261 $ 413,384 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA CDBG/HOME Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Expenditures Current: General government: Development services Total expenditures Excess of revenues over expenditures Other financing uses Transfers out Total other financing uses Net change in fund balances $ 1,357,130 1,357,130 Actual Amounts Final $ 1,357,130 1,357,130 $ 1,515,773 48 1,515,821 Final Budget Positive (Negative) $ 158,643 48 158,691 1,340,450 1,340,450 1,340,450 1,340,450 836,606 836,606 503,844 503,844 16,680 16,680 679,215 662,535 (438,000) (438,000) (438,000) (438,000) (768,347) (768,347) (330,347) (330,347) (421,320) (89,132) (421,320) $ Fund balance at beginning of year 16,536 Fund deficit at end of year $ 78 (72,596) $ 332,188 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Street Light Improvement District Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Taxes Total revenues $ Expenditures Current: Highways and streets Total expenditures Final $ 1,636,240 1,636,240 Deficiency of revenues under expenditures Net change in fund balances 1,431,360 1,431,360 (204,880) 1,431,360 1,431,360 $ 1,636,240 1,636,240 (204,880) $ Actual Amounts $ 1,434,740 1,434,740 (204,880) (45,643) (204,880) (45,643) 326,155 $ 79 $ 1,480,383 1,480,383 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 280,512 3,380 3,380 155,857 155,857 159,237 $ 159,237 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Parkway Maintenance District Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Taxes Investment earnings Total revenues $ Expenditures Current: Community services Total expenditures Final $ 1,191,270 1,191,270 Excess (deficiency) of revenues over (under) expenditures Net change in fund balances 1,107,490 1,107,490 (83,780) 1,107,490 1,107,490 $ 1,191,270 1,191,270 (83,780) $ Actual Amounts $ 1,108,197 69 1,108,266 707 69 776 184,667 184,667 (83,780) 101,663 185,443 (83,780) 101,663 54,554 $ 80 $ 1,006,603 1,006,603 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 156,217 $ 185,443 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA General Debt Obligations Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Property taxes Investment earnings Total revenues $ Expenditures Debt service: Principal Interest Bond issuance costs Fiscal and other charges Total expenditures 21,400,000 75,000 21,475,000 Actual Amounts Final $ 21,400,000 75,000 21,475,000 $ 21,502,322 90,286 21,592,608 Final Budget Positive (Negative) $ 102,322 15,286 117,608 26,660,000 16,363,390 8,320 43,031,710 26,660,000 16,363,390 8,320 43,031,710 22,655,000 15,417,091 402,163 1,534 38,475,788 4,005,000 946,299 (402,163) 6,786 4,555,922 Deficiency of revenues under expenditures (21,556,710) (21,556,710) (16,883,180) 4,673,530 Other financing sources (uses) Transfers in Refunding bonds issued Premium on refunding bonds Payment to refunded bond escrow agent Total other financing sources and uses 20,333,780 20,333,780 20,333,780 (41,626,810) (21,293,030) 19,736,738 37,925,000 4,110,575 (41,626,798) 20,145,515 (597,042) 37,925,000 4,110,575 12 41,438,545 (42,849,740) 3,262,335 Net change in fund balances $ (1,222,930) Fund balance at beginning of year Fund balance at end of year $ $ 81 6,927,284 10,189,619 $ 46,112,075 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Special Assessments Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Special assessments Investment earnings Total revenues $ 1,167,660 1,167,660 $ Final Actual Amounts 1,167,660 1,167,660 $ 878,981 1,295 880,276 Final Budget Positive (Negative) $ (288,679) 1,295 (287,384) Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures 400,000 574,660 750 975,410 400,000 574,660 750 975,410 400,000 574,655 1,073 975,728 Excess (deficiency) of revenues over (under) expenditures 192,250 192,250 (95,452) (287,702) - - 305,836 (202,978) 102,858 305,836 (202,978) 102,858 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ 192,250 $ 192,250 7,406 Fund balance at beginning of year 56,611 Fund balance at end of year $ 82 64,017 5 (323) (318) $ (184,844) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Streets and Transportation Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental Other entities' participation Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Development services Highways and streets Capital outlay Total expenditures Deficiency of revenues under expenditures Other financing sources Transfers in Total other financing sources Net change in fund balances $ 11,895,000 1,000,000 3,400 12,898,400 Final $ 11,895,000 1,000,000 3,400 12,898,400 Actual Amounts $ 634,918 1,278,413 773,594 1,779,024 4,465,949 Final Budget Positive (Negative) $ (11,260,082) 278,413 773,594 1,775,624 (8,432,451) 76,950,840 76,950,840 46,770 77,628,543 77,675,313 1,559 20,852 25,389,756 25,412,167 45,211 (20,852) 52,238,787 52,263,146 (64,052,440) (64,776,913) (20,946,218) 43,830,695 2,289,000 2,289,000 2,289,000 2,289,000 $ (61,763,440) 286,869 286,869 $ (62,487,913) (20,659,349) Fund balance at beginning of year 87,625,742 Fund balance at end of year $ 83 66,966,393 (2,002,131) (2,002,131) $ 41,828,564 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Traffic Control Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Total revenues $ Expenditures Capital outlay Total expenditures Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ 529,000 689,000 1,218,000 $ Final Actual Amounts 529,000 689,000 1,218,000 $ 53,549 1,269,395 14,360 1,337,304 Final Budget Positive (Negative) $ (475,451) 580,395 14,360 119,304 1,207,000 1,207,000 1,207,000 1,207,000 254,633 254,633 952,367 952,367 11,000 11,000 1,082,671 1,071,671 42,000 (31,000) 11,000 42,000 (31,000) 11,000 22,000 $ 19,755 (7,946) 11,809 22,000 1,094,480 Fund balance at beginning of year 1,301,404 Fund balance at end of year $ 84 2,395,884 (22,245) 23,054 809 $ 1,072,480 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Municipal Facilities Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Total revenues Expenditures Current: General government: Development services Public safety: Police Fire Debt service: Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ Actual Amounts Final 3,018,000 2,564,000 5,582,000 $ 3,018,000 2,564,000 5,582,000 $ 2,856,346 5,677,183 15,848 8,549,377 Final Budget Positive (Negative) $ (161,654) 3,113,183 15,848 2,967,377 250,000 250,000 64,078 185,922 - - 285,690 133,183 (285,690) (133,183) 6,184,000 6,434,000 6,184,000 6,434,000 6,582 4,551,246 5,040,779 (6,582) 1,632,754 1,393,221 3,508,598 4,360,598 103,177 (6,107,067) (6,003,890) (2,806,823) 6,739,083 3,932,260 (852,000) (852,000) 2,910,000 (12,846,150) (9,936,150) 2,910,000 (12,846,150) (9,936,150) $ (10,788,150) $ (10,788,150) Fund deficit at beginning of year Fund deficit at end of year (2,495,292) $ 85 (13,750,951) (16,246,243) $ 8,292,858 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Parks, Open Space and Recreation Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Miscellaneous Total revenues $ 1,487,000 4,092,000 5,579,000 $ Final Actual Amounts 1,487,000 4,092,000 5,579,000 $ 11,010,594 95,905 1,520,389 12,626,888 Final Budget Positive (Negative) $ (1,487,000) 6,918,594 95,905 1,520,389 7,047,888 Expenditures Current: Community services Capital outlay Total expenditures Excess of revenues over expenditures Other financing uses Transfers out Total other financing uses Net change in fund balances 355,000 4,579,000 4,934,000 355,000 4,641,000 4,996,000 49,414 328,166 377,580 305,586 4,312,834 4,618,420 645,000 583,000 12,249,308 11,666,308 (5,467,400) (5,467,400) $ (4,822,400) $ (5,467,400) (5,467,400) (5,862,305) (5,862,305) (4,884,400) 6,387,003 Fund balance at beginning of year 8,259,413 Fund balance at end of year $ 86 14,646,416 (394,905) (394,905) $ 11,271,403 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Special Assessments Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Investment earnings Total revenues Final $ - $ Final Budget Positive (Negative) Actual Amounts - $ 377 377 $ 377 377 Expenditures Capital outlay Total expenditures - - 5,710 5,710 (5,710) (5,710) Deficiency of revenues under expenditures - - (5,333) (5,333) Other financing uses Transfers out Total other financing uses - Net change in fund balances $ - $ (311,550) (311,550) (305,836) (305,836) (311,550) (311,169) Fund balance at beginning of year 311,169 Fund balance at end of year $ 87 - 5,714 5,714 $ 381 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Redevelopment Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Revenues Other entities' participation Investment earnings Miscellaneous Total revenues $ Expenditures Capital outlay Total expenditures Actual Amounts Final 349,000 349,000 $ 349,000 349,000 $ 26,835 3,300 30,135 Final Budget Positive (Negative) $ (349,000) 26,835 3,300 (318,865) 7,411,000 7,411,000 7,442,660 7,442,660 35,486 35,486 7,407,174 7,407,174 Deficiency of revenues under expenditures (7,062,000) (7,093,660) (5,351) 7,088,309 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 7,062,000 7,062,000 7,061,000 7,061,000 (23,538) (23,538) (7,061,000) (23,538) (7,084,538) Net change in fund balances $ - $ (32,660) (28,889) Fund balance at beginning of year 3,893,746 Fund balance at end of year $ 88 3,864,857 $ 3,771 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Water Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Assets - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses Operating loss Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before capital contributions and transfers Capital contributions Transfers in Transfers out Change in net assets $ 36,094,000 1,440,000 37,534,000 Actual Amounts Final $ 36,094,000 1,440,000 37,534,000 $ 36,692,434 1,646,827 38,339,261 Final Budget Positive (Negative) $ 598,434 206,827 805,261 910,130 5,912,140 13,650,130 26,282,870 2,309,430 1,903,930 7,844,550 13,730,120 26,281,000 2,309,430 1,073,874 6,745,643 12,042,823 8,156,003 1,149,154 830,056 1,098,907 1,687,297 18,124,997 1,160,276 11,393,740 808,000 61,266,440 11,393,740 808,000 64,270,770 11,326,341 40,493,838 67,399 808,000 23,776,932 (23,732,440) (26,736,770) (2,154,577) 24,582,193 (6,988,530) 90,000 (6,898,530) (6,988,530) 90,000 (6,898,530) (6,764,676) 895,168 4,168 (5,865,340) 223,854 805,168 4,168 1,033,190 (30,630,970) (33,635,300) (8,019,917) 25,615,383 7,676,000 438,000 (2,445,920) 7,676,000 438,000 (2,445,920) 17,509,478 1,050,840 (669,513) 9,833,478 612,840 1,776,407 (27,967,220) 9,870,888 (24,962,890) $ Explanation of difference between budgetary change in net assets at June 30, 2012, and GAAP change in net assets: Obligations for compensated absenses are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2011 Less compensated absences at June 30, 2012 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Debt service principal payments are not recognized as expenses on the GAAP basis but are recognized as expenses on the budget basis. Capital assets contributed by developers are recognized as revenue for GAAP purposes by are not recognized as revenue on the budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Amortization of bond issuance costs is recognized as an expense for GAAP purposes but not recognized for budgetary purposes. Change in net assets as reported on the statement of revenues, expenses and changes in fund net assets 89 734,656 (900,475) 8,156,003 11,326,341 2,702,539 (9,490,239) (111,369) $ 22,288,344 $ 37,838,108 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Wastewater Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Assets- Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 21,221,010 1,000 21,222,010 Actual Amounts Final $ 21,221,010 1,000 21,222,010 $ 22,739,462 8,467 22,747,929 Final Budget Positive (Negative) $ 1,518,452 7,467 1,525,919 Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses 689,690 3,032,430 9,747,440 3,471,000 1,649,460 689,690 3,032,430 9,779,900 3,471,000 1,649,460 810,667 3,545,827 8,245,112 219,865 648,797 (120,977) (513,397) 1,534,788 3,251,135 1,000,663 8,798,660 943,000 28,331,680 16,154,100 943,000 35,719,580 16,093,659 29,563,927 60,441 943,000 6,155,653 Operating loss (7,109,670) (14,497,570) (6,815,998) 7,681,572 (573,790) 79,590 (494,200) (573,790) 79,590 (494,200) (376,895) 211,306 2,652 (162,937) 196,895 131,716 2,652 331,263 (7,603,870) (14,991,770) (6,978,935) 8,012,835 5,807,340 820,000 (766,000) 5,807,340 820,000 (766,000) 15,154,154 492,290 (183,373) 9,346,814 (327,710) 582,627 (9,130,430) 8,484,136 Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before capital contributions and transfers Capital contributions Transfers in Transfers out Change in net assets $ (1,742,530) $ Explanation of difference between budgetary change in net assets at June 30, 2012, and GAAP change in net assets: Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2011 Less compensated absences at June 30, 2012 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Debt service principal payments are not recognized as expenses on the GAAP basis but are recognized as expenses on the budget basis. Capital assets contributed by developers are recognized as revenue for GAAP purposes but are not recognized as revenue on the budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Amortization of bond issuance costs is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net assets as reported on the statement of revenues, expenses and changes in fund net assets 90 363,769 (441,571) 219,865 16,093,659 1,841,828 (8,381,788) (521,345) $ 17,658,553 $ 17,614,566 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Solid Waste Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Assets - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Contingency Total operating expenses Operating income Nonoperating revenues Investment earnings Gain on sale of capital assets Total nonoperating revenues Income before capital contributions $ Final 17,162,100 70,000 17,232,100 $ 17,162,100 70,000 17,232,100 $ 17,923,883 109,830 18,033,713 Final Budget Positive (Negative) $ 761,783 39,830 801,613 414,690 4,916,070 7,158,010 2,077,000 1,352,640 453,000 16,371,410 414,690 4,916,070 7,158,010 2,077,000 1,352,640 453,000 16,371,410 927,851 5,387,927 6,243,114 149,158 584,653 13,292,703 (513,161) (471,857) 914,896 1,927,842 767,987 453,000 3,078,707 860,690 860,690 4,741,010 3,880,320 83,200 83,200 83,200 83,200 137,675 31,459 169,134 54,475 31,459 85,934 943,890 943,890 4,910,144 3,966,254 - - 13,713 13,713 943,890 4,923,857 Capital contributions Change in net assets Actual Amounts 943,890 $ Explanation of difference between budgetary change in net assets at June 30, 2012, and GAAP change in net assets: Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2011 Less compensated absences at June 30, 2012 Capital outlays are not recognized as GAAP expenses but are recognized as expenses on a budget basis. Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net assets as reported on the statement of revenues, expenses and changes in fund net assets 91 465,941 (486,616) 149,158 (1,674,985) $ 3,377,355 $ 3,979,967 TABLE OF CONTENTS 92 TABLE OF CONTENTS INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government, on a cost reimbursement basis. Equipment Maintenance - to account for the revenues and expenses from the maintenance of Gilbert's motorized equipment. Copy Services - to account for the revenues and expenses from the operation of centrally located copiers within Gilbert. Employee Benefit Self-Insurance - to account for and finance Gilbert’s uninsured risks of loss for medical claims. 93 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Net Assets June 30, 2012 Equipment Maintenance ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Inventories Total current assets $ 794,020 Employee Benefit SelfInsurance Copier Services $ 277,533 $ Total 5,155,839 $ 6,227,392 1,566 32,949 468,041 1,296,576 870 278,403 1,816 1,910 5,159,565 4,252 34,859 468,041 6,734,544 223,225 (200,381) 22,844 1,319,420 324,888 (112,188) 212,700 491,103 5,159,565 548,113 (312,569) 235,544 6,970,088 260,850 23,755 64,110 348,715 92,818 92,818 13,253 1,244,571 1,257,824 366,921 23,755 64,110 1,244,571 1,699,357 90,273 - - 90,273 Total liabilities 438,988 92,818 1,257,824 1,789,630 NET ASSETS Invested in capital assets, net of related debt Unrestricted Total net assets 22,844 857,588 880,432 212,700 185,585 398,285 3,901,741 3,901,741 235,544 4,944,914 5,180,458 Noncurrent assets: Capital assets: Property, plant and equipment Less accumulated depreciation Total capital assets (net) Total assets LIABILITIES Current liabilities: Accounts payable Accrued liabilities Current portion of compensated absences Claims payable Total current liabilities Long-term portion of compensated absences $ 94 $ $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended June 30, 2012 Equipment Maintenance Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Claims Incurred Depreciation Total operating expenses 6,955,403 5,967 6,961,370 Employee Benefit SelfInsurance Copier Services $ 147,393 1,414,035 5,377,404 18,979 6,957,811 355,134 355,134 $ 12,893,622 46,113 12,939,735 Total $ 20,204,159 52,080 20,256,239 383,578 21,863 405,441 790,985 13,506,651 14,297,636 938,378 1,414,035 5,760,982 13,506,651 40,842 21,660,888 (1,357,901) (1,404,649) Operating income (loss) 3,559 (50,307) Nonoperating revenues (expenses) Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) 3,966 3,966 2,723 (24,711) (21,988) Change in net assets 7,525 (72,295) (1,343,830) (1,408,600) 470,580 5,245,571 6,589,058 Total net assets, beginning of year Total net assets, end of year 872,907 $ 880,432 95 $ 398,285 14,071 14,071 $ 3,901,741 20,760 (24,711) (3,951) $ 5,180,458 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Cash Flows Year Ended June 30, 2012 Equipment Maintenance Cash flows from operating activities: Other operating cash receipts Cash receipts from other funds for services Cash payments to suppliers for goods and services Cash payments to employees for services $ Net cash provided by (used in) operating activities 5,967 6,996,746 (5,556,770) (1,367,150) Net cash used in capital and related financing activities Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Reconciliation of operating income (loss) to net cash provided by (used in) operations: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation Changes in assets and liabilities: Decrease in accounts receivable Decrease in prepaid items Increase in inventories Increase (decrease) in accounts payable Increase in claims payable Increase in accrued expenses 355,134 (290,920) 64,214 Employee Benefit SelfInsurance $ 46,702 12,893,622 (14,120,556) (1,180,232) Total $ 52,669 20,245,502 (19,968,246) (1,367,150) (1,037,225) - (159,336) - (159,336) - (159,336) - (159,336) 3,154 2,280 14,719 20,153 3,154 2,280 14,719 20,153 81,947 712,073 (92,842) 370,375 (1,165,513) 6,321,352 (1,176,408) 7,403,800 $ 794,020 $ 277,533 $ 5,155,839 $ 6,227,392 $ 3,559 $ (50,307) $ (1,357,901) $ (1,404,649) Total adjustments Net cash provided by (used in) operating activities $ 78,793 Cash flows from capital and related financing activities: Acquisition and construction of capital assets Cash and cash equivalents at end of year Copier Services $ 18,979 21,863 - 41,343 7,266 (37,614) (1,625) 46,885 92,658 - 589 12,950 164,130 - 41,932 7,266 (37,614) 103,983 164,130 46,885 75,234 114,521 177,669 367,424 78,793 96 $ 64,214 $ (1,180,232) 40,842 $ (1,037,225) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Equipment Maintenance Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Assets - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Depreciation Total operating expenses Operating income Nonoperating revenues Investment earnings Total nonoperating revenues Change in net assets $ 7,931,060 7,931,060 Actual Amounts Final $ 7,931,060 7,931,060 $ 6,955,403 5,967 6,961,370 Final Budget Positive (Negative) $ (975,657) 5,967 (969,690) 87,900 1,703,260 5,767,800 7,558,960 87,900 1,703,260 5,767,800 7,558,960 147,393 1,382,496 5,377,404 18,979 6,926,272 (59,493) 320,764 390,396 (18,979) 632,688 372,100 372,100 35,098 (337,002) 1,200 1,200 1,200 1,200 3,966 3,966 373,300 39,064 373,300 $ Explanation of difference between budgetary change in net assets at June 30, 2012, and GAAP change in net assets: Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2011 Less compensated absences at June 30, 2012 Change in net assets as reported on the statement of revenues, expenses and changes in fund net assets 97 122,844 (154,383) $ 7,525 2,766 2,766 $ (334,236) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Copier Services Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Assets - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Total operating revenues $ Operating expenses Operation and maintenance Depreciation Total operating expenses Operating loss Nonoperating revenues (expenses) Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) Change in net assets 365,000 365,000 Final $ $ 355,134 355,134 $ (9,866) (9,866) 579,130 579,130 579,130 579,130 383,578 21,863 405,441 195,552 (21,863) 173,689 (214,130) (214,130) (50,307) 163,823 2,723 (24,711) (21,988) (877) (24,711) (25,588) 3,600 3,600 $ 365,000 365,000 Actual Amounts Final Budget Positive (Negative) (210,530) 98 3,600 3,600 $ (210,530) $ (72,295) $ 138,235 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Employee Benefit Self-Insurance Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Assets - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2012 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 12,630,000 65,000 12,695,000 Actual Amounts Final $ 12,630,000 65,000 12,695,000 $ 12,893,622 46,113 12,939,735 Final Budget Positive (Negative) $ 263,622 (18,887) 244,735 Operating expenses General and administrative Claims Incurred Total operating expenses 870,720 13,363,000 14,233,720 870,720 13,363,000 14,233,720 790,985 13,506,651 14,297,636 79,735 (143,651) (63,916) Operating loss (1,538,720) (1,538,720) (1,357,901) 180,819 Nonoperating revenues Investment earnings Total nonoperating revenues Change in net assets 21,400 21,400 $ (1,517,320) 99 21,400 21,400 $ (1,517,320) 14,071 14,071 $ (1,343,830) (7,329) (7,329) $ 173,490 TABLE OF CONTENTS 100 TABLE OF CONTENTS AGENCY FUNDS Agency Funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Flexible Spending - accounts for monies received from employees for medical and dependent care expenses under Internal Revenue Code Section 125. Fire Retirement Health - accounts for monies received from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. 101 TABLE OF CONTENTS 102 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2012 Flexible Spending Assets Restricted cash and investments Total assets Liabilities Accounts payable Medical benefits payable Dependent care benefits payable Total liabilities Beginning Balance Ending Balance Additions Deductions $ 24,277 286,057 287,378 22,956 $ 24,277 286,057 287,378 22,956 $ 8,927 15,350 1,224 223,672 63,585 1,224 223,507 65,071 9,092 13,864 $ 24,277 288,481 289,802 22,956 $ 92,419 99 47,055 391 2,574 184 136,900 306 $ 92,518 47,446 2,758 137,206 $ 92,518 1,720 47,431 1,720 2,743 137,206 $ 92,518 49,151 4,463 137,206 $ 116,696 99 333,112 391 289,952 184 159,856 306 $ 116,795 333,503 290,136 160,162 $ 92,518 8,927 15,350 2,944 47,431 223,672 63,585 2,944 2,743 223,507 65,071 137,206 9,092 13,864 $ 116,795 337,632 294,265 160,162 Fire Retirement Health Fund Assets Restricted cash and investments Restricted accrued interest Total assets Liabilities Accounts payable Other deposits Total liabilities Total-All Agency Funds Assets Restricted cash and investments Restricted accrued interest Total assets Liabilities Accounts payable Other deposits Medical benefits payable Dependent care benefits payable Total liabilities 103 TABLE OF CONTENTS 104 TABLE OF CONTENTS Statistical Section ________________________________ Financial Trends Revenue Capacity Debt Capacity Demographic and Economic Information Operating Information Other Information TABLE OF CONTENTS STATISTICAL SECTION This part of Gilbert's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about the Town's overall financial health. Contents Page Financial Trends 105 These schedules contain trend information to help the reader understand how Gilbert's financial performance and well-being have changed over time. Revenue Capacity 112 These schedules contain information to help the reader assess Gilbert's most significant local revenue source, sales tax. Debt Capacity 115 These schedules present information to help the reader assess the affordability of Gilbert's current levels of outstanding debt and Gilbert's ability to issue additional debt in the future. Demographic and Economic Information 120 These schedules offer demographic and economic indicators to help the reader understand the environment within which Gilbert's financial activities take place. Operating information 122 These schedules contain service and infrastructure data to help the reader understand how the information in Gilbert's financial report relates to the services Gilbert provides and the activities it performs. Other information 125 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Report for the relevant year. 105 TABLE OF CONTENTS 106 TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS