Town of Gilbert, Arizona Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2013 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, 2013 John W. Lewis, Mayor Ben Cooper, Vice Mayor Eddie Cook, Council Member Jenn Daniels, Council Member Victor Petersen, Council Member Jordan Ray, Council Member Jared Taylor, Council Member Patrick Banger, Manager Prepared by the Finance & Management Services Department Cindi Mattheisen, Finance & Management Services Director i TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2013 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal Advisory Organization Chart Organization Reporting Chart v xii xiii 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 Position Statement of Activities 15 16 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position 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 Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - 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 Municipal Facilities Capital Projects Fund Flood Control and Storm Water Capital Projects Fund ii 70 72 76 77 78 79 80 81 82 83 84 85 86 TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2013 TABLE OF CONTENTS Page Parks, Open Space and Recreation Capital Projects Fund Redevelopment Capital Projects Fund Schedules of Revenues, Expenses and Changes in Net Position Budget and Actual: Water Enterprise Fund Wastewater Enterprise Fund Environmental Services Enterprise Fund Combining Statement of Net Position - Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds Schedules of Revenues, Expenses and Changes in Net Position 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 87 88 89 90 91 94 95 96 97 98 99 102 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years Changes in Net Position - 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, 2013 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 2013 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2013 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 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 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 Firemen’s Pension and Relief Fund Board Redevelopment Commission Arts, Culture, and Tourism Board xii TABLE OF CONTENTS Organization Reporting Chart Town Manager Office of Communications Office of Intergovernmental Relations Office of Economic Development Office of Management and Budget Office of Human Resources Office of Water Resources Office of Information Technology Deputy Town Manager Prosecutor Fire Finance & Management Services Police Parks and Recreation Development Services Public W orks xiii TABLE OF CONTENTS xiv 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 AUDITOR’S REPORT Honorable Mayor and Members of the Town Council Town of Gilbert, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate discretely presented component information of Town of Gilbert, Arizona (Town), as of and for the year ended related notes to the financial statements, which collectively comprise the statements as listed in the table of contents. activities, business-type unit and remaining fund June 30, 2013, and the Town’s basic financial Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Town’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, 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, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and Streets Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com TABLE OF CONTENTS Change in Accounting Principle As described in Note 1, the Town implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, for the year ended June 30, 2013, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 14 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules information is fairly stated in all material respects in relation to the basic 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2013, on our consideration of Town of Gilbert, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Town of Gilbert, Arizona’s internal control over financial reporting and compliance. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 9, 2013 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, 2013. 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 position is $371 million of unrestricted net position, of which $142 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $229 million which may be used to fund ongoing operations in future years. Net position includes a $688 million net investment in capital assets such as streets, park land, and municipal buildings and a $325 million net investment in water, wastewater and environmental services infrastructure and equipment. The combined fund balance for all governmental funds is $195 million, of which $82 million is unrestricted. The General Fund unrestricted fund balance is $70 million, of which $10 million has been assigned for capital replacement. The remaining General Fund unassigned balance of $60 million is approximately 58% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $434 million, as compared to $470 million at the end of fiscal year 2012. 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 position presents information on all of Gilbert’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position 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 position from the previous year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (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, parks and recreation, and transportation. The business-type activities include water, wastewater, and environmental services. 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 environmental services. 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 position. 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 37-68. 4 TABLE OF CONTENTS Government-wide Financial Analysis Net position serves as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2013 and 2012. Town of Gilbert Condensed Statement of Net Position Current and other assets Capital assets Total assets Long-term liabilities Other liabilities Total liabilities Net position: Net investment in capital assets Restricted Unrestricted Total net position Governmental Activities 2013 2012 $ 252,230,825 $ 238,239,389 958,295,935 971,493,653 1,210,526,760 1,209,733,042 Business-type Activities 2013 2012 $ 347,855,563 $ 322,483,617 450,584,901 448,330,984 798,440,464 770,814,601 Total 2013 2012 $ 600,086,388 $ 560,723,006 1,408,880,836 1,419,824,637 2,008,967,224 1,980,547,643 303,184,128 51,735,948 354,920,076 327,204,298 51,053,891 378,258,189 120,994,065 17,232,584 138,226,649 135,318,490 11,754,773 147,073,263 424,178,193 68,968,532 493,146,725 462,522,788 62,808,664 525,331,452 687,909,606 60,524,680 107,172,398 $ 855,606,684 695,984,256 52,217,239 83,273,358 $ 831,474,853 325,356,563 70,878,871 263,978,381 $ 660,213,815 316,268,041 71,375,688 236,097,609 $ 623,741,338 1,013,266,169 131,403,551 371,150,779 $ 1,515,820,499 1,012,252,297 123,592,927 319,370,967 $ 1,455,216,191 Net position consists of three components. The largest portion of Gilbert’s net position (67%) 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 position (9%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (24%) includes $142 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $229 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. Governmental Activities Governmental activities in fiscal year 2013 increased Gilbert’s net position by $24 million, accounting for 40% of the total growth in net position. 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 98.5% of total revenues for governmental activities. Taxes (local and stateshared) were $124 million, an increase of $10 million from the prior year. Program revenues were $76 million, an increase of $12 million from the prior year which was mostly due to the increase in capital grants and contributions. It should be noted that $4.6 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 position is expenses. The largest expense functions were public safety which represented 38%, and highways and streets which represented 25% of total governmental activities expenses. Total expenses increased $3.7 million (2%) over the prior fiscal year. A portion of this increase was due to a $3.3 million increase in personnel costs for the public safety function. 5 TABLE OF CONTENTS The following table details the changes in net position for governmental and business-type activities. Changes in Net Position Business-type Activities Governmental Activities 2013 2012 2013 Total 2012 2013 2012 Revenues Program revenues: Charges for services $ 19,176,355 $ 17,013,296 $ 76,298,150 $ 77,355,779 $ 95,474,505 $ 94,369,075 Operating grants and contributions 21,270,393 21,044,646 - - 21,270,393 21,044,646 Capital grants and contributions 36,088,697 26,060,002 34,152,978 37,221,712 70,241,675 63,281,714 Sales taxes 61,813,421 54,513,265 - - 61,813,421 54,513,265 Property taxes 19,183,696 21,502,322 - - 19,183,696 21,502,322 State-shared sales taxes 17,062,262 16,288,580 - - 17,062,262 16,288,580 State-shared income taxes 21,293,026 17,593,587 - - 21,293,026 17,593,587 4,459,359 3,793,777 - - 4,459,359 3,793,777 General revenues: Other taxes Grants and contributions not 1,192,913 1,349,124 - - 1,192,913 1,349,124 Unrestricted investment earnings restricted to specific programs 722,141 1,909,629 1,061,205 1,244,149 1,783,346 3,153,778 Other 932,108 4,922,205 1,178,738 1,803,403 2,110,846 6,725,608 203,194,371 185,990,433 112,691,071 117,625,043 315,885,442 303,615,476 10,461,389 2,982,636 - - 10,461,389 2,982,636 - 8,632,288 - - - 8,632,288 Finance and management services 4,149,492 1,216,418 - - 4,149,492 1,216,418 Legal and court 5,474,112 5,409,709 - - 5,474,112 5,409,709 Development services 6,849,490 8,551,083 - - 6,849,490 8,551,083 Police 42,759,060 40,466,828 - - 42,759,060 40,466,828 Fire 25,866,786 24,906,506 - - 25,866,786 24,906,506 Highways and streets 44,048,280 43,437,623 - - 44,048,280 43,437,623 Parks and recreation 20,857,878 19,931,592 - - 20,857,878 19,931,592 461,120 1,268,998 - - 461,120 1,268,998 3,113,705 2,910,114 - - 3,113,705 2,910,114 Total revenues Expenses Management and policy Support services * Transportation Non departmental Interest and fiscal charges 15,142,477 15,785,320 - - 15,142,477 15,785,320 Water on long-term debt - - 38,339,466 37,694,869 38,339,466 37,694,869 Wastewater - - 22,169,529 22,661,900 22,169,529 22,661,900 Environmental services - - 15,588,350 14,917,749 15,588,350 14,917,749 179,183,789 175,499,115 76,097,345 75,274,518 255,281,134 250,773,633 24,010,582 10,491,318 36,593,726 42,350,525 60,604,308 52,841,843 690,244 - - Total expenses Increase in net position before transfers Transfers 121,249 Increase in net position Net position, beginning of year Net position, end of year $ (690,244) (121,249) 24,131,831 9,801,074 36,472,477 43,040,769 60,604,308 52,841,843 831,474,853 821,673,779 623,741,338 580,700,569 1,455,216,191 1,402,374,348 855,606,684 $ 831,474,853 $ 660,213,815 $ 623,741,338 $ 1,515,820,499 $ 1,455,216,191 * During fiscal year 2013, the support services function was eliminated. Expenditures previously reported under the support services function were moved to management and policy and to finance and management services. 6 TABLE OF CONTENTS Business-type Activities Development related growth increased Gilbert’s net position for business-type activities in fiscal year 2013 by $36 million including $30 million in system development fee collections and $3.8 million in water and wastewater infrastructure contributed by developers. The revenues for business-type activities decreased $5 million from the prior year mainly due to the decrease in capital contributions of $3 million. Expenses increased $800 thousand (1%) 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 2013, the governmental funds reported ending unrestricted fund balances totaling $82 million, an increase of $24 million in comparison with the prior fiscal year. Town of Gilbert Governmental Funds - Fund Balances As of June 30, 2013 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 $ 13,925,796 9,599,968 40 29,484,118 6,894,361 17,136,758 12,613,357 $ 89,654,398 Unrestricted Total $ 69,647,550 $ 69,647,550 4,482,970 18,408,766 1,135,277 10,735,245 (638) (598) 30,142,024 59,626,142 (23,428,795) (16,534,434) 17,136,758 317,480 12,930,837 $ 82,295,868 $ 171,950,266 TABLE OF CONTENTS General Fund The General Fund is the primary operating fund. At the end of fiscal year 2013, the fund balance of the General Fund was $93.2 million, an increase of $14.9 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 $70 million, of which $10 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 58% 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 $20.7 million; however, transfers to other funds (net) were $5.8 million resulting in an increase in fund balance of $14.9 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 half of total General Fund revenues, increased $7.4 million (13.6%) from the prior fiscal year which continues to be due to the economic recovery. • Intergovernmental revenue increased $4.6 million (12%) from the prior fiscal year mainly due to increased state shared income tax revenue. • Public safety expenditures which comprise 57.8% of the total General Fund expenditures increased $3.8 million (6.7%) over the prior fiscal year mainly due to an increase in personnel costs. • Management and policy and finance and management services increased in total by $2.2 million over the prior fiscal year partly due to an increase in personnel costs (due to reorganization, support services function was eliminated and these divisions are now part of management and policy and finance and management services functions). General Fund Sources $125.5 Million Sales Tax 49% All Other 4% Transfers In 1% Charges for Services 7% Franchise Fees 2% Intergovernmental 33% Licenses and Permits 4% General Fund Uses $110.6 M illion Parks and Recreation 11% All Other 11% Police 34% Legal and Court 4% Fire 20% Development Finance and Services Management 5% Services 4% Management and Policy 11% 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 increased $1.1 million (6%) from the prior year. This was primarily due to increased highway user revenue of $1 million. Total expenditures increased by $617 thousand (6%) due to increased highways and streets expenditures. In total, revenues exceeded expenditures by $6.9 million; however, there were $4 million in transfers to other funds including $3.3 million to the Debt Service Fund, resulting in a $3 million (19%) increase in fund balance. Other Major Governmental Funds General Debt Service. The fund balance increased by $546 thousand during the year. This was primarily due to the current year property tax revenues of $19.2 million and transfers in from other funds of $20.2 million offset by the debt service requirements of $39 million. The remaining fund balance of $10.7 million will be used to fund future debt service payments on voter approved general obligation bonds. Special Assessments Debt Service. The deficit balance will be eliminated through future special assessment revenue. Streets and Transportation Capital Projects. The fund balance decreased by $7.3 million to $59.6 million. Current year expenditures exceeded revenues by $9.8 million but this deficit was covered by existing fund balance. Municipal Facilities Capital Projects. The fund balance decreased by $288 thousand during the year from a deficit of $16.2 million to a deficit of $16.5 million. Current year revenues and expenditures decreased from prior year by $2.8 million and $3.9 million, respectively, due to the completion of a fire station in fiscal year 2012 that was partially funded with a federal grant. The deficit will be covered by future collections of system development fees. Parks, Open Space and Recreation Capital Projects. The fund balance increased by $2.5 million to $17.1 million. Current year revenues of $9.7 million exceeded expenditures of $2 million; however, there were $5.4 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 $470 thousand (3.8%) to a balance at year end of $12.9 million. Nonmajor funds represent 6.6% 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 Environmental Services 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 also sized and pressurized 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 position increased by $18.3 million to $348 million due primarily to capital contributions of $19.2 million, including $16.6 million in system development fees and $2.6 million in distribution lines contributed by developers. Operating income was $5.6 million. Wastewater Fund The Wastewater Fund provides wastewater collection and treatment services to residents and businesses in Gilbert. The services also include the storage and distribution of effluent (treated wastewater). Net position increased $16.7 million to $284.4 million due primarily to capital contributions of $14.9 million, including $13.8 million in system development fees and $1.1 million in collection lines contributed by developers. Operating income was $1 million. Environmental Services Fund Gilbert operates the Environmental Services 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 position increased by $1.4 million to $26.9 million primarily from operating income. The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Environmental Services Funds. Proprietary Funds Operating Revenues and Expenses $40 Millions $30 Revenu es $20 Expe nses $10 $Water Wastewater Environmental Services General Fund Budgetary Highlights There was no difference between the original adopted budget and the final amended budget in total; however, there were several contingency transfers made to the various functions. The final amended budget projected that expenditures would exceed revenues by $8 million and included $5.3 million in net transfers to other funds resulting in a $13.7 million reduction to fund balance per the budget. During the year actual revenues exceeded the budgeted amount by $11 million (10%) mainly due to higher than expected local sales taxes. Actual expenditures were less than budgeted by $18.1 million (15%) mainly due to not needing budgeted contingency. This resulted in an excess of revenues over expenditures of $29.2 million more than budgeted, resulting in the actual net change in fund balance being $28.6 million more than budgeted. 10 TABLE OF CONTENTS Capital Asset and Debt Administration Capital Assets. As of June 30, 2013, Gilbert had $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 $19.6 million. Developer contributions of street related infrastructure valued at $4.6 million. Business-type Activities • • Developer contributions of water and wastewater infrastructure valued at $3.8 million. Completed water system improvements totaling $12.4 million and wastewater system improvements totaling $547 thousand. The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2013 and 2012. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Land Construction-in-progress Buildings Business-type Activities 2013 Total 2013 2012 $ 174,747,784 $ 173,438,077 23,134,530 18,101,080 4,117,565 3,044,140 27,252,095 21,145,220 148,773,207 157,411,702 - - 148,773,207 157,411,702 $ 2012 55,731,983 $ 2013 50,703,249 $ 230,479,767 2012 $ 224,141,326 Improvements 38,166,672 40,639,819 - - 38,166,672 40,639,819 Plant, Machinery & Equip 14,245,745 15,607,655 79,472,310 84,114,653 93,718,055 99,722,308 Water Rights - - 7,453,870 7,552,162 7,453,870 7,552,162 Infrastructure 559,227,997 566,295,320 303,809,174 302,916,780 863,037,171 869,212,100 Total Capital Assets $ 958,295,935 $ 971,493,653 $ 450,584,902 $ 448,330,984 $ 1,408,880,837 $ 1,419,824,637 Total governmental capital assets decreased $13 million and business-type capital assets increased $2 million. The majority of the decrease for the governmental capital assets can be attributable to increased depreciation as assets get older and the removal of obsolete or auctioned machinery and equipment assets. The majority of the increase for the business-type capital assets can be attributable to the purchase of land offset by increased depreciation as assets get older. See Note 6 on pages 50-52 for further information regarding capital assets. Long-term Debt. At June 30, 2013, Gilbert had total bonded debt obligations of $307.2 million related to governmental activities and $127.2 million in business-type activities; $149.7 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $10.4 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, 2013 was $95.7 million in the 6% capacity and $169.3 million in the 20% capacity. 11 TABLE OF CONTENTS See Note 8 on pages 53-58 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2013 and 2012. Town of Gilbert Outstanding Debt Governmental Activities 2013 $ 147,565,000 Special Assessment 10,430,000 Street and Highway User 16,945,000 Utility Revenue Municipal Property Corporation 132,295,000 Totals $ 307,235,000 General Obligation Business-type Activities 2012 $ 159,465,000 11,015,000 19,470,000 141,990,000 $ 331,940,000 2013 $ 2,110,000 13,980,000 111,120,000 $ 127,210,000 Total 2012 2013 2012 3,870,000 15,410,000 118,895,000 $ 138,175,000 $ 149,675,000 10,430,000 16,945,000 13,980,000 243,415,000 $ 434,445,000 $ 163,335,000 11,015,000 19,470,000 15,410,000 260,885,000 $ 470,115,000 $ 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, 2013. 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 AAAA+ AA A+ A Not Rated AA Not Rated AA+ A+ Not Rated Economic Factors and Next Year’s Budget This is an inspiring time for Gilbert. Residential and business communities alike are not only recovering from the recession, but in many cases are thriving. The Town continues to lead the Phoenix metropolitan area in residential permit activity, and is enthusiastic by the tremendous economic development partners that have engaged the community in recent years. Gilbert’s first class neighborhoods and exceptional citizen satisfaction have clearly established Gilbert as an iconic location to live, work, and play. Our business partners too are accomplishing many amazing things by establishing Gilbert’s presence at the regional, national, and global level. Orbital Sciences is working with NASA to build a satellite to monitor global climate change; Chicago based St. Xavier University, a Catholic based institution founded in 1846, plans to open its first satellite campus in downtown Gilbert; Banner MD Andersen Cancer Center has begun stem cell transplants to treat cancer patients, and has initiated a second expansion of its facility; American Furniture Warehouse is the largest retail project in the state, poised to open a nearly 600,000 square foot retail facility; Heliae, a remarkable success story from ASU Polytechnic, is recognized nationally as the leader in algae technology, and is undertaking an ambitious expansion of its Gilbert facility; and Nationwide Reality Investment is establishing a first class mixed use complex to include over 3,100,000 square feet of new office and retail space at Gilbert’s western entrance along the 202 freeway corridor. 12 TABLE OF CONTENTS Gilbert is committed to doing its part to ensure the continued success of the community. The Gilbert Town Council made solid responsible decisions during the recession, positioning the Town to succeed during recovery. As the economy began to improve, Gilbert’s staff and Council approached recovery just as seriously as it did recession, aligning both short-term goals and resources toward the long-term realization of Gilbert’s established strategic initiatives: Community Livability; Technology Leader; Long and Short Term Financial Plans; Infrastructure; Economic Development; and High Performing Government. Town staff continue to employ new and innovative ways to bring strategic focus to our goals and accomplish them with excellence utilizing tools and techniques such as FranklinCovey’s Four Disciplines of Execution. There are many elements to each of our strategic initiatives, and each tie back, in some way, to the long and short term financial plans. Government is a service industry and the compensation strategy for its workforce is a primary driver of costs and a critical element to accurate forecasts. Similarly, having the right classification structure in place is a significant element of developing a High Performing Organization. After completing a staffing vulnerability analysis and establishing a compensation philosophy, the Town partnered with a consultant, Fox Lawson and Associates, to conduct a comprehensive classification and compensation study in fiscal year 2012-13. This was a tremendous undertaking for all involved. Periodically conducting such an analysis will ensure that Gilbert maintains the correct structure and that our employees are competitively compensated based on the value of the service provided to the community. The fiscal year 2013-14 budget reflects the implementation of the findings from the classification and compensation study. It also demonstrates the Town’s commitment to its strategic initiatives and to becoming best in class in all lines of service. Our executive leadership team worked hard to develop a collaborative budget recommendation; one that accomplishes the policy direction laid out by the Town Council and reflects the best interests of the Town as a whole. The resulting budget emphasizes economic development, technology solutions and disaster recovery, restoring maintenance where it had previous been deferred, and positioning the community and the organization for long term success. Budget Highlights for Fiscal Year 2014 The total adopted budget for fiscal year 2013-14 is $466,461,200, and includes $279,835,323 in operating fund expenditures, $24,137,249 in special revenue and trust accounts, $97,116,790 in capital improvement funds, and $65,372,461 in debt service. Tax Rates: The recommended budget reflects no increases to tax rates. Balanced Financial Plan: The fiscal year 2013-14 adopted budget is balanced, based upon identified revenues and expenditures. Constitutional Expenditure Limit: The fiscal year 2013-14 adopted budget reflects expenses that will be under the constitutional expenditure limitation. Staff regularly monitors conformity with the constitutional expenditure requirements and will recommend, if necessary, continuing adjustments and modifications necessary to comply with expenditure limitation requirements. State Shared Revenues: The fiscal year 2013-14 adopted budget reflects State Shared Revenues based upon statutory distribution formulas, taking into account currently projected State sales and income tax collections (provided by the Arizona League of Cities and Towns), which reflect the state’s budgeted HURF distributions. Secondary Property Tax Rate: Total revenues included in the adopted budget reflect maintenance of the current secondary property tax rate of $1.15 per $100 of secondary assessed valuation. Utility Rate Modifications: The fiscal year 2013-14 adopted budget reflects revenues projected from Gilbert’s current water, wastewater, and reclaimed water rates. No rate increases are recommended for this fiscal year. 13 TABLE OF CONTENTS Capital Project Financing – System Development Fees: The fiscal year 2013-14 adopted budget reflects revenues projected from the continued collection of System Development Fees as allowed under current State Law. Staff has undertaken a comprehensive system development fee study to ensure our continued compliance. 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 & Management Services Department 50 E Civic Center Drive Gilbert, AZ 85296 (480) 503-6752 14 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position June 30, 2013 Primary Government Governmental Activities 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 $ Business-type Activities $ 5,359,966 10,557,283 482,004 16,304,623 2,863,091 (9,322,475) 3,319 474,747 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 Post-employment benefits Total liabilities NET POSITION Net investment in capital assets Restricted for: Debt service Capital projects System repair & maintenance Highways and streets Grant programs Court/public safety programs Parks and recreation programs Contract agreements Special districts Unrestricted Total net position 203,787,957 $ Component Unit 125,696,857 Industrial Development Authority Total $ 329,484,814 $ 14,371 286,712 5,011,417 136,545 9,322,475 224,569 5,359,966 10,557,283 768,716 21,316,040 2,999,636 3,319 699,316 - 20,046,876 75 1,335,046 338,313 64,463,849 63,648 1,241,838 141,407,653 84,510,725 63,723 2,576,884 141,745,966 - 197,882,314 760,413,621 1,210,526,760 59,849,547 390,735,354 798,440,464 257,731,861 1,151,148,975 2,008,967,224 14,371 7,599,148 10,418,526 1,211,404 200,536 3,436,676 121,606 4,356,056 324,964 1,363,675 3,210,592 - 11,955,204 10,743,490 1,363,675 1,211,404 200,536 3,210,592 3,436,676 121,606 - 4,053,052 24,695,000 737,297 7,240,000 4,790,349 31,935,000 - 7,026,342 295,814,800 342,986 354,920,076 1,192,258 119,714,433 87,374 138,226,649 8,218,600 415,529,233 430,360 493,146,725 - 687,909,606 325,356,563 1,013,266,169 - 20,155,806 20,323,593 13,500,048 4,226,459 1,852,986 14,392 107,314 344,082 107,172,398 855,606,684 20,828,847 36,804,300 13,245,724 263,978,381 660,213,815 40,984,653 57,127,893 13,245,724 13,500,048 4,226,459 1,852,986 14,392 107,314 344,082 371,150,779 $ 1,515,820,499 14,371 14,371 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, 2013 Program Revenues Charges for Services Expenses Functions/Programs Primary government Governmental activities: General government Management and policy Finance and management services Legal and court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities Business-type activities: Water Wastewater Environmental Services Total business-type activities Total primary government Component unit Industrial development authority $ 10,461,389 4,149,492 5,474,112 6,849,490 $ 2,931 250,894 762,287 7,239,914 Operating Grants and Contributions $ 32,583 30,000 - Capital Grants and Contributions $ - 42,759,060 25,866,786 44,048,280 20,857,878 461,120 3,113,705 5,511,716 185,224 1,516,389 3,705,724 1,276 215,945 1,241,059 18,467,762 1,224,350 8,810 49,884 1,941,322 2,652,557 21,296,276 9,545,376 653,166 - 15,142,477 179,183,789 19,176,355 21,270,393 36,088,697 $ 38,339,466 22,169,529 15,588,350 76,097,345 255,281,134 $ 36,455,247 23,082,930 16,759,973 76,298,150 95,474,505 $ 21,270,393 $ 19,206,550 14,946,428 34,152,978 70,241,675 $ 28 $ 9,666 $ - $ - 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 Miscellaneous Transfers Total general revenues and transfers Change in net position Net position, July 1, 2012 Net position, June 30, 2013 16 TABLE OF CONTENTS Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities $ (10,425,875) (3,898,598) (4,681,825) 390,424 Business-type Activities $ - Component Unit Industrial Development Authority Total $ (10,425,875) (3,898,598) (4,681,825) 390,424 $ - (35,090,077) (21,787,946) (2,767,853) (6,382,428) 200,856 (3,062,545) - (35,090,077) (21,787,946) (2,767,853) (6,382,428) 200,856 (3,062,545) - (15,142,477) (102,648,344) - (15,142,477) (102,648,344) - (102,648,344) 17,322,331 15,859,829 1,171,623 34,353,783 34,353,783 17,322,331 15,859,829 1,171,623 34,353,783 (68,294,561) 9,638 61,813,421 - 61,813,421 - 19,183,696 - 19,183,696 - 1,376,579 - 1,376,579 - 3,082,780 - 3,082,780 - 17,062,262 - 17,062,262 - 21,293,026 - 21,293,026 - 1,192,913 - 1,192,913 - 722,141 1,061,205 1,783,346 5 932,108 1,178,738 2,110,846 - - - 126,780,175 121,249 2,118,694 (121,249) 128,898,869 5 24,131,831 36,472,477 60,604,308 9,643 831,474,853 $ 855,606,684 $ 623,741,338 1,455,216,191 660,213,815 $ 1,515,820,499 4,728 $ 14,371 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, 2013 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 $ $ $ $ 69,158,457 $ 17,914,484 Special Assessments Debt Service General Debt Service $ 10,526,157 $ 48 5,172,183 192,503 15,020,233 239,935 349,332 3,319 23,523,354 44,343 3,944 1,417,739 - 169,685 39,327 - 10,557,283 281 - 6,137 113,665,453 19,380,510 13,131,677 75 23,866,921 10,557,612 3,971,019 10,268,762 106,750 - $ $ 889,227 67,065 15,452 - $ $ 9,695,000 3,436,676 - $ $ 2,412 - 6,144,699 20,491,230 971,744 13,131,676 10,555,798 10,558,210 23,526,673 10,092,418 59,555,132 93,174,223 113,665,453 13,925,796 4,482,970 18,408,766 19,380,510 9,599,968 1,135,277 10,735,245 23,866,921 40 (638) (598) 10,557,612 18 $ $ $ TABLE OF CONTENTS Streets and Transportation Capital Projects Municipal Facilities Capital Projects Parks, Open Space and Recreation Capital Projects $ $ $ $ $ $ 61,553,393 204,412 Other Governmental Funds 17,142,877 $ 12,270,492 Total Governmental Funds $ 188,770,320 139,743 1,175,336 - 702 - 40,289 17,802 31,422 - 18,098 21,604 50,363 1,173,995 591 - 5,359,966 10,557,283 478,090 16,268,380 2,863,091 349,332 3,319 591 23,523,354 62,868,472 6,909,062 7,114,176 17,232,390 13,535,143 20,046,876 75 268,220,677 1,975,957 13,399 78,334 - $ $ 125,256 23,523,354 1,174,640 3,242,330 23,648,610 29,484,118 30,142,024 59,626,142 62,868,472 6,894,361 93,857 (23,522,652) (16,534,434) 7,114,176 $ $ $ $ 95,632 - $ 95,632 $ 219,648 35,951 346,920 - $ $ 1,196 603,715 17,136,758 17,136,758 17,232,390 $ The notes to the financial statement are an integral part of this statement. 19 591 12,613,357 403,442 (85,962) 12,931,428 13,535,143 7,276,739 10,385,177 200,536 349,332 9,695,000 3,436,676 23,523,354 10,555,798 7,320,535 72,743,147 $ 23,527,264 89,654,398 46,349,988 35,945,880 195,477,530 268,220,677 TABLE OF CONTENTS 20 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2013 Fund balances - total governmental funds $ 195,477,530 Amounts reported for governmental activities in the statement of net position 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 1,493,897,963 (535,756,706) 958,141,257 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds 338,313 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 franchise fee revenue Deferred sales tax revenue 10,555,798 4,877,353 1,174,640 708,867 438,069 17,754,727 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 position, but are not included on the governmental fund balance sheet. 4,651,892 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 Post-employment benefits (307,235,000) (10,934,295) (342,986) (318,512,281) 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 position. Bond issuance costs/discounts/premiums Net position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement. 21 (2,244,754) $ 855,606,684 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2013 General 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 $ Expenditures Current: General government: Management and policy Finance and management services Legal and court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 61,889,627 2,373,913 5,433,766 41,347,579 8,186,206 14,376 4,123,082 124,866 611,686 124,105,101 Streets Special Revenue $ 18,389,548 6,294 2,776 156,198 161,837 18,716,653 General Debt Service $ 19,183,696 154,307 11,184 19,349,187 Special Assessments Debt Service $ 1,298,984 818 1,299,802 12,570,902 4,234,992 4,410,864 5,821,962 - - - 37,255,202 22,442,219 11,879,902 451,408 3,063,821 8,804,635 - - - 1,230,498 103,361,770 2,980,516 11,785,151 24,120,000 14,857,753 1,210 38,978,963 585,000 553,258 5,663 1,143,921 20,743,331 6,931,502 (19,629,776) 155,881 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 1,411,239 (7,240,729) (5,829,490) 50,000 (4,025,376) (3,975,376) 20,175,402 20,175,402 (220,496) (220,496) Net change in fund balances 14,913,841 2,956,126 545,626 (64,615) Fund balances at beginning of year 78,260,382 15,452,640 10,189,619 Fund balances at end of year $ 93,174,223 22 $ 18,408,766 $ 10,735,245 64,017 $ (598) TABLE OF CONTENTS Streets and Transportation Capital Projects $ 11,176,893 2,252,080 14,298 7,851 13,451,122 Municipal Facilities Capital Projects $ $ 31,422 9,513,954 157,697 9,703,073 Other Governmental Funds $ 2,363,923 1,958,283 1,380,763 2,611,545 104,655 584,736 91,188 104,379 9,199,472 Total Governmental Funds $ 61,889,627 21,547,619 2,373,913 5,433,766 72,903,725 1,298,984 9,573,263 2,252,080 17,836,264 119,031 4,710,594 706,589 932,937 201,578,392 - 52,090 - 12,799 342,315 124,542 12,583,701 4,234,992 4,753,179 5,998,594 65,265 - 1,762 3,709 - 265,488 - 1,560,209 96,541 1,767,558 1,749,779 9,712 49,884 38,817,173 22,542,469 10,637,458 13,895,169 461,120 3,113,705 23,215,797 23,281,062 6,576 1,092,968 1,157,105 1,765,899 2,031,387 563,718 6,277,057 24,705,000 15,411,011 13,449 30,849,396 188,016,416 (9,829,940) 4,596,877 7,671,686 2,922,415 13,561,976 2,550,894 (61,205) 2,489,689 1,201,402 (6,086,470) (4,885,068) 179,908 (5,361,252) (5,181,344) 204,946 (2,657,014) (2,452,068) 25,773,791 (25,652,542) 121,249 (7,340,251) 66,966,393 $ 5,710,765 7,217 36,000 5,753,982 Parks, Open Space and Recreation Capital Projects 59,626,142 $ (288,191) 2,490,342 470,347 13,683,225 (16,246,243) 14,646,416 12,461,081 181,794,305 (16,534,434) $ 17,136,758 $ The notes to the financial statements are an integral part of this statement. 23 12,931,428 $ 195,477,530 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, 2013 Net change in fund balances - total governmental funds $ 13,683,225 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 30,849,396 (48,599,223) (17,749,827) 24,705,000 (120,867) (151,572) 554,422 24,986,983 357,016 15,552 (40,060) 332,508 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 position 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 Amortization of bond issuance costs Amortization of deferred charge on refunding bonds Amortization of bond premium 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 income 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 4,614,943 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 Post-employment benefits (1,309,800) (342,986) (1,652,786) 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 Franchise fee revenue Sales tax Special assessments Change in net position of governmental activities - statement of activities The notes to the financial statements are an integral part of this statement. 25 25,281 708,867 (76,206) (741,157) (83,215) $ 24,131,831 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, 2013 Variance with Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Intergovernmental Charges for services Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Management and policy Finance and management services Legal and court Development services Public safety: Police Fire Parks and recreation Transportation Non departmental Capital outlay Contingency Total expenditures 55,400,000 2,444,210 3,131,500 40,509,830 7,329,130 10,000 3,740,500 280,000 205,000 113,050,170 Actual Amounts Final $ 55,400,000 2,444,210 3,131,500 40,509,830 7,329,130 10,000 3,740,500 280,000 205,000 113,050,170 $ 61,889,627 2,373,913 5,433,766 41,347,579 8,186,206 14,376 4,123,082 124,866 611,686 124,105,101 Final Budget Positive (Negative) $ 6,489,627 (70,297) 2,302,266 837,749 857,076 4,376 382,582 (155,134) 406,686 11,054,931 12,876,732 4,196,285 4,298,935 6,069,427 13,783,115 4,325,885 4,489,551 6,845,070 12,570,902 4,234,992 4,410,864 5,821,962 1,212,213 90,893 78,687 1,023,108 35,921,921 21,567,256 11,996,551 547,700 3,392,270 3,826,640 16,800,000 121,493,717 37,564,149 22,357,684 12,522,954 547,700 3,392,270 4,253,601 11,411,738 121,493,717 37,255,202 22,442,219 11,879,902 451,408 3,063,821 1,230,498 103,361,770 308,947 (84,535) 643,052 96,292 328,449 3,023,103 11,411,738 18,131,947 Excess (deficiency) of revenues over (under) expenditures (8,443,547) (8,443,547) 20,743,331 29,186,878 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 3,746,530 (9,025,220) (5,278,690) 3,746,530 (9,025,220) (5,278,690) 1,411,239 (7,240,729) (5,829,490) (2,335,291) 1,784,491 (550,800) (13,722,237) 14,913,841 Net change in fund balances $ (13,722,237) Fund balance at beginning of year Fund balance at end of year $ $ The notes to the financial statements are an integral part of this statement. 26 78,260,382 93,174,223 $ 28,636,078 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, 2013 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures 18,380,000 15,400 45,000 18,440,400 Final $ 18,380,000 15,400 45,000 18,440,400 $ 18,389,548 6,294 2,776 156,198 161,837 18,716,653 Final Budget Positive (Negative) $ 9,548 6,294 2,776 140,798 116,837 276,253 8,690,900 3,811,530 1,108,317 13,610,747 9,385,915 3,822,689 402,143 13,610,747 8,804,635 2,980,516 11,785,151 581,280 842,173 402,143 1,825,596 4,829,653 4,829,653 6,931,502 2,101,849 50,000 (6,395,670) (6,345,670) 50,000 (6,395,670) (6,345,670) 50,000 (4,025,376) (3,975,376) 2,370,294 2,370,294 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 $ (1,516,017) Fund balance at beginning of year Fund balance at end of year $ (1,516,017) 2,956,126 $ The notes to the financial statements are an integral part of this statement. 27 15,452,640 18,408,766 $ 4,472,143 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2013 Water ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Due from other governments Inventories $ Business-type Activities - Enterprise Funds Environmental Wastewater Services 71,531,833 $ 39,330,840 $ Total 23,214,472 $ 134,077,145 156,260 3,131,787 136,545 224,569 79,218 1,187,504 - 51,234 692,126 - 286,712 5,011,417 136,545 224,569 75,180,994 40,597,562 23,957,832 139,736,388 58,287,726 63,648 1,033,275 73,674,640 6,176,123 208,563 67,733,013 - 64,463,849 63,648 1,241,838 141,407,653 46,064,765 225,186,551 13,784,782 161,140,227 4,408,576 59,849,547 390,735,354 404,310,605 249,042,708 4,408,576 657,761,889 479,491,599 289,640,270 28,366,408 797,498,277 2,116,432 158,638 365,721 1,363,675 6,718,111 3,188,683 1,390,290 61,698 177,363 521,889 - 849,334 104,628 194,213 21,909 4,356,056 324,964 737,297 1,363,675 7,240,000 3,210,592 13,911,260 2,151,240 1,170,084 17,232,584 Noncurrent liabilities: General obligation bonds payable Utility revenue bonds payable Accrued compensated absences Post-employment benefits 250,170 116,773,585 549,336 43,230 2,690,678 365,797 15,251 277,125 28,893 250,170 119,464,263 1,192,258 87,374 Total noncurrent liabilities 117,616,321 3,071,726 306,018 120,994,065 131,527,581 5,222,966 1,476,102 138,226,649 149,235,545 20,134,070 36,804,300 7,898,122 133,891,981 $ 347,964,018 171,712,442 694,777 5,347,602 106,662,483 $ 284,417,304 4,408,576 22,481,730 26,890,306 325,356,563 20,828,847 36,804,300 13,245,724 263,036,194 $ 659,271,628 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 POSITION Net investment in capital assets Restricted for debt service Restricted for capital projects Restricted for system repair & maintenance Unrestricted Total net position $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 942,187 Net position of business-type activities $ 660,213,815 28 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 6,637,349 3,914 36,243 474,156 7,151,662 154,678 154,678 7,306,340 322,409 33,349 68,397 1,211,404 1,635,559 76,702 76,702 1,712,261 $ 154,678 5,439,401 5,594,079 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 Position Proprietary Funds For the Year Ended June 30, 2013 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 Nonoperating revenues (expenses) Interest expense Investment earnings Amortization of bond issuance costs Loss on sale of capital assets Total nonoperating revenues (expenses) Income (loss) before capital contributions and transfers $ Business-type Activities - Enterprise Funds Environmental Wastewater Services 36,455,247 1,084,488 37,539,735 $ 23,082,930 4,398 23,087,328 $ 16,759,973 89,852 16,849,825 564,559 3,711,601 8,633,963 8,326,684 752,977 21,989,784 970,222 5,535,165 6,892,629 1,545,518 668,502 15,612,036 2,606,238 16,013,236 28,640,690 19,400,211 2,930,471 69,590,846 5,550,709 1,097,544 1,237,789 7,886,042 (6,278,702) 506,447 (110,299) (5,882,554) (331,845) (171,388) 409,408 (27,223) 210,797 145,350 145,350 1,308,341 (6,450,090) 1,061,205 (137,522) (5,526,407) 1,383,139 19,206,550 (588,142) 14,946,428 493,143 (26,250) Change in net position 18,286,563 16,721,662 1,383,139 329,677,455 267,695,642 25,507,167 $ 347,964,018 $ 284,417,304 Total net position, end of year 76,298,150 1,178,738 77,476,888 1,071,457 6,766,470 13,114,098 9,528,009 1,508,992 31,989,026 Capital contributions Transfers in Transfers out Total net position, beginning of year $ Total 2,359,635 - $ 34,152,978 493,143 (614,392) 36,391,364 26,890,306 81,113 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities 30 $ 36,472,477 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 21,513,852 66,894 21,580,746 837,813 1,481,587 6,141,678 12,641,454 40,085 21,142,617 438,129 15,552 (40,060) (24,508) 413,621 413,621 5,180,458 $ 5,594,079 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, 2013 Water Cash flows from operating activities: Cash receipts from customers 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 Cash payments to other funds for services Net cash provided by operating activities $ 36,413,917 1,084,488 (13,138,354) (6,676,265) (1,508,992) 16,174,794 Cash flows from noncapital financing activities: 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 sales of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Net cash provided by (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 to net cash provided by (used in) operations: Operating income Adjustments to reconcile operating income to net cash provided by (used in) operating activities: Depreciation Provision for uncollectible accounts Changes in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in inventories Increase (decrease) in accounts payable Decrease in claims payable Decrease in deposits Increase in accrued expenses Total adjustments Net cash provided by operating activities Supplemental disclosures of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment $ 23,812,303 4,398 (8,711,549) (3,583,532) (752,977) 10,768,643 (588,142) (588,142) 493,143 (26,250) 466,893 (11,935,184) 16,556,838 (6,366,405) (10,471,421) (12,216,172) (2,694,218) 13,814,379 (171,388) (493,579) 10,455,194 Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Business-type Activities - Enterprise Funds Environmental Wastewater Services $ 17,018,299 89,852 (7,364,231) (5,498,619) (668,502) 3,576,799 $ - Total 77,244,519 1,178,738 (29,214,134) (15,758,416) (2,930,471) 30,520,236 493,143 (614,392) (121,249) (608,995) (608,995) (15,238,397) 30,371,217 (6,537,793) (10,965,000) (2,369,973) 512,618 512,618 368,940 368,940 141,774 141,774 1,023,332 1,023,332 3,883,098 125,936,461 $ 129,819,559 $ 22,059,670 23,447,293 45,506,963 3,109,578 20,104,894 23,214,472 29,052,346 169,488,648 $ 198,540,994 $ 71,531,833 58,287,726 $ 129,819,559 $ $ 134,077,145 64,463,849 $ 198,540,994 $ 5,550,709 $ $ $ 39,330,840 6,176,123 45,506,963 $ 23,214,472 23,214,472 $ 1,097,544 $ 1,237,789 $ 7,886,042 9,528,009 223,445 8,326,684 228,065 1,545,518 207,164 19,400,211 658,674 (207,894) 42,919 1,004,282 (56,881) 90,205 10,624,085 501,309 486,973 128,068 9,671,099 55,898 498,620 (4,736) 36,546 2,339,010 349,313 42,919 1,989,875 (61,617) 254,819 22,634,194 $ 16,174,794 $ 10,768,643 $ 3,576,799 $ 30,520,236 $ $ 2,649,712 2,649,712 $ $ 1,132,049 1,132,049 $ $ - $ $ 3,781,761 3,781,761 32 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 49,254 21,530,108 (19,704,740) (1,481,277) 393,345 - 722 722 15,890 15,890 $ $ 409,957 6,227,392 6,637,349 $ 6,637,349 6,637,349 $ 438,129 40,085 (1,384) (6,115) (44,513) (33,167) 310 (44,784) $ 393,345 $ $ - 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 Position Fiduciary Funds June 30, 2013 Firemen's Pension Trust Agency Funds $ 97,229 - $ 210,890 384 97,229 $ 211,274 - $ 184,483 7,849 672 18,270 - $ 211,274 ASSETS Restricted cash and investments Restricted accrued interest Total assets LIABILITIES Guaranty and other deposits Due to developers Medical benefits payable Dependent care benefits payable Total liabilities NET POSITION Held in trust for pension benefits $ The notes to the financial statements are an integral part of this statement. 34 97,229 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Position Fiduciary Fund For the Year Ended June 30, 2013 Firemen's Pension Trust Additions Interest on investments $ Total additions 104 104 Deductions Benefits Administration 2,400 100 Total deductions 2,500 Change in net position (2,396) Net position - beginning of the year 99,625 Net position - end of the year The notes to the financial statements are an integral part of this statement. 35 $ 97,229 TABLE OF CONTENTS 36 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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. During the fiscal year ended June 30, 2013, Gilbert implemented the provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statement No. 63 establishes criteria for reporting the consumption and acquisition of net position that is applicable to future reporting periods. A. Reporting Entity Gilbert’s operations include public safety (police, fire, and animal control), parks and recreation (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 environmental services, 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, 2013, 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 position. 37 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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. 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 2013 (life to date $7,174,250) 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 Position 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 Position reports all financial and capital resources of the government (excluding fiduciary funds). It is displayed in a format of assets less liabilities equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) Net investment in capital assets, 2) restricted and 3) unrestricted. Net investment in capital assets 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 position has constraints placed on its 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 position 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. 38 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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. 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 Position. 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. 39 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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. 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). 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 environmental 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, 2013 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 position, 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. Environmental Services Fund – The environmental services 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, 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, and monies collected from developers for sewer buy-ins and paid out to the developer that constructed the sewer. 41 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 F. Budgetary Data In January of each year, the Office of Management & Budget (OMB) prepares a revenue estimate based upon local and state-shared 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 OMB. Departments work with the Capital Improvement Program (CIP) Division to finalize project estimates for the CIP, and submit them to the OMB for funding. Estimates for trust and agency, debt service, maintenance improvement districts, and internal service funds are prepared by the OMB 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 sets policy and adopts the annual budget at the fund level as a total amount of expenditures. Financial control is set by Council at the fund level, with budgetary control for operating performance administered at the departmental level. Budget adjustments for special revenue funds, excluding Highway User Revenue Funds, will be administered by the OMB and will not exceed the available revenues. Grants and restricted appropriations are administered by department. Directors may authorize transfers within nonpersonnel budget lines at the same fund, department, and project level. Council action is required to approve adjustments between funds, projects, or contingency transactions over $50,000. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget on a case-by-case basis. 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, repurchase agreements, corporate notes, commercial paper, 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, 2013 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 position, 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 vary 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, 2013 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 position. 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, 2013 N. Property Tax Gilbert's property tax levy 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 & Management Services 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, 2013 As of June 30, 2013, 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 $23,523,354 Inventory $ - $ - $ - $ - $ - $ - $ - $ 23,523,354 - - - - - - - 591 591 3,319 - - - - - - - 3,319 Capital projects - - - - 29,484,118 6,894,361 17,136,758 6,062,187 59,577,424 Court/public safety programs - - - - - - - 1,852,986 1,852,986 Debt service - - 9,599,968 40 - - - - 9,600,008 Grants - - - - - - - 4,232,987 4,232,987 Highways and streets - 13,925,796 - - - - - - 13,925,796 Contract agreements - - - - - - - 107,314 107,314 Parks & recreation programs - - - - - - - 14,392 14,392 Special districts - - - - - - - 343,491 343,491 Prepaid items Restricted for: Assigned to: Capital replacement 9,381,351 4,482,970 - - - - - - 13,864,321 Capital projects 416,374 - - - - 93,857 - 202,550 712,781 Court/public safety programs 150,000 - - - - - - 120,056 270,056 - - 1,135,277 - - - - - 1,135,277 23,500 - - - - - - - 23,500 - - - - 30,142,024 - - - 30,142,024 116,097 - - - - - - - 116,097 5,096 - - - - - - 80,836 85,932 59,555,132 - - (638) - (23,522,652) - (85,962) 35,945,880 $93,174,223 $18,408,766 $10,735,245 (598) $59,626,142 ($16,534,434) $17,136,758 $12,931,428 $195,477,530 Debt service Development services Highways and streets Management and policy Parks & recreation programs Unassigned: Total fund balances $ 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 position/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, 2013 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. The State Board of Investment 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, 2013, Gilbert’s investments were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Municipal Bonds Corporate Notes State Treasurer’s Investment Pool Money Market – U.S. Treasuries: Wells Fargo Bank of NY Mellon Total Fair Value $111,181,358 69,550,599 3,607,029 36,811,131 93,707,538 11,446,863 13,730,807 $340,035,325 47 Investment Maturities (in Years) Less than 1 1-4 $11,372,513 $ 99,808,845 18,608,932 50,941,667 3,607,029 4,349,760 32,461,371 30,507,636 63,199,902 11,446,863 13,730,807 $90,016,511 $250,018,814 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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, 2013, the investments in the U.S. Government Agencies were rated AA+, the investments in Municipal Bonds ranged from AA ratings to AAA ratings, and the investments in Corporate Notes ranged from A ratings to AA+ ratings. Gilbert’s investment in the State Treasurer’s Investment Pool had a weighted average rating of AA+ at year end as it was invested in obligations of the U.S. Government or obligations guaranteed by the U.S. Government. 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, 2013, Gilbert’s bank balance was $73,095,185 of which $11,380,082 was with JP Morgan and $61,715,103 was with Alliance Bank of Arizona. $11,130,082 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 limits corporate notes to 20% of total funds and 3% per issuer. As of June 30, 2013, of Gilbert’s investments, 33% are in U.S. Government Treasuries, 28% are in the State Treasurer’s Investment Pool and 20% are in U.S. Government Agencies. Reconciliation of pooled cash and investments as reported on the statement of net position: Primary government: Carrying amount of cash/deposits Carrying amount of investments Total cash and investments $ 74,268,333 340,035,325 $414,303,658 Pooled cash and investments Restricted cash and investments Total cash and investments (per Statement of Net Position) Pension trust fund Agency funds Total cash and investments 48 $329,484,814 84,510,725 413,995,539 97,229 210,890 $414,303,658 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Note 4 - Taxes Receivable and Due from Other Governments The general fund taxes receivable amount at June 30, 2013, includes $1,485,509 in state shared sales tax and $3,686,674 in local sales tax due from the State of Arizona. Amounts due from other governments recorded in the streets special revenue fund include $1,079,446 in highway user revenues and $338,293 in vehicle license tax both due from the State of Arizona. Other governmental funds include $399,261 in federal grants from the U.S. Department of Housing and Urban Development, $68,111 from the U.S. Department of Transportation, and $19,796 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, 2013, 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 $ $ 349,332 Special assessments debt service fund 2,412 Other governmental funds 346,920 Total $ 349,332 $ 349,332 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 $ $23,523,354 Municipal facilities capital projects fund 23,523,354 Total $23,523,354 $23,523,354 49 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Note 6 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2013, is as follows: July 1, 2012 Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ Additions 173,438,077 $ 18,101,080 191,539,157 1,309,707 $ 26,475,689 27,785,396 216,660,579 69,654,839 54,170,636 928,998,473 Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation June 30, 2013 - $ (21,442,239) (21,442,239) 174,747,784 23,134,530 197,882,314 70,106 1,092,789 2,416,601 25,348,915 (1,964,170) - 216,730,685 70,747,628 54,623,067 954,347,388 1,269,484,527 28,928,411 (1,964,170) 1,296,448,768 (59,248,877) (29,015,020) (38,562,981) (362,703,153) (8,708,601) (3,565,936) (3,680,273) (32,416,238) 1,865,932 - (67,957,478) (32,580,956) (40,377,322) (395,119,391) (489,530,031) (48,371,048) 1,865,932 (536,035,147) 779,954,496 (19,442,637) (98,238) 760,413,621 Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets, net Governmental activities capital assets, net Deletions $ 971,493,653 $ 8,342,759 $ (21,540,477) $ 958,295,935 Governmental activities construction-in-progress and related construction commitments at June 30, 2013, were composed of the following: Constructionin-progress Commitments Redevelopment Municipal facilities Parks Storm water Traffic control Streets capital projects Total $ $ 708,236 1,363,637 2,341,039 43,422 482,661 18,195,535 23,134,530 $ $ 189,192 6,737,600 6,926,792 In addition, there were non-construction related commitments at June 30, 2013, as follows: General Streets special revenue Other governmental Total $ $ 50 801,727 245,928 156,894 1,204,549 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Depreciation expense was charged to governmental functions in the government-wide financial statement as follows: Management and policy Finance and management services Legal and court Development services Police Fire Highways and streets Parks and recreation 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 $ 165,930 300,855 675,372 876,302 2,885,955 3,091,338 33,395,162 6,940,049 48,330,963 40,085 Total depreciation expense - governmental activities $48,371,048 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2013, is as follows: July 1, 2012 Non-depreciable assets: Land $ Construction-in-progress Total non-depreciable assets Depreciable assets: Plant and equipment Water rights Infrastructure Additions 50,703,249 $ 3,044,140 53,747,389 5,028,733 $ 14,043,186 19,071,919 Deletions June 30, 2013 - $ (12,969,761) (12,969,761) 55,731,982 4,117,565 59,849,547 131,085,876 9,146,281 409,716,998 1,189,346 11,363,252 - 132,275,222 9,146,281 421,080,250 Total depreciable assets Less accumulated depreciation: Plant and equipment Water rights Infrastructure 549,949,155 12,552,598 - 562,501,753 (46,971,223) (1,594,119) (106,800,218) (5,831,689) (98,292) (10,470,858) - (52,802,912) (1,692,411) (117,271,076) Total accumulated depreciation Total depreciable assets, net (155,365,560) 394,583,595 (16,400,839) (3,848,241) - (171,766,399) 390,735,354 Business-type activities capital assets, net $ 448,330,984 $ 51 15,223,678 $ (12,969,761) $ 450,584,901 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Business-type activities construction-in-progress and related construction commitments at June 30, 2013, are composed of the following: Constructionin-progress Commitments Water system Wastewater system Total $ $ 1,170,994 2,946,571 4,117,565 $ $ 365,272 42,070 407,342 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 Office of Human Resources. 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 2013, 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. 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 $1,211,404 reported in the employee benefit self-insurance trust at June 30, 2013, 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 2013, a decrease of $32,067 was recorded for IBNR claims under the medical plan and a decrease of $1,100 was recorded 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 2013 reflects a decrease in claims costs from fiscal year 2012. Of the $865,197 decrease in claims costs during fiscal year 2013, $816,926 was attributable to medical benefits and $48,271 was attributable to dental benefits. 52 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Changes in the fund’s claim liability amount in fiscal years 2012 and 2013 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 $ 1,080,441 $ 1,244,571 13,506,651 12,641,454 13,342,521 12,674,621 $1,244,571 $1,211,404 2012 2013 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, 2013, were as follows: Governmental 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 $ Business-type - $2,110,000 10,715,000 - 136,850,000 - $147,565,000 $2,110,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 Total Governmental Activities Principal Interest $ 12,500,000 12,350,000 17,465,000 13,200,000 14,000,000 78,050,000 $147,565,000 $ 6,592,000 5,967,000 5,349,500 4,476,250 3,816,250 8,698,750 $34,899,750 53 Business-type Activities Principal Interest $1,865,000 245,000 _______$2,110,000 $ 121,325 14,088 ______$ 135,413 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 In prior years, Gilbert refinanced various bond issues through the issuance of refunding bonds that are considered an in-substance defeasance of debt. The securities purchased with the proceeds of the refunding bonds were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments. The amount of principal outstanding on the defeased bonds at June 30, 2013, was: 2003 Street and Highway User Revenue Bonds $2,525,000 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, 2013: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Purposes Bonds All Other General Obligation Bonds Secondary Assessed Valuation $1,594,806,737 Secondary Assessed Valuation $1,594,806,737 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 $318,961,347 (149,675,000) $169,286,347 $95,688,404 $95,688,404 As of June 30, 2013, 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. 54 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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, 2013, 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. Special assessment bonds outstanding at June 30, 2013, were as follows: Governmental 2002 Improvement District #19 Bonds, 5.2%, original amount $6,510,000, annual retirements due January 1, 2005 through January 1, 2027 $ 2,380,000 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012 through January 1, 2029 8,050,000 Total $10,430,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Total Governmental Activities Principal Interest $ 470,000 475,000 500,000 540,000 570,000 3,240,000 3,935,000 700,000 $10,430,000 $ 522,265 498,045 473,058 446,405 417,958 1,618,137 679,178 17,850 $4,672,895 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. 55 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Street and highway user revenue bonds outstanding at June 30, 2013, were as follows: Governmental 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 $16,945,000 Annual debt service requirements to maturity for street and highway user revenue bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019 Total Governmental Activities Principal Interest $ 2,030,000 2,750,000 2,845,000 2,975,000 3,095,000 3,250,000 $16,945,000 $ 693,450 632,550 550,050 436,250 317,250 162,500 $ 2,792,050 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, 2013, were as follows: Business-type 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 $13,980,000 Annual debt service requirements to maturity for revenue bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2022 Total Business-type Activities Principal Interest $ 1,500,000 1,585,000 1,660,000 1,745,000 1,380,000 6,110,000 $13,980,000 56 $ 610,162 535,163 455,913 372,912 307,475 649,213 $2,930,838 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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.) Municipal property corporation revenue bonds outstanding at June 30, 2013, were as follows (the 7/1/13 principal payment was deducted as fiscal year 2013 resources were dedicated): Governmental 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 $ 45,095,000 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 $ - - 111,120,000 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 68,055,000 - 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 19,145,000 - $132,295,000 $111,120,000 Total Annual debt service requirements to maturity for municipal property corporation revenue bonds are as follows: Year Ending June 30 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2032 Total Governmental Activities Principal Interest $ 10,080,000 7,515,000 7,950,000 8,950,000 10,485,000 44,450,000 42,865,000 ________$132,295,000 $ 6,458,288 6,028,788 5,700,138 5,330,088 4,905,888 16,560,760 7,738,925 ______$52,722,875 Business-type Activities Principal Interest $ 3,875,000 4,075,000 4,275,000 4,500,000 4,750,000 27,550,000 35,075,000 27,020,000 $111,120,000 $ 5,357,825 5,159,075 4,950,325 4,730,950 4,499,700 18,613,687 11,086,875 2,120,263 $56,518,700 During the fiscal year ended June 30, 2013, Gilbert paid $4,075,000 of the 2007 Water Resources Municipal Property Corporation, Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds. Proceeds collected from the 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, 2013 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2013, was as follows: Balance July 1, 2012 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 Post-employment benefits 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 Post-employment benefits Total long-term liabilities $159,465,000 Additions $ 11,015,000 170,795,000 6,762,920 Reductions Balance June 30, 2013 Due Within One Year - $(11,900,000) $147,565,000 $12,500,000 - (585,000) (11,860,000) (554,423) 10,430,000 158,935,000 6,208,497 470,000 11,725,000 - (2,780,269) 345,257,651 9,778,878 - 8,796,573 419,047 151,572 (24,747,851) (7,496,057) (76,061) (2,628,697) 320,509,800 11,079,394 342,986 24,695,000 4,053,052 - $355,036,529 $9,215,620 $(32,319,969) $331,932,180 $28,748,052 $ $ - $ (1,760,000) (9,205,000) 2,697 (47,070) $ 2,110,000 125,100,000 (38,550) 436,756 $ 1,865,000 5,375,000 - (721,159) 137,896,420 1,828,662 - 1,648,690 106,750 67,386 (10,941,987) (1,547,797) (19,376) (653,773) 126,954,433 1,929,555 87,374 7,240,000 737,297 - $139,725,082 $1,755,440 $(12,509,160) $128,971,362 $ 7,977,297 3,870,000 134,305,000 (41,247) 483,826 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, $145,099 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 and Master Lease and Sublease Agreements 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 leases, and accordingly they have not been reported in the accompanying combined financial statements. At June 30, 2013, Industrial Development Authority Revenue Bonds and Master Lease and Sublease Agreements outstanding were $29,551,982 and $47,993,320, respectively. 58 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Note 9 - 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. 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 seven-member board, known as The Board of Trustees, 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 EORP is governed by The Board of Trustees of PSPRS according to the provisions of 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 defined benefit 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. 59 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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, 2013, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.14% (10.90% 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 11.14% (10.25% for retirement, 0.65% 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 2013 2012 2011 Retirement Fund $ 3,925,481 3,658,186 3,236,934 Health Benefit Supplement Fund $248,933 233,501 211,964 Long-Term Disability Fund $ 91,364 96,821 89,656 Agent plans - For the year ended June 30, 2013, active PSPRS members were required by statute to contribute 9.55% of police member’s annual covered payroll and 9.55% for fire member’s annual covered payroll. Gilbert was required to contribute at the actuarially determined rate of 17.02% for police personnel, of which 0.39% was the health insurance premium portion; and 12.77% for fire personnel, of which 0.30% was the health insurance premium portion. Active EORP members were required by statute to contribute 11.5% 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 36.44% of the members’ annual covered payroll, of which 1.50% was the health insurance premium portion. Actuarial methods and assumptionsThe contribution requirements for the year ended June 30, 2013, were established by the June 30, 2011 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 2013 contribution requirements, are as follows: 60 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Actuarial valuation date June 30, 2011 Actuarial cost method Entry Age Normal Amortization method Level percent-of-pay closed Remaining amortization period 25 years for underfunded actuarial accrued liability, 20 years for overfunded Asset valuation method 7-year smoothed market value Actuarial assumptions: Investment rate of return Projected salary increases including inflation rate at 8.25% 5.0% - 8.0% for PSPRS and 4.5% for EORP 5.0% for PSPRS and 4.5% for EORP Annual Pension/OPEB Cost – Gilbert’s pension/other post-employment benefits (OPEB) cost for the agent plans for the year ended June 30, 2013, and related information follows (actual contributions made were equal to the annual pension/OPEB cost): PSPRS-Police $2,892,162 67,826 Pension Health Insurance PSPRS-Fire $1,729,072 41,598 EORP $57,265 2,458 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 2013 2012 2011 $ 2,805,501 2,439,689 2,496,320 100.0% 100.0% 100.0% -0-0-0- 2013 2012 2011 65,793 97,156 92,055 100.0% 100.0% 100.0% -0-0-0- 2013 2012 2011 $ 1,672,852 1,297,068 1,422,492 100.0% 100.0% 100.0% -0-0-0- 2013 2012 2011 40,245 62,951 57,488 100.0% 100.0% 100.0% -0-0-0- 2013 2012 2011 $57,265 51,135 45,923 100.0% 100.0% 100.0% -0-0-0- 2013 2012 2011 2,458 2,934 2,901 100.0% 100.0% 100.0% -0-0-0- 61 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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, 2013, and the previous two fiscal years. The fiscal year 2013 actuarial methods and assumptions used for the schedules are not significantly different than the fiscal year 2011 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 Board of Trustees 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 2013 $ 51,402,243 2012 46,823,028 2011 40,140,063 Actuarial Actuarial Valuation Value of Date Plan June 30 Assets Health Insurance 2013 $ -02012 -02011 -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)____ 68,370,995 61,175,480 53,624,989 (16,968,752) (14,352,452) (13,484,926) 17,167,856 16,652,610 16,176,077 (98.8)% (86.2)% (83.4)% Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ 1,808,786 1,663,617 1,575,279 (1,808,786) (1,663,617) (1,575,279) 0.0% 0.0% 0.0% 75.2% 76.5% 74.9% 17,167,856 16,652,610 16,176,077 (10.54)% (9.99)% (9.74)% PSPRS - Fire (1) Actuarial Valuation Actuarial Date Value of June 30 Assets Pension 2013 $40,413,033 2012 35,417,839 2011 28,233,335 Actuarial Valuation Actuarial Date Value of June 30 Assets Health Insurance 2013 $ -02012 -02011 -0- (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll 42,232,338 37,018,127 30,559,021 (1,819,305) (1,600,288) (2,325,686) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) 1,251,900 1,097,566 1,027,298 (1,251,900) (1,097,566) (1,027,298) 62 95.7% 95.7% 92.4% Funded Ratio (1)/(2) 0.0% 0.0% 0.0% 13,278,222 13,072,322 12,905,560 Annual Covered Payroll 13,278,222 13,072,322 12,905,560 (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (13.7)% (12.2)% (18.0)% Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (9.43)% (8.40)% (7.96)% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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 2013. Administrative costs are financed through investment earnings. There is only one remaining pensioner receiving retirement benefits from the Fund. Note 10 - Post-Employment Healthcare Benefits Other post-employment healthcare benefits, like the cost of pension benefits, constitute an exchange of compensation for employee services rendered. Similar to pension benefits, the cost of OPEB generally should be associated with the periods in which the exchange occurs rather than in future periods in which the benefits are provided. GASB Statement No. 45 required Gilbert to measure and recognize the OPEB cost while employee services are rendered and provide information about the potential demands on Gilbert’s future cash flows. Plan Description Gilbert provides post-employment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan. The plan provides medical and dental benefits for eligible retirees, their spouses and dependents through Gilbert’s group health and dental insurance plans, which cover active and retired members. To be eligible for benefits, the retired employee must retire under one of the state retirement plans for public employees, must have a minimum of ten years of service with Gilbert, and be covered under Gilbert’s medical plan during their active status. Plan benefits and coverage levels are reviewed annually by Town staff and the Board of Trustees for recommendation to and approval from Town Council. The Board of Trustees makes corresponding premium recommendations to the Town Council based on revenues needed to cover the projected cost to operate the plan which are subject to approval by the Town Council. As of June 30, 2013, there are 19 retirees that are currently receiving medical and/or dental benefits. The plan is not accounted for as a trust fund because an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. Funding Policy Gilbert requires retirees to pay 100% of the full blended contribution rate. Gilbert makes no contributions for retirees other than allowing them to participate through Gilbert’s pooled benefits. By providing retirees access to Gilbert’s healthcare plans, Gilbert is in effect providing a subsidy to retirees. This implied subsidy exists because on average, retiree healthcare costs are higher than active employee healthcare costs. Gilbert pays for and reports retiree benefits on a pay-as-you-go basis, which is the practice of paying for these benefits as they become due each year. As of June 30, 2013, retirees contributed $198,175 and Gilbert contributed $95,437 (implied subsidy). 63 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Annual OPEB Cost and Net OPEB Obligation Gilbert’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. Gilbert’s annual OPEB costs for the current year and related information for the plan are as follows at June 30, 2013: Annual Required Contribution (ARC) ARC Adjustment Interest on the Net OPEB Obligation Annual OPEB Cost Contributions Made Increase in Net OPEB Obligation Net OPEB Obligation – Beginning of year Net OPEB Obligation – End of year $289,950 218,067 17,780 $525,797 (95,437) $430,360 $430,360 Gilbert’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the fiscal year ended June 30, 2013 is as follows: Fiscal Year Ended 2013 Annual OPEB Cost $525,797 Percentage of OPEB Cost Contributed 18.15% Employer Contributions $95,437 Net OPEB Obligation $430,360 Schedule of Funded Status and Funding ProgressFollowing is the schedule of funded status and funding progress of the plan as of the most recent actuarial valuation date, June 30, 2013: Actuarial Valuation Date July 1 2012 $ (1) (2) (3) (4) (5) Actuarial Value of Plan Assets 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)____ -0- 4,151,069 (4,151,069) 0.0% 58,114,323 (7.1)% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the employer and plan members in the future. Actuarial calculations reflect a long-term perspective. 64 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 The actuarial methods and significant assumptions used to determine the ARC for the current fiscal year are as follows: 1. The actuarial cost method used is the unit credit normal method. 2. As of the valuation date, there are no assets, hence no need for an actuarial value of assets. 3. The amortization method is level dollar. The amortization period is 30 years. The period is open. For the July 1, 2012 actuarial valuation, the unit credit normal method was used along with a discount rate of 3.5%. In addition, the actuarial assumptions included: an annual medical healthcare cost trend rate of 9.0% initially, reduced by decrements to an ultimate rate of 5.0% after 8 years; an annual dental healthcare cast trend rate of 4.5% initially, reduced to 3.0% after 8 years; and an annual salary increase of 2%. Note 11 - Capital Contributions During the year ended June 30, 2013, the Enterprise funds external capital contributions consisted of the following: Contributions from developers Development fees Total Water Wastewater Total $ 2,649,712 $ 1,132,049 $ 3,781,761 16,556,838 13,814,379 30,371,217 $19,206,550 $14,946,428 $34,152,978 Note 12 – Interfund Transfers As of June 30, 2013, 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 $ 1,411,239 50,000 20,175,402 2,550,894 1,201,402 179,908 204,946 25,773,791 $ 7,240,729 4,025,376 220,496 61,205 6,086,470 5,361,252 2,657,014 25,652,542 493,143 493,143 588,142 26,250 614,392 $26,266,934 $26,266,934 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 2013 that were either nonroutine in nature or inconsistent with the activities of the fund making the transfer. 65 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Note 13 - Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2013, were as follows: Debt service funds Special assessments $ Capital projects funds Municipal facilities $16,534,434 Special revenue funds CDBG/HOME $ 598 73,697 The deficiency in the special assessments fund of the debt service funds will be eliminated through the future collection of principal and interest payments on the improvement bonds. 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, 2013, were as follows: Debt service funds General debt obligations Special assessments $ $ 2,543 702 The excess of expenditures over appropriations in the general debt obligations was funded by available fund balance. The excess of expenditures over appropriations in the special assessments was funded by principal and interest payments on the improvement bonds from property owners. 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 9 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $16,910,837. Principal and interest paid for the current year was $2,111,663, and total customer net revenues were $24,502,946. 66 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 Gilbert has pledged future water 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 $146,175,000 in utility revenue bonds issued since 2007. Proceeds from the bonds provided financing for the construction of a joint use water treatment plant and for the acquisition of additional water production and distribution capacity for the water system. The bonds are payable from water connection development fees revenue and water and wastewater net revenues and are payable through 2032. Annual principal and interest payments on the bonds are expected to require less than 27 percent of revenue. The total principal and interest remaining to be paid on the bonds is $167,638,700. Principal and interest paid for the current year was $13,317,403 (of which $4,075,000 in principal was an advance defeasance). Total water connection development fees revenue was $12,466,409 and water and wastewater net revenues after debt payments were $22,391,283. Gilbert has pledged future street and highway revenues to repay $16,945,000 in highway user revenue refunding bonds issued in 2012. Proceeds from the 2012 refunding bonds were used to advance refund $17,950,000 of outstanding 2003 highway user revenue bonds (proceeds from the 2003 bonds provided financing for the purpose of street and highway construction projects). The refunding 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 30 percent of revenues. The total principal and interest remaining to be paid on the bonds is $19,737,050. Principal and interest paid for the current year was $3,332,400, and the total street and highway revenues were $11,414,425. Gilbert has pledged future excise taxes and state-shared revenues to repay $154,005,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2006 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 16 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds is $185,017,875. Principal and interest paid for the current year was $16,568,353, and the total excise taxes and state-shared revenues were $109,637,647. 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, 2013, was: Mesa’s Share Gilbert’s Share Queen Creek’s Share Total $ 64,583,249 67,733,013 26,625,541 $158,941,803 67 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2013 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 treats 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, 2013, was: Gilbert’s Share Chandler’s Share Total $ 73,674,640 69,197,886 $142,872,526 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). On May 1, 2012, Rio Verde Fire District Joined TOPAZ. 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 six month rolling average of airtime. Gilbert’s investment in joint venture is reflected within the governmental activities in the government-wide statement of net position. Separate financial statements are not prepared. Total investment as of June 30, 2013, was: Mesa’s Share Gilbert’s Share Apache Junction’s Share Apache Junction FD’s Share Queen Creek’s Share Rio Verde FD’s Share Total $1,567,692 338,313 94,406 44,781 21,061 7,193 $2,073,446 Note 17 - Subsequent Events Gilbert advance defeased $3,125,000 of the $111,120,000 in outstanding Water Resources MPC Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds on October 1, 2013. 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. 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, 2013 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 $ 4,179,580 $ 1,475,891 8,710 76,846 $ 4,265,136 3,273 49,948 686,482 $ 2,215,594 $ $ $ $ 43,218 - 10,557 29,453 - 1,196 44,414 40,010 4,220,722 4,220,722 $ 4,265,136 1,974,692 200,892 2,175,584 $ 2,215,594 70 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ 12,238 $ 240,890 $ 112,826 27 399,261 411,526 $ 11,206 252,096 $ 6,892 217 591 120,526 135,263 3,040 346,920 $ 485,223 $ 12,265 (85,962) (73,697) 411,526 $ - $ 25,082 3,458 - - 28,540 252,096 252,096 252,096 591 91,395 91,986 120,526 $ TABLE OF CONTENTS Capital Projects Traffic Control $ 4,817,055 Flood Control and Storm Water $ - 9,377 415 11,406 $ 4,838,253 $ - $ $ 4,544 - - Redevelopment $ 1,432,012 $ 1,432,012 $ 984 - 4,544 - 984 4,778,348 55,361 4,833,709 $ 4,838,253 - 1,283,839 147,189 1,431,028 1,432,012 $ $ Total Nonmajor Governmental Funds $ 12,270,492 $ 18,098 21,604 50,363 1,173,995 591 13,535,143 $ 219,648 35,951 346,920 1,196 603,715 $ 591 12,613,357 403,442 (85,962) 12,931,428 13,535,143 71 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, 2013 Special Revenue Other Special Revenue Grants Revenues Taxes: Property Intergovernmental Charges for services 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 Parks and recreation Transportation Non departmental 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 Fund balances at beginning of year Fund balances at end of year $ 1,048,932 24,317 86,270 1,159,519 $ 1,380,763 104,655 584,736 16,026 14,901 2,101,081 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ $ $ 826,362 78 3 826,443 1,507,319 1,507,319 856,604 842 505 857,951 9,643 12,799 342,315 - - - - 188,629 71,892 231,823 9,712 77,780 589,479 1,371,580 24,649 180 49,884 75,533 1,876,940 827,417 827,417 1,535,735 1,535,735 922,182 922,182 570,040 224,141 (974) 10,930 (49,194) (38,264) 569 (196,387) (195,818) (127) (127) (28,416) (64,231) - - 531,776 28,323 (1,101) (28,416) (64,231) 3,688,946 2,147,261 (72,596) 280,512 156,217 $ 4,220,722 $ 2,175,584 72 $ (73,697) $ 252,096 $ 91,986 TABLE OF CONTENTS Capital Projects Flood Control and Storm Water Traffic Control $ 82,989 2,611,545 34,748 2,729,282 $ - Redevelopment $ 15,177 2,700 17,877 Total Nonmajor Governmental Funds $ 2,363,923 1,958,283 1,380,763 2,611,545 104,655 584,736 91,188 104,379 9,199,472 - - 114,899 12,799 342,315 124,542 358,116 358,116 1,292 1,292 50,997 165,896 1,560,209 96,541 1,767,558 1,749,779 9,712 49,884 563,718 6,277,057 (1,292) (148,019) 2,922,415 2,371,166 73,118 (6,459) 66,659 1,292 1,292 119,037 (2,404,847) (2,285,810) 2,437,825 - (2,433,829) 2,395,884 - 3,864,857 $ 4,833,709 $ - $ 1,431,028 204,946 (2,657,014) (2,452,068) 470,347 12,461,081 $ 12,931,428 73 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, 2013 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 Capital outlay Contingency Total expenditures Net change in fund balances Final 5,000,000 5,000,000 $ $ 1,048,932 24,317 86,270 1,159,519 $ (3,951,068) 24,317 86,270 (3,840,481) - 9,643 (9,643) 5,000,000 5,000,000 167,590 63,900 232,135 69,920 4,392,355 4,925,900 188,629 71,892 231,823 9,712 77,780 589,479 (21,039) (7,992) 312 (9,712) (7,860) 4,392,355 4,336,421 - 74,100 570,040 495,940 (2,947,000) (2,947,000) $ 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 (2,947,000) $ (2,947,000) (2,947,000) 10,930 (49,194) (38,264) (2,872,900) 531,776 Fund balance at beginning of year 3,688,946 Fund balance at end of year $ 76 4,220,722 10,930 2,897,806 2,908,736 $ 3,404,676 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, 2013 Variance with Budgeted Amounts Original Revenues Charges for services Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Management and policy Legal and court Public safety: Police Fire Parks and recreation Non departmental Capital outlay Total expenditures 1,220,000 98,890 395,890 1,000 1,715,780 Actual Amounts Final $ 1,220,000 98,890 395,890 1,000 1,715,780 $ 1,380,763 104,655 584,736 16,026 14,901 2,101,081 92,200 422,780 129,700 445,170 12,799 342,315 1,422,783 24,000 49,890 2,011,653 1,464,868 28,400 49,890 2,118,028 1,371,580 24,649 180 49,884 75,533 1,876,940 Final Budget Positive (Negative) $ 160,763 5,765 188,846 15,026 14,901 385,301 116,901 102,855 93,288 3,751 (180) 6 (75,533) 241,088 Excess (deficiency) of revenues over (under) expenditures (295,873) (402,248) 224,141 626,389 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses (185,920) (185,920) (185,920) (185,920) 569 (196,387) (195,818) 569 (10,467) (9,898) (588,168) 28,323 Net change in fund balances $ (481,793) $ Fund balance at beginning of year 2,147,261 Fund balance at end of year $ 77 2,175,584 $ 616,491 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, 2013 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Parks and recreation Total expenditures 1,784,530 1,784,530 (13,477) $ (35,557) (1,101) (72,596) $ 78 (73,697) (958,168) 78 3 (958,087) 992,670 992,670 34,583 (127) (127) Fund deficit at beginning of year Fund deficit at end of year $ (974) $ 826,362 78 3 826,443 827,417 827,417 (35,557) $ 1,784,530 1,784,530 1,820,087 1,820,087 (13,477) Other financing uses Transfers out Total other financing uses Net change in fund balances $ 1,798,007 1,798,007 Deficiency of revenues under expenditures Actual Amounts Final Final Budget Positive (Negative) (127) (127) $ 34,456 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, 2013 Variance with Budgeted Amounts Original Revenues Taxes Total revenues $ Expenditures Current: Highways and streets Total expenditures $ 1,694,330 1,694,330 Deficiency of revenues under expenditures Net change in fund balances 1,508,560 1,508,560 (185,770) 1,508,560 1,508,560 $ 1,694,330 1,694,330 (185,770) $ Actual Amounts Final (185,770) (28,416) 280,512 $ 79 252,096 (1,241) (1,241) 158,595 158,595 (28,416) Fund balance at beginning of year Fund balance at end of year $ 1,535,735 1,535,735 (185,770) $ 1,507,319 1,507,319 Final Budget Positive (Negative) 157,354 $ 157,354 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, 2013 Variance with Budgeted Amounts Original Revenues Taxes Investment earnings Miscellaneous Total revenues $ Expenditures Current: Parks and recreation Total expenditures $ 1,012,680 1,012,680 Deficiency of revenues under expenditures Net change in fund balances 847,760 847,760 (164,920) 847,760 847,760 $ 1,029,609 1,029,609 (164,920) $ Actual Amounts Final $ 856,604 842 505 857,951 8,844 842 505 10,191 107,427 107,427 (181,849) (64,231) 117,618 (181,849) (64,231) 156,217 $ 80 $ 922,182 922,182 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 91,986 $ 117,618 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, 2013 Variance with Budgeted Amounts Original Revenues Property taxes Investment earnings Miscellaneous Total revenues $ Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures Deficiency of revenues under expenditures Other financing sources Transfers in Total other financing sources Net change in fund balances $ 19,300,000 50,000 19,350,000 $ Final Actual Amounts 19,300,000 50,000 19,350,000 $ 19,183,696 154,307 11,184 19,349,187 Final Budget Positive (Negative) $ (116,304) 104,307 11,184 (813) 24,120,000 14,856,420 38,976,420 24,120,000 14,856,420 38,976,420 24,120,000 14,857,753 1,210 38,978,963 (1,333) (1,210) (2,543) (19,626,420) (19,626,420) (19,629,776) (3,356) 20,173,850 20,173,850 20,173,850 20,173,850 20,175,402 20,175,402 1,552 1,552 547,430 545,626 547,430 $ Fund balance at beginning of year 10,189,619 Fund balance at end of year $ 81 10,735,245 $ (1,804) 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, 2013 Variance with Budgeted Amounts Original Revenues Special assessments Investment earnings Total revenues $ 1,208,750 1,208,750 $ Final Actual Amounts Final Budget Positive (Negative) 1,208,750 1,208,750 $ $ 1,298,984 818 1,299,802 90,234 818 91,052 Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures 435,000 553,260 988,260 585,000 553,260 4,959 1,143,219 585,000 553,258 5,663 1,143,921 Excess of revenues over expenditures 220,490 65,531 155,881 90,350 (205,000) (205,000) (205,000) (205,000) (220,496) (220,496) (15,496) (15,496) (139,469) (64,615) Other financing uses Transfers out Total other financing uses Net change in fund balances $ 15,490 $ Fund balance at beginning of year 64,017 Fund deficit at end of year $ 82 (598) 2 (704) (702) $ 74,854 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, 2013 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 Contingency Total expenditures 20,397,000 1,065,000 1,108,400 22,570,400 Final $ 20,397,000 1,065,000 1,108,400 22,570,400 Actual Amounts $ 11,176,893 2,252,080 14,298 7,851 13,451,122 Final Budget Positive (Negative) $ (9,220,107) 1,187,080 14,298 (1,100,549) (9,119,278) 1,075,512 360,000 65,323,000 1,165,000 67,923,512 1,109,172 360,000 71,225,781 1,165,000 73,859,953 65,265 23,215,797 23,281,062 1,109,172 294,735 48,009,984 1,165,000 50,578,891 Deficiency of revenues under expenditures (45,353,112) (51,289,553) (9,829,940) 41,459,613 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 3,772,000 3,772,000 3,772,000 3,772,000 2,550,894 (61,205) 2,489,689 (1,221,106) (61,205) (1,282,311) (47,517,553) (7,340,251) Net change in fund balances $ (41,581,112) $ Fund balance at beginning of year 66,966,393 Fund balance at end of year $ 83 59,626,142 $ 40,177,302 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, 2013 Variance with Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Total revenues $ 624,000 1,000,000 1,624,000 Expenditures Capital outlay Total expenditures $ Final Actual Amounts 624,000 1,000,000 1,624,000 $ 82,989 2,611,545 34,748 2,729,282 Final Budget Positive (Negative) $ (541,011) 1,611,545 34,748 1,105,282 1,201,000 1,201,000 1,201,000 1,201,000 358,116 358,116 842,884 842,884 Excess of revenues over expenditures 423,000 423,000 2,371,166 1,948,166 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 249,000 249,000 249,000 249,000 Net change in fund balances $ 672,000 $ 73,118 (6,459) 66,659 672,000 2,437,825 Fund balance at beginning of year 2,395,884 Fund balance at end of year $ 84 4,833,709 (175,882) (6,459) (182,341) $ 1,765,825 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, 2013 Variance with Budgeted Amounts Original Revenues System development fees Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Development services Public safety: Police Fire Debt service: Fiscal and other charges 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 $ Actual Amounts Final 3,930,000 3,930,000 $ 3,930,000 3,930,000 $ 5,710,765 7,217 36,000 5,753,982 Final Budget Positive (Negative) $ 1,780,765 7,217 36,000 1,823,982 - 61,590 52,090 9,500 - - 1,762 3,709 (1,762) (3,709) 2,071,910 2,071,910 2,128,410 2,190,000 6,576 1,092,968 1,157,105 (6,576) 1,035,442 1,032,895 1,858,090 1,740,000 4,596,877 2,856,877 2,213,000 (12,550,760) (10,337,760) 2,213,000 (12,550,760) (10,337,760) 1,201,402 (6,086,470) (4,885,068) (1,011,598) 6,464,290 5,452,692 (8,479,670) $ (8,597,760) (288,191) Fund deficit at beginning of year (16,246,243) Fund deficit at end of year $ 85 (16,534,434) $ 8,309,569 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Flood Control and Storm Water Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Total revenues Deficiency of revenues under expenditures Other financing sources Transfers in Total other financing sources Net change in fund balances Final $ Expenditures Capital outlay Total expenditures $ Actual Amounts - $ - $ - $ - 373,000 373,000 373,000 373,000 1,292 1,292 371,708 371,708 (373,000) (373,000) (1,292) 371,708 373,000 373,000 373,000 373,000 1,292 1,292 (371,708) (371,708) - $ - - Fund balance at beginning of year - Fund balance at end of year $ 86 - $ - 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, 2013 Variance with Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Total revenues $ 100,000 8,750,000 8,850,000 $ Final Actual Amounts 100,000 8,750,000 8,850,000 $ 31,422 9,513,954 157,697 9,703,073 Final Budget Positive (Negative) $ (68,578) 763,954 157,697 853,073 Expenditures Current: Parks and recreation Capital outlay Total expenditures 497,000 3,442,000 3,939,000 497,000 3,941,000 4,438,000 265,488 1,765,899 2,031,387 231,512 2,175,101 2,406,613 Excess of revenues over expenditures 4,911,000 4,412,000 7,671,686 3,259,686 592,000 (5,331,810) (4,739,810) 592,000 (5,331,810) (4,739,810) 179,908 (5,361,252) (5,181,344) Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ 171,190 $ (327,810) 2,490,342 Fund balance at beginning of year 14,646,416 Fund balance at end of year $ 87 17,136,758 (412,092) (29,442) (441,534) $ 2,818,152 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, 2013 Variance with Budgeted Amounts Original Revenues Other entities' participation Investment earnings Miscellaneous Total revenues $ Expenditures Current: Development services Capital outlay Total expenditures 349,000 349,000 Actual Amounts Final $ 349,000 349,000 $ 15,177 2,700 17,877 Final Budget Positive (Negative) $ (349,000) 15,177 2,700 (331,123) 7,745,000 7,745,000 7,745,000 7,745,000 114,899 50,997 165,896 (114,899) 7,694,003 7,579,104 Deficiency of revenues under expenditures (7,396,000) (7,396,000) (148,019) 7,247,981 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 7,037,000 7,037,000 7,037,000 7,037,000 Net change in fund balances $ (359,000) $ 119,037 (2,404,847) (2,285,810) (359,000) (2,433,829) Fund balance at beginning of year 3,864,857 Fund balance at end of year $ 88 1,431,028 (6,917,963) (2,404,847) (9,322,810) $ (2,074,829) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Water Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 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 Total nonoperating revenues (expenses) Loss before capital contributions and transfers Capital contributions Transfers out Change in net position $ 36,857,000 1,440,000 38,297,000 Actual Amounts Final $ 36,857,000 1,440,000 38,297,000 $ 36,455,247 1,084,488 37,539,735 Final Budget Positive (Negative) $ (401,753) (355,512) (757,265) 67,481 7,853,560 15,542,917 28,632,780 1,508,990 179,956 7,928,220 16,347,621 29,072,241 1,508,990 1,071,457 6,708,658 13,114,098 11,301,474 1,508,992 (891,501) 1,219,562 3,233,523 17,770,767 (2) 7,869,530 1,765,000 63,240,258 10,371,420 677,857 66,086,305 10,471,421 44,176,100 (100,001) 677,857 21,910,205 (24,943,258) (27,789,305) (6,636,365) 21,152,940 (6,555,140) 3,394,000 (3,161,140) (6,558,640) 3,394,000 (3,164,640) (6,278,702) 506,447 (5,772,255) 279,938 (2,887,553) (2,607,615) (28,104,398) (30,953,945) (12,408,620) 18,545,325 14,000,000 (1,611,000) 14,000,000 (1,611,000) 16,556,838 (588,142) 2,556,838 1,022,858 (18,564,945) 3,560,076 (15,715,398) $ Explanation of difference between budgetary change in net position at June 30, 2013, and GAAP change in net position: Obligations for compensated absenses and post-employment benefits are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2012 Less compensated absences at June 30, 2013 Add post-employment benefits at June 30, 2012 Less post-employment benefits at June 30, 2013 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 position as reported on the statement of revenues, expenses and changes in fund net position 89 900,475 (915,057) (43,230) 11,301,474 10,471,421 2,649,712 (9,528,009) (110,299) $ 18,286,563 $ 22,125,021 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Wastewater Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 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 income Nonoperating revenues (expenses) Interest expense Investment earnings Total nonoperating revenues (expenses) 22,935,000 22,935,000 Final $ 22,935,000 22,935,000 Actual Amounts $ 23,082,930 4,398 23,087,328 Final Budget Positive (Negative) $ 147,930 4,398 152,328 652,288 3,041,470 9,777,667 3,223,800 752,980 658,608 3,689,960 10,137,994 3,223,800 752,980 564,559 3,594,761 8,633,963 156,542 752,977 94,049 95,199 1,504,031 3,067,258 3 493,580 2,289,340 20,231,125 493,580 1,285,103 20,242,025 493,579 14,196,381 1 1,285,103 6,045,644 2,703,875 2,692,975 8,890,947 6,197,972 (171,390) 50,000 (121,390) (171,390) 50,000 (121,390) (171,388) 409,408 238,020 2 359,408 359,410 Income before capital contributions and transfers 2,582,485 2,571,585 9,128,967 6,557,382 Capital contributions Transfers in Transfers out 9,000,000 820,000 (774,000) 9,000,000 820,000 (774,000) 13,814,379 493,143 (26,250) 4,814,379 (326,857) 747,750 Change in net position $ 11,628,485 $ 11,617,585 23,410,239 Explanation of difference between budgetary change in net position at June 30, 2013, and GAAP change in net position: Obligations for compensated absences and post-employment benefits are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2012 Less compensated absences at June 30, 2013 Add post-employment benefits at June 30, 2012 Less post-employment benefits at June 30, 2013 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 position as reported on the statement of revenues, expenses and changes in fund net position 90 441,571 (543,160) (15,251) 156,542 493,579 1,132,049 (8,326,684) (27,223) $ 16,721,662 $ 11,792,654 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Environmental Services Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 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 Final $ 716,654 5,121,850 6,142,540 3,109,000 668,500 2,273,180 18,031,724 Operating income (loss) Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position 17,832,000 74,000 17,906,000 $ 17,832,000 74,000 17,906,000 $ 917,008 5,677,240 6,890,016 3,115,124 668,500 763,836 18,031,724 (125,724) (125,724) 74,200 74,200 74,200 74,200 (51,524) Actual Amounts $ (51,524) 16,759,973 89,852 16,849,825 2,187,927 2,313,651 145,350 145,350 71,150 71,150 and GAAP change in net position: 91 (1,072,027) 15,852 (1,056,175) (53,214) 155,690 (2,613) 2,506,129 (2) 763,836 3,369,826 2,333,277 486,616 (471,338) (28,893) 608,995 (1,545,518) $ $ 970,222 5,521,550 6,892,629 608,995 668,502 14,661,898 Explanation of difference between budgetary change in net position at June 30, 2013, Obligations for compensated absences and post-employment benefits are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2012 Less compensated absences at June 30, 2013 Add post-employment benefits at June 30, 2012 Less post-employment benefits at June 30, 2013 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 position as reported on the statement of revenues, expenses and changes in fund net position Final Budget Positive (Negative) 1,383,139 $ 2,384,801 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 and dental claims. 93 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Net Position June 30, 2013 Equipment Maintenance ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Inventories Total current assets $ 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 841,243 Employee Benefit SelfInsurance Copier Services $ 214,963 $ Total 5,581,143 $ 6,637,349 953 16,693 474,156 1,333,045 146 215,109 2,815 19,550 5,603,508 3,914 36,243 474,156 7,151,662 223,225 (217,764) 5,461 1,338,506 209,894 (60,677) 149,217 364,326 5,603,508 433,119 (278,441) 154,678 7,306,340 285,925 33,349 68,397 387,671 25,315 25,315 11,169 1,211,404 1,222,573 322,409 33,349 68,397 1,211,404 1,635,559 76,702 - - 76,702 Total liabilities 464,373 25,315 1,222,573 1,712,261 NET POSITION Net investment in capital assets Unrestricted Total net position 5,461 868,672 874,133 149,217 189,794 339,011 4,380,935 4,380,935 154,678 5,439,401 5,594,079 $ 94 $ $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended June 30, 2013 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 Copier Services $ 68,225 1,481,587 5,889,535 17,383 7,456,730 Operating income (loss) Nonoperating revenues (expenses) Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) Change in net position Total net position, beginning of year Total net position, end of year 7,445,455 3,035 7,448,490 254,357 254,357 $ 252,143 22,702 274,845 13,814,040 63,859 13,877,899 Total $ 21,513,852 66,894 21,580,746 769,588 12,641,454 13,411,042 837,813 1,481,587 6,141,678 12,641,454 40,085 21,142,617 (8,240) (20,488) 466,857 438,129 1,941 1,941 1,274 (40,060) (38,786) 12,337 12,337 15,552 (40,060) (24,508) (6,299) (59,274) 479,194 413,621 3,901,741 5,180,458 880,432 $ Employee Benefit SelfInsurance 874,133 95 398,285 $ 339,011 $ 4,380,935 $ 5,594,079 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Cash Flows Year Ended June 30, 2013 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 $ 3,035 7,461,711 (5,938,800) (1,481,277) Net cash provided by (used in) operating activities Net cash provided by 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: (Increase) decrease in accounts receivable Increase in inventories Increase (decrease) in accounts payable Decrease in claims payable Increase in accrued expenses $ $ 49,254 21,530,108 (19,704,740) (1,481,277) 413,966 393,345 - 722 - 722 - 722 2,554 1,998 11,338 15,890 2,554 1,998 11,338 15,890 425,304 5,155,839 409,957 6,227,392 (62,570) 277,533 $ 214,963 $ 5,581,143 $ 6,637,349 $ (20,488) $ $ 466,857 22,702 16,256 (6,115) 25,075 310 (67,504) - (17,640) (2,084) (33,167) - (1,384) (6,115) (44,513) (33,167) 310 52,909 (44,802) (52,891) (44,784) $ (65,290) - 438,129 17,383 44,669 96 46,219 13,814,040 (13,446,293) - 722 (8,240) $ $ Total - 841,243 $ 254,357 (319,647) - Employee Benefit SelfInsurance (65,290) 47,223 794,020 Total adjustments Net cash provided by (used in) operating activities $ 44,669 Cash flows from capital and related financing activities: Proceeds from sales of capital assets Cash and cash equivalents at end of year Copier Services $ 413,966 40,085 $ 393,345 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Equipment Maintenance Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 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 (loss) Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position $ Actual Amounts Final 8,075,000 8,075,000 $ 8,075,000 8,075,000 91,340 1,685,730 5,790,290 7,567,360 91,340 1,585,730 5,909,330 7,586,400 507,640 488,600 - - 507,640 $ $ 7,445,455 3,035 7,448,490 (506,124) 1,941 1,941 (15,583) and GAAP change in net position: 154,383 (145,099) $ (6,299) (629,545) 3,035 (626,510) 23,115 94,859 19,795 (17,383) 120,386 (17,524) Explanation of difference between budgetary change in net position at June 30, 2013, 97 $ 68,225 1,490,871 5,889,535 17,383 7,466,014 488,600 Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2012 Less compensated absences at June 30, 2013 Change in net position as reported on the statement of revenues, expenses and changes in fund net position Final Budget Positive (Negative) 1,941 1,941 $ (504,183) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Copier Services Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 Variance with Budgeted Amounts Original Operating revenues Charges for services Total operating revenues $ Operating expenses Operation and maintenance Capital outlay Depreciation Total operating expenses Operating loss Nonoperating revenues (expenses) Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) Change in net position Final 565,000 565,000 $ $ 254,357 254,357 $ (310,643) (310,643) 420,000 250,000 670,000 420,000 250,000 670,000 252,143 22,702 274,845 167,857 250,000 (22,702) 395,155 (105,000) (105,000) (20,488) 84,512 1,274 (40,060) (38,786) (1,726) (40,060) (41,786) 3,000 3,000 $ 565,000 565,000 Actual Amounts Final Budget Positive (Negative) (102,000) 98 3,000 3,000 $ (102,000) $ (59,274) $ 42,726 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Employee Benefit Self-Insurance Internal Service Fund Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2013 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Claims Incurred Total operating expenses Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position 14,205,000 45,000 14,250,000 $ 837,850 13,610,000 14,447,850 Operating income (loss) $ Actual Amounts Final 14,205,000 45,000 14,250,000 $ 837,850 13,610,000 14,447,850 13,814,040 63,859 13,877,899 664,707 466,857 13,000 13,000 13,000 13,000 12,337 12,337 99 (184,850) $ (390,960) 18,859 (372,101) 68,262 968,546 1,036,808 (197,850) $ $ 769,588 12,641,454 13,411,042 (197,850) (184,850) Final Budget Positive (Negative) 479,194 (663) (663) $ 664,044 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. Payback Agreement – accounts for monies received from developers to payback other developers for sanitary wastewater system development. 101 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2013 Flexible Spending Assets Restricted cash and investments Total assets Liabilities Accounts payable Medical benefits payable Dependent care benefits payable Total liabilities Beginning Balance Additions Ending Balance Deductions $ 22,956 $ 337,296 $ 341,310 $ 18,942 $ 22,956 $ 337,296 $ 341,310 $ 18,942 $ 9,092 13,864 $ 2,552 268,789 68,507 $ 2,552 277,209 64,101 $ $ 22,956 $ 339,848 $ 343,862 $ 18,942 $ 136,900 306 $ 47,312 384 $ 113 306 $ 184,099 384 $ 137,206 $ 47,696 $ 419 $ 184,483 $ 137,206 $ 47,674 $ 397 $ 184,483 $ 137,206 $ 47,674 $ 397 $ 184,483 $ - $ 43,844 $ 35,995 $ 7,849 $ - $ 43,844 $ 35,995 $ 7,849 $ - $ 87,688 $ 79,839 $ 7,849 $ - $ 87,688 $ 79,839 $ 7,849 672 18,270 Fire Retirement Health Fund Assets Restricted cash and investments Restricted accrued interest Total assets Liabilities Guaranty and other deposits Total liabilities Payback Agreement Assets Restricted cash and investments Total assets Liabilities Due to developers Total liabilities 102 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2013 Total-All Agency Funds Assets Restricted cash and investments Restricted accrued interest Total assets Liabilities Accounts payable Guaranty and other deposits Due to developers Medical benefits payable Dependent care benefits payable Total liabilities Beginning Balance Additions Ending Balance Deductions $ 159,856 306 $ 428,452 384 $ 377,418 306 $ 210,890 384 $ 160,162 $ 428,836 $ 377,724 $ 211,274 $ 137,206 9,092 13,864 $ 2,552 47,674 87,688 268,789 68,507 $ 2,552 397 79,839 277,209 64,101 $ 184,483 7,849 672 18,270 $ 160,162 $ 475,210 $ 424,098 $ 211,274 103 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 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