Town of Gilbert, Arizona Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014 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, 2014 John W. Lewis, Mayor Eddie Cook, Vice Mayor Jenn Daniels, Council Member Victor Petersen, Council Member Brigette Peterson, 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, 2014 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 Outside Sources Capital Projects Fund Prop 400 Capital Projects Fund GO Bonds Capital Projects Fund Municipal Property Corporation 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, 2014 TABLE OF CONTENTS Page System Development Fees 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 Sales Tax Collections 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, 2014 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 2014 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2014 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 November 24, 2014 Honorable Mayor, Members of the Council, and Gilbert Citizens: I am pleased to submit to you the Comprehensive Annual Financial Report (CAFR) for the Town of Gilbert (Gilbert), for the fiscal year ended June 30, 2014. State law (Arizona Revised Statutes §9-481) requires that local governments publish a complete set of audited financial statements within six months of the close of each fiscal year. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any significant misstatements. Heinfeld, Meech & Company, a firm of licensed certified public accountants, has issued an unmodified opinion on Gilbert’s financial statements for the year ended June 30, 2014. The independent auditors’ report is located in the Financial Section of this report. This letter of transmittal is designed to complement Management’s Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found in the Financial Section of this report. GILBERT PROFILE Governmental Structure Gilbert is an Arizona Municipal Corporation, operating as a general law community as prescribed in the Arizona Revised Statutes. Gilbert was incorporated July 6, 1920, and operates under the CouncilManager form of government. The Mayor is a member of the Council and is elected by the voters for a four-year term. Six additional council members are elected at-large to staggered four-year terms. The Mayor is the chief executive officer and chairperson of the Council. The Town Manager (Manager) is appointed by the Council and serves as the chief administrative officer. During fiscal year 2014, the Manager administered Gilbert's operations through a staff of 1,237 budgeted full time equivalent positions. Gilbert provides or administers a full range of services including police and fire protection, development services (planning, code enforcement, and engineering), public works (water, wastewater, environmental services, and streets), and parks and recreation services (parks, recreation, libraries, culture and arts, and social services). Transit and “dial-a-ride” services are provided through an intergovernmental agreement with the Regional Public Transportation Authority. Library services, incarceration and animal control are provided through intergovernmental agreements with Maricopa County. v TABLE OF CONTENTS Geography and Population Gilbert is located in the southeastern section of the greater Phoenix metropolitan area in Maricopa County, bounded on the north and east by the City of Mesa, on the west by the City of Chandler, on the southeast by the Town of Queen Creek, and on the south by the Gila River Indian Community. Gilbert has a planning area of 72.6 square miles. The most recent estimate of population from the Maricopa Association of Governments as of July 1, 2014, was 233,028, an increase of 2.4% from fiscal year 2013. The following graph depicts the ten-year population trend for Gilbert. Population 250,000 200,000 150,000 100,000 50,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FACTORS AFFECTING FINANCIAL CONDITION Growth and Construction There were 1,613 new residential permits and 284 commercial permits issued in fiscal year 2014 which represents a decrease of 402 residential permits and an increase of 60 commercial permits from the prior fiscal year. The total value of all new construction in fiscal year 2014, including commercial, was $472 million, down from $534 million in fiscal year 2013. System Development Fees (SDF’s) are collected for capital needs related to growth in the community. The Council has adopted SDF’s for police, fire, general government, traffic signals, parks and recreation, water resources, water, and wastewater. The fees are based on build-out system requirements to serve the projected population and land uses. During fiscal year 2014, a total of $38.5 million was collected in SDF’s compared to $48 million in fiscal year 2013. Economic Development With over 233,000 residents, Gilbert, Arizona is a clean, safe and vibrant community as evidenced by several recent awards and rankings: • • • • 22nd best place to live in the nation (CNN/Money Magazine, 2014) 2nd safest city in the United States (Law Street Media, 2014) 17th Best City for First-Time Home Buyers (WalletHub, 2014) 8th Most Thriving City in the United States (The Daily Beast, 2013) vi TABLE OF CONTENTS Gilbert is also a community committed to education with 38.8 percent of its residents holding a bachelor’s degree or higher, compared with 28.1 percent nationally. Major employers like Banner Health, Dignity Health, Banner MD Anderson Cancer Center, Go Daddy, Mapfre Insurance, Unicon, Orbital Sciences, Lockheed Martin, and Heliae, benefit from this commitment to education and have helped keep Gilbert’s unemployment hovering around 5 percent, as compared to 7.1 percent for the state and 6 percent for the nation. Knowledge assets that support the community include Arizona State University (ASU) Polytechnic Campus, Chandler-Gilbert Community College, A.T. Still University, as well as over 69 other colleges, universities and technical schools within a 30-minute commute. Additionally, three A rated school districts – Gilbert, Higley and Chandler – serve the citizens of Gilbert. To further commercial real estate development in the community, the Gilbert Office of Economic Development (OED) has worked closely with stakeholders, elected officials and the development community to encourage the construction of speculative building space within municipal borders. As a result, several major projects are either under construction or in the planning phases. Most notably, Nationwide Realty Investors will provide more than three million square feet of Class A office space northeast of Gilbert Road and the Loop 202 Freeway and Trammel Crow broke ground in September 2014 on Park Lucero – a multi-phase industrial park that will feature six buildings totaling 618,000 square feet. Additionally, staff created Accelerated Development Sites that will allow the community to market large acre parcels and respond quickly to large build-to-suit projects. The Gilbert OED is one of approximately forty Accredited Economic Development Organizations in the nation. Gilbert achieved this accreditation through the International Economic Development Council in 2013 and was the first Arizona economic development organization, and the second municipality in the nation, to do so. Fiscal year 2014 represented the second year of a five year Strategic Plan for the OED which produced an increase in business development activity, resulting in: • • • $198 million in capital investment 875,000 new or renovated square feet 1,700 announced jobs Gilbert also continued to move forward on its commitment to attracting higher education institutions to the community by finalizing the development agreement in September 2013 with Chicago-based, Saint Xavier University (SXU), a Catholic school founded in 1846. Currently under construction in Gilbert's Heritage District, SXU will be open for the fall 2015 semester. The transformation of Gilbert’s Heritage District continued in fiscal year 2014 with the formation of a downtown “entertainment district”. Through these efforts, Gilbert has experienced an influx of high quality restaurant, retail, art and cultural developments supported in large part by the development of a 364 space parking garage and Heritage Marketplace that will be home to Zinburger, Lo Lo’s Chicken and Waffles, Pomo Pizzeria, Barrio Queen Gilbert, Petersen’s Ice Cream, and Regus Executive Suites. Gilbert OED also began to oversee tourism for the community in FY14 and focused on executing a marketing strategy to support tourism efforts. This strategy included designing and distributing Visit Gilbert postcards, forming a relationship with Local First Arizona and implementing Gilbert’s first localist tour, and engaged a hotel task force focused on advancing tourism. Gilbert’s connectivity to major markets is provided through a comprehensive transportation network which includes the Santan Loop 202 and US-60 Superstition Freeways, Sky Harbor International Airport, and Phoenix-Mesa Gateway Airport. This comprehensive transportation network provides access to Gilbertbased enterprises while providing reliable and accessible modes of transportation to local, national and international markets. Both the Loop 202 and US-60 are six-lane divided highways that connect to Interstate 10. Located just over 10 miles west of Gilbert, Phoenix Sky Harbor Airport is served by 16 major airlines. Sky Harbor is one of the ten busiest airports in the nation for passenger traffic with 100,000 passengers daily and a $79 million daily economic impact. Sky Harbor cargo facilities handle over 800 tons of freight a day. Phoenix-Mesa Gateway Airport is located on Gilbert’s eastern border and handles over one million passengers yearly with flights to 35 destinations throughout the United States. The airport also provides air cargo services and is located within a Foreign Trade Zone. vii TABLE OF CONTENTS Transaction Privilege (Sales) Tax Trend Sales tax revenues represented 50% of General Fund revenues for fiscal year 2014, totaling approximately $66.8 million. Local sales taxes are collected by the Arizona Department of Revenue and remitted to Gilbert weekly. The following graph depicts sales tax receipts by source for the past five years. Property Taxes State law requires municipalities to adopt a property tax levy based on the exact amount of scheduled debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2014, Gilbert’s property tax rate is $1.0659 per $100 of secondary assessed valuation and is used exclusively for the payment of voter approved general obligation bond debt. Gilbert does not levy a primary property tax for general operating purposes. Assessed Valuation The assessed value of real property within the Gilbert annexed area is a vital economic forecast variable, as the State Constitution contains regulatory restrictions on the amount of debt a community may have outstanding based on secondary assessed valuation. Taking the market value of a property and applying the statutory assessment rate derives the assessed value. Residential properties are assessed at 10%, vacant land is assessed at 16%, and commercial properties are assessed at 19%. This illustrates how crucial the additions of commercial properties are to the tax base. The assessed valuation increased by 14.7% in fiscal year 2014 from $1.595 billion to $1.829 billion. The following graph depicts the changes in the assessed valuation in Gilbert for the past ten years: Secondary Assessed Value (Millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2005 2006 2007 2008 2009 viii 2010 2011 2012 2013 2014 TABLE OF CONTENTS State Shared Revenues State shared revenues totaled $41 million for the General Fund and $19 million for the Streets Special Revenue Fund in fiscal year 2014, representing approximately 31% of total General Fund revenues and 97% of total Streets Special Revenue Fund revenues. State shared revenues include allocations of state sales tax, income tax, gas tax, motor vehicle in-lieu tax, and lottery funds. These revenues are shared based upon relative population in the State as determined by census. The 2010 Census established Gilbert’s population at 208,453 compared to 173,072 from the mid-decade census in September 2005. Budget and Financial Policies The Town’s financial policies establish the framework for overall fiscal planning and management. The policies set forth guidelines for both current activities and long range planning. The purposes of the financial policies are: Balanced Budget - The Town is required by Arizona Revised Statutes to adopt a balanced budget each fiscal year. A balanced budget is one in which the sum of estimated revenues and appropriated fund balances is equal to appropriations. Fiscal Conservatism – To ensure that the Town is at all times in solid financial condition, defined as: Cash solvency – the ability to pay bills Budgetary solvency – the ability to balance the budget Long-term solvency – the ability to pay future costs Service level solvency – the ability to provide needed and desired services Flexibility – To ensure the Town is in a position to respond to changes in the economy or new service challenges without an undue amount of financial stress. Transparency and Communication – To utilize best practices in communicating financial information to facilitate sound decision-making, to promote openness and transparency, and to inspire public confidence and trust. Adherence to the Highest Accounting and Management Practices – As set by the Governmental Accounting Standards Board and the Government Finance Officers Association (GFOA) standards for financial reporting and budgeting. A five-year financial plan is developed for each operating fund and current year decisions are made with a forecasted future impact. Other financial policies that guide the budget include: maintaining a minimum General Fund balance sufficient to cover 90 days of operating expenditures and the annual debt service payments; one-time revenues are not applied toward ongoing expenditures; and establishment of an economic development reserve. The Town Council adopted a comprehensive listing of policies of responsible financial management in November of 2011. These policies are reviewed annually to ensure their continued relevance and adherence. Long-Term Financial Planning In addition to the Town’s General Plan and Capital Improvement Program, the Town is developing infrastructure inventories (including repair and replacement plans) and functional area master plans. The Town also has a total of six strategic initiatives as follows: Long and Short-Term Financial Plans, Community Livability, Technology Leader, Economic Development, Proactive Infrastructure, and High Performing Government, which will be discussed in more detail throughout the document. We have implemented Franklin Covey’s The 4 Disciplines of Execution, providing an exceptional tool for advancing these goals while managing the challenges of the daily whirlwind, and have begun implementing Lean process improvement events to optimize processes throughout the organization. Several staff members have also begun Lean Six Sigma certification requirements to further enhance the Town’s long-term financial resiliency. The Town is updating its Long-Term Financial Plan according to the GFOA guidelines offered in the book Financing the Future by Shayne Kavanagh. ix TABLE OF CONTENTS TABLE OF CONTENTS Advisory Organization Chart xi 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 Works xii TABLE OF CONTENTS Financial Section ________________________________ Independent Auditor’s Report Management’s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Combining and Individual Fund Statements and Schedules TABLE OF CONTENTS TABLE OF CONTENTS 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, 2014. 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 $374 million of unrestricted net position, of which $139 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $235 million which may be used to fund ongoing operations in future years. Net position includes a $681 million net investment in capital assets such as streets, park land, and municipal buildings and a $352 million net investment in water, wastewater and environmental services infrastructure and equipment. The combined fund balance for all governmental funds is $185 million, of which $67 million is unrestricted. The General Fund unrestricted fund balance is $74 million, of which $9 million has been assigned for capital replacement. The General Fund unassigned balance of $62 million is approximately 50% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $396 million, as compared to $444 million at the end of fiscal year 2013. 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, liabilities, and deferred inflows/outflows of resources, 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 37-67. 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, 2014 and 2013. Town of Gilbert Condensed Statement of Net Position Current and other assets Capital assets Total assets Deferred outflows of resources Long-term liabilities Other liabilities Total liabilities Net position: Net investment in capital assets Restricted Unrestricted Total net position Governmental Activities 2014 2013 $ 239,768,377 $ 252,230,825 947,841,509 958,295,935 1,187,609,886 1,210,526,760 Business-type Activities 2014 2013 $ 357,637,183 $ 347,855,563 456,128,322 450,584,901 813,765,505 798,440,464 Total 2014 2013 $ 597,405,560 $ 600,086,388 1,403,969,831 1,408,880,836 2,001,375,391 2,008,967,224 2,341,801 - - - 2,341,801 - 280,137,290 55,816,482 335,953,772 303,184,128 51,735,948 354,920,076 101,366,569 13,633,593 115,000,162 120,994,065 17,232,584 138,226,649 381,503,859 69,450,075 450,953,934 424,178,193 68,968,532 493,146,725 680,716,975 80,924,415 92,356,525 $ 853,997,915 687,909,606 60,524,680 107,172,398 $ 855,606,684 351,796,858 65,576,792 281,391,693 $ 698,765,343 325,356,563 70,878,871 263,978,381 $ 660,213,815 1,032,513,833 146,501,207 373,748,218 $ 1,552,763,258 1,013,266,169 131,403,551 371,150,779 $ 1,515,820,499 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 $139 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $235 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. Governmental Activities Governmental activities in fiscal year 2014 decreased Gilbert’s net position by $1.6 million. 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% of total revenues for governmental activities. Taxes (local and state-shared) were $130 million, an increase of $6 million from the prior year. Program revenues were $60 million, a decrease of $16 million from the prior year which was mostly due to the decrease in capital grants and contributions. It should be noted that $1.8 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 23% of total governmental activities expenses. Total expenses increased $16.8 million (9%) over the prior fiscal year. A portion of this increase was due to a $9 million increase in personnel costs applicable to all functions. 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 2014 2013 2014 Total 2013 2014 2013 97,812,094 $ 95,474,505 Revenues Program revenues: Charges for services $ 18,785,496 $ 19,176,355 $ 79,026,598 $ 76,298,150 $ Operating grants and contributions 22,325,826 21,270,393 - - 22,325,826 21,270,393 Capital grants and contributions 19,185,760 36,088,697 36,251,598 34,152,978 55,437,358 70,241,675 General revenues: Sales taxes 66,756,593 61,813,421 - - 66,756,593 61,813,421 Property taxes 18,315,083 19,183,696 - - 18,315,083 19,183,696 State-shared sales taxes 18,118,706 17,062,262 - - 18,118,706 17,062,262 State-shared income taxes 23,204,634 21,293,026 - - 23,204,634 21,293,026 3,902,993 4,459,359 - - 3,902,993 4,459,359 904,497 1,192,913 - - 904,497 1,192,913 Other taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings 1,508,342 722,141 1,741,848 1,061,205 3,250,190 1,783,346 Other 1,255,284 932,108 1,296,109 1,178,738 2,551,393 2,110,846 194,263,214 203,194,371 118,316,153 112,691,071 312,579,367 315,885,442 13,377,552 10,461,389 - - 13,377,552 10,461,389 Total revenues Expenses Management and policy Finance and management services 4,347,031 4,149,492 - - 4,347,031 4,149,492 Legal and court 5,975,194 5,474,112 - - 5,975,194 5,474,112 9,061,728 6,849,490 - - 9,061,728 6,849,490 Police Development services 45,930,719 42,759,060 - - 45,930,719 42,759,060 Fire 28,853,208 25,866,786 - - 28,853,208 25,866,786 Highways and streets 45,780,743 44,048,280 - - 45,780,743 44,048,280 Parks and recreation 22,493,451 20,857,878 - - 22,493,451 20,857,878 Transportation Non departmental 842,184 461,120 - - 842,184 461,120 4,104,289 3,113,705 - - 4,104,289 3,113,705 15,215,884 15,142,477 - - 15,215,884 15,142,477 - - 39,926,683 38,339,466 39,926,683 38,339,466 Interest and fiscal charges on long-term debt Water Wastewater - - 23,614,969 22,169,529 23,614,969 22,169,529 Environmental services - - 16,112,973 15,588,350 16,112,973 15,588,350 195,981,983 179,183,789 79,654,625 76,097,345 275,636,608 255,281,134 (1,718,769) 24,010,582 38,661,528 36,593,726 36,942,759 60,604,308 110,000 121,249 (110,000) (121,249) - - (1,608,769) 24,131,831 38,551,528 36,472,477 36,942,759 60,604,308 855,606,684 831,474,853 660,213,815 623,741,338 1,515,820,499 1,455,216,191 Total expenses Increase in net position before transfers Transfers Change in net position Net position, beginning of year Net position, end of year $ 853,997,915 $ 855,606,684 $ 698,765,343 $ 660,213,815 $ 1,552,763,258 $ 1,515,820,499 6 TABLE OF CONTENTS Business-type Activities Development related growth increased Gilbert’s net position for business-type activities in fiscal year 2014 by $38.5 million including $25 million in system development fee collections and $11 million in water and wastewater infrastructure contributed by developers. The revenues for business-type activities increased $5.6 million (5%) from the prior year and expenses increased $3.6 million (5%) from the prior year. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds (due to a change in reporting capital projects funds, these funds were reclassified and are now reported based on funding source, see Note 2): • • • • • • General Fund Streets Special Revenue Fund General Debt Service Fund Special Assessments Debt Service Fund GO Bonds Capital Projects Fund System Development Fees Capital Projects Fund All nonmajor funds are combined for reporting purposes captioned “Other Governmental Funds”. As of the end of fiscal year 2014, the governmental funds reported ending unrestricted fund balances totaling $67 million, a decrease of $15 million in comparison with the prior fiscal year. Town of Gilbert Governmental Funds - Fund Balances As of June 30, 2014 Restricted $ 15,391,104 8,942,949 479,414 17,584,623 25,387,147 24,551,624 $ 92,336,861 General Streets Special Revenue General Debt Service Special Assessments Debt Service GO Bonds Capital Projects System Development Fees Capital Projects Other Governmental Funds Total Fund Balances 7 Unrestricted Total $ 73,844,739 $ 73,844,739 4,307,200 19,698,304 1,440,140 10,383,089 479,414 5,409,080 22,993,703 (25,378,428) 8,719 7,520,444 32,072,068 $ 67,143,175 $ 159,480,036 TABLE OF CONTENTS General Fund The General Fund is the primary operating fund. At the end of fiscal year 2014, the fund balance of the General Fund was $99.2 million, an increase of $6 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 $74 million, of which $9 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 50% 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 $9.7 million; however, other financing sources and uses (net) were $3.6 million resulting in an increase in fund balance of $6 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 84% of the total revenues. • Local sales tax, which accounts for half of total General Fund revenues, increased $4.9 million (7.9%) from the prior fiscal year which continues to be due to the economic recovery. • Intergovernmental revenue increased $2.7 million (6.5%) from the prior fiscal year mainly due to increased state shared income tax revenue. • Public safety expenditures which comprise 53.1% of the total General Fund expenditures increased $5.4 million (9%) over the prior fiscal year mainly due to an increase in personnel costs. • Management and policy and parks and recreation expenditures increased in total by $4.4 million over the prior fiscal year mainly due to an increase in personnel costs. • Capital outlay expenditures increased $7.7 million from prior fiscal year due to a change made in which fund these expenditures are reported and are now reported based on funding source (see Note 2). Ge neral Fund Sources $134.3 M illion Sales Tax 50% All Other 3% Fines and Forfeitures 3% Charges for Services 6% Franchise Fees 2% Intergovernmental 33% Licenses and Permits 3% Ge neral Fund Uses $128.2 M illion All Other 15% Police 31% Parks and Recreation 11% Fire 19% Legal and Court 4% Management and Policy 12% 8 Development Services Finance and 5% Management Services 3% 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 million (5%) from the prior year. This was primarily due to increased highway user and auto lieu revenue of $800 thousand. Total expenditures increased by $6 million (51%) mostly due to increased capital outlay expenditures. Capital outlay expenditures are now recorded based on funding source. In total, revenues exceeded expenditures by $1.9 million; however, there were $500 thousand net transfers out, resulting in a $1.3 million (7.5%) increase in fund balance. Other Major Governmental Funds General Debt Service. The fund balance decreased by $352 thousand during the year. This was primarily due to the current year property tax revenues of $18.3 million and transfers in from other funds of $19.6 million offset by the debt service requirements of $38.3 million. The remaining fund balance of $10.3 million will be used to fund future debt service payments on voter approved general obligation bonds. Special Assessments Debt Service. The fund balance of $479 thousand is all restricted to pay future debt service requirements on special assessment bonds. GO Bonds Capital Projects. Due to a change made in the reporting of capital projects funds, an analysis to prior year cannot be made (see also Note 2). The GO bonds fund consists of general obligation bond proceeds and the expenditure of those proceeds to purchase or construct capital assets. The $21.7 million transfers out was due to the creation of two new nonmajor capital projects funds, outside sources and prop 400. An analysis to prior year activity will be done next fiscal year. System Development Fees Capital Projects. Due to a change made in the reporting of capital projects funds, an analysis to prior year cannot be made (see also Note 2). The system development fees fund accounts for fees collected from building permits paid and the expenditure of those funds for infrastructure related to growth in Gilbert. $11 million was transferred to the general debt service fund for principal and interest payments on bonds. An analysis to prior year activity will be done next fiscal year. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. Due to a change made in the reporting of capital projects funds, an analysis to prior year cannot be made (see also Note 2). $21.7 million of the $22 million transfers in was from the GO bonds capital projects fund in the creation of two new nonmajor capital projects funds. Nonmajor funds represent 17.3% of the total governmental fund balance. An analysis to prior year activity will be done next fiscal year. 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 Water Fund 9 TABLE OF CONTENTS The Water Fund is responsible for producing and distributing potable water that exceeds all county, state and federal drinking water standards. The water system is also sized and pressurized to provide adequate fire suppression to the entire planning area 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 $19.4 million to $367.4 million due primarily to capital contributions of $19.9 million, including $13.9 million in system development fees and $6 million in distribution lines contributed by developers. Operating income was $6.2 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 $17.9 million to $302.3 million due primarily to capital contributions of $16.4 million, including $11.2 million in system development fees and $5.2 million in collection lines contributed by developers. Operating income was $772 thousand. 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 $1.6 million to $28.5 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 $50 Millions $40 $30 Revenu es $20 Expe nses $10 $- Water Wastewater Environmental Services General Fund Budgetary Highlights Differences between the original adopted budget and the final amended budget were less that 3% reflecting an increase of $3.8 million. The final amended budget projected that expenditures would exceed revenues by $24.2 million resulting in a $29 million reduction to fund balance per the budget. This was mainly due to budgeting $20.8 million in capital outlay expenditures and $6.3 million in contingency. During the year actual revenues exceeded the budgeted amount by $10 million (8%) mainly due to higher than expected local sales taxes. Actual expenditures were less than budgeted by $23.9 million (16.3%) mainly due to $11.9 million lower than expected capital outlay expenditures and not needing any budgeted contingency. This resulted in an excess of revenues over expenditures of $33.9 million more than budgeted, resulting in the actual net change in fund balance being $35 million more than budgeted. 10 TABLE OF CONTENTS Capital Asset and Debt Administration Capital Assets. As of June 30, 2014, 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 $23 million. Developer contributions of street related infrastructure valued at $1.8 million. Business-type Activities • • Developer contributions of water and wastewater infrastructure valued at $11.2 million. Completed water system improvements totaling $6.6 million and wastewater system improvements totaling $225 thousand. The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2014 and 2013. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Business-type Activities Total 2014 2013 $ 179,058,053 $ 174,747,784 28,469,708 23,134,530 7,210,026 4,117,565 35,679,734 27,252,095 140,107,581 148,773,207 - - 140,107,581 148,773,207 Improvements 35,513,538 38,166,672 - - 35,513,538 38,166,672 Plant, Machinery & Equip 13,779,548 14,245,745 75,018,746 79,472,310 88,798,294 93,718,055 Water Rights - - 7,355,578 7,453,870 7,355,578 7,453,870 Infrastructure 550,913,081 559,227,997 307,034,461 303,809,174 857,947,542 863,037,171 Total Capital Assets $ 947,841,509 $ 958,295,935 $ 456,128,322 $ 450,584,902 $ 1,403,969,831 $ 1,408,880,837 Land Construction-in-progress Buildings 2014 $ 2013 59,509,511 $ 2014 55,731,983 $ 238,567,564 $ 2013 230,479,767 Total governmental capital assets decreased $10.5 million and business-type capital assets increased $5.5 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 and an increase in construction projects, offset by increased depreciation as assets get older. See Note 7 on pages 50-52 for further information regarding capital assets. Long-term Debt. At June 30, 2014, Gilbert had total bonded debt obligations of $291.7 million related to governmental activities and $104.4 million in business-type activities; $135.3 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $9.4 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, 2014 was $109.8 million in the 6% capacity and $230.6 million in the 20% capacity. 11 TABLE OF CONTENTS See Note 10 on pages 53-58 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2014 and 2013. Town of Gilbert Outstanding Debt 2014 Governmental Activities $ 135,065,000 Special Assessment 9,410,000 Street and Highway User 14,915,000 Utility Revenue Municipal Property Corporation 132,295,000 Totals $ 291,685,000 General Obligation 2013 $ 147,565,000 10,430,000 16,945,000 141,990,000 $ 316,930,000 2014 $ Business-type Activities 245,000 104,120,000 $ 104,365,000 Total 2013 2014 2,110,000 13,980,000 111,120,000 $ 127,210,000 $ 135,310,000 9,410,000 14,915,000 236,415,000 $ 396,050,000 $ 2013 $ 149,675,000 10,430,000 16,945,000 13,980,000 253,110,000 $ 444,140,000 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, 2014. General Obligation Street and Highway User Revenue 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 Aa2 Not Rated Aa3 AA AA AA AAA Not Rated AA AA+ AANot Rated Economic Factors and Next Year’s Budget Gilbert, Arizona has embraced the challenge of effectively managing rapid growth and change. Known as the “Hay Capital” in the 1920's, Gilbert was home to fewer than 2,000 residents in 1970. Today, Gilbert is one of the fastest-growing communities in the country, with an estimated population of 233,028; boasting numerous accolades including 2nd safest and 8th most thriving city in the country. Nearly 39% of Gilbert residents have a bachelor's degree or higher; the average household income is $80,080 per year, the highest in Arizona. Gilbert is a stronghold for modern science, a leader in biomedical, adult stem-cell, and algae research, and is also staged to welcome its first university, Saint Xavier University, next year. Recognizing the need for drastic change, Town leadership laid out stringent expectations for the budget process. Processes and systems are fine-tuned each year to increase efficiency and effectiveness. Gilbert now undertakes a zero-based process every third year, and always applies priority, program, and performance-based approaches. Directors are now tasked with balancing the budget through consensus, rather than presenting requests and waiting to hear back. Only after the directors achieve consensus is the Town Manager presented with the recommended budget. This method allows the town to promote transparency and the importance of short- and long-term planning, while maintaining a strong return on investment for the zero-based process. The budget for FY 2015 reflects an effort to deliver both effective and efficient services to our community. The budget is balanced assuming no increases in taxes or utility rates, and applies the non-recurring level of construction-related revenues toward non-recurring costs. Recommended increases in ongoing expenses are within the growth in ongoing levels of revenue recognized as a result of growth both in population and in additional retail opportunities within the Town. 12 TABLE OF CONTENTS Implementing components of a performance-based process allows for an increased focus on results. Departments identify lines of service and performance measures that will be impacted through budgetary requests. Structuring requests by anticipated outcomes allows the leadership team to identify programs that readily align with Council-identified goals. In FY 2015, two additional improvements were made: two staff received Lean black-belt certifications to help enhance the process; a separate budget subcommittee from the executive team was formed to determine the most efficient way to review department requests. Budget Highlights for Fiscal Year 2014 With carry forwards and contingency adjustments, the proposed budget of $554,729,200 is just slightly less than the $554,735,125 adopted on May 15, 2014 as the legal limitation for FY 2015, and is an increase of $88 million from FY 2014. The change from FY 2014 primarily reflects the budget necessary for carry forward and new capital projects. In prior years, capital improvement projects were budgeted on a cash flow basis. Beginning in FY 2014, Council approved a shift to allow staff to budget the full amount necessary to fulfill a contract, thereby providing for the full encumbrance of that contract. After updating the anticipated carry forward for capital projects, the proposed FY 2015 budget includes not only the $79,337,673 necessary for awarding new contracts during the fiscal year, but also the carry forward of $80,637,408 in budget authority from FY 2014. This includes an update to the CIP to provide funding for the consolidated canal project. The capital projects contingency budget of $64,750,000 also reflects an increase over FY 2014 to allow Council the flexibility and legal authority to respond to community needs related to the finalization of master plans. As with all contingency, any amounts exceeding $50,000 would require explicit Council approval. Tax Rates: The adopted budget reflects no increases to sales tax rates and a decrease in the secondary property tax rate from $1.15 to $1.0659. Balanced Financial Plan: The FY 2015 adopted budget is balanced based upon identified revenues and expenditures. Constitutional Expenditure Limit: The FY 2015 adopted budget reflects expenses that will be under the constitutional expenditure limitation. Staff annually 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 FY 2015 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. Much credit goes to the Town’s Intergovernmental Relations staff and to our State legislators. We understand that there are difficult decisions that our legislators must address. We greatly appreciate the consideration that was given to protecting and restoring cities’ and towns’ abilities to provide necessary public service. Secondary Property Tax Levy: Previously collections in April could be applied to the following October debt service payment, allowing for a consistent property tax levy when scheduled debt service payments fluctuated. House Bill 2347 from the 2013 Legislative Session requires municipalities to adopt a property tax levy based on the exact amount of scheduled debt service for the year, plus a reasonable amount for delinquencies and certain costs. Because the $18,576,087 general obligation debt service payment required for FY 2015 is less than the $19,092,000 required in FY 2014, the average tax payer will see a decrease in the Town’s portion of the corresponding property tax in the upcoming year. The $22,814,500 debt service payment due in FY 2016 may cause a corresponding increase in the following fiscal year. The FY 2015 recommended tax levy of $19,500,000 allows for a 5% delinquency factor. 13 TABLE OF CONTENTS Utility Rates: The FY 2015 adopted budget reflects revenues projected from Gilbert’s current water, wastewater, environmental services, and reclaimed water rates. No rate increases are recommended for this fiscal year. Gilbert recently completed a utility rate study. The results of this study offered a recommendation to consider a new rate structure and potential rate changes. During the second and third quarter of FY 2015, Gilbert will update the rate models based on the results of our zero base budget process and begin discussions with Council and citizens. Potential changes to the structure and rates would be included in the FY 2016 budget. Capital Project Financing – System Development Fees: The FY 2015 adopted budget reflects revenues projected from the continued collection of System Development Fees as allowed under current State Law. Staff has completed 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, 2014 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 Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total assets $ Business-type Activities $ 5,946,710 9,020,631 405,227 16,714,079 3,191,627 (8,967,789) 87,704 540,292 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding Total deferred outflows of resources 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 Due in more than one year 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 193,603,095 $ Component Unit 140,930,048 Industrial Development Authority Total $ 334,533,143 $ 14,365 311,237 4,207,544 115,091 8,967,789 206,570 5,946,710 9,020,631 716,464 20,921,623 3,306,718 87,704 746,862 - 18,916,593 88 310,120 64,432,341 59,266 138,407,297 83,348,934 59,354 138,717,417 - 207,527,761 740,313,748 1,187,609,886 66,719,537 389,408,785 813,765,505 274,247,298 1,129,722,533 2,001,375,391 14,365 2,341,801 2,341,801 - 2,341,801 2,341,801 - 9,915,531 11,013,195 1,266,492 245,033 3,229,144 110,018 3,782,259 380,323 1,278,128 3,134,148 - 13,697,790 11,393,518 1,278,128 1,266,492 245,033 3,134,148 3,229,144 110,018 - 30,037,069 280,137,290 335,953,772 5,058,735 101,366,569 115,000,162 35,095,804 381,503,859 450,953,934 - 680,716,975 351,796,858 18,439,085 43,663,212 14,931,372 1,606,944 1,921,249 30,386 107,436 224,731 92,356,525 853,997,915 20,045,832 30,883,507 14,647,453 281,391,693 698,765,343 1,032,513,833 38,484,917 74,546,719 14,647,453 14,931,372 1,606,944 1,921,249 30,386 107,436 224,731 373,748,218 $ 1,552,763,258 The notes to the financial statements are an integral part of this statement. 15 $ - $ 14,365 14,365 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2014 Program Revenues 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 $ Operating Grants and Contributions Charges for Services 13,377,552 4,347,031 5,975,194 9,061,728 $ 10,598 261,542 793,414 6,782,976 $ 48,294 30,000 24,200 Capital Grants and Contributions $ - 45,930,719 28,853,208 45,780,743 22,493,451 842,184 4,104,289 5,477,073 254,556 1,439,724 3,764,882 731 257,153 1,459,142 19,172,563 1,256,037 28,553 49,884 1,473,004 1,983,757 7,605,479 7,439,867 683,653 - 15,215,884 195,981,983 18,785,496 22,325,826 19,185,760 39,926,683 23,614,969 16,112,973 79,654,625 $ 275,636,608 $ 37,866,520 23,852,369 17,307,709 79,026,598 97,812,094 $ 22,325,826 $ 19,883,317 16,368,281 36,251,598 55,437,358 $ $ - $ - $ - 10 General revenues: Sales taxes Property taxes, levied for debt service In-Lieu property taxes Franchise taxes Unrestricted state shared sales taxes Unrestricted state shared income taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain on sale of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position, July 1, 2013 Net position, June 30, 2014 16 TABLE OF CONTENTS Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities $ (13,318,660) (4,085,489) (5,151,780) (2,254,552) Business-type Activities $ - Component Unit Industrial Development Authority Total $ (13,318,660) (4,085,489) (5,151,780) (2,254,552) $ - (38,723,489) (25,155,753) (17,562,977) (10,032,665) (129,978) (4,053,674) - (38,723,489) (25,155,753) (17,562,977) (10,032,665) (129,978) (4,053,674) - (15,215,884) (135,684,901) - (15,215,884) (135,684,901) - (135,684,901) 17,823,154 16,605,681 1,194,736 35,623,571 35,623,571 17,823,154 16,605,681 1,194,736 35,623,571 (100,061,330) (10) 66,756,593 - 66,756,593 - 18,315,083 - 18,315,083 - 1,286,862 - 1,286,862 - 2,616,131 - 2,616,131 - 18,118,706 - 18,118,706 - 23,204,634 - 23,204,634 - 904,497 - 904,497 - 1,508,342 1,741,848 3,250,190 4 29,366 30,372 59,738 - 1,225,918 1,265,737 2,491,655 - 110,000 134,076,132 (1,608,769) (110,000) 2,927,957 - - 137,004,089 4 38,551,528 36,942,759 855,606,684 660,213,815 1,515,820,499 $ 853,997,915 $ 698,765,343 $ 1,552,763,258 (6) 14,371 $ 14,365 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, 2014 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, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Deposits held for others Due to other funds Bonds payable Interest payable Advances from other funds Unearned revenue Total liabilities $ $ $ Deferred Inflows of Resources: Unavailable revenue - special assessments Unavailable revenue - court fines Unavailable revenue - sales tax Unavailable revenue - other Total deferred inflows of resources Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ 71,828,521 $ 19,767,726 Special Assessments Debt Service General Debt Service $ 10,195,245 $ 474,744 5,778,783 160,168 15,545,281 36,650 2,750,914 6,507 25,373,654 41,702 3,944 1,424,998 81,197 - 152,402 35,383 - 9,020,631 761 - 79,365 121,559,843 21,319,567 13,309,145 58 23,692,233 9,496,136 5,109,292 10,846,072 109,576 110,018 16,174,958 $ $ 1,439,910 84,704 15,452 1,540,066 $ $ 10,080,000 3,229,144 13,309,144 $ $ - 5,111,912 423,001 625,072 6,159,985 - - 9,016,722 9,016,722 25,380,161 12,081,060 61,763,679 99,224,900 81,197 15,391,104 4,307,200 19,779,501 8,942,949 1,440,140 10,383,089 479,414 479,414 121,559,843 18 $ 21,319,567 $ 23,692,233 $ 9,496,136 TABLE OF CONTENTS System Development Fees Capital Projects GO Bonds Capital Projects $ $ $ 24,302,499 $ 25,317,219 $ 28,379,077 Total Governmental Funds $ 180,265,031 86,309 192,046 - 53,659 16,269 - 15,525 24,567 954,954 1,729,979 1,825 - 5,946,710 9,020,631 402,549 16,712,494 3,191,627 2,750,914 87,704 1,825 25,373,654 24,580,854 25,387,147 5,528,083 30 36,634,040 18,916,593 88 262,669,820 1,275,796 120,005 1,395,801 $ $ 191,350 191,350 24,580,854 4,774 25,373,654 25,378,428 $ $ - 17,584,623 5,409,080 22,993,703 $ Other Governmental Funds 25,387,147 $ - 25,387,147 (25,378,428) 8,719 $ 1,764,391 44,842 2,750,914 4,560,147 $ 9,016,722 5,111,912 423,001 816,422 15,368,057 1,825 24,551,624 7,607,716 (87,272) 32,073,893 $ 36,634,040 25,463,183 92,336,861 30,845,196 36,297,979 184,943,219 $ The notes to the financial statement are an integral part of this statement. 19 9,594,163 10,975,618 245,033 2,750,914 10,080,000 3,229,144 25,373,654 110,018 62,358,544 262,669,820 TABLE OF CONTENTS 20 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2014 Fund balances - total governmental funds $ 184,943,219 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 1,530,919,523 (583,280,055) 947,639,468 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds 310,120 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 15,368,057 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 funds balance sheet. 3,312,365 Certain 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 funds statement. Unamortized deferred outflow on bond refunding Bonds payable Bonds premium Compensated absences Post-employment benefits Net position of governmental activities - statement of net position The notes to the financial statements are an integral part of this statement. 21 2,341,801 (281,605,000) (5,537,710) (12,070,974) (703,431) (297,575,314) $ 853,997,915 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2014 Revenues Taxes: Sales Property Franchise Licenses and permits Intergovernmental Special assessments Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues General $ Expenditures Current: General government: Management and policy 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 Other financing sources (uses) Transfers in Transfers out Sale of capital assets Total other financing sources and uses Net change in fund balances Fund balances at beginning of year Fund balances at end of year Streets Special Revenue 66,771,661 2,699,926 4,748,310 44,039,441 8,657,665 24,200 32,919 3,861,905 772,153 574,649 132,182,829 $ $ 18,315,083 130,319 18,445,402 Special Assessments Debt Service $ 2,089,887 4,767 2,094,654 15,301,777 4,413,584 4,749,129 6,077,733 - - - 40,235,229 24,820,093 13,555,026 350,000 4,054,405 10,372,765 - - - 8,951,361 122,508,337 7,456,090 17,828,855 24,610,000 13,743,738 1,586 38,355,324 1,020,000 507,965 1,165 1,529,130 9,674,492 1,875,333 (19,909,922) 565,524 1,492,272 (5,706,272) 590,185 (3,623,815) 2,750,968 (3,255,566) (504,598) 19,557,766 19,557,766 (85,512) (85,512) 6,050,677 1,370,735 93,174,223 $ 19,325,179 6,462 2,321 160,924 209,302 19,704,188 General Debt Service 99,224,900 22 (352,156) 18,408,766 $ 19,779,501 480,012 10,735,245 $ 10,383,089 (598) $ 479,414 TABLE OF CONTENTS System Development Fees Capital Projects GO Bonds Capital Projects $ 66,213 66,213 $ 13,434,970 209,996 13,644,966 $ 2,366,473 4,680,964 1,363,281 1,953,036 121,914 604,576 149,218 471,333 11,710,795 Total Governmental Funds $ 66,771,661 20,681,556 2,699,926 4,748,310 68,045,584 2,089,887 10,027,408 1,977,236 13,434,970 154,833 4,468,802 1,493,590 1,255,284 197,849,047 - - 34,175 339,717 - 15,335,952 4,413,584 5,088,846 6,077,733 81,618 - - 1,711,520 172,751 1,596,201 1,977,668 491,257 49,884 41,946,749 24,992,844 11,968,966 15,614,312 841,257 4,104,289 3,250 11,804,894 11,889,762 567,485 567,485 7,026 10,024,451 16,404,650 25,630,000 14,251,703 13,027 38,804,281 209,083,543 (11,823,549) 13,077,481 (4,693,855) (11,234,496) 35,063 (21,733,757) (21,698,694) 670 (11,635,341) (11,634,671) 22,054,043 (3,364,334) 18,689,709 45,890,782 (45,780,782) 590,185 700,185 (33,522,243) 1,442,810 13,995,854 (10,534,311) 56,515,946 $ Other Governmental Funds 22,993,703 (1,434,091) $ 8,719 18,078,039 $ 32,073,893 195,477,530 $ The notes to the financial statements are an integral part of this statement. 23 184,943,219 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, 2014 Net change in fund balances - total governmental funds $ (10,534,311) 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 38,804,281 (51,180,406) (12,376,125) 25,630,000 (951,154) 24,678,846 Repayment of bond principal is reported as expenditures in governmental funds and thus has 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. Also, governmental funds report the effect of deferred outflows of resources, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Principal payments Amortization expense 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. (1,339,527) 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 1,846,142 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 (1,136,679) (360,445) (1,497,124) (1,539,077) 234,559 (15,068) (1,067,084) (2,386,670) Certain revenues are not reported 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. Special assessments Court fines Sales tax Other Change in net position of governmental activities - statement of activities The notes to the financial statements are an integral part of this statement. 25 $ (1,608,769) 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, 2014 Variance with Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Intergovernmental Charges for services Other entities' participation Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 60,500,000 2,335,000 4,103,000 43,694,290 7,317,156 10,000 3,414,000 430,000 319,320 122,122,766 Actual Amounts Final $ 60,500,000 2,335,000 4,103,000 43,694,290 7,317,156 10,000 3,414,000 430,000 319,320 122,122,766 $ 66,771,661 2,699,926 4,748,310 44,039,441 8,657,665 24,200 32,919 3,861,905 772,153 574,649 132,182,829 Final Budget Positive (Negative) $ 6,271,661 364,926 645,310 345,151 1,340,509 24,200 22,919 447,905 342,153 255,329 10,060,063 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 18,352,697 4,558,104 4,930,256 5,788,607 18,168,871 4,640,216 4,930,406 6,194,971 15,301,777 4,413,584 4,749,129 6,077,733 2,867,094 226,632 181,277 117,238 40,954,283 25,069,735 14,275,206 350,000 3,447,860 11,802,200 13,044,000 142,572,948 41,061,733 25,128,963 15,322,431 350,000 3,447,860 20,822,482 6,303,408 146,371,341 40,235,229 24,820,093 13,555,026 350,000 4,054,405 8,951,361 122,508,337 826,504 308,870 1,767,405 (606,545) 11,871,121 6,303,408 23,863,004 Excess (deficiency) of revenues over (under) expenditures (20,450,182) (24,248,575) 9,674,492 33,923,067 1,111,191 (5,844,772) (4,733,581) 1,111,191 (5,844,772) (4,733,581) 1,492,272 (5,706,272) 590,185 (3,623,815) 381,081 138,500 590,185 1,109,766 (28,982,156) 6,050,677 Other financing sources (uses) Transfers in Transfers out Sale of capital assets Total other financing sources and uses Net change in fund balances $ (25,183,763) $ Fund balance at beginning of year 93,174,223 Fund balance at end of year $ The notes to the financial statements are an integral part of this statement. 26 99,224,900 $ 35,032,833 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, 2014 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 18,600,000 50,000 18,650,000 Final $ 18,600,000 50,000 18,650,000 Actual Amounts $ 19,325,179 6,462 2,321 160,924 209,302 19,704,188 Final Budget Positive (Negative) $ 725,179 6,462 2,321 110,924 209,302 1,054,188 Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures 11,129,591 10,844,080 1,000,000 22,973,671 11,159,479 11,227,346 426,846 22,813,671 10,372,765 7,456,090 17,828,855 786,714 3,771,256 426,846 4,984,816 Excess (deficiency) of revenues over (under) expenditures (4,323,671) (4,163,671) 1,875,333 6,039,004 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 50,000 (3,283,721) (3,233,721) 50,000 (3,283,721) (3,233,721) 2,750,968 (3,255,566) (504,598) 2,700,968 28,155 2,729,123 Net change in fund balances $ (7,557,392) Fund balance at beginning of year Fund balance at end of year $ (7,397,392) 1,370,735 $ The notes to the financial statements are an integral part of this statement. 27 18,408,766 19,779,501 $ 8,768,127 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2014 ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Due from other governments Inventories Total current assets Noncurrent assets: Restricted assets: Cash and investments Accrued interest 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 Noncurrent liabilities: Utility revenue bonds payable Accrued compensated absences Post-employment benefits Total noncurrent 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 Water $ Business-type Activities - Enterprise Funds Environmental Wastewater Services 68,285,169 $ 56,159,176 $ Total 24,865,991 $ 149,310,336 151,817 2,391,523 115,091 206,570 109,257 1,167,139 - 50,163 648,882 - 311,237 4,207,544 115,091 206,570 71,150,170 57,435,572 25,565,036 154,150,778 57,761,051 59,266 72,199,454 6,671,290 66,207,843 - 64,432,341 59,266 138,407,297 51,860,930 225,500,360 14,849,514 159,971,148 9,093 3,937,277 66,719,537 389,408,785 407,381,061 247,699,795 3,946,370 659,027,226 478,531,231 305,135,367 29,511,406 813,178,004 1,240,564 175,552 362,888 1,278,128 4,322,585 3,105,379 2,234,767 72,317 176,302 - 306,928 132,454 196,960 28,769 3,782,259 380,323 736,150 1,278,128 4,322,585 3,134,148 10,485,096 2,483,386 665,111 13,633,593 100,008,879 541,610 87,292 343,002 31,942 293,772 60,072 100,008,879 1,178,384 179,306 100,637,781 374,944 353,844 101,366,569 111,122,877 2,858,330 1,018,955 115,000,162 173,029,826 19,340,732 29,798,887 8,754,917 136,483,992 $ 367,408,354 174,820,662 705,100 1,084,620 5,892,536 119,774,119 $ 302,277,037 3,946,370 24,546,081 28,492,451 351,796,858 20,045,832 30,883,507 14,647,453 280,804,192 $ 698,177,842 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 587,501 Net position of business-type activities $ 698,765,343 28 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 4,957,776 2,678 1,585 538,467 5,500,506 202,041 202,041 5,702,547 321,368 37,577 78,541 1,266,492 1,703,978 98,703 98,703 1,802,681 $ 202,041 3,697,825 3,899,866 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, 2014 Water Operating revenues Charges for services Other Total operating revenues Operating expenses General and administrative Personal services Operation and maintenance Claims Incurred Depreciation Allocation of indirect expenses Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Interest expense Investment earnings Gain (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 37,866,520 1,143,907 39,010,427 $ 23,852,369 10,410 23,862,779 $ 17,307,709 111,420 17,419,129 674,632 3,917,740 9,411,338 8,349,360 737,948 23,091,018 926,402 5,692,286 6,922,187 1,700,804 700,723 15,942,402 2,836,189 16,530,417 29,329,878 20,062,058 3,060,056 71,818,598 6,225,249 771,761 1,476,727 8,473,737 (6,997,895) 1,010,510 8,111 (5,979,274) (413,019) 543,330 (38,277) 92,034 245,975 188,008 (9,889) 178,119 863,795 (7,410,914) 1,741,848 (40,055) (5,709,121) 1,654,846 19,883,317 79,051 (764,007) 16,368,281 679,007 (51,350) Change in net position 19,444,336 17,859,733 1,602,145 347,964,018 284,417,304 26,890,306 $ 367,408,354 $ 302,277,037 Total net position, end of year 79,026,598 1,265,737 80,292,335 1,235,155 6,920,391 12,996,353 10,011,894 1,621,385 32,785,178 Capital contributions Transfers in Transfers out Total net position, beginning of year $ Total 2,764,616 (52,701) $ 36,251,598 758,058 (868,058) 38,906,214 28,492,451 (354,686) Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities 30 $ 38,551,528 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 22,304,990 119,276 22,424,266 823,376 1,697,103 6,126,916 15,458,122 27,714 24,133,231 (1,708,965) 14,752 14,752 (1,694,213) (1,694,213) 5,594,079 $ 3,899,866 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, 2014 Water Cash flows from operating activities: Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash receipts from deposits Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments to other funds for services Net cash provided by (used in) operating activities $ 38,544,934 1,143,907 (15,089,377) (6,869,973) (1,621,385) 16,108,106 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 development fees Cash paid for interest and fiscal charges Principal payments on bonds Proceeds from sales of capital assets Net cash provided by (used in) capital and related financing activities Reconciliation of operating income (loss) to net cash provided by (used in) operations: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation Provision for uncollectible accounts Changes in assets and liabilities: Decrease in accounts receivable (Increase) decrease in inventories Increase (decrease) in accounts payable Increase in claims payable Increase (decrease) in deposits Increase in accrued expenses Total adjustments Net cash provided by (used in) operating activities Supplemental disclosures of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment 23,872,733 10,410 (9,241,492) (3,914,286) (737,948) 9,989,417 $ 17,350,953 111,420 6,860 (8,390,995) (5,613,887) (700,723) 2,763,628 $ 79,768,620 1,265,737 6,860 (32,721,864) (16,398,146) (3,060,056) 28,861,151 679,007 (51,350) 627,657 (52,701) (52,701) 758,058 (868,058) (110,000) (8,692,486) 13,929,121 (5,883,684) (19,576,886) 8,111 (20,215,824) (1,544,118) 11,154,279 (148,909) (3,268,114) 6,193,138 (1,248,487) (1,248,487) (11,485,091) 25,083,400 (6,032,593) (22,845,000) 8,111 (15,271,173) 1,019,335 1,019,335 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year includes: Equity in pooled cash and investments Restricted cash and investments Total cash and cash equivalents $ Total 79,051 (764,007) (684,956) Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Cash and cash equivalents at end of year Business-type Activities - Enterprise Funds Environmental Wastewater Services (3,773,339) 129,819,559 513,291 513,291 189,079 189,079 1,721,705 1,721,705 17,323,503 45,506,963 1,651,519 23,214,472 15,201,683 198,540,994 $ 126,046,220 $ 62,830,466 $ 24,865,991 $ 213,742,677 $ 68,285,169 57,761,051 $ 126,046,220 $ $ $ 56,159,176 6,671,290 62,830,466 $ 24,865,991 24,865,991 $ 149,310,336 64,432,341 $ 213,742,677 $ $ 771,761 $ 1,476,727 6,225,249 $ 8,473,737 10,011,894 (9,394) 8,349,360 (3,303) 1,700,804 (1,002) 20,062,058 (13,699) 771,112 17,999 (875,868) (83,304) 50,418 9,882,857 23,668 844,477 3,454 9,217,656 44,246 (542,406) 6,860 78,399 1,286,901 839,026 17,999 (573,797) (76,444) 132,271 20,387,414 $ 16,108,106 $ 9,989,417 $ 2,763,628 $ 28,861,151 $ $ 5,954,196 5,954,196 $ $ 5,214,002 5,214,002 $ $ - $ $ 11,168,198 11,168,198 32 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 138,752 22,320,172 (22,418,678) (1,660,730) (1,620,484) - (75,077) (75,077) 15,988 15,988 (1,679,573) 6,637,349 $ 4,957,776 $ $ 4,957,776 4,957,776 $ (1,708,965) 27,714 34,658 (64,311) (1,041) 55,088 36,373 88,481 $ $ $ (1,620,484) - 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, 2014 Firemen's Pension Trust Agency Funds $ 94,778 - $ 240,415 10,685 94,778 $ 251,100 - $ 229,117 21,983 - $ 251,100 ASSETS Restricted cash and investments Prepaid items Total assets LIABILITIES Guaranty and other deposits Dependent care benefits payable Total liabilities NET POSITION Held in trust for pension benefits $ 94,778 The notes to the financial statements are an integral part of this statement. 34 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Position Fiduciary Fund For the Year Ended June 30, 2014 Firemen's Pension Trust Additions Interest on investments $ Total additions 49 49 Deductions Benefits Administration 2,400 100 Total deductions 2,500 Change in net position (2,451) Net position - beginning of the year 97,229 Net position - end of the year $ The notes to the financial statements are an integral part of this statement. 35 94,778 TABLE OF CONTENTS 36 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the Council-Manager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 - Summary of Significant Accounting Policies Gilbert’s accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity Gilbert’s operations include public safety (police, fire, and animal control), 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, 2014, 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, 2014 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 Phoenix-Mesa Gateway Airport Authority (PMGAA) 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 2014 (life to date $7,524,250) to the PMGAA 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, is 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, 2014 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, 2014 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, 2014 GO Bonds Capital Projects Fund – The GO bonds fund accounts for the receipt of proceeds from general obligation bonds and the expenditure of those proceeds to purchase or construct capital assets. System Development Fees Capital Projects Fund – The System development fees fund accounts for the receipt of fees collected from building permits paid and the expenditure of those funds for infrastructure related to growth in Gilbert. 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, 2014 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 departments. Directors may authorize transfers within non-personnel 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 3. 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, 2014 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. 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, 2014 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 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. 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 6 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, 2014 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. State law requires municipalities to adopt a property tax levy based on the exact amount of scheduled debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2014, Gilbert’s property tax rate is $1.0659 per $100 of secondary assessed valuation. O. Deferred outflows/inflows of resources During the fiscal year ended June 30, 2014, Gilbert implemented the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB Statement No. 65 reclassifies certain items that were previously reported as assets and liabilities as deferred inflows of resources or deferred outflows of resources. On the government-wide Statement of Net Position, deferred outflows of resources are reported and represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. Gilbert only has one item that qualifies for reporting in this category. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. On the governmental funds Balance Sheet, deferred inflows or resources are reported and represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Gilbert only has one item, which arises only under a modified accrual basis of accounting, that qualifies for reporting in this category. The governmental funds report unavailable revenues from several sources: special assessments, court fines, sales tax and other. These amounts are deferred and recognized as an inflow of resources in the period that the amount becomes available. P. 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. 45 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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. Per the Policies of Responsible Financial Management, Council has 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. As of June 30, 2014, the fund balance details by classification are listed below: Streets Fund balances: General Special Fund Revenue Major Major Debt Service Funds Capital Projects Funds Special General Assmnts GO Bonds System Other Dev Fees Gov’t Total Nonspendable: Advances Inventory $25,373,654 $ - $ - $ - $ - $ - $ - $ 25,373,654 - - - - - - 1,825 1,825 6,507 81,197 - - - - - 87,704 Capital projects - - - - 17,584,623 25,387,147 20,590,377 63,562,147 Court/public safety programs - - - - - - 1,946,968 1,946,968 Debt service - - 8,942,949 479,414 - - - 9,422,363 Grants - - - - - - 1,618,141 1,618,141 Highways and streets - 15,391,104 - - - - - 15,391,104 Contract agreements - - - - - - 107,436 107,436 Parks & recreation programs - - - - - - 30,386 30,386 Special districts - - - - - - 258,316 258,316 Capital replacement 9,174,397 4,307,200 - - - - - 13,481,597 Capital projects 2,209,960 - - - 5,409,080 - 7,510,780 15,129,820 334,039 - - - - - 15,432 349,471 - - 1,440,140 - - - - 1,440,140 Prepaid items Restricted for: Assigned to: Court/public safety programs Debt service Development services Management and policy Parks & recreation programs Unassigned: Total fund balances 28,900 - - - - - - 28,900 136,278 - - - - - - 136,278 197,486 - - - - - 81,504 278,990 61,763,679 - - - - (25,378,428) (87,272) 36,297,979 $99,224,900 $19,779,501 $10,383,089 $479,414 $22,993,703 $32,073,893 $184,943,219 46 $ 8,719 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Q. Pronouncement Issued But Not Yet Adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions, will be effective for the fiscal year ending June 30, 2015. This Statement requires governments providing defined benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. This Statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information. R. 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. S. 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. Note 2 – Changes in Beginning Balances Due to a change in reporting of capital projects funds, these funds were reclassified and are now reported based on funding source. Fund balances at June 30, 2013, as previously reported, capital projects funds: Streets and transportation capital projects Municipal facilities capital projects Parks, open space and recreation capital projects Nonmajor capital projects funds Total fund balances at June 30, 2013, as previous reported $59,626,142 (16,534,434) 17,136,758 6,264,737 $66,493,203 Fund balances at June 30, 2013, as revised, capital projects funds: GO bonds capital projects System development fees capital projects Nonmajor capital projects funds Total fund balances at June 30, 2013, as revised $56,515,946 (1,434,091) 11,411,348 $66,493,203 Note 3 - 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. 47 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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 4 - 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, and the participant’s shares are not identified with specific investments. At June 30, 2014, 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 $122,388,869 70,690,159 3,604,162 49,081,639 69,004,280 9,721,739 19,844,555 $344,335,403 Investment Maturities (in Years) Less than 1 1-4 $10,579,396 $111,809,473 14,655,308 56,034,851 395,000 3,209,162 20,337,852 28,743,787 13,667,882 55,336,398 9,721,739 19,844,555 $89,201,732 $255,133,671 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, 2014, 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 AAA ratings. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. 48 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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, 2014, Gilbert’s bank balance was $76,855,953 of which $10,224,927 was with JP Morgan and $66,631,026 was with Alliance Bank of Arizona. $9,974,927 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, 2014, of Gilbert’s investments, 35% were in U.S. Government Treasuries, 20% were in the State Treasurer’s Investment Pool and 20% were 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 $ 73,881,867 344,335,403 $418,217,270 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 $334,533,143 83,348,934 417,882,077 94,778 240,415 $418,217,270 Note 5 - Taxes Receivable and Due from Other Governments The general fund taxes receivable amount at June 30, 2014, includes $1,539,822 in state shared sales tax and $4,238,961 in local sales tax due from the State of Arizona. Amounts due from other governments recorded in the streets special revenue fund include $1,106,646 in highway user revenues and $318,352 in vehicle license tax both due from the State of Arizona. Other governmental funds include $744,189 in federal grants from the U.S. Department of Housing and Urban Development, $97,494 from the U.S. Department of Transportation, and $95,038 from the U.S. Department of Homeland Security. The balance of these receivables represents various grants from the state and federal governments. 49 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Note 6 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2014, 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 $ $ 2,750,914 Other governmental funds 2,750,914 Total $ 2,750,914 $ 2,750,914 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 $ $25,373,654 System development fees capital projects fund 25,373,654 Total $25,373,654 $25,373,654 Note 7 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2014, is as follows: July 1, 2013 Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets $ Additions 174,747,784 $ 23,134,530 197,882,314 6,812,633 $ 30,378,980 37,191,613 216,730,685 70,747,628 54,623,067 954,347,388 Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets, net Governmental activities capital assets, net $ Deletions June 30, 2014 (2,502,364) $ (25,043,802) (27,546,166) 179,058,053 28,469,708 207,527,761 45,666 909,183 3,158,777 24,464,065 (1,126,500) - 216,776,351 71,656,811 56,655,344 978,811,453 1,296,448,768 28,577,691 (1,126,500) 1,323,899,959 (67,957,478) (32,580,956) (40,377,322) (395,119,391) (8,711,292) (3,562,317) (3,597,229) (32,778,981) 1,098,755 - (76,668,770) (36,143,273) (42,875,796) (427,898,372) (536,035,147) (48,649,819) 1,098,755 (583,586,211) 760,413,621 (20,072,128) (27,745) 740,313,748 958,295,935 $ 50 17,119,485 $ (27,573,911) $ 947,841,509 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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 $ 400,911 295,654 640,828 887,601 2,999,642 2,979,210 33,689,456 6,728,803 48,622,105 27,714 Total depreciation expense - governmental activities $48,649,819 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2014, is as follows: July 1, 2013 Non-depreciable assets: Land $ Construction-in-progress Total non-depreciable assets Depreciable assets: Plant and equipment Water rights Infrastructure Additions 55,731,982 $ 4,117,565 59,849,547 3,777,529 $ 6,103,505 9,881,034 Deletions - $ (3,011,044) (3,011,044) June 30, 2014 59,509,511 7,210,026 66,719,537 132,275,222 9,146,281 421,080,250 1,635,734 14,162,865 (1,142,924) - 132,768,032 9,146,281 435,243,115 Total depreciable assets Less accumulated depreciation: Plant and equipment Water rights Infrastructure 562,501,753 15,798,599 (1,142,924) 577,157,428 (52,802,912) (1,692,411) (117,271,076) (6,018,871) (98,292) (10,937,578) 1,072,497 - (57,749,286) (1,790,703) (128,208,654) Total accumulated depreciation Total depreciable assets, net (171,766,399) 390,735,354 (17,054,741) (1,256,142) 1,072,497 (70,427) (187,748,643) 389,408,785 Business-type activities capital assets, net $ 450,584,901 $ 51 8,624,892 $ (3,081,471) $ 456,128,322 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Note 8 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2014, were as follows: Constructionin-Progress Commitments Redevelopment Municipal facilities Parks Storm water Traffic control Streets capital projects Total $ $ 8,314,823 1,035,408 2,955,348 43,422 1,062,264 15,058,443 28,469,708 $ 4,461,824 2,097,633 19,693 320,618 6,393,891 13,293,659 $ Business-type activities construction-in-progress and related construction commitments at June 30, 2014, were as follows: Water system Wastewater system Municipal facilities Total $ $ 3,192,870 4,008,064 9,093 7,210,027 $ $ 2,164,491 816,751 2,981,242 In addition, there were non-construction related commitments at June 30, 2014, as follows: Governmental funds: General Streets special revenue Other governmental Total $ $ Proprietary funds: Water system Wastewater system Total $ $ 1,270,670 16,435 250,440 1,537,545 423,775 46,399 470,174 Note 9 - 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 2014, 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. 52 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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 reimbursement to the Plan for medical claims incurred by an individual member in excess of $250,000 after an additional $125,000 aggregate Plan risk retention. 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 $1,266,492 reported in the employee benefit self-insurance trust at June 30, 2014, 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 2014, an increase of $55,088 was recorded for IBNR claims under the medical plan and no change 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 2014 reflected a net increase in claims costs of $2,816,668 from fiscal year 2013. This was due to an increase of $2,830,892 in medical claims and a decrease of $14,224 in dental claims. The increase in medical claims costs was substantially due to large claims costs that triggered stop loss insurance reimbursements. Recoveries from stop loss insurance were received after the close of the Plan year, with $1,962,672 received through September 2014. Changes in the fund’s claim liability amount in fiscal years 2013 and 2014 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 $ 1,244,571 $ 1,211,404 12,641,454 15,458,122 12,674,621 15,403,034 $1,211,404 $1,266,492 2013 2014 Note 10 - 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, 2014, were as follows: 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 53 Governmental $ Business-type - $ 245,000 9,715,000 - 125,350,000 - $135,065,000 $ 245,000 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 Governmental Activities Principal Interest 2015 2016 2017 2018 2019 2020-2023 Total $ 12,350,000 17,465,000 13,200,000 14,000,000 14,250,000 63,800,000 $135,065,000 $ 5,967,000 5,349,500 4,476,250 3,816,250 3,116,250 5,582,500 $28,307,750 Business-type Activities Principal Interest $245,000 _______$ 245,000 $ 14,088 ______$ 14,088 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, 2014: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Purposes Bonds All Other General Obligation Bonds Secondary Assessed Valuation $1,829,471,839 Secondary Assessed Valuation $1,829,471,839 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 $ 365,894,367 (135,310,000) $ 230,584,367 $ 109,768,310 $ 109,768,310 As of June 30, 2014, Gilbert had authorized, but unissued bonds, approved by the voters as follows: 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, 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, 2014 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, 2014, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were 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, 2014, 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 $ 1,710,000 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012 through January 1, 2029 7,700,000 Total $ 9,410,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2015 2016 2017 2018 2019 2020-2024 2025-2029 Total Governmental Activities Principal Interest $ 445,000 475,000 505,000 535,000 540,000 3,185,000 3,725,000 $ 9,410,000 $ 470,225 446,668 421,575 394,947 367,423 1,376,305 466,267 $3,943,410 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, 2014 Street and highway user revenue bonds outstanding at June 30, 2014, 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 $14,915,000 Annual debt service requirements to maturity for street and highway user revenue bonds are as follows: Year Ending June 30 2015 2016 2017 2018 2019 Total Governmental Activities Principal Interest $ 2,750,000 2,845,000 2,975,000 3,095,000 3,250,000 $14,915,000 $ 632,550 550,050 436,250 317,250 162,500 $ 2,098,600 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 17 regarding Pledged Revenues.) Municipal property corporation revenue bonds outstanding at June 30, 2014, were as follows: 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 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, 2030 $ 45,095,000 Business-type $ - - 104,120,000 2009 Public Facilities Municipal Property Corporation Revenue Bonds, 4.0% 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 $104,120,000 Total 56 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Annual debt service requirements to maturity for municipal property corporation revenue bonds are as follows: Year Ending June 30 Governmental Activities Principal Interest 2015 2016 2017 2018 2019 2020-2024 2025-2029 2030-2031 Total $ 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 $ 4,075,000 4,275,000 4,500,000 4,750,000 4,975,000 28,925,000 36,850,000 15,770,000 $104,120,000 $ 5,010,638 4,801,888 4,582,513 4,351,263 4,108,138 16,497,935 8,571,125 723,081 $48,646,581 During the fiscal year ended June 30, 2014, Gilbert paid $3,125,000 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. Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2014, was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Unamortized bond premium 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 Total bonds payable Compensated absences Post-employment benefits Total long-term liabilities Balance July 1, 2013 $147,565,000 Additions $ Reductions - Balance June 30, 2014 Due Within One Year $(12,500,000) $135,065,000 $12,350,000 10,430,000 158,935,000 6,208,497 323,138,497 11,079,394 342,986 9,425,060 416,934 (1,020,000) (11,725,000) (670,787) (25,915,787) (8,256,236) (56,489) 9,410,000 147,210,000 5,537,710 297,222,710 12,248,218 703,431 445,000 12,830,000 25,625,000 4,412,069 - $334,560,877 $9,841,994 $(34,228,512) $310,174,359 $30,037,069 $ $ 1,592,777 106,339 $ (1,865,000) (20,980,000) 2,429 (434,171) (23,276,742) (1,607,798) (14,407) $ $ $1,699,116 $(24,898,947) $106,425,304 2,110,000 125,100,000 (38,550) 436,756 127,608,206 1,929,555 87,374 $129,625,135 245,000 104,120,000 (36,121) 2,585 104,331,464 1,914,534 179,306 245,000 4,075,000 2,585 4,322,585 736,150 - $ 5,058,735 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, $177,244 of internal service funds compensated absences are included in the above amounts. 57 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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, 2014, Industrial Development Authority Revenue Bonds and Master Lease and Sublease Agreements outstanding were $29,401,404 and $39,213,843 respectively. Note 11 - Retirement and Pension Plans Plan Descriptions and Financial Reports Gilbert contributes to three retirement plans described below. The plans are component units of the State of Arizona, state statutes establish benefits, and the plans 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. The health insurance premium benefit is paid as a fixed dollar amount per month toward the retiree’s healthcare insurance premiums, in amounts based on whether the benefit is for the retiree or for the retiree and his or her 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 is available on their web site at www.azasrs.gov or 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 is available on their web site at www.psprs.com or 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. 58 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 The Elected Officials’ Retirement Plan (EORP) administers a cost-sharing, multiple-employer defined benefit pension plan and a cost-sharing, multiple-employer defined benefit health insurance premium plan that covers State of Arizona and county elected officials and judges, and elected officials of participating municipalities who were plan members on December 31, 2013. This plan was closed to new members as of January 1, 2014. The PSPRS Board of Trustees governs the EORP 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 multipleemployer plan. Accordingly, the disclosures that follow reflect the EORP as if it were an agent multipleemployer 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. 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, 2014, statute required active ASRS members to contribute at the actuarially determined rate of 11.54% (11.30% for retirement and 0.24% for long-term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 11.54% (10.7% for retirement, 0.6% for health insurance premium, and 0.24% for long-term disability) of the members’ annual covered payroll. Statute required active EORP members to contribute 13.0% of the members’ annual covered payroll and statute required Gilbert to remit a designated portion of certain court fees plus additional contributions at a percent of the members’ annual covered payroll. Through December 31, 2013, the additional contributions were at the actuarially determined rate of 39.62%. Beginning January 1, 2014, the additional contributions were at the statutorily required rate of 23.5%. Both rates include the actuarially set rate of 1.56% for the plan’s health insurance premium benefit. Gilbert’s contributions for the current and two preceding years, all of which were equal to the required contributions, were as follows: ASRS Fiscal Year Ended 2014 2013 2012 Retirement Fund $ 4,522,413 3,925,481 3,658,186 Health Benefit Supplement Fund $253,593 248,933 233,501 EORP Fiscal Year Ended 2014 2013 2012 Retirement Fund $ 51,371 57,265 51,135 Health Insurance Premium Benefit $2,556 2,458 2,934 Long-Term Disability Fund $100,955 91,364 96,821 Agent plans - For the year ended June 30, 2014, statute required active PSPRS members to contribute 10.35% of police member’s annual covered payroll and 10.35% for fire member’s annual covered payroll. Gilbert was required to contribute at the actuarially determined rate of 17.58% for police personnel, of which 0.34% was the health insurance premium portion; and 13.30% for fire personnel, of which 0.28% was the health insurance premium portion. 59 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Actuarial methods and assumptionsThe contribution requirements for the year ended June 30, 2014, were established by the June 30, 2012 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 plans’ funded status 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 Gilbert and plans’ members understand them and include the types of benefits in force at the valuation date, and 2) the pattern of sharing benefit costs between Gilbert and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions 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 following actuarial methods and assumptions were used to establish the fiscal year 2014 contribution requirements: Actuarial valuation date June 30, 2012 Actuarial cost method Entry Age Normal Amortization method Level percent closed for unfunded actuarial accrued liability, open for excess Remaining amortization period 24 years for underfunded actuarial accrued liability, 20 years for excess Asset valuation method 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return Projected salary increases including inflation rate at Healthcare cost trend rate 8.0% 5.0% - 9.0% 5.0% N/A flat rate subsidy Annual Pension/OPEB Cost – Gilbert’s pension/other post-employment benefits (OPEB) cost for the agent plans for the year ended June 30, 2014, and related information follows (actual contributions made were equal to the annual pension/OPEB cost): Pension Health Insurance PSPRS-Police $3,229,406 63,689 PSPRS-Fire $1,974,691 42,466 60 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Trend InformationAnnual pension cost information for the current and two preceding years follows for each of the agent plans. Plan PSPRS-Police Pension Fiscal Year Ended Health Insurance PSPRS-Fire Pension Health Insurance Percentage of Annual Cost Contributed Annual Pension/ OPEB Cost Net Pension/ OPEB Obligation 2014 2013 2012 $3,008,540 2,805,501 2,439,689 100.0% 100.0% 100.0% -0-0-0- 2014 2013 2012 59,333 65,793 97,156 100.0% 100.0% 100.0% -0-0-0- 2014 2013 2012 $ 1,773,479 1,672,852 1,297,068 100.0% 100.0% 100.0% -0-0-0- 2014 2013 2012 38,139 40,245 62,951 100.0% 100.0% 100.0% -0-0-0- 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, 2014, and the previous two fiscal years. The fiscal year 2014 actuarial methods and assumptions used for the schedules are not significantly different than the fiscal year 2012 actuarial methods and assumptions as described on page 60. 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 2014 $ 54,735,780 2013 51,402,243 2012 46,823,028 Actuarial Actuarial Valuation Value of Date Plan June 30 Assets Health Insurance 2014 $ 1,764,456 2013 -02012 -0- (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll 83,549,777 68,370,995 61,175,480 (28,813,997) (16,968,752) (14,352,452) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll 1,993,264 1,808,786 1,663,617 (228,808) (1,808,786) (1,663,617) 88.5% 0.0% 0.0% 18,650,590 17,167,856 16,652,610 61 65.5% 75.2% 76.5% 18,650,590 17,167,856 16,652,610 (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (154.5)% (98.8)% (86.2)% Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (1.23)% (10.54)% (9.99)% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 PSPRS - Fire (1) Actuarial Valuation Actuarial Date Value of June 30 Assets Pension 2014 $44,417,914 2013 40,413,033 2012 35,417,839 Actuarial Valuation Actuarial Date Value of June 30 Assets Health Insurance 2014 $1,039,413 2013 -02012 -0- (2) (3) (4) (5) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) Funded Ratio (1)/(2) Annual Covered Payroll 51,464,815 42,232,338 37,018,127 (7,046,901) (1,819,305) (1,600,288) Actuarial Accrued Liability (AAL) Funding (Liability) Excess (1)-(2) 1,335,632 1,251,900 1,097,566 (296,219) (1,251,900) (1,097,566) 86.3% 95.7% 95.7% Funded Ratio (1)/(2) 77.8% 0.0% 0.0% 14,685,147 13,278,222 13,072,322 Annual Covered Payroll 14,685,147 13,278,222 13,072,322 (6) Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (48.0)% (13.7)% (12.2)% Funding Excess (Unfunded Liability) As Percentage of Covered Payroll (3)/(5)____ (2.02)% (9.43)% (8.40)% 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 2014. Administrative costs are financed through investment earnings. There is only one remaining pensioner receiving retirement benefits from the Fund. Note 12 - 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. 62 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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, 2014, there are 31 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, 2014, retirees contributed $257,371 and Gilbert contributed $70,896 (implied subsidy). 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, 2014: 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 $525,797 (17,587) 15,063 $523,273 (70,896) $452,377 430,360 $882,737 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, 2014 is as follows: Fiscal Year Ended 2014 2013 Annual OPEB Cost $523,273 525,797 Employer Contributions $70,896 95,437 63 Percentage of OPEB Cost Contributed 13.55% 18.15% Net OPEB Obligation $882,737 430,360 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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: 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. 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 projected unit credit actuarial cost 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 most recent actuarial valuation, the projected unit credit actuarial cost 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; an annual salary increase of 2%; and an inflation rate of 3%. Note 13 - Capital Contributions During the year ended June 30, 2014, the Enterprise funds external capital contributions consisted of the following: Water Contributions from developers Development fees Total Wastewater $ 5,954,196 13,929,121 $19,883,317 64 $ 5,214,002 11,154,279 $16,368,281 Total $11,168,198 25,083,400 $36,251,598 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Note 14 – Interfund Transfers As of June 30, 2014, interfund transfers were as follows: Governmental funds: General fund Streets special revenue General debt service Special assessments GO bonds System development fees Other governmental funds Total governmental funds Enterprise funds: Water Wastewater Environmental Services Total enterprise funds Total transfers Transfers-In Transfers-Out $ 1,492,272 2,750,968 19,557,766 35,063 670 22,054,043 45,890,782 $ 5,706,272 3,255,566 85,512 21,733,757 11,635,341 3,364,334 45,780,782 79,051 679,007 758,058 764,007 51,350 52,701 868,058 $46,648,840 $46,648,840 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 replacement. During fiscal year 2014, a change was made in how Gilbert reports the capital projects funds. These funds were reclassified and are now reported based on funding source. Therefore, transfers were made to properly report this change. See also Note 2. Besides this, there were no other significant transfers during fiscal year 2014 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 15 - Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2014, were as follows: Special revenue funds CDBG/HOME $ 75,007 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. Note 16 – 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. 65 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 Note 17 – Pledged Revenues Gilbert has pledged future water system development fees revenue and future water and wastewater revenues, net of specified operating expenses, 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 system development fees revenue and water and wastewater net revenues and are payable through 2030. 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 $152,766,581. Principal and interest paid for the current year was $12,198,059 (of which $3,125,000 in principal was an advance defeasance). Total water system development fees revenue was $10,567,046 and water and wastewater net revenues after debt payments were $23,248,101. 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 10 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 24 percent of revenues. The total principal and interest remaining to be paid on the bonds is $17,013,600. Principal and interest paid for the current year was $2,723,450, and the total street and highway revenues were $11,747,325. 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 15 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 $16,538,288, and the total excise taxes and state-shared revenues were $117,627,904. Note 18 - 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 (net of depreciation) as of June 30, 2014, was: Mesa’s Share Gilbert’s Share Queen Creek’s Share Total $ 61,976,980 66,207,843 25,478,284 $153,663,107 66 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2014 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 (net of depreciation) as of June 30, 2014, was: Gilbert’s Share Chandler’s Share Total $ 72,199,454 65,904,530 $138,103,984 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 (net of depreciation) as of June 30, 2014, 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 $1,116,190 310,120 71,351 29,501 15,001 5,533 $1,547,696 Note 19 - Subsequent Events Gilbert advance defeased $1,820,000 of the $104,120,000 in outstanding Water Resources MPC Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds on October 1, 2014. 67 TABLE OF CONTENTS 68 TABLE OF CONTENTS NONMAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues and expenditures from specific taxes or other earmarked sources. Such funds are usually required by statute or ordinance to finance particular functions or activities. Grants - accounts for miscellaneous grants received from Federal, State and local governments that require segregation of revenues and expenditures. Other Special Revenue - accounts for revenues received from various agencies and sources, including seized funds from law enforcement agencies that are required to be used for specific purposes. Community Development Block Grants (CDBG) – accounts for a series of ongoing entitlements received directly from the U.S. Department of Housing and Urban Development (HUD) and used for affordable housing and redevelopment activities. HOME Program accounts for HUD monies received from Maricopa County for affordable housing activities including housing rehabilitation. Street Light Improvement District - accounts for taxes received from and expenditures of the street light maintenance improvement districts. Parkway Maintenance District - accounts for taxes received from and expenditures of the parkway maintenance improvement districts. Capital Projects Funds Capital Projects Funds are established to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Outside Sources - accounts for the purchase or construction of capital assets with funds from outside sources, i.e., developers or other governments. Prop 400 - accounts for the receipt of state funds in accordance with the MAG Regional Transportation Plan approved by voters as Proposition 400 in 2004. The expenditure of those funds are for various street improvement projects. Municipal Property Corporation – accounts for the construction or purchase of capital assets to be funded through the use of Public Facilities Municipal Property Corporation revenue bonds. 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, 2014 ASSETS Pooled cash and investments Receivables, net: Taxes Accrued interest Accounts Due from other governments Inventories Restricted assets: Cash and investments Accrued interest Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Total liabilities Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances Special Revenue Grants Other Special Revenue $ 1,396,552 $ 1,411,967 2,330 214,178 - 3,050 48,886 771,612 - 24 744,189 - 9,539 - 5,986 183 1,825 $ 1,613,060 $ 2,235,515 $ 756,454 86,837 202,472 $ $ $ 5,293 1,891 7,184 1,605,876 1,605,876 $ 1,613,060 18,941 34,848 53,789 2,084,790 96,936 2,181,726 $ 2,235,515 70 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ $ $ $ 12,241 197,588 4,342 629,531 831,461 12,265 (87,272) (75,007) 756,454 $ $ $ 77,298 - 86,837 86,837 86,837 $ $ $ 194,478 25,407 3,761 29,168 1,825 171,479 173,304 202,472 TABLE OF CONTENTS Capital Projects Municipal Property Prop 400 Corporation Outside Sources $ 6,605,778 $ 18,680,763 6,797 906,068 - 12,183 - - - 15,525 24,567 954,954 1,729,979 1,825 $ 7,518,643 $ 18,692,946 $ 5,528,083 30 5,528,113 - 5,528,083 30 36,634,040 $ $ $ 7,863 7,863 7,510,780 7,510,780 $ 7,518,643 654,787 654,787 18,038,159 18,038,159 $ 18,692,946 $ $ - Redevelopment 854,512 2,121,383 2,975,895 2,552,218 2,552,218 5,528,113 $ - Total Nonmajor Governmental Funds $ $ - - $ 71 $ $ $ $ 28,379,077 1,764,391 44,842 2,750,914 4,560,147 1,825 24,551,624 7,607,716 (87,272) 32,073,893 36,634,040 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, 2014 Special Revenue Other Special Revenue Grants Revenues Taxes: Property Intergovernmental Charges for services Other entities' participation Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Management and policy Legal and court Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures $ 1,115,954 10,590 16,177 1,142,721 $ $ $ 1,120,152 79 1,120,231 1,430,942 1,430,942 935,531 777 1,216 937,524 34,175 339,717 - - - 249,800 153,950 491,257 - 1,461,720 18,801 49,884 1,121,462 - 1,596,201 - 856,206 - 164,838 1,059,845 1,904,297 1,121,462 1,596,201 856,206 82,876 204,368 2,278 (2,700,000) (2,697,722) Net change in fund balances (2,614,846) Fund balances at end of year 1,363,281 121,914 604,576 18,894 2,108,665 Parkway Maintenance District - Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Fund balances at beginning of year $ CDBG/HOME Street Light Improvement District (1,231) 79 (198,305) (198,226) (79) (79) 6,142 4,220,722 2,175,584 $ 1,605,876 $ 2,181,726 72 (165,259) - (1,310) (75,007) - (165,259) (73,697) $ 81,318 81,318 252,096 $ 86,837 91,986 $ 173,304 TABLE OF CONTENTS Capital Projects Outside Sources $ Municipal Property Corporation Prop 400 921,070 1,953,036 27,085 453,940 3,355,131 $ 1,523,788 48,911 1,572,699 $ 42,882 42,882 Redevelopment $ - Total Nonmajor Governmental Funds $ 2,366,473 4,680,964 1,363,281 1,953,036 121,914 604,576 149,218 471,333 11,710,795 - - - - 34,175 339,717 - - - - 1,711,520 172,751 1,596,201 1,977,668 491,257 49,884 2,895,022 2,895,022 1,357,036 1,357,036 7,026 4,357,539 4,364,565 1,250,016 1,250,016 7,026 10,024,451 16,404,650 460,109 215,663 (4,321,683) (1,250,016) (4,693,855) (181,012) (181,012) 22,054,043 (3,364,334) 18,689,709 4,225,414 (284,938) 3,940,476 17,822,496 17,822,496 4,400,585 18,038,159 3,110,195 - $ 7,510,780 $ 18,038,159 3,776 3,776 (4,317,907) 6,870,125 $ 2,552,218 13,995,854 (1,431,028) 1,431,028 $ - 73 18,078,039 $ 32,073,893 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, 2014 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Miscellaneous Total revenues $ Expenditures Current: Public safety: Police Fire Transportation Capital outlay Contingency Total expenditures 7,607,000 7,607,000 $ (532,430) $ (567,519) $ 7,607,000 7,607,000 285,836 168,940 645,850 2,791,466 4,282,427 8,174,519 (532,430) Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances Final 532,430 2,607,000 5,000,000 8,139,430 Excess (deficiency) of revenues over (under) expenditures Actual Amounts $ 1,115,954 10,590 16,177 1,142,721 (567,519) 36,036 14,990 154,593 2,626,628 4,282,427 7,114,674 82,876 650,395 (2,614,846) $ (6,491,046) 10,590 16,177 (6,464,279) 249,800 153,950 491,257 164,838 1,059,845 4,220,722 76 $ 2,278 (2,700,000) (2,697,722) Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 1,605,876 2,278 (2,700,000) (2,697,722) $ (2,047,327) 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, 2014 Variance with Budgeted Amounts Original Revenues Charges for services Gifts and donations Fines and forfeitures Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Legal and court Public safety: Police Fire Non departmental Capital outlay Contingency Total expenditures 1,498,374 325,650 551,000 2,375,024 Final $ 1,498,374 325,650 551,000 2,375,024 Actual Amounts $ 1,363,281 121,914 604,576 18,894 2,108,665 Final Budget Positive (Negative) $ (135,093) (203,736) 53,576 18,894 (266,359) 131,500 579,012 143,000 585,012 34,175 339,717 108,825 245,295 1,734,630 65,260 49,890 12,860 200,000 2,773,152 1,735,730 65,260 49,890 12,860 127,311 2,719,063 1,461,720 18,801 49,884 1,904,297 274,010 46,459 6 12,860 127,311 814,766 Excess (deficiency) of revenues over (under) expenditures (398,128) (344,039) 204,368 548,407 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses (185,920) (185,920) (185,920) (185,920) 79 (198,305) (198,226) 79 (12,385) (12,306) Net change in fund balances $ (584,048) $ (529,959) 6,142 Fund balance at beginning of year 2,175,584 Fund balance at end of year $ 77 2,181,726 $ 536,101 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, 2014 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Expenditures Current: General government: Parks and recreation Total expenditures Final 854,764 854,764 $ 854,764 854,764 Deficiency of revenues under expenditures - Other financing uses Transfers out Total other financing uses - Net change in fund balances $ Actual Amounts - 854,764 854,764 $ 1,310,324 1,310,324 - (1,310) (73,697) $ 78 454,329 (79) (79) (455,560) (75,007) 265,388 79 265,467 188,862 188,862 (1,231) Fund deficit at beginning of year Fund deficit at end of year $ 1,121,462 1,121,462 (455,560) $ 1,120,152 79 1,120,231 Final Budget Positive (Negative) (79) (79) $ 454,250 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, 2014 Variance with Budgeted Amounts Original Revenues Taxes Total revenues $ Expenditures Current: Highways and streets Total expenditures Final $ 1,674,830 1,674,830 Deficiency of revenues under expenditures Net change in fund balances 1,427,060 1,427,060 (247,770) 1,427,060 1,427,060 $ 1,674,830 1,674,830 (247,770) $ Actual Amounts $ 1,430,942 1,430,942 (247,770) (165,259) (247,770) (165,259) 252,096 $ 79 $ 1,596,201 1,596,201 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 86,837 3,882 3,882 78,629 78,629 82,511 $ 82,511 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, 2014 Variance with Budgeted Amounts Original Revenues Taxes Investment earnings Miscellaneous Total revenues $ 935,190 935,190 Actual Amounts Final $ 935,190 935,190 $ 935,531 777 1,216 937,524 Final Budget Positive (Negative) $ 341 777 1,216 2,334 Expenditures Current: Parks and recreation Total expenditures 970,950 970,950 970,950 970,950 856,206 856,206 114,744 114,744 Excess (deficiency) of revenues over (under) expenditures (35,760) (35,760) 81,318 117,078 (35,760) 81,318 Net change in fund balances $ (35,760) $ Fund balance at beginning of year 91,986 Fund balance at end of year $ 80 173,304 $ 117,078 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, 2014 Variance with Budgeted Amounts Original Revenues Property taxes Investment earnings 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 $ 18,340,000 100,000 18,440,000 $ Final Actual Amounts 18,340,000 100,000 18,440,000 $ 18,315,083 130,319 18,445,402 24,610,000 13,743,738 820 38,354,558 24,610,000 13,743,738 1,920 38,355,658 24,610,000 13,743,738 1,586 38,355,324 (19,914,558) (19,915,658) (19,909,922) 19,557,159 19,557,159 19,557,159 19,557,159 19,557,766 19,557,766 (357,399) $ (358,499) (352,156) Fund balance at beginning of year 10,735,245 Fund balance at end of year $ 81 10,383,089 Final Budget Positive (Negative) $ (24,917) 30,319 5,402 334 334 5,736 607 607 $ 6,343 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, 2014 Variance with Budgeted Amounts Original Revenues Special assessments Investment earnings Total revenues $ Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures Excess of revenues over expenditures Other financing uses Transfers out Total other financing uses Net change in fund balances $ 7,085,577 7,085,577 $ Final Actual Amounts 7,085,577 7,085,577 $ 2,089,887 4,767 2,094,654 Final Budget Positive (Negative) $ (4,995,690) 4,767 (4,990,923) 6,470,000 530,065 5,350 7,005,415 6,470,000 530,065 6,350 7,006,415 1,020,000 507,965 1,165 1,529,130 5,450,000 22,100 5,185 5,477,285 80,162 79,162 565,524 486,362 (205,000) (205,000) (205,000) (205,000) (85,512) (85,512) 119,488 119,488 (125,838) 480,012 (124,838) $ Fund deficit at beginning of year (598) Fund balance at end of year $ 82 479,414 $ 605,850 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Outside Sources Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2014 Variance with Budgeted Amounts Original Revenues Intergovernmental Other entities' participation Investment earnings Miscellaneous Total revenues $ Expenditures Current: Highways and streets Capital outlay Total expenditures Final 19,329,000 19,329,000 $ 124,000 19,205,000 19,329,000 Excess (deficiency) of revenues over (under) expenditures - Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses - Net change in fund balances $ Actual Amounts - 929,000 929,000 $ 92,578 3,609,211 3,701,789 (2,772,789) $ (2,772,789) 921,070 1,953,036 27,085 453,940 3,355,131 $ 83 921,070 1,024,036 27,085 453,940 2,426,131 92,578 714,189 806,767 460,109 3,232,898 4,225,414 (284,938) 3,940,476 4,225,414 (284,938) 3,940,476 3,110,195 Fund balance at end of year $ 2,895,022 2,895,022 4,400,585 Fund balance at beginning of year Final Budget Positive (Negative) 7,510,780 $ 7,173,374 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Prop 400 Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2014 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Actual Amounts Final - $ 18,400,000 18,400,000 Expenditures Capital outlay Total expenditures - 20,926,379 20,926,379 Excess (deficiency) of revenues over (under) expenditures - (2,526,379) Other financing sources Transfers in Total other financing sources - Net change in fund balances $ - $ $ Final Budget Positive (Negative) (2,526,379) 1,523,788 48,911 1,572,699 19,569,343 19,569,343 215,663 2,742,042 17,822,496 17,822,496 17,822,496 17,822,496 - Fund balance at end of year $ 84 (16,876,212) 48,911 (16,827,301) 1,357,036 1,357,036 18,038,159 Fund balance at beginning of year $ 18,038,159 $ 20,564,538 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA GO Bonds Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2014 Variance with Budgeted Amounts Original Revenues Investment earnings Total revenues Expenditures Current: Parks and recreation Debt service: Fiscal and other charges Capital outlay Total expenditures Deficiency of revenues under expenditures $ Final - $ - $ 66,213 66,213 Final Budget Positive (Negative) $ 66,213 66,213 43,000 113,520 81,618 27,891,000 27,934,000 29,635,739 29,749,259 3,250 11,804,894 11,889,762 (3,250) 17,830,845 17,859,497 (27,934,000) (29,749,259) (11,823,549) 17,925,710 35,063 (21,733,757) (21,698,694) 35,063 (21,733,757) (21,698,694) Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances Actual Amounts $ (27,934,000) $ (29,749,259) (33,522,243) Fund balance at beginning of year 56,515,946 Fund balance at end of year $ 85 22,993,703 31,902 $ (3,772,984) TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Municipal Property Corporation Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2014 Variance with Budgeted Amounts Original Revenues Investment earnings Total revenues $ Expenditures Debt service: Fiscal and other charges Capital outlay Total expenditures Deficiency of revenues under expenditures - $ $ 42,882 42,882 $ 42,882 42,882 7,100 6,591,608 6,598,708 7,026 4,357,539 4,364,565 74 2,234,069 2,234,143 (7,582,100) (6,598,708) (4,321,683) 2,277,025 $ - 6,100 7,576,000 7,582,100 Other financing sources Transfers in Total other financing sources Net change in fund balances Actual Amounts Final Final Budget Positive (Negative) (7,582,100) $ 3,776 3,776 (6,598,708) (4,317,907) Fund balance at beginning of year 6,870,125 Fund balance at end of year $ 86 2,552,218 3,776 3,776 $ 2,280,801 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA System Development Fees Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2014 Variance with Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ Expenditures Capital outlay Total expenditures Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances $ 15,650,000 65,000 15,715,000 Actual Amounts Final $ 15,650,000 65,000 15,715,000 $ 13,434,970 209,996 13,644,966 1,142,000 1,142,000 1,378,456 1,378,456 567,485 567,485 14,573,000 14,336,544 13,077,481 (11,088,937) (11,088,937) (11,088,937) (11,088,937) 670 (11,635,341) (11,634,671) 3,247,607 1,442,810 3,484,063 $ Fund deficit at beginning of year (1,434,091) Fund balance at end of year $ 87 8,719 Final Budget Positive (Negative) $ (2,215,030) 144,996 (2,070,034) 810,971 810,971 (1,259,063) 670 (546,404) (545,734) $ (1,804,797) 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, 2014 Variance with Budgeted Amounts Original Revenues Total revenues Final $ - $ Final Budget Positive (Negative) Actual Amounts - $ - $ - Expenditures Capital outlay Total expenditures - 1,250,100 1,250,100 1,250,016 1,250,016 84 84 Deficiency of revenues under expenditures - (1,250,100) (1,250,016) 84 Other financing uses Transfers out Total other financing uses - Net change in fund balances $ - $ (181,012) (181,012) (1,250,100) (1,431,028) Fund balance at beginning of year 1,431,028 Fund balance at end of year $ 88 - (181,012) (181,012) $ (180,928) 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, 2014 Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses Operating loss Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before capital contributions and transfers Capital contributions Transfers in Transfers out Change in net position $ 36,036,000 900,000 36,936,000 Actual Amounts Final $ 36,036,000 900,000 36,936,000 $ 37,866,520 1,143,907 39,010,427 Variance with Final Budget Positive (Negative) $ 1,830,520 243,907 2,074,427 1,480,207 7,640,134 14,878,698 25,201,460 1,621,385 1,495,259 7,640,134 15,040,686 25,257,011 1,621,385 1,235,155 6,886,888 12,996,353 8,723,333 1,621,385 260,104 753,246 2,044,333 16,533,678 - 9,718,111 1,765,000 62,304,995 19,576,886 1,723,917 72,355,278 19,576,886 51,040,000 1,723,917 21,315,278 (25,368,995) (35,419,278) (12,029,573) 23,389,705 (6,140,166) 300,000 (5,840,166) (6,151,466) 300,000 (5,851,466) (6,997,895) 1,010,510 8,111 (5,979,274) (31,209,161) (41,270,744) (18,008,847) 14,000,000 180,000 (905,000) 14,000,000 180,000 (905,000) 13,929,121 79,051 (764,007) (27,995,744) (4,764,682) (17,934,161) $ Explanation of difference between budgetary change in net position at June 30, 2014, 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, 2013 Less compensated absences at June 30, 2014 Add post-employment benefits at June 30, 2013 Less post-employment benefits at June 30, 2014 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. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 89 915,057 (904,498) 43,230 (87,292) 8,723,333 19,576,886 5,954,196 (10,011,894) $ 19,444,336 (846,429) 710,510 8,111 (127,808) 23,261,897 (70,879) (100,949) 140,993 $ 23,231,062 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, 2014 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 22,837,500 22,837,500 Actual Amounts Final $ 22,837,500 22,837,500 $ 23,852,369 10,410 23,862,779 674,632 3,924,905 9,411,338 1,549,588 737,948 76,263 209,208 1,150,202 4,939,816 - 521,889 1,680,000 23,565,651 3,268,114 367,662 26,309,676 3,268,114 19,566,525 367,662 6,743,151 4,296,254 7,768,430 (3,472,176) Nonoperating revenues (expenses) Interest expense Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) (146,709) 300,000 153,291 (148,909) 300,000 151,091 Income (loss) before capital contributions and transfers (574,860) (3,321,085) 4,388,288 12,000,000 820,000 (115,000) 12,000,000 820,000 (115,000) 11,154,279 679,007 (51,350) 9,383,915 16,170,224 $ 1,014,869 10,410 1,025,279 750,895 4,134,113 10,561,540 6,489,404 737,948 (728,151) Change in net position $ 763,081 4,134,113 10,305,620 5,423,000 737,948 Operating income (loss) Capital contributions Transfers in Transfers out Final Budget Positive (Negative) 12,130,140 $ (413,019) 543,330 (38,277) 92,034 Explanation of difference between budgetary change in net position at June 30, 2014, 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, 2013 Less compensated absences at June 30, 2014 Add post-employment benefits at June 30, 2013 Less post-employment benefits at June 30, 2014 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. Change in net position as reported on the statement of revenues, expenses and changes in fund net position 90 543,160 (519,304) 15,251 (31,942) 1,549,588 3,268,114 5,214,002 (8,349,360) $ 17,859,733 (264,110) 243,330 (38,277) (59,057) 7,709,373 (845,721) (140,993) 63,650 $ 6,786,309 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, 2014 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 17,335,000 50,000 17,385,000 Actual Amounts Final $ 17,335,000 50,000 17,385,000 $ 17,307,709 111,420 17,419,129 Final Budget Positive (Negative) $ (27,291) 61,420 34,129 Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Contingency Total operating expenses 775,239 6,465,292 6,450,929 6,422,870 700,723 1,850,000 22,665,053 840,239 6,465,292 6,765,929 6,422,870 700,723 1,470,000 22,665,053 926,402 5,641,713 6,922,187 1,260,545 700,723 15,451,570 (86,163) 823,579 (156,258) 5,162,325 1,470,000 7,213,483 Operating income (loss) (5,280,053) (5,280,053) 1,967,559 7,247,612 Nonoperating revenues (expenses) Investment earnings Loss on sale of capital assets Total nonoperating revenues (expenses) 133,000 133,000 Income (loss) before transfers Transfers in Transfers out Change in net position $ 133,000 133,000 (5,147,053) (5,147,053) 55,000 (90,000) 55,000 (90,000) (5,182,053) $ 188,008 (9,889) 178,119 2,145,678 2,092,977 Explanation of difference between budgetary change in net position at June 30, 2014, and GAAP change in net position: 91 7,292,731 (52,701) (5,182,053) 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, 2013 Less compensated absences at June 30, 2014 Add post-employment benefits at June 30, 2013 Less post-employment benefits at June 30, 2014 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 55,008 (9,889) 45,119 471,338 (490,732) 28,893 (60,072) 1,260,545 (1,700,804) $ 1,602,145 (55,000) 37,299 $ 7,275,030 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, 2014 Equipment Maintenance ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Inventories Total current assets $ 753,243 Employee Benefit SelfInsurance Copier Services $ 253,584 $ Total 3,950,949 $ 4,957,776 473 1,511 538,467 1,293,694 253,584 2,205 74 3,953,228 2,678 1,585 538,467 5,500,506 236,422 (222,630) 13,792 1,307,486 271,774 (83,525) 188,249 441,833 3,953,228 508,196 (306,155) 202,041 5,702,547 274,083 37,577 78,541 390,201 46,865 46,865 420 1,266,492 1,266,912 321,368 37,577 78,541 1,266,492 1,703,978 98,703 - - 98,703 Total liabilities 488,904 46,865 1,266,912 1,802,681 NET POSITION Net investment in capital assets Unrestricted Total net position 13,792 804,790 818,582 188,249 206,719 394,968 2,686,316 2,686,316 202,041 3,697,825 3,899,866 Noncurrent assets: Capital assets: Property, plant and equipment Less accumulated depreciation Total capital assets (net) Total assets LIABILITIES Current liabilities: Accounts payable Accrued liabilities Current portion of compensated absences Claims payable Total current liabilities Long-term portion of compensated absences $ 94 $ $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended June 30, 2014 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 7,475,304 3,509 7,478,813 Copier Services $ 63,785 1,697,103 5,770,554 4,866 7,536,308 Operating income (loss) (57,495) Nonoperating revenues Investment earnings Total nonoperating revenues Employee Benefit SelfInsurance 1,944 1,944 435,085 435,085 $ 14,394,601 115,767 14,510,368 Total $ 22,304,990 119,276 22,424,266 356,362 22,848 379,210 759,591 15,458,122 16,217,713 823,376 1,697,103 6,126,916 15,458,122 27,714 24,133,231 55,875 (1,707,345) (1,708,965) 82 82 12,726 12,726 14,752 14,752 Change in net position (55,551) 55,957 (1,694,619) (1,694,213) Total net position, beginning of year 874,133 339,011 4,380,935 5,594,079 Total net position, end of year $ 818,582 95 $ 394,968 $ 2,686,316 $ 3,899,866 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Cash Flows Year Ended June 30, 2014 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 $ 3,509 7,490,486 (5,910,492) (1,660,730) Copier Services $ 435,085 (334,812) - Employee Benefit SelfInsurance $ 135,243 14,394,601 (16,173,374) - $ 138,752 22,320,172 (22,418,678) (1,660,730) Net cash provided by (used in) operating activities (77,227) 100,273 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (13,197) (61,880) - (75,077) (13,197) (61,880) - (75,077) Net cash used in capital and related financing activities Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided by (used in) operations: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation Changes in assets and liabilities: Decrease in accounts receivable Increase in inventories Increase (decrease) in accounts payable Increase in claims payable Increase in accrued expenses (1,620,484) 2,424 228 13,336 15,988 2,424 228 13,336 15,988 (88,000) 841,243 38,621 214,963 (1,630,194) 5,581,143 (1,679,573) 6,637,349 $ 753,243 $ 253,584 $ 3,950,949 $ 4,957,776 $ (57,495) $ 55,875 $ (1,707,345) $ (1,708,965) Total adjustments Net cash provided by (used in) operating activities (1,643,530) Total $ 4,866 22,848 15,182 (64,311) (11,842) 36,373 21,550 - 19,476 (10,749) 55,088 - 34,658 (64,311) (1,041) 55,088 36,373 (19,732) 44,398 63,815 88,481 (77,227) 96 $ 100,273 - $ (1,643,530) 27,714 $ (1,620,484) 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, 2014 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 Depreciation Total operating expenses 7,708,000 2,000 7,710,000 $ 7,708,000 2,000 7,710,000 (30,556) $ 7,475,304 3,509 7,478,813 (30,556) 25,097 153,296 32,866 16,802 (4,866) 223,195 1,944 1,944 1,944 1,944 (36,604) 13,198 145,099 (177,244) $ (232,696) 1,509 (231,187) (7,992) and GAAP change in net position: 97 $ (38,548) Explanation of difference between budgetary change in net position at June 30, 2014, Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2013 Less compensated absences at June 30, 2014 Change in net position as reported on the statement of revenues, expenses and changes in fund net position Final Budget Positive (Negative) 63,785 1,664,958 5,770,554 13,198 4,866 7,517,361 (30,556) $ $ 88,882 1,818,254 5,803,420 30,000 7,740,556 (30,556) Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position Final 95,282 1,811,854 5,803,420 30,000 7,740,556 Operating loss Actual Amounts (55,551) $ (6,048) 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, 2014 Variance with Budgeted Amounts Original Operating revenues Charges for services Total operating revenues $ 585,000 585,000 Final $ 585,000 585,000 Operating expenses Operation and maintenance Capital outlay Depreciation Total operating expenses 420,000 250,000 670,000 477,675 192,325 670,000 Operating loss (85,000) (85,000) 3,000 3,000 3,000 3,000 Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position $ (82,000) $ Actual Amounts $ 435,085 435,085 78,995 82 82 (82,000) (5,923) 61,880 $ 55,957 (149,915) (149,915) 121,313 130,445 (22,848) 228,910 (6,005) and GAAP change in net position: 98 $ 356,362 61,880 22,848 441,090 Explanation of difference between budgetary change in net position at June 30, 2014, Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. Change in net position as reported on the statement of revenues, expenses and changes in fund net position Final Budget Positive (Negative) (2,918) (2,918) $ 76,077 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, 2014 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Claims Incurred Total operating expenses $ 867,020 14,258,000 15,125,020 Operating loss (670,020) Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position 14,390,000 65,000 14,455,000 11,000 11,000 $ (659,020) 99 Actual Amounts Final 14,390,000 65,000 14,455,000 $ $ 4,601 50,767 55,368 867,020 15,377,000 16,244,020 759,591 15,458,122 16,217,713 107,429 (81,122) 26,307 (1,789,020) (1,707,345) 81,675 11,000 11,000 $ 14,394,601 115,767 14,510,368 Final Budget Positive (Negative) (1,778,020) 12,726 12,726 $ (1,694,619) 1,726 1,726 $ 83,401 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, 2014 Flexible Spending Assets Restricted cash and investments Prepaid items Beginning Balance Additions Ending Balance Deductions $ 18,942 - $ 276,452 229,383 $ 284,096 218,698 $ 11,298 10,685 $ 18,942 $ 505,835 $ 502,794 $ 21,983 Liabilities Medical benefits payable Dependent care benefits payable $ 672 18,270 $ 57,754 $ 672 54,041 $ 21,983 Total liabilities $ 18,942 $ 57,754 $ 54,713 $ 21,983 $ 184,099 384 $ 48,975 436 $ 3,957 820 $ 229,117 - $ 184,483 $ 49,411 $ 4,777 $ 229,117 $ 184,483 $ 49,411 $ 4,777 $ 229,117 $ 184,483 $ 49,411 $ 4,777 $ 229,117 $ 7,849 $ 44,620 $ 52,469 $ - $ 7,849 $ 44,620 $ 52,469 $ - $ 7,849 $ 44,620 $ 52,469 $ - $ 7,849 $ 44,620 $ 52,469 $ - Total assets Fire Retirement Health Fund Assets Restricted cash and investments Restricted accrued interest Total assets Liabilities 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, 2014 Total-All Agency Funds Assets Restricted cash and investments Prepaid items Restricted accrued interest Total assets Liabilities Other deposits Due to developers Medical benefits payable Dependent care benefits payable Total liabilities Beginning Balance Additions Ending Balance Deductions $ 210,890 384 $ 370,047 229,383 436 $ 340,522 218,698 820 $ 240,415 10,685 - $ 211,274 $ 599,866 $ 560,040 $ 251,100 $ 184,483 7,849 672 18,270 $ 49,411 44,620 57,754 $ 4,777 52,469 672 54,041 $ 229,117 21,983 $ 211,274 $ 151,785 $ 111,959 $ 251,100 103 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 50 E. 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