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, 2015 John W. Lewis, Mayor Jordan Ray, Vice Mayor Eddie Cook, Council Member Jenn Daniels, Council Member Victor Petersen, Council Member Brigette Peterson, 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, 2015 TABLE OF CONTENTS Page INTRODUCTORY SECTION 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 Required Supplementary Information Schedule of the Proportionate Share of the Net Pension Liability - ASRS Schedule of Changes in the Net Pension Liability & Related Ratios - PSPRS - Police Schedule of Changes in the Net Pension Liability & Related Ratios - PSPRS - Fire Schedule of Pension Contributions - ASRS Schedule of Pension Contributions - PSPRS Note to Pension Plan Schedules-Actuarially Determined Contribution Rates - PSPRS Schedule of Agent OPEB Plans' Funding Progress - PSPRS 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 ii 78 79 80 81 82 83 84 86 88 92 93 94 95 TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2015 TABLE OF CONTENTS Page 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 System Development Fees Capital Projects Fund Saint Xavier University Revenue Obligations 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 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, 2015 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 2015 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2015 iii 96 97 98 99 100 101 102 103 104 105 106 107 110 111 112 113 114 115 118 123 124 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 TABLE OF CONTENTS iv TABLE OF CONTENTS Introductory Section ________________________________ Letter of Transmittal Advisory Organization Chart Organization Reporting Chart TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS Advisory Organization Chart 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 Required Supplementary Information 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, 2015. 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 $321 million of unrestricted net position, of which $132 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $189 million which may be used to fund ongoing operations in future years. Net position includes a $689 million net investment in capital assets such as streets, park land, and municipal buildings and a $363 million net investment in water, wastewater and environmental services infrastructure and equipment. The combined fund balance for all governmental funds is $204 million, of which $83 million is unrestricted. The General Fund unrestricted fund balance is $84 million, of which $13 million has been assigned for capital replacement. The General Fund unassigned balance of $67 million is approximately 52% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $398 million, as compared to $396 million at the end of fiscal year 2014. With the implementation of Governmental Accounting Standards Board (GASB) Statement No. 68, Gilbert’s total outstanding net pension liability at the end of the fiscal year was $108 million. 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 3 TABLE OF CONTENTS and construct facilities deemed to be in the public interest. The financial information for the Authority is presented separately in the statements. 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 109-115. 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 37-75. 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 2015. 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 Deferred inflows of resources Net position: Net investment in capital assets Restricted Unrestricted Total net position Governmental Activities 2015 2014 $ 255,101,566 $ 239,768,377 971,375,442 947,841,509 1,226,477,008 1,187,609,886 Business-type Activities 2015 2014 $ 374,524,748 $ 357,637,183 461,523,528 456,128,322 836,048,276 813,765,505 Total 2015 2014 $ 629,626,314 $ 597,405,560 1,432,898,970 1,403,969,831 2,062,525,284 2,001,375,391 29,588,990 2,341,801 3,603,374 - 33,192,364 2,341,801 382,714,341 58,983,087 441,697,428 280,137,290 55,816,482 335,953,772 114,316,250 13,742,010 128,058,260 101,366,569 13,633,593 115,000,162 497,030,591 72,725,097 569,755,688 381,503,859 69,450,075 450,953,934 12,646,822 - 3,306,408 - 15,953,230 - 688,900,313 680,716,975 82,545,485 80,924,415 30,275,950 92,356,525 $ 801,721,748 $ 853,997,915 363,332,604 351,796,858 54,084,512 65,576,792 290,869,866 281,391,693 $ 708,286,982 $ 698,765,343 1,052,232,917 1,032,513,833 136,629,997 146,501,207 321,145,816 373,748,218 $ 1,510,008,730 $ 1,552,763,258 Net position consists of three components. The largest portion of Gilbert’s net position (70%) is its investment in capital assets (land, buildings, equipment, infrastructure, etc.), less depreciation and any related debt used to acquire those assets that is still outstanding. Gilbert uses these capital assets to provide services to citizens; consequently, these assets are not available for appropriation. Although Gilbert’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt are provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Gilbert’s net position (9%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (21%) includes $132 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $189 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. Governmental Activities Governmental activities in fiscal year 2015 decreased Gilbert’s net position by $52.3 million. The reason for a decrease in net position was the addition of net pension liability of $89.3 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 99% of total revenues for governmental activities. Taxes (local and state-shared) were $139 million, an increase of $9 million from the prior year. Program revenues were $79 million, an increase of $19 million from the prior year which was mostly due to the increase in capital grants and contributions. It should be noted that $13.5 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 $5 million (2.6%) over the prior fiscal year. 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 2015 2014 2015 Total 2014 2015 2014 98,109,745 $ 97,812,094 Revenues Program revenues: Charges for services $ 17,976,626 $ 18,785,496 $ 80,133,119 $ 79,026,598 $ Operating grants and contributions 24,170,883 22,325,826 - - 24,170,883 22,325,826 Capital grants and contributions 37,213,656 19,185,760 29,016,502 36,251,598 66,230,158 55,437,358 Sales taxes 71,772,575 66,756,593 - - 71,772,575 66,756,593 Property taxes 19,422,848 18,315,083 - - 19,422,848 18,315,083 State-shared sales taxes 19,041,027 18,118,706 - - 19,041,027 18,118,706 State-shared income taxes 25,222,298 23,204,634 - - 25,222,298 23,204,634 3,937,907 3,902,993 - - 3,937,907 3,902,993 restricted to specific programs 2,595,244 904,497 - - 2,595,244 904,497 Unrestricted investment earnings 1,224,192 1,508,342 1,457,286 1,741,848 2,681,478 3,250,190 952,804 1,255,284 1,481,805 1,296,109 2,434,609 2,551,393 223,530,060 194,263,214 112,088,712 118,316,153 335,618,772 312,579,367 General revenues: Other taxes Grants and contributions not Other Total revenues Expenses Management and policy 19,090,117 13,377,552 - - 19,090,117 13,377,552 Finance and management services 1,814,026 4,347,031 - - 1,814,026 4,347,031 Court 4,053,033 5,975,194 - - 4,053,033 5,975,194 Development services 7,082,385 9,061,728 - - 7,082,385 9,061,728 Police 47,541,179 45,930,719 - - 47,541,179 45,930,719 Fire 28,070,881 28,853,208 - - 28,070,881 28,853,208 Highways and streets 46,931,705 45,780,743 - - 46,931,705 45,780,743 Parks and recreation 28,428,423 22,493,451 - - 28,428,423 22,493,451 Transportation Non departmental 777,965 842,184 - - 777,965 842,184 4,423,234 4,104,289 - - 4,423,234 4,104,289 Interest and fiscal charges 12,780,375 15,215,884 - - 12,780,375 15,215,884 Water on long-term debt - - 41,817,466 39,926,683 41,817,466 39,926,683 Wastewater - - 25,619,743 23,614,969 25,619,743 23,614,969 Environmental services - - 16,719,837 16,112,973 16,719,837 16,112,973 200,993,323 195,981,983 84,157,046 79,654,625 285,150,369 275,636,608 22,536,737 (1,718,769) 27,931,666 38,661,528 50,468,403 36,942,759 184,313 110,000 (184,313) (110,000) - - 22,721,050 (1,608,769) 27,747,353 38,551,528 50,468,403 36,942,759 779,000,698 855,606,684 680,539,629 660,213,815 1,459,540,327 1,515,820,499 Total expenses Increase in net position before transfers Transfers Change in net position Net position, beginning of year, as restated, (see note 2) Net position, end of year $ 801,721,748 $ 853,997,915 $ 708,286,982 $ 698,765,343 $ 1,510,008,730 $ 1,552,763,258 6 TABLE OF CONTENTS Business-type Activities Development related growth increased Gilbert’s net position for business-type activities in fiscal year 2015 by $9.5 million including $21.2 million in system development fee collections and $7.8 million in water and wastewater infrastructure contributed by developers offset by $18.9 million in net pension liability. The revenues for business-type activities decreased $6.1 million (5%) from the prior year and expenses increased $4.5 million (5.7%) from the prior year. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds: • • • • • • • General Fund Streets Special Revenue Fund General Debt Service Fund Special Assessments Debt Service Fund GO Bonds Capital Projects Fund Saint Xavier University Revenue Obligations 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 2015, the governmental funds reported ending unrestricted fund balances totaling $82.6 million, an increase of $15.4 million in comparison with the prior fiscal year. Town of Gilbert Governmental Funds - Fund Balances As of June 30, 2015 Restricted $ 13,431,471 10,165,593 33,734 13,810,764 12,635,183 29,544,109 17,216,403 $ 96,837,257 General Streets Special Revenue General Debt Service Special Assessments Debt Service GO Bonds Capital Projects Saint Xavier University Revenue Obligations System Development Fees Capital Projects Other Governmental Funds Total Fund Balances 7 Unrestricted Total $ 84,103,248 $ 84,103,248 4,772,582 18,204,053 4,767,195 14,932,788 33,734 5,409,080 19,219,844 12,635,183 (23,967,885) 5,576,224 7,499,690 24,716,093 $ 82,583,910 $ 179,421,167 TABLE OF CONTENTS General Fund The General Fund is the primary operating fund. At the end of fiscal year 2015, the fund balance of the General Fund was $108.6 million, an increase of $9.3 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 $84.1 million, of which $13 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 52% of total General Fund expenditures for the current year. Key elements of General Fund sources and uses are as follows: • Overall, revenues exceeded expenditures in the General Fund by $12.1 million; however, other financing sources and uses (net) were ($2.8) million resulting in an increase in fund balance of $9.3 million. The transfers out included $5.8 million for 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 $5 million (7.5%) from the prior fiscal year due to the increase in economic development. • Intergovernmental revenue increased $3 million (6.8%) from the prior fiscal year mainly due to increased state shared sales and income tax revenue. • Parks and recreation expenditures increased over the prior fiscal year due to additional park repairs of approximately $3 million. • Management and policy expenditures increased over the prior fiscal year due to payments of approximately $1.5 million for the special census. • Expenditures increased across the board by approximately $6 million over the prior fiscal year mainly due to an increase in personnel costs. Ge neral Fund Sources $143.9 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 $134.6 M illion All Other 12% Police 31% Parks and Recreation 15% Court 2% Fire 19% Management and Policy 14% 8 Development Services 5% Finance and Management Services 2% 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 highway user revenues 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 $1.5 million (7.7%) from the prior year. This was due to increased highway user and vehicle license revenue of $1.7 million. Total expenditures increased by $955 thousand (5.4%) mostly due to increased capital outlay expenditures. In total, revenues exceeded expenditures by $2.4 million; however, there were $4 million net transfers out, resulting in a $1.6 million (8%) decrease in fund balance. Other Major Governmental Funds General Debt Service. The fund balance increased by $4.5 million during the year. This was primarily due to the current year property tax revenues of $19.4 million and transfers in from other funds of $20.2 million exceeding the debt service requirements of $35.2 million. The remaining fund balance of $14.9 million will be used to fund future debt service payments on voter approved general obligation bonds. Special Assessments Debt Service. The fund balance of $34 thousand is all restricted to pay future debt service requirements on special assessment bonds. GO Bonds Capital Projects. The GO bonds fund consists of general obligation bond proceeds and the expenditure of those proceeds to purchase or construct capital assets. The fund balance decreased by $3.8 million during the year. This was due to the current year capital outlay expenditures to purchase or construct capital assets. Saint Xavier University Revenue Obligations Capital Projects. This fund was created this fiscal year to account for the construction of a building to be leased to Saint Xavier University. Revenue obligations were issued in the amount of $37 million at a premium of $2.7 million to fund the project. The remaining fund balance of $12.6 million will be used in fiscal year 2016 to complete construction. System Development Fees Capital Projects. 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. The fund balance increased by $5.6 million during the year. This was primarily due to the current year system development fees revenues of $18.9 million offset by the $2.3 million in capital outlay expenditures and the $11.2 million transferred to the general debt service fund for principal and interest payments on bonds. The remaining fund balance of $5.6 million will be used to fund future infrastructure needs related to growth in Gilbert. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. The combined fund balance of these funds decreased $7.3 million (22.9%) to a balance at year-end of $24.7 million. A portion of the decrease in fund balance can be attributable to an increase in capital outlay expenditures from the prior year. The capital outlay expenditures were for roadway improvements. Nonmajor funds represent 12.1% of the total governmental fund balance. Proprietary Funds Gilbert’s proprietary funds statements are prepared on the same basis (accrual) as the government-wide financial statements. Gilbert operates and separately reports the following proprietary funds: • • • Water Fund Wastewater Fund Environmental Services Fund 9 TABLE OF CONTENTS Water Fund The Water Fund is responsible for producing and distributing potable water that 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 $15.1 million to $373.5 million due primarily to capital contributions of $18.1 million, including $13.1 million in system development fees and $5 million in distribution lines contributed by developers. Operating income was $1.9 million. The beginning net position was restated due to the implementation of GASB Statement No. 68. See Note 2. 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 $11 million to $309.8 million due primarily to capital contributions of $10.9 million, including $8.1 million in system development fees and $2.8 million in collection lines contributed by developers. Operating loss was $1 million. The beginning net position was restated due to the implementation of GASB Statement No. 68. See Note 2. 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 $1.7 million to $24.5 million primarily from operating income. The beginning net position was restated due to the implementation of GASB Statement No. 68. See Note 2. 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 than 8% reflecting a decrease of $1.9 million and was attributable to an increase in transfers in. The final amended budget projected that expenditures would exceed revenues by $21 million resulting in a $24 million reduction to fund balance per the budget. This was mainly due to budgeting $17.1 million in capital outlay expenditures and $11.8 million in contingency. 10 TABLE OF CONTENTS During the year actual revenues exceeded the budgeted amount by $5.4 million (4%) mainly due to higher than expected local sales taxes. Actual expenditures were less than budgeted by $27.7 million (17.7%) mainly due to $11 million lower than expected capital outlay expenditures and not needing any budgeted contingency. This resulted in an excess of revenues over expenditures of $33.1 million more than budgeted, resulting in the actual net change in fund balance being $33 million more than budgeted. Capital Asset and Debt Administration Capital Assets. As of June 30, 2015, 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 $21 million. Developer contributions of street related infrastructure valued at $13.5 million. Business-type Activities • • Developer contributions of water and wastewater infrastructure valued at $7.8 million. Completed water system improvements totaling $9.6 million and wastewater system improvements totaling $2 million. The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2015 and 2014. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Land Construction-in-progress Buildings Business-type Activities 2015 Total 2015 2014 $ 181,644,373 $ 179,058,053 57,193,525 28,469,708 6,504,633 7,210,026 63,698,158 35,679,734 139,984,488 140,107,581 - - 139,984,488 140,107,581 $ 2014 64,675,175 $ 2015 59,509,511 $ 246,319,548 2014 $ 238,567,564 Improvements 32,311,791 35,513,538 - - 32,311,791 35,513,538 Plant, Machinery & Equip 12,527,705 13,779,548 72,459,504 75,018,746 84,987,209 88,798,294 Water Rights - - 7,257,286 7,355,578 7,257,286 7,355,578 Infrastructure 547,713,560 550,913,081 310,626,930 307,034,461 858,340,490 857,947,542 Total Capital Assets $ 971,375,442 $ 947,841,509 $ 461,523,528 $ 456,128,322 $ 1,432,898,970 $ 1,403,969,831 Total governmental capital assets increased $23.5 million and business-type capital assets increased $5.4 million. The increase for the governmental capital assets can be attributable to increased streets construction projects. The majority of the increase for the business-type capital assets can be attributable to the purchase of land. See Note 7 on pages 51-52 for further information regarding capital assets. Long-term Debt. At June 30, 2015, Gilbert had total bonded debt obligations of $300.2 million related to governmental activities and $98.2 million in business-type activities; $122.7 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $8.3 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. 11 TABLE OF CONTENTS 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, 2015 was $110.7 million in the 6% capacity and $246.4 million in the 20% capacity. See Note 10 on pages 54-59 for additional information on debt. The following schedule shows Gilbert’s outstanding debt as of June 30, 2015 and 2014. Town of Gilbert Outstanding Debt Governmental Activities 2015 $ 122,715,000 Special Assessment 8,275,000 Street and Highway User 12,165,000 Revenue Obligations 36,980,000 Municipal Property Corporation 120,090,000 Totals $ 300,225,000 General Obligation Business-type Activities 2014 $ 135,065,000 9,410,000 14,915,000 132,295,000 $ 291,685,000 2015 $ $ 98,225,000 98,225,000 Total 2014 2015 2014 245,000 104,120,000 $ 104,365,000 $ 122,715,000 8,275,000 12,165,000 36,980,000 218,315,000 $ 398,450,000 $ 135,310,000 9,410,000 14,915,000 236,415,000 $ 396,050,000 $ 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, 2015. General Obligation Street and Highway User Revenue Public Facilities Municipal Property Corporation* Water Resources Municipal Property Corporation Subordinate Lien Pledged Revenue Obligations Improvement Districts Moody's Investor Service Standard and Poors Ratings Group Fitch Ratings AAA Aa3 Aa1 Not Rated Aa2 Aa1 AA+ AA AA+ AAAA+ A+ Not Rated AA AA+ AA AA+ Not Rated Economic Factors and Next Year’s Budget Gilbert, Arizona is successfully managing rapid growth. In May 2014, the U.S. Census Bureau rated th Gilbert as the 12 fastest growing community in the nation of all communities with a population over 50,000. Over the past five years, about 30,000 new residents have come to call Gilbert home. New fire stations, police services, park amenities, roads, and water resources have been added to accommodate these new residents. To give perspective to the magnitude of growth and increased services, it is interesting to note that the Town provides approximately 170 million gallons of additional water annually to accommodate the residents who moved in over the past 12 months. Yet, amid this growth, Gilbert has nd rd been deemed Money Magazine’s 22 Best Place to Live and Wallethub’s 3 Best Place to find a Job. Gilbert is a stronghold for modern science, a leader in biomedical, adult stem-cell, and algae research, and also welcomed its first university, Saint Xavier University, in 2015. 12 TABLE OF CONTENTS Regarding the budget, Gilbert undertakes a zero-based process every third year, and always applies priority, program, and performance-based approaches. Directors are 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 Gilbert 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 2016 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. 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. Budget Highlights for Fiscal Year 2016 With carry forwards and contingency adjustments, the proposed budget of $615,009,220 is less than the $621,134,250 adopted on June 4, 2015 as the legal limitation for FY 2016, and is an increase of $66 million from FY 2015. The change from FY 2015 primarily reflects the budget necessary for carry forward and new capital projects. Balanced Financial Plan: The FY 2016 adopted budget is balanced based upon identified revenues and expenditures. Constitutional Expenditure Limit: The FY 2016 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 2016 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). Secondary Property Tax Levy: Previously collections in the current fiscal year could be applied to debt service payments in the following fiscal year, 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. As debt service payments and property values fluctuate, the property tax rate will also fluctuate from year to year. In FY 2015 the secondary property tax rate was $1.06 per $100 of assessed value. In FY 2016, the rate would have increased to cover the required payments, but Council chose to use fund balance in the debt service fund to make up the difference so the rate could be kept at the $1.06 level. Utility Rates: The proposed FY 2016 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. Capital Project Financing – System Development Fees: The FY 2016 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. 13 TABLE OF CONTENTS 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, 2015 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 $ 4,163,338 8,287,296 315,087 14,490,412 2,832,419 (8,839,217) 578,161 555,550 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refundings Pension-related items 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 DEFERRED INFLOWS OF RESOURCES Pension-related items Total deferred inflows of resources NET POSITION Net investment in capital assets Restricted for: Debt service Capital projects Highways and streets Grant programs Court/police programs Parks and recreation Special districts Contract agreements Unrestricted Total net position 206,468,253 $ Component Unit 174,896,065 Industrial Development Authority Total $ 381,364,318 $ 17,369 300,893 4,117,879 150,234 8,839,217 49,272 4,163,338 8,287,296 615,980 18,608,291 2,982,653 578,161 604,822 - 25,967,776 563 281,928 54,816,287 45,311 131,309,590 80,784,063 45,874 131,591,518 - 238,837,898 732,537,544 1,226,477,008 71,179,808 390,343,720 836,048,276 310,017,706 1,122,881,264 2,062,525,284 17,369 4,079,965 25,509,025 29,588,990 3,603,374 3,603,374 4,079,965 29,112,399 33,192,364 - 9,501,428 11,548,499 1,398,171 400,978 3,016,604 67,887 3,544,342 784,041 1,205,580 3,182,022 - 13,045,770 12,332,540 1,205,580 1,398,171 400,978 3,182,022 3,016,604 67,887 - 33,049,520 382,714,341 441,697,428 5,026,025 114,316,250 128,058,260 38,075,545 497,030,591 569,755,688 - 12,646,822 12,646,822 3,306,408 3,306,408 15,953,230 15,953,230 - 688,900,313 363,332,604 1,052,232,917 - 18,486,623 47,773,574 12,815,005 1,432,764 1,676,765 24,622 207,328 128,804 30,275,950 801,721,748 17,408,808 36,675,704 290,869,866 708,286,982 35,895,431 84,449,278 12,815,005 1,432,764 1,676,765 24,622 207,328 128,804 321,145,816 $ 1,510,008,730 17,369 17,369 The notes to the financial statements are an integral part of this statement. 15 $ $ TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2015 Program Revenues Charges for Services Expenses Functions/Programs Primary government Governmental activities: General government Management and policy Finance and management services 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 $ 19,090,117 1,814,026 4,053,033 7,082,385 $ 7,913 26,811 794,286 6,607,990 Operating Grants and Contributions $ 953,952 30,000 - Capital Grants and Contributions $ - 47,541,179 28,070,881 46,931,705 28,428,423 777,965 4,423,234 4,526,099 223,794 1,642,703 4,146,240 790 534,487 1,479,579 20,865,939 246,095 10,947 49,884 3,914,269 2,063,008 21,988,833 8,619,465 628,081 - 12,780,375 200,993,323 17,976,626 24,170,883 37,213,656 41,817,466 25,619,743 16,719,837 84,157,046 $ 285,150,369 $ 37,500,541 24,625,084 18,007,494 80,133,119 98,109,745 $ 24,170,883 $ 18,089,457 10,927,045 29,016,502 66,230,158 $ $ 3,000 $ - $ - - 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, 2014, as restated, (see note 2) Net position, June 30, 2015 16 TABLE OF CONTENTS Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities Business-type Activities $ $ (18,128,252) (1,787,215) (3,228,747) (474,395) - Component Unit Industrial Development Authority Total $ (18,128,252) (1,787,215) (3,228,747) (474,395) $ - (38,566,324) (24,304,500) (2,434,230) (15,416,623) (138,937) (4,372,560) - (38,566,324) (24,304,500) (2,434,230) (15,416,623) (138,937) (4,372,560) - (12,780,375) (121,632,158) - (12,780,375) (121,632,158) - (121,632,158) 13,772,532 9,932,386 1,287,657 24,992,575 24,992,575 13,772,532 9,932,386 1,287,657 24,992,575 (96,639,583) 3,000 71,772,575 - 71,772,575 - 19,422,848 - 19,422,848 - 1,200,604 - 1,200,604 - 2,737,303 - 2,737,303 - 19,041,027 - 19,041,027 - 25,222,298 - 25,222,298 - 2,595,244 - 2,595,244 - 1,224,192 1,457,286 2,681,478 4 106,028 172,109 278,137 - 846,776 1,309,696 2,156,472 - 184,313 144,353,208 (184,313) 2,754,778 - - 147,107,986 4 22,721,050 27,747,353 50,468,403 3,004 779,000,698 680,539,629 1,459,540,327 14,365 $ 801,721,748 $ 708,286,982 $ 1,510,008,730 $ The notes to the financial statements are an integral part of this statement. 17 17,369 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2015 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 $ 86,539,451 $ 17,728,073 Special Assessments Debt Service General Debt Service $ 14,718,755 $ 37,487 3,993,490 120,202 14,287,439 28,674 501,870 578,161 23,891,929 32,146 12,174 1,538,323 - 150,856 36,801 - 8,287,296 1,247 - 111,900 130,053,116 19,310,716 10,557,872 108 25,464,392 8,326,030 4,602,128 11,239,836 115,034 66,807 16,023,805 $ $ 945,756 158,555 2,352 1,106,663 $ $ 7,515,000 3,016,604 10,531,604 $ $ 5,000 5,000 4,654,068 401,905 400,000 5,455,973 - - 8,287,296 8,287,296 24,470,090 17,045,919 67,057,329 108,573,338 13,431,471 4,772,582 18,204,053 10,165,593 4,767,195 14,932,788 33,734 33,734 130,053,116 18 $ 19,310,716 $ 25,464,392 $ 8,326,030 TABLE OF CONTENTS GO Bonds Capital Projects Saint Xavier University Revenue Obligations System Development Fees Capital Projects $ $ $ $ $ $ 19,382,961 - 29,535,253 Other Governmental Funds $ 24,827,525 Total Governmental Funds $ 192,769,505 31,842 - - 48,667 16,269 - 18,992 41,353 57,562 1,265,422 2,328 - 4,163,338 8,287,296 312,258 14,373,444 2,832,419 501,870 578,161 2,328 23,891,929 19,414,803 14,832,185 455 14,832,640 29,600,189 465,819 26,679,001 25,967,776 563 273,680,887 182,937 12,022 194,959 $ $ 1,889,450 308,007 2,197,457 - - 13,810,764 5,409,080 19,219,844 12,635,183 12,635,183 19,414,803 $ 14,832,640 $ $ 132,036 23,891,929 24,023,965 $ $ 1,459,971 64,436 283,592 151,501 1,080 1,960,580 - 29,600,189 $ - 29,544,109 (23,967,885) 5,576,224 $ $ 8,287,296 4,654,068 401,905 400,000 13,743,269 2,328 17,216,403 7,512,752 (13,062) 24,718,421 $ 26,679,001 The notes to the financial statement are an integral part of this statement. 19 9,217,278 11,474,849 400,978 459,508 7,515,000 3,016,604 23,891,929 67,887 56,044,033 24,472,418 96,837,257 39,507,528 43,076,382 203,893,585 $ 273,680,887 TABLE OF CONTENTS 20 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2015 Fund balances - total governmental funds $ 203,893,585 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 1,602,422,711 (631,244,398) 971,178,313 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds. 281,928 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 13,743,269 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. 1,880,534 Deferred outflows and inflows of resources related to pensions and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the funds. Unamortized deferred outflow on bond refunding Pension-related items 4,079,965 12,832,223 16,912,188 (87,357,883) (292,710,000) (11,550,003) (13,136,140) (1,414,043) (406,168,069) 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. Net pension 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 $ 801,721,748 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2015 General Revenues Taxes: Sales Property Franchise Licenses and permits Intergovernmental Special assessments Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Bond issuance costs Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses) Transfers in Transfers out Revenue obligations issued Premium on revenue obligations Refunding bonds issued Premium on refunding bonds Payment to refunded bond escrow agent Total other financing sources and uses Net change in fund balances Fund balances at beginning of year Fund balances at end of year $ 71,793,671 2,737,303 4,790,601 47,052,108 9,333,868 69,002 3,847,669 493,751 739,596 140,857,569 Streets Special Revenue $ 20,865,939 5,452 10,676 8,873 123,626 213,208 21,227,774 General Debt Service $ 19,422,848 139,220 19,562,068 Special Assessments Debt Service $ 1,184,368 5,345 1,189,713 19,543,428 1,942,824 3,129,710 6,069,032 - - - 41,277,759 25,502,853 20,408,135 350,000 4,373,350 10,796,093 - - - 6,100,083 128,697,174 7,987,849 18,783,942 22,615,000 12,637,592 260,516 3,060 35,516,168 1,135,000 470,225 8,302 1,613,527 12,160,395 2,443,832 (15,954,100) (423,814) 3,045,025 (5,856,982) (2,811,957) 50,000 (4,069,280) (4,019,280) 20,217,016 28,080,000 4,417,395 (32,210,612) 20,503,799 (21,866) (21,866) (1,575,448) 19,779,501 18,204,053 4,549,699 10,383,089 14,932,788 (445,680) 479,414 33,734 9,348,438 99,224,900 $ 108,573,338 22 $ $ $ TABLE OF CONTENTS GO Bonds Capital Projects $ 75,403 75,403 Saint Xavier University Revenue Obligations System Development Fees Capital Projects $ $ 18,836,030 187,869 19,023,899 $ 2,530,121 8,365,919 1,100,391 371,320 123,555 619,586 184,196 13,295,088 Total Governmental Funds $ 71,793,671 21,952,969 2,737,303 4,790,601 76,283,966 1,184,368 10,439,711 381,996 18,836,030 192,557 4,476,128 1,210,177 952,804 215,232,281 - - - 941,618 362,937 - 20,485,046 1,942,824 3,492,647 6,069,032 - - - 1,806,452 127,915 1,682,203 1,428,239 423,936 49,884 43,084,211 25,630,768 12,478,296 21,836,374 773,936 4,423,234 3,849,262 3,849,262 208,601 24,940,129 25,148,730 2,295,938 2,295,938 35,421 13,675,353 20,533,958 23,750,000 13,107,817 469,117 46,783 58,848,614 236,438,699 (3,773,859) (25,147,963) 16,727,961 (7,238,870) (21,206,418) (1,902,542) 36,980,000 2,705,688 37,783,146 (11,160,456) (11,160,456) 88,724 (205,326) (116,602) 23,400,765 (23,216,452) 36,980,000 2,705,688 28,080,000 4,417,395 (32,210,612) 40,156,784 12,635,183 12,635,183 5,567,505 8,719 5,576,224 - $ 767 767 Other Governmental Funds (3,773,859) 22,993,703 19,219,844 $ $ $ The notes to the financial statements are an integral part of this statement. 23 (7,355,472) 32,073,893 24,718,421 $ 18,950,366 184,943,219 203,893,585 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, 2015 Net change in fund balances - total governmental funds $ 18,950,366 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 58,848,614 (48,823,531) 10,025,083 (36,980,000) (2,705,688) (28,080,000) (4,417,395) 32,210,612 (39,972,471) 23,750,000 843,341 24,593,341 Issuance of debt, applicable premium and payment to refunded bond escrow agent are reported as a financing source (use) in the governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net position and does not affect the statement of activities. Bond premium is deferred and amortized in the statement of activities. Revenue obligations Premium on revenue obligations Refunding bonds Premium on refunding bonds Payment to refunded bond escrow agent 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. 408,137 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 13,485,570 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 (1,065,169) (710,612) (1,775,781) 9,032,015 (10,400,422) (1,368,407) (729,426) (457,844) (21,096) (416,422) (1,624,788) Pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the statement of net position because the reported net pension liability is measured a year before the report date. Pension expense, which is the change in the net pension liability adjusted for changes in deferred outflows and inflows of resources related to pensions, is reported in the statement of activities. Pension contributions Pension expense 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 $ 22,721,050 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, 2015 Variance with Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Intergovernmental Charges for services Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 68,849,000 2,365,000 4,388,000 46,639,691 8,635,590 20,000 3,361,000 430,000 745,000 135,433,281 Actual Amounts Final $ 68,849,000 2,365,000 4,388,000 46,639,691 8,635,590 20,000 3,361,000 430,000 745,000 135,433,281 $ 71,793,671 2,737,303 4,790,601 47,052,108 9,333,868 69,002 3,847,669 493,751 739,596 140,857,569 Final Budget Positive (Negative) $ 2,944,671 372,303 402,601 412,417 698,278 49,002 486,669 63,751 (5,404) 5,424,288 Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Parks and recreation Transportation Non departmental Capital outlay Contingency Total expenditures 19,658,109 2,069,096 3,146,321 6,324,062 21,692,946 1,989,746 3,167,524 6,424,887 19,543,428 1,942,824 3,129,710 6,069,032 2,149,518 46,922 37,814 355,855 41,663,623 26,429,823 17,723,017 350,000 3,509,670 18,798,213 16,747,500 156,419,434 41,786,136 26,478,947 22,136,540 350,000 3,513,970 17,112,547 11,765,891 156,419,134 41,277,759 25,502,853 20,408,135 350,000 4,373,350 6,100,083 128,697,174 508,377 976,094 1,728,405 (859,380) 11,012,464 11,765,891 27,721,960 Excess (deficiency) of revenues over (under) expenditures (20,986,153) (20,985,853) 12,160,395 33,146,248 1,236,830 (5,845,340) (4,608,510) 3,139,380 (5,845,340) (2,705,960) $ (25,594,663) $ (23,691,813) Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances 3,045,025 (5,856,982) (2,811,957) 9,348,438 99,224,900 Fund balance at beginning of year $ 108,573,338 Fund balance at end of year The notes to the financial statements are an integral part of this statement. 26 (94,355) (11,642) (105,997) $ 33,040,251 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, 2015 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Other entities' participation Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 19,570,000 4,000 100,000 19,674,000 Actual Amounts Final $ 19,570,000 4,000 100,000 19,674,000 $ 20,865,939 5,452 10,676 8,873 123,626 213,208 21,227,774 Final Budget Positive (Negative) $ 1,295,939 1,452 10,676 8,873 23,626 213,208 1,553,774 Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures 11,187,252 10,176,132 2,000,000 23,363,384 11,513,069 10,850,671 1,910,268 24,274,008 10,796,093 7,987,849 18,783,942 716,976 2,862,822 1,910,268 5,490,066 Excess (deficiency) of revenues over (under) expenditures (3,689,384) (4,600,008) 2,443,832 7,043,840 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses 50,000 (4,016,190) (3,966,190) 50,000 (4,069,160) (4,019,160) 50,000 (4,069,280) (4,019,280) (8,619,168) (1,575,448) Net change in fund balances $ (7,655,574) $ 19,779,501 Fund balance at beginning of year $ Fund balance at end of year The notes to the financial statements are an integral part of this statement. 27 18,204,053 (120) (120) $ 7,043,720 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2015 Water 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 DEFERRED OUTFLOWS OF RESOURCES Pension-related items Total deferred outflows of resources LIABILITIES Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Due to other funds Accrued interest Bonds payable Utility deposits Total current liabilities Noncurrent liabilities: Utility revenue bonds payable Accrued compensated absences Post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension-related items Total deferred inflows of resources NET POSITION Net investment in capital assets Restricted for debt service Restricted for capital projects Unrestricted Total net position $ Business-type Activities - Enterprise Funds Environmental Wastewater Services 89,245,225 $ 68,326,602 $ 25,704,526 $ Total 183,276,353 141,056 2,156,603 150,234 49,272 117,561 1,116,974 - 42,276 844,302 - 300,893 4,117,879 150,234 49,272 91,742,390 69,561,137 26,591,104 187,894,631 44,828,766 45,311 68,904,567 9,987,521 62,405,023 - 54,816,287 45,311 131,309,590 56,210,377 226,432,797 14,734,522 158,544,395 234,909 5,366,528 71,179,808 390,343,720 396,421,818 488,164,208 245,671,461 315,232,598 5,601,437 32,192,541 647,694,716 835,589,347 1,804,333 1,804,333 674,640 674,640 1,124,401 1,124,401 3,603,374 3,603,374 1,315,586 413,242 380,792 1,205,580 4,275,000 3,154,813 10,745,013 1,216,715 142,415 161,798 1,520,928 1,012,041 228,384 208,435 27,209 1,476,069 3,544,342 784,041 751,025 1,205,580 4,275,000 3,182,022 13,742,010 93,915,924 557,698 172,002 9,467,833 104,113,457 114,858,470 314,185 64,960 3,540,025 3,919,170 5,440,098 262,404 121,176 5,900,043 6,283,623 7,759,692 93,915,924 1,134,287 358,138 18,907,901 114,316,250 128,058,260 1,655,632 1,655,632 619,041 619,041 1,031,735 1,031,735 3,306,408 3,306,408 184,452,250 17,408,808 27,452,515 144,140,866 373,454,439 173,278,917 9,223,189 127,345,993 309,848,099 5,601,437 18,924,078 24,525,515 $ 363,332,604 17,408,808 36,675,704 290,410,937 707,828,053 $ 458,929 708,286,982 $ $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities 28 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 5,318,460 2,829 116,967 553,222 5,991,478 197,129 197,129 6,188,607 363,777 363,777 284,150 73,650 76,146 1,398,171 42,362 1,874,479 95,807 1,908,838 2,004,645 3,879,124 333,797 333,797 $ 197,129 2,142,334 2,339,463 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, 2015 Business-type Activities - Enterprise Funds Environmental Water Wastewater Services 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) 37,500,541 1,207,776 38,708,317 $ 24,625,084 5,021 24,630,105 18,007,494 96,899 18,104,393 $80,133,119 1,309,696 81,442,815 1,096,405 7,752,434 14,036,453 11,918,035 1,963,590 36,766,917 765,693 3,918,519 9,838,681 10,173,643 944,870 25,641,406 792,883 6,140,731 7,533,697 1,353,842 893,630 16,714,783 2,654,981 17,811,684 31,408,831 23,445,520 3,802,090 79,123,106 1,941,400 (1,011,301) 1,389,610 2,319,709 Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) (4,905,368) 788,031 9,037 (4,108,300) 498,944 2,757 501,701 Income (loss) before capital contributions and transfers (2,166,900) Capital contributions Transfers in Transfers out Change in net position 170,311 160,315 330,626 (4,905,368) 1,457,286 172,109 (3,275,973) (509,600) 1,720,236 (956,264) 18,089,457 (750,233) 10,927,045 590,920 (25,000) - 29,016,502 590,920 (775,233) 15,172,324 10,983,365 1,720,236 358,282,115 298,864,734 22,805,279 $ 373,454,439 $ 309,848,099 Total net position, beginning of year, as restated (see note 2) Total net position, end of year $ Total $ 24,525,515 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business-type activities 30 27,875,925 (128,572) $27,747,353 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 22,312,941 2,343,346 24,656,287 1,033,020 1,788,540 5,933,642 15,605,420 30,115 24,390,737 265,550 14,015 14,015 279,565 279,565 2,059,898 $ 2,339,463 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, 2015 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 operating activities $ 37,700,319 1,207,776 49,434 (14,900,539) (7,203,150) (1,963,590) 14,890,250 Cash flows from noncapital financing activities: Changes in due to other funds Transfers from other funds Transfers to other funds Net cash provided by (used in) noncapital financing activities Cash flows from capital and related financing activities: Acquisition and construction of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Proceeds from sale of capital assets Net cash provided by (used in) capital and related financing activities $ 24,675,250 5,021 (11,622,428) (3,786,601) (944,870) 8,326,372 (750,233) (750,233) 590,920 (25,000) 565,920 (8,933,933) 13,118,358 (4,978,456) (6,140,000) 9,037 (6,924,994) (2,002,865) 8,100,833 2,757 6,100,725 Cash flows from investing activities: Interest received on investments Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Business-type Activities - Enterprise Funds Environmental Wastewater Services $ 17,810,514 96,899 (7,621,467) (5,883,384) (893,630) 3,508,932 $ - Total 80,186,083 1,309,696 49,434 (34,144,434) (16,873,135) (3,802,090) 26,725,554 590,920 (775,233) (184,313) (3,008,910) 160,315 (2,848,595) (13,945,708) 21,219,191 (4,978,456) (6,140,000) 172,109 (3,672,864) 812,748 812,748 490,640 490,640 178,198 178,198 1,481,586 1,481,586 8,027,771 126,046,220 15,483,657 62,830,466 838,535 24,865,991 24,349,963 213,742,677 Cash and cash equivalents at end of year $ 134,073,991 $ 78,314,123 $ 25,704,526 $ 238,092,640 Cash and cash equivalents at end of year includes: Equity in pooled cash and investments Restricted cash and investments $ 89,245,225 44,828,766 $ 68,326,602 9,987,521 $ 25,704,526 - $ 183,276,353 54,816,287 $ 134,073,991 $ 78,314,123 $ 25,704,526 $ 238,092,640 $ $ (1,011,301) $ 1,389,610 Total cash and cash equivalents Reconciliation of operating income (loss) to net cash provided by (used in) operations: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation Provision for uncollectible accounts Pension expense Employer pension contributions Changes in assets and liabilities: (Increase) decrease in accounts receivable 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 operating activities 1,941,400 $ 2,319,709 11,918,035 (286,736) 893,642 (700,749) 10,173,643 (183,018) 334,133 (262,010) 1,353,842 (162,232) 556,889 (436,684) 23,445,520 (631,986) 1,784,664 (1,399,443) 486,513 157,298 75,021 49,434 356,392 12,948,850 233,183 (1,018,053) 59,795 9,337,673 (33,188) 705,113 (1,560) 137,142 2,119,322 686,508 157,298 (237,919) 47,874 553,329 24,405,845 $ 14,890,250 $ 8,326,372 $ 3,508,932 $ 26,725,554 $ 4,971,099 $ 2,826,212 $ - $ 7,797,311 $ 4,971,099 $ 2,826,212 $ - $ 7,797,311 Supplemental disclosures of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment 32 TABLE OF CONTENTS Governmental Activities Internal Service Funds $ 2,233,011 22,307,894 (22,492,378) (1,718,867) 329,660 42,362 42,362 (25,202) (25,202) 13,864 13,864 360,684 4,957,776 $ 5,318,460 $ 5,318,460 - $ 5,318,460 $ 265,550 30,115 180,170 (141,280) (115,382) (14,755) (37,219) 131,679 30,782 64,110 $ 329,660 $ - $ - 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, 2015 Firemen's Pension Trust Agency Funds ASSETS Restricted cash and investments Prepaid items $ Total assets 92,346 - $ 22,355 92,346 $ 22,355 - $ 3,513 18,842 - $ 22,355 LIABILITIES Accounts payable Dependent care benefits payable Total liabilities NET POSITION Held in trust for pension benefits $ The notes to the financial statements are an integral part of this statement. 34 92,346 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Position Fiduciary Fund For the Year Ended June 30, 2015 Firemen's Pension Trust Additions Interest on investments $ Total additions 68 68 Deductions Benefits Administration 2,400 100 Total deductions 2,500 Change in net position (2,432) Net position - beginning of the year 94,778 $ Net position - end of the year The notes to the financial statements are an integral part of this statement. 35 92,346 TABLE OF CONTENTS 36 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the Council-Manager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 - Summary of Significant Accounting Policies Gilbert’s accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. During the fiscal year ended June 30, 2015, Gilbert implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. GASB Statement No. 68 improves the accounting and financial reporting by state and local governments for pensions. GASB Statement No. 71 addresses the issue of amounts associated with contributions made by a state or local government to a defined benefit pension plan after the measurement date of their beginning net pension liability. The implementation of these Statements represents a change in accounting principle. See Note 2. 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, 2015, 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, 2015 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. 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 2015 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, 2015 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, 2015 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, 2015 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. Saint Xavier University (SXU) Revenue Obligations Capital Projects Fund – The SXU revenue obligations fund accounts for the receipt of revenue obligations proceeds and the expenditure of those proceeds to design and construct a building that will be leased to the St. Xavier University. 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, 2015 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 require a pooled collateral program for public deposits and 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, 2015 H. Inventories and Prepaid Items Inventories are recorded in 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. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 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, 2015 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, 2015 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 2015, Gilbert’s property tax rate is $1.06 per $100 of secondary assessed valuation. O. Deferred outflows/inflows of resources On the government-wide and proprietary funds 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 has two items that qualify 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. A deferred charge on pension-related items results from the difference between expected and actual experience and also changes in proportion and differences between Gilbert contributions and proportionate share of contributions. These amounts are deferred and amortized over a closed period equal to the average of the expected remaining service lives of active and inactive members. On the governmental funds Balance Sheet, deferred inflows of 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, which 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. On the government-wide and proprietary funds Statement of Net Position, deferred inflows of resources are reported on pension-related items for the net difference between projected and actual investment earnings on pension plan investments. These amounts are amortized into pension expense over a closed five-year period. 45 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 P. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Q. Fund Balance Classifications Fund balance classifications comprise a hierarchy based primarily on the extent to which Gilbert is bound to observe constraints imposed upon the use of the resources reported in the governmental funds. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned and Unassigned represent the unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form such as inventory or (b) legally or contractually required to be maintained intact. Restricted fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed internally by formal action of the Council. Formal action by Council through resolution is required to establish, modify or rescind committed fund balance. Assigned fund balance includes amounts that are limited to specific purposes by management. 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. 46 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 As of June 30, 2015, the fund balance details by classification are listed below: Streets Fund balances: General Special Fund Revenue Major Major Debt Service Funds Capital Projects Funds SXU System Other Rev Oblig Dev Fees Gov’t Special General Assmnts GO Bonds Total Nonspendable: Advances $23,891,929 Inventory $ - $ - $ - $ - $ - $ - $ - $ 23,891,929 - - - - - - - 2,328 2,328 578,161 - - - - - - - 578,161 Capital projects - - - - 13,810,764 12,635,183 29,544,109 13,662,548 69,652,604 Court/public safety programs - - - - - - - 1,707,503 1,707,503 Debt service - - 10,165,593 33,734 - - - - 10,199,327 Grants - - - - - - - 1,450,012 1,450,012 Highways and streets - 13,431,471 - - - - - - 13,431,471 Contract agreements - - - - - - - 128,804 128,804 Parks & recreation programs - - - - - - - 24,622 24,622 Special districts - - - - - - - 242,914 242,914 13,382,516 4,772,582 - - - - - - 18,155,098 2,814,762 - - - 5,409,080 - - 7,495,778 15,719,620 116,728 - - - - - - - 116,728 - - 4,767,195 - - - - - 4,767,195 Development services 171,040 - - - - - - - 171,040 Management and policy 137,831 - - - - - - - 137,831 Parks & recreation programs 423,042 - - - - - - 16,974 440,016 67,057,329 - - - - - (23,967,885) (13,062) 43,076,382 $108,573,338 $18,204,053 $14,932,788 $ 33,734 $19,219,844 $ 12,635,183 $ 5,576,224 $24,718,421 $203,893,585 Prepaid items Restricted for: Assigned to: Capital replacement Capital projects Court/public safety programs Debt service Unassigned: Total fund balances 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 – Change in Accounting Principle Net position as of July 1, 2014, has been restated as follows for the implementation of GASB Statements No. 68 and No. 71 for the Governmental and Business-type Activities in the Statement of Activities; for the Water, Wastewater, Environmental Services Enterprise Funds and Internal Service Funds in the Statement of Revenues, Expenses, and Changes in Fund Net Position. 47 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Business-type Activities Water Enterprise Fund Wastewater Enterprise Fund Environmental Services Enterprise Fund Internal Service Funds $698,765,343 $367,408,354 $302,277,037 $28,492,451 $3,899,866 (83,395,398) (19,458,243) (9,743,408) (3,643,063) (6,071,772) (1,964,397) 8,398,181 1,232,529 617,169 230,760 384,600 124,429 $779,000,698 $680,539,629 $358,282,115 $298,864,734 $22,805,279 $2,059,898 Governmental Activities Net position as previously reported at June 30, 2014 Net pension liability (measurement date as of June 30, 2013) Deferred outflows – contributions made during fiscal year 2014 Net position as restated, July 1, 2014 $853,997,915 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. The primary differences between the GAAP and budget basis statements for the proprietary funds are: 1. Obligations for compensated absences, post-employment benefits, net pension liability 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 is expensed on the GAAP basis but is 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 Arizona Revised Statutes require a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102% of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. The investment of public monies is also regulated by the Arizona Revised Statutes Title 35. Gilbert limits its investments to the Local Government Investment Pools 7 and 700 (that only invest in U.S. government securities and managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, commercial paper, corporate notes 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. 48 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 At June 30, 2015, 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 US Bank Total Fair Value $129,714,643 81,397,342 3,184,664 48,945,517 89,691,152 9,279,996 11,820,423 14,832,185 $388,865,922 Investment Maturities (in Years) Less than 1 1-3 $20,045,459 $109,669,184 81,397,342 1,555,000 1,629,664 2,500,260 46,445,257 50,849,267 38,841,885 9,279,996 11,820,423 14,832,185 $110,882,590 $277,983,332 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, 2015, 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. 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, 2015, Gilbert’s bank balance was $76,560,467 of which $9,634,603 was with JP Morgan and $66,925,864 was with Alliance Bank of Arizona. $9,134,603 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, a portion of Gilbert’s bank balance is transferred to a sweep investment account. The amount of the sweep account at June 30, 2015, was $5,314,645 and was invested in U.S. Treasuries only. All of the Alliance Bank of Arizona bank balance was FDIC-insured because deposits are placed into multiple banks in increments of less than $250,000. 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, 2015, of Gilbert’s investments, 34% were in U.S. Government Treasuries, 23% were in the State Treasurer’s Investment Pool and 21% were in U.S. Government Agencies. 49 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 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 $ 73,374,805 388,865,922 $462,240,727 Pooled cash and investments Restricted cash and investments Total cash and investments (per Statement of Net Position) Pension trust fund Total cash and investments $381,364,318 80,784,063 462,148,381 92,346 $462,240,727 Note 5 - Taxes Receivable and Due from Other Governments The general fund taxes receivable amount at June 30, 2015, includes $1,658,539 in state shared sales tax and $2,334,951 in local sales tax due from the State of Arizona. Amounts due from other governments recorded in the streets special revenue fund include $1,205,176 in highway user revenues and $332,868 in vehicle license tax both due from the State of Arizona. Other governmental funds include $479,795 in federal grants from the U.S. Department of Housing and Urban Development, $45,180 from the U.S. Department of Transportation, $63,084 from the U.S. Department of Homeland Security and $79,814 from Valley Metro Regional Transportation Authority. The water fund includes $150,234 in amounts due from the City of Chandler for the joint operation of the SanTan Vista Water Treatment Plant. The balance of these receivables represents various grants from the state and federal governments. Note 6 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2015, is as follows: Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following funds (cash deficits are temporary, until reimbursements are received): Due To $ 308,007 151,501 42,362 $ 501,870 General fund SXU revenue obligations Other governmental funds Copier services fund Total Due From $ 501,870 $ 501,870 Advances from/to other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: General fund System development fees capital projects fund Total 50 Advances from $ 23,891,929 $23,891,929 Advances to $23,891,929 $23,891,929 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Note 7 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2015, is as follows: July 1, 2014 Non-depreciable assets: Land Construction-in-progress $ Additions Deletions June 30, 2015 179,058,053 $ 28,469,708 2,586,320 $ 54,638,108 - $ (25,914,291) 181,644,373 57,193,525 Total non-depreciable assets 207,527,761 57,224,428 (25,914,291) 238,837,898 Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure 216,776,351 71,656,811 56,655,344 978,811,453 8,532,655 383,563 1,825,351 30,307,679 (830,996) - 225,309,006 72,040,374 57,649,699 1,009,119,132 Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure 1,323,899,959 41,049,248 (830,996) 1,364,118,211 (76,668,770) (36,143,273) (42,875,796) (427,898,372) (8,655,748) (3,585,310) (3,072,605) (33,507,200) 826,407 - (85,324,518) (39,728,583) (45,121,994) (461,405,572) Total accumulated depreciation (583,586,211) (48,820,863) 826,407 (631,580,667) 740,313,748 (7,771,615) (4,589) 732,537,544 947,841,509 $ 49,452,813 $ Total depreciable assets, net Governmental activities capital assets, net $ (25,918,880) $ 971,375,442 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 Total depreciation expense - governmental activities 51 $ 396,255 295,654 493,062 890,257 2,639,909 3,017,946 34,309,097 6,748,568 48,790,748 30,115 $48,820,863 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2015, is as follows: July 1, 2014 Non-depreciable assets: Land Construction-in-progress $ Deletions June 30, 2015 59,509,511 $ 7,210,026 5,165,664 $ 10,869,777 - $ (11,575,170) 64,675,175 6,504,633 66,719,537 16,035,441 (11,575,170) 71,179,808 132,768,032 9,146,281 435,243,115 3,075,930 14,206,817 (1,661,606) - 134,182,356 9,146,281 449,449,932 Total non-depreciable assets Depreciable assets: Plant and equipment Water rights Infrastructure Additions Total depreciable assets Less accumulated depreciation: Plant and equipment Water rights Infrastructure 577,157,428 17,282,747 (1,661,606) 592,778,569 (57,749,286) (1,790,703) (128,208,654) (5,635,172) (98,292) (10,614,348) 1,661,606 - (61,722,852) (1,888,995) (138,823,002) Total accumulated depreciation Total depreciable assets, net (187,748,643) 389,408,785 (16,347,812) 934,935 1,661,606 - (202,434,849) 390,343,720 Business-type activities capital assets, net $ 456,128,322 $ 16,970,376 $ (11,575,170) $ 461,523,528 Note 8 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2015, were as follows: Constructionin-Progress Commitments Redevelopment Municipal facilities Parks Storm water Traffic control Streets capital projects Total $ $ 27,179,695 6,656,480 2,761,602 43,422 1,362,663 19,189,663 57,193,525 52 $ $ 8,928,771 1,444,341 1,347,631 549,040 4,743,323 17,013,106 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Business-type activities construction-in-progress and related construction commitments at June 30, 2015, were as follows: Water system Wastewater system Municipal facilities Storm water Total $ $ 2,386,463 3,883,261 224,309 10,600 6,504,633 $ $ 5,859,842 388,492 18,550 6,266,884 In addition, there were non-construction related commitments at June 30, 2015, as follows: Governmental funds: General Streets special revenue Other governmental Total $ $ Proprietary funds: Water system Wastewater system Environmental services Total $ $ 901,167 108,539 26,468 1,036,174 519,054 447 806,292 1,325,793 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 2015, there was no reduction in insurance coverage from prior years. Additionally, settlements have not exceeded insurance coverage during any of the last three fiscal years. Self-Insurance Gilbert has established an employee benefit self-insurance trust to account for and finance its uninsured risks of loss for medical claims. Gilbert purchases commercial stop loss insurance to limit the claims liability to the employee benefit self-insurance fund. The stop loss insurance provides 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. 53 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 The claims liability of $1,398,171 reported in the employee benefit self-insurance trust at June 30, 2015, 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 2015, an increase of $133,766 was recorded for IBNR claims under the medical plan and a decrease of $2,087 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 2015 reflected an increase in claims costs of $147,298 from fiscal year 2014. This was due to an increase of $140,790 in medical claims and $6,508 in dental claims. Changes in the fund’s claim liability amount in fiscal years 2014 and 2015 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 $ 1,211,404 $ 1,266,492 15,458,122 15,605,420 (15,403,034) (15,473,741) $1,266,492 $1,398,171 2014 2015 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. Currently, there are no outstanding general obligation bonds for 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, 2015, were as follows: 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 Governmental $ 9,715,000 113,000,000 Total $122,715,000 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2023 Total Governmental Activities Principal Interest $ 17,465,000 13,200,000 14,000,000 14,250,000 14,800,000 49,000,000 $122,715,000 54 $ 5,349,500 4,476,250 3,816,250 3,116,250 2,403,750 3,178,750 $22,340,750 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 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. The following is a summary of legal borrowing capacity at June 30, 2015: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Purposes Bonds All Other General Obligation Bonds Secondary Assessed Valuation $1,845,325,449 Secondary Assessed Valuation $1,845,325,449 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 $ 369,065,090 (122,715,000) $ 246,350,090 $ 110,719,527 $ 110,719,527 As of June 30, 2015, 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. 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, 2015, 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. 55 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Special assessment bonds outstanding at June 30, 2015, 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 $ 1,615,000 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012 through January 1, 2029 6,660,000 Total $ 8,275,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2025 2026-2029 Total Governmental Activities Principal Interest $ 440,000 470,000 495,000 500,000 530,000 3,100,000 2,740,000 $ 8,275,000 $ 412,370 389,063 364,348 338,863 312,478 1,112,824 268,604 $3,198,550 Street and Highway User Revenue Bonds Street and highway user revenue bonds are issued specifically for the purpose of street and highway construction projects. These bonds are payable solely from the revenues derived from highway user taxes, including motor vehicle fuel taxes and all other taxes; fees and charges relating to registration, operation or use of vehicles on public highways or streets; or to fuels or any other energy source used for the vehicles collected by the State and returned to Gilbert. Street and highway user revenue bonds outstanding at June 30, 2015, 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 $12,165,000 Annual debt service requirements to maturity for street and highway user revenue bonds are as follows: Year Ending June 30 2016 2017 2018 2019 Total Governmental Activities Principal Interest $ 2,845,000 2,975,000 3,095,000 3,250,000 $12,165,000 56 $ 550,050 436,250 317,250 162,500 $ 1,466,050 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the service center facility, a police property facility and a sports complex (the 2006 issue); 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); and the refunding of certain maturities of outstanding bonds (the 2011 and 2014 issues). The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. (See also Note 18 regarding Pledged Revenues.) Municipal property corporation revenue bonds outstanding at June 30, 2015, 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, 2016 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 $10,165,000 - Business-type $ - 98,225,000 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 64,795,000 - 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 17,050,000 - 2014 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 2.0% to 5.00%, original amount $28,080,000, retirements due July 1, 2016 through July 1, 2021 28,080,000 - Total $120,090,000 $98,225,000 Annual debt service requirements to maturity for municipal property corporation revenue bonds are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031 Total Governmental Activities Principal Interest $ 7,515,000 8,000,000 9,005,000 10,540,000 11,040,000 36,200,000 37,790,000 ________$120,090,000 $ 5,837,717 5,456,700 5,057,700 4,592,588 4,082,088 13,583,198 4,435,188 ______$43,045,179 57 Business-type Activities Principal Interest $ 4,275,000 4,500,000 4,750,000 4,975,000 5,225,000 30,350,000 38,725,000 5,425,000 $98,225,000 $ 4,715,438 4,696,063 4,264,813 4,021,688 3,766,688 14,638,372 6,264,063 128,844 $42,295,969 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 During the fiscal year ended June 30, 2015, Gilbert paid $1,820,000 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. Subordinate Lien Pledged Revenue Obligations The Subordinate Lien Pledged Revenue Obligations were issued specifically for the purpose of providing funds to design, acquire and construct a four-story building for use as a satellite campus for Saint Xavier University (“University”). The building will be leased by the University under a lease-purchase contract. These obligations are payable solely from the revenues generated by excise taxes and state shared revenue. Subordinate lien pledged revenue obligations outstanding at June 30, 2015, were as follows: Governmental Subordinate Lien Pledged Revenue Obligations, Series 2015, 3.00% to 5.00% original amount $36,980,000, annual retirements due July 1, 2017, through July 1, 2045 $36,980,000 Annual debt service requirements to maturity for subordinate lien pledged revenue obligations are as follows: Year Ending June 30 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 2036-2040 2041-2045 Total Governmental Activities Principal Interest $ 655,000 670,000 700,000 735,000 4,260,000 5,440,000 6,610,000 7,910,000 10,000,000 $36,980,000 58 $ 1,815,566 1,605,906 1,586,256 1,559,456 1,524,456 7,033,281 5,855,781 4,677,319 3,380,695 1,548,750 $ 30,587,466 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2015, was as follows: Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Revenue obligations Unamortized bond premium Total bonds payable 1 Net pension liability Compensated absences Post-employment benefits Total long-term liabilities Balance July 1, 2014 Additions $135,065,000 $ 1 Balance June 30, 2015 Due Within One Year - $(12,350,000) $122,715,000 $17,465,000 9,410,000 147,210,000 5,537,710 297,222,710 74,997,222 12,248,218 703,431 28,080,000 36,980,000 7,123,083 72,183,083 26,916,321 9,462,302 1,092,773 (1,135,000) (43,035,000) (1,110,790) (57,630,790) (12,646,822) (8,402,426) (382,161) 8,275,000 132,255,000 36,980,000 11,550,003 311,775,003 89,266,721 13,308,094 1,414,043 440,000 10,360,000 28,265,000 4,784,520 - $385,171,581 $109,654,479 $(79,062,199) $415,763,861 $33,049,520 $ $ Business-type activities: Bonds payable: General obligation bonds Revenue bonds Unamortized bond discount Unamortized bond premium Total bonds payable 1 Net pension liability Compensated absences Post-employment benefits Total long-term liabilities Reductions $ 245,000 104,120,000 (36,121) 2,585 104,331,464 18,225,714 1,914,534 179,306 $ 3,988,595 1,480,840 275,006 $ (245,000) (5,895,000) 2,045 (2,585) (6,140,540) (3,306,408) (1,510,062) (96,174) $124,651,018 $5,744,441 $(11,053,184) 98,225,000 (34,076) 98,190,924 18,907,901 1,885,312 358,138 $119,342,275 4,275,000 4,275,000 751,025 - $ 5,026,025 Added due to the implementation of GASB Statement No. 68 (see Notes 1 and 2). 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, $171,953 of internal service funds compensated absences and $1,908,838 net pension liability are included in the above amounts. Long-term compensated absences of governmental activities are expected to be liquidated by the operating funds (primarily the general fund and the streets special revenue fund) as they come due. Conduit Debt Obligations The Industrial Development Authority, a discretely presented component unit of the Town of Gilbert, has issued Industrial Revenue Bonds and Master Lease and Sublease Agreements to provide financial assistance to private sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. Neither Gilbert, Maricopa County nor the State of Arizona shall in any event be liable for payment of principal, premium or interest on these bonds and leases, and accordingly they have not been reported in the accompanying combined financial statements. At June 30, 2015, Industrial Development Authority Revenue Bonds and Master Lease and Sublease Agreements outstanding were $29,243,433 and $30,274,787 respectively. 59 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Note 11 – Refunding Bonds On December 23, 2014, Gilbert Public Facilities MPC issued $28,080,000 of revenue refunding bonds with a net premium of $4,417,395 to advance refund $30,205,000 of outstanding Series 2006 Public Facilities MPC revenue bonds. The Series 2014 Public Facilities MPC revenue refunding bonds were issued with an average interest rate of 5.0 percent. Gilbert realized net proceeds of $32,392,504 after payment of $78,624 for underwriting fees. These proceeds were provided to an escrow trustee to pay issuance costs of approximately $181,893 with remaining $32,210,611 used to provide cash and purchase United States government securities. The cash and government securities were deposited in an irrevocable trust to provide for all future debt service payments of the Series 2006 refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed. The purpose of the refunding was to take advantage of lower interest rates thereby reducing future debt service payments. The refunding will reduce debt service payments by $2,330,015 over the next 7 years producing an economic gain (difference between present value of old and new debt service payments) of $2,170,730. Note 12 - Pension and Other Postemployment Benefits Gilbert contributes to the pension plans described below. Gilbert also contributes to the Elected Officials Retirement Plan; however, the plan is not described below because of its relative insignificance to the financial statements. The plans are component units of the State of Arizona. Gilbert reported $8,993,500 of pension expenditures in the governmental funds related to all pension plans to which it contributes for fiscal year 2015. A. Arizona State Retirement System Plan Description – Gilbert employees not covered by the other pension plans described below participate in the Arizona State Retirement System (ASRS). The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multiple-employer defined benefit health insurance premium supplement (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term disability (OPEB) plan. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS 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. Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Years of service and age required to receive benefit Sum of years and age equals 80 10 years age 62 5 years age 50* Any years age 65 30 years age 55 25 years age 60 10 years age 62 5 years age 50* Any years age 65 Final average salary is based on Highest 36 months of last 120 months Highest 60 months of last 120 months Benefit percent per year of service 2.1% to 2.3% 2.1% to 2.3% *With actuarially reduced benefits 60 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the survivor benefit is determined by the retirement benefit option chosen. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions – In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2015, statute required active ASRS members to contribute at the actuarially determined rate of 11.6% (11.48% for retirement and 0.12% for long term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 11.6% (10.89% for retirement, 0.59% for health insurance premium benefit, and 0.12% for long-term disability) of the members’ annual covered payroll. Gilbert’s contributions for the current and two preceding years for the Arizona State Retirement System OPEB, all of which were equal to the required contributions, were as follows: Year Ending 2015 2014 2013 Health Benefit Supplement Fund $264,076 253,593 248,933 Long-Term Disability Fund $ 53,539 100,955 91,364 During fiscal year 2015, Gilbert paid for ASRS pension and OPEB contributions as follows: 62% from the general fund, 33% from major funds, and 5% from other funds. Pension Liability – At June 30, 2015, Gilbert reported a liability of $69,412,268 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was determined using updated procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2013, to the measurement date of June 30, 2014. Gilbert’s reported liability at June 30, 2015, decreased by $2,020,345 from the prior year liability of $71,432,613 because of changes in the ASRS’ net pension liability and Gilbert’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. Gilbert’s proportion of the net pension liability was based on a projection of Gilbert’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. Gilbert’s proportion measured as of June 30, 2014, was 0.469110%, which was an increase of 0.039423% from its proportion measured as of June 30, 2013. The allocation of pension liability to the funds will be based on employer contributions for the fiscal year. 61 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2015, Gilbert recognized pension expense for ASRS of $6,551,629. At June 30, 2015, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 3,527,735 - Deferred Inflows of Resources - - $12,138,063 4,563,056 5,137,457 $13,228,248 $12,138,063 The $5,137,457 reported as deferred outflows of resources related to ASRS pensions resulting from Gilbert’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year Ending June 30 2016 2017 2018 2019 2020 Thereafter $ 483,219 483,219 (1,979,195) (3,034,515) - Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2013 June 30, 2014 Entry age normal 8% 3.0% - 6.75% 3.0% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2013, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. The purpose of the experience study was to review actual experience in relation to the actuarial assumptions in effect. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2013, actuarial valuation. The study did not include an analysis of the assumed investment rate of return. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.79% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. 62 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Equity 63% 7.03% Fixed income 25% 3.20% Real estate 8% 4.50% Commodities 4% 4.75% Total 100% Discount Rate – The discount rate used to measure the ASRS total pension liability was 8%, which is less than the long-term expected rate of return of 8.79%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of Gilbert’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s proportionate share of the net pension liability calculated using the discount rate of 8%, as well as what Gilbert’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7%) or 1 percentage point higher (9%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (9%)___ (7%) _ (8%) Gilbert’s proportionate share of the net pension liability $87,733,547 $69,412,268 $59,472,055 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. B. Public Safety Personnel Retirement System Plan Description – Gilbert public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multipleemployer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan. A seven-member board known as the Board of Trustees and the participating local boards govern the PSPRS 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. Benefits Provided – The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Certain retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows. See the publicly available PSPRS financial report for additional benefits information. 63 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 Retirement and Disability: Years of service and age required to receive benefit 20 years any age 15 years age 62 25 years and age 52.5 Final average salary is based on Highest 36 months of last 20 years Highest 60 months of last 20 years Normal retirement 50% less 2.0% for each year of credited service less than 20 years or plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 2.5% per year of credited service, not to exceed 80% Accidental disability retirement 50% or normal retirement, whichever is greater Survivor benefit: Retired members Active members 80% of retired member’s pension benefit 80% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earnings. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. Employees Covered by Benefit Terms – At June 30, 2015, the following employees were covered by the agent pension plan’s benefit terms: Police Fire Inactive employees or beneficiaries currently receiving benefits 40 5 Inactive employees entitled to but not yet receiving benefits 33 10 174 Active employees 220 Total 293 189 Contributions and Annual OPEB Cost – State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contributions rates for the year ended June 30, 2015, are indicated below. Rates are a percentage of active members’ annual covered payroll. Fire Police Active members – pension 11.05% 11.05% Gilbert: Pension 17.72% 12.41% Health insurance 0.94% 0.82% 64 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 For the agent plans, the contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended June 30, 2015, were as follows (actual contributions made were equal to the annual pension/OPEB cost) (100% from the general fund): Fire Police Pension: Contributions made Health insurance premium benefit: Contributions made $3,366,022 $1,946,787 $ $ 48,585 35,372 Pension Liability – At June 30, 2015, Gilbert reported $37,235,775 in net pension liability. The net pension liabilities were measured as of June 30, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2014, reflects changes of benefit terms and actuarial assumptions for a court ruling for funding permanent benefit increases and a decrease in the wage growth assumption from 4.5% to 4.0%. Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date June 30, 2014 Actuarial cost method Entry age normal Investment rate of return 7.85% Projected salary increases 4.0% – 8.0% Inflation 4.0% Permanent benefit increase Included Mortality rates RP-2000 mortality table, adjusted by 105% for both males and females Actuarial assumptions used in the June 30, 2014, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.85% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Short term investments 2% 3.25% Absolute return 4% 6.75% Risk parity 4% 6.04% Fixed income 7% 4.75% Real assets 8% 5.96% Global Technical Asset Allocation 10% 5.73% Private equity 11% 9.50% Real estate 11% 6.50% Credit opportunities 13% 8.00% Non-U.S. equity 14% 8.63% U.S. equity 16% 7.60% Total 100% 65 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Pension Discount Rates – A single discount rate of 7.85% was used to measure the total pension liability. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the Agent Plans Net Pension Liability Police: Increase/Decrease Total Pension Liability Balances at June 30, 2014 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Difference between expected and actual experience in the measurement of the total pension liability Changes of assumptions or other inputs Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expenses Other changes Net changes Balances at June 30, 2015 $68,370,995 Plan Fiduciary Net Position $44,567,146 Net Pension Liability $23,803,849 3,293,404 5,414,469 605,849 3,293,404 5,414,469 605,849 2,479,128 5,473,070 2,479,128 5,473,070 (3,103,356) (2,088,159) (6,306,779) 3,103,356 2,088,159 6,306,779 (2,087,138) (2,087,138) (50,793) 49,298 50,793 (49,298) 15,178,782 9,409,661 5,769,121 $83,549,777 $53,976,807 $29,572,970 66 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Fire: Increase/Decrease Total Pension Liability Balances at June 30, 2014 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Difference between expected and actual experience in the measurement of the total pension liability Changes of assumptions or other inputs Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expenses Net changes Balances at June 30, 2015 $42,232,338 Plan Fiduciary Net Position $35,346,851 Net Pension Liability $6,885,487 2,545,607 3,408,433 (131,651) 2,545,607 3,408,433 (131,651) 2,247,902 1,333,403 2,247,902 1,333,403 (1,954,145) (1,667,772) (5,045,090) 1,954,145 1,667,772 5,045,090 (171,217) (171,217) (40,631) 40,631 9,232,477 8,455,159 777,318 $51,464,815 $43,802,010 $7,662,805 Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s net pension liability calculated using the discount rates noted above, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: Police: Rate Net pension liability Fire: Rate Net pension liability 1% Decrease Current Discount Rate 1% Increase 6.85% $41,813,033 7.85% $29,572,970 8.85% $19,546,041 1% Decrease Current Discount Rate 1% Increase 6.85% $15,916,461 7.85% $ 7,662,805 $ 8.85% 909,060 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense – For the year ended June 30, 2015, Gilbert recognized $5,548,488 as pension expense for police and $1,946,374 as pension expense for fire. 67 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Pension Deferred Outflows/Inflows of Resources – At June 30, 2015, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Police: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total Fire: Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total Deferred Outflows of Resources $ 2,116,847 4,673,276 Deferred Inflows of Resources - - $2,103,521 3,414,607 $10,204,730 $2,103,521 Deferred Outflows of Resources $2,032,989 1,205,922 Deferred Inflows of Resources - - $1,682,703 1,982,159 $5,221,070 $1,682,703 The $3,414,607 for Police and the $1,982,159 for Fire reported as deferred outflows of resources related to PSPRS pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 2016 2017 2018 2019 2020 Thereafter Police $ 636,195 636,195 636,195 636,195 1,162,075 979,747 Fire $ (78,282) (78,282) (78,282) (78,282) 342,394 1,526,942 Agent Plan OPEB Trend Information – The table below presents the annual OPEB cost information for the health insurance premium benefit for the current and two preceding years: Police: Fiscal Year Ended June 30, 2015 June 30, 2014 June 30, 2013 Percentage of Annual Cost Contributed 100.0% 100.0% 100.0% Annual OPEB Cost $48,585 59,333 65,793 68 Net OPEB Obligation $-0-0-0- TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Fire: Fiscal Year Ended June 30, 2015 June 30, 2014 June 30, 2013 Percentage of Annual Cost Contributed 100.0% 100.0% 100.0% Annual OPEB Cost $35,372 38,139 40,245 Net OPEB Obligation $-0-0-0- Agent Plan OPEB Actuarial Assumptions – Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plan 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 for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plan’s assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plan as understood by Gilbert and plan’s members and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between Gilbert and plan’s members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The actuarial methods and assumptions used to establish the fiscal year 2015 contribution requirements, are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth June 30, 2013 Entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 23 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value (80%/120% market) 7.85% 4.5%-8.5% 4.5% Agent Plan OPEB Funded Status – The following table presents the funded status of the health insurance premium benefit plan as of the most recent valuation date, June 30, 2015. Actuarial value of assets (a) Actuarial accrued liability (b) Unfunded actuarial accrued liability (funding excess) (b) - (a) Funded ratio (a) / (b) Annual covered payroll (c) Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll (b) – (a) / (c) 69 Police $ 1,995,251 2,191,760 Fire $ 1,209,449 1,465,883 196,509 91.03% $17,676,371 256,434 82.51% $14,561,683 1.11% 1.76% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 The funded status of the PSPRS health insurance premium benefit plan in the June 30, 2014, actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth June 30, 2014 Individual entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 22 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value (80%/120% market) 7.85% 4%-8% 4% 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 2015. Administrative costs are financed through investment earnings. There is only one remaining pensioner receiving retirement benefits from the Fund. Note 13 - Post-Employment Healthcare Benefits Other post-employment healthcare benefits, like the cost of pension benefits, constitute an exchange of compensation for employee services rendered. Similar to pension benefits, the cost of OPEB generally should be associated with the periods in which the exchange occurs rather than in future periods in which the benefits are provided. GASB Statement No. 45 required Gilbert to measure and recognize the OPEB cost while employee services are rendered and provide information about the potential demands on Gilbert’s future cash flows. Plan Description Gilbert provides post-employment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan. The plan provides medical and dental benefits for eligible retirees, their spouses and dependents through Gilbert’s group health and dental insurance plans, which cover active and retired members. To be eligible for benefits, the retired employee must retire under one of the state retirement plans for public employees, must have a minimum of ten years of service with Gilbert, and be covered under Gilbert’s medical plan during their active status. Plan benefits and coverage levels are reviewed annually by Town staff and the Board of Trustees for recommendation to and approval from Town Council. The Board of Trustees makes corresponding premium recommendations to the Town Council based on revenues needed to cover the projected cost to operate the plan which are 70 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 subject to approval by the Town Council. As of June 30, 2015, there are 34 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, 2015, retirees contributed $257,278 and Gilbert contributed $478,335 (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, 2015: 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 $1,383,256 (46,373) 30,896 $1,367,779 (478,335) $ 889,444 882,737 $1,772,181 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, 2015 is as follows: Fiscal Year Ended 2015 2014 2013 Annual OPEB Cost $1,367,779 523,273 525,797 Percentage of OPEB Cost Contributed 34.97% 13.55% 18.15% Employer Contributions $478,335 70,896 95,437 Net OPEB Obligation $1,772,181 882,737 430,360 Schedule of Funded Status and Funding ProgressFollowing is the schedule of funded status and funding progress of the plan as of the most recent actuarial valuation date: (1) Actuarial Actuarial Valuation Value of Date Plan July 1 Assets 2014 $ -02012 $ -0- (2) Actuarial Accrued Liability (AAL) $10,619,282 4,151,069 (3) (4) (5) Unfunded AAL (1)-(2) $(10,619,282) (4,151,069) Funded Ratio (1)/(2) 0.0% 0.0% Annual Covered Payroll $68,126,846 58,114,323 71 (6) Unfunded AAL As Percentage of Covered Payroll (3)/(5)____ (15.59)% (7.14)% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 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 8.5% initially, reduced by decrements to an ultimate rate of 5.0% after 7 years; an annual dental healthcare cast trend rate of 4.5% initially, reduced to 3.0% after 7 years; an annual salary increase of 2%; and an inflation rate of 3%. Note 14 - Capital Contributions During the year ended June 30, 2015, the Enterprise funds external capital contributions consisted of the following: Water Contributions from developers Development fees Total Wastewater $ 4,971,099 13,118,358 $18,089,457 72 $ 2,826,212 8,100,833 $10,927,045 Total $ 7,797,311 21,219,191 $29,016,502 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Note 15 – Interfund Transfers As of June 30, 2015, interfund transfers were as follows: Governmental funds: General fund Streets special revenue General debt service Special assessments SXU revenue obligations System development fees Other governmental funds Total governmental funds Enterprise funds: Water Wastewater Total enterprise funds Total transfers Transfers-In Transfers-Out $ 3,045,025 50,000 20,217,016 88,724 23,400,765 $ 5,856,982 4,069,280 21,866 1,902,542 11,160,456 205,326 23,216,452 590,920 590,920 750,233 25,000 775,233 $23,991,685 $23,991,685 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. There were no significant transfers during fiscal year 2015 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 16 - Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2015, were as follows: Special revenue funds CDBG/HOME $ Internal service funds Equipment maintenance $1,076,162 717 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. The deficiency in the equipment maintenance fund of the internal service funds occurred due to the implementation of GASB Statement No. 68. See also Note 2. Note 17 – 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. 73 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 Note 18 – 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 $140,520,969. Principal and interest paid for the current year was $10,789,864 (of which $1,820,000 in principal was an advance defeasance). Total water system development fees revenue was $10,461,708 and water and wastewater net revenues were $23,021,777. 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 27 percent of revenues. The total principal and interest remaining to be paid on the bonds is $13,631,050. Principal and interest paid for the current year was $3,382,550, and the total street and highway revenues were $12,900,529. 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, $20,980,000 in public facilities MPC revenue refunding bonds issued in 2011 and $28,080,000 in public facilities MPC revenue refunding bonds issued on 2014. 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. Proceeds from the 2014 refunding bonds were used to advance refund $30,205,000 of outstanding 2006 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 11 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds is $165,419,367. Principal and interest paid for the current year was $13,545,998, and the total excise taxes and state-shared revenues were $125,743,087. Note 19 - 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, 2015, was: Mesa’s Share Gilbert’s Share Queen Creek’s Share Total $ 59,224,954 62,405,023 25,038,641 $146,668,618 74 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2015 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, 2015, was: Gilbert’s Share Chandler’s Share Total $ 68,904,567 62,611,174 $131,515,741 In August 2008, Gilbert entered into an Intergovernmental Agreement with the Cities of Mesa and Apache Junction, Superstition Fire & Medical (F&M), 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, 2015, was: Mesa’s Share Gilbert’s Share Apache Junction’s Share Superstition F&M’s Share Queen Creek’s Share Rio Verde FD’s Share Total $2,457,466 281,928 196,457 35,852 21,231 6,307 $2,999,241 Note 20 - Subsequent Events Gilbert advance defeased $1,365,000 of the $98,225,000 in outstanding Water Resources MPC Water System Development Fee and Subordinate Lien Water Utility Revenue Bonds on October 1, 2015. 75 TABLE OF CONTENTS 76 TABLE OF CONTENTS REQUIRED SUPPLEMENTARY INFORMATION 77 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of the Proportionate Share of the Net Pension Liability: Arizona State Retirement System Fiscal Year 2015 Proportion of the net pension liability Proportionate share of the net pension liability Covered-employee payroll (1) Proportionate share of the net pension liability as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total pension liability 0.47% $69,412,268 $42,295,765 2014 through 2006 Information not available 164% 69.49% (1) The covered-employee payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2015, the measurement date of the net pension liability is June 30, 2014. See also Note 12. 78 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of Changes in the Net Pension Liability and Related Ratios: Public Safety Personnel Retirement System - Police Fiscal Year 2015 Total pension liability: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability – ending (a) Plan fiduciary net position: Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position – beginning Plan fiduciary net position – ending (b) $ 3,293,404 5,414,469 605,849 2,479,128 5,473,070 (2,087,138) 15,178,782 68,370,995 $83,549,777 $ 3,103,356 2,088,159 6,306,779 (2,087,138) (50,793) 49,298 9,409,661 44,567,146 $53,976,807 Net pension liability – ending (a) – (b) $29,572,970 Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 64.60% $19,071,843 Gilbert’s net pension liability as a percentage of covered-employee payroll 155.06% 79 2014 through 2006 Information not available TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of Changes in the Net Pension Liability and Related Ratios: Public Safety Personnel Retirement System - Fire Fiscal Year 2015 Total pension liability: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability – ending (a) Plan fiduciary net position: Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net change in plan fiduciary net position Plan fiduciary net position – beginning Plan fiduciary net position – ending (b) Net pension liability – ending (a) – (b) $ 2,545,607 3,408,433 (131,651) 2,247,902 1,333,403 (171,217) 9,232,477 42,232,338 $51,464,815 $ 1,954,145 1,667,772 5,045,090 (171,217) (40,631) 8,455,159 35,346,851 $43,802,010 $ 7,662,805 Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll 85.11% $15,274,115 Gilbert’s net pension liability as a percentage of covered-employee payroll 50.17% 80 2014 through 2006 Information not available TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of Pension Contributions: Arizona State Retirement System Fiscal Year 2015 Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 2014 2013 2012 2011 $ 5,137,457 $ 4,763,978 $ 4,162,425 $ 3,880,631 $ 3,448,898 5,137,457 $ $43,765,044 4,763,978 $ $42,295,765 4,162,425 $ $38,356,312 3,880,631 $ $36,582,049 3,448,898 $ $37,474,457 11.74% 11.26% 10.85% 10.61% 9.20% 2010 2009 2008 2007 2006 $ 3,329,705 $ 3,407,288 $ 3,546,148 $ 2,933,481 $ 2,101,170 3,329,705 $ $37,007,042 3,407,288 $ $38,106,015 3,546,148 $ $38,803,852 2,933,481 $ $33,803,833 2,101,170 $ $29,963,291 8.94% 9.14% 8.68% 7.01% Fiscal Year Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 9.0% 81 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of Pension Contributions: Public Safety Personnel Retirement System - Police Fiscal Year Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 2015 2014 2013 2012 2011 $ 3,414,607 $ 3,231,755 $ 2,930,117 $ 2,384,390 $ 2,239,987 3,414,607 $ $19,071,843 3,231,755 $ $18,990,156 2,930,117 $ $17,477,557 2,384,390 $ $16,492,849 2,239,987 $ $16,550,117 17.90% 17.02% 16.77% 14.46% 13.54% Fiscal Year Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 2010 2009 2008 2007 2006 $ 2,330,954 $ 2,540,087 $ 1,626,604 $ 1,245,928 $ 1,239,381 2,330,954 $ $16,686,272 2,540,087 $ $17,138,480 1,626,604 $ $16,159,092 1,245,928 $ $14,272,140 1,239,381 $ $12,543,554 13.97% 14.82% 10.07% 8.73% 9.88% Public Safety Personnel Retirement System - Fire Fiscal Year Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 2015 2014 2013 2012 2011 $ 1,982,159 $ 2,037,266 $ 1,793,907 $ 1,479,746 $ 1,422,964 1,982,159 $ $15,274,115 2,037,266 $ $15,508,151 1,793,907 $ $13,954,822 1,479,746 $ $13,335,971 1,422,964 $ $13,220,688 12.98% 13.14% 12.86% 11.10% 10.76% 2007 2006 Fiscal Year Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll 2010 2009 2008 $ 1,446,837 $ 1,528,199 $ 1,099,558 $ 664,443 $ 619,730 1,446,837 $ $12,186,063 1,528,199 $ $12,476,282 1,099,558 $ $12,766,878 664,443 $ $10,737,465 619,730 $ $8,412,156 11.87% 12.25% 8.61% 6.19% 82 7.37% TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Note to Pension Plan Schedules – Actuarially Determined Contribution Rates Actuarial determined contribution rates for the Public Safety Personnel Retirement System are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial cost method Amortization method Remaining amortization period as of the 2013 actuarial valuation Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth Retirement age Mortality Individual entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 23 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value, 20% corridor In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85% In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%-9.0% to 4.5%-8.5% In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5% Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 – June 30, 2011. RP-2000 mortality table (adjusted by 105% for both males and females). 83 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2015 Schedule of Agent OPEB Plans’ Funding Progress: Arizona Public Safety Personnel Retirement System – Police Schedule of Funding Progress – Health Insurance Premium Benefit Actuarial Valuation Date June 30 2015 2014 2013 Actuarial Value of Plan Assets $1,995,251 1,764,456 -0- Actuarial Accrued Liability (AAL) $2,191,760 1,993,264 1,808,786 Unfunded AAL (1)-(2) $ (196,509) (228,808) (1,808,786) Unfunded AAL As Percentage of Covered Payroll (3)/(5)____ Funded Ratio (1)/(2) Annual Covered Payroll 91.03% 88.52% 0.00% $17,676,371 18,650,590 17,167,856 (1.11)% (1.23)% (10.54)% Annual Covered Payroll Unfunded AAL As Percentage of Covered Payroll (3)/(5)____ Arizona Public Safety Personnel Retirement System –Fire Schedule of Funding Progress – Health Insurance Premium Benefit Actuarial Valuation Date June 30 2015 2014 2013 Actuarial Value of Plan Assets Actuarial Accrued Liability (AAL) Unfunded AAL (1)-(2) $ 1,209,449 1,039,413 -0- $1,465,883 1,335,632 1,251,900 $ (256,434) (296,219) (1,251,900) Funded Ratio (1)/(2) 82.51% 77.82% 0.00% $14,561,683 14,685,147 13,278,222 (1.76)% (2.02)% (9.43)% Note: Beginning in fiscal year 2014, the Arizona Public Safety Personnel Retirement System established separate funds for pension benefits and health insurance premium benefits. Previously, the plans recorded both pension and health insurance premium contributions in the same Pension Fund. During fiscal year 2014, the plans transferred prior-year health insurance premium benefit contributions that exceeded benefit payments from each plan’s Pension Fund to the new Health Insurance Fund. 84 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. 85 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2015 Special Revenue ASSETS Pooled cash and investments Receivables, net: Taxes Accrued interest Accounts Due from other governments Inventories Restricted assets: Cash and investments Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Deposits held for others Due to other funds Unearned revenue Total liabilities Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities and fund balances Grants Other Special Revenue $ 1,274,391 $ 1,346,788 1,861 204,462 - 2,684 57,562 581,165 - $ 1,480,714 $ 1,988,199 $ $ $ $ 37,607 4,360 1,080 43,047 1,437,667 1,437,667 $ 1,480,714 66,775 43,521 110,296 1,860,929 16,974 1,877,903 $ 1,988,199 86 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ $ $ 12,325 20 479,795 - $ 492,140 358,934 8,300 125,623 492,857 12,345 (13,062) (717) 492,140 21,732 11,281 - $ $ $ 33,013 - 33,013 33,013 33,013 236,009 7,711 211 2,328 $ $ $ 246,259 25,775 8,255 34,030 2,328 209,901 212,229 246,259 TABLE OF CONTENTS Capital Projects Municipal Property Corporation Outside Sources Prop 400 $ 7,897,495 $ 14,038,785 12,915 - 23,662 - $ 7,910,410 $ 14,062,447 $ $ $ $ 131,040 283,592 414,632 7,495,778 7,495,778 $ 7,910,410 839,840 839,840 13,222,607 13,222,607 $ 14,062,447 $ - Total Nonmajor Governmental Funds $ - $ 465,819 465,819 25,878 25,878 439,941 439,941 465,819 24,827,525 18,992 41,353 57,562 1,265,422 2,328 $ $ $ 465,819 26,679,001 1,459,971 64,436 283,592 151,501 1,080 1,960,580 2,328 17,216,403 7,512,752 (13,062) 24,718,421 26,679,001 87 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, 2015 Special Revenue Other Special Revenue Grants Revenues Taxes: Property Intergovernmental Charges for services Other entities' participation Gifts and donations Fines and forfeitures Investment earnings Total revenues Expenditures Current: General government: Management and policy 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 Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances at beginning of year Fund balances at end of year $ 1,132,018 8,150 1,140,168 $ 1,588 1,100,391 123,555 619,586 15,328 1,860,448 CDBG/HOME Street Light Improvement District Parkway Maintenance District $ $ $ 826,134 79 826,213 1,628,379 1,628,379 901,742 1,201 902,943 65,150 - 40,601 362,937 835,867 - - - 320,327 107,548 423,936 - 1,486,125 20,367 49,884 - 1,682,203 - 843,221 - 391,501 1,308,462 1,959,914 835,867 1,682,203 20,797 864,018 (168,294) 85 85 (168,209) (99,466) (9,654) 969 (205,326) (204,357) 83,944 83,944 (303,823) 1,605,876 2,181,726 $ 1,437,667 $ 1,877,903 88 $ (53,824) 38,925 - - 74,290 (53,824) 38,925 (75,007) 86,837 173,304 (717) $ 33,013 $ 212,229 TABLE OF CONTENTS Capital Projects Outside Sources $ Municipal Property Corporation Prop 400 441,205 371,320 53,441 865,966 $ 5,964,974 105,867 6,070,841 $ 130 130 Total Nonmajor Governmental Funds $ 2,530,121 8,365,919 1,100,391 371,320 123,555 619,586 184,196 13,295,088 - - - 941,618 362,937 585,018 - - - 1,806,452 127,915 1,682,203 1,428,239 423,936 49,884 295,950 880,968 10,886,393 10,886,393 35,421 2,080,712 2,116,133 35,421 13,675,353 20,533,958 (15,002) (4,815,552) (2,116,003) (7,238,870) (15,002) - 3,726 3,726 88,724 (205,326) (116,602) (4,815,552) (2,112,277) (7,355,472) 7,510,780 18,038,159 2,552,218 32,073,893 $ 7,495,778 $ 13,222,607 $ 439,941 $ 24,718,421 89 TABLE OF CONTENTS 90 TABLE OF CONTENTS BUDGETARY COMPARISON SCHEDULES 91 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, 2015 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Public safety: Police Fire Transportation Capital outlay Contingency Total expenditures Deficiency of revenues under expenditures Final 6,548,048 6,548,048 $ $ 1,132,018 8,150 1,140,168 - 65,150 19,606 67,239 574,171 1,391,326 5,000,000 7,052,342 418,351 181,329 574,171 1,551,173 4,498,118 7,223,142 320,327 107,548 423,936 391,501 1,308,462 (504,294) (675,094) $ 6,548,048 6,548,048 - Other financing sources Transfers in Total other financing sources Net change in fund balances Actual Amounts (504,294) (168,209) 1,605,876 Fund balance at beginning of year $ Fund balance at end of year 92 98,024 73,781 150,235 1,159,672 4,498,118 5,914,680 506,800 85 85 (675,094) 1,437,667 (5,416,030) 8,150 (5,407,880) (65,150) (168,294) $ $ 85 85 $ 506,885 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, 2015 Variance with Budgeted Amounts Original Revenues Intergovernmental Charges for services Gifts and donations Fines and forfeitures Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Court Public safety: Police Fire Non departmental Contingency Total expenditures 1,517,067 135,190 541,000 2,193,257 Actual Amounts Final $ 1,517,067 135,190 541,000 2,193,257 $ 1,588 1,100,391 123,555 619,586 15,328 1,860,448 Final Budget Positive (Negative) $ 1,588 (416,676) (11,635) 78,586 15,328 (332,809) 157,500 592,686 166,820 592,686 40,601 362,937 126,219 229,749 1,842,299 70,960 49,890 1,000,000 3,713,335 1,842,299 70,960 49,890 912,259 3,634,914 1,486,125 20,367 49,884 1,959,914 356,174 50,593 6 912,259 1,675,000 Deficiency of revenues under expenditures (1,520,078) (1,441,657) (99,466) Other financing sources (uses) Transfers in Transfers out Total other financing sources and uses (185,920) (185,920) (185,920) (185,920) 969 (205,326) (204,357) (1,627,577) (303,823) Net change in fund balances $ (1,705,998) $ 2,181,726 Fund balance at beginning of year $ Fund balance at end of year 93 1,877,903 1,342,191 969 (19,406) (18,437) $ 1,323,754 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, 2015 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Expenditures Current: General government: Management and policy Total expenditures 834,624 834,624 $ $ (157,108) 834,624 834,624 $ 1,367,366 1,367,366 (157,108) Other financing sources Transfers in Total other financing sources Net change in fund balances Final 991,732 991,732 Deficiency of revenues under expenditures Actual Amounts $ 826,134 79 826,213 (532,742) (9,654) 74,320 74,320 83,944 83,944 (458,422) 74,290 (75,007) $ 94 $ 835,867 835,867 Fund deficit at beginning of year Fund deficit at end of year Final Budget Positive (Negative) (717) (8,490) 79 (8,411) 531,499 531,499 523,088 9,624 9,624 $ 532,712 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, 2015 Variance with Budgeted Amounts Original Revenues Taxes Total revenues $ Expenditures Current: Highways and streets Total expenditures Final $ 1,731,670 1,731,670 Deficiency of revenues under expenditures Net change in fund balances 1,634,020 1,634,020 (97,650) 1,634,020 1,634,020 $ 1,731,670 1,731,670 (97,650) $ Actual Amounts $ 1,628,379 1,628,379 (97,650) (53,824) (97,650) (53,824) 86,837 $ 95 $ 1,682,203 1,682,203 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 33,013 (5,641) (5,641) 49,467 49,467 43,826 $ 43,826 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, 2015 Variance with Budgeted Amounts Original Revenues Taxes Investment earnings Total revenues $ Expenditures Current: Parks and recreation Capital outlay Total expenditures Final $ 982,100 19,500 1,001,600 Excess (deficiency) of revenues over (under) expenditures Net change in fund balances 902,140 902,140 (99,460) 902,140 902,140 $ 982,100 19,500 1,001,600 (99,460) $ Actual Amounts $ 901,742 1,201 902,943 (398) 1,201 803 138,879 (1,297) 137,582 (99,460) 38,925 138,385 (99,460) 38,925 173,304 $ 96 $ 843,221 20,797 864,018 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 212,229 $ 138,385 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, 2015 Variance with Budgeted Amounts Original Revenues Property taxes Investment earnings Total revenues $ Expenditures Debt service: Principal Interest Bond issuance costs Fiscal and other charges Total expenditures 18,576,000 100,000 18,676,000 Actual Amounts Final $ 18,576,000 100,000 18,676,000 $ 19,422,848 139,220 19,562,068 Final Budget Positive (Negative) $ 846,848 39,220 886,068 22,860,000 12,642,440 2,740 35,505,180 22,860,000 14,105,070 260,520 3,060 37,228,650 22,615,000 12,637,592 260,516 3,060 35,516,168 245,000 1,467,478 4 1,712,482 Deficiency of revenues under expenditures (16,829,180) (18,552,650) (15,954,100) 2,598,550 Other financing sources (uses) Transfers in Refunding bonds issued Premium on refunding bonds Payment to refunded bond escrow agent Total other financing sources and uses 20,213,560 20,213,560 20,213,560 (32,210,620) (11,997,060) 20,217,016 28,080,000 4,417,395 (32,210,612) 20,503,799 3,456 28,080,000 4,417,395 8 32,500,859 3,384,380 $ (30,549,710) Net change in fund balances $ 4,549,699 10,383,089 Fund balance at beginning of year $ Fund balance at end of year 97 14,932,788 $ 35,099,409 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, 2015 Variance with Budgeted Amounts Original Revenues Special assessments Investment earnings Total revenues $ Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing uses Transfers out Total other financing uses Net change in fund balances $ 7,085,577 7,085,577 Actual Amounts Final $ 7,085,577 7,085,577 $ 1,184,368 5,345 1,189,713 Final Budget Positive (Negative) $ 6,060,000 515,900 8,150 6,584,050 6,055,000 515,900 13,150 6,584,050 501,527 501,527 (423,814) (925,341) (205,000) (205,000) (205,000) (205,000) (21,866) (21,866) 183,134 183,134 296,527 (445,680) 296,527 $ 1,135,000 470,225 8,302 1,613,527 (5,901,209) 5,345 (5,895,864) 479,414 Fund balance at beginning of year $ Fund balance at end of year 98 33,734 4,920,000 45,675 4,848 4,970,523 $ (742,207) 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, 2015 Variance with Budgeted Amounts Original Revenues Intergovernmental Other entities' participation Investment earnings Total revenues $ Expenditures Current: Parks and recreation Capital outlay Contingency Total expenditures Net change in fund balances Final 1,190,050 128,662 1,318,712 $ 601,000 717,712 1,318,712 Deficiency of revenues under expenditures - 1,190,050 128,662 1,318,712 $ 664,245 717,001 75,112 1,456,358 $ Actual Amounts $ 441,205 371,320 53,441 865,966 (748,845) 242,658 53,441 (452,746) 79,227 421,051 75,112 575,390 (137,646) (15,002) 122,644 (137,646) (15,002) 7,510,780 $ 99 $ 585,018 295,950 880,968 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 7,495,778 $ 122,644 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, 2015 Variance with Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Expenditures Capital outlay Contingency Total expenditures Final 23,028,982 23,028,982 $ 23,028,982 23,028,982 23,028,982 23,028,982 22,071,094 957,888 23,028,982 - Deficiency of revenues under expenditures Net change in fund balances Actual Amounts $ - $ $ 5,964,974 105,867 6,070,841 (17,064,008) 105,867 (16,958,141) 11,184,701 957,888 12,142,589 - (4,815,552) (4,815,552) - (4,815,552) 18,038,159 $ 100 $ 10,886,393 10,886,393 Fund balance at beginning of year Fund balance at end of year Final Budget Positive (Negative) 13,222,607 $ (4,815,552) 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, 2015 Variance with Budgeted Amounts Original Revenues Investment earnings Total revenues Expenditures Capital outlay Contingency Total expenditures Deficiency of revenues under expenditures Net change in fund balances $ Actual Amounts Final - $ - $ 75,403 75,403 Final Budget Positive (Negative) $ 75,403 75,403 19,709,762 19,709,762 17,598,217 2,411,545 20,009,762 3,849,262 3,849,262 13,748,955 2,411,545 16,160,500 (19,709,762) (20,009,762) (3,773,859) 16,235,903 $ (19,709,762) $ (20,009,762) (3,773,859) 22,993,703 Fund balance at beginning of year $ Fund balance at end of year 101 19,219,844 $ 16,235,903 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, 2015 Variance with Budgeted Amounts Original Revenues Investment earnings Total revenues $ Expenditures Debt service: Fiscal and other charges Capital outlay Contingency Total expenditures Deficiency of revenues under expenditures Other financing sources Transfers in Total other financing sources Net change in fund balances Final - $ - $ 130 130 Final Budget Positive (Negative) $ 130 130 3,850 5,599,962 5,603,812 4,450 2,234,153 3,365,809 5,604,412 35,421 2,080,712 2,116,133 (30,971) 153,441 3,365,809 3,488,279 (5,603,812) (5,604,412) (2,116,003) 3,488,409 3,830 3,830 $ Actual Amounts (5,599,982) 3,830 3,830 $ 3,726 3,726 (5,600,582) (2,112,277) 2,552,218 Fund balance at beginning of year $ Fund balance at end of year 102 439,941 (104) (104) $ 3,488,305 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, 2015 Variance with Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ Expenditures Capital outlay Contingency Total expenditures Excess of revenues over expenditures Other financing uses Transfers out Total other financing 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 $ 18,836,030 187,869 19,023,899 Final Budget Positive (Negative) $ 3,186,030 122,869 3,308,899 4,646,969 4,646,969 4,433,085 213,884 4,646,969 2,295,938 2,295,938 2,137,147 213,884 2,351,031 11,068,031 11,068,031 16,727,961 5,659,930 (11,088,800) (11,088,800) (11,088,800) (11,088,800) (11,160,456) (11,160,456) (20,769) $ (20,769) 5,567,505 8,719 Fund balance at beginning of year $ Fund balance at end of year 103 5,576,224 (71,656) (71,656) $ 5,588,274 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Saint Xavier University Revenue Obligations Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Budgetary Basis For the Year Ended June 30, 2015 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Investment earnings Total revenues $ Expenditures Debt service: Bond issuance costs Capital outlay Contingency Total expenditures Actual Amounts Final - $ 800 800 $ 767 767 $ (33) (33) 39,750,283 39,750,283 209,000 38,402,458 1,138,825 39,750,283 208,601 24,940,129 25,148,730 399 13,462,329 1,138,825 14,601,553 Deficiency of revenues under expenditures (39,750,283) (39,749,483) (25,147,963) 14,601,520 Other financing sources (uses) Transfers out Revenue obligations issued Premium on revenue obligations Total other financing sources and uses 40,304,493 40,304,493 (1,902,550) 37,597,993 2,705,700 38,401,143 (1,902,542) 36,980,000 2,705,688 37,783,146 (1,348,340) 12,635,183 Net change in fund balances $ 554,210 $ - Fund balance at beginning of year $ Fund balance at end of year 104 12,635,183 8 (617,993) (12) (617,997) $ 13,983,523 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, 2015 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Debt service: Principal Contingency Total operating expenses Operating loss Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Loss before capital contributions and transfers Capital contributions Transfers out Change in net position $ 38,069,621 900,000 38,969,621 Final $ 38,069,621 900,000 38,969,621 Final Budget Positive (Negative) Actual Amounts $ 37,500,541 1,207,776 38,708,317 $ (569,080) 307,776 (261,304) 1,993,734 7,686,696 16,258,174 37,310,713 1,963,590 1,995,500 7,686,696 16,384,697 35,662,106 1,963,590 1,096,405 7,633,732 14,036,453 8,933,932 1,963,590 899,095 52,964 2,348,244 26,728,174 - 9,124,050 1,760,830 76,097,787 9,124,050 4,183,224 76,999,863 6,140,000 39,804,112 2,984,050 4,183,224 37,195,751 (37,128,166) (38,030,242) (1,095,795) 36,934,447 (5,433,190) 466,218 (4,966,972) (5,433,190) 466,218 (4,966,972) (4,905,368) 788,031 9,037 (4,108,300) 527,822 321,813 9,037 858,672 (42,095,138) (42,997,214) (5,204,095) 37,793,119 14,000,000 (905,000) 14,000,000 (979,320) 13,118,358 (750,233) (29,976,534) 7,164,030 (29,000,138) $ Explanation of difference between budgetary change in net position at June 30, 2015, 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, 2014 904,498 Less compensated absences at June 30, 2015 (938,490) Add post-employment benefits at June 30, 2014 87,292 Less post-employment benefits at June 30, 2015 (172,002) Capital outlays are not recognized as GAAP expenses but are recognized as expenses on the budget basis. 8,933,932 Debt service principal payments are not recognized as expenses on the GAAP basis but are recognized as expenses on the budget basis. 6,140,000 Capital assets contributed by developers are recognized as revenue for GAAP purposes by are not recognized as revenue on the budget basis. 4,971,099 Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. (11,918,035) Change in net position as reported on the statement of revenues, expenses and changes in fund net position $ 15,172,324 105 (881,642) 229,087 $ 37,140,564 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, 2015 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 24,350,729 24,350,729 Actual Amounts Final $ 24,350,729 24,350,729 $ 24,625,084 5,021 24,630,105 Final Budget Positive (Negative) $ 274,355 5,021 279,376 452,604 4,091,376 11,116,213 10,317,196 944,870 550,940 4,091,376 11,080,431 11,066,378 944,870 765,693 3,928,822 9,838,681 2,002,865 944,870 535,960 4,189,559 31,647,778 535,960 3,378,123 31,648,078 17,480,931 535,960 3,378,123 14,167,147 (7,297,049) (7,297,349) 7,149,174 14,446,523 (120,620) 197,933 77,313 (120,620) 197,933 77,313 498,944 2,757 501,701 120,620 301,011 2,757 424,388 Income (loss) before capital contributions and transfers (7,219,736) (7,220,036) 7,650,875 14,870,911 Capital contributions Transfers in Transfers out 12,000,000 820,000 (25,000) 12,000,000 820,000 (25,000) 8,100,833 590,920 (25,000) (3,899,167) (229,080) - Operating income (loss) Nonoperating revenues (expenses) Interest expense Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) Change in net position $ 5,575,264 $ 5,574,964 16,317,628 Explanation of difference between budgetary change in net position at June 30, 2015, 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, 2014 Less compensated absences at June 30, 2015 Add post-employment benefits at June 30, 2014 Less post-employment benefits at June 30, 2015 Capital outlays are not recognized as GAAP expenses 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 106 519,304 (475,983) 31,942 (64,960) 2,002,865 2,826,212 (10,173,643) $ 10,983,365 (214,753) 162,554 1,241,750 9,063,513 - $ 10,742,664 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, 2015 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ 17,121,575 59,113 17,180,688 $ 17,121,575 59,113 17,180,688 Operating expenses General and administrative Personal services Operation and maintenance Capital outlay Allocation of indirect expenses Contingency Total operating expenses 467,528 6,459,430 7,125,950 6,700,202 893,630 2,620,785 24,267,525 528,279 6,559,430 7,164,365 6,740,137 893,630 2,381,684 24,267,525 Operating loss (7,086,837) (7,086,837) Nonoperating revenues Investment earnings Gain on sale of capital assets Total nonoperating revenues 191,472 191,472 Income (loss) before transfers Change in net position (6,840,365) 107 6,862,590 (21,161) 160,315 139,154 106,379 7,001,744 106,379 490,732 (470,840) 60,072 (121,176) 3,008,911 (1,353,842) $ 1,720,236 885,919 37,786 923,705 (264,604) 459,911 (369,332) 3,731,226 2,381,684 5,938,885 170,311 160,315 330,626 (6,840,365) Explanation of difference between budgetary change in net position at June 30, 2015, and GAAP change in net position: Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2014 Less compensated absences at June 30, 2015 Add post-employment benefits at June 30, 2014 Less post-employment benefits at June 30, 2015 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 $ (224,247) 55,000 $ 18,007,494 96,899 18,104,393 792,883 6,099,519 7,533,697 3,008,911 893,630 18,328,640 (6,895,365) 55,000 $ $ 191,472 191,472 (6,895,365) Transfers in Actual Amounts Final (55,000) $ 6,946,744 TABLE OF CONTENTS 108 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. 109 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Net Position June 30, 2015 Equipment Maintenance ASSETS Current assets: Pooled cash and investments Receivables (net): Accrued interest Accounts Inventories Total current assets $ 724,019 Copier Services $ 1,017 6,558 553,222 1,284,816 Noncurrent assets: Capital assets: Property, plant and equipment Less accumulated depreciation Total capital assets (net) Total assets Employee Benefit SelfInsurance - $ - 236,422 (226,433) 9,989 1,294,805 296,976 (109,836) 187,140 187,140 Total 4,594,441 $ 5,318,460 1,812 110,409 4,706,662 2,829 116,967 553,222 5,991,478 4,706,662 533,398 (336,269) 197,129 6,188,607 DEFERRED OUTFLOWS OF RESOURCES Pension-related items Total deferred outflows of resources 363,777 363,777 - - 363,777 363,777 LIABILITIES Current liabilities: Accounts payable Accrued liabilities Current portion of compensated absences Claims payable Due to other funds Total current liabilities 246,506 73,650 76,146 396,302 35,328 42,362 77,690 2,316 1,398,171 1,400,487 284,150 73,650 76,146 1,398,171 42,362 1,874,479 Noncurrent liabilities: Long-term portion of compensated absences Net pension liability Total noncurrent liabilities 95,807 1,908,838 2,004,645 - - 95,807 1,908,838 2,004,645 Total liabilities 2,400,947 77,690 1,400,487 3,879,124 333,797 333,797 - - 333,797 333,797 3,306,175 3,306,175 197,129 2,142,334 2,339,463 DEFERRED INFLOWS OF RESOURCES Pension-related items Total deferred inflows of resources NET POSITION Net investment in capital assets Unrestricted Total net position $ 9,989 (1,086,151) (1,076,162) 110 $ 187,140 (77,690) 109,450 $ $ 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, 2015 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 7,470,375 2,275 7,472,650 326 326 (54,776) (285,518) (1,021,386) Total net position, beginning of year, as restated (see note 2) $ (1,076,162) 111 $ (285,844) 3,892 3,892 Change in net position 956 956 260,489 26,311 286,800 (58,668) Nonoperating revenues Investment earnings Total nonoperating revenues Total net position, end of year $ 65,821 1,788,540 5,673,153 3,804 7,531,318 Operating income (loss) Employee Benefit SelfInsurance Copier Services 394,968 $ 109,450 $ 14,841,610 2,341,071 17,182,681 Total $ 22,312,941 2,343,346 24,656,287 967,199 15,605,420 16,572,619 1,033,020 1,788,540 5,933,642 15,605,420 30,115 24,390,737 610,062 265,550 9,797 9,797 14,015 14,015 619,859 279,565 2,686,316 2,059,898 3,306,175 $ 2,339,463 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Internal Service Funds Combining Statement of Cash Flows Year Ended June 30, 2015 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 $ 2,275 7,465,328 (5,781,308) (1,718,867) Net cash provided by (used in) operating activities $ (32,572) Cash flows from noncapital financing activities: Changes in due to other funds Employee Benefit SelfInsurance Copier Services 956 (272,026) - $ 2,230,736 14,841,610 (16,439,044) - (271,070) Total $ 2,233,011 22,307,894 (22,492,378) (1,718,867) 633,302 329,660 - 42,362 - 42,362 Net cash provided by noncapital financing activities - 42,362 - 42,362 Cash flows from capital and related financing activities: Acquisition and construction of capital assets - (25,202) - (25,202) - (25,202) - (25,202) 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 Pension expense Employer pension contributions Changes in assets and liabilities: Increase in accounts receivable Increase in inventories Increase (decrease) in accounts payable Increase in claims payable Increase in accrued expenses 326 10,190 13,864 3,348 326 10,190 13,864 643,492 3,950,949 360,684 4,957,776 (29,224) 753,243 (253,584) 253,584 $ 724,019 $ $ (58,668) $ - (285,844) $ 4,594,441 $ 5,318,460 $ $ 265,550 610,062 3,804 180,170 (141,280) 26,311 - (5,047) (14,755) (27,578) 30,782 (11,537) - (110,335) 1,896 131,679 - (115,382) (14,755) (37,219) 131,679 30,782 26,096 14,774 23,240 64,110 Total adjustments Net cash provided by (used in) operating activities 3,348 $ (32,572) 112 $ (271,070) - $ 633,302 30,115 180,170 (141,280) $ 329,660 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, 2015 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 Contingency Total operating expenses 8,208,000 2,000 8,210,000 $ 8,208,000 2,000 8,210,000 (466,874) 113 (56,263) 177,244 (171,953) (3,804) $ (54,776) (737,625) 275 (737,350) 32,014 57,361 471,967 84,030 498,697 1,144,069 406,719 3,892 3,892 (466,874) Explanation of difference between budgetary change in net position at June 30, 2015, and GAAP change in net position: Obligations for compensated absences are accrued on the GAAP basis but are not recognized on the budget basis: Add compensated absences at June 30, 2014 Less compensated absences at June 30, 2015 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 $ (60,155) $ 7,470,375 2,275 7,472,650 Final Budget Positive (Negative) 65,821 1,793,831 5,673,153 7,532,805 (466,874) $ $ 97,835 1,851,192 6,145,120 84,030 498,697 8,676,874 (466,874) Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position Final 94,232 1,851,192 6,147,420 84,030 500,000 8,676,874 Operating loss Actual Amounts 3,892 3,892 $ 410,611 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, 2015 Variance with Budgeted Amounts Original Operating revenues Charges for services Total operating revenues $ Operating expenses Operation and maintenance Capital outlay Total operating expenses Operating loss Nonoperating revenues Investment earnings Total nonoperating revenues Change in net position 585,000 585,000 Final $ 585,000 585,000 $ 956 956 Final Budget Positive (Negative) $ (584,044) (584,044) 552,974 250,000 802,974 552,974 250,000 802,974 260,489 260,489 292,485 250,000 542,485 (217,974) (217,974) (259,533) (41,559) 3,000 3,000 $ Actual Amounts (214,974) 3,000 3,000 $ 326 326 (214,974) (259,207) Explanation of difference between budgetary change in net assets at June 30, 2015, and GAAP change in net assets: Depreciation is recognized as an expense for GAAP purposes but is not recognized for budgetary purposes. Change in net assets as reported on the statement of revenues, expenses and changes in fund net assets 114 (26,311) $ (285,518) (2,674) (2,674) $ (44,233) 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, 2015 Variance with Budgeted Amounts Original Operating revenues Charges for services Other Total operating revenues $ Operating expenses General and administrative Claims Incurred Total operating expenses Final $ 1,078,020 14,255,000 15,333,020 Nonoperating revenues Investment earnings Total nonoperating revenues (867,020) 115 $ (2,878,020) 11,000 11,000 $ 14,390,000 65,000 14,455,000 1,078,020 16,255,000 17,333,020 (878,020) Operating (loss) income Change in net position 14,390,000 65,000 14,455,000 Actual Amounts 11,000 11,000 $ (2,867,020) 14,841,610 2,341,071 17,182,681 Final Budget Positive (Negative) $ 967,199 15,605,420 16,572,619 110,821 649,580 760,401 610,062 3,488,082 9,797 9,797 $ 451,610 2,276,071 2,727,681 619,859 (1,203) (1,203) $ 3,486,879 TABLE OF CONTENTS 116 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. 117 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2015 Beginning Balance Flexible Spending Assets Restricted cash and investments Prepaid items Additions Ending Balance Deductions $ 11,298 10,685 $ 316,652 255,653 $ 327,950 243,983 $ 22,355 $ 21,983 $ 572,305 $ 571,933 $ 22,355 Liabilities Accounts payable Dependent care benefits payable $ 21,983 $ 3,513 69,157 $ 72,298 $ 3,513 18,842 Total liabilities $ 21,983 $ 72,670 $ 72,298 $ 22,355 $ 229,117 - $ 41,485 435 $ 270,602 435 $ - $ 229,117 $ 41,920 $ 271,037 $ - $ 229,117 $ 41,920 $ 271,037 $ - $ 229,117 $ 41,920 $ 271,037 $ - $ - $ 46,522 $ 46,522 $ - $ - $ 46,522 $ 46,522 $ - $ - $ 46,522 $ 46,522 $ - $ - $ 46,522 $ 46,522 $ - 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 118 TABLE OF CONTENTS TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2015 Beginning Balance Total-All Agency Funds Assets Restricted cash and investments Prepaid items Restricted accrued interest Total assets Liabilities Accounts payable Other deposits Due to developers Dependent care benefits payable Total liabilities Additions Ending Balance Deductions $ 240,415 10,685 - $ 404,659 255,653 435 $ 645,074 243,983 435 $ 22,355 - $ 251,100 $ 660,747 $ 889,492 $ 22,355 $ 229,117 21,983 $ 3,513 41,920 46,522 69,157 $ 271,037 46,522 72,298 $ 3,513 18,842 $ 251,100 $ 161,112 $ 389,857 $ 22,355 119 TABLE OF CONTENTS 120 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 122 TABLE OF CONTENTS Schedule 1 Town of Gilbert, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2006 Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business-type activities Net investment in capital assets Restricted Unrestricted Total business-type activities net position 123 Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position $ $ 513,996 47,716 48,971 610,683 2007 $ $ 347,213 62,356 17,927 427,496 $ 861,209 110,072 66,898 $ 1,038,179 $ $ $ $ 596,974 42,681 67,610 707,265 2008 $ $ 386,130 103,425 9,480 499,035 $ 983,104 146,106 77,090 $ 1,206,300 $ $ 688,393 34,926 48,022 771,341 2009 $ $ 273,513 106,871 136,635 517,019 $ 961,906 141,797 184,657 $ 1,288,360 $ $ 704,908 24,036 63,994 792,938 2010 $ $ 261,028 91,738 182,090 534,856 $ 965,936 115,774 246,084 $ 1,327,794 $ $ $ 707,100 43,766 66,030 816,896 276,059 86,943 195,803 558,805 983,159 130,709 261,833 $ 1,375,701 2011 $ $ $ $ 705,986 38,404 77,284 821,674 294,516 76,504 209,680 580,700 $ 1,000,502 114,908 286,964 $ 1,402,374 2012 $ $ $ $ 695,983 52,219 83,273 831,475 316,268 71,376 236,097 623,741 $ 1,012,251 123,595 319,370 $ 1,455,216 2013 $ $ $ $ 687,910 60,525 107,172 855,607 325,357 70,879 263,978 660,214 $ 1,013,267 131,404 371,150 $ 1,515,821 2014 $ $ $ $ 680,717 80,924 92,357 853,998 351,797 65,577 281,391 698,765 $ 1,032,514 146,501 373,748 $ 1,552,763 2015 $ $ $ $ 688,900 82,546 30,276 801,722 363,333 54,084 290,870 708,287 $ 1,052,233 136,630 321,146 $ 1,510,009 TABLE OF CONTENTS Schedule 2 Town of Gilbert, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2006 124 Expenses Governmental activities: General government: Management and policy Support services Finance and management services Court Development services Public works Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities expenses Business-type activities: Water Wastewater Environmental services Irrigation Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for services: Development services Police Fire Highways and streets Parks and recreation Other activities Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 2,900 8,854 4,352 11,232 4,281 2007 $ 3,070 9,828 5,316 13,394 914 2008 $ 3,167 10,351 5,848 14,501 978 2009 $ 3,068 10,137 5,838 12,243 1,451 2010 $ 2,831 9,297 5,937 10,085 2,782 2011 $ 3,110 8,503 1,287 5,126 8,201 - 2012 $ 2,983 8,632 1,216 5,410 8,551 - 2013 $ 10,461 4,150 5,474 6,850 - 2014 $ 13,378 4,347 5,975 9,062 - 2015 $ 19,090 1,814 4,053 7,082 - 29,765 15,378 24,852 11,239 1,622 7,944 122,419 34,022 18,872 31,052 15,926 1,439 9,532 143,365 39,641 22,564 36,385 16,176 1,563 8,893 160,067 42,109 24,255 38,541 19,350 1,682 17,096 175,770 41,328 22,871 36,906 19,826 1,170 18,418 171,451 38,869 24,473 40,440 19,764 1,010 2,194 17,675 170,652 40,467 24,906 43,438 19,932 1,269 2,910 15,785 175,499 42,759 25,867 44,048 20,858 461 3,114 15,142 179,184 45,931 28,853 45,781 22,493 842 4,104 15,216 195,982 47,541 28,071 46,932 28,429 778 4,423 12,780 200,993 25,234 19,061 11,359 39 55,693 24,030 19,873 12,978 30 56,911 34,277 23,507 14,783 67 72,634 35,451 22,398 13,843 158 71,850 36,163 23,002 13,852 54 73,071 36,863 23,039 14,255 74,157 37,695 22,662 14,918 75,275 38,339 22,170 15,588 76,097 39,927 23,615 16,113 79,655 41,817 25,620 16,720 84,157 $ 178,112 $ 200,276 $ 232,701 $ 247,620 $ 244,522 $ 244,809 $ 250,773 $ 255,281 $ 275,637 $ 285,150 $ $ $ $ $ $ $ $ $ $ 11,432 3,750 795 1,258 2,464 543 17,079 43,856 81,177 10,227 6,015 100 1,396 2,955 503 22,466 70,076 113,738 7,385 6,358 72 1,265 3,130 707 22,631 45,821 87,369 3,773 6,594 100 1,454 3,193 703 21,183 31,494 68,494 4,027 6,374 79 1,659 3,735 789 19,206 39,632 75,501 3,178 2,891 136 1,739 3,740 853 21,168 28,002 61,707 5,347 5,584 129 1,497 3,595 861 21,045 26,060 64,117 7,240 5,512 185 1,516 3,706 1,017 21,270 36,089 76,535 6,783 5,477 254 1,440 3,765 1,066 22,326 19,186 60,297 6,608 4,526 224 1,643 4,146 829 24,171 37,214 79,361 TABLE OF CONTENTS Business-type activities: Charges for services: Water Wastewater Environmental services Irrigation Capital grants and contributions Total business-type activities program revenues Total primary government program revenues 24,126 13,989 11,307 17 59,183 108,622 $ 189,799 28,244 16,173 13,886 18 64,674 122,995 $ 236,733 32,321 18,440 15,642 18 34,556 100,977 $ 188,346 $ Net (Expense)/Revenue a Governmental activities Business-type activities Total primary government net revenue (expense) $ (41,242) 52,929 $ 11,687 $ (29,627) 66,084 $ 36,457 $ (72,698) 28,343 $ (44,355) $ (107,276) 17,126 $ (90,150) $ (95,950) 21,172 $ (74,778) $ (108,945) 19,005 $ (89,940) $ (111,381) 39,303 $ (72,078) $ (102,649) 34,354 $ (68,295) $ (135,685) 35,624 $ (100,061) $ (121,632) 24,993 $ (96,639) $ $ $ $ $ $ $ $ $ 125 General Revenues and Other Changes in Net Position Governmental activities: Taxes: Sales taxes $ 49,198 Property taxes, levied for debt service 14,054 In-Lieu property taxes 373 Franchise taxes 2,011 Unrestricted state shared sales taxes 12,088 Unrestricted state shared income taxes 11,485 Unrestricted grants and contributions 3,157 Unrestricted investment earnings 7,019 Gain on sale of capital assets 216 Miscellaneous 615 Transfers 54 Total governmental activities 100,270 Business-type activities: Investment earnings (Loss)/Gain on sale of capital assets Miscellaneous Transfers Total business-type activities Total primary government Change in Net Position Governmental activities Business-type activities Total primary government a 57,697 16,500 376 2,361 16,595 19,761 3,157 8,508 24 620 610 126,209 56,980 26,345 831 2,595 16,317 24,986 2,195 4,463 260 544 1,257 136,773 5,144 131 801 (54) 6,022 $ 106,292 5,288 (377) 406 (610) 4,707 $ 130,916 7,509 56 400 (1,257) 6,708 $ 143,481 $ $ $ $ $ 59,028 58,951 $ 117,979 96,582 70,791 $ 167,373 $ 64,075 35,051 99,126 $ 33,416 19,722 16,592 18 19,228 88,976 157,470 49,060 30,836 948 2,544 14,126 26,435 939 2,003 152 669 1,161 128,873 1,066 52 754 (1,161) 711 129,584 21,597 17,837 39,434 $ $ $ $ 34,601 21,024 16,567 25 22,026 94,243 169,744 47,119 30,117 1,328 2,448 13,029 22,923 1,235 1,301 74 680 (346) 119,908 739 148 1,544 346 2,777 122,685 23,958 23,949 47,907 $ $ $ $ 35,966 21,678 17,194 18,324 93,162 154,869 49,249 25,796 1,351 2,401 13,787 17,281 864 2,137 355 537 113,758 1,012 164 2,216 (537) 2,855 116,613 4,813 21,860 26,673 $ $ $ $ 36,692 22,740 17,924 37,222 114,578 178,696 54,513 21,502 1,331 2,463 16,288 17,594 1,349 1,910 178 4,744 (690) 121,182 1,244 39 1,765 690 3,738 124,920 9,801 43,041 52,842 $ $ $ $ 36,455 23,083 16,760 34,153 110,451 186,986 61,813 19,184 1,377 3,083 17,062 21,293 1,193 722 932 121 126,780 1,061 1,179 (121) 2,119 128,899 24,131 36,473 60,604 $ $ $ $ 37,867 23,852 17,308 36,252 115,279 175,576 66,757 18,315 1,287 2,616 18,119 23,205 904 1,508 29 1,226 110 134,076 1,742 30 1,266 (110) 2,928 137,004 (1,609) 38,552 36,943 $ $ $ $ 37,501 24,625 18,007 29,017 109,150 188,511 71,773 19,423 1,201 2,737 19,041 25,222 2,595 1,224 106 847 184 144,353 1,457 172 1,310 (184) 2,755 147,108 22,721 27,748 50,469 The increase in Net Expense for Governmental activities in fiscal year 2006 is due to a 32% increase in public safety expenses (hiring more police and fire personnel - see Schedule 16 for details) and a 28% decrease in capital grants and contributions (developer contributions). The increase in Net Expense for Governmental activities in fiscal year 2008 is due to a 18% increase in public safety expenses (hiring more police and fire personnel - see Schedule 16 for details) and a 35% decrease in capital grants and contributions (developer contributions). The increase in Net Expense for Governmental activities in fiscal year 2009 is due to a 92% increase in interest and fiscal charges on long-term debt (interest and principal payments on general obligation bonds issued at the end of 2008) and a 31% decrease in capital grants and contributions (developer contributions). The increase in Net Expense for Governmental activities for fiscal years 2011 and 2014 is due to a decrease in capital grants and contributions (developer contributions) of 29% and 47%, respectively. The decrease in Net Expense for Governmental activities for fiscal year 2015 is due to an increase in capital grants and contributions (developer contributions) of $12M. TABLE OF CONTENTS Schedule 3 Town of Gilbert, Arizona Program Revenues by Function Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 126 2006 Function/Program Governmental activities: General government: Management and policy $ 66 Support services 237 Finance and management services Court 344 Development services 12,326 1,976 Public works Public Safety: 7,140 Police Fire 5,196 40,428 Highways and streets a 13,313 Parks and recreation Transportation 150 Non departmental - 2007 $ 70 1,133 412 11,662 5,837 2008 $ 47 1,184 675 8,101 1,948 2009 $ 11 128 586 4,571 901 2010 $ 10 215 597 4,576 1,005 2011 $ 15 649 9 597 4,273 - 2012 $ 16 242 11 670 6,891 - 2013 $ 36 251 792 7,240 - 2014 $ 59 262 823 6,807 - 2015 $ 962 27 824 6,608 - 9,629 5,286 65,949 13,249 511 - 8,491 4,223 52,536 9,861 303 - 7,838 4,386 39,126 10,539 408 - 8,495 3,447 45,193 11,649 314 - 3,989 3,163 39,324 9,422 215 51 7,689 6,892 25,634 15,314 624 135 7,669 4,079 41,280 14,475 662 51 7,207 3,697 28,218 12,461 712 51 8,975 3,766 44,497 13,012 639 51 Subtotal governmental activities 81,176 113,738 87,369 68,494 75,501 61,707 64,118 76,535 60,297 79,361 Business-type activities: Water Wastewater Environmental services Irrigation 55,933 41,365 11,307 17 64,313 44,778 13,886 18 52,172 33,145 15,642 18 43,997 28,369 16,592 18 47,232 30,419 16,567 25 46,133 29,835 17,194 - 56,904 39,735 17,938 - 55,662 38,029 16,760 - 57,750 40,220 17,308 - 55,590 35,552 18,008 - 108,622 122,995 100,977 88,976 94,243 93,162 114,577 110,451 115,278 109,150 $ 189,798 $ 236,733 $ 188,346 $ 157,470 $ 169,744 $ 154,869 $ 178,695 $ 186,986 $ 175,575 $ 188,511 Subtotal business-type activities Total primary government a The decrease in governmental activities revenue in fiscal years 2008, 2009, 2011, and 2014 is mainly due to decreased developer contributions. The increase in fiscal year 2015 is mainly due to increased developer contributions. TABLE OF CONTENTS Schedule 4 Town of Gilbert, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund 127 All other governmental funds Reserved a Unreserved, reported in: Special revenue funds Debt service funds Capital projects funds b Total Unreserved Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds a 2006 2007 2008 2009 2010 2011c 2012 2013 2014 441 $ 37,671 38,112 $ 16,082 $ 33,431 49,513 $ 16,015 $ 38,375 54,390 $ 17,630 $ 36,245 53,875 $ 21,383 $ 33,168 54,551 $ - $ 22,317 10,729 33,521 66,568 $ - $ 23,213 10,797 44,250 78,260 $ - $ 23,527 10,092 59,555 93,174 $ - $ 25,380 24,470 12,081 17,046 61,764 67,057 99,225 $ 108,573 $ 108,785 $ 69,736 $ 42,863 $ 67,626 $ 45,147 $ $ $ - $ - 28,239 28,546 29,348 25,886 27,635 (4,501) (3,627) (17,762) (36,581) 99,570 86,482 20,111 10,784 (7,233) 125,456 114,117 4 2 108,051 100,572 28,261 26,159 (20,781) (23,199) $ 128,896 $ 80,520 $ 35,630 $ 193,082 $ 159,264 $ 115,535 $ 103,534 $ - $ 2015 - $ - 1 83 2 89,654 92,337 96,837 36,258 18,764 22,462 (23,609) (25,466) (23,981) $ 102,304 $ 85,718 $ 95,320 In fiscal year 2006, the increase in reserved fund balance was due to unspent bond proceeds that were encumbered for the South Area Service Center municipal facilities capital project and the Elliot Road District Park capital project. b The increase in fund balance in fiscal year 2009 was due to Public Facilities Municipal Property Corporation bonds that were issued during the year. c GASB Statement No. 54 was implemented in fiscal year 2011. This statement established new fund balance classifications for governmental funds. TABLE OF CONTENTS Schedule 5 Town of Gilbert, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) 2006 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 128 Expenditures Current: General government: Management and policy Support services Finance and management services Court Development services Public works Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Bond issuance costs Fiscal and other charges Capital outlay Total expenditures $ 49,198 15,672 2,011 8,539 46,259 1,426 9,536 2,326 22,959 342 2,833 6,934 799 168,834 2007 $ 57,698 18,529 2,361 6,818 65,759 355 9,391 6,082 23,015 502 4,094 8,386 670 203,660 2008 $ 56,980 28,303 2,595 4,734 73,255 2,121 9,594 1,620 15,566 177 4,564 4,345 800 204,654 2009 $ 48,736 33,131 2,544 2,459 67,053 422 8,596 1,055 8,395 114 4,223 1,978 819 179,525 2010 $ 46,873 33,073 2,448 2,614 72,535 437 8,795 1,234 11,608 124 4,445 1,286 754 186,226 2011 $ 49,315 28,732 2,401 2,365 55,362 559 7,288 2,313 8,736 176 4,351 2,106 355 164,059 2012 $ 2013 54,503 24,045 2,463 3,995 61,468 879 8,164 1,300 17,957 186 4,442 1,889 4,947 186,238 $ 61,890 21,548 2,374 5,434 72,904 1,299 9,573 2,252 17,836 119 4,710 706 933 201,578 2014 $ 66,772 20,681 2,700 4,748 68,046 2,090 10,027 1,977 13,435 155 4,469 1,494 1,255 197,849 2015 $ 71,794 21,953 2,737 4,791 76,284 1,184 10,440 382 18,836 192 4,476 1,210 953 215,232 3,230 8,722 3,714 10,967 1,412 3,822 9,771 4,682 12,693 1,255 3,919 10,814 5,222 14,024 1,329 3,642 10,386 5,203 11,321 1,798 3,458 10,257 5,261 9,204 1,225 3,845 9,239 1,416 4,403 7,160 - 3,676 9,160 1,722 4,617 7,514 - 12,584 4,235 4,753 5,999 - 15,336 4,413 5,089 6,078 - 20,485 1,943 3,493 6,069 - 27,835 13,983 7,505 8,514 1,622 - 31,534 17,224 9,424 12,725 1,439 - 36,126 20,521 10,631 12,568 1,563 - 37,851 21,171 10,378 13,151 1,682 - 37,669 20,115 10,097 12,684 1,170 - 35,007 20,200 9,736 12,591 1,010 2,194 36,384 21,552 10,815 12,688 1,269 2,910 38,817 22,543 10,637 13,895 461 3,114 41,947 24,993 11,969 15,614 841 4,104 43,084 25,631 12,478 21,836 774 4,423 15,100 7,906 425 49 83,798 194,782 20,305 9,578 45 106,748 241,244 36,350 8,961 98 29 87,528 249,683 29,805 16,501 670 12 134,013 297,584 31,855 18,553 9 58,785 220,342 29,215 18,451 20 41,935 196,422 23,055 15,992 402 9 34,500 186,265 24,705 15,411 13 30,849 188,016 25,630 14,252 13 38,804 209,083 23,750 13,108 209 307 58,849 236,439 Excess (deficiency) of revenues over (under) expenditures (25,948) (37,584) (45,029) (118,059) (34,116) (32,363) (27) 13,562 (11,234) (21,207) Other financing sources (uses) Transfers in Transfers out Sale of capital assets Revenue obligations issued Premium on revenue obligations Bonds issued Premium on bonds Payment to refunded bond escrow agent Total other financing sources and uses 45,392 (45,338) 103,230 3,078 (14,872) 91,490 77,502 (76,892) 610 45,661 (44,404) 3,760 5,017 90,680 (89,519) 273,490 344 274,995 26,608 (25,634) 974 25,272 (24,586) 686 25,195 (25,885) 37,925 4,111 (41,627) (281) 25,774 (25,653) 121 45,891 (45,781) 590 700 23,401 (23,216) 36,980 2,706 28,080 4,417 (32,211) 40,157 Net change in fund balances $ Debt service as a percentage of noncapital expenditures 65,542 20.7% $ (36,974) 22.2% $ (40,012) 27.9% $ 156,936 28.3% $ (33,142) 31.2% $ (31,677) 30.9% $ (308) 25.7% $ 13,683 25.5% $ (10,534) 23.4% $ 18,950 20.8% TABLE OF CONTENTS Schedule 6 Town of Gilbert, Arizona Sales Tax Collections by Category Last Ten Fiscal Years 2006 Construction Manufacturing Communications & Utilities Wholesale Retail Restaurant & Bar Real Estate, Rental & Leasing Accommodation a Services 129 Other a Transportation & Warehousing b Finance & Insurance b Public Administration b Arts & Entertainment b Total 2007 2008 $ 15,457,650 734,423 4,028,971 446,597 19,598,312 2,501,237 4,299,410 $ 19,373,957 684,148 4,548,528 483,943 21,385,004 2,972,678 5,276,563 $ 15,416,006 789,804 5,269,633 577,086 23,550,094 3,228,910 5,538,416 945,003 711,618 9,906 63,851 9,819 391,459 973,552 1,491,268 17,264 73,410 11,416 405,765 1,729,464 319,810 13,347 93,008 8,272 446,057 $ 49,198,256 $ 57,697,496 $ 56,979,907 Gilbert's local sales tax rate 1.5% 1.5% 1.5% 2009 $ 7,804,840 650,179 5,303,338 527,933 23,305,081 3,509,671 5,751,120 2010 2011 2012 2013 $ 4,389,279 706,514 5,562,364 854,466 25,540,515 3,820,368 5,874,288 252,974 1,069,661 652,043 21,161 89,990 481,592 $ 5,718,727 727,755 5,774,403 965,523 28,390,526 4,072,187 6,078,364 299,270 1,211,864 520,302 25,830 112,496 4,586 600,794 $ 1,039,678 243,510 12,575 100,490 4,748 483,123 $ 5,193,872 635,188 5,724,639 610,065 23,775,975 3,566,427 5,249,645 1,002,691 481,122 16,464 100,293 9,503 506,855 $ 48,736,286 $ 46,872,739 $ 49,315,215 $ 54,502,627 $ 61,805,552 1.5% 1.5% 1.5% 1.5% 7,867,067 763,152 5,931,935 1,100,749 30,784,509 4,402,299 7,944,973 377,228 1,369,608 487,279 25,667 154,772 2,271 594,043 1.5% 2014 $ 8,837,079 939,861 6,120,225 1,207,006 33,078,748 4,867,638 7,952,365 487,680 1,676,438 505,146 22,721 398,169 4,311 674,274 $ 66,771,661 1.5% 2015 $ 7,663,801 882,509 6,342,578 1,320,977 37,463,617 5,526,275 8,286,878 533,870 2,018,647 629,740 30,529 438,257 3,020 652,973 $ 71,793,671 1.5% Source: Arizona Department of Revenue a Prior to fiscal year 2011, Accommodations was included in the "Other" category due to confidentiality requirements. Beginning in fiscal year 2011, it was broken out into its own category. b Beginning in January 2004, the Arizona Department of Revenue began using a new reporting software system for classifying business establishments called the North American Industry Classification System (NAICS). Under the new system, the category may be defined a little differently. In addition, more categories were established. When NAICS reporting began, many businesses checked the "Other" category due to uncertainty. This problem is being remedied and therefore, the "Other" category will decrease as more businesses will be classified under their property category. In addition, due to confidentiality requirements, categories that contain ten or less taxpayers will be included in the "Other" category. Note: State and local laws prohibit the disclosure of individual taxpayer information. TABLE OF CONTENTS Schedule 7 Town of Gilbert, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 a 2014 2015 Town Direct Rates: Hotel/Transient Lodging 4.50% All Others 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% County Rates: Hotel/Transient Lodging 1.77% All Others 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% State Rates: Hotel/Transient Lodging 5.50% All Others 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 6.50% 6.60% 6.50% 6.60% 6.50% 6.60% 6.50% 6.60% 5.50% 5.60% 5.50% 5.60% 2006 130 Source: Gilbert Finance & Management Services Department Note: Gilbert sales tax rate may be changed with the approval of Council. The Temporary State sales tax increase passed by voters in 2010 expired on May 31, 2013. The State sales tax for hotel/transient lodging decreased to 5.50% and for all others to 5.60% on June 1, 2013. a TABLE OF CONTENTS Schedule 8 Town of Gilbert, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years General Obligation Bonds Fiscal Year 2006 2007 2008 2009 2010 2011 131 2012 2013 2014 2015 $ Governmental Activities Municipal Street and Property Special Highway User Corporation Assessment Revenue Revenue Bonds Bonds Bonds 90,735,405 $ 79,470,332 57,390,066 226,030,524 204,147,283 178,722,625 4,519,554 $ 4,394,150 2,999,660 11,633,524 11,548,249 11,457,958 34,593,516 $ 107,370,000 $ 32,782,853 105,845,000 31,753,147 100,635,000 29,796,281 175,810,000 27,712,795 169,750,000 25,502,688 161,045,000 159,547,197 147,640,933 135,775,830 123,420,395 11,056,456 10,469,338 9,445,797 8,306,402 20,836,060 18,130,241 16,864,197 13,754,807 152,243,537 142,828,198 133,835,907 126,607,711 Business-type Activities General Obligation Bonds Revenue Obligations 39,685,688 Notes: See Schedule 13 for personal income and population data. Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. Includes unamortized bond discounts/premiums. $ 13,103,265 $ 11,745,680 10,353,095 8,900,510 7,127,925 5,540,340 3,877,755 2,115,170 247,585 - Special Assessment Bonds - Water and Wastewater Revenue Bonds Municipal Property Corporation Revenue Bonds $ 22,858,573 $ 60,491,428 $ 21,644,644 194,555,369 20,414,733 182,839,461 19,155,224 167,031,835 17,861,117 160,388,430 16,527,813 143,200,304 15,164,911 13,757,813 - 118,853,753 111,081,450 104,083,879 98,190,924 Total Primary Government 333,671,741 450,438,029 406,385,162 638,357,898 598,535,799 541,996,729 481,579,670 446,023,143 400,253,194 409,965,927 Percentage of Personal Income 6.39 % $ 7.87 6.65 10.25 9.40 8.56 7.72 6.31 6.09 5.51 Per Capita 1,874 2,356 2,029 3,117 2,871 2,546 2,193 1,960 1,718 1,687 TABLE OF CONTENTS Schedule 9 Town of Gilbert, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding b Fiscal Year 2006 2007 2008 132 2009 2010 2011 2012 2013 2014 2015 a b Less Amount Available in Debt Service Fund $ 103,838,670 91,216,012 67,743,161 234,931,034 211,275,208 184,262,965 163,424,952 149,756,103 136,023,415 123,420,395 $ 10,224,408 11,087,607 7,279,915 6,655,504 6,720,588 6,366,097 9,335,818 9,599,968 8,942,949 10,165,593 Net General Bonded Debt Outstanding $ 93,614,262 80,128,405 60,463,246 228,275,530 204,554,620 177,896,868 154,089,134 140,156,135 127,080,466 113,254,802 Secondary Assessed Property Value a $ Percentage of Secondary Assessed Property Value 1,466,841,566 2,370,134,999 2,768,391,194 6.38 % 3.38 2.18 2,672,949,852 2,297,228,317 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 1,845,325,449 8.54 8.90 9.56 9.20 8.79 6.95 6.14 Maricopa County Assessor's Office Includes unamortized bond discounts/premiums. Notes: See Schedule 13 for population data. General Obligations bonds principal and interest payments are paid for with secondary property taxes. Per Capita $ 525.88 419.07 301.84 1114.51 981.30 835.71 701.63 615.81 545.34 466.16 TABLE OF CONTENTS Schedule 10 Town of Gilbert, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2015 Debt Outstanding Governmental Unit Debt repaid with property taxes Maricopa County b Maricopa County Community College District c Maricopa County Hospital District No. 1 Gilbert Unified School District No. 41 Higley Elementary School District No. 60 Chandler Unified School District No. 80 Mesa Unified School District No. 4 East Valley Institute of Technology District No. 401 d $ None 654,190,000 None 116,780,000 103,590,000 196,270,000 637,462,699 None Estimated Share of Direct and Overlapping Debt Estimated Percentage Applicable a 5.33% 5.33% 5.33% 70.11% 88.57% 11.78% 0.30% 12.12% $ 133 Subtotal, overlapping debt Town of Gilbert direct debt None 34,868,327 None 81,874,458 91,749,663 23,120,606 1,912,388 None 233,525,442 e Total direct and overlapping debt 311,775,003 100.00% 311,775,003 $ 545,300,445 Source: The various jurisdictions a Proportion applicable to Town of Gilbert, Arizona is computed on the ratio of secondary assessed valuation for fiscal year 2014/15. b Excludes various other non-property tax supported debt such as Public Finance Corporation lease revenue bonds, Stadium District revenue bonds, Stadium District loans, Housing Authority loans and capital leases. c Excludes non-property tax supported debt such as revenue bonds. d Based on the East Valley Institute of Technology's secondary assessed valuation and does not include amount of secondary assessed valuation in Pinal County. e Includes: General Obligation bonds, Special Assessments bonds, Revenue obligations, Revenue bonds and unamortized bond premiums. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of Gilbert. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Gilbert. This process recognizes that, when considering Gilbert's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. TABLE OF CONTENTS Schedule 11 Town of Gilbert, Arizona Legal Debt Margin Information Last Ten Fiscal Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20% Limitation Debt limit equal to 20% of assessed valuation $ Total net debt applicable to 20% limit 293,368,313 $ 474,027,000 $ 553,678,000 $ 31,215,000 78,050,000 51,705,000 262,153,313 $ 395,977,000 $ 501,973,000 $ 534,590,000 $ 459,446,000 $ 372,239,000 $ 335,072,084 $ 318,961,347 $ 365,894,367 $ 369,065,090 217,730,000 195,320,000 175,915,000 163,335,000 149,675,000 135,310,000 122,715,000 316,860,000 $ 264,126,000 $ 196,324,000 $ 171,737,084 $ 169,286,347 $ 230,584,367 $ 246,350,090 Legal 20% debt margin (available borrowing capacity) $ Total net debt applicable to the 20% limit as a percentage of 20% debt limit 10.64% 16.47% 9.34% 40.73% 42.51% 47.26% 48.75% 46.93% 36.98% 33.25% 6% Limitation Debt limit equal to 6% of assessed valuation $ Total net debt applicable to 6% limit 88,010,494 $ 64,870,000 142,208,100 $ 3,550,000 166,103,000 $ 855,000 160,377,000 $ - 137,834,000 $ - 111,672,000 $ 100,521,625 $ - 95,688,404 $ - - 109,768,310 $ - 110,719,527 - Legal 6% debt margin (available borrowing 134 capacity) $ 23,140,494 $ 138,658,100 $ 165,248,000 $ 160,377,000 $ 137,834,000 $ 111,672,000 $ 100,521,625 $ 95,688,404 $ 109,768,310 $ 110,719,527 Total net debt applicable to the 6% limit as a percentage of 6% debt limit 73.71% 2.50% 0.51% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Legal Debt Margin Calculation for Fiscal Year 2015 Net secondary assessed valuation as of June 30, 2015 $ 1,845,325,449 20% Limitation Debt limit equal to 20% of assessed valuation 369,065,090 Debt applicable to limit: General obligation bonds 122,715,000 Legal 20% debt margin (available borrowing capacity) $ 6% Limitation Debt limit equal to 6% of assessed valuation 110,719,527 Debt applicable to limit: General obligation bonds Legal 6% debt margin (available borrowing capacity) Note: The Constitution of the State of Arizona establishes two levels of bonded indebtedness limits based upon the type of improvement constructed with the debt. The twenty percent bond type is restricted to water, wastewater, electric, parks and open space improvements, streets, public safety, and fire and emergency facilities. The six percent bond type is all other general purpose improvements. In November 2006, voters amended the constitution to move streets, public safety and fire and emergency facilities from the six percent bond type to the twenty percent bond type. 246,350,090 $ 110,719,527 TABLE OF CONTENTS Schedule 12 Town of Gilbert, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years Special Assessment Bonds Highway User Revenue Bonds Special Fiscal Assessment Year Collections 2006 $ 1,425,857 $ Public Facilities Municipal Property Corp. Revenue Bonds Highway User Tax Debt Service Principal Interest Excise Taxes Coverage 765,000 $ 262,458 1.39 Revenue $ 8,782,895 $ & State-Shared Debt Service Principal Interest Coverage 1,750,000 $ 1,522,950 2.68 Revenue $ 79,497,344 $ Debt Service Principal Interest Coverage 1,525,000 $ 3,155,681 16.98 2007 355,124 125,000 231,010 1.00 12,355,280 1,845,000 1,437,450 3.76 102,525,938 5,210,000 4,753,688 10.29 2008 2,121,038 1,390,000 191,620 1.34 12,333,576 1,925,000 1,347,313 3.77 107,273,375 5,410,000 4,567,400 10.75 2009 421,894 75,000 153,530 1.85 10,651,366 2,050,000 1,251,063 3.23 97,901,565 6,060,000 5,404,460 8.54 2010 437,493 85,000 149,370 1.87 10,090,894 2,175,000 1,148,563 3.04 91,609,318 8,705,000 8,014,525 5.48 2011 559,284 90,000 587,245 0.83 10,356,131 2,275,000 1,039,813 3.12 89,202,148 9,030,000 7,705,188 5.33 2012 878,981 400,000 574,655 0.90 10,437,844 2,400,000 570,375 3.51 97,342,250 9,335,000 7,149,316 5.91 2013 1,298,984 585,000 553,258 1.14 11,414,425 2,525,000 807,400 3.43 109,637,647 9,695,000 6,873,353 6.62 135 2014 2,089,887 1,020,000 507,965 1.37 11,747,325 2,030,000 693,450 4.31 117,627,904 10,080,000 6,458,288 7.11 2015 1,184,368 1,135,000 470,225 0.74 12,900,529 2,750,000 632,550 3.81 125,743,087 7,515,000 6,030,998 9.28 Water and Wastewater Revenue Bondsc Less: Net Fiscal Operating Operating Available Year Revenues a Expenses a Revenue 2006 $ Water Resources Municipal Property Corp. Revenue Bonds Debt Service Principal Interest Coverage $ Net Water Available System System Revenue b Dev't Fee Dev't Fee 7,971,237 $ - Wastewater 38,518,047 $ 28,439,547 $ 10,078,500 $ 1,180,000 $ 927,263 4.78 2007 44,698,632 28,173,011 16,525,621 1,230,000 897,913 7.77 14,397,708 2008 51,061,203 32,100,716 18,960,487 1,250,000 866,563 8.96 16,843,924 11,697,125 10,923,733 2009 53,633,557 32,618,247 21,015,310 1,280,000 835,313 9.93 18,899,997 6,329,797 6,190,815 - $ 20,491,288 $ 17,033,202 Debt Service Principal 2,130,000 3,200,000 $ Interest Coverage 4,332,600 6.57 2,629,122 6.60 9,130,452 4.32 7,808,650 2.85 2010 57,096,936 32,034,177 25,062,759 1,315,000 803,313 11.83 22,944,446 8,491,638 8,715,622 3,300,000 7,910,188 3.58 2011 59,780,559 33,231,244 26,549,315 1,355,000 763,863 12.53 24,430,452 6,485,383 6,878,502 3,400,000 7,198,049 3.57 2012 61,087,190 34,505,518 26,581,672 1,385,000 723,213 12.61 24,473,459 13,590,998 15,154,154 3,550,000 6,096,337 5.52 2013 60,627,063 36,124,117 24,502,946 1,430,000 681,663 11.60 22,391,283 12,466,409 - 3,700,000 5,542,403 3.77 2014 62,873,206 37,514,942 25,358,264 1,500,000 610,163 12.02 23,248,101 10,567,046 - 3,875,000 5,198,059 3.73 2015 63,338,422 40,316,645 23,021,777 N/A 23,021,777 10,461,708 - 4,075,000 4,894,864 3.73 - - a Combined operating revenues and expenses for the Water and Wastewater Funds, as applicable. b Combined operating revenues and expenses for the Water and Wastewater Funds less debt service payments for the Water and Wastewater Revenue Bonds. c These bonds were paid off in fiscal year 2014. Note: Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. TABLE OF CONTENTS Schedule 13 Town of Gilbert, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Personal Income b Fiscal Year 136 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Population a 178,015 191,206 200,314 204,821 208,453 212,869 219,617 227,598 233,028 242,955 (in thousands) (estimate) 5,222,000 5,721,000 6,113,000 6,230,000 6,370,000 6,329,000 6,240,000 7,064,000 6,568,000 7,444,000 Per Capita Income c (estimate) 29,334 29,920 30,518 30,416 30,559 29,731 28,413 31,035 28,184 30,639 Median Age c 30.1 31.3 31.3 30.4 30.7 32.7 31.5 33.1 37.5 32.7 School Enrollment d Unemployment Rate e 37,662 37,979 38,662 39,142 39,089 38,660 38,696 38,573 38,573 37,240 2.2% 2.0% 2.4% 4.6% 5.1% 5.1% 5.4% 5.7% 5.2% 4.3% Sources: a Maricopa Association of Governments b Estimated based on population and per capita income c American Community Survey d Arizona Department of Education e laborstats.az.gov (formerly azstats.gov) The 2006 through 2010 per capita income figures are estimates. The 2006 through 2010 median age, school enrollment, and unemployment rates were obtained from Gilbert's Development Services Department. The 2011-2014 school enrollment was obtained from the Gilbert Public Schools website. TABLE OF CONTENTS Schedule 14 Town of Gilbert, Arizona Principal Employers Current Fiscal Year and Nine Years Ago Employer Fiscal Year 2015 Percentage of Total Town Employees Rank Employment 137 Gilbert Unified School District Banner Health Wal-Mart Stores, Inc. Go Daddy Software, Inc. Town of Gilbert Dignity Health B H Drywall Fry's Food and Drug Higley Unified School District Hunter Contracting Target General Dynamics C4 Systems Costco Wholesale Earnhardt Auto Center 3,657 2,811 1,398 1,346 1,126 1,093 997 988 848 650 --------- Total 14,914 Source: Maricopa Association of Governments 1 2 3 4 5 6 7 8 9 10 4.23% 3.25% 1.62% 1.56% 1.30% 1.26% 1.15% 1.14% 0.98% 0.75% --------17.24% Fiscal Year 2006 Percentage of Total Town Employees Rank Employment 5,000 --470 700 1,107 --1,100 ----500 660 607 550 480 11,174 1 10 4 2 3 8 5 6 7 9 7.24% --0.68% 1.01% 1.60% --1.60% ----0.72% 0.96% 0.88% 0.80% 0.70% 16.19% TABLE OF CONTENTS Schedule 15 Town of Gilbert, Arizona Full-time Equivalent Employees by Function Last Ten Fiscal Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Function Governmental Funds General government: Management and policy 100.5 30.8 32.0 32.2 29.2 21.2 22.2 88.5 95.8 120.0 N/A 91.00 92.75 91.3 88.3 62.0 62.0 N/A N/A N/A Support services Finance and management services N/A N/A N/A N/A N/A 18.25 19.3 29.0 19.0 19.0 Court 35.1 51.3 53.3 52.3 52.9 52.9 51.9 49.9 51.9 32.9 Development services 98.4 115.6 99.1 70.5 70.5 72.5 72.5 69.6 68.8 73.3 Public works 28.0 17.3 18.0 17.5 17.5 0.0 - - - - Police 309.0 330.0 352.5 347.0 346.0 346.0 346.0 346.0 349.0 354.0 Fire 201.0 Public safety: 138 139.0 173.8 193.0 199.5 197.0 197.0 197.0 197.0 201.0 Highways and streets 47.5 54.5 55.3 55.3 49.3 49.3 49.3 51.0 58.0 58.0 Parks and recreation 113.2 114.4 120.0 117.1 106.8 101.7 102.0 106.8 121.8 118.7 116.5 Enterprise Funds Water 63.5 69.0 72.0 79.0 83.0 118.1 120.0 118.2 118.0 Wastewater 30.0 33.0 35.0 40.7 40.7 40.7 41.7 41.7 44.7 45.4 Environmental services 63.1 71.3 77.1 79.0 79.0 79.0 78.5 79.0 83.5 84.0 0.5 0.5 0.7 0.7 0.7 0.0 - - - - 21.0 24.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 1,048.8 1,176.5 1,226.8 1,208.1 1,186.9 1,184.8 1,188.4 1,202.7 1,237.5 1,248.8 Irrigation Internal Service Funds Equipment maintenance Total Source: Gilbert Office of Management & Budget Note: During fiscal year 2007, the organization structure was changed to reflect a new support services function to include areas previously reported under management and policy and public works. During fiscal year 2011, financial services was moved from support services to its own function. During fiscal year 2013, the support services function was eliminated and financial services was renamed finance and management services. Areas previously reported under the support services function were moved to management and policy and finance and management services. Economic development and budget were moved from development services and finance and management services, respectively, to management and policy. Community services was renamed parks and recreation and CDBG/HOME was moved from development services to parks and recreation. Solid waste was renamed environmental services. During fiscal year 2015, CDBG/HOME was moved from parks and recreation to management and policy. Facilities was moved to parks and recreation. Legal was moved from legal and court to management and policy. Legal and court was renamed court. TABLE OF CONTENTS Schedule 16 Town of Gilbert, Arizona Operating Indicators by Function Last Ten Fiscal Years 2006 Function General government: Management and policy % of population satisfied with value received from tax dollar Number of recruitments Employee turnover Legal and court Case filings % of cases charged after review Development services Building permits issued Value of permits issued (in millions) Public Safety: Police Number of arrests Crimes per 1,000 population Fire Number of emergency calls Response time average from time of alert at station to on-scene 2008 89% 87 8.1% 86% 90 4.9% 90% 86 6.6% 29,175 61% 38,315 66% 37,821 61% 36,890 61% 32,299 64% 25,888 64% 139 8,845 28.3 13,324 26.6 11,718 5 min 17 sec 89 Transportation Average daily ridership Water Daily average water production (mg) Average # of meters read per month Number of utility locates Wastewater Daily average wastewater influent (mg) Annual effluent produced/reused (mg) Environmental services Solid waste tonnage Recycle tonnage $ 2011 87% 107 9.2% 3,663 $ 539.6 Facility reservations Participants in recreation programs 2010 90% 246 9.5% 5,322 $ 825.5 Parks and recreation Facility reservation requests 2009 88% 171 13.1% 6,750 $ 983.3 Highways and streets Average pavement condition index Irrigation Cost per house irrigated 2007 2,054 266.3 2,506 $ 324.3 2,219 $ 238.7 10,528 25.4 12,487 23.3 11,411 20.4 12,260 5 min 2 sec 13,259 5 min 8 sec 12,972 4 min 11 sec 90 91 91 $ 2012 2013 c 2014 2015 79 6.8% 77% 110 8.0% 75% 155 7.5% N/A 148 8.3% 26,271 72% 31,794 72% 28,896 72% 29,499 71% N/A 3,474 474.9 3,418 $ 534.4 3,254 $ 472.5 3,364 $ 496.0 8,330 19.3 9,003 18.3 8,734 16.5 8,400 15.5 8,900 16.2 13,566 3 min 43 sec 13,946 3 min 37 sec 14,133 3 min 49 sec 15,509 3 min 47 sec 16,185 3 min 50 sec 17,777 3 min 57 sec 91 91 91 80 75 75 $ N/A 15,505 N/A 57,122 17,434 N/A 45,516 18,691 N/A 54,815 19,222 N/A 48,892 15,681 N/A 50,038 16,637 N/A 47,493 16,880 N/A 48,725 16,277 N/A 52,714 16,440 N/A 52,616 523 388 421 1,039 835 845 560 635 685 687 40 60,190 35,265 44 64,320 26,616 42 68,447 16,451 44 70,630 12,000 42 71,814 12,373 42 71,910 10,576 43 73,469 15,190 43 75,718 23,277 44 75,908 20,235 43 73,199 20,100 10.71 2,599 11.71 3,417 12.32 4,174 12.37 4,160 12.91 4,420 12.67 4,840 12.18 4,651 12.90 4,545 12.89 4,550 13.21 4,822 101,168 17,084 112,880 18,388 113,777 19,055 110,144 18,810 110,403 19,191 111,943 19,242 109,472 18,653 110,905 19,036 113,965 19,607 112,778 19,418 309 $ 309 $ 384 $ 1,532 a $ 542 N/A b N/A b N/A b N/A b c d b N/A Increase compared to prior years due to a one-time expense in 2009 for mapping and as-built condition reports on the Heritage Flood District Irrigation System in anticipation of the Town transferring this operation to another entity. Service is no longer available. Survey completed every other year. Indicator no longer being tracked. Beginning in 2015, tracking actual facility reservations. d 11,747 62,815 Source: The various departments a c b TABLE OF CONTENTS Schedule 17 Town of Gilbert, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Function Public safety: Police Number of police cars Fire Fire stations 142 150 151 162 156 166 164 164 180 185 9 9 9 9 9 9 10 10 10 10 140 Highways and streets Street centerline miles (estimate) a Traffic control signals 986 111 1,013 137 1,017 159 872 169 903 168 923 173 979 175 989 177 905 180 1,032 185 Parks and recreation Total acres of park land, trails, open space, municipal areas and support facilities, operated and maintained 676 676 676 676 690 690 652 653 605 605 Water Miles of water main 825 900 1,067 1,137 1,175 1,189 1,216 1,219 1,261 1,304 Wastewater Miles of wastewater main 487 770 809 843 860 868 970 976 1,006 1,019 51 52 52 54 57 61 61 61 66 67 Environmental services Garbage trucks Source: The various departments Note: No capital asset statistics are available for the general government or transportation functions. a The street centerline miles were previously estimated using different methods, such as end of warranty and beginning of Town ownership. Beginning in FY15, the estimate is based on acceptance letter date. TABLE OF CONTENTS Schedule 18 Town of Gilbert, Arizona Property Value, Construction and Bank Deposits Last Ten Fiscal Years Fiscal Year 141 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Residential Construction a Number of Permits Value 3,638 2,896 1,536 1,038 1,427 1,130 2,331 2,015 1,613 1,668 $ 589,698,508 474,991,497 268,197,375 161,128,906 213,032,031 182,201,825 408,322,951 385,182,885 315,632,904 350,707,421 Sources: Development Services Department b Maricopa County Assessor's Office c Arizona Banker's Association d Federal Deposit Insurance Corporation a Commercial Construction a Number of Permits Value 500 430 349 151 147 180 182 224 284 268 $ 304,955,513 252,353,478 180,776,005 60,768,344 67,488,230 25,831,880 31,550,416 102,447,825 99,959,286 81,934,987 Other Construction a Number of Permits Value 2,612 1,997 1,778 865 932 909 961 1,179 1,357 1,428 $ 88,679,208 98,134,107 90,605,562 44,414,870 43,754,466 30,710,863 35,017,191 46,773,456 56,890,360 63,344,257 Secondary Assessed Property Value b $ 1,466,841,566 2,370,134,999 2,768,391,194 2,672,949,852 2,297,228,317 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 1,845,325,449 Maricopa County Bank Deposits $ 54,925,528,000 55,663,285,000 55,054,948,000 55,358,822,000 61,925,568,000 60,408,631,000 61,673,751,000 65,485,982,000 70,253,713,000 76,889,448,000 c c d d d d d d d d TABLE OF CONTENTS Schedule 19 Town of Gilbert, Arizona System Development Fees Fiscal Year 2015 Beginning Balance Traffic signal system development fee $ System Development Fees Collected Other Revenue Ending Balance Expenditures 6,140,922 1,644,045 45,415 (3,029,461) 3,914,269 - (2,681,137) (1,796,329) a (14,668,744) 2,063,007 - (2,099,271) (14,705,008) a General government system development fee (7,680,223) 2,595,244 - (2,381,569) (7,466,548) a Parks and recreation system development fee 19,246,226 8,619,465 142,453 (5,339,142) 22,669,002 Water system development fee 19,518,818 10,461,708 121,322 (11,317,124) 18,784,724 Water resources system development fee 10,205,754 2,656,650 53,615 (4,248,228) 8,667,791 1,084,620 8,100,833 54,393 (16,657) 9,223,189 30,817,912 40,055,221 417,198 (29,038,403) Police system development fee Fire system development fee 142 Wastewater system development fee Totals $ (955,275) $ $ 6,875,107 42,251,928 Equivalent Residential Unit Water system development fee 4,927 Wastewater system development fee - Greenfield 4,015 Wastewater system development fee - Neely 3,176 Source: Gilbert Finance & Management Services Department a The negative ending balances for the police, fire, and general government system development fees are funded by the general fund. The general fund had a cash balance of $86,539,451 at June 30, 2015. TABLE OF CONTENTS Schedule 20 Town of Gilbert, Arizona Property Tax Levies and Collections Last Ten Fiscal Years 143 Fiscal Year Adopted Tax Levy 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $ 14,395,693 $ 16,913,578 27,315,101 31,332,659 30,389,882 26,198,053 21,380,254 19,253,745 18,327,289 19,487,085 County Resolutions (79,702) $ (199,706) (402,220) (134,438) (153,319) (107,618) (96,162) (99,396) (57,876) (72,483) Source: Maricopa County Treasurer's Office Initial Year Collections Net Current Tax Levy Collections 14,315,991 $ 13,928,035 16,713,872 16,226,531 26,912,881 25,797,060 31,198,221 29,744,757 30,236,563 28,984,405 26,090,435 25,253,466 21,284,092 20,772,494 19,154,349 18,962,640 18,269,413 18,056,441 19,414,602 19,230,809 Percent Of Levy 97.29% $ 97.08% 95.85% 95.34% 95.86% 96.79% 97.60% 99.00% 98.83% 99.05% County Resolutions Cumulative Collections Net Delinquent Total Tax Levy Collections Collections 280,050 $ (185,897) $ 14,209,796 $ 391,241 (293,895) 16,619,683 1,018,331 (497,142) 26,817,959 1,253,523 (299,819) 31,032,840 992,332 (388,745) 30,001,137 656,433 (275,214) 25,922,839 388,685 (209,082) 21,171,172 143,919 (132,710) 19,121,035 125,089 (68,379) 18,258,910 (72,483) 19,414,602 14,208,085 16,617,772 26,815,391 30,998,280 29,976,737 25,909,899 21,161,179 19,106,559 18,181,530 19,230,809 Percent of Levy 99.99% 99.99% 99.99% 99.89% 99.92% 99.95% 99.95% 99.92% 99.58% 99.05% TABLE OF CONTENTS Schedule 21 Town of Gilbert, Arizona Principal Property Taxpayers Fiscal Year 2015 144 Principal Taxpayer Type of Business Westcor Santan Village LLC Verizon Wireless Southwest Gas Corporation (T&D) American Furniture Warehouse Co. Target Corporation Power & Ray LLC Vestar CTC Phase 1 LLC BRE DDR BR SAN TAN II AZ LLC ATPD LLC Redstone at Santan Village Apartments LLC Earnhardt Arizona Properties LLC Pillar at Santan LLC Lowe's HIW Inc. Azul at Spectrum AZ LLC Branch Brook Gardens Gilbert Center Holdings Inc. Echostar Holding Corporation FRI San Tan LLC CTC Gilbert LLC Qwest Corporation Whitewing 5 LLC Shopping Center Communications Utility Retail Retail Commercial Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Commercial Real Estate Development / Holdings Real Estate Development / Holdings Utility Real Estate Development / Holdings Secondary Assessed Valuation $ 20,482,223 7,241,586 6,391,519 6,284,522 5,934,060 5,297,815 5,175,170 5,108,665 4,815,196 4,567,420 3,969,580 3,937,500 3,798,592 3,750,680 3,696,000 3,627,369 3,484,425 3,355,860 3,337,273 3,295,962 3,227,392 $ 110,778,809 As % of Town's Total Secondary Assessed Valuation 1.11% 0.39% 0.35% 0.34% 0.32% 0.29% 0.28% 0.28% 0.26% 0.25% 0.22% 0.21% 0.21% 0.20% 0.20% 0.20% 0.19% 0.18% 0.18% 0.18% 0.17% 6.01% . Source: Maricopa County. Top taxpayers based on Secondary Net Assessed Value of Real and Secured Personal Property for tax year 2015. Note: Information included for current fiscal year only as this is what is required for continuing disclosure requirements for Gilbert's bond issues. 50 E. Civic Center Drive Gilbert, AZ 85296 (480) 503-6752 | gilbertaz.gov