CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 Jay Tibshraeny, Mayor Kevin Hartke, Vice-Mayor Nora Ellen, Councilmember Rick Heumann, Councilmember Rene‘ Lopez, Councilmember Terry Roe, Councilmember Jack Sellers, Councilmember Executive Staff Marsha Reed, Acting City Manager Nachie Marquez, Assistant City Manager Prepared by Management Services Department Dawn Lang, Management Services Director Penny Malia, Accounting Manager Derrick Beracy, Sr. Financial Reporting Analyst CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ............................................................................................................................................... 1 Organizational Chart .............................................................................................................................................. 7 Certificate of Achievement for Excellence in Financial Reporting................................................................... 8 FINANCIAL SECTION Independent Auditor’s Report .............................................................................................................................. 9 Management’s Discussion and Analysis (MD&A)........................................................................................... 13 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position ....................................................................................................................... 26 Statement of Activities ............................................................................................................................ 28 Fund Financial Statements Balance Sheet – Governmental Funds ................................................................................................... 30 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position .................................................................... 31 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds ........................................................................................................................ 32 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances Government-Wide Statement of Activities .................................... 33 Statement of Net Position - Proprietary Funds .................................................................................... 34 Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds.............................................................................................................................. 36 Statement of Cash Flows - Proprietary Funds ..................................................................................... 38 Statement of Fiduciary Net Position - Fiduciary Funds ..................................................................... 40 Statement of Changes in Fiduciary Net Position - Fiduciary Funds-Trust Funds.......................... 41 Notes to Financial Statements ................................................................................................................... 43 Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balances– Budget and Actual General Fund ........................................................................................................... 88 Schedule of the Proportionate Share of the Net Pension Liability-ASRS ............................................ 89 Schedule of Contributions – All Pension Plans....................................................................................... 90 Schedule of Funding Progress – Last Three Actuarial Valuations ....................................................... 91 Schedule of Changes in the Net Pension Liability and Related Ratios-PSPRS Police ....................... 92 Schedule of Changes in the Net Pension Liability and Related Ratios-PSPRS Fire ........................... 93 Notes to Required Supplementary Information ..................................................................................... 94 Other Financial Statements: Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Streets Capital Projects ............................................................................................................................ 96 General Obligation Bonds Debt Service................................................................................................ 97 i CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS, continued FINANCIAL SECTION, continued Non-Major Governmental Funds: Combining Balance Sheet ..................................................................................................................... 101 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances.................... 104 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual: Highway User Special Revenue ......................................................................................................... 107 Local Transportation Assistance Special Revenue .......................................................................... 108 Grants Special Revenue ....................................................................................................................... 109 Community Development Special Revenue..................................................................................... 110 Police Confiscated Property Special Revenue .................................................................................. 111 Parks and Recreation Special Revenue.............................................................................................. 112 Library Special Revenue ...................................................................................................................... 113 General Government Capital Projects ................................................................................................ 114 Public Buildings Capital Projects ....................................................................................................... 115 Grants Capital Projects ........................................................................................................................ 116 Community Services Capital Projects ............................................................................................... 117 Public Safety Buildings and Improvements Capital Projects......................................................... 118 Vehicle and Capital Equipment Capital Projects ............................................................................. 119 Special Assessments Capital Projects ................................................................................................ 120 Technology Replacement Capital Projects........................................................................................ 121 Municipal Arts Capital Projects ......................................................................................................... 122 Non-Major Proprietary Funds: Combining Statement of Net Position ................................................................................................ 126 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................................................................................................................ 128 Combining Statement of Cash Flows .................................................................................................. 130 Fiduciary Funds: Statement of Changes in Assets and Liabilities - Agency Fund .................................................... 132 Other Supplemental Information: HUD Programs: Combining Statement of Net Position - All HUD Programs ......................................................... 136 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - All HUD Programs ............................................................................... 138 ii CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS, continued STATISTICAL SECTION Financial Trends Schedule 1 Net Position by Component ............................................................................................. 142 Schedule 2a Changes in Net Position .................................................................................................. 144 Schedule 2b Changes in Net Position.................................................................................................. 146 Schedule 2c Changes in Net Position .................................................................................................. 148 Schedule 3 Fund Balances of Governmental Funds .......................................................................... 150 Schedule 4 Governmental Funds Revenues ....................................................................................... 152 Schedule 5 Governmental Funds Expenditures and Debt Service Ratio ....................................... 154 Schedule 6 Other Financial Sources and Uses and Net Changes in Fund Balance, Governmental Funds .......................................................................................................................... 156 Revenue Capacity Schedule 7 Taxable Revenue by Category .......................................................................................... 158 Schedule 8 Direct and Overlapping Sales and Use Tax Rates ......................................................... 160 Schedule 9 Principal Sales and Use Taxpayers .................................................................................. 161 Debt Capacity Schedule 10 Ratios of Outstanding Debt ............................................................................................ 162 Schedule 11 Direct and Overlapping Governmental Activities Debt............................................. 163 Schedule 12 Legal Debt Margin Information ..................................................................................... 164 Schedule 13a Pledged-Revenue Coverage ......................................................................................... 166 Schedule 13b Pledged-Revenue Coverage ......................................................................................... 167 Demographic and Economic Information Schedule 14 Demographic and Economic Statistics .......................................................................... 169 Schedule 15 Principal Employers ........................................................................................................ 170 Operating Information Schedule 16 Employees by Function ................................................................................................... 172 Schedule 17 Operating Indicators by Function/Program ................................................................ 174 Schedule 18 Capital Asset Statistics by Function/Program............................................................. 176 iii December 16, 2015 Honorable Mayor, Members of the City Council, Acting City Manager and Citizens of the City of Chandler: The comprehensive annual financial report of the City of Chandler, Arizona (the City), for the year ended June 30, 2015, is hereby submitted in accordance with City Charter and state statutes. Both the City Charter and state statutes require that the City issue annually a report on its financial position and activity, and that this report be audited by an independent certified public accountant. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City’s management. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner that presents fairly the financial position and results of operations of the various funds and component units of the City. Accounting principles generally accepted in the United States of America (GAAP) require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Chandler’s MD&A can be found immediately following the report of the independent auditors. The City is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act of 1996 and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Information related to this single audit, including a schedule of expenditures of federal awards, the independent auditors’ reports on the internal control structure and compliance with applicable laws and regulations, and a schedule of findings and questioned costs are included in a separately issued report. GOVERNMENTAL STRUCTURE, LOCAL ECONOMIC CONDITION AND OUTLOOK The City, incorporated on February 17, 1920, is located in the southeastern portion of Maricopa County (the County), and encompasses approximately 65 square miles. The City has operated under a council-manager form of government since May 25, 1964, and is governed by the City Council, consisting of a mayor and a six member council. Councilmembers are elected at-large on a staggered basis; the mayor and councilmembers are elected for four-year terms. The City Council is vested with policy and legislative authority, and is responsible for passing ordinances, adopting the annual budget, appointing committees, commissions and board members, and appointing the positions of City Manager, City Attorney, City Clerk and City Magistrate. The City Manager is responsible for carrying out the policies and ordinances of the City Council, as well as overseeing the day-to-day operations of the City. The City is the fourth largest city in Arizona and is one of several major cities comprising the greater Phoenix metropolitan area, which is the economic, political and population center of the state of Arizona. Between 1992 and 2010, the City’s population increased by over 100 percent, from 100,416 to 236,326. The City’s growth for nearly two decades prior to the recession is attributable to the growth in its manufacturing sector, which is led by high-tech industrial companies such as Intel, Orbital ATK, Microchip Technologies and Freescale Semiconductor. These four companies combined employ about 15,975 in the City. The City boasts a strong labor market serving the high technology field’s demand for skilled workers. Resident population has a median age of 35.6 years and a median household income of $67,572. In addition, approximately 74 percent of the population has a college degree or some college education. Over 75 percent of the City’s manufacturing employees are in high technology fields; the national average is 15 percent. Mailing Address Mail Stop 609 PO Box 4008 Chandler, Arizona 85244-4008 Management Services Telephone (480)782-2250 Fax (480) 782-2253 Web www.chandleraz.gov Location Third Floor 175 S. Arizona Avenue Chandler, Arizona 85225 The City’s unemployment averaged 5.1 percent for calendar year 2014 compared with 5.9 percent for Maricopa County and 6.9% for the State of Arizona. The City’s sales tax revenues, which comprise over 50 percent of its general fund, increased by 4.6 percent for 2014-15 from the prior year actuals. The City continues to strengthen its financial position and has benefitted from one-time revenues created by a large industrial expansion and new developments. With only slow and steady operating revenue growth anticipated, managing costs of services and maintaining existing infrastructure continues. Consistently applying sound financial practices and achieving notable economic development successes have helped the City continue its strong financial position while maintaining its AAA General Obligation Bond credit rating from all three ratings agencies. 2014-2015 Accomplishments Under the guidance and leadership of the Mayor and Council, along with the expertise and dedication of City management and staff, a number of accomplishments were achieved this last fiscal year. Listed below are just a few of those accomplishments. • Maintained AAA General Obligation Bond credit ratings with stable outlook from all three rating agencies; • Successfully completed the Home Rule election and conducted the fourth online budget meeting, “Budget Connect” enhancing citizen involvement in the budget process; • Initiated the Chandler News & Events pages which appear monthly in two local newspapers as part of the City’s efforts to provide residents with information about City news, programs, and events. • Maintained Chandler’s regional influence in monitoring state and federal legislation affecting City operations; • Assisted with locates and expansions of more than 1,200 jobs and over $38M in capital expenditures, including companies such as AvAir, Arvato Bertelsmann, Clairvoyant, WinCo, Stone Creek Furniture, Arizona General Hospital, and Crown Castle; • Entered into an agreement with NexMetro to assist in the redevelopment of 66,000 square feet of retail space at East Valley Mall into a multi-family housing complex, which brings additional density to a key transportation corridor; • FedEx’s 300,000 square food distribution facility is underway in the Airpark Area, which will bring 200 new jobs and important shipping efficiency advantages to Chandler companies; • Executed development lease with WingSpan for multi-phase, $50+ million corporate hangar/office development; • American Heart Association awarded Chandler the “Fit Friendly Worksite” Gold Level Award for the third consecutive year for its promotion and creation of a worksite environment where Wellness is encouraged at all levels of the organization; • Successfully implemented the roll out of the new High Deductible Health Plan with a Health Savings Account, and negotiated two contracts with labor and trades (SEIU), and administrative, technical, and clerical (ACE) employee groups; • Chandler Public Library renovated the Downtown Library’s Copper Room, creating exciting new spaces for public meetings and library programs; • Chandler Public Library completed a fiber connection between the Downtown Library and the Sunset Library, resulting in all four libraries now using City fiber to communicate at the highest possible speeds; • Chandler earned the national designation of Playful City USA for the ninth consecutive year; • The Aquatics Division received the 2014 Arizona Parks & Recreation Outstanding Aquatic Program – Adult Stroke Clinic Award and the Recreation Division received the 2015 USTA Outstanding Facility 2 Award for the Tennis Center, which was also the Featured Facility of the Year; the highest tennis facility honor; • Implemented the ACTIVE Net facility reservation and registration system that allowed participants to reserve pavilions and ball fields online for the first time; • Saved 17,614,000 gallons of water through the Water Conservation Residential Audit Program; • Implemented a new Utility Billing & Payment System, creating greater functionality and increasing online/automated usage by 80%; • Implemented the Learning in Firesafe Environments (L.I.F.E) certification program in the Chandler Unified School District which educated more than 6,000 students, evaluated fire drills that had over 41,000 participants, had 100% cooperation of teachers and custodians on the use of self-inspection forms, inspected 51 schools, and certified 125 teachers in CPR; • Firefighters and Community Emergency Response Team (CERT) members provided emergency assistance to the community in the aftermath of Tropical Storm Norbert; and • Chandler Police Department participated in a Commission on Accreditation for Law Enforcement Agencies (CALEA) Assessment and achieved the Gold Standard Accreditation with Excellence. Chandler Police Department was the first agency in the state to obtain this accomplishment. Strategic Goals The City of Chandler’s continued goal is to provide the highest quality services to the community in the most cost-effective manner. The Council’s strategy to achieve these results is through goals to improve Chandler in a coordinated manner and to make fiscally responsible decisions that will ultimately strengthen the City. The City continued with the Council’s strategic goals by focusing on the following organizational priorities. • Downtown Downtown Chandler and the Historic Square have served as the focal point of community life since Chandler’s inception. Emerging today as a location for independent business and retail, the downtown also serves as the City’s cultural center providing the community with a sense of identity and uniqueness. • Economic Development The ability of the City to maintain and enhance the quality of life of its residents depends upon a successful economic development program. High paid quality jobs attract potential residents, and diversifying the employment and tax base provides revenue to support the amenities enjoyed by the community. • Neighborhoods As Chandler has grown rapidly from a community of 30,000 in 1980 to about 247,500 today, neighborhoods have become increasingly important to help define the community’s quality of life and provide a sense of identity and place. The maintenance and long term care of our neighborhoods will become increasingly important as the community continues to age. • Sustainability In order to assure that Chandler’s quality of life is enjoyed by future generations, it is imperative that the City acts as an effective steward of our financial and environmental resources. This effort is even more critical as City resources are becoming increasingly limited, and as best practices throughout the country have provided ample evidence of the many benefits of doing business in a more sustainable fashion. The City Council is committed to the stewardship of the City’s resources through improved business practices and the conservation of our financial and environmental assets. 3 • Transportation An effective multimodal transportation system is critical to the long-term vitality of the Chandler community. The City must maintain a viable transportation network that includes an efficient arterial street and transit system that is connected regionally, as well as a network that is bicycle and pedestrian friendly. FINANCIAL INFORMATION Internal Control Structure Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with GAAP. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of federal, state and county financial assistance, the City is also responsible for ensuring that an adequate internal control structure is in place to ensure and document compliance with applicable laws and regulations related to these programs. This internal control structure is subject to periodic evaluation by management and various other City staff, as needed. Single Audit As a part of the City’s single audit, described earlier, tests were made of the City’s internal control structure and of its compliance with applicable laws and regulations, including those related to federal financial assistance programs. Budgetary Controls The City maintains budgetary controls as an integral part of its overall system of internal controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the general fund, special revenue funds, capital projects funds, enterprise funds, internal service funds, and fiduciary funds are included in the annual appropriated budget. The level of budgetary control (i.e., the level at which expenditures cannot legally exceed the appropriated amount) is the total budget, as adopted (FY 2014-15, $783,474,647). The City additionally exercises management control and oversight of the budget at the department level within each fund and maintains an encumbrance accounting system as another method of maintaining budgetary control. Encumbered amounts do not lapse at fiscal year-end and appropriation equal to the amount of year-end encumbrances are added to the current year budget in each cost center. Expenditures against those encumbrances are charged to the current year appropriation. As demonstrated by the statements and schedules included in the financial section of this report, the City continues to meet its responsibility for sound financial management. OTHER INFORMATION Independent Audit City Charter and state statute require an annual audit by a firm of independent certified public accountants and the firm of Heinfeld, Meech & Co., has been selected by the City to uphold this requirement. In addition to meeting the requirements set forth in City Charter and state statutes, the audit was also designed to meet the requirements of the federal Single Audit Act of 1996 and the related U.S. Office of Management and Budget’s 4 Circular A-133. Auditing standards generally accepted in the United States of America and the standards set forth in the General Accounting Office’s Government Auditing Standards were used by the auditors in conducting the engagement. The Auditor’s report on the basic financial statements is included in the financial section of this report. The auditor’s reports on internal controls and compliance with applicable laws and regulations can be found in a separately issued single audit report. Financial Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Chandler, Arizona for its comprehensive annual financial report for the year ended June 30, 2014, marking the thirty third consecutive year the City has received the GFOA Certificate of Achievement. The Certificate of Achievement is a prestigious national awardrecognizing conformance with the highest standards for preparation of a municipal government financial report. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both GAAP and applicable legal requirements. Additionally, the City of Chandler was also awarded the Distinguished Budget Presentation Award for the year ended June 30, 2015 from the GFOA, marking the twenty-seventh consecutive year of receiving this award. The award reflects the commitment of staff to meeting the highest principles of governmental budgeting. In order to be awarded a Distinguished Budget Presentation Award, the City had to satisfy nationally recognized guidelines for effective budget presentation. The guidelines are designed to assess how well an entity’s budget serves as a policy document, financial plan, operational guide and communications device. The City’s budget also receives Special Recognition for the quality of the Performance Measures published as part of the budget. The Certificate of Achievement and Distinguished Budget Presentation Awards are valid for a period of one year only. We believe our current Certificate of Achievement report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA. Acknowledgments I wish to express my sincere thanks to the entire staff of the Accounting Division; without whose assistance this report could not have been prepared. Special acknowledgment is made for the work of Penny Malia, Accounting Manager; April Wilkerson, Accounting Supervisor; Derrick Beracy, Senior Financial Reporting Analyst; Robert Steele, Senior Accountant; Tracy Schmidt, Senior Accountant; Joanne Chang, Senior Accountant; and Annette Fries, Management Assistant. Special thanks also goes to Julie Buelt, Senior Financial Analyst for assistance in reviewing the final document. Finally, I wish to thank the Mayor and Council, the Acting City Manager, Assistant City Manager, Directors and City Staff for their continued support in promoting sound financial policies and internal controls. Respectfully submitted, Dawn Lang Management Services Director 5 6 City of Chandler, Arizona Organizational Chart Citizens of Chandler Mayor/City Council Advisory Boards/Commissions City Magistrate Law City Clerk City Manager Assistant City Managers Community & Neighborhood Services Administration Park Dev. & Operations Aquatics Neighborhood Resources Code Enforcement Community Development General Government Human Resources Building and Facilities Communications & Public Affairs Recreation Sports & Fitness Nature & Recreation Housing & Redevelopment (Video Production, Print, Mail & Graphics, Mayor & Council Administration) Cultural Affairs (Library, Museum, Center for the Arts, Vision Gallery) Environmental Resources Wastewater Collection Lone Butte Wastewater Treatment Ocotillo Brine Reduction Facility Water/Wastewater Operations Water Systems Maintenance Administration Budget Accounting Utility Services San Tan Vista Water Treatment Plant Meter Services Airport Water Reclamation Wastewater Quality Administration Professional Standards Property & Evidence Forensic Services Transportation & Development Transportation Transit Services Streets Development Services Planning Land Use Planning Site Development Capital Projects Real Estate Civil Plan Review Building Plan Review Building Inspections Customer Service Special Projects Group IT Applications Support IT Infrastructure & Client Support IT Srvc. Delivery & Admin. Purchasing Central Supply Tax and License Environmental Management Police Department Ocotillo Water Reclamation Facility Administration Engineering Mapping/Standards (Tourism, Downtown Redevelopment, Airport, Innovations) Management Services Municipal Utilities Administration Solid Waste Services Water Distribution Water Treatment Plant Water Quality Economic Development Field Operations Criminal Investigations Planning & Research Communications Records Detention Services Community Resources & Training Fire, Health & Medical Administration Emergency Services Operations Prevention & Preparedness Construction Management Contract Management 7 Support Services Fleet Services 8 10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the City Council City of Chandler, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate discretely presented component units and remaining fund information of the City of Chandler, Arizona (the “City”), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate discretely presented component units and remaining fund information of the City of Chandler, Arizona, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 9 TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (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, for the year ended June 30, 2015, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, budgetary comparison information, and net pension liability information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, the Other Financial Statements, Other Supplemental Information: HUD Programs, and the Statistical Section are presented for additional analysis and are not a required part of the financial statements. The Other Financial Statements and the Other Supplemental Information: HUD Programs, as listed in the table of contents, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Other Financial Statements and the Other Supplemental Information: HUD Programs, are fairly stated in all material respects, in relation to the basic financial statements as a whole. The Introductory Section and the Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2015, on our consideration of City of Chandler, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Chandler, Arizona’s internal control over financial reporting and compliance. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 16, 2015 10 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) 11 12 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 As management of the City of Chandler (City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2015. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal beginning on page one and the accompanying notes to the financial statements. FINANCIAL HIGHLIGHTS The financial statements, which follow the Management’s Discussion and Analysis, provide these significant, key financial highlights for fiscal year 2015 as follows: • • • • • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $1.282 billion (net position) which represents a decrease of $164.9 million from the prior year; this is due to the recognition of pension obligations during the year. Of this amount, $225.5 million (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors. However, $62.6 million is invested in a joint venture with the Town of Gilbert, and not available for obligations. At June 30, 2015, the City’s governmental funds reported combined ending fund balances of $277 million, an increase of $3.7 million in comparison with the prior year. Approximately 60.3 percent of the total amount, $167.1 million, is available for spending at the City’s discretion (assigned or unassigned). At June 30, 2015, total fund balance for the General Fund was $185.1 million which represents an increase of $5.4 million from the prior year; this is primarily due to higher than budgeted revenues, particularly Transaction Privilege Tax, Building Permit revenues and other revenues related to development such as Building Plan Review fees, and Encroachment Permit fees. Total revenues exceed the Adopted Budget by more than $14 million. General revenues from governmental activities accounted for $227.6 million, or 73 percent, of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $84.3 million or 27 percent of total governmental activity revenues. The City had $151 million of program revenues and $3.4 million in general revenues and transfers related to business-type activities. At June 30, 2015, the City’s proprietary funds reported combined total net position of $598.4 million, and total unrestricted net position of $217.8 million. A total of $144.8 million of the unrestricted net position is in the Water Fund. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Net position is categorized as capital assets less related debt, restricted by an outside third party, and unrestricted. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). 13 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 In the government-wide financial statements the City’s activities are presented in the following categories: • • • Governmental activities – Most of the City’s basic services are included here, such as general government, public safety, transportation and development, and community services. Sales taxes, state shared revenues, and charges for services finance most of these activities. Business-type activities – The services provided by the City included here are water, wastewater, solid waste, airport services, and housing services. The services are financed through user fees and charges. Component units – The discretely presented component units are the Chandler Industrial Development Authority and the Chandler Cultural Foundation. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s near-term financing decision. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 21 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Streets Capital Projects Fund, and General Obligation Bonds Debt Service Fund, which are considered to be major funds. Data from the other 18 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules in the financial section of this report. The City adopts an annual appropriated budget for the General, Special Revenue, General Obligation and Highway User Revenue Debt Service, Capital Projects and Proprietary Funds. Budgetary comparison statements have been provided in the basic financial statements for the General, Streets Capital Projects, and General Obligation Bonds Debt Service Funds to demonstrate compliance with the budget. Budgetary comparison schedules for other Non-major Special Revenue and Non-major Capital Projects Funds are also included in the financial section. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water, wastewater, solid waste, airport, and housing services. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for its self-insurance funds. Because self-insurance funds are funded predominantly by governmental functions rather than business-type functions, it has been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. 14 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 The proprietary fund financial statements provide separate information for the water and wastewater funds, which are considered to be major funds of the City. Data from the other three enterprise funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major enterprise funds are provided in the form of combining statements and schedules in the financial section of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements in this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s budget process. The City adopts an annual budget for all governmental and enterprise funds. A budgetary comparison schedule has been provided for the General Fund as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $1.282 billion as of June 30, 2015. This reflects continued strong operations in governmental activities and increased investments in capital infrastructure within the business-type activities. A significant portion of the City’s net position (73.9 percent) reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, improvements other than buildings, vehicles, machinery and equipment and construction in progress), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position (8.5 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (17.6 percent) includes $62.6 million which is invested in a joint venture with the Town of Gilbert that may not be used to meet the City’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. There was an increase of $11.5 million in unrestricted net position reported in connection with the City’s business-type activities. This was due primarily to system development fees. 15 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 The following table presents a condensed statement of the City’s net position for the fiscal years ended June 30, 2015 and 2014. Current assets Capital assets, net Long-term assets Total assets Total deferred outflows of resources Total assets and deferred outflows of resources Governmental Activities 2015 2014 $ 380,261,643 $ 366,097,177 805,630,969 807,912,209 1,185,892,612 1,174,009,386 49,156,931 42,583 Current liabilities Long-term liabilities Total liabilities Total deferred inflows of resources Total liabilities and deferred inflows of resources Net position: Net investment in capital assets Restricted Unrestricted Total net position $ Business-type Activities 2015 2014 $ 239,034,348 $ 234,029,568 666,905,029 669,534,355 63,235,221 66,240,980 969,174,598 969,804,903 11,255,258 952,566 Total (Primary Govt.) 2015 2014 $ 619,295,991 $ 600,126,745 1,472,535,998 1,477,446,564 63,235,221 66,240,980 2,155,067,210 2,143,814,289 60,412,189 995,149 1,235,049,543 1,174,051,969 980,429,856 970,757,469 2,215,479,399 2,144,809,438 64,642,692 460,027,117 524,669,809 26,662,630 52,998,146 269,207,876 322,206,022 - 42,588,983 335,211,119 377,800,102 4,258,428 43,831,309 331,804,218 375,635,527 - 107,231,675 795,238,236 902,469,911 30,921,058 96,829,455 601,012,094 697,841,549 - 551,332,439 322,206,022 382,058,530 375,635,527 933,390,969 697,841,549 567,041,560 108,965,994 7,709,550 683,717,104 563,033,503 105,723,768 183,088,676 851,845,947 380,427,606 119,075 217,824,645 $ 598,371,326 388,837,444 206,284,498 $ 595,121,942 947,469,166 109,085,069 225,534,195 $ 1,282,088,430 951,870,947 105,723,768 389,373,174 $ 1,446,967,889 $ Governmental Actvities Business-type Actvities Millions $0 $1,000 Total assets and deferred outflows of resources Total liabilities and deferred inflows of resources Total net position 16 $2,000 $3,000 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 Changes in net position. The City’s total revenues for the fiscal year ended June 30, 2015 were $466.2 million. The total cost of all programs and services was $426.7 million, which results in an increase in net position of $39.5 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2015 and 2014. Governmental Business-type Total Activities Activities (Primary Govt.) 2015 2014 2015 2014 2015 2014 67,665,580 $ 68,583,660 $ 109,739,794 $105,900,166 $ 177,405,374 $ 174,483,826 3,514,714 4,744,636 5,862,477 5,457,991 9,377,191 10,202,627 13,133,637 10,170,236 35,357,741 72,176,582 48,491,378 82,346,818 28,708,033 108,657,130 3,300,129 28,348,952 103,880,801 3,145,449 10,865 - 70,065 - 28,708,033 108,667,995 3,300,129 28,348,952 103,950,866 3,145,449 14,633,470 10,106,891 59,236,588 1,763,585 1,197,215 13,352,622 3,243,937 55,423,759 1,869,128 819,766 819,556 2,475,760 788,025 1,683,332 14,633,470 10,106,891 59,236,588 2,583,141 3,672,975 13,352,622 3,243,937 55,423,759 2,657,153 2,503,098 311,916,972 293,582,946 154,266,193 186,076,161 466,183,165 479,659,107 104,456,315 102,050,425 99,231,501 94,738,371 - - 104,456,315 102,050,425 99,231,501 94,738,371 51,714,085 31,784,321 6,986,490 52,183,052 32,331,286 10,044,363 - - 51,714,085 31,784,321 6,986,490 52,183,052 32,331,286 10,044,363 296,991,636 288,528,573 55,470,724 50,823,497 14,087,780 1,860,057 7,433,284 129,675,342 55,877,774 41,969,764 14,131,202 1,980,706 7,616,301 121,575,747 55,470,724 50,823,497 14,087,780 1,860,057 7,433,284 426,666,978 55,877,774 41,969,764 14,131,202 1,980,706 7,616,301 410,104,320 14,925,336 5,054,373 24,590,851 64,500,414 39,516,187 69,554,787 123,350 132,082 - - 24,714,201 64,632,496 39,516,187 69,554,787 Revenues: Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Sales taxes Franchise fees Highway user taxes Other taxes State shared revenues Investment income Miscellaneous Total revenues $ Expenses: General government Public safety Tansportation and development Community services Interest and fiscal charges Water Wastewater Solid waste Airport Housing authority Total expenses Increase (decrease) before transfers Transfers in (out) Increase (decrease) in net position Beginning net position, restated Ending net position (123,350) 14,801,986 (132,082) 4,922,291 668,915,118 846,923,656 573,657,125 530,489,446 1,242,572,243 1,377,413,102 $ 683,717,104 $ 851,845,947 $ 598,371,326 $595,121,942 $1,282,088,430 $ 1,446,967,889 17 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 Revenue Sources - Fiscal Year 2015 Other taxes 2.17% State shared revenues 12.71% Highway user taxes 3.14% Investment income 0.55% Miscellaneous 0.79% Charges for services 38.05% Franchise fees 0.71% Operating grants and contributions 2.01% Sales taxes 23.31% Property taxes 6.16% Capital grants and contributions 10.40% Functional Expenses - Fiscal Year 2015 Solid waste 3.30% Airport 0.44% Wastewater 11.91% Housing authority 1.74% General government 24.48% Water 13.00% Interest expense on long-term debt 1.64% Community services 7.45% Public safety 23.92% Transportation & development 12.12% Governmental activities. The increase in governmental net position totaled $14.8 million for the year ended June 30, 2015 compared with an increase of $4.9 million in the prior year. This reflects larger than normal increases in charges for services and local and state shared sales tax as the economy strengthens and development increases in Chandler. At the same time, increased spending in general government category reflects the City’s use of one-time funds towards maintaining existing infrastructure (ie. streets and parks) resulting in a minimal change in net position. 18 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 Business-type activities. The increase in business-type net position totaled $24.7 million for the year ended June 30, 2015 compared with an increase of $64.6 million in the prior year. This is primarily due to relatively lower capital contributions from Intel to reimburse the City for costs to expand water and wastewater infrastructure as construction winds down on the facilities. As evident in the previous graph, the largest financing source for the City is charges for services at 38.05 percent associated with the user fees and charges for services. Sales taxes and state shared revenues also comprise a significant portion of the City’s revenues at 23.31 percent and 12.71 percent, respectively, of the total revenues with capital grants and contributions accounting for an additional 10.4 percent of the City’s total revenues. The City as a whole uses the largest amount of resources for general government functions at 24.48 percent of the total functional expenses of the City. The next largest users of resources are public safety and water services at 23.92 percent and 13 percent, respectively, with transportation & development accounting for 12.12 percent of the City’s total expenses. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. Fund balances are reported on a hierarchy of five classifications based on spending constraints in order to provide better consistency and clarification. These classifications include Nonspendable, Restricted, Committed, Assigned and Unassigned. The spendable balances are the Restricted, Committed, Assigned and Unassigned fund balances. Additional information on Fund Balances and their classifications can be found in Note 9 of the financial statements. The financial performance of the City as a whole is reflected in its governmental funds. As the City completed the year, its governmental funds reported a combined fund balance of $277 million, an increase of $3.7 million in comparison with the prior year. Approximately $167.1 million (60.3 percent) of this amount is combined assigned and unassigned balances, all which may be spent at the City’s discretion. The total compared to the prior years’ assigned and unassigned balances of $166.6 million represents a slight increase of $447.3 thousand. The remainder of the fund balance comprising of non-spendable and restricted balances amounts to $109.9 million (39.7 percent of the total fund balance). The non-spendable balance consists of inventories and pre-paid amounts. The restricted balance is constrained for specific purposes imposed by external parties or enabling legislation. The total compared to the prior years’ restricted balance of $106.6 million represents an increase of $3.3 million. This increase is due to the increase in the general fund balance as a result of higher revenues than budgeted. The general fund is the chief operating fund of the City. At the end of the current fiscal year, assigned and unassigned fund balance of the general fund was $182.4 million, while total fund balance reached $185.1 million. As a measure of the general fund’s liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total fund expenditures. Assigned and unassigned fund balance represents 1.02 coverage of total annual general fund expenditures. This is well above the City’s contingency reserve financial policy, allowing the funding of other reserves (i.e. economic development and capital projects, compensated absences). The City’s general fund balance increased by $5.4 million during the current fiscal year primarily due to higher than budgeted revenues, particularly transaction privilege tax, building permit revenues, and other revenues related to development. Total revenues exceeded the adopted budget by more than $14 million. The streets capital projects fund accounts for the acquisition, construction and improvements of the City’s streets’ projects. At the end of the current fiscal year total fund balance was $36.4 million. The fund balance of the City’s street fund increased by $3.9 million during the current fiscal year due to higher than budgeted Arterial Street Impact Fee revenues and reimbursements from the Proposition 400 Arterial Life Cycle program for completed projects. 19 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 The general obligation bonds debt service fund accounts for the accumulation of resources for and payments of general obligation bonded debt. The fund balance restricted for general obligation debt service payments decreased by $1.3 million during the current fiscal year. The decrease is due to the fact that the secondary property tax rate was decreased from $.09422 to $.088 per $100 of assessed valuation in FY 2014-15 to partially offset the impact on homeowners who saw secondary property values increase by an average of 9.48%. Proprietary funds. The City’s proprietary funds, which include enterprise and internal service funds, provide the same type of information found in the government-wide financial statements, but in more detail. Net position for the enterprise funds and the internal service funds at the end of the fiscal year amounted to $598.4 million and $36.1 million, respectively, compared to $595.1 million and $35.7 million in the prior fiscal year. The enterprise funds net position after net investment in capital assets is 36.4 percent unrestricted compared to 34.7 percent in the prior fiscal year. Unrestricted net position of the water fund at the end of the year amounted to $144.8 million, and those for the wastewater fund amounted to $63.5 million, compared to $137.8 million and $54.8 million in the prior fiscal year. BUDGETARY HIGHLIGHTS For the 2014-15 Budget Year, the City of Chandler continued to engage in fiscally responsible budgeting practices. With signs of continuing modest economic recovery in the City and the region, the City Council adopted a balanced budget for 2014-15, with adjustments to operating and capital expenditure budgets based upon anticipated increases to the ongoing revenue stream and using one-time revenues for select capital projects. Most local revenue sources were expected to see improvement during the year, including the City’s major sources of General Fund revenues: Local Sales Tax, State Shared Sales Tax, and Urban Revenue Sharing (State Shared Income Tax). While the total City budget decreased by -2.5% from the previous year, continued increases in the largest General Fund revenue categories allowed the City Council to increase the General Fund budget by 10.9% from the previous year. As has been the City’s practice, the budget and revenue forecast distinguished between ongoing and one-time revenues and ensure spending programs were aligned with the appropriate category of revenues. The City’s 2014-15 budget included various salary adjustments based on agreements between bargaining units and the City. Other ongoing costs, such as maintenance, utilities, and supplies were managed closely to ensure they could be covered with ongoing revenues. The City continued to emphasize its strong financial policies, and higher revenues allowed the City Council to increase the General Fund contingency reserve from 12% of anticipated annual revenue to 15% of anticipated revenue. The City Council also continued the Infrastructure Maintenance Reserve to support street and park capital maintenance projects until additional general obligation bonds can be sold for these purposes. Those Infrastructure Maintenance and Reserve funds are planned for use through 2016-17. 20 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets. As of June 30, 2015, the City had invested $947.5 million in capital assets net of related debt, including buildings, facilities, vehicles, computers, equipment, and infrastructure assets. Total depreciation expense for the year was $89 million. The City completed several improvement projects including Intel Plant Expansion at a cost of $136.5 million, Water Reclamation Plant Expansion at a cost of $26.5 million, Land Acquisition at a cost of $8.4 million, installation of Transmission Mains at a cost of $8 million, McQueen Road improvements from Queen Creek to Riggs Road at a cost of $3.3 million, miscellaneous Chandler downtown improvements at a cost of $2.6 million, construction of ASU Chandler downtown at a cost of $2.5 million, construction of a Police Driver Training Facility at a cost of $2 million, construction of Roadrunner Park Site at a cost of $1.6 million, and construction of Centennial Park Site at a cost of $1.5 million. There were also various other infrastructure and improvement projects for parks, street lights, data center cooling system, and utility services software upgrade. The following table presents capital asset balances net of accumulated depreciation for the fiscal years, ended June 30, 2015 and 2014: Additional information on the City’s capital assets can be found in Note 4 of the financial statements. Governmental Business-type Total Activities Activities (Primary Govt.) 2015 Land Land improvements $ 85,355,474 - 2014 $ 83,306,168 - 2015 $ 49,829,747 490,716 2014 $ 41,306,107 381,777 2015 $ 135,185,221 490,716 2014 $ 124,612,275 381,777 Infrastructure System improvements 385,600,420 - 395,999,265 - 575,513,084 367,289,443 385,600,420 575,513,084 395,999,265 367,289,443 Buildings and improvements Vehicles, machinery 244,406,111 243,318,226 8,561,616 9,020,706 252,967,727 252,338,932 28,727,474 61,541,490 $ 805,630,969 27,381,060 57,907,490 $ 807,912,209 3,872,052 28,637,814 $ 666,905,029 1,463,204 250,073,118 $ 669,534,355 32,599,526 90,179,304 $ 1,472,535,998 28,844,264 307,980,608 $ 1,477,446,564 and equipment Construction in progress Total 21 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 Long-term Debt. At the end of the current fiscal year, the City of Chandler had total bonded debt outstanding of $554.5 million in long-term debt outstanding with $45.3 million due within one year. The following table presents a summary of the City’s outstanding long-term obligations for the fiscal years ended June 30, 2015 and 2014. Governmental Business-type Activities General obligation bonds Revenue bonds Excise tax revenue obligations Special assessment bonds Issuance premiums Total Activities (Primary Govt.) 2015 2014 2015 2014 2015 $ 222,143,000 $ 233,678,000 $ 140,072,000 $ 150,972,000 $ 362,215,000 384,650,000 14,025,000 18,000,000 31,610,000 36,095,000 45,635,000 54,095,000 142,200,000 148,380,000 142,200,000 148,380,000 4,440,000 4,905,000 4,440,000 4,905,000 - - 2014 17,898,207 4,346,195 20,931,905 12,429,175 38,830,112 16,775,370 Total bonds & obligations payable $ 258,506,207 $ 260,929,195 $ 334,813,905 $ 347,876,175 $ 593,320,112 $ 608,805,370 30,978 37,392 29,022 42,608 5,642,383 4,602,971 - - Arbitrage payable Claims payable Landfill closure/post closure Compensated absences Net Pension Liability Post employment benefits Total long term liabilities - - 60,000 80,000 5,642,383 4,602,971 4,340,000 4,340,000 4,340,000 4,340,000 9,819,302 9,356,834 1,073,631 1,000,172 10,892,933 10,357,006 195,607,344 197,196,450 19,019,081 22,704,592 214,626,425 219,901,042 18,839,333 15,132,055 1,644,965 1,277,762 20,484,298 16,409,817 $ 488,445,547 $ 487,254,897 $ 360,920,604 $ 377,241,309 $ 849,366,151 $ 864,496,206 The City of Chandler’s total long term liabilities decreased by $15.1 million during the current fiscal year. The key factors in the decrease were principal payments made on long-term debt while not adding additional debt. State statutes currently limit the amount of general obligation debt a city may issue to 20 percent of its total assessed valuation for water, sewer, artificial lighting, open space, parks, public safety and emergency services, streets, transportation, and recreational facilities. The current debt limitation for the City is $476.1 million. The City has $352.4 million of outstanding general obligation debt for these purposes. State statutes also currently limit the amount of general obligation debt a city may issue to 6 percent of its total assessed valuation for all other purposes. The current debt limitation for the City is $142.8 million. The City has $9.8 million of outstanding general obligation debt for this purpose. As of year-end, the City’s current bond ratings on general obligation bonds were Aaa from Moody’s Investor Services, AAA from Standard & Poor’s, and AAA from Fitch Ratings. Ratings for the street and highway users were Aa3 from Moody’s, AA from Standard & Poor’s, and AA from Fitch. Water and wastewater revenue bonds were Aa1 from Moody’s Investor Services, AA+ from Standard & Poor’s, and AA+ from Fitch. Excise Tax bonds were Aa1 from Moody’s Investor Services, AAA from Standard & Poor’s, and AAA from Fitch. Additional information on the City’s long-term debt can be found in Note 5 of the financial statements. 22 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2015 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET Adopting a balanced budget for the next fiscal year (2015-16) required the combined efforts of citizens, the City Council, Executive Leadership team, and staff members throughout the organization. The City’s overall budget increased from $783 million in 2014-15 to $910 million (+16.2%) in 2015-16, with the increase due to higher expenditures for department spending, capital projects, debt service, and larger contingencies. Overall increases in General Fund revenues and use of fund balance helped support a 7.6% increase in the General Fund budget for 2015-16, with the largest portion of the increase due to larger contingencies and reserves ($11 million), increased personnel costs ($10 million), and a relatively small increase in capital spending ($1.5 million). With the State of Arizona changing to the use of limited property values for the calculation of both primary and secondary assessed values, the City Council chose to hold the primary property tax rate at $0.2992 and the secondary property tax rate at $0.88 for 2015-16 which will keep most property owners tax payment unchanged from the prior year. The City Council also continued the Budget Stabilization Reserve in the amount of $15 million. This reserve provides the opportunity to utilize the reserve to balance the General Fund budget in the future for no more than three consecutive years, should state legislation, operational changes in tax collections, or unexpected decreases in property values cause revenues to suddenly decrease. The 2015-16 budget includes some new General Obligation bonds appropriation, but bond projects remain in a hold status until existing debt service costs decrease or property values show consistent increases year after year. As a result, the City Council maintained the Infrastructure Maintenance Reserve, which will be appropriated over two years to further supplement the Street Repaving and other capital improvement program. Additionally, the City Council maintained the General Fund operating contingency at 15% of revenues to provide a further buffer for emergencies or to support new opportunities, such as unanticipated grants or development agreements. CONTACTING THE CITY’S FINANCE OFFICE This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the money it receives. If you have questions about this report or need additional information, contact the Management Services Department, City of Chandler, P.O. Box 4008, MS 609, Chandler, AZ 85244-4008 or by calling 480-782-2333. 23 24 BASIC FINANCIAL STATEMENTS 25 City of Chandler Statement of Net Position June 30, 2015 Governmental Activities Business-Type Activities $ $ Total Component Units Chandler Industrial Chandler Development Cultural Authority Foundation ASSETS Current assets: Equity in pooled cash and investments Cash and investments Accounts receivable Privilege license tax receivable Property taxes receivable Internal balances Due from other governments Inventories Prepaid items Accrued interest receivable Special assessments receivable Notes receivable - current Other receivables Total current assets Long-term assets: Cash and investments - restricted Notes receivable - long term Investment in joint venture Other assets Capital assets: Non-depreciable Depreciable, net Total capital assets Total long-term assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of pension plan items Deferred amounts on refundings Total deferred outflows of resources 363,049,836 621,682 582,749 356,706 72,478 7,648,944 941,359 690,731 4,043,375 448,503 1,805,280 380,261,643 224,094,987 13,986,217 (72,478) 68,611 212,487 315,702 282,243 146,579 239,034,348 $ 587,144,823 14,607,899 582,749 356,706 7,717,555 1,153,846 315,702 972,974 4,043,375 448,503 1,951,859 619,295,991 $ 731,662 731,662 $ 1,029,459 1,426 57,896 1,088,781 - 336,450 62,611,174 287,597 336,450 62,611,174 287,597 - 1,413,102 6,000 146,896,964 658,734,005 805,630,969 805,630,969 1,185,892,612 78,467,561 588,437,468 666,905,029 730,140,250 969,174,598 225,364,525 1,247,171,473 1,472,535,998 1,535,771,219 2,155,067,210 731,662 33,910 33,910 1,453,012 2,541,793 36,474,966 12,681,965 49,156,931 2,284,902 8,970,356 11,255,258 38,759,868 21,652,321 60,412,189 - - 26 LIABILITIES Current liabilities: Accounts payable Accrued payroll Trust liabilities and deposits Accrued interest Unearned revenue Customer advances Arbitrage liability Compensated absences payable Bonds payable Landfill closure and postclosure liability Claims and judgements payable Total current liabilities Long-term liabilities: Arbitrage liability Compensated absences payable Bonds payable Net pension liability OPEB liability Landfill closure and postclosure liability Claims and judgements payable Total long-term liabilities Total liabilities 13,604,279 6,806,482 10,633,177 4,686,304 494,020 15,000 87,369 23,237,917 5,078,144 64,642,692 6,612,340 796,059 3,022,267 6,259,232 189,599 5,000 9,462 25,600,578 94,446 42,588,983 20,216,619 7,602,541 13,655,444 10,945,536 494,020 189,599 20,000 96,831 48,838,495 94,446 5,078,144 107,231,675 - 42,189 404,292 446,481 15,978 9,731,933 235,268,290 195,607,344 18,839,333 564,239 460,027,117 24,022 1,064,169 309,213,328 19,019,081 1,644,965 4,245,554 335,211,119 40,000 10,796,102 544,481,618 214,626,425 20,484,298 4,245,554 564,239 795,238,236 - - 524,669,809 377,800,102 902,469,911 - 446,481 26,662,630 4,258,428 30,921,058 567,041,560 380,427,606 947,469,166 - 33,910 52,751,255 20,932,155 17,218,970 447,931 15,823,503 1,792,180 108,965,994 7,709,550 119,075 119,075 217,824,645 52,751,255 20,932,155 17,218,970 447,931 15,823,503 1,792,180 119,075 109,085,069 225,534,195 731,662 1,413,102 1,413,102 648,300 DEFERRED INFLOWS OF RESOURCES Deferred inflows of pension plan items NET POSITION Net investment in capital assets Restricted for: Transportation and development Capital improvements Community services Community development Debt service Legal restrictions Family Self Sufficiency escrow accounts Total restricted Unrestricted Total net position See accompanying Notes to Basic Financial Statements. $ 683,717,104 27 $ 598,371,326 $ 1,282,088,430 $ 731,662 $ 2,095,312 City of Chandler Statement of Activities For the year ended June 30, 2015 Program Revenues Functions/Programs Expenses Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ $ Total Primary government: Governmental activities: General government $ 104,456,315 Public safety $ 39,207,061 102,050,425 6,469,215 Transportation and development 51,714,085 Community services 31,784,321 1,810,371 - $ 41,017,432 1,263,001 - 7,732,216 14,438,138 - 12,959,637 27,397,775 7,551,166 441,342 174,000 8,166,508 6,986,490 - - - - 296,991,636 67,665,580 3,514,714 13,133,637 84,313,931 Water 55,470,724 48,045,103 - 17,036,891 65,081,994 Wastewater 50,823,497 45,666,777 - 17,370,211 63,036,988 Solid waste Interest on long-term debt Total governmental activities Business-type activities: 14,087,780 14,140,246 - - 14,140,246 Airport 1,860,057 1,010,288 - 808,560 1,818,848 Chandler housing authority 7,433,284 877,380 5,862,477 142,079 6,881,936 129,675,342 109,739,794 5,862,477 35,357,741 150,960,012 $ 426,666,978 $ 177,405,374 $ $ 235,273,943 $ $ $ Total business-type activities Total primary government 9,377,191 $ 48,491,378 - $ - Component units Chandler Industrial Development Authority Chandler Cultural Foundation Total component units 1,909 1,454,180 $ 1,456,089 62,143 1,289,597 $ 1,351,740 204,751 $ 204,751 $ General revenues and transfers: Taxes: Property taxes, levied for general purposes Sales taxes Highway user taxes Other taxes Total taxes Franchise fees State shared revenues (unrestricted) Investment income Miscellaneous Transfers Total general revenues and transfers Change in net position Net position - beginning of year, restated Net position - end of year See accompanying Notes to Basic Financial Statements. 28 $ - 62,143 1,494,348 $ 1,556,491 Net (Expense) Revenue and Changes in Net Position Primary Government Component Units Chandler Industrial Governmental Business-Type Activities Activities $ (63,438,883) $ - $ (63,438,883) Cultural Authority Foundation $ - $ - (94,318,209) - (94,318,209) - - (24,316,310) - (24,316,310) - - (23,617,813) - (23,617,813) - - (6,986,490) - (6,986,490) - - (212,677,705) - (212,677,705) - - - 9,611,270 9,611,270 - - - 12,213,491 12,213,491 - - - 52,466 52,466 - - - (41,209) (41,209) - - - (551,348) (551,348) - - - 21,284,670 21,284,670 - - (212,677,705) 21,284,670 (191,393,035) - - - - - 60,234 - - - - - 40,168 - - - 60,234 40,168 28,708,033 - 28,708,033 - - 108,657,130 10,865 108,667,995 - - 14,633,470 - 14,633,470 - - 10,106,891 - 10,106,891 - - 162,105,524 10,865 162,116,389 - - 3,300,129 - 3,300,129 - - 59,236,588 - 59,236,588 - - 1,763,585 819,556 2,583,141 3,467 6,797 1,197,215 2,475,760 3,672,975 - - 123,350 - - - 227,479,691 3,429,531 230,909,222 3,467 6,797 14,801,986 24,714,201 39,516,187 63,701 46,965 668,915,118 573,657,125 1,242,572,243 667,961 2,048,347 (123,350) $ Total Chandler Development 683,717,104 $ 598,371,326 $ 1,282,088,430 $ 731,662 29 $ 2,095,312 City of Chandler Balance Sheet Governmental Funds June 30, 2015 Major Funds General Obligation Other Streets Bonds Governmental General Capital Projects Debt Service Funds 177,575,168 $ Total ASSETS Equity in pooled cash and investments $ 40,968,222 $ 36,131,687 $ 66,582,358 $ 321,257,435 Accounts receivable 496,908 42,996 - 113 540,017 Privilege license tax receivable 582,749 - - - 582,749 Property taxes receivable 91,182 - 265,524 - 356,706 Advances to other funds 19,585,809 19,585,809 - - - Due from other funds 4,190,479 - - - 4,190,479 Due from other governments 2,258,809 - - 5,390,135 7,648,944 Inventories 941,359 - - - 941,359 Accrued interest receivable 348,600 79,874 48,310 123,599 600,383 - - - 4,043,375 4,043,375 Special assessments receivable Notes receivable Other receivables Total assets - - - 448,503 448,503 1,780,292 - - - 1,780,292 $ 361,976,051 $ 207,851,355 $ 41,091,092 $ 36,445,521 $ 76,588,083 $ 7,309,625 $ 1,837,298 $ - $ 4,391,481 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ 13,538,404 Accrued payroll 6,474,000 18,419 - 241,315 6,733,734 Trust liabilities and deposits 8,431,337 - - 2,201,840 10,633,177 - - 4,368,641 317,663 4,686,304 Accrued interest Due to other funds - - - 4,118,001 4,118,001 Advances from other funds - 2,814,300 - 16,771,509 19,585,809 487,001 - - - 487,001 Arbitrage liability - 1,448 - 13,552 15,000 Bonds payable (matured) - - 17,055,000 3,970,000 21,025,000 22,701,963 4,671,465 21,423,641 32,025,361 80,822,430 - - - 4,040,812 4,040,812 Unearned revenue Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Unavailable revenues - property taxes Total deferred inflows of resources 41,118 - 111,863 - 152,981 41,118 - 111,863 4,040,812 4,193,793 Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows and fund balances See accompanying Notes to Basic Financial Statements. $ 941,359 - - - 941,359 1,792,180 36,419,627 14,910,017 55,844,170 108,965,994 - - - - - 102,222,466 - - - 102,222,466 (15,322,260) 40,521,910 276,959,828 80,152,269 - - 185,108,274 36,419,627 14,910,017 207,851,355 $ 30 41,091,092 $ 36,445,521 $ 76,588,083 64,830,009 $ 361,976,051 City of Chandler Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June 30, 2015 $ Total Fund Balances - Total Governmental Funds 276,959,828 Amounts reported for governmental activities in the Statement of Net Position were reported differently because: Capital assets used in governmental activities are not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. Non-depreciable 146,896,964 Depreciable buildings, property, equipment and infrastructure, net 658,734,005 Total capital assets 805,630,969 Certain revenues are not available to pay for current period expenditures and, therefore, are unavailable in the funds. 4,193,792 Deferred charges on refundings are not financial resources and, therefore, are not reported in the funds. 12,681,965 Deferred outflows related to pensions are not financial resources and, therefore, are not reported in the funds. 36,474,966 Deferred inflows related to pensions represent a future acquisition of net position that is not reported in the funds. (26,662,630) The internal service fund is used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the Government-Wide Statement of Net Position. 36,075,808 Long-term liabilities are not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. Except for the internal service funds amounts of $5,767,953 which are included above, the long-term liabilities were adjusted as follows: Bonds payable (237,481,207) Net pension liability (195,607,344) OPEB liability (18,783,733) Arbitrage liability (15,978) Compensated absences (9,749,332) Total long-term liabilities (461,637,594) $ Net Position of Governmental Activities See accompanying Notes to Basic Financial Statements. 31 683,717,104 City of Chandler Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the year ended June 30, 2015 Major Funds General General Obligation Other Streets Bonds Governmental Capital Projects Debt Service Funds Total REVENUES: Property taxes $ Sales taxes 7,099,821 $ - 108,657,130 Franchise fees Highway user taxes Regional transportation taxes $ - 21,799,863 $ - - $ - 28,899,684 108,657,130 3,300,129 - - - 3,300,129 - - - 14,633,470 14,633,470 - 10,106,891 - - 10,106,891 59,236,588 - - - 59,236,588 153,397 - - 10,485,434 10,638,831 System development fees - 5,114,796 - 5,470,827 10,585,623 Special assessments - - - 573,438 573,438 Licenses and permits 5,146,556 - - - 5,146,556 Charges for services 19,981,917 - - 128,119 20,110,036 Fines and forfeitures 3,630,084 - - 971,417 4,601,501 Rentals 751,163 - - - 751,163 Contributions 150,000 - - - 150,000 Interest revenue 901,647 199,086 126,188 335,320 1,562,241 State shared Grants and entitlements Miscellaneous - 323,432 572,252 209,257,252 248,820 15,420,773 21,926,051 32,921,457 279,525,533 General government 44,091,053 - - 2,804,053 46,895,106 Public safety 92,015,545 - - 1,757,761 93,773,306 Transportation and development 15,378,323 398,256 - 8,992,974 24,769,553 Community services 23,958,155 - - 611,128 24,569,283 3,368,449 11,792,683 - 41,377,984 56,539,116 Principal - - 17,055,000 4,435,000 21,490,000 Interest and fiscal charges - - 7,089,028 648,946 7,737,974 Bond issuance costs - - 722,293 - 722,293 178,811,525 12,190,939 24,866,321 60,627,846 276,496,631 30,445,727 3,229,834 (2,940,270) (27,706,389) Proceeds from disposal of capital assets - - - 103,964 103,964 Bond premium - - 17,045,635 - 17,045,635 Face amount of bonds issued - - 128,254,000 - 128,254,000 Payment to escrow agent - - (143,635,520) - (143,635,520) - Total revenues - EXPENDITURES: Current: Capital outlay Debt service: Total expenditures REVENUES OVER (UNDER) EXPENDITURES 3,028,902 OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) 643,526 - 28,074,464 28,717,990 (25,035,249) - - (4,741,332) (29,776,581) (25,035,249) 643,526 1,664,115 23,437,096 (1,276,155) (4,269,293) 5,410,478 NET CHANGE IN FUND BALANCE 3,873,360 709,488 3,738,390 FUND BALANCES: Beginning of year End of year See accompanying Notes to Basic Financial Statements. 179,697,796 $ 185,108,274 32,546,267 $ 36,419,627 32 16,186,172 $ 14,910,017 44,791,203 $ 40,521,910 273,221,438 $ 276,959,828 City of Chandler Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities For the year ended June 30, 2015 $ Net Change in Fund Balances - Total Governmental Funds 3,738,390 Governmental activities in the Statement of Activities were reported differently because: Governmental funds report capital outlay as expenditures. However, in the GovernmentWide Statement of Activities and Changes in Net Position, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded and transfered in the current period. 39,462,506 Depreciation expense on capital assets is reported in the Government-Wide Statement of Activities and Changes in Net Position, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as an expenditure in governmental funds. (47,582,779) Some items reported in the governmental funds are sources and uses of current financial resources and therefore are not reported as revenues or expenses in Statement of Activities. These items include: Principal payments on debt 21,490,000 Face amount of bonds issued (128,254,000) Payment to escrow agent 143,635,520 Bond premium (17,045,635) Pension expense (2,864,179) Other postemployment benefits obligation (3,698,860) Loss on disposal of capital assets (195,768) 13,067,078 Accrued interest payable related to long-term debt is recognized as an expense in the Statement of Activities, however is not recognized in the governmental funds because it is not payable from current financial resources. 751,485 Arbitrage liability 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. 4,022 Compensated absence 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. (450,407) Certain revenues in the governmental funds that provide current financial resources are not included in the Statement of Activities because they were recognized in a prior period. However, other revenues that are unavailable in the governmental funds because they do not provide current financial resources due to unavailability are recognized in the Statement of Activities. (586,451) Capital assets contributed by developers to the City are not recorded in the governmental funds as they do not provide current financial resources but are recognized in the Statement of Activities as program revenues. 6,034,801 The internal service fund is used by management to charge the costs of certain activities, such as insurance, to individual funds. The change in financial position of the internal service fund is reported with governmental activities. 363,341 $ Change in Net Position of Governmental Activities See accompanying Notes to Basic Financial Statements. 33 14,801,986 City of Chandler Statement of Net Position Proprietary Funds June 30, 2015 Other Major Funds Water Governmental Proprietary Wastewater Activities: Internal Funds Total Service Fund ASSETS Current assets: Equity in pooled cash and investments $ 102,834,379 $ 103,052,626 $ 18,207,982 $ 224,094,987 $ 41,792,402 Accounts receivable 6,519,426 5,756,409 1,710,382 13,986,217 81,665 Advances to other funds 3,900,000 - - 3,900,000 - Due from other governments Inventories Prepaid items Accrued interest receivable Other receivables Total current assets - - 68,611 68,611 193,927 - 18,560 212,487 - - - 315,702 315,702 - 160,757 95,994 25,492 282,243 90,348 - 84,791 61,788 146,579 24,988 113,608,489 108,989,820 20,408,517 243,006,826 41,989,403 Long-term assets: Notes receivable Investment in joint venture Other assets - - 336,450 336,450 - 62,611,174 - - 62,611,174 - 165,125 122,472 - 287,597 - Capital assets: Non-depreciable 18,054,965 31,419,669 28,992,927 78,467,561 - Depreciable, net 207,103,315 355,929,911 25,404,242 588,437,468 - Total capital assets 225,158,280 387,349,580 54,397,169 666,905,029 - Total long-term assets 287,934,579 387,472,052 54,733,619 730,140,250 - Total assets 401,543,068 496,461,872 75,142,136 973,147,076 41,989,403 Deferred outflows of pension plan items 1,142,451 634,695 507,756 2,284,902 - Deferred amounts on refundings Total deferred outflow of resources 5,654,091 6,796,542 3,316,265 3,950,960 507,756 8,970,356 11,255,258 - DEFERRED OUTFLOWS OF RESOURCES 34 LIABILITIES Current liabilities: Accounts payable Accrued payroll 1,140,757 392,476 4,493,917 242,339 977,666 6,612,340 161,244 796,059 65,875 72,748 Trust liabilities and deposits 1,777,370 978,748 266,149 3,022,267 - Accrued interest 2,928,694 3,329,069 1,469 6,259,232 - - - 72,478 72,478 - Due to other funds Unearned revenue Customer advances Arbitrage liability Compensated absences payable - 7,674 170,894 189,599 7,019 11,031 2,350 2,650 - 5,000 623 - 5,106 2,726 1,630 9,462 14,224,118 11,351,264 25,196 25,600,578 - Landfill closure and postclosure liability - - 94,446 94,446 - Claims and judgements payable - - - - 5,078,144 20,481,902 20,408,387 1,771,172 42,661,461 5,224,409 12,294 11,728 - 24,022 - 568,789 303,638 191,742 1,064,169 69,347 - 3,900,000 - 3,900,000 - 146,793,409 162,341,568 78,351 309,213,328 - 9,509,540 5,283,078 4,226,463 19,019,081 - 906,541 491,500 246,924 1,644,965 55,600 Bonds payable Total current liabilities Long-term liabilities: Arbitrage liability Compensated absences payable Advances from other funds Bonds payable Net pension liability OPEB liability Landfill closure and postclosure liability - - 4,245,554 4,245,554 - Claims and judgements payable - - - - 564,239 Total long-term liabilities 157,790,573 172,331,512 8,989,034 339,111,119 689,186 Total liabilities 178,272,475 192,739,899 10,760,206 381,772,580 5,913,595 2,129,214 1,182,897 946,317 4,258,428 - 83,101,051 242,961,531 54,365,024 380,427,606 - - - 119,075 119,075 - 144,836,870 63,528,505 9,459,270 217,824,645 36,075,808 DEFERRED INFLOWS OF RESOURCES Deferred inflows of pension plan items NET POSITION Net investment in capital assets Restricted for Family Self Sufficiency escrow accounts Unrestricted Total net position $ 227,937,921 $ 306,490,036 See accompanying Notes to Basic Financial Statements. 35 $ 63,943,369 $ 598,371,326 $ 36,075,808 City of Chandler Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the year ended June 30, 2015 Major Funds Water Wastewater Other Governmental Proprietary Activities: Internal Funds Total Service Fund OPERATING REVENUES: Service fees $ 48,045,103 $ 45,666,777 $ 15,150,534 $ 108,862,414 $ - Grants and entitlements - - 5,862,477 5,862,477 - Rentals - - 877,380 877,380 - Sales taxes - - 10,865 10,865 - Self insurance premiums - - - - 26,116,785 221,891 9,004 464,288 695,183 624,964 48,266,994 45,675,781 22,365,544 116,308,319 26,741,749 General and administrative 3,528,594 2,861,973 1,188,333 7,578,900 - Personal services 8,574,512 4,713,373 3,596,079 16,883,964 2,183,752 Contractual services 7,069,407 6,465,103 10,734,584 24,269,094 2,233,671 Commodities 8,472,563 8,866,662 1,522,291 18,861,516 1,787,830 - - - 21,305,714 18,485,368 21,157,140 4,512,048 4,512,048 - 1,817,848 41,460,356 - 46,130,444 44,064,251 23,371,183 113,565,878 27,510,967 2,136,550 1,611,530 (1,005,639) Miscellaneous Total operating revenues OPERATING EXPENSES: Claims expense Housing assistance payments Depreciation and amortization expense Total operating expenses OPERATING INCOME (LOSS) 2,742,441 (769,218) NONOPERATING REVENUES (EXPENSES): Interest revenue 433,717 Interest and fiscal charges Accretion of bond premium Amortization of deferred bond items Bond issuance costs Gain (loss) on disposal of capital assets Equity interest in joint venture 303,855 81,984 819,556 197,318 (5,641,263) (6,516,032) (2,938) (12,160,233) - 959,118 (77,519) (306,142) (22,000) 821,263 (49,416) (179,798) (14,000) 196 (7,000) 1,780,577 (126,935) (485,940) (43,000) - - (3,293,356) - (3,293,356) - Total nonoperating revenues (expenses) (7,947,445) (5,634,128) 72,242 (13,509,331) 197,318 (5,810,895) (4,022,598) (933,397) (10,766,890) (571,900) 17,036,891 17,370,211 950,639 35,357,741 - - - 1,274,137 1,274,137 950,000 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS CAPITAL CONTRIBUTIONS AND TRANSFERS: Capital contributions Transfers in Transfers out (1,150,787) (14,759) Total capital contributions and transfers 16,734,635 (302,256) 17,216,637 (153,574) 1,529,819 (694,957) 35,481,091 935,241 Change in Net Position 10,923,740 13,194,039 596,422 24,714,201 363,341 NET POSITION: Beginning of year, restated End of year 217,014,181 $ 227,937,921 293,295,997 $ See accompanying Notes to Basic Financial Statements. 36 306,490,036 63,346,947 $ 63,943,369 573,657,125 $ 598,371,326 35,712,467 $ 36,075,808 37 City of Chandler Statement of Cash Flows Proprietary Funds For the year ended June 30, 2015 Other Proprietary Funds Major Funds Water Wastewater CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Cash received from grantors Cash payments to suppliers Cash payments to employees for services Net cash provided (used) by operating activities $ CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in Transfers out Net cash provided (used) by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets Proceeds from sale/refunding of bonds Principal paid on bond maturities Interest paid on bonds Cash received from capital contributions Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Investment income Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year 49,357,598 (18,960,039) (8,545,449) 21,852,110 $ $ 16,431,991 5,906,170 (17,946,594) (3,588,296) 803,271 $ 115,491,690 5,906,170 (59,143,444) (16,799,513) 45,454,903 $ 26,700,230 (24,338,714) (2,150,409) 211,107 (302,256) (302,256) (153,574) (153,574) 1,274,137 (694,957) 579,180 1,274,137 (1,150,787) 123,350 950,000 (14,759) 935,241 (1,302,289) 44,121,385 (18,367,784) 21,935,332 (897,534) - (20,567,607) 66,056,717 - (57,188,473) (29,713,168) (20,000) (86,921,641) - (5,931,357) (6,639,220) (3,167) (12,573,744) - 7,861,625 (12,439,109) 9,047,613 (23,737,227) 142,079 (778,622) 17,051,317 (36,954,958) - 56,492 56,492 660,321 537,313 537,313 9,160,608 272,960 272,960 9,383,705 $ 49,702,101 (22,236,811) (4,665,768) 22,799,522 Total Governmental Activities: Internal Service Fund 93,450,674 102,834,379 38 207,861 207,861 (883,418) $ 103,936,044 103,052,626 $ 17,547,661 18,207,982 $ 214,934,379 224,094,987 106,970 106,970 1,253,318 $ 40,539,084 41,792,402 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets, liabilities and deferred items: (Increase) decrease in receivables (Increase) decrease in inventories (Increase) decrease in other assets Increase (decrease) in payables Increase (decrease) in accrued payroll and compensated absences Increase (decrease) in deposits Increase (decrease) in claims payable Increase (decrease) in unearned revenue Increase (decrease) in customer advances Increase (decrease) in net pension items Increase (decrease) in OPEB liability Total adjustments Net cash provided (used) by operating activities NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Contributions of capital assets from developers Contributions of capital assets from city government Loss on disposal of assets Accretion of bond premiums Amortization of deferred bond charges $ $ $ 2,136,550 $ 1,611,530 $ (1,005,639) $ 2,742,441 18,485,368 21,157,140 1,817,848 41,460,356 575,785 103,352 419,709 7,173 60,504 329,581 (234,471) (236,105) 204,664 19,715,560 21,852,110 3,886,456 245,260 (4,043,073) 76,144 (7,855) (97,541) (131,169) 102,630 21,187,992 22,799,522 (94,687) 15,334 24,296 47,789 10,947 (25,146) 57,555 (104,935) 59,909 1,808,910 803,271 4,367,554 118,686 689,265 (3,988,111) 147,595 296,580 (274,457) (472,209) 367,203 42,712,462 45,454,903 9,175,266 22,000 959,118 77,519 See accompanying Notes to Basic Financial Statements. 39 $ $ 8,322,598 14,000 821,263 49,416 $ $ 808,560 7,000 196 - $ $ (769,218) - $ $ (40,045) (50,911) 24,925 1,039,412 (1,474) 8,418 980,325 211,107 - City of Chandler Statement of Fiduciary Net Position Fiduciary Funds June 30, 2015 Volunteer Firemen's Pension and Relief Trust Fund Agency Funds ASSETS Equity in pooled cash and investments Total assets $ 18,957 $ 8,000 $ 18,957 $ 8,000 $ - $ - LIABILITIES Due to others Total liabilities NET POSITION Assets held in trust for pension benefits 18,957 $ Total net position See accompanying Notes to Basic Financial Statements. 40 18,957 8,000 $ 8,000 City of Chandler Statement of Changes in Fiduciary Net Position Fiduciary Funds - Trust Funds For the year ended June 30, 2015 Volunteer Firemen's Pension and Relief Trust Fund ADDITIONS: Net investment income $ 14 14 Total additions DEDUCTIONS: Benefits paid to plan members - Change in net position 14 NET POSITION: Beginning of year 18,943 End of year $ See accompanying Notes to Basic Financial Statements. 41 18,957 42 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 The City of Chandler (City) was incorporated on February 17, 1920. On May 25, 1964, voters ratified a City charter providing for a Council-Manager form of government. The government of the City is operated by authority of its charter, as limited by the state legislature. A seven-member council including a separately elected mayor governs the City. The following notes to the financial statements are an integral part of the City’s financial statements. NOTE 1 - Summary of Significant Accounting Policies The accounting policies and procedures of the City conform to accounting principles generally accepted in the United States of America (GAAP) as applied to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below. A. Reporting Entity As required by GAAP, these financial statements present the City and its component units, i.e., entities for which the City is considered to be financially accountable and/or exercise significant influence over operations. Blended component units, although legally separate entities, are in substance part of the City’s operations, and therefore data from these units are combined with data of the City. The City’s discretely presented component units, on the other hand, are reported in a separate column in the basic financial statements, to emphasize that they are legally separate from the City. The component units discussed below are included in the City’s reporting entity because of the significance of their operational and/or financial relationships with the City. Each component unit has a June 30 year-end. 1. Blended Component Unit The City of Chandler Municipal Property Corporation (Corporation) is a nonprofit corporation which exists solely for the purpose of constructing or otherwise acquiring or equipping buildings, structures or improvements on land owned by the City for the benefit, common good and general welfare of the City and its citizens. The Chandler City Council appoints the five members of the Board, who are responsible for approving the Corporation’s bond sales. Additionally, all bond sales must be submitted to and approved by the City Council. All financial activities are reported within the enterprise funds of the City. Unaudited financial statements for the Corporation are available from the City of Chandler, Management Services Department, P.O. Box 4008, MS 702, Chandler, AZ 85244-4008. 2. Discretely Presented Component Units The component unit column in the basic financial statements includes the financial data of the Chandler Industrial Development Authority (Authority). The Authority is responsible for the issuance of tax-exempt bonds for qualified projects approved by the Authority and the City Council. The Authority has a seven-member board of directors appointed by the City Council. The City is able to impose its will on the Authority inasmuch as the City Council must vote to ratify the actions of the Authority with regard to the issuance of bonds. The accounting records of the Authority are maintained by the City and are available from the City of Chandler, Management Services Department, P.O. Box 4008, MS 702, Chandler, AZ 85244-4008. The Chandler Cultural Foundation (Foundation) oversees the operations of the Chandler Center for the Arts for the selection and scheduling of performances, other facility use and general policy setting activities. The City is able to significantly influence its operations. Specifically, the Foundation’s budget is annually reviewed and approved by the City Council and the Foundation’s nine-member Board is appointed by the City Council. Financial statements for the Foundation are available from the City of Chandler, Management Services Department, P.O. Box 4008, MS 702, Chandler, AZ 85244-4008. 43 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) present financial information about the City as a whole. The reported information includes all of the nonfiduciary activities of the City and its component units. For the most part, the effect of interfund activity has been removed from these statements. These statements are to distinguish between the governmental and business-type activities of the City. Governmental activities normally are supported by taxes and intergovernmental revenues, and are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes, state shared revenues, investment income, and other items not included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Basis of Presentation Government-wide Financial Statements - 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 revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements; the exception is any interfund activity between governmental and business-type activities, such as transfers. Interfund services provided and used are not eliminated. Fund Financial Statements - 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, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service resources are provided during the current year for payment of long-term debt principal and interest due early in the following year (not to exceed one month) and, therefore, the expenditures and related liabilities have been recognized. Compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise fees, licenses and permits, charges for services, special assessments and investment income associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Grants and similar awards are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Miscellaneous revenues are not susceptible to accrual because generally they are not measurable until received in cash. 44 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued Delinquent property taxes have been recorded as deferred inflows of resources. Grants and similar awards received before the eligibility requirements are met are recorded as unearned revenue. Cash receipts received in advance of being billed have also been reported as unearned revenue on the governmental fund financial statements. The City reports the following major governmental funds: General Fund – This fund accounts for all financial resources of the City, except those required to be accounted for in other funds. Streets Fund – This fund is used to account for the acquisition, construction and improvements of City streets projects. General Obligation Bonds Fund – This fund accumulates monies for the payment of principal and interest requirements of the City’s tax supported General Obligation Bonds. Revenues for repayment are generated from secondary property taxes. The City reports the following major proprietary funds: Water Fund – This fund is used to account for the provision of water services to the residents of the City and certain county residents within the City’s municipal boundaries. All activities necessary to provide such service are accounted for in this fund. Wastewater Fund – This fund is used to account for the provision of wastewater services to the residents of the City and certain county residents within the City’s municipal boundaries. All activities necessary to provide such service are accounted for in this fund. Additionally, the City reports the following fund types: Internal Service Fund - Internal Service Funds are established to account for financing of goods and services provided by one department or agency to other departments or agencies of the City on a cost reimbursement basis. The Internal Service Fund consists of Self Insurance Funds that administer the City’s self-insured property, liability, health, dental, short term disability, and workers’ compensation insurance programs. Fiduciary Funds – Fiduciary funds account for assets held by the City on behalf of the Volunteer Firemen’s Pension and Relief Trust Fund, and agency funds which account for resources held by the City in a custodial capacity for peddler bonds. The Volunteer Firemen’s Pension and Relief Trust Fund is a single-employer defined benefit pension plan established to provide pension benefits for volunteer firemen of the City. 45 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued 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 revenues of the City’s internal service fund are interfund transfers from the general fund for property and liability insurance and charges to user departments for premiums related to health, dental, workers’ compensation, and short term disability self-insurance. The principal operating revenues of the City’s enterprise funds are user fees and charges to customers for water, wastewater, solid waste, and airport services. Operating expenses for these funds include the cost of sales and services, administrative expenses, depreciation, claims and premiums. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first where allowable, and then unrestricted resources, as they are needed. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. Internal service funds are combined and the totals are presented in a single column on the face of the proprietary fund statements. Fiduciary funds are reported by fund type. D. Budgeting and Budgetary Control The City Council formally adopts an annual operating budget for the General, Special Revenue, Capital Projects, Enterprise, Internal Service Funds, and debt service funds. The level of control at which expenditures may not exceed budget is by department. Upon written request by the City Manager, the City Council has the authority to transfer part or all of any unencumbered appropriation balance from one department to another per City Charter requirement. The City Manager and Department heads have the authority to transfer appropriations between divisions and expenditure categories within departments. Appropriations totaling $12,760,832 were transferred from the contingency reserves within the General, Enterprise, Internal Service, and Capital Projects funds. All appropriations expire at the end of the fiscal year except for encumbered and capital improvements carryforward appropriations. Encumbrance accounting, under which purchase orders, contracts and other commitments for the future expenditure of funds are recorded in order to reserve that portion of the related fund balance, is employed in the governmental and proprietary fund types. Encumbrances outstanding at year-end are reported as part of unassigned fund balance and capital improvement carry forward at year-end are reported as part of assigned fund balance. Significant encumbrances for the general fund are $6,545,886, for the streets capital projects fund are $7,625,294, for water enterprise fund are $5,572,893, for wastewater enterprise fund are $22,504,360, and for nonmajor governmental funds are $16,351,400. The budgets are adopted on a basis differing from GAAP in that for budgetary purposes: (1) current year encumbrances are treated as expenditures; (2) bond proceeds for proprietary funds are considered revenue; (3) capital outlays for enterprise funds are treated as expenditures; (4) debt service principal payments are treated as expenditures for enterprise funds; (5) accrued compensated absences are not recognized as expenditures; (6) depreciation and amortization are not recognized as expenditures; (7) estimated landfill closure and post closure costs are not recognized as expenditures until incurred; (8) sales tax collected by merchants but not yet required to be remitted at the end of the fiscal year is not recorded as revenue; and (9) investments are recorded at cost. 46 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments. This limitation restricts the growth of expenditures to a percentage determined by population and inflation, with certain expenditures excluded from the limitation. Through a Home Rule option, any city can adopt its own alternative expenditure limitation if a majority of the qualified electors vote in favor of the issue at a regular election. On August 26, 2014, the City of Chandler voters approved to continue under Home Rule for the next four years. E. Pooled Cash and Investments City Charter, Ordinance and Trust Agreements authorize the City to invest in obligations guaranteed by the full faith and credit of the United States of America, government sponsored enterprises, government bonds with minimum credit ratings of Aa or AA, commercial paper with a minimum short term rating of P1 or A1, negotiable certificates of deposit, corporate bonds carrying a minimum credit rating of A, repurchase agreements, and the Local Government Investment Pool. The City of Chandler Municipal Property Corporation is additionally authorized to invest in banker’s acceptances, U.S. Corporate obligations rated Aa3 and AA-, or better, full faith and credit general obligations or special revenue bonds of any state or political subdivision rated AAA and Aaa, Refcorp interest strips and money market funds. Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest investment contracts with a remaining maturity of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Cash resources of the City are combined to form a pool of cash and investments. Excluded from this pool are the cash and investments of the Chandler Health Care Benefits Trust, Workers’ Compensation and Employer Liability Trust, Chandler Industrial Development Authority, and the Chandler Cultural Foundation. Interest earned on the pooled cash and investments is distributed each month on the basis of average monthly equity in the pool. F. Receivables and Payables 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). The water, wastewater, and solid waste enterprise funds use the direct write off method for bad debts and therefore do not have an allowance for uncollectibles. All other funds’ trade receivables are shown net of an allowance for uncollectibles. Trade accounts receivable in excess of 90 days comprise the trade accounts receivable allowance for uncollectibles. G. Inventories Inventories are stated at average cost using the first-in/first-out (FIFO) method. Inventories are recorded as expenses/expenditures when consumed in the government-wide financial statements and governmental and proprietary fund financial statements, respectively. H. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. 47 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued I. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $5,000 or more and an estimated useful life of more than one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The City defines general government infrastructure capital assets included in capital improvement projects completed at year’s end in excess of $100,000. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are completed. Estimated useful lives for capital assets were determined based on the City’s historical experience and the various industry standards. Capital assets of the City are depreciated using the straight-line method over the following estimated useful lives: Assets Buildings Building improvements Infrastructure System improvements Vehicles Machinery and equipment J. Years 20-40 20 12-50 25 4-7 5-15 Compensated Absences Vacation leave vests with the employee as it is earned dependent on accumulated time and the individual’s vacation benefits associated with their rank within the City. All employees may carryforward only the amount of vacation benefits equal to the maximum allowable earned credits for the preceding calendar year. Upon termination or retirement, an employee will be compensated for accumulated vacation leave dependent on accumulated time and the individual's vacation benefits associated with their rank within the City. Payment will be based on the individual's rate of pay at termination or retirement. Upon death, the same benefits shall be paid to the employee's beneficiary. The amount, including related benefits, for accumulated vacation leave is reported on the governmentwide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee leave, resignations or retirements. Generally, resources from the general fund are used to pay for compensated absences. Sick leave benefits provided for ordinary sick pay are not vested with the employee. Upon retirement, an employee will be compensated for 50 percent of accumulated sick leave. Payment will be based on the monthly compensation paid to the employee at the time of retirement and paid into a Retirement Health Savings Plan. Upon death, the same benefits shall be paid to the employee's beneficiary. K. Long-Term Obligations In the government-wide financial statements and proprietary fund statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental or business-type activities and proprietary fund statement of net position. Bond related items, such as premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are expensed in the current period. 48 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, continued In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. 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 and lease purchase obligations, which 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 the portion that is expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. L. Fund Equity In the fund financial statements, governmental funds report fund balances as Nonspendable, Restricted, Committed, Assigned and Unassigned. Nonspendable, Restricted and Committed classifications represent “reserved” fund balances whereas Assigned and Unassigned classifications represent “unreserved” fund balances (See Note 9 for a more detailed explanation of fund balance classifications). M. Capital Contributions - Enterprise Funds Capital contributions as shown in the enterprise funds represent federal and state grants received, subdividers’ costs of installing water mains, water service connections installed at the customers’ expense, and transfers of equipment from governmental funds. Capital contributions are shown as an inflow of resources in both the government-wide and fund financial statements (See Note 8). N. 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 plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. 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. O. Post-Employment Health Care and Life Insurance Benefits In addition to providing pension benefits, the City allows for continuance of certain health care and life insurance benefits for retired employees. Substantially all of the City's employees may become eligible for those benefits if they are eligible to receive a retirement pension when leaving employment with the City. The cost of retiree health care and life insurance premiums is borne both by the retiree and the specific retirement plan under which they participated. There is no direct cost paid by the City. P. Statements of Cash Flows The City considers all highly liquid investments (including restricted assets) with an original maturity of three months or less to be cash equivalents. In the statements of cash flows, cash receipts and payments are classified according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. 49 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 1 - Summary of Significant Accounting Policies, concluded Q. Interfund Activity Flows of cash from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers between governmental funds are eliminated in the Statement of Activities. Interfund transfers in the fund statements are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds. R. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. S. Implementation of New Accounting Standards During the year ended June 30, 2015, the City 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. This Statement requires governments providing defined benefit pensions to recognize the long-term obligation for pension benefits as a liability, and to more comprehensively and comparably measure the annual costs of pension benefits. This Statement also enhances accountability and transparency through revised note disclosures and new required supplementary information. NOTE 2 - Cash and Investments The City maintains a cash and investment pool that is available for use by all funds, except for the Chandler Industrial Development Authority, the Chandler Cultural Foundation, the Chandler Health Care Benefits Trust, and the Chandler Workers Compensation Employer Liability Trust. Each fund’s portion of this pool is displayed on the financial statements as Equity in Pooled Cash and Investments. Pooled cash and investments are stated at fair value with accrued interest shown separately. Restricted cash and investments are amounts held separately by trustees and amounts segregated due to their source and future intent. In addition, the Industrial Development Authority, the Chandler Cultural Foundation, the Chandler Health Care Benefits Trust, and the Chandler Workers Compensation Employer Liability Trust separately hold investments. Deposits At year-end, cash on hand was $45,640, the carrying amount of the City deposits was $24,777,092, and the bank balance was $15,540,368. Of the bank balance, $10,850,000 was covered by federal depository insurance and $4,690,368 was covered by collateral held in the pledging bank’s trust department in the City’s name. In addition, at year ended June 30, 2015, the City had $110,005,250 of restricted cash held by paying agent consisting of $55,790,534 in July 1, 2015 debt service payments and $54,214,716 in unspent bond proceeds from the 2013 Excise Tax Revenue Bond issuance. The cash held by paying agent is in money market funds invested primarily in short-term U.S. Treasury securities. 50 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 2 – Cash and Investments, continued At June 30, 2015, the City had the following investments and maturities: Investment Maturities (in Years) Investment Type U.S. Treasuries U.S. Agencies: Federal Farm Credit Bank Federal Home Loan Bank Federal Home Loan Mortgage Corp Federal National Mortgage Assn Commercial Paper: Band of Tokyo Comm BNP Paribas Financial Inc Corporate Bonds: Alabama Power Co American Honda Finance Corp Apple Inc Global Bank of America Bank of New York Mellon Berkshire Hathaway Inc Boeing Co Branch Banking and Trust Charles Schwab Corp Chevron Corp Cisco Systems Inc Conocophillips Company Daimler Finance Na LLC Exxon Mobile Corp General Electric Capital Corp IBM Corp John Deere Capital Johnson & Johnson JP Morgan Chase Merck and Co Inc Met Life Glob Funding Inc National Rural Utility Cooperative Pepsico, Inc PNC Bank INA Toyota Motor Credit Corp Note Union Bank INA US Bankcorp Volkswagen Group America Wal-Mart Stores, Inc Wells Fargo Municipal Bonds: Arizona School Facilities Board Money Market Certificate of Deposit Money Market U.S. Treasuries & Agencies Total Fair Value $ 131,043,367 Less than 1 $ 40,506,282 1-5 $ 90,537,085 45,819,454 5,726,887 33,578,240 61,274,337 5,538,061 16,080,537 22,068,826 40,281,393 5,726,887 17,497,703 39,205,511 5,356,529 3,693,662 5,356,529 3,693,662 2,029,497 7,833,901 1,025,285 3,748,695 6,271,298 2,101,573 1,039,686 2,905,977 1,802,723 1,967,969 2,754,705 304,778 2,007,866 3,786,923 3,868,631 4,191,256 3,508,306 2,755,559 7,069,607 3,499,895 2,994,411 3,269,730 2,239,823 3,948,812 545,524 1,003,164 3,153,444 3,201,331 627,722 2,706,410 2,029,497 1,802,723 3,750,000 3,508,306 115,331 3,499,895 3,269,730 Credit Rating 28.97 % Aaa/AA+/AAA 10.13 1.27 7.42 13.55 Aaa/AA+/AAA Aaa/AA+/AAA Aaa/AA+/AAA Aaa/AA+/AAA 1.18 0.82 P-1/A-1 P-1/A-1 2,638,710 200,000 7,833,901 1,025,285 3,748,695 6,271,298 2,101,573 1,039,686 2,905,977 1,967,969 2,754,705 304,778 2,007,866 3,786,923 118,631 4,191,256 2,755,559 6,954,276 2,994,411 2,239,823 1,310,102 545,524 1,003,164 3,153,444 3,201,331 627,722 2,506,410 0.45 1.73 0.23 0.83 1.39 0.46 0.23 0.64 0.40 0.44 0.61 0.07 0.44 0.84 0.86 0.93 0.78 0.61 1.56 0.77 0.66 0.72 0.50 0.87 0.12 0.22 0.70 0.71 0.14 0.60 A1/A/A+ A1/A+/NA Aa1/AA+ A1/A/A+ A1/A+/AAAa2/AA A2/AA A1/A/A+ A2/A/A Aa1/AA A1/AA-/NA A1/A A3/A-/AAaa/AAA A1/AA+/NR Aa3/AAA2/A/NA Aaa/AAA/AAA A3/A/A+ A2/AA/A Aa3/AA-/AAA1/A/A+ A1/A A2/A/A+ Aa3/AAA2/A+/A A1/A+/AAA2/A/NA Aa2/AA A2/A+ 1,358,889 42,206,106 34,121,826 16,055,106 34,121,826 1,358,889 26,151,000 - 0.30 9.33 7.54 Aaa/AAA $ 452,343,798 $ 164,235,021 $ 288,108,777 51 - Concentration of Credit Risk % 100.00 % Aaa/AAAm/NR CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 2 – Cash and Investments, concluded Interest Rate Risk. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the maturities of its investment portfolio to five years. Credit Risk. The City’s investment policy allows for investments in obligations guaranteed by the full faith and credit of the United States of America, government sponsored enterprises, government bonds with minimum credit ratings of Aa or AA, commercial paper with a minimum short term rating of P1 or A1, negotiable certificates of deposit, corporate bonds carrying a minimum credit rating of A, repurchase agreements, and the Local Government Investment Pool. The City’s investment in U.S. Agencies, Corporate Bonds and Money Market Funds were rated no lower than AA+, A-, and AAAm by Standard & Poor’s respectively as of June 30, 2015. Concentration of Credit Risk. The City’s investment policy does not allow for an investment in any one issuer that is in excess of five percent of the City’s total investments. Securities issues by the United States of America or its agencies are exempt from this provision. More than 5 percent of the City’s investments are in the U.S. Agencies, and U.S. Treasuries and Agencies money market funds. See percentages in above table. NOTE 3 - Property Taxes The City’s property tax is levied and collected by the Maricopa County Treasurer. Property taxes are levied on or before the third Monday in August based upon the previous January 1 full cash value of property as determined by the Maricopa County Assessor. Under Arizona Revised Statutes (A.R.S.), two assessed valuations are used. One is for primary taxes (used to fund operating expenditures) and the other is for secondary taxes (used to meet general obligation debt service requirements). Taxes are due in two equal installments on October 1 and March 1 following the levy date and are delinquent on the first day of November and May, respectively. Delinquent amounts bear interest at the rate of 16 percent. The City also levies various personal property taxes during the year, which are due the second Monday of the month following receipt of the tax notice, and become delinquent 30 days thereafter. Pursuant to A.R.S. a lien against assessed real and personal property attaches on the first day of January preceding assessment and levy; however according to case law, an enforceable legal claim to the asset does not arise. The State Constitution and State law specify a property tax levy limitation system. The system consists of two levies, a limited levy known as the primary property tax levy and an unlimited levy referred to as the secondary levy, which may only be used to retire bonded indebtedness. There is also a control on the assessed value of property for primary tax purposes. The base year for the new tax system is fiscal year 1979-80. From this base year, two assessed values evolve. The primary assessed values are allowed to increase by no more than 10 percent a year. The dollar amount of the secondary property tax levy is "unlimited" and the actual full cash value of property is used in determining the tax rate. The primary tax levy is limited to an increase of 2 percent over the previous year's maximum allowable primary levy, plus an increased dollar amount because of a net gain in property not taxed the previous year. Also, the primary property tax from all taxing jurisdictions for homeowners may not exceed 1 percent of the market value of their homes. If the combined primary property tax (for the City, County, School District, etc.) exceeds 1 percent of the market value of the homes, the school districts will reduce their rate until the homeowners' aggregate rate is equal to or less than the allowable 1 percent. The State will then subsidize the school districts for the reduced revenue. This 1 percent limitation applies to primary property taxes only and does not affect the secondary property tax levy. In fiscal year 2014-15, current property tax collections were $27,510,723 or 99.1 percent of the tax levy, and were recognized as revenue when received. At fiscal year end, the delinquent property tax expected to be collected within 60 days is recognized as revenue and recorded as a receivable. Property taxes levied in August 2015 are not available for fiscal year 2014-15; accordingly, such taxes will not be recognized as revenue until fiscal year 2015-16. 52 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 4 – Capital Assets A summary of changes in capital assets for governmental activities is as follows: Balance July 1, 2014 Governmental Activities Capital assets, not being depreciated: Land Construction in progress $ 83,306,168 57,907,490 Additions and Transfers In Deletions and Transfers Out $ $ 2,049,306 35,362,810 Balance June 30, 2015 (31,728,810) 85,355,474 61,541,490 Total capital assets not being depreciated 141,213,658 37,412,116 (31,728,810) 146,896,964 Capital assets, being depreciated: Infrastructure Building and improvements Machinery and equipment 643,021,337 363,644,414 72,134,700 14,704,658 17,963,456 7,145,887 (742,235) 657,725,995 381,607,870 78,538,352 1,078,800,451 39,814,001 (742,235) 1,117,872,217 (247,022,072) (120,326,188) (44,753,640) (25,103,503) (16,875,571) (5,603,705) 546,467 (272,125,575) (137,201,759) (49,810,878) (412,101,900) (47,582,779) 546,467 (459,138,212) Total capital assets, being depreciated, net 666,698,551 (7,768,778) (195,768) 658,734,005 Governmental activities capital assets, net $ 807,912,209 Total capital assets being depreciated Less accumulated depreciation for: Infrastructure Building and improvements Machinery and equipment Total accumulated depreciation $ 29,643,338 $ (31,924,578) Construction in progress in the governmental activities capital assets is comprised of the following: Expended to June 30, 2015 Streets $ Parks and recreation Buildings and related improvements Total $ 53 43,325,121 Remaining Commitments $ 15,773,550 4,169,172 2,726,768 14,047,197 3,629,797 61,541,490 $ 22,130,115 $ 805,630,969 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 4 – Capital Assets, continued A summary of changes in capital assets for business-type activities is as follows: Balance July 1, 2014 Business-Type Activities Capital assets, not being depreciated: Land Construction in progress Total capital assets not being depreciated $ Capital assets, being depreciated: System improvements Building and improvements Vehicles, machinery and equipment Land improvements Total capital assets being depreciated Less accumulated depreciation for: System improvements Buildings and improvements Vehicles, machinery and equipment Land improvements Total accumulated depreciation Total capital assets, being depreciated, net Business-type activities capital assets, net $ Additions and Transfers In 41,306,107 250,073,118 291,379,225 $ 8,523,640 35,261,652 43,785,292 893,664,437 22,395,445 15,569,678 2,228,813 933,858,373 248,601,142 95,695 2,874,948 213,909 251,785,694 (526,374,994) (13,374,739) (14,106,474) (1,847,036) (555,703,243) 378,155,130 (40,377,501) (554,785) (423,100) (104,970) (41,460,356) 210,325,338 669,534,355 $ 254,110,630 Deletions and Transfers Out Balance June 30, 2015 $ (256,696,956) (256,696,956) $ 49,829,747 28,637,814 78,467,561 (83,346) (83,346) 1,142,265,579 22,491,140 18,361,280 2,442,722 1,185,560,721 40,346 40,346 (43,000) $ (256,739,956) (566,752,495) (13,929,524) (14,489,228) (1,952,006) (597,123,253) 588,437,468 $ 666,905,029 Construction in progress in the business-type activities capital assets is comprised of the following: Sewer system improvements Expended to June 30, 2015 Remaining Commitments $ $ Water system improvements Solid waste system improvements Airport improvements Total $ 54 17,173,395 20,083,215 10,190,322 4,282,287 188,839 60,002 1,085,258 245,784 28,637,814 $ 24,671,288 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 4 – Capital Assets, concluded Depreciation expense was charged to functions/programs as follows: Governmental activities: General government Public safety Community services Transportation and development Total depreciation expense - governmental activities Business-type activities: Water Wastewater Solid waste Airport Chandler housing authority Total depreciation expense - business-type activities $ 5,885,707 6,259,967 9,264,989 26,172,116 $ 47,582,779 $ 18,485,368 21,157,140 481,034 830,279 506,535 $ 41,460,356 NOTE 5 - Long-Term Liabilities A. General Obligation Bonds The City 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. Bonds issued for business-type activities are reported in the enterprise funds as they are to be repaid from enterprise revenues. In addition, general obligation bonds have been issued to refund other general obligation bonds. General obligation bonds are direct obligations and pledge the full faith and credit of the City. These bonds are generally issued as 10 to 15 year serial bonds, except for refunding issues, with varying amounts of principal maturing each year. The City has pledged future ad valorem tax revenues and net enterprise revenues to repay a total of $362,215,000 in outstanding general obligation bonds. Proceeds of the bonds were used for governmental and business-type activities. The bonds are payable from ad valorem taxes and enterprise fund revenues and are payable through July 1, 2028. Governmental Activities General Obligation Bonds Annual principal and interest payments on the government activities bonds are expected to require approximately 83 percent of total 2014-15 ad valorem taxes. The total principal and interest remaining to be paid on the governmental activities portion of the bonds is $285,101,583. Principal and interest paid for the current year and total ad valorem property taxes were $24,144,028 and $28,899,684 respectively. 55 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued General obligation bonds outstanding as reported in governmental and business-type activities at June 30, 2015 were as follows: Governmental Activities General Obligation Bonds: $16,265,000 Refunding Bonds, Series 2003, due in annual installments of $1,050,000 to $2,585,000 through 7/1/16; interest at 4.25 percent to 5 percent. $24,800,000 Capital Improvement Bonds, Series 2005, due in an annual installment of $2,900,000 on 7/1/15; interest at 4 percent. $30,905,000 Capital Improvement Bonds, Series 2006, due in annual installments of $2,550,000 to $6,675,000 through 7/1/17; interest at 4 percent to 4.5 percent. $111,045,000 Capital Improvement Bonds, Series 2007, due in annual installments of $1,000,000 to $6,600,000 through 7/1/26; interest at 3 percent to 5 percent. $22,960,000 Refunding Bonds, Series 2007, due in annual installments of $845,000 to $4,240,000 through 7/1/20; interest at 4 percent to 5 percent. $252,000,000 Capital Improvement Bonds, Series 2009, due in annual installments of $1,250,000 to $17,000,000 through 7/1/28; interest at 2.5 percent to 4.25 percent. $9,925,000 Capital Improvement Bonds, Series 2011A, due in annual installments of $500,000 to $3,300,000 starting 7/1/15 through 7/1/20; interest at 3 percent to 4 percent. $10,360,000 Refunding Bonds, Series 2011B, due in annual installments of $795,000 to $1,710,000 through 7/1/18; interest at 2.25 percent to 4 percent. $214,540,000 Refunding Bonds, Series 2014, due in annual installments of $275,000 to $16,210,000 through 7/1/28; interest at 1.5 percent to 5 percent. Total Governmental Activities General Obligation Bonds Outstanding June 30, 2015 $ 3,635,000 2,900,000 14,225,000 16,100,000 18,260,000 25,504,000 9,925,000 3,340,000 128,254,000 $ 222,143,000 Business-Type Activity General Obligation Bonds Annual principal and interest payments on the business-type activities bonds are expected to require less than 56 percent of total 2014-15 net water and wastewater system and airport revenues. The total principal and interest remaining to be paid on the business-type activities portion of the general obligation bonds is $178,609,826. Principal and interest paid for the current year and total net water and wastewater system and airport revenues and were $16,395,244 and $29,374,479 respectively. 56 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Business-Type Activities General Obligation Bonds: Outstanding June 30, 2015 $16,265,000 Refunding Bonds, Series 2003, due in an annual installment of $ $2,385,000 on 7/1/15; interest at 5 percent. 2,385,000 $111,045,000 Capital Improvement Bonds, Series 2007, due in annual installments of $2,000,000 to $3,275,000 through 7/1/26; 12,700,000 interest at 3 percent to 5 percent. $252,000,000 Capital Improvement Bonds, Series 2009, due in annual installments of $6,525,000 to $9,500,000 through 7/1/27; interest 38,701,000 at 2.5 percent to 4.25 percent. $214,540,000 Refunding Bonds, Series 2014, due in annual installments of $185,000 to $11,036,000 beginning 7/1/15 through 7/1/28 86,286,000 interest at 1.5 percent to 5.0 percent. Total Business-Type Activities General Obligation Bonds $ 140,072,000 B. Street and Highway Revenue Bonds Street and highway revenue bonds are issued specifically for the purpose of constructing street and highway projects. These bonds are payable solely from the revenues derived by the City 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 the City. The City has pledged future highway user revenues to repay a total of $14,025,000 in outstanding street and highway user revenue bonds. Proceeds of the bonds were used for improvements and expansions to the City’s streets and highways. The bonds are payable solely from state shared gasoline tax revenues and are payable through July 1, 2019. Annual principal and interest payments on the bonds are expected to require less than 31 percent of total 2014-15 street and highway user revenues. The total principal and interest remaining to be paid on the bonds is $15,129,138. Principal and interest paid for the current year and street and highway user revenue taxes were $4,432,047 and $14,633,470, respectively. 57 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Street and highway revenue bonds outstanding as reported in governmental activities at June 30, 2015 were as follows: Outstanding June 30, 2015 Governmental Activities Revenue Bonds: $1,250,000 Street & Highway User Bonds, Series 1996B, due in an annual $ installment of $25,000 on 7/1/15; interest at 5.5 percent. 25,000 $5,000,000 Street & Highway User Bonds, Series 2003, due in annual installments of $1,000,000 starting 7/1/16 through 7/1/17; 2,000,000 interest at 5 percent. $10,450,000 Street & Highway User Refunding Bonds, Series 2010, due in annual installments of $535,000 to $770,000 through 7/1/19; 3,340,000 interest at 2.25 percent to 3.5 percent. $8,660,000 Street & Highway User Refunding Bonds, Series 2014, due in annual installments of $645,000 to $3,225,000 through 7/1/19; 8,660,000 interest at 2 percent to 4 percent. Total Governmental Activities Revenue Bonds $ 14,025,000 C. Water and Sewer Revenue Bonds Water and sewer revenue bonds are issued as authorized by the voters to provide funds to acquire and construct certain improvements to the water and sewer systems of the City and to pay the costs incurred in connection with the issuance of the bonds. These bonds are secured by a pledge of revenues from these systems, and do not constitute a general obligation of the City backed by the general taxing authority. The City has pledged future water and wastewater system revenues, net of $31,610,000 in outstanding water and wastewater system revenue bonds. improvements and expansions to the City’s water and wastewater systems. water and wastewater system revenues and are payable through July 1, payments on the bonds are expected to require less than 28 percent of net revenue. operating expenses, to repay a total of Proceeds of the bonds were used for The bonds are payable solely from net 2020. Annual principal and interest 2014-15 water and wastewater system The total principal and interest remaining to be paid on the bonds is $34,463,325. Principal and interest paid for the current year and net water and wastewater system revenues were $8,039,398 and $29,391,031 respectively. 58 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Water and sewer revenue bonds outstanding as reported in business-type activities at June 30, 2015 were as follows: Business-Type Activities Revenue Bonds: $17,830,000 Water & Sewer Refunding Bonds, Series 2003, due in an annual installment of $4,035,000 on 7/1/15; interest at 5 percent. $10,000,000 Water & Sewer Bonds, Series 2005, due in annual installments of $225,000 to $1,750,000 through 7/1/17; interest at 4 percent to 5 percent. $15,485,000 Water & Sewer Refunding Bonds, Series 2005, due in annual installments of $1,750,000 to $5,725,000 through 7/1/17; interest at 5 percent. $15,400,000 Water & Sewer Refunding Bonds, Series 2014, due in annual installments of $2,340,000 to $7,555,000 beginning 7/1/16 through 7/1/20; interest at 2 percent to 4 percent. Total Business-Type Activities Revenue Bonds Outstanding June 30, 2015 $ 4,035,000 2,275,000 9,900,000 15,400,000 $ 31,610,000 D. Excise Tax Revenue Obligations Excise tax revenue obligations are issued to provide funds to acquire and construct certain improvements to the water and sewer systems of the City and to pay the costs incurred in connection with the issuance of the obligations. The City has collateralized the obligations by the pledge of all unrestricted excise taxes (transaction privilege tax, franchise fees, state-shared sales and income taxes, and fees for licenses and permits) including all fines and forfeitures, which the City presently or in the future imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The City agrees that, so long as any of the obligations remain outstanding and their principal and interest are unpaid, it will not further encumber the excise taxes unless the excise taxes received by the City in the immediately preceding fiscal year are at least three times the highest combined debt service for the current or any succeeding fiscal year for all outstanding parity obligations, including the additional parity obligations proposed be secured by a pledge of the same excise taxes. The City does have the right to incur additional parity obligations payable from and secured by the excise taxes on parity with the obligations. Annual principal and interest payments on the obligations are being repaid from net water and wastewater system revenues and are expected to require less than 37 percent of net 2014-15 system revenues. The total principal and interest to be paid on the obligations is $212,627,625. Principal and interest paid for the current year and net water and wastewater system revenues were $10,814,175 and $29,391,031, respectively. Total excise tax revenues collected were $170,432,597. Principal and interest paid in 2014-15 equal less than 7 percent of total excise tax revenues collected. 59 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Business-Type Actvities Excise Tax Revenue Obligations: $34,040,000 Water & Sewer Excise Tax Obligations, Series 2009, due in annual installments of $1,300,000 to $3,530,000 through 7/1/28; interest at 2.5 percent to 4.375 percent. $15,000,000 Water & Sewer Excise Tax Obligations, Series 2011, due in annual installments of $740,000 to $1,210,000 through 7/1/28; interest at 3 percent to 5 percent. $104,500,000 Water & Sewer Excise Tax Obligations, Series 2013, due in annual installments of $500,000 to $12,000,000 starting 7/1/15 through 7/1/33; interest at 4 percent to 5 percent. Total Business-Type Activities Excise Tax Revenue Obligations Outstanding June 30, 2015 $ 24,785,000 12,915,000 104,500,000 $ 142,200,000 E. Special Assessment Bonds with Governmental Commitment As trustee for improvement districts, the City 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, are adequate for the scheduled maturities of the bonds payable and related interest. Special assessment bonds are collateralized by properties within the districts. In the event of default by the property owner, the City may enforce an auction sale to satisfy the debt service requirements of the bonds. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. Special assessment bonds payable with governmental commitment outstanding as reported in governmental activities at June 30, 2015 were as follows: Governmental Activities Special Assessment Bonds: Outstanding June 30, 2015 $7,370,000 Spectrum Improvement District Bonds, due in annual installments of $480,000 to $635,000 through 1/1/23; interest at 4 percent. Total Special Assessment Bonds with Governmental Commitment 60 $ 4,440,000 $ 4,440,000 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Changes in Long-Term Liabilities Governmental Activities: Compensated absences Bonds payable: General obligation bonds Revenue bonds Balance July 1, 2014 $ General obligation bonds Revenue bonds Excise tax revenue obligations Issuance premiums Total bonds & obligations payable Arbitrage liability Net Pension Liability Post employment benefits Landfill closure/post closure Totals $ (495,654) Due Within One Year $ $ 9,819,302 87,369 (139,789,000) (3,975,000) 222,143,000 14,025,000 17,055,000 3,970,000 4,905,000 4,346,195 260,929,195 17,045,635 145,299,635 (465,000) (3,493,623) (147,722,623) 4,440,000 17,898,207 258,506,207 480,000 1,732,917 23,237,917 37,392 4,602,971 5,978 21,695,297 (12,392) (20,655,885) 30,978 5,642,383 15,000 5,078,144 197,196,450 15,132,055 18,146,226 3,707,278 (19,735,332) - 195,607,344 18,839,333 - $ 487,254,897 $ 189,812,536 $ (188,621,886) $ 488,445,547 $ 28,418,430 Balance July 1, 2014 Additions Reductions Balance June 30, 2015 Due Within One Year Net Pension Liability Post employment benefits Compensated absences Bonds & obligations payable: 958,122 Balance June 30, 2015 128,254,000 - Arbitrage liability Claims payable Business-Type Activities: $ Reductions 233,678,000 18,000,000 Special assessment bonds Issuance premiums Total bonds payable Totals 9,356,834 Additions $ 1,000,172 $ 105,276 $ (31,817) $ 1,073,631 $ 9,462 150,972,000 36,095,000 148,380,000 12,429,175 86,286,000 11,467,866 (97,186,000) (4,485,000) (6,180,000) (2,965,136) 140,072,000 31,610,000 142,200,000 20,931,905 12,290,000 6,760,000 4,770,000 1,780,578 347,876,175 97,753,866 (110,816,136) 334,813,905 25,600,578 42,608 22,704,592 1,277,762 4,340,000 4,022 846,087 367,203 - (17,608) (4,531,598) - 29,022 19,019,081 1,644,965 4,340,000 5,000 94,446 99,076,454 $ (115,397,159) $ 360,920,604 $ 25,709,486 $ 377,241,309 $ Statutory Debt Limitation In the absence of more restrictive bond authorization ballot limitations, the City is subject to state limitations on the amount of net bonded debt (exclusive of revenue bonds, excise tax revenue obligations and improvement district bonds), it may have outstanding. The statutory debt limitation is 20 percent of the secondary assessed valuation for purposes of water, wastewater, artificial light, acquisition and development of land for open space preserves, recreation facilities, public safety and emergency services, streets and transportation, and 6 percent of the secondary assessed valuation for all other purposes (e.g., library, museum, center for the arts). At June 30, 2015, the 6 percent debt limitation was $142,827,478, providing a debt margin of $132,979,078 and the 20 percent debt limitation was $476,091,596, providing a debt margin of $123,724,996. 61 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, continued Bond Covenants Pursuant to certain bond indenture agreements, the City is obligated to various limitations and restrictions on annual debt service requirements, maintenance and flow of monies through various restricted accounts, minimum amounts to be maintained in various sinking funds and minimum revenue bond coverages. The City is in compliance with all such significant limitations and restrictions in the opinion of City’s management. Debt Service Requirements to Maturity The following is a summary of debt service requirements to maturity for all bonds payable as of June 30, 2015: Years Ended June 30 2016 2017 2018 2019 2020 2021-2025 2026-2029 Total GOVERNMENTAL ACTIVITIES Highway Highway General Improvement Improvement Users Users Obligation Districts Districts Revenue Revenue Interest Principal Interest Principal Interest General Obligation Principal 17,055,000 13,615,000 14,215,000 16,719,000 16,845,000 78,045,000 65,649,000 8,414,631 7,808,794 7,218,469 6,665,337 6,128,422 21,737,790 4,985,140 3,970,000 3,370,000 2,415,000 2,220,000 2,050,000 - 416,688 316,044 210,212 121,594 39,600 - 480,000 500,000 520,000 545,000 565,000 1,830,000 - $ 222,143,000 $ 62,958,583 $ 14,025,000 $ 1,104,138 $ 4,440,000 $ Total 177,600 158,400 138,400 117,600 95,800 148,400 - 30,513,919 25,768,238 24,717,081 26,388,531 25,723,822 101,761,190 70,634,140 836,200 $ 305,506,921 BUSINESS-TYPE ACTIVITIES Years Ended June 30 General Obligation Principal General Obligation Interest Revenue Principal Revenue Interest Excise Tax Principal Excise Tax Interest Total 2016 12,290,000 5,007,650 6,760,000 1,103,400 4,770,000 5,976,450 35,907,500 2017 9,710,000 4,656,513 9,530,000 811,350 2,805,000 5,860,775 33,373,638 2018 10,015,000 4,328,137 7,475,000 500,675 3,605,000 5,743,750 31,667,562 2019 9,806,000 4,020,406 3,160,000 250,600 3,760,000 5,600,556 26,597,562 2020 9,640,000 3,740,300 2,345,000 140,500 4,975,000 5,417,212 26,258,012 2021-2025 47,530,000 13,547,635 2,340,000 46,800 31,320,000 23,208,963 117,993,398 2026-2030 41,081,000 3,237,185 - - 43,465,000 14,737,419 102,520,604 2031-2034 - - - - 47,500,000 3,882,500 51,382,500 $ 140,072,000 $ 38,537,826 $ 31,610,000 $ 2,853,325 $ 142,200,000 $ 70,427,625 $ 425,700,776 Total 62 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 5 - Long-Term Liabilities, concluded Compensated Absences The City’s policy relating to compensated absences is described in Note 1. The long-term portion of this debt is expected to be paid in future years from future resources. Compensated absences for governmental activities have been liquidated primarily by the General Fund. Balance July 1, 2014 Incurred Satisfied Balance Due Within June 30, 2015 One Year Governmental Activities Compensated Absences $ 9,356,834 $ 958,122 $ (495,654) $ 9,819,302 $ 87,369 $ 1,000,172 $ 105,276 $ (31,817) $ 1,073,631 $ 9,462 Business-Type Activities Compensated Absences NOTE 6 - Defeased Debt Current Year Defeasance On October 29, 2014, the City issued $214,540,000 in General Obligation Refunding Bonds with an average interest rate of 2.354 percent. These proceeds were split between governmental funds in the amount of $128,254,000 and business-type funds in the amount of $86,286,000. This issuance was used to advance refund $55,400,000 of Series 2007 General Obligation Bonds with an average interest rate of 4.73 percent and $159,140,000 of Series 2009 General Obligation Bonds with an average interest rate of 4.4 percent. The advanced refunding portion of the total net proceeds totaling $240,269,812 (after payment of $1,208,233 in underwriting fees, insurance, and other issuance costs, receipt of $28,513,501 in original issue premium and a $1,575,455 deposit to city debt service fund) was used to purchase $236,884,391 in U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the 2007 and 2009 General Obligation Bonds. As a result, the liability for these bonds has been removed from the government-wide and proprietary funds statements of net position. The refunding issuance resulted in a deferred outflow of $22,784,549. This difference will be allocated to operations through fiscal year 2028 using the straight-line amortization method. The City completed the refunding to decrease its total debt service payments over the next 14 years by $11,611,797 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $11,450,618. 63 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 6 - Defeased Debt, concluded Prior Year Defeasance In prior years, the City defeased certain general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City’s financial statements. Bonds that have been advance refunded (defeased) as of June 30, 2015: Refunded Debt Outstanding General Obligation Bonds, Series 1996 (Final Redemption 7/1/16) Amount $ 2,910,000 General Obligation Bonds, Series 2007 (Final Redemption 7/1/17) 55,400,000 General Obligation Bonds, Series 2009 (Final Redemption 7/1/19) 159,140,000 Total Refunded Bonds Outstanding $ 217,450,000 NOTE 7 – Landfill Closure and Postclosure Costs State and federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for thirty years after closure. In addition to operating expenses related to landfill activities through its closure date (October 1, 2005), an expense provision and related liability has been recognized based on the future closure and postclosure care costs to be incurred near or after the date the landfill no longer accepts waste. The recognition of these landfill closure and postclosure care costs is based on the amount of the landfill used during the year. As of June 30, 2015, the City estimates total costs related to landfill closure and postclosure care is $15,511,458 and has recognized that entire amount since the landfill no longer accepts waste. To date, $11,171,458 has been paid. The remaining balance of $4,340,000 consists of a current liability of $94,446 and $4,245,554 recorded as a non-current liability on the City’s financial statements. The estimated total current cost of the landfill closure and postclosure, $15,511,458, is based on the amount that would be paid if all equipment, facilities, and services required to care, monitor, and maintain the landfill were acquired as of June 30, 2015. However, the actual cost of closure and postclosure care may be higher due to inflation, changes in technology, or changes in landfill laws and regulations. The City is required by state and federal regulations to comply with local government financial test requirements that assure the City can meet the costs of landfill closure, postclosure care and, if necessary, corrective action when needed. The City complied with all local government financial test requirements for the year ended June 30, 2014. It is anticipated that future inflation costs will be financed in part from earnings on investments. The remaining portion of anticipated future inflation costs and any additional costs that might arise from changes in postclosure requirements, e.g., due to changes in technology or more rigorous environmental regulations, may need to be covered by additional charges to future taxpayers. 64 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 8 - Capital Contributions Capital contributions in the Water, Wastewater, Airport, and Housing Authority funds are the result of system development fees, developer contributions and government contributions. Developer Contributions include $7,211,405 (Wastewater) for agreed reimbursements from Intel Corporation for certain City enterprise fund infrastructure projects directly related to Intel Corporation's FAB 42 expansion. Total capital contributions amounted to the following: System Water Wastewater Development Developer Government Fees Contributions Contributions $ $ $ 7,861,625 9,175,266 Total - $ 17,036,891 9,047,613 8,322,598 - 17,370,211 Airport - - 808,560 808,560 Housing Authority - - 142,079 142,079 $ 16,909,238 $ 17,497,864 950,639 $ 35,357,741 Total $ NOTE 9 – Fund Equity In the fund financial statements, fund balances are reported in five classifications that comprise a hierarchy based on spending constraints placed on the purposes for which resources can be used for better consistency and clarification. The classifications of fund balance are explained below: Nonspendable fund balance includes amounts that cannot be spent because either, 1) it is not in a spendable form, such as inventory or prepaid items or 2) it is legally or contractually required to be maintained intact. Restricted fund balance includes amounts constrained to specific purposes by their providers which are either imposed 1) by external parties (grantors, bondholders and higher levels of government), 2) by law through constitutional provisions or 3) by enabling legislation legally enforceable by external parties. Committed fund balance includes amounts with self-imposed limitations to be used only for a specific purpose pursuant to constraints by formal action of the highest level of decision making authority, namely Mayor and Council. Mayor and Council approval is required to commit resources and amounts cannot be used for any other purpose unless Mayor and Council take the same formal action to remove or change the commitment. Assigned fund balance includes amounts intended to be used for a specific purpose. For general fund, the assigned fund balance must be for a specific purpose and for all other governmental funds the assigned fund balance represents the residual balance of the fund. Fund balance assignments are approved through the Annual Budget Fund Policies section by Mayor and Council. Unlike committed fund balances, assigned fund balance amounts can be changed without formal action by the City Manager. Unassigned fund balance includes amounts available for any purpose; these amounts are reported only in the general fund. In addition, other governmental funds that result in a negative fund balance are presented in this classification. Generally, the City would first apply restricted resources, then committed, assigned and unassigned resources when an expense is incurred for purposes for which more than one classification of fund balance is available. 65 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 9 – Fund Equity, concluded As of June 30, 2015 the constraints placed on fund balance for the major governmental funds and other non-major governmental funds are presented in the following table: Streets Capital Projects General Non-spendable: Inventories Total non-spendable Restricted for: Court enhancement Judicial enhancement Transportation and development Debt service reserve Community development Community services Other capital projects Total restricted Committed to: Total committed Assigned to: Domestic violence prevention Self-insurance purposes Infrastructure maintenance Capital improvement projects Economic development projects Total assigned Unassigned Total unassigned Total fund balances $ 941,359 $ G.O. Bonds Debt Service - $ Other Governmental - $ - Total $ 941,359 941,359 - - - 941,359 1,459,772 332,408 - 36,419,627 - 14,910,017 - 16,331,628 913,486 447,931 17,218,970 20,932,155 1,459,772 332,408 52,751,255 15,823,503 447,931 17,218,970 20,932,155 1,792,180 36,419,627 14,910,017 55,844,170 108,965,994 - - - - - - - - - - 332,408 396,555 21,100,000 65,862,399 14,531,104 - - - 332,408 396,555 21,100,000 65,862,399 14,531,104 102,222,466 - - - 102,222,466 80,152,269 - - (15,322,260) 64,830,009 80,152,269 - - (15,322,260) 64,830,009 $ 185,108,274 $ 36,419,627 $ 14,910,017 $ 40,521,910 $ 276,959,828 The City’s General Fund Reserve Policy requires an amount equal to 15 percent of adopted General Fund operating revenues, excluding transfers in for fiscal year 2014-15. This amounts to $30,725,000 and is included in unassigned above. 66 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 - Retirement and Pension Plans The City of Chandler contributes to the pension plans described below. The City of Chandler 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. The City of Chandler reported $15,282,047 and $1,318,297 of pension expenditures in its governmental and enterprise funds, respectively, related to all pension plans to which it contributed in the current fiscal year. Arizona State Retirement System A. Plan Description The City of Chandler employees not covered by the other pension plans described after this section 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 benefit (OPEB) plan, and a cost-sharing multiple-employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS 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 its financial statements and required supplementary information. The report is available on the ASRS website at www.azasrs.gov. B. 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: Years of service and age required to receive benefit Retirement Initial Membership Date: Before July 1, 2011 On or After July 1, 2011 Sum of years and age equals 80 30 years age 55 10 years age 62 25 years age 60 5 years age 50* 10 years age 62 Any years age 65 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 Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-ofliving 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 members’ 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. 67 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 - Retirement and Pension Plans, continued C. 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 current fiscal year, active ASRS members were required by statute to contribute at the actuarially determined rate of 11.60 percent (11.48 percent for retirement and 0.12 percent for long-term disability) of the members’ annual covered payroll, and the City of Chandler was required by statute to contribute at the actuarially determined rate of 11.60 percent (10.89 percent for retirement, 0.59 percent for health insurance premium benefit, and 0.12 percent for long-term disability) of the members’ annual covered payroll. In addition, the City of Chandler was required by statute to contribute at the actuarially determined rate of 9.57 percent (9.51 for retirement and 0.06 percent for long-term disability) of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to ASRS. The City of Chandler’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: Health Benefit Supplement Fund Long-Term Disability Fund 2015 393,591 80,598 2014 384,872 154,188 2013 439,370 161,241 D. Pension Liability At June 30, 2015, the City of Chandler reported a liability of $105,661,552 for its proportionate share of the net pension liability of the ASRS. 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 update 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. The City of Chandler’s proportion of the net pension liability was based on a projection of the City of Chandler’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2014, the City of Chandler’s proportion was 0.71 percent, which was a decrease of 0.05 percent from its proportion measured as of June 30, 2013. E. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2015, the City of Chandler recognized pension expense for ASRS of $4,700,479 and reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 68 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 - Retirement and Pension Plans, continued Deferred Outflows of Resources $ 5,370,029 - 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 contributions and proportionate share of contributions Contributions subsequent to the measurement date Total Deferred Inflows of Resources $ - - $ 7,323,872 12,693,901 18,476,943 $ 5,180,992 23,657,935 The deferred outflows of resources related to ASRS pensions resulting from contributions subsequent to the measurement date as reported in the table above 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 F. $ (4,537,046) (4,537,046) (4,594,579) (4,619,235) - Actuarial Assumptions The significant actuarial assumptions used to measure the total ASRS pension liability are as follows: Actuarial valuation date Actuarial roll forward date Actuarial cost method Discount rate Projected salary increases Inflation Permanent base increases Mortality rates June 30, 2013 June 30, 2014 Entry age normal 8.0% 3.0-6.75% 3.0% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the five-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 percent 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. 69 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 - Retirement and Pension Plans, continued The target allocation and best estimates of arithmetic real rates of return for each major asset class of ASRS are summarized in the following table: Target Allocation 63% 25% 8% 4% 100% Asset Class Equity Fixed income Real estate Commodities Total Long-Term Expected Real Rate of Return 7.03% 3.20 4.75 4.50 G. Discount Rate The discount rate used to measure the ASRS total pension liability was 8.0 percent, which is less than the long-term expected rate of return of 8.79 percent. 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 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. H. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City of Chandler’s proportionate share of the net pension liability calculated using the discount rate of 8.0 percent, as well as what the proportionate share of 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: 1% Decrease (7.0%) Current Discount Rate (8.0%) 133,550,783 105,661,552 1% Increase (9.0%) City of Chandler's proportionate share of the net pension liability I. 90,530,244 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. Public Safety Personnel Retirement System A. Plan Description City of Chandler public safety employees who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan. A sevenmember 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. 70 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 - Retirement and Pension Plans, continued The PSPRS issues a publicly available financial report that includes their financial statements and required supplementary information. The report is available on the PSPRS website at www.psprs.com. B. 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. Years of service and age required to receive benefit Retirement Initial Membership Date: Before January 1, 2012 On or After January 1, 2012 20 years any age 25 years and age 52.5 15 years age 62 Final average salary is based on Highest 36 months of last 20 years Normal retirement 50% less 2.0% for each year of credited 2.5% per year of credited service, not service less than 20 years or plus to exceed 80% 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% 50% or normal retirement, whichever is greater Accidental disability retirement Survivor benefit: Retired members Active members Highest 60 months of last 20 years 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 earning. PSPRS also provides temporary disability benefits of 50 percent of the member's compensation for up to 12 months. C. Employees Covered by Benefit Terms At June 30, 2015, the following employees were covered by the agent pension plan’s benefit terms: 71 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued PSPRS - Police PSPRS - Fire Inactive employees or beneficiaries currently receiving benefits 101 48 32 21 291 179 424 248 Inactive employees entitled to but not yet receiving benefits Active employees Total D. 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. PSPRS - Police Active members - pension PSPRS - Fire 11.05% 11.05% 23.39% 20.26% 1.34% 1.19% City of Chandler Pension Health Insurance In addition, the City of Chandler was required by statute to contribute at the actuarially determined rate of 19.65 percent for the PSPRS of annual covered payroll of retired members who worked in positions that would typically be filled by an employee who contributes to the PSPRS. 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 were: PSPRS - Police PSPRS - Fire Pension: Contributions made $ 6,083,333 $ 3,193,139 Health insurance premium benefit: Annual OPEB costs 388,298 168,060 Contributions made 388,298 168,060 E. Pension Liability At June 30, 2015, the City of Chandler reported $73,019,189 in net pension liability for police and $35,945,682 in net pension liability for fire. 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. 72 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued F. Actuarial Assumptions The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2014 Entry age normal 7.85% 5.0 - 8.0% 4.0% Included 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 percent 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: Asset Class Short-term investments Absolute return Risk parity Fixed income Real assets GTAA Private equity Real estate Credit opportunities Non-U.S. equity U.S. equity Total Target Allocation 2% 4% 4% 7% 8% 10% 11% 11% 13% 14% 16% 100% 73 Long-Term Expected Real Rate of Return 3.25% 6.75% 6.04% 4.75% 5.96% 5.73% 9.50% 6.50% 8.00% 8.63% 7.60% CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued G. Pension Discount Rates The discount rate of 7.85% was used to measure the total pension liability. The projection of cash flows used to determine the PSPRS discount rates 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 the actuarially determined contribution rates and the member rate. 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 long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments for these plans to determine the total pension liability. Total Pension Liability Increase/Decrease Plan Fiduciary Net Position Net Pension Liability PSPRS - Police Balances at June 30, 2014 $ 152,068,214 $ 90,271,860 $ 61,796,354 Changes for the year: Service cost $ Interest on the total pension liability Changes of benefit terms 4,602,603 - 11,841,118 - $ 11,841,118 4,602,603 1,741,535 - 1,741,535 567,380 - 567,380 - 13,082,165 Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs 13,082,165 Contributions – employer - 5,465,059 (5,465,059) Contributions – employee - 2,675,724 (2,675,724) Net investment income - 12,429,421 (12,429,421) Benefit payments, including refunds of employee contributions (7,054,499) (7,054,499) Administrative Expenses Other changes - - (100,102) 100,102 141,864 (141,864) Net annual changes $ 24,780,302 $ 13,557,467 $ 11,222,835 Balances at June 30, 2015 $ 176,848,516 $ 103,829,327 $ 73,019,189 74 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued Increase/Decrease Plan Fiduciary Net Position Total Pension Liability PSPRS - Fire Balances at June 30, 2014 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions – employer Contributions – employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net annual changes Balances at June 30, 2015 $ 91,765,966 $ 2,949,507 7,191,487 930,663 $ $ $ 59,797,901 - Net Pension Liability $ 31,968,065 $ 2,949,507 7,191,487 930,663 (409,426) 6,465,545 - 3,152,694 1,775,319 8,284,553 (409,426) 6,465,545 (3,152,694) (1,775,319) (8,284,553) (3,258,846) (3,258,846) (66,721) 4,314 9,891,313 69,689,214 66,721 (4,314) 3,977,617 35,945,682 13,868,930 105,634,896 $ $ $ $ H. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the City of Chandler’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: 1% Decrease Current Discount Rate 1% Increase PSPRS - Police: Rate Net pension liability 6.85% $ 95,953,404 $ 49,600,978 7.85% $ 73,019,189 $ 35,945,682 8.85% $ 54,058,072 $ 24,580,833 PSPRS - Fire: Rate Net pension liability 6.85% 75 7.85% 8.85% CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued I. 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. J. Pension Expense For the year ended June 30, 2015, the City of Chandler recognized the following as pension expense: Pension Expense PSPRS - Police $ PSPRS - Fire 12,434,519 6,401,989 K. Pension Deferred Outflows/Inflows of Resources At June 30, 2015, the City of Chandler reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources PSPRS - 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 contributions and proportionate share of contributions Contributions subsequent to the measurement date Total $ 465,309 10,728,707 Deferred Inflows of Resources $ - $ 6,083,333 17,277,349 4,145,622 $ Deferred Outflows of Resources PSPRS - 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 contributions and proportionate share of contributions Contributions subsequent to the measurement date Total 76 $ 5,595,479 $ 4,145,622 Deferred Inflows of Resources $ 3,193,139 8,788,618 - 354,330 2,763,172 $ 3,117,502 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued The amounts reported as deferred outflows of resources related to 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: PSPRS - Police 2016 $ 1,439,144 PSPRS - Fire $ 137,521 2017 1,439,144 137,521 2018 1,439,144 137,521 2019 1,439,144 137,521 2020 1,291,818 Thereafter - 761,593 1,166,300 L. 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: Annual OPEB Cost Percentage of Annual Cost Contributed June 30, 2015 388,298 100% June 30, 2014 307,173 100% - June 30, 2013 317,028 100% - Fiscal Year End Net OPEB Obligation PSPRS - Police: $ - PSPRS - Fire: June 30, 2015 168,060 100% - June 30, 2014 175,987 100% - June 30, 2013 176,845 100% - M. 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. 77 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued Projections of benefits are based on (1) the plan as understood by the City of Chandler and plan’s members and include the types of benefits enforce at the valuation date, and (2) the pattern of sharing benefit costs between the City of Chandler 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 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) Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at 7.85% 4.5%-8.5% 4.5% The funded status of the PSPRS health insurance premium benefit plan in the June 30, 2015, 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 June 30, 2015 Entry age normal Level percent of pay closed Remaining amortization period 21 years for underfunded 20 years for overfunded Asset valuation method 7-year smoothed market value (80%/120% market) Actuarial assumptions: Investment rate of return Projected salary increases includes inflation at 7.85% 4.0%-8.0% 4.0% 78 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, continued N. Agent Plan OPEB Funding 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. PSPRS - Police Actuarial value of assets $ PSPRS - Fire 3,836,997 Actuarial accrued liability $ 2,363,835 4,834,826 2,659,680 997,829 295,845 Unfunded actuarial accrued liability (funding excess) Funded ratio 79.36% Annual covered payroll 26,432,406 88.88% 15,789,534 Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll 3.78% 1.87% Beginning Net Position Restatement The implementation 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, represents a change in accounting principle. Net position as of July 1, 2014, has been restated as follows for this change in accounting principle: Net position, June 30, 2014, as previously reported Net pension liability Net position, July 1, 2014, as restated Statement of Activities Governmental Business-Type Activities Activities $ 851,845,947 $ 595,121,942 182,930,829 21,464,817 $ 668,915,118 $ 573,657,125 Volunteer Firemen's Pension and Relief Fund A. Plan Description The Volunteer Firemen’s Pension Plan (VFPP) is a single-employer defined benefit pension plan administered by the City. The last actuarial valuation of the Volunteer Firemen's Pension and Relief Fund was made as of June 30, 2004, at which time the actuarial liability was fully funded. As of June 30, 2015, there were no retiree and/or beneficiary of a retiree receiving retirement benefits under the plan. There were no terminated employees entitled to benefits and not yet receiving them. Additionally there are no non-vested active employees and no partially vested employees covered by the plan. The VFPP issues a publicly available financial report that may be obtained from the City of Chandler, Management Services Department, P.O. Box 4008, MS 702, Chandler, AZ 85244-4008. 79 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 10 – Retirement and Pension Plans, concluded B. Funding Policy There were no contributions to the Volunteer Firemen's Pension and Relief Fund by the City in fiscal year 2014-15. Pursuant to the June 30, 2004, actuarial valuation, the present value of all benefits payable in future years was $30,494 based upon a 6 percent rate of return and the pension obligation was deemed to be fully funded. NOTE 11 – Post-Employment Benefits Other Than Pensions The cost of post-employment healthcare benefits, from an accrual accounting perspective, similar to the cost of pension benefits, should be associated with the periods in which the cost occurs, rather than in the future year when it will be paid. A. Plan Description The City provides post-employment health care (OPEB) for retired employees through a single employer defined benefit health plan. The plan provides health benefits for eligible retirees, their spouses and dependents though the City’s group health insurance plans, which covers active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Human Resources Department and approved by the City Council. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. The City also provides a Retirement Health Savings Plan (RHSP) for active employees that may be used upon separation from City employment. The City funds $15 per pay period during the term of employment. The plan provides health expense reimbursements eligible under Internal Revenue Code Section 213, other than direct longterm care expenses. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. B. Benefits Provided The City provides post-employment health care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the state retirement plans for public employees and be covered under the City’s health plan during their active status. Upon retirement, the City deposits a one-time payment of $800 per year of City service in the retiree’s Retirement Health Savings Plan account. The retiree must have a minimum of five years of City service to receive this contribution. C. Funding Policy The plan premium rates are determined annually by the City’s Human Resources Department, in collaboration with an outside consulting firm, reviewed and recommended by a five member Health Care Benefits Trust Board, and approved by the City Council. The retiree’s contribution is 100 percent of the actuarially determined blended premium rate. The City makes no contribution to the retirees’ premiums other than allowing them to participate through the City’s pooled benefits. By providing retirees with access to the City’s healthcare plans based on the same rates it charges to active employees, the City 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. By not contributing anything toward this plan in advance, the City employs a pay-as-you-go method through paying the higher rate for active employees each year. As of June 30, 2015, retirees contributed $1,275,060 and the City contributed $1,645,573 (implied subsidy). For both the governmental and proprietary activities, the corresponding fund is used to liquidate the OPEB liability. In prior years the general fund, streets capital project fund, water enterprise fund, and wastewater enterprise fund have each had to liquidate a portion of the net other postemployment benefit obligation when an employee of that fund has retired. 80 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 11 – Post-Employment Benefits Other Than Pensions, continued D. Annual OPEB Costs and Net OPEB Obligation The City’s annual other post-employment benefit (OPEB) cost for each plan is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The City’s annual OPEB cost for the current year and related information for each plan are as follows at June 30, 2015: Annual Required Contribution (ARC) $ ARC Adjustment 5,806,989 (743,327) Interest Adjustment to Net OPEB Obligation 656,393 Annual OPEB Cost $ Contributions Made 5,720,055 (1,645,573) Increase in Net OPEB Obligation $ Net OPEB Obligation - Beginning of year 4,074,482 16,409,817 Net OPEB Obligation - End of year $ 20,484,299 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2015 were as follows: Percentage of Fiscal Year Annual Employer OPEB Cost Net OPEB Ended June, 30 2015 OPEB Cost $ 5,720,055 Contributions $ 1,645,573 Contributed 28.77% Obligation $ 20,484,299 2014 $ 5,743,316 $ 1,352,308 23.55% $ 16,409,817 2013 $ 4,199,727 $ 980,252 23.34% $ 12,018,809 E. Funded Status and Funding Progress The funded status of the plan as of June 30, 2015, the most recent actuarial valuation, is as follows: Actuarial Accrued Liability $ 50,002,842 Actuarial Value of Plan Assets - Unfunded Actuarial Accrued Liability (UAAL) Funded Ratio $ 50,002,842 0.0% Covered Payroll $ 103,252,770 UAAL as a percentage of covered payroll 81 48.45% CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 11 – Post-Employment Benefits Other Than Pensions, concluded Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. 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 year are as follows: 1. 2. 3. The actuarial cost method used is the projected unit credit method. As of the valuation date, July 1, 2015, there are no assets, hence no need for an actuarial value of assets. The amortization method is level percent of payroll. The amortization period is 30 years. The period is open. In the June 30, 2015 actuarial valuation, the projected unit credit actuarial cost method was used along with a discount rate of 4.5 percent. In addition, the actuarial assumptions included: an inflation rate of 3.0 percent, an annual healthcare inflation rate of 7 percent initially, reduced by decrements to an ultimate rate of 5 percent after 8 years, and an annual projected salary increase of 2 percent. NOTE 12 - Commitments and Contingencies The City is subject to a number of lawsuits, investigations, and other claims (some of which involve alleged damages in substantial amounts) that are incidental to the ordinary course of its operations, including those related to property damage and personal injury matters as well as alleged civil rights violations. All cases are being vigorously defended by the City of Chandler both as to liability as well as the amount of damages claimed. Although the City Attorney cannot reasonably estimate the actual results upon disposition of the outstanding cases, some could be significant to the City’s operations, which is why the City not only self-insures with a $2,000,000 liability retention, but carries an additional $50,000,000 in liability insurance policies which are in excess of its self-insured retention. While the ultimate resolution of such lawsuits, investigations, and claims cannot be determined at this time, in the opinion of City management, (based on the advice of the City Attorney), the resolution of these matters will not have a material adverse effect on the City’s financial position. NOTE 13 - Risk Management The City is exposed to various risks of loss related to litigation, claims and torts; theft of, damage to, and destruction of assets; errors and omissions; employee health claims; and natural disasters (for which the City carries commercial insurance). The City established a Self-Insurance Fund (an Internal Service Fund) to account for and finance its uninsured risks of loss. This fund is broken down into the following areas: workers’ compensation insurance, property and liability insurance, health insurance, dental insurance, and short-term disability insurance. Premiums are paid into the Internal Service Fund by all other funds for worker’s compensation insurance and by the general fund for property and liability insurance. The premiums are available to pay claims, fund claim reserves and pay administrative costs of the program. As with any risk retention program, the City is contingently liable with respect to claims beyond those actuarially projected. Interfund premiums are used to reduce the amount of claim expenditures reported in the Internal Service Fund. In the opinion of City management, based on the advice of the City Attorney, the outcome of such litigation and claims will not have materially adverse effect on the City’s financial position. 82 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 13 - Risk Management, concluded In fiscal year 2014-15, the Self-Insurance Fund provided coverage for up to a maximum of $50,000 for each property damage claim and $2,000,000 per occurrence for general liability claims. Coverage is also provided for claims up to $600,000 in worker’s compensation. The City purchases commercial insurance for claims in excess of coverage provided by the Self-Insurance Fund and for all other risks of loss. During fiscal year 2014-15, there were no significant reductions in the amounts of excess coverage purchased, nor has the City experienced any settlements in excess of insurance coverage over the past three fiscal years. The City also has commercial stop loss insurance that provides specific (by individual member) coverage for health insurance claims incurred in excess of $300,000 within the plan year, and aggregate (plan wide) coverage for health insurance claims incurred above 110 percent of total plan wide claims for the plan year. Liabilities include an amount for claims that have been incurred but not reported (IBNR). 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. The claims liability of $5,642,382 reported as claims payable in the Self-Insurance Fund at June 30, 2015, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that liabilities be reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. This includes known future payments made for insurance as well as estimated IBNR calculations. Changes in the Fund’s claims liability amount in fiscal years 2014 and 2015 were: Years Ended June 30, 2014 Risk of Loss Workers' compensation $ Property and liability 2015 Current Year Claims and Changes in Estimates Beginning of Fiscal Year Balance 2,706,547 $ 62,395 Claim Payments $ (1,569,953) $ Balance at Fiscal Year End 1,198,989 954,586 207,298 (199,714) 962,170 Health 2,429,042 18,747,498 (18,878,548) 2,297,992 Dental 146,639 1,863,419 (1,866,238) Workers' compensation 143,820 $ 6,236,814 $ 20,880,610 $ (22,514,453) $ 4,602,971 $ 1,198,989 $ 2,542,528 $ (2,267,111) $ 1,474,406 Property and liability Health Dental 962,170 421,672 (111,545) 1,272,297 2,297,992 17,012,979 (16,553,159) 2,757,812 143,820 $ 4,602,971 83 1,718,117 $ 21,695,296 (1,724,070) $ (20,655,885) $ 137,867 5,642,382 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 14 – Interfund Transfers The interfund transfers in and out at June 30, 2015 are as follows: Fund General Transfer Detail Capital projects-streets Non-major governmental Non-major enterprise Internal service Total general fund Transfers In $ - Capital projects-streets General Total capital projects Non-major governmental General Non-major governmental Enterprise-water Enterprise-wastewater Non-major enterprise Internal service Total non-major governmental funds Water Non-major governmental 643,526 643,526 Total water fund Wastewater Non-major governmental Total wastewater fund Non-major enterprise General Non-major enterprise Non-major governmental Total non-major enterprise funds Internal service General Non-major governmental Total internal service fund Transfers Out $ 643,526 22,886,943 554,780 950,000 25,035,249 Total $ - 22,886,943 4,605,416 302,256 153,574 111,516 14,759 28,074,464 4,605,416 135,916 4,741,332 - 302,256 - 302,256 - 153,574 153,574 554,780 583,441 135,916 1,274,137 583,441 111,516 694,957 950,000 950,000 14,759 14,759 30,942,127 $ 30,942,127 Interfund transfers are made from various funds and cost centers to fund costs including property and liability insurance, technology replacement, vehicle replacement, debt service, streets capital projects and general government capital projects. 84 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 15 – Interfund Receivables and Payables A. Interfund Advances To/Advances From Advances To General Advances From Total Capital projects-public safety buildings & improvements $ 13,282,082 Capital projects-streets 2,814,300 Capital projects-public buildings 3,489,427 Total general fund 19,585,809 Enterprise Water Enterprise-wastewater 3,900,000 Total $ 23,485,809 Interfund advances were made from the general fund to capital projects funds to cover expenditures in impact fee funds until impact fees are received. $500,000 of the public safety buildings and improvements capital projects fund advance and $400,000 of the public buildings capital projects fund advance will be repaid within one year. The interfund advance was made from the water enterprise fund to the wastewater system development fees fund of the wastewater enterprise to cover expenditures until system development fees are collected. None will be repaid within one year. B. Interfund Due To/Due From Due from other funds Due to other funds General Capital projects-Grants General Special revenue-community development General Non-major enterprise-Chandler housing authority Total $ 3,888,790 229,211 72,478 $ 4,190,479 Interfund due to/due from other funds was made as a short term loan until the grants capital projects fund, community development special revenue fund and Chandler Housing Authority enterprise fund due from other government’s balances are received. 85 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2015 NOTE 16 – Joint Venture The City and the Town of Gilbert entered into an Intergovernmental Agreement (Agreement) for the design, construction and operation of a Joint Water Treatment Plant. Under the Agreement, the real property, plant infrastructure and raw water pipelines will be jointly owned with each party entitled to 50 percent of the plant capacity, and each party paying 50 percent of the construction costs. The Town of Gilbert acts as the Lead Agent, overseeing construction activities, which were substantially complete at June 30, 2015, and operating the plant. The City’s investment in the joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total Investment as of June 30, 2015, was: City of Chandler's Share $62,611,174 Town of Gilbert's Share 68,904,567 $131,515,741 NOTE 17 – Deficit in Fund Balances The police confiscated property special revenue fund and grants capital projects fund had deficit fund balances of $53,209 and $2,862,939 respectively. The deficits will be covered by future revenues. The public buildings capital projects fund and the public safety buildings and improvements capital projects fund had deficit fund balances of $3,434,845 and $8,971,267 respectively. The funds were financed by advances of interfund loans and will be paid back by future impact fee revenues. 86 REQUIRED SUPPLEMENTARY INFORMATION 87 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Property taxes $ Sales taxes Franchise fees State shared Grants and entitlements 6,964,900 $ 6,964,900 $ 7,099,821 $ 134,921 99,250,000 99,250,000 108,657,130 2,990,000 2,990,000 3,300,129 310,129 57,907,000 57,907,000 59,236,588 1,329,588 9,407,130 147,000 147,000 153,397 6,397 Licenses and permits 3,580,400 3,580,400 5,146,556 1,566,156 Charges for services 18,970,960 18,970,960 19,981,917 1,010,957 Fines and forfeitures 3,477,100 3,477,100 3,629,008 151,908 Rentals 1,078,400 1,078,400 751,163 Contributions 150,000 150,000 150,000 - Interest revenue 670,300 670,300 901,638 231,338 Miscellaneous 230,000 230,000 241,051 11,051 195,416,060 195,416,060 209,248,398 13,832,338 28,833,461 30,660,810 29,862,194 798,616 788,201 836,270 797,624 38,646 Communications and public affairs 2,073,811 2,296,995 2,104,873 192,122 Law 3,552,717 3,608,219 3,367,230 240,989 City magistrate 4,183,379 4,242,231 3,879,603 362,628 57,407,297 46,489,209 10,002,604 36,486,605 784,819 822,853 789,806 33,047 Fire 30,409,131 31,255,820 30,683,794 572,026 Police 60,777,605 64,080,640 62,744,184 1,336,456 Transportation and development 18,735,955 21,357,319 20,079,498 1,277,821 Community services 19,024,437 20,484,527 19,654,153 830,374 226,570,813 226,134,893 183,965,563 42,169,330 (31,154,753) (30,718,833) 25,282,835 56,001,668 Total revenues (327,237) EXPENDITURES: General government City manager City clerk Management services Mayor and council Public safety Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in - Transfers out - - - (39,572,449) (39,572,449) (25,035,249) 14,537,200 (39,572,449) (39,572,449) (25,035,249) 14,537,200 Change in fund balance (70,727,202) (70,291,282) Fund balances, July 1, 2014 179,697,796 179,697,796 Total other financing sources (uses) Fund balances, June 30, 2015 $ 108,970,594 See accompanying notes to this schedule. 88 $ 109,406,514 $ 247,586 70,538,868 179,697,796 - 179,945,382 $ 70,538,868 City of Chandler Schedule for the Proportionate Share of the Net Pension Liability Arizona State Retirement System For the year ended June 30, 2015 2015 City's proportion of the net pension 0.71% liability (asset) City's proportionate share of the net pension liability (asset) City's covered-employee payroll $ 105,661,552 $ 64,263,236 City's proportionate share of the net pension liability (asset) as a percentage 164.42% of its covered-employee payroll Plan fiduciary net position as a 69.49% percentage of the total pension liability 89 City of Chandler Schedule of Contributions All Pension Plans For the year ended June 30, 2015 2015 Arizona State Retirement System: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 7,323,872 7,323,872 Contribution deficiency (excess) $ - City's covered-employee payroll $ 67,230,465 Contributions as a percentage of covered-employee payroll 10.89% Public Safety Personnel Retirement System - Police: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 6,083,333 6,083,333 Contribution deficiency (excess) $ - City's covered-employee payroll $ 26,187,641 Contributions as a percentage of covered-employee payroll 23.23% Public Safety Personnel Retirement System - Fire: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 3,193,139 3,193,139 Contribution deficiency (excess) $ - City's covered-employee payroll $ 15,671,133 Contributions as a percentage of covered-employee payroll 20.38% 90 City of Chandler Schedule of Funding Progress Last Three Actuarial Valuations For the year ended June 30, 2015 Actuarial Valuation Date Actuarial Valuation of Assets Actuarial Accrued Liability (AAL) Unfunded AAL (UAAL) $ $ Funded Ratio Covered Payroll $ UAAL as a percentage of Covered Payroll PSPRS - Police: 2015 $ 2014 3,836,997 3,466,256 2013 - 4,834,826 997,829 79.36% 26,432,405 3.78% 4,500,038 1,033,782 77.03% 24,120,110 4.29% 4,246,573 4,246,573 - 23,985,615 17.70% 295,845 88.88% 15,789,534 1.87% 2,503,120 347,849 86.10% 15,201,535 2.29% 2,459,475 2,459,475 - 15,395,116 15.98% PSPRS - Fire: 2015 $ 2014 2,363,835 $ 2,155,271 2013 - 2,659,680 $ $ Post Employment Benefits Other than Pensions(1): 52,022,842 - 103,252,770 48.45% 2013 2015 $ - - $ 52,300,279 52,022,842 $ 52,300,279 - 96,935,187 53.95% 2011 - 33,009,726 33,009,726 - 93,253,195 35.40% (1) The actuarial cost method used is projected unit credit method. 91 $ City of Chandler Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System - Police For the year ended June 30, 2015 2015 Total pension liability Service cost $ 4,602,603 Interest 11,841,118 Changes of benefit terms 1,741,535 Differences between expected and actual experience 567,380 Changes of assumptions 13,082,165 Benefit payments, including refunds (7,054,499) Net change in total pension liability 24,780,302 Total pension liability—beginning 152,068,214 Total pension liability—ending $ 176,848,516 Plan fiduciary net position Contributions—employer $ 5,465,059 Contributions—employee 2,675,724 Net investment income 12,429,421 Benefit payments, including refunds (7,054,499) Administrative expense (100,102) Other 141,864 Net change in plan fiduciary net position 13,557,467 Plan fiduciary net position—beginning 90,271,860 Plan fiduciary net position—ending $ 103,829,327 Net pension liability—ending $ 73,019,189 Plan fiduciary net position as a percentage of the total pension liability 58.71% Covered-employee payroll 24,120,118 Net pension liability as a percentage of covered-employee payroll 302.73% 92 City of Chandler Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System - Fire For the year ended June 30, 2015 2015 Total pension liability Service cost $ 2,949,507 Interest 7,191,487 Changes of benefit terms 930,663 Differences between expected and actual experience (409,426) Changes of assumptions 6,465,545 Benefit payments, including refunds (3,258,846) Net change in total pension liability 13,868,930 Total pension liability—beginning 91,765,966 Total pension liability—ending $ 105,634,896 Plan fiduciary net position Contributions—employer $ 3,152,694 Contributions—employee 1,775,319 Net investment income 8,284,553 Benefit payments, including refunds (3,258,846) Administrative expense (66,721) Other 4,314 Net change in plan fiduciary net position 9,891,313 Plan fiduciary net position—beginning 59,797,901 Plan fiduciary net position—ending $ 69,689,214 Net pension liability—ending $ 35,945,682 Plan fiduciary net position as a percentage of the total pension liability 65.97% Covered-employee payroll 15,201,530 Net pension liability as a percentage of covered-employee payroll 236.46% 93 CITY OF CHANDLER, ARIZONA Required Supplementary Information June 30, 2015 NOTE 1 – Budgetary Basis of Accounting The adopted budget of the City is prepared on a basis consistent with accounting principles generally accepted in the United States of America with the following exception: reserved encumbrances at year end are recognized as expenditures. Consequently, the following adjustment is necessary to present the change in fund balance on a budgetary basis in order to provide a meaningful comparison. Change in Fund Balances Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds $ Reserved encumbrances at June 30, 2015 recognized as budgetary expenditures in fiscal year ended June 30, 2015 Budgetary Comparison Schedule for the General Fund 5,410,478 (5,162,892) $ 247,586 NOTE 2 – Pension Plan Schedules Actuarial Assumptions for Valuations Performed The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated, which is the most recent actuarial valuation. The actuarial assumptions used are disclosed in the notes to the financial statements. Factors that Affect Trends – ASRS The actuarial assumptions used in the June 30, 2013, valuation were based on the results of an actuarial experience study for the five-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. Factors that Affect Trends – PSPRS 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. 94 OTHER FINANCIAL STATEMENTS 95 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Streets Capital Projects For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Interest revenue $ 218,000 $ 218,000 $ 199,080 $ (18,920) System development fees 4,126,180 4,126,180 5,114,796 988,616 Regional transportation tax 5,516,122 5,516,122 10,106,891 4,590,769 - - - - 9,860,302 9,860,302 15,420,767 5,560,465 4,200,000 4,200,000 - 4,200,000 Miscellaneous Total revenues EXPENDITURES: General government Transportation and development 17,899,261 1,143,963 512,453 631,510 Capital outlay 11,639,559 31,741,618 19,303,778 12,437,840 33,738,820 37,085,581 19,816,231 17,269,350 (23,878,518) (27,225,279) (4,395,464) 22,829,815 5,527,122 5,527,122 (5,527,122) (5,527,122) Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out - Total other financing sources (uses) Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 643,526 - 5,527,122 643,526 643,526 (23,878,518) (27,225,279) (3,751,938) 32,546,267 32,546,267 32,546,267 8,667,749 96 $ 5,320,988 $ (4,883,596) - 28,794,329 23,473,341 $ 23,473,341 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Obligation Bonds Debt Service For the year ended June 30, 2015 Positive (Negative) Budgeted Amounts Original Final Actual Variance with Amounts Final Budget REVENUES: Property taxes $ Interest revenue Total revenues 21,257,000 $ 21,257,000 $ 21,799,863 $ 542,863 107,000 107,000 126,187 19,187 21,364,000 21,364,000 21,926,050 562,050 15,020,000 15,020,000 17,055,000 (2,035,000) 9,494,169 9,494,169 7,089,028 2,405,141 - - 722,293 (722,293) 24,514,169 24,514,169 24,866,321 (352,152) (3,150,169) (3,150,169) (2,940,271) 209,898 EXPENDITURES: Principal Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Bond premium - - Face amount of bonds issued - Payment to escrow agent - - Total other financing sources (uses) 17,045,635 (17,045,635) - 128,254,000 (128,254,000) - (143,635,520) 143,635,520 1,664,115 (1,664,115) (1,454,217) Change in fund balances (3,150,169) (3,150,169) (1,276,156) Fund balances, July 1, 2014 16,186,172 16,186,172 16,186,172 Fund balances, June 30, 2015 $ 13,036,003 97 $ 13,036,003 $ 14,910,016 $ (1,454,217) 98 City of Chandler Non-Major Governmental Funds NON-MAJOR SPECIAL REVENUE FUNDS A Special Revenue Fund is used to finance particular activities and is created out of receipts of specific taxes or other earmarked revenues. Such funds are authorized by statutory or charter provisions to pay for certain activities with some special form of continuing revenues. Highway User Used to account for the receipt and expenditure of the City’s allocation of State highway user taxes. State law restricts the use of these monies to maintenance, construction and reconstruction of streets, and repayment of transportation-related debt. Local Transportation Assistance Used to account for the receipt and expenditure of the City’s allocation of State lottery monies. State law restricts the use of these monies to street and highway projects in the public right-of-way and to mass transportation purposes. Grants Used to account for the receipt and expenditure of miscellaneous federal and state grants awarded to the City for various, specific operational purposes. Community Development Used to account for monies received from the U.S. Department of Housing and Urban Development and Maricopa County for affordable housing activities including housing rehabilitation and redevelopment activities. Police Confiscated Property Used to account for monies confiscated by the police department and monies received from the sale of confiscated property. Parks and Recreation Use to account for donations for park improvements and programs restricted pursuant to donor covenants. Library Used to account for donations for library improvements and programs restricted pursuant to donor covenants. NON-MAJOR DEBT SERVICE FUNDS Highway User Revenue Bonds Accumulates monies for the payment of principal and interest requirements of the City's Highway User Revenue Bonds. Revenues for repayment are generated from gas tax generated within the State of Arizona. Special Assessment Bonds Accumulates monies for the payment of principal and interest on Special Assessment Bonds that were issued to finance costs of improvements applicable to benefiting properties within certain improvement districts. 99 City of Chandler Non-Major Governmental Funds, Continued NON-MAJOR CAPITAL PROJECTS FUNDS General Government Used to account for the acquisition, construction, reconstruction, improvement and renovation of general government projects. Public Buildings Used to account for bond proceeds used for the acquisition, construction, reconstruction, improvement and renovation of City buildings. Grants Used to account for the receipt and expenditure of miscellaneous federal and state grants awarded to the City for various, specific capital purposes. Community Services Used to account for the acquisition of land and equipment, development, construction and improvement of community parks and projects. Public Safety Buildings and Improvements Used to account for public safety, e.g., police and fire department, building construction, renovation and improvements and equipment purchases. Vehicle and Capital Equipment Replacement Used to account for the purchase and/or replacement of general equipment-type assets, e.g., vehicles, furniture, and office equipment. Special Assessments Used to account for expenditures related to special assessment districts within the City. Technology Replacement Used to account for the purchase and/or replacement of technology assets. Municipal Arts Used to account for amounts earmarked for the acquisition of art for public spaces. 100 City of Chandler Combining Balance Sheet Non-Major Governmental Funds June 30, 2015 Special Revenue Local Police Community Confiscated Parks and Highway Transportation User Assistance Grants $ 3,499,620 $ 1,512,026 Property Recreation Library - $ 1,760,299 $ 275,456 $ 59,994 Development ASSETS Equity in pooled cash and investments $ 10,152,697 Receivables (net of allowance for uncollectible): Accounts $ - - 113 - - - - Special assessments - - - - - - - Notes - - - 448,503 - - - 24,281 6,901 3,332 - 3,353 546 136 Accrued interest Due from other governments Total assets 1,367,068 - 232,879 285,797 419,735 - - $ 11,544,046 $ 3,506,521 $ 1,748,350 $ 734,300 $ 2,183,387 $ 276,002 $ 60,130 $ $ 318 $ 182,423 $ $ 34,760 $ 19,061 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued payroll 60,613 46,251 - 182,522 - 41,413 10,903 - - - Trust liabilities and deposits - - - 4 2,201,836 - - Accrued interest - - - - - - - Due to other funds Advances from other funds Arbitrage liability - current Bonds payable - current - - - 229,211 - - - - - - - - - - 243,135 318 223,836 286,369 2,236,596 19,061 - - - - - - - - - - - - - - - 11,300,911 - 3,506,203 - 1,524,514 - 447,931 - (53,209) 256,941 - 60,130 - 11,300,911 3,506,203 1,524,514 447,931 (53,209) 256,941 60,130 $ 11,544,046 $ 3,506,521 $ 1,748,350 $ 734,300 $ 276,002 $ 60,130 Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Total deferred inflows of resources Fund Balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows and fund balances $ 2,183,387 (Continued) 101 City of Chandler Combining Balance Sheet Non-Major Governmental Funds June 30, 2015 Debt Service Capital Projects Special Highway User Assessment General Public Revenue Bonds Bonds Government Buildings Grants ASSETS Equity in pooled cash and investments $ 4,410,216 $ 799,892 $ 1,422,420 $ 54,219 $ - Receivables (net of allowance for uncollectible): Accounts - - - - - Special assessments - 4,043,375 - - - Notes - - - - - - 1,484 - 363 - - - - - 3,084,656 Accrued interest Due from other governments Total assets $ 4,410,216 $ 4,844,751 $ 1,422,420 $ 54,582 $ 3,084,656 $ - $ 8,006 $ 1,419,186 $ - $ 2,058,424 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued payroll Trust liabilities and deposits Accrued interest Due to other funds Advances from other funds Arbitrage liability - current Bonds payable - current Total liabilities - - 3,234 - 381 - - - - - 228,863 88,800 - - - - - - - 3,888,790 5,000 3,970,000 - - 3,489,427 - - 4,203,863 96,806 1,422,420 3,489,427 5,947,595 - 4,040,812 - - - - 4,040,812 - - - 206,353 - 707,133 - - (3,434,845) (2,862,939) 206,353 707,133 - (3,434,845) (2,862,939) Deferred inflows of resources: Unavailable revenues - special assessments Total deferred inflows of resources Fund Balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows and fund balances $ 4,410,216 $ 4,844,751 102 $ 1,422,420 $ 54,582 $ 3,084,656 Capital Projects Public Safety Community Services Total Other Buildings and Capital Equipment Improvements $ 17,177,408 Vehicle and $ 4,329,999 Replacement $ 13,137,757 Special Technology Municipal Governmental Assessments Replacement Arts Funds $ 4,536,227 $ 3,422,769 $ 31,359 $ 66,582,358 - - - - - - 113 - - - - - - 4,043,375 - - - - - - 448,503 33,184 8,409 25,873 8,920 6,755 62 - - - - - - 123,599 5,390,135 $ 3,429,524 $ 31,421 $ 76,588,083 $ $ - $ $ 17,210,592 $ 4,338,408 $ 13,163,630 $ 4,545,147 $ $ 25,213 $ 203,958 $ 34 642 66 - 2,154 - - 4,391,481 241,315 - - - - - - 2,201,840 - - - - - - 317,663 333,234 - - - - - - - 6,238 - 13,282,082 2,314 - - - - - 4,118,001 16,771,509 13,552 3,970,000 340,114 13,309,675 203,958 2,188 - - 32,025,361 - - - - - - 4,040,812 - - - - - - 4,040,812 16,870,478 - (8,971,267) 12,959,672 - 4,542,959 - 3,429,524 - 31,421 - 55,844,170 (15,322,260) 16,870,478 (8,971,267) 12,959,672 4,542,959 3,429,524 31,421 40,521,910 4,545,147 $ 3,429,524 $ 17,210,592 $ 4,338,408 $ 13,163,630 $ $ 31,421 $ 76,588,083 (Concluded) 103 City of Chandler Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds For the year ended June 30, 2015 Special Revenue Local Police Highway Transportation User Assistance Grants Community Confiscated Parks and Development Property Recreation Library REVENUES: Highway user taxes $ 14,633,470 $ - $ - $ - $ - $ - $ - Grants and entitlements - 707,939 1,894,952 1,454,968 - 81,951 71,950 System development fees - - - - - - - Special assessments - - - - - - - Charges for services - 96,128 - - - - - Fines and forfeitures - - - - 971,417 - - Interest revenue 61,371 18,627 10,571 230 - 1,448 607 Miscellaneous 36,862 3,300 - - - - - 14,731,703 825,994 1,905,523 1,455,198 971,417 83,399 72,557 General government - - 321,382 1,320,978 - - - Public safety - - 872,951 - 550,590 - - 7,505,569 1,161,922 - - - - - Total revenues EXPENDITURES: Current: Transportation and development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures - - 271,056 - - 77,434 4,611 751,509 364,825 229,164 - 438,789 9,111 121,449 - - - - - - - - - - - - - - 8,257,078 1,526,747 1,694,553 1,320,978 989,379 86,545 126,060 210,970 134,220 (17,962) (3,146) (53,503) REVENUES OVER (UNDER) 6,474,625 EXPENDITURES (700,753) OTHER FINANCING SOURCES (USES): Proceeds from disposal of capital assets - - - - - - - Transfers in - - - - - - - Transfers out Total other financing sources (uses) (4,601,415) (4,001) - (135,916) - - - (4,601,415) (4,001) - (135,916) - - - (704,754) 210,970 (1,696) REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER 1,873,210 FINANCING USES (17,962) (3,146) (53,503) FUND BALANCES (DEFICITS): Beginning of year End of year 9,427,701 $ 11,300,911 $ 4,210,957 1,313,544 3,506,203 $ 1,524,514 104 449,627 $ 447,931 (35,247) $ (53,209) 260,087 $ 256,941 113,633 $ 60,130 Debt Service Capital Projects Special Highway User Assessment General Public Revenue Bonds Bonds Government Buildings $ - $ - $ - - $ - - - $ Services - $ - 6,273,674 3,734,090 - - - 229,413 - - 573,438 - - - - - - - - - - - - - - - - - 3,801 - 1,199 - 87,970 - 25 248,214 - - 473 - 577,264 248,214 230,612 6,273,674 3,822,533 - - 779,505 - 4,712 - - - 332,814 - - - - - 325,483 - - - - - 44,658 - 1,860 161,597 - - 16,967,217 - 9,678,366 3,112,332 3,970,000 465,000 - - - - 462,046 186,900 - - - - 4,432,046 651,900 18,449,677 - 9,684,938 3,273,929 (4,432,046) (74,636) (18,201,463) 230,612 (3,411,264) 548,604 - - - - - 4,432,317 - 18,201,463 - - - - - - - - - 4,432,317 - 18,201,463 - - - (74,636) - 230,612 781,769 - 271 206,082 $ - Community Grants 206,353 $ 707,133 $ - (3,411,264) (3,665,457) $ - (3,434,845) 548,604 548,325 $ (2,862,939) 16,321,874 $ 16,870,478 (Continued) 105 City of Chandler Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds For the year ended June 30, 2015 Capital Projects Public Safety Vehicle and Total Other Buildings and Capital Equipment Improvements Replacement Special Technology Municipal Governmental Assessments Replacement Arts Funds REVENUES: Highway user taxes $ Grants and entitlements - $ - $ - $ - $ - $ 14,633,470 - - - - - 10,485,434 1,507,324 - - - - 5,470,827 Special assessments - - - - - 573,438 Charges for services - - - - 31,991 128,119 Fines and forfeitures - - - - - 971,417 26,239 76,011 24,098 23,020 128 335,320 - 34,558 - - - 323,432 1,533,563 110,569 24,098 23,020 32,119 32,921,457 System development fees Interest income Miscellaneous Total revenues EXPENDITURES: Current: General government - - 53,575 323,901 - 2,804,053 1,406 - - - - 1,757,761 Transportation and development - - - - - 8,992,974 Community services - - - - 49,912 611,128 3,170,107 3,466,756 - 3,068,359 - 41,377,984 - - - - - 4,435,000 - - - - - 648,946 3,171,513 3,466,756 53,575 3,392,260 49,912 60,627,846 (1,637,950) (3,356,187) (29,477) (3,369,240) (17,793) (27,706,389) Public safety Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from disposal of capital assets - 103,964 - - - 103,964 Transfers in - 2,808,810 - 2,631,874 - 28,074,464 Transfers out - - - - - (4,741,332) - 2,912,774 - 2,631,874 - 23,437,096 Total other financing sources (uses) REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER (1,637,950) FINANCING USES (443,413) (29,477) (737,366) (17,793) (4,269,293) 49,214 44,791,203 FUND BALANCES (DEFICITS): Beginning of year End of year (7,333,317) $ (8,971,267) 13,403,085 $ 12,959,672 4,572,436 $ 4,542,959 4,166,890 $ 3,429,524 $ 31,421 $ 40,521,910 (Concluded) 106 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Highway User Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Highway user taxes $ 13,000,000 $ 13,000,000 - - - 63,000 63,000 61,370 (1,630) - - 36,862 36,862 13,063,000 13,063,000 14,731,702 1,668,702 General government 4,177,700 3,067,648 - 3,067,648 Transportation and development 9,334,776 8,706,766 8,127,054 579,712 Capital outlay 2,401,364 3,106,772 1,892,325 1,214,447 15,913,840 14,881,186 10,019,379 4,861,807 (2,850,840) (1,818,186) 4,712,323 6,530,509 (4,846,123) (4,846,123) (4,601,415) 244,708 (4,846,123) (4,846,123) (4,601,415) 244,708 (7,696,963) (6,664,309) 9,427,701 9,427,701 1,730,738 $ 2,763,392 Charges for services Interest revenue Miscellaneous Total revenues $ 14,633,470 $ 1,633,470 - EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers out Total other financing sources (uses) Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 107 $ 110,908 6,775,217 9,427,701 - 9,538,609 $ 6,775,217 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Local Transportation Assistance Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ 694,355 $ 694,355 $ 707,939 $ 13,584 Charges for services 88,000 88,000 96,128 8,128 Interest revenue 20,000 20,000 18,625 (1,375) - - 3,300 3,300 802,355 802,355 825,992 23,637 General government 2,001,800 1,552,707 - 1,552,707 Transportation and development 1,537,992 1,937,398 1,165,020 772,378 13,278 415,106 370,866 44,240 3,553,070 3,905,211 1,535,886 2,369,325 (2,750,715) (3,102,856) (709,894) 2,392,962 (4,001) (4,001) (4,001) - (4,001) (4,001) (4,001) - (2,754,716) (3,106,857) (713,895) 2,392,962 4,210,957 4,210,957 Miscellaneous Total revenues EXPENDITURES: Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers out Total other financing sources (uses) Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 1,456,241 108 $ 1,104,100 4,210,957 $ 3,497,062 $ 2,392,962 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Grants Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ 4,315,053 Interest revenue Total revenues $ 4,315,053 $ 1,894,952 $ (2,420,101) - - 10,573 10,573 4,315,053 4,315,053 1,905,525 766,460 478,352 323,886 154,466 2,750,250 2,718,602 915,253 1,803,349 - - - - 751,743 741,454 299,417 442,037 1,785,050 2,002,321 398,452 1,603,869 6,053,503 5,940,729 1,937,008 4,003,721 (1,738,450) (1,625,676) 1,313,544 1,313,544 (2,409,528) EXPENDITURES: General government Public safety Transportation and development Community services Capital outlay Total expenditures Change in fund balances Fund balances, July 1, 2014 Fund balances (deficits), June 30, 2015 $ (424,906) 109 $ (312,132) (31,483) 1,594,193 1,313,544 $ 1,282,061 $ 1,594,193 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Community Development Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ 2,935,000 Interest revenue Total revenues $ 2,935,000 $ 1,454,968 $ (1,480,032) - - 229 229 2,935,000 2,935,000 1,455,197 (1,479,803) 3,902,500 3,610,695 1,650,639 1,960,056 - - - - 3,902,500 3,610,695 1,650,639 1,960,056 EXPENDITURES: General government Capital outlay Total expenditures (967,500) (675,695) (195,442) 480,253 Transfers in - - - - Transfers out - - (135,916) (135,916) - - (135,916) (135,916) (967,500) (675,695) (331,358) 344,337 449,627 449,627 449,627 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Total other financing sources (uses) Change in fund balances Fund balances, July 1, 2014 Fund balances (deficits), June 30, 2015 $ (517,873) 110 $ (226,068) $ 118,269 $ 344,337 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Police Confiscated Property Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Fines and forfeitures $ 3,000,000 $ 3,000,000 Total revenues 3,000,000 $ 3,000,000 971,417 $ 971,417 (2,028,583) (2,028,583) EXPENDITURES: 300,000 - - - Public safety General government 1,605,000 1,920,131 614,069 1,306,062 Capital outlay 1,395,000 1,144,386 751,086 393,300 3,300,000 3,064,517 1,365,155 1,699,362 Total expenditures Change in fund balances Fund balances (deficits), July 1, 2014 Fund balances (deficits), June 30, 2015 $ (300,000) (64,517) (393,738) (35,247) (35,247) (35,247) (335,247) 111 $ (99,764) $ (428,985) (329,221) $ (329,221) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Parks and Recreation Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ Interest revenue Total revenues 103,602 $ 103,602 $ 81,951 $ (21,651) 2,000 2,000 1,446 (554) 105,602 105,602 83,397 (22,205) 252,736 201,794 77,434 124,360 - - 9,111 252,736 201,794 86,545 115,249 (147,134) (96,192) (3,148) 93,044 260,087 260,087 EXPENDITURES: Community services Capital outlay Total expenditures Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 112,953 112 $ 163,895 (9,111) 260,087 $ 256,939 $ 93,044 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Library Special Revenue For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ Interest revenue 93,000 $ 1,000 Miscellaneous Total revenues 93,000 $ 1,000 71,950 $ 606 (21,050) (394) - - - - 94,000 94,000 72,556 (21,444) 93,000 25,672 4,806 20,866 - - 9,111 (9,111) 93,000 25,672 13,917 11,755 1,000 68,328 58,639 (9,689) 113,633 113,633 113,633 EXPENDITURES: Community services Capital outlay Total expenditures Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 114,633 113 $ 181,961 $ 172,272 $ (9,689) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Government Capital Projects For the year ended June 30, 2015 Total Budgeted Amounts Original Final Positive Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Miscellaneous $ 250,000 $ 250,000 $ 248,213 $ (1,787) 250,000 250,000 248,213 General government Public safety Transportation and development Community services 13,353,145 4,662,086 2,068,958 1,080,051 7,733,957 432,370 415,000 76,943 1,073,388 348,145 481,680 62,033 Capital outlay 20,273,190 34,117,815 20,895,675 13,222,140 41,437,430 42,776,085 22,860,921 19,915,164 (41,187,430) (42,526,085) (22,612,708) (19,916,951) 41,187,430 41,187,430 18,201,463 (22,985,967) - - - - 41,187,430 41,187,430 18,201,463 (22,985,967) Total revenues (1,787) EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures $ 6,660,569 84,225 (66,680) 14,910 Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Change in fund balances - (1,338,655) (4,411,245) (42,902,918) Fund balances, July 1, 2014 - - - - Fund balances (deficits), June 30, 2015 $ - 114 $ (1,338,655) $ (4,411,245) $ (42,902,918) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public Buildings Capital Projects For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: System development fees $ Interest revenue Total revenues 162,490 $ 162,490 $ 229,413 $ 66,923 1,200 1,200 1,199 (1) 163,690 163,690 230,612 66,922 20,000 20,000 - 20,000 - - - - 20,000 20,000 - 20,000 143,690 143,690 230,612 86,922 (286,235) (286,235) 230,612 516,847 (3,665,457) (3,665,457) EXPENDITURES: General government Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Change in fund balances Fund balances (deficits), July 1, 2014 Fund balances (deficits), June 30, 2015 $ (3,951,692) 115 $ (3,951,692) (3,665,457) $ (3,434,845) $ 516,847 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Grants Capital Projects For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: Grants and entitlements $ Total revenues 11,768,570 $ 11,768,570 $ 6,273,671 11,768,570 11,768,570 6,273,671 $ (5,494,899) (5,494,899) EXPENDITURES: 1,352,150 436,211 4,712 431,499 12,827,982 14,500 - 14,500 Community services 1,813,924 97,708 1,860 95,848 Capital outlay 6,111,368 23,016,479 15,683,278 7,333,201 22,105,424 23,564,898 15,689,850 7,875,048 (10,336,854) (11,796,328) (9,416,179) 2,380,149 General government Transportation and development Total expenditures Change in fund balances 548,325 Fund balances, July 1, 2014 Fund balances (deficits), June 30, 2015 $ (9,788,529) 116 548,325 $ (11,248,003) 548,325 $ (8,867,854) $ 2,380,149 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Community Services Capital Projects For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: System development fees $ Interest revenue 2,548,050 $ 2,548,050 $ 3,734,090 $ 1,186,040 93,100 93,100 87,971 - - 473 473 2,641,150 2,641,150 3,822,534 1,181,384 General government Community services 5,571,050 6,143,825 5,676,926 408,467 165,947 (5,676,926) (242,520) Capital outlay 1,771,080 5,751,627 4,972,895 (778,732) 13,485,955 11,837,020 5,138,842 (6,698,178) Excess (deficiency) of revenues over expenditures (10,844,805) (9,195,870) (1,316,308) (5,516,794) Change in fund balances (10,844,805) (9,195,870) (1,316,308) 7,879,562 16,321,874 16,321,874 16,321,874 Miscellaneous Total revenues (5,129) EXPENDITURES: Total expenditures Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 5,477,069 117 $ 7,126,004 $ 15,005,566 $ 7,879,562 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public Safety Buildings and Improvements Capital Projects For the year ended June 30, 2015 Positive Budgeted Amounts Original Final Non-GAAP (Negative) Actual Variance with Amounts Final Budget REVENUES: System development fees $ Interest revenue 862,460 $ 862,460 $ 1,507,324 $ 644,864 31,000 31,000 26,240 893,460 893,460 1,533,564 640,104 260,000 260,000 - 260,000 4,650,450 968,271 1,406 966,865 - 3,683,311 3,318,337 364,974 4,910,450 4,911,582 3,319,743 1,591,839 Excess (deficiency) of revenues over expenditures (4,016,990) (4,018,122) (1,786,179) 2,231,943 Change in fund balances (4,016,990) (4,018,122) (1,786,179) 2,231,943 Fund balances (deficits), July 1, 2014 (7,333,317) (7,333,317) (7,333,317) - (11,350,307) $ (11,351,439) Total revenues (4,760) EXPENDITURES: General government Public safety Capital outlay Total expenditures Fund balances (deficits), June 30, 2015 $ 118 $ (9,119,496) $ 2,231,943 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Vehicle and Capital Equipment Capital Projects For the year ended June 30, 2015 Positive Non-GAAP (Negative) Actual Variance with Amounts Final Budget Budgeted Amounts Original Final REVENUES: Interest revenue $ Miscellaneous 94,000 $ 94,000 $ 76,014 $ (17,986) 15,000 15,000 34,558 19,558 109,000 109,000 110,572 1,572 General government 2,632,100 2,500,312 - 2,500,312 Capital outlay 6,843,591 8,381,882 4,496,368 3,885,514 9,475,691 10,882,194 4,496,368 6,385,826 (9,366,691) (10,773,194) (4,385,796) 6,387,398 Total revenues EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Proceeds from disposal of capital assets 70,000 70,000 103,964 33,964 2,773,594 2,773,594 2,808,810 35,216 2,843,594 2,843,594 2,912,774 69,180 Change in fund balances (6,523,097) (7,929,600) (1,473,022) Fund balances, July 1, 2014 13,403,085 13,403,085 13,403,085 6,879,988 $ 5,473,485 $ 11,930,063 Transfers in Total other financing sources (uses) Fund balances, June 30, 2015 $ 119 6,456,578 $ 6,456,578 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Assessments Capital Projects For the year ended June 30, 2015 Positive (Negative) Budgeted Amounts Original Final Actual Variance with Amounts Final Budget REVENUES: Interest revenue $ 26,000 $ 26,000 $ 24,097 $ (1,903) 26,000 26,000 24,097 (1,903) 76,534 73,544 53,575 19,969 76,534 73,544 53,575 19,969 Excess (deficiency) of revenues over expenditures (50,534) (47,544) (29,478) 18,066 Change in fund balances (50,534) (47,544) (29,478) 18,066 Total revenues EXPENDITURES: General government Total expenditures 4,572,436 Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 4,521,902 120 4,572,436 $ 4,524,892 4,572,436 $ 4,542,958 $ 18,066 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Technology Replacement Capital Projects For the year ended June 30, 2015 Positive Non-GAAP (Negative) Actual Variance with Amounts Final Budget Budgeted Amounts Original Final REVENUES: Interest revenue $ 28,000 $ 28,000 $ 23,021 $ 23,021 (4,979) 28,000 28,000 General government 1,489,699 1,395,185 412,194 982,991 Capital outlay 3,424,071 3,612,082 3,093,479 518,603 4,913,770 5,007,267 3,505,673 1,501,594 (4,885,770) (4,979,267) (3,482,652) (1,506,573) 2,587,395 2,587,395 2,631,874 44,479 2,587,395 2,587,395 2,631,874 44,479 (2,298,375) (2,391,872) 4,166,890 4,166,890 4,166,890 1,775,018 $ 3,316,112 Total revenues (4,979) EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Total other financing sources (uses) Change in fund balances Fund balances, July 1, 2014 Fund balances, June 30, 2015 $ 1,868,515 121 $ (850,778) (1,462,094) $ (1,462,094) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Municipal Arts Capital Projects For the year ended June 30, 2015 Positive (Negative) Budgeted Amounts Original Final Actual Variance with Amounts Final Budget REVENUES: Charges for services $ - Interest revenue Total revenues $ - $ 31,991 $ 31,991 200 200 127 (73) 200 200 32,118 31,918 EXPENDITURES: Community services Total expenditures Change in fund balances Fund balances, July 1, 2014 Fund balances (deficits), June 30, 2015 $ 50,000 51,000 49,912 1,088 52,000 52,000 49,912 2,088 (51,800) (51,800) (17,794) 34,006 49,214 49,214 49,214 (2,586) 122 $ (2,586) $ 31,420 $ 34,006 123 124 City of Chandler Non-Major Proprietary Funds Solid Waste Used to account for the provision of solid waste (refuse) services to the residential customers of the City. All activities necessary to provide such service are accounted for in this fund. Airport Used to account for the provision of airport services at the City's municipal airport. All activities necessary to provide such service are accounted for in this fund, including but not limited to administration, operation, maintenance, financing, and related debt service, billing, and collection. Chandler Housing Authority Used to account for expenditures of the City's housing assistance programs which consist of housing owned and operated by the City and rent subsidy payments to private sector owners of dwelling units. Financing for this fund is derived from tenants and the United States Department of Housing and Urban Development. 125 City of Chandler Combining Statement of Net Position Non-Major Proprietary Funds June 30, 2015 Solid Waste Airport Chandler Total Other Housing Proprietary Authority Funds ASSETS Current assets: Equity in pooled cash and investments $ 13,360,908 $ 158,235 $ 4,688,839 $ 18,207,982 1,604,078 51,288 55,016 1,710,382 Due from other governments - - 68,611 68,611 Inventories - 18,560 - 18,560 Prepaid items - - 315,702 315,702 Accrued interest receivable 25,341 151 - 25,492 Other receivables 61,788 - - 61,788 15,052,115 228,234 5,128,168 20,408,517 - - 336,450 336,450 Non-depreciable 7,277,757 19,963,633 1,751,537 28,992,927 Depreciable, net 8,082,083 9,807,307 7,514,852 25,404,242 15,359,840 29,770,940 9,266,389 54,397,169 15,359,840 29,770,940 9,602,839 54,733,619 30,411,955 29,999,174 14,731,007 75,142,136 126,939 126,939 253,878 507,756 Accounts receivable Total current assets Long-term assets: Notes receivable Capital assets: Total capital assets Total long-term assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of pension plan items 126 LIABILITIES Current liabilities: Accounts payable 882,268 41,353 54,045 Accrued payroll 67,242 20,021 73,981 977,666 161,244 Trust liabilities and deposits 15,527 41,980 208,642 266,149 Accrued interest - 1,469 - 1,469 Due to other funds - - 72,478 123,600 30,183 17,111 72,478 170,894 604 247 779 1,630 - 25,196 - 25,196 94,446 - - 94,446 1,183,687 160,449 427,036 1,771,172 67,305 27,490 96,947 191,742 - 78,351 - 78,351 1,056,616 1,056,616 2,113,231 4,226,463 183,123 63,801 - 246,924 4,245,554 - - 4,245,554 5,552,598 1,226,258 2,210,178 8,989,034 6,736,285 1,386,707 2,637,214 10,760,206 236,579 236,579 473,159 946,317 15,359,840 29,738,795 9,266,389 54,365,024 Customer advances Compensated absences payable Bonds payable Landfill closure and postclosure liability Total current liabilities Long-term liabilities: Compensated absences payable Bonds payable Net pension liability OPEB liability Landfill closure and postclosure liability Total long-term liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflows of pension plan items NET POSITION Investment in capital assets Restricted for Family Self Sufficiency escrow accounts Unrestricted Total net position $ - - 119,075 119,075 8,206,190 (1,235,968) 2,489,048 9,459,270 23,566,030 $ 28,502,827 127 $ 11,874,512 $ 63,943,369 City of Chandler Combining Statement of Revenues, Expenses, and Changes in Net Position Non-Major Proprietary Funds For the year ended June 30, 2015 Solid Waste Airport Chandler Total Other Housing Proprietary Authority Funds OPERATING REVENUES: Service fees $ 14,140,246 $ 1,010,288 $ - $ 15,150,534 Grants and entitlements - - 5,862,477 5,862,477 Rentals - - 877,380 877,380 Sales taxes - 10,865 - 10,865 Miscellaneous 1 5,049 459,238 464,288 14,140,247 1,026,202 7,199,095 22,365,544 1,088,333 100,000 - 1,188,333 Total operating revenues OPERATING EXPENSES: General and administrative 1,475,243 482,349 1,638,487 3,596,079 10,432,862 18,952 282,770 10,734,584 Commodities Housing assistance payments 603,308 425,539 493,444 - - 4,512,048 1,522,291 4,512,048 Depreciation and amortization expense 481,034 830,279 506,535 1,817,848 14,080,780 1,857,119 7,433,284 23,371,183 Personal services Contractual services Total operating expenses 59,467 OPERATING INCOME (LOSS) (830,917) (234,189) (1,005,639) NONOPERATING REVENUES (EXPENSES): Interest revenue 68,200 Interest expense - Accretion of bond premium Gain (loss) on disposal of capital assets - 410 (7,000) Total nonoperating revenues (expenses) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 13,374 (2,938) 81,984 - (2,938) 196 - - - 196 (7,000) 61,200 (2,332) 120,667 (833,249) 13,374 72,242 (220,815) (933,397) CAPITAL CONTRIBUTION AND TRANSFERS: Capital contributions - 808,560 142,079 950,639 Transfers in - 269,780 1,004,357 1,274,137 Transfers out (95,643) (15,873) (95,643) Total transfers Change in net position (583,441) (694,957) 1,062,467 562,995 1,529,819 25,024 229,218 342,180 596,422 23,541,006 28,273,609 11,532,332 63,346,947 NET POSITION Beginning of year, restated End of year $ 128 23,566,030 $ 28,502,827 $ 11,874,512 $ 63,943,369 129 City of Chandler Combining Statement of Cash Flows Non-Major Proprietary Funds For the year ended June 30, 2015 Solid Waste CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Cash received from grantors Cash payments to suppliers Cash payments to employees for services $ 14,071,957 (12,072,179) (1,440,101) Chandler Housing Authority Airport $ 1,051,007 (491,111) (499,103) $ 1,309,027 5,906,170 (5,383,304) (1,649,092) Total Other Proprietary Funds $ 16,431,991 5,906,170 (17,946,594) (3,588,296) 559,677 60,793 182,801 803,271 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in Transfers out (95,643) 269,780 (15,873) 1,004,357 (583,441) 1,274,137 (694,957) Net cash provided (used) by noncapital financing activities (95,643) 253,907 420,916 579,180 (248,041) (214,892) (434,601) (897,534) Principal paid on bond maturities - (20,000) - (20,000) Interest paid on bonds Capital contributions - (3,167) - 142,079 (3,167) 142,079 (248,041) (238,059) (292,522) (778,622) Net cash provided (used) by operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 42,859 260 13,373 56,492 42,859 260 13,373 56,492 258,852 76,901 324,568 660,321 13,102,056 81,334 4,364,271 17,547,661 158,235 $ 4,688,839 Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year $ 13,360,908 130 $ $ 18,207,982 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Changes in assets, liabilities and deferred items: (Increase) decrease in receivables (Increase) decrease in inventories (Increase) decrease in other assets Increase (decrease) in payables Increase (decrease) in accrued payroll and compensated absences Increase (decrease) in deposits Increase (decrease) in customer advances Increase (decrease) in net pension items Increase (decrease) in OPEB liability Total adjustments Net cash provided (used) by operating activities NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Contributions of capital assets from city government $ 59,467 $ (830,917) $ (234,189) $ (1,005,639) 481,034 830,279 506,535 1,817,848 (114,721) 52,324 16,822 46,431 (26,234) 44,554 500,210 13,594 15,334 38,046 (5,875) (13) 11,224 (26,234) 15,355 891,710 6,440 24,296 (42,581) (25,133) (100) (52,467) 416,990 (94,687) 15,334 24,296 47,789 10,947 (25,146) 57,555 (104,935) 59,909 1,808,910 $ 559,677 $ 60,793 $ 182,801 $ 803,271 $ - $ 808,560 $ - $ 808,560 Loss on disposal of assets Accretion of bond premiums 131 7,000 - - 7,000 - 196 - 196 City of Chandler Statement of Changes in Assets and Liabilities - Agency Fund Fiduciary Funds For the year ended June 30, 2015 Balance Balance July 1, 2014 Additions Deletions June 30, 2015 Miscellaneous Deposit Fund Assets: Equity in pooled cash and investments Total assets $ 7,000 $ 3,000 $ (2,000) $ 8,000 $ 7,000 $ 3,000 $ (2,000) $ 8,000 $ 7,000 $ 3,000 $ (2,000) $ 8,000 $ 7,000 $ 3,000 $ (2,000) $ 8,000 Liabilities: Due to others Total liabilities 132 133 134 City of Chandler Financial Data Schedule Housing and Redevelopment For the year ended June 30, 2015 AS SUBMITTED ELECTRONICALLY TO: U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REAL ESTATE ASSESSMENT CENTER (REAC) The Financial Data Schedule is a required electronic submission to the U.S. Department of Housing and Urban Development by all Housing Authorities receiving HUD funding. Financial data on each of the grant programs is presented in a combining schedule. The Financial Data Schedule presented herein has been submitted electronically to HUD. The activities of the City of Chandler Housing and Redevelopment Division are reported as an enterprise fund in the City's Comprehensive Annual Financial Report. 135 City of Chandler Financial Data Sheet Housing and Redevelopment June 30, 2015 Combining Statement of Net Position - All HUD Programs FDS Line # Low Rent Public Housing AMP 1 14.850a Account description AMP 2 14.850a All AMPs 14.850a ASSETS 111 113 114 122 125 126 126.1 142 161 162 164 166 171 200 Cash - unrestricted Cash - restricted for FSS escrow accounts Cash - security deposits $ Accounts receivable - HUD other projects Accounts receivable - miscellaneous Accounts receivable - tenants - dwelling rents Allowance for doubtful accounts - dwelling rents Prepaid expenses and other assets 1,493,702 17,264 59,800 $ 1,303,972 8,669 58,620 $ 2,797,674 25,933 118,420 50,406 5,513 (1,604) - 6,541 (4,009) - 50,406 12,054 (5,613) - 2,249,977 5,374,706 161,884 (5,854,772) 81,241 1,590,642 9,461,129 69,163 (5,274,454) 40,619 3,840,619 14,835,835 231,047 (11,129,226) 121,860 3,638,117 7,260,892 10,899,009 29,254 22,375 159 21,391 59,800 10,588 12,200 11,877 103 58,620 6,523 41,454 34,252 262 21,391 118,420 17,111 17,264 17,759 676,234 151,411 8,669 11,477 338,117 75,705 25,933 29,236 1,014,351 227,116 1,006,235 523,291 1,529,526 Net investment in capital assets Restricted net position Unrestricted net position 1,931,795 17,264 682,823 5,846,480 8,669 882,452 7,778,275 25,933 1,565,275 TOTAL NET POSITION 2,631,882 6,737,601 9,369,483 Land Buildings Furniture, equipment, machinery - admin Accumulated depreciation Notes and mortgages receivable - non-current Deferred outflow of resources TOTAL ASSETS AND DEFERRED OUTFLOW OF RESOURCES LIABILITIES 312 321 322 333 341 345 Accounts payable Accrued wage/payroll taxes payable Accrued compensated absences - current Accounts payable - other government Tenant security deposits Other current liabilities 353 354 357 400 Noncurrent liabilities - other Accrued compensated absences - noncurrent Accrued Pension and OPEB liabilities Deferred inflow of resources TOTAL LIABILITIES AND DEFERRED INFLOW OF RESOURCES NET POSITION 508.4 511.4 512.4 TOTAL LIABILITIES AND NET POSITION $ 136 3,638,117 $ 7,260,892 $ 10,899,009 Business Activities Central Office 14.850a $ Other Business 203,695 - $ - $ 1,440,621 5,966 Housing Choice Vouchers 14.871 Total Business Activities $ 848 - 1,644,316 5,966 $ 848 - 4,872 107,860 - Total $ 18,205 47,727 315,702 4,446,862 133,793 124,386 68,611 47,727 12,902 (5,613) 315,702 32,718 (25,718) 78,702 353,640 1,227,704 129,671 (229,901) 336,450 353,640 1,227,704 162,389 (255,619) 336,450 78,702 35,470 (35,470) 53,314 4,194,259 16,063,539 428,906 (11,420,315) 336,450 253,876 289,397 3,264,999 3,554,396 547,680 15,001,085 3,450 22,591 471 - 3,229 3 5,966 1,550 6,679 22,591 474 5,966 1,550 5,911 17,047 134 49,537 54,044 73,890 870 21,391 124,386 68,198 52,505 655,102 146,679 339 52,844 655,102 146,679 58,323 14,867 443,779 99,363 84,256 96,947 2,113,232 473,158 880,798 11,087 90,104 688,961 3,110,372 7,000 (598,401) 1,481,114 1,772,798 1,488,114 1,174,397 93,142 (234,423) 9,266,389 119,075 2,505,249 (591,401) 3,253,912 2,662,511 (141,281) 11,890,713 289,397 $ 3,264,999 $ 2,752,615 $ 547,680 $ 137 15,001,085 City of Chandler Financial Data Sheet Housing and Redevelopment For the year ended June 30, 2015 Statement of Revenues, Expenses, and Changes in Fund Net Position - All HUD Programs Low Rent Public Housing AMP 1 AMP 2 14.850a FDS Line # All AMPs 14.850a 14.850a Account description REVENUES 70300 70400 70600 70610 70710 70720 70730 71100 71400 71500 Net tenant rental revenue Tenant revenue - other HUD operating grants HUD capital grants Management fees earned Asst management fees earned Bookkeeping fees earned Investment income - unrestricted Fraud recovery Other revenue $ TOTAL REVENUES 391,092 8,025 761,856 140,100 10,659 32,872 $ 1,344,604 406,037 398,176 66,957 9,629 16,482 $ 897,281 797,129 8,025 1,160,032 207,057 20,288 49,354 2,241,885 EXPENSES 91100 91200 91300 91310 91500 91600 91900 92000 92100 92300 92400 93100 93200 93300 93800 94100 94200 94300 94500 96100 96200 96210 96300 96400 97300 97350 97400 Administrative salaries Auditing fees Management fees Bookkeeping fees Employee benefit contributions - administrative Office expenses Other operating - administrative Asset management fees Tenant services - salaries Employee benefit contributions - tenant services Tenant services - other Water Electricity Gas Other utility expenditures Ordinary maintenance and operations - labor Ordinary maintenance and operations - materials Ordinary maintenance and operations - contract costs Ordinary maintenance and operations - ordinary maintenance Insurance Other general expenditures Compensated absences Payments in lieu of taxes Bad debt - tenant rents Total operating expenditures $ Other expenditures: Housing assistance payments HAP portability-in Depreciation TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES BEFORE OTHER FINANCING SOURCES (USES) 145,128 2,525 118,823 14,423 61,681 2,696 20,883 19,560 27,796 2,417 782 35,385 48,789 974 45,369 171,284 69,801 104,041 75,057 11,824 11,446 17,918 5,288 1,013,890 $ 84,836 2,066 102,898 12,510 40,690 2,592 15,901 16,800 300 2,184 6,287 57 3,151 82,824 55,609 90,329 38,863 17,735 9,735 11,580 3,991 600,938 $ 229,964 4,591 221,721 26,933 102,371 5,288 36,784 36,360 27,796 2,417 1,082 37,569 55,076 1,031 48,520 254,108 125,410 194,370 113,920 29,559 21,181 29,498 9,279 1,614,828 185,314 1,199,204 290,529 891,467 475,843 2,090,671 145,400 5,814 151,214 OTHER FINANCING SOURCES (USES) 10030 11040 Operating transfers in from primary government Prior period adjustments and equity transfers TOTAL OTHER FINANCING SOURCES (USES) CHANGE IN NET POSITION TOTAL NET POSITION, BEGINNING OF YEAR RESTATED NET POSITION, END OF YEAR 135,916 (756,194) (620,278) (388,597) (388,597) 135,916 (1,144,791) (1,008,875) (474,878) (382,783) (857,661) 3,106,760 $ 2,631,882 7,120,384 $ 6,737,601 10,227,144 $ 9,369,483 OTHER MEMORANDUM AMOUNTS 11170 11180 11190 11210 11270 11640 11650 Administrative fee equity Hosing assistance payment equity Unit months available Number of unit months leased Excess cash Furniture & equipment - administrative purchases Leashold improvement purchases 1,956 1,923 1,381,513 8,837 102,275 138 1,680 1,668 1,227,287 31,751 52,181 3,636 3,591 2,608,800 40,588 154,456 Business Activities Central Office Other 14.850a $ Business 296,707 36,360 71,235 2,692 - $ 406,994 $ 326,714 110,129 16,361 1,299 52,976 507,479 Activities $ 85,977 $ 7,634 5,350 780 509 2,934 515 55 2,400 79,794 2,145 342 51 102,509 80,251 296,707 36,360 71,235 6,347 2,071 14.871 $ 492,971 $ 334,348 5,350 780 110,638 19,295 515 55 3,699 79,794 2,145 53,318 51 609,988 $ 4,570,363 - PIH Family Self-Sufficiency Program Eliminations $ $ 2,940 8,765 391,023 - (296,707) (36,360) (71,235) - 4,973,091 67,104 (404,302) 171,974 3,445 69,636 43,522 87,155 12,760 73,091 25,154 13,721 11,624 15,001 527,083 Total 14.896 $ 48,654 18,450 67,104 $ - $ 7,370,749 $ (404,302) 736,286 8,036 300,164 18,048 129,170 101,604 16,138 19,532 37,569 55,591 1,031 48,575 254,108 129,109 274,164 113,920 29,559 34,950 97,817 51 9,279 2,414,701 (404,302) 4,169,139 342,909 506,535 7,433,284 (296,707) (71,235) (36,360) - 30,692 640,680 (100,485) (47,224) (147,709) (66,040) - - (62,535) 135,000 (1,322,785) (1,187,785) 583,441 583,441 135,000 (739,344) (604,344) 150,000 (500,846) (350,846) - - 420,916 (2,384,981) (1,964,065) (1,288,270) 536,217 (752,053) (416,886) - - (2,026,600) 275,605 - - 13,917,313 (591,401) - $ 3,253,912 108 99 - 3,414,564 $ 2,662,511 108 99 - $ (141,281) (234,423) 93,142 5,832 5,802 - 67,104 877,380 8,025 5,797,499 207,057 29,575 8,765 442,448 30,692 133,201 2,717,695 4,169,139 342,909 5,039,131 67,104 - 507,479 696,869 $ 80,251 3,655 2,071 Housing Choice Vouchers Total Business $ - $ - - - 139 $ 11,890,713 (234,423) 93,142 9,576 9,492 2,608,800 40,588 154,456 140 CITY OF CHANDLER, ARIZONA Statistical Section This part of the City of Chandler’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends 142 Schedules 1-6 contain information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 158 Schedules 7-9 contain information to help the reader assess the factors affecting the City’s ability to generate its sales and use tax. Debt Capacity 162 Schedules 10-13 present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information 169 Schedules 14-15 offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place and to help make comparisons over time and with other governments. Operating Information 172 Schedules 16-18 contain information about the City’s operations and resources to help the reader understand how the City’s financial information relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 141 CITY OF CHANDLER, ARIZONA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Governmental activities Net investment in capital assets $ 260,653,345 $ 288,893,354 $ 353,996,843 $ 433,851,899 Restricted 106,396,966 115,343,816 56,979,639 117,712,539 Unrestricted 208,727,675 265,645,323 341,971,306 271,690,158 575,777,986 669,882,493 752,947,788 823,254,596 387,401,986 Total governmental activities net position Business-type activities Net investment in capital assets 325,992,618 347,306,362 427,130,654 Restricted 52,511,899 57,835,328 24,319,427 - Unrestricted 76,090,729 78,718,941 45,300,009 98,413,928 454,595,246 483,860,631 496,750,090 485,815,914 Net investment in capital assets 586,645,963 636,199,716 781,127,497 821,253,885 Restricted 158,908,865 173,179,144 81,299,066 117,712,539 Unrestricted 284,818,404 344,364,264 387,271,315 Total business-type activities net position Primary government Total primary government net position $ 1,030,373,232 142 $ 1,153,743,124 $ 1,249,697,878 370,104,086 $ 1,309,070,510 Schedule 1 Fiscal Year 2010 $ $ 2011 537,576,346 $ 2012 534,292,488 $ 2013 545,926,100 $ 2014 558,279,485 $ 2015 563,033,503 $ 567,041,560 94,440,806 41,906,129 44,047,942 112,307,412 105,723,768 198,059,181 260,307,288 259,783,598 179,518,042 183,088,676 7,709,550 830,076,333 836,505,905 849,757,640 850,104,939 851,845,947 683,717,104 298,938,820 281,936,017 280,440,445 355,015,004 388,837,444 380,427,606 - - - - - 119,075 163,103,784 168,164,942 179,339,498 176,961,822 206,284,498 217,824,645 462,042,604 450,100,959 459,779,943 531,976,826 595,121,942 598,371,326 836,515,166 816,228,505 826,366,545 913,294,489 951,870,947 947,469,166 94,440,806 41,906,129 44,047,942 112,307,412 105,723,768 109,085,069 361,162,965 428,472,230 439,123,096 356,479,864 389,373,174 1,292,118,937 $ 1,286,606,864 $ 1,309,537,583 $ 1,382,081,765 143 $ 1,446,967,889 108,965,994 225,534,195 $ 1,282,088,430 CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Expenses Governmental activities: General government $ Public safety Community development Public works Transportation and development Community services Interest and fiscal charges 36,669,140 $ 42,317,392 $ 54,459,719 $ 52,293,004 63,840,179 76,200,082 80,860,917 87,609,165 8,706,473 9,154,407 11,692,559 10,429,826 31,940,075 32,402,242 39,241,652 47,180,197 - - - - 24,087,695 29,464,039 33,086,565 34,278,998 11,658,090 11,479,112 14,880,604 12,938,524 176,901,652 201,017,274 234,222,016 244,729,714 Water 38,582,431 40,687,283 53,554,653 53,201,379 Wastewater 25,294,189 27,230,862 30,657,939 36,079,767 Solid waste 8,154,317 9,843,824 6,845,979 12,076,998 Airport 1,765,772 1,757,279 1,602,268 2,269,691 Chandler housing authority 6,713,829 9,133,427 7,593,242 7,239,185 80,510,538 88,652,675 100,254,081 110,867,020 Total governmental activities expenses Business-type activities: Total business-type activities expenses Total primary government expenses $ 257,412,190 $ 289,669,949 $ 334,476,097 $ 355,596,734 (1) In FY 2011 the City changed its functional categories to eliminate "Community development" and "Public works" and add "Transportation and development." 144 Schedule 2a Fiscal Year 2010 $ $ 2011 48,920,813 $ 2012 67,808,567 92,421,801 90,738,477 11,715,276 - 56,155,939 - - 50,909,361 $ 2013 88,876,901 $ 2014 90,143,339 $ 2015 99,231,501 $ 104,456,315 89,141,559 95,974,126 94,738,371 102,050,425 (1) - - - - (1) - - - - (1) 52,111,019 55,846,316 52,183,052 51,714,085 31,784,321 35,299,676 28,919,560 28,966,271 30,979,208 32,331,286 13,541,708 12,767,934 12,425,819 11,777,701 10,044,363 6,986,490 258,055,213 251,143,899 271,521,569 284,720,690 288,528,573 296,991,636 62,556,496 57,452,876 56,277,327 55,440,712 55,877,774 55,470,724 38,227,999 37,896,180 38,804,360 40,401,849 41,969,764 50,823,497 14,605,448 13,443,102 13,756,352 13,974,858 14,131,202 14,087,780 1,797,991 2,107,354 1,941,752 1,960,788 1,980,706 1,860,057 7,654,449 7,580,783 7,642,503 7,473,891 7,616,301 7,433,284 124,842,383 118,480,295 118,422,294 119,252,098 121,575,747 129,675,342 382,897,596 $ 369,624,194 $ 389,943,863 $ 403,972,788 145 $ 410,104,320 $ 426,666,978 CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Program Revenues Governmental activities: Charges for services: General government $ 12,359,183 $ 12,793,179 $ 12,629,779 $ 14,349,483 Public safety 3,303,895 4,178,941 4,317,843 4,802,272 Community development 8,338,156 10,405,425 5,488,535 3,581,458 24,529,838 13,145,192 15,831,165 5,226,726 - - - - Public works Transportation and development Community services Operating grants and contributions Capital grants and contributions Total governmental activities program revenues 2,272,309 2,272,826 2,699,469 5,235,864 2,167,327 3,707,115 1,897,300 2,337,910 12,751,519 26,428,112 36,104,151 23,902,360 65,722,227 72,930,790 78,968,242 59,436,073 Business-type activities: Charges for services: Water 38,112,680 39,054,531 40,613,727 39,707,910 Wastewater 20,499,458 21,083,587 25,145,258 25,922,530 Solid waste 12,218,720 12,769,423 12,979,695 12,762,120 1,005,728 974,190 773,449 741,556 648,766 661,509 1,061,658 595,420 6,634,435 6,312,438 6,114,138 6,225,928 Airport Community services - housing authority Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues 23,547,210 28,014,518 19,782,193 9,110,319 102,666,997 108,870,196 106,470,118 95,065,783 $ 168,389,224 $ 181,800,986 $ 185,438,360 $ 154,501,856 $ (111,179,425) $ (128,086,484) $ (155,253,774) $ (185,293,641) $ (89,022,966) $ (107,868,963) $ (149,037,737) $ (201,094,878) Net (expense)/revenue Governmental activities Business-type activities Total primary government net (expense) 22,156,459 20,217,521 6,216,037 (1) In FY 2011 the City changed its functional categories to eliminate "Community development" and "Public works" and add "Transportation and development." 146 (15,801,237) Schedule 2b Fiscal Year 2010 $ 2011 16,621,003 $ 2012 22,548,679 7,110,304 5,658,628 3,336,188 - 6,025,846 - $ 2013 31,381,062 $ 2014 35,898,378 $ 2015 38,832,217 $ 39,207,061 5,794,329 7,375,050 5,861,044 (1) - - - 6,469,215 - - (1) - - - - 11,884,554 (1) 27,905,311 10,150,102 16,145,692 14,438,138 4,515,980 4,079,359 4,136,285 8,240,732 7,744,507 7,551,166 5,510,710 5,890,147 6,162,320 3,999,536 4,744,636 3,514,714 8,159,960 16,041,213 11,016,136 9,116,635 10,170,236 13,133,637 51,279,991 66,102,580 86,395,443 74,780,433 83,498,332 84,313,931 42,276,145 43,708,974 49,565,071 48,258,282 49,588,376 48,045,103 28,406,808 31,610,009 35,907,085 37,690,400 40,509,289 45,666,777 12,891,628 13,277,403 13,890,957 13,836,363 14,034,894 14,140,246 815,751 995,307 996,605 976,102 961,067 1,010,288 521,404 457,781 466,556 637,329 806,540 877,380 6,367,024 6,297,200 6,341,087 5,785,335 5,457,991 5,862,477 8,484,239 8,659,772 19,118,567 81,572,568 72,176,582 35,357,741 99,762,999 105,006,446 126,285,928 188,756,379 183,534,739 150,960,012 $ 151,042,990 $ 171,109,026 $ 212,681,371 $ 263,536,812 $ 267,033,071 $ 235,273,943 $ (206,775,222) $ (185,041,319) $ (185,126,126) $ (209,940,257) $ (205,030,041) $ (212,677,705) $ (231,854,606) $ (198,515,168) $ (177,262,492) $ (140,435,976) $ (143,071,049) $ (191,393,035) (25,079,384) (13,473,849) 7,863,634 147 69,504,281 61,958,992 21,284,670 CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Governmental Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes $ Sales taxes 25,016,760 $ 82,327,461 Franchise fees Highway user taxes Other taxes 26,921,292 $ 95,410,460 34,063,123 $ 97,226,841 38,957,986 85,897,334 2,198,738 3,230,429 3,937,952 3,264,093 - 16,490,129 15,856,863 13,849,284 - 3,481,086 3,786,677 7,921,275 State shared revenues 45,853,506 57,716,644 62,970,459 61,211,289 Investment income 12,286,630 17,868,181 20,823,059 10,045,274 10,736 1,822,070 767,221 995,606 34,500,000 - - 478,441 469,201 534,086 202,672,272 223,409,492 239,966,281 Miscellaneous Westcor contract payment Transfers in (out) Total governmental activities (1,542,346) 220,599,795 Business-type activities: Sales tax Investment income Miscellaneous Transfers in (out) - - - 6,876,399 5,906,545 2,536,237 1,043,407 (469,200) 1,792,816 (534,086) 788,478 1,542,346 7,450,606 7,165,275 4,867,061 532,354 (478,441) Total business-type activities: Total primary government 6,424,600 6,478,513 $ 209,150,785 $ 230,860,098 $ $ 22,796,183 $ 28,634,972 51,431,155 247,131,556 $ $ 95,323,008 $ 27,668,127 122,991,135 225,466,856 $ 84,712,507 $ 35,306,154 $ 13,381,312 98,093,819 $ (10,934,176) 24,371,978 Change in Net Position Governmental activities Business-type activities Total primary government 148 Schedule 2c Fiscal Year 2010 $ 2011 40,617,269 $ 83,019,726 36,158,574 $ 86,523,295 2013 31,877,716 $ 97,485,387 2014 29,656,415 $ 102,200,517 2015 28,348,952 $ 103,880,801 28,708,033 108,657,130 3,174,390 2,819,521 2,988,456 2,936,533 3,145,449 3,300,129 13,116,481 13,287,878 11,823,280 12,929,504 13,352,622 14,633,470 13,965,973 88,561 5,979,715 6,295,212 3,243,937 10,106,891 54,492,427 47,732,614 45,958,627 51,347,206 55,423,759 59,236,588 3,487,145 1,841,244 1,221,923 2,843,417 1,869,128 1,763,585 850,191 3,071,588 1,116,832 2,181,627 819,766 1,197,215 - - - - - 873,357 (244,702) 213,596,959 (74,075) 191,278,573 (102,875) 198,377,861 - (132,082) 210,287,556 (123,350) 209,952,332 227,479,691 - - - - 70,065 10,865 756,641 533,313 389,446 1,180,290 788,025 819,556 1,422,790 (873,357) 946,507 244,702 1,351,829 74,075 1,409,437 102,875 1,683,332 132,082 2,475,760 123,350 1,724,522 1,815,350 2,692,602 2,673,504 3,429,531 1,306,074 $ 2012 214,903,033 $ 193,003,095 $ 200,193,211 $ $ 6,821,737 $ (23,773,310) (16,951,573) 212,980,158 $ $ 6,237,254 $ 13,251,735 $ (11,749,327) (5,512,073) $ 9,678,984 22,930,719 $ 347,299 $ 72,196,883 72,544,182 149 212,625,836 $ 230,909,222 $ 4,922,291 $ 14,801,986 $ 64,632,496 69,554,787 $ 24,714,201 39,516,187 CITY OF CHANDLER, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2006 General fund Reserved $ Unreserved 2007 15,211,490 $ 148,606,301 2008 12,349,638 $ 189,087,760 2009 28,237,521 $ 196,093,067 30,482,311 194,457,561 Nonspendable - - - - Restricted - - - - Assigned - - - - Unassigned Total general fund $ 163,817,791 $ 201,437,398 $ 224,330,588 $ 224,939,872 $ 100,167,158 $ 109,777,210 $ 43,039,742 $ 97,267,450 All other governmental funds Reserved Unreserved, reported in: Special revenue funds 8,089,144 14,064,542 17,752,306 18,786,740 Capital projects funds 253,903 9,158,971 11,608,190 7,868,412 Restricted - - - - Unassigned - - - - Total all other governmental funds $ 108,510,205 $ 133,000,723 (1) In FY 2011 the City implemented GASB 54, thus changing how fund balance is categorized. 150 $ 72,400,238 $ 123,922,602 Schedule 3 Fiscal Year 2010 $ 2011 62,149,646 $ 2012 $ 2013 - $ 2014 - $ 2015 - (1) 137,041,044 - (1) - - - - - 893,067 (1) 947,804 938,549 892,533 941,359 - 844,754 (1) 939,867 939,867 1,166,105 1,792,180 - 61,733,537 (1) 102,635,587 101,115,766 95,185,696 102,222,466 199,190,690 98,872,954 162,344,312 (1) $ $ 61,355,662 $ - (1) 18,103,651 - (1) - - - 7,379,375 - (1) - - - - - 105,756,072 (1) 111,378,788 111,367,545 104,557,663 107,173,814 - (12,315,197) (1) (12,798,348) (13,646,428) (11,034,021) (15,322,260) 86,838,688 $ 93,440,875 69,223,074 173,746,332 $ 66,077,714 169,071,896 $ 82,453,462 179,697,796 $ - $ - $ - - $ $ $ $ $ 98,580,440 $ 151 97,721,117 $ 93,523,642 $ 80,152,269 185,108,274 - $ 91,851,554 CITY OF CHANDLER, ARIZONA GOVERNMENTAL FUNDS REVENUES LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 - (1) $ - 60,107,031 - (1) - - Property taxes - 26,909,841 (1) 33,844,181 38,677,156 Sales taxes - 95,410,460 (1) 97,226,841 85,897,334 Taxes - local $ Taxes - intergovernmental 109,141,434 $ $ - Franchise fees - 3,230,429 3,937,952 3,264,093 Highway user taxes - 16,490,129 15,856,863 13,849,284 Other taxes - 3,786,677 7,921,275 State shared revenues - 57,716,644 62,970,459 61,211,289 9,296,423 7,610,807 10,553,680 18,168,904 4,475,029 Grants and entitlements System development fees 3,481,086 (1) 10,322,313 11,871,969 8,111,597 Special assessments 303,336 309,386 426,428 863,747 License and permits 5,541,215 6,728,309 3,894,368 2,667,720 15,475,362 18,216,653 17,254,859 19,492,740 4,231,306 4,058,090 4,342,621 4,912,159 138,667 Charges for current services Fines and forfeitures Rentals Contributions Investment income Miscellaneous Total revenues $ 8,363 89,875 94,575 500 50,000 50,000 50,000 10,699,944 15,589,318 18,334,581 8,825,695 1,632,785 1,830,328 1,255,681 1,661,772 226,760,012 $ 269,593,324 $ 281,941,363 (1) As of fiscal year ended June 30, 2007, the City reclassed the governmental funds revenues of Taxes-local and Taxes-intergovernmental to Property taxes, Sales taxes, and Other taxes. 152 $ 272,076,864 Schedule 4 Fiscal Year 2010 $ $ 2011 - $ 2012 - $ 2013 - $ 2014 - $ 2015 - $ - - - - - - - 40,259,579 36,301,709 32,329,560 29,841,739 28,442,823 28,899,684 83,019,726 86,523,295 97,485,387 102,200,517 103,880,801 108,657,130 3,174,390 2,819,521 2,988,456 2,936,533 3,145,449 3,300,129 13,116,481 13,287,878 11,823,280 12,929,504 13,352,622 14,633,470 13,965,973 88,561 5,979,715 6,295,212 3,243,937 10,106,891 54,492,427 47,732,614 45,958,627 51,347,206 55,423,759 59,236,588 10,377,502 14,759,620 13,826,606 9,480,090 10,187,895 10,638,831 4,768,306 6,739,920 11,724,823 7,781,083 11,846,275 10,585,623 663,209 673,064 678,027 676,127 678,843 573,438 2,758,392 3,208,944 6,955,605 4,887,466 5,479,384 5,146,556 19,420,434 18,002,168 19,938,566 19,786,513 20,269,976 20,110,036 5,336,294 4,697,317 4,700,430 5,825,098 4,622,215 4,601,501 101,322 387,952 455,842 570,638 732,807 751,163 50,000 100,000 100,000 100,000 100,000 150,000 3,171,308 1,635,258 1,034,895 2,529,078 1,623,973 1,562,241 1,913,571 4,593,104 1,392,691 1,384,123 650,117 572,252 256,588,914 $ 241,550,925 $ 257,372,510 $ 153 258,570,927 $ 263,680,876 $ 279,525,533 CITY OF CHANDLER, ARIZONA GOVERNMENTAL FUNDS EXPENDITURES AND DEBT SERVICE RATIO LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2006 General government $ Public safety 2007 33,729,455 $ 64,090,649 Community development Public works Transportation and development 2008 38,124,478 $ 75,800,634 2009 51,261,849 $ 78,306,604 40,503,113 84,493,816 8,740,380 8,989,308 11,593,642 10,509,467 32,555,171 22,987,692 19,306,381 19,283,643 - - - - Community services 22,738,420 25,714,032 28,830,926 29,916,002 Capital improvements 49,884,875 75,524,840 104,836,442 124,680,957 Principal retirement 17,122,071 12,374,500 16,659,500 15,275,000 Interest and fiscal charges 10,465,983 10,669,877 14,437,346 13,059,295 135,437 189,840 179,201 961,100 Debt service: Bond issuance costs Total expenditures Debt service as a percentage of noncapital expenditures $ 239,462,441 $ 15.9% 270,375,201 12.1% $ 325,411,891 14.1% (1) In FY 2011 the City changed its functional categories to eliminate "Community development" and "Public works" and add "Transportation and development." 154 $ 338,682,393 12.5% Schedule 5 Fiscal Year 2010 $ 2011 44,663,091 $ 85,390,303 $ 2012 43,636,784 $ 84,007,752 2013 48,894,811 $ 2014 44,512,533 $ 2015 46,807,747 $ 46,895,106 82,820,106 89,587,613 90,068,218 93,773,306 - 11,614,214 - (1) - - - 17,664,633 - (1) - - - - - 22,126,233 (1) 25,532,739 24,807,578 23,418,175 24,769,553 30,078,856 22,836,317 23,255,568 23,554,854 23,771,925 24,569,283 106,366,737 67,299,941 29,787,069 41,793,319 45,657,265 56,539,116 17,260,000 15,090,000 15,970,000 26,870,000 15,955,000 21,490,000 13,646,479 12,901,616 12,550,323 11,908,025 10,682,206 7,737,974 183,969 278,512 - - 145,970 722,293 326,868,282 13.3% $ 268,177,155 13.3% $ 238,810,616 $ 263,033,922 13.5% 16.4% 155 $ 256,506,506 11.6% $ 276,496,631 11.7% CITY OF CHANDLER, ARIZONA OTHER FINANCING SOURCES AND USES AND NET CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2006 2007 2008 2009 Other Financing Sources (Uses) Bond premium $ Face amount of bonds issued 515,129 $ 30,905,000 Proceeds from sale of capital assets 205,936 Payment to escrow agent - 1,975,876 $ 165,431 $ 2,348,878 88,405,000 7,370,000 120,513,000 173,742 280,969 219,793 - - (24,335,292) Westcor contract payment 34,500,000 - - - Transfers in 37,204,132 31,525,563 38,442,603 40,593,319 Transfers out (39,584,767) (34,246,951) (41,108,342) (44,937,903) 63,745,430 63,497,938 5,150,661 118,737,087 Total other financing sources and (uses) Net change in fund balances $ (17,956,999) 156 $ 62,716,055 $ (38,319,867) $ 52,131,648 Schedule 6 Fiscal Year 2010 $ 2011 290,569 $ 10,450,000 97,609 (10,556,600) $ 2012 1,047,424 $ 2013 - $ 2014 - 20,285,000 - - 108,929 89,007 76,381 - - (10,816,839) $ 2015 562,052 $ 8,660,000 17,045,635 128,254,000 161,126 103,964 (9,061,800) (143,635,520) - - - - - - 46,309,016 41,605,646 20,576,188 32,849,979 24,586,418 28,717,990 (39,144,322) (56,040,439) (22,685,504) (33,997,394) (25,653,741) (29,776,581) 7,446,272 (3,810,279) (2,020,309) (1,071,034) (745,945) (62,833,096) $ (30,436,509) $ 16,541,585 $ (5,533,759) 157 $ 6,428,425 709,488 $ 3,738,390 CITY OF CHANDLER, ARIZONA TAXABLE REVENUE BY CATEGORY LAST TEN FISCAL YEARS Fiscal Year 2006 Amusements Contracting General Retail Hotel/Motel Miscellaneous Related Revenue 1 Publishing Rentals - Personal Property Rentals - Real Property Restaurant/Bar Telecommunications Use Tax Utilities $ Total Sales and Use Taxes $ City Direct Sales Tax Rate 2 2007 611,352 16,580,509 38,501,000 1,716,055 $ 1,898,671 699,456 1,743,393 7,141,065 6,994,533 3,603,977 989,767 8,910,538 89,390,316 1.72% 679,666 15,665,738 41,719,797 1,938,442 2008 $ 2,765,527 723,532 1,935,981 7,883,794 7,655,093 3,709,781 1,044,225 9,688,886 $ 95,410,462 1.72% 660,985 15,519,590 41,253,934 2,103,714 2009 $ 3,329,891 492,770 2,177,125 8,449,059 7,908,883 3,978,715 950,808 10,401,302 $ 97,226,776 2,774,033 389,046 2,474,464 8,520,878 7,267,718 4,057,982 930,636 10,982,905 $ 1.72% Source: Tax & License Division 1 Includes license application fees, annual license fees, audit assessments, penalties, and interest. 2 The direct tax rate was calculated using a weighted average of the actual revenues collected for each category. Tax rates vary by category, currently ranging from 1.5% to 4.4%. 158 623,159 9,352,480 36,851,140 1,672,893 85,897,334 1.75% Schedule 7 Fiscal Year 2010 $ 602,027 6,573,348 36,560,075 1,611,912 2011 $ 2,911,821 382,080 2,389,241 8,921,788 7,436,900 3,974,448 869,092 10,786,994 $ 83,019,726 1.75% 673,666 6,380,957 38,741,270 1,973,790 2012 $ 2,551,354 351,250 2,462,219 9,479,850 7,971,183 3,524,076 1,000,342 11,413,338 $ 86,523,295 1.77% 714,641 10,869,566 42,844,871 2,255,786 2013 $ 2,334,179 352,550 2,606,371 10,025,726 8,670,199 3,628,007 1,054,968 12,128,475 $ 97,485,337 717,442 10,408,518 45,331,307 2,288,989 2014 $ 2,937,426 334,981 2,884,618 10,817,611 9,069,109 3,731,350 1,315,599 12,363,565 $ 1.76% 102,200,515 1.75% 159 728,110 9,780,645 47,454,682 2,472,754 2015 $ 2,660,201 258,547 2,949,421 11,058,203 9,542,714 3,533,636 1,090,428 12,421,526 $ 103,950,867 1.75% 895,730 8,870,092 49,740,000 2,892,470 2,815,040 260,712 3,261,716 11,967,509 10,188,718 3,435,949 1,145,534 13,194,526 $ 108,667,995 1.76% CITY OF CHANDLER, ARIZONA DIRECT AND OVERLAPPING SALES AND USE TAX RATES LAST TEN FISCAL YEARS Schedule 8 Overlapping Rates Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 City Direct Maricopa County Tax Rate Tax Rate 1.72% 1.72% 1.72% 1.75% 1.75% 1.77% 1.76% 1.75% 1.75% 1.76% 1 0.68% 0.68% 0.68% 0.67% 0.67% 0.67% 0.67% 0.67% 0.67% 0.67% 2 State of Arizona Tourism & Sports Authority Tax Rate 3 Tax Rate 4 5.14% 5.12% 5.09% 5.10% 5.86% 5.85% 5.90% 5.80% 4.99% 4.96% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.03% Source: Tax & License Division 1 The City's direct tax rate was calculated using a weighted average of the actual revenues collected for each category. Tax rates vary by category, currently ranging from 1.5% to 4.4%. City tax rates were last increased effective 5/01/1994. 2 The overlapping County tax rate was calculated using a weighted average of the actual revenues the City collected for each category. Tax rates vary by category, currently ranging from 0.5% to 0.77%. No rate changes in the past ten fiscal years. 3 The overlapping State tax rate was calculated using a weighted average of the actual revenues the City collected for each category. Tax rates vary by category, currently ranging from 5.5% to 5.6%. State tax rate increases during the past ten fiscal years: 1.0% effective 6/01/2010 through 5/31/2013. 4 The Tourism & Sports Authority (TSA) was authorized by Maricopa County voters on November 7, 2000. An additional tax rate of 1.0% is to be levied from March 1, 2001 through February 28, 2031. The only category the overlapping tax rate applies to is the Hotel/Motel category. The overlapping tax rate is calculated using a weighted average of the actual revenues the City collected for this category. 160 CITY OF CHANDLER, ARIZONA PRINCIPAL SALES AND USE TAXPAYERS CURRENT YEAR AND TEN YEARS AGO Schedule 9 Fiscal Year 2015 Taxpayer Business Type Taxpayer A Taxpayer B Taxpayer C Taxpayer D Taxpayer E Taxpayer F Taxpayer G Taxpayer H Taxpayer I Taxpayer J Taxpayer K Taxpayer L Taxpayer M Taxpayer N Taxpayer O Utility Department Store Grocery Store Department Store Home Improvement Telecommunications Vehicle Dealer Department Store Utility Vehicle Dealer Grocery Store Department Store Home Improvement Vehicle Dealer Construction Sales and Use Tax Payments $ 9,999,771 3,461,960 2,182,473 2,000,503 1,937,620 1,405,314 1,373,539 1,302,605 1,274,998 1,064,700 - $ 26,003,482 Fiscal Year 2006 Rank Percentage of Total Sales and Use Tax Payments 1 2 3 4 5 6 7 8 9 10 - 9.20% 3.19% 2.01% 1.84% 1.78% 1.29% 1.26% 1.20% 1.17% 0.98% - $ 6,371,347 1,819,618 2,090,935 1,472,368 1,144,181 1,397,810 1,369,867 1,323,773 1,214,528 1,210,522 23.93% $ 19,414,949 Sales and Use Tax Payments Rank Percentage of Total Sales and Use Tax Payments 1 3 2 4 10 5 6 7 8 9 7.13% 2.04% 2.34% 1.65% 1.28% 1.56% 1.53% 1.48% 1.36% 1.35% 21.72% Source: Tax & License Division Notes: The identities of the ten largest revenue payers are prohibited from disclosure per State statute. Alternatively, the business type of the top ten taxpayers for each period has been disclosed along with the appropriate data. 161 CITY OF CHANDLER, ARIZONA RATIOS OF OUTSTANDING DEBT LAST TEN FISCAL YEARS Schedule 10 Governmental Activities Fiscal Year General Obligation Bonds Revenue Bonds 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 140,130,000 197,075,000 187,645,000 294,588,000 282,888,000 279,968,000 268,148,000 256,288,000 233,678,000 222,143,000 42,920,000 40,480,000 37,655,000 34,690,000 31,800,000 28,620,000 25,745,000 22,045,000 18,000,000 14,025,000 Special Assessment Bonds Accrued Interest - Capital Appreciation Bonds 1,219,000 1,099,500 8,345,000 7,820,000 7,315,000 6,190,000 5,780,000 5,350,000 4,905,000 4,440,000 33,620,916 34,505,099 35,000,654 - Business-type Activities Fiscal Year General Obligation Bonds Revenue Bonds 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 19,415,000 62,410,000 60,395,000 188,612,000 185,032,000 179,747,000 170,987,000 161,567,000 150,972,000 140,072,000 108,870,000 101,095,000 93,000,000 76,415,000 67,580,000 60,280,000 52,670,000 44,740,000 36,095,000 31,610,000 Fiscal Year General Bonded Debt 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 159,545,000 259,485,000 248,040,000 483,200,000 467,920,000 459,715,000 439,135,000 417,855,000 384,650,000 362,215,000 Less Amount Available in Debt Service Fund 18,321,538 19,258,684 16,419,386 16,186,172 14,910,017 Excise Tax Revenue Obligations Certificates of Participation - 34,040,000 34,040,000 48,540,000 47,440,000 45,695,000 148,380,000 142,200,000 Intergovernmental Loans Total Primary Government 2 37,135 16,304 - 346,212,051 436,680,903 422,040,654 636,165,000 608,655,000 603,345,000 570,770,000 535,685,000 592,030,000 554,490,000 Net General Bonded Debt Outstanding Estimated Actual Taxable Value of Property Percentage of Estimated Actual Taxable Value of Property 159,545,000 259,485,000 248,040,000 483,200,000 467,920,000 441,393,462 419,876,316 401,435,614 368,463,828 347,304,983 13,936,132,832 15,180,800,679 26,166,428,389 30,523,597,506 31,011,422,761 22,396,334,191 21,102,582,630 21,502,506,694 23,588,561,444 29,230,173,658 1.14% 1.71% 0.95% 1.58% 1.51% 1.97% 1.99% 1.87% 1.56% 1.19% Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 1 Population and personal income data can be found in Schedule 14. 2 Includes general bonded debt, other governmental activities debt and business-type activities debt. 162 Percentage of Personal Income 1 5.70% 7.23% 6.22% 9.20% 9.35% 9.22% 7.84% 6.71% 7.54% 6.68% Per Capita 1 1,496 1,877 1,804 2,704 2,578 2,535 2,383 2,213 2,452 2,240 CITY OF CHANDLER, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2015 Schedule 11 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Overlapping Debt Debt repaid with property taxes State of Arizona Maricopa County Maricopa County Community College District East Valley Institute of Technology Chandler Unified School District No. 80 Mesa Unified School District No. 4 Gilbert Unified School District No. 41 Kyrene Elementary School District No. 28 Tempe Union High School District No. 213 None None $ 709,690,000 None 197,985,000 246,950,000 116,680,000 146,365,000 75,475,000 4.05% 6.75 6.75 13.52 71.08 4.96 1.99 21.97 16.21 None None $ Subtotal, overlapping debt 47,902,285 None 140,724,208 12,252,454 2,318,537 32,161,046 12,230,724 247,589,254 258,506,207 City direct debt 100.00 258,506,207 $ Total direct and overlapping debt 506,095,461 Source: Piper Jaffray & Co. Note: The applicable percentage of overlap for each type of debt was computed on the ratio of secondary assessed valuation as calculated for fiscal year 2014-15 for the overlapping jurisdiction to the amount of such valuation which lies within the City of Chandler. 163 CITY OF CHANDLER, ARIZONA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Fiscal Year 2006 2007 2008 2009 6% General Obligation Bond Limitation Debt limit $ Total net debt applicable to limit Legal debt margin 116,449,443 $ 179,351,393 74,720,000 $ 41,729,443 $ 66,460,000 $ 207,310,517 $ 7,795,000 112,891,393 $ 199,515,517 210,484,297 10,934,000 $ 199,550,297 Total net debt applicable to the limit as a percentage of the debt limit 64% 37% (1) 4% 5% 20% General Obligation Bond Limitation Debt limit $ Total net debt applicable to limit Legal debt margin 388,164,810 $ 597,837,975 84,825,000 $ 303,339,810 $ 193,025,000 $ 691,035,056 $ 240,245,000 404,812,975 $ 450,790,056 701,614,322 472,266,000 $ 229,348,322 Total net debt applicable to the limit as a percentage of the debt limit 22% 32% (1) 35% 67% Source: Piper Jaffray, Inc. (1) In November 2006, Arizona Revised Statutes were amended to move public safety and emergency services, streets and transportation from the 6 percent category to the 20 percent category. Notes: Under Arizona law, cities may issue general obligation bonds for purposes of water, wastewater, artificial light, open space preserves, parks, public safety and emergency services, streets, transportation, playgrounds and recreational facilities up to an amount not to exceed 20 percent of secondary assessed valuation. Cities may issue general obligation bonds for any other purpose up to an amount not to exceed 6 percent of secondary assessed valuation. 164 Schedule 12 Legal Debt Margin Calculation for Fiscal Year 2015 Net secondary assessed valuation as of June 30, 2015 $ Debt limit (6% of assessed value) 2,380,457,981 142,827,478 Debt applicable to limit: 6% general obligation bonds 9,848,400 Legal 6% debt margin $ 132,979,078 Debt limit (20% of assessed value) $ 476,091,596 Debt applicable to limit: 20% general obligation bonds 352,366,600 Legal 20% debt margin $ 123,724,996 Fiscal Year 2010 $ 210,484,297 2011 $ 9,494,000 $ 200,990,297 701,614,322 $ 243,188,322 65% 134,756,597 $ 493,725,323 $ 47,371,323 90% $ 130,522,600 123,470,758 $ 451,035,860 $ 23,740,860 95% $ 119,653,600 $ 435,075,335 $ 28,089,335 94% 165 $ 132,697,404 $ 476,318,016 $ 101,866,016 79% 132,979,078 7% $ 374,452,000 $ 142,827,478 9,848,400 7% 406,986,000 $ 142,895,404 2015 10,198,000 8% 427,295,000 $ 2014 10,869,000 9% 446,354,000 $ 135,310,758 2013 11,840,000 9% 458,426,000 $ $ 13,361,000 5% $ 148,117,597 2012 476,091,596 352,366,600 $ 123,724,996 74% CITY OF CHANDLER, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Schedule 13a Street & Highway Revenue Bonds Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Highway User Taxes 13,870,790 16,490,129 15,856,863 13,849,284 13,116,481 13,287,878 11,823,280 12,929,504 13,352,622 14,633,470 Less: Operating Expenses 7,731,437 8,527,904 8,299,229 10,599,041 9,018,598 9,336,554 7,895,663 10,893,216 10,547,032 8,257,078 Net Available Revenue 6,139,353 7,962,225 7,557,634 3,250,243 4,097,883 3,951,324 3,927,617 2,036,288 2,805,590 6,376,392 Debt Service Principal Interest 2,440,000 2,825,000 2,965,000 3,050,000 3,180,000 2,875,000 3,700,000 3,830,000 3,975,000 3,970,000 1,870,433 1,735,306 1,628,797 1,572,829 1,198,194 1,176,009 936,975 833,475 515,175 462,047 Coverage 1.42 1.75 1.65 0.70 0.94 0.98 0.85 0.44 0.62 1.44 Water Revenue Bonds Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Utility Service Charges 38,112,680 39,054,531 40,613,727 39,707,910 42,276,145 43,708,974 49,556,831 48,258,282 49,588,376 48,045,103 Less: Operating Expenses 22,633,168 23,844,731 32,812,618 31,084,108 31,137,157 26,834,274 26,351,735 26,890,219 27,840,478 27,645,076 Net Available Revenue 15,479,512 15,209,800 7,801,109 8,623,802 11,138,988 16,874,700 23,205,096 21,368,063 21,747,898 20,400,027 Debt Service Principal Interest 4,275,097 4,447,321 4,643,032 4,854,151 5,471,256 6,007,332 6,498,090 6,062,435 3,300,000 3,205,000 3,181,666 2,881,971 2,700,799 2,419,526 2,205,623 1,875,330 1,641,612 1,375,854 869,064 730,854 Coverage 2.08 2.08 1.06 1.19 1.45 2.14 2.85 2.87 5.22 5.18 Excise Tax Revenue Obligations Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Excise Tax Collections 148,768,677 141,025,083 136,164,353 148,885,867 156,621,139 162,664,325 170,432,597 Less: Operating Expenses Net Available Revenue - 148,768,677 141,025,083 136,164,353 148,885,867 156,621,139 162,664,325 170,432,597 Debt Service Principal 500,000 1,100,000 1,745,000 1,815,000 6,180,000 4,770,000 Interest 462,667 1,133,063 1,118,063 1,703,358 1,584,863 4,483,662 6,044,175 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation or amortization expenses. See Note 5 for breakdown of revenue pledged for Excise Tax Revenue Obligations first pledged February 4, 2009. 166 Coverage 0.00 0.00 0.00 321.55 86.36 61.39 43.18 46.07 15.25 15.76 CITY OF CHANDLER, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Schedule 13b Wastewater Revenue Bonds Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Utility Service Charges 20,499,458 21,083,587 25,145,258 25,922,530 28,406,808 31,610,009 35,907,085 37,690,400 40,509,289 45,666,777 Less: Operating Expenses 14,217,466 14,349,752 17,923,089 17,663,644 15,821,939 15,759,431 16,752,467 18,879,022 18,780,034 22,907,111 Net Available Revenue 6,281,992 6,733,835 7,222,169 8,258,886 12,584,869 15,850,578 19,154,618 18,811,378 21,729,255 22,759,666 Debt Service Principal 3,499,903 3,647,679 3,786,968 3,915,849 3,678,744 1,602,668 1,431,910 2,197,565 1,185,000 3,555,000 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation or amortization expenses. 167 Interest 1,828,920 1,691,169 1,554,504 1,341,752 1,104,530 947,148 874,363 809,286 585,029 548,545 Coverage 1.18 1.26 1.35 1.57 2.63 6.22 8.31 6.26 12.28 5.55 168 CITY OF CHANDLER, ARIZONA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Schedule 14 Total Fiscal Year Population (1) Per Capita Personal Median Unemployment Personal Income (2) Age (2) Rate (3) Income (2) 2006 231,399 6,075,380,745 31.6 3.0% 26,255 2007 232,699 6,038,771,749 31.1 2.5% 25,951 2008 233,998 6,787,111,990 31.2 3.2% 29,005 2009 235,298 6,916,584,710 32.8 6.2% 29,395 2010 236,123 2011 237,979 (4) 6,507,077,634 32.5 6.9% 27,558 6,541,804,731 31.7 6.6% 27,489 2012 239,538 7,279,080,744 32.4 6.1% 30,388 2013 242,115 7,983,015,780 34.9 6.0% 32,972 2014 241,460 7,846,725,620 35.0 5.5% 32,497 2015 247,552 8,297,943,040 34.9 4.7% 33,520 Sources: 1 City's Planning Division based on July 1st 2 3 City's Economic Development Division Arizona Office of Employment and Population Statistics 4 Official U.S. Census Notes: Total personal income is composed of earned income, dividends, interest and rents, and government transfer payments. Per capita personal income is calculated by dividing total personal income by population; amounts may not be exact due to rounding. 169 CITY OF CHANDLER, ARIZONA PRINCIPAL EMPLOYERS CURRENT YEAR AND TEN YEARS AGO 2015 Percentage Employer Employees Rank of Total City Employment Intel Corporation 11,300 1 8.75% Chandler Unified School District 4,900 2 3.79% Bank of America 3,800 3 2.94% Wells Fargo 2,600 4 2.01% Verizon Wireless 2,400 5 1.86% City of Chandler 2,175 6 1.68% Chandler Regional Hospital 2,100 7 1.63% Paypal 2,000 8 1.55% Orbital ATK 1,650 9 1.28% Microchip Technology 1,626 10 1.26% Freescale Semiconductors - - - Motorola - - - Countrywide Home Mortgage - - - Total 34,551 Source: City's Economic Development Division and Arizona Office of Employment and Population Statistics. 170 26.75% Schedule 15 2006 Percentage Employees Rank of Total City Employment 9,500 1 7.50% 2,400 2 1.89% - - - 2,200 4 1.74% - - - 1,701 6 1.34% 1,188 8 0.94% - - - 1,100 10 0.87% 1,485 7 1.17% 1,800 5 1.42% 1,100 9 0.87% 2,350 3 1.85% 24,824 19.59% 171 CITY OF CHANDLER, ARIZONA EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS Fiscal Year 2006 2007 2008 2009 5 5 74 18 39 25 95 5 5 5 6 79 17 6 104 18 44 27 101 48 29 106 43 28 105 Total General Government 261 279 316 308 Total Planning and Development 108 111 114 103 182 219 243 207 3 59 3 64 3 57 Airport Engineering, development and Real estate Total Public Works 3 55 6 6 6 6 71 135 76 144 85 158 80 146 Police Fire Total Public Safety 460 207 667 487 219 706 496 228 724 483 223 706 5 85 41 21 152 5 5 5 85 42 21 153 88 43 20 156 86 41 18 150 1,505 1,612 1,711 1,620 Full Time Equivalent Personnel Mayor and council City clerk City manager Communications/public affairs City magistrate Law Management services (1) 6 103 18 Total Transportation and Development Total Community Services Public works administration Streets Municipal utilities administration Water Wastewater Solid waste Total Municipal Utilities Total Primary Government Source: City's Human Resources Division (1) The significant change in this year is a result of the Neighborhood Programs moving from the Mayor and Council to the City Manager Department. Code Enforcement, Tourism, and Real Estate Services Downtown are new to the City Manager Department. (2) The significant change in this year is a result of the City offering a retirement incentive, voluntary separation packages, and movement between departments to retain employees. (3) The significant change in this year is the result of Public Works Department and Planning and Development Department consolidated into one Transportation and Development Department. Notes: The calculation of full time equivalent personnel includes full time and part time regular employees as of the last pay period of the fiscal year. 172 Schedule 16 Fical Year 2010 2011 2012 2013 2014 2015 5 5 6 4 4 4 6 96 15 5 122 12 4 124 14 5 178 19 6 174 13 6 176 13 41 27 95 40 27 85 38 30 72 39 29 72 35 29 66 37 31 69 296 288 346 327 336 (2) 285 80 226 (2) (2) - (3) - - - - 172 (3) 170 163 159 165 231 192 199 198 229 3 50 - (3) (3) - - - - 6 (3) - - - - 74 133 - (3) - - - - 478 219 697 467 218 685 467 238 705 468 234 702 467 224 691 483 237 720 6 5 5 4 5 5 80 42 20 148 88 42 20 155 89 42 19 155 85 46 18 153 87 46 16 154 87 62 20 174 1,569 1,537 1,549 1,556 1,530 1,593 173 CITY OF CHANDLER, ARIZONA OPERATING INDICATORS BY FUNCTION / PROGRAM LAST TEN FISCAL YEARS Fiscal Year Function/Program 2006 General Government Privilege tax licenses Meeting notices posted City council actions and agenda items prepared Grant awards received Inventory turnover ratio Transportation & Development Building permits issued Community Services Library circulation Center for the Arts events & exhibits Public Safety Crime rate (per 1,000 population) Total calls for police services (estimated) Total calls for fire services Fire inspections Fire investigations Municipal Utilities Water connections Operating wells Daily pumping capacity - wells (gallons) Daily pumping capacity - plants (gallons) Sewer connections Sanitary sewer (miles) Solid waste customers served Solid waste refuse collected (tons) Solid waste refuse recycled (tons) 2007 2008 20,464 505 1,292 57 2.78 20,652 721 1,292 57 3.32 22,980 470 1,188 61 3.94 7,909 6,474 5,750 2,004,000 1,024 2,082,000 1,024 2,349,232 989 38.0 160,355 16,682 4,878 74 34.9 159,535 16,709 3,585 57 74,406 23 58,400,000 45,000,000 70,169 828 66,451 97,646 25,877 74,841 26 65,100,000 60,000,000 70,863 837 67,433 94,633 25,555 39.9 151,941 16,662 4,375 73 73,822 23 59,900,000 45,000,000 68,515 814 65,173 99,547 25,017 Source: City of Chandler Departments (1) The 2010 Center for the Arts events & exhibits is the result of renovations within the Center for the Arts (2) The 2010 increase in Daily pumping capacity-plants (gallons) is the result of the completion of the San Tan Water Treatment Plant and the Chandler Water Treatment Plant 174 Schedule 17 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 23,460 479 1,055 66 2.50 22,715 481 977 40 2.10 23,821 506 848 43 2.22 25,726 599 908 26 2.07 27,387 584 834 43 1.89 27,467 564 780 53 2.10 28,224 544 867 51 1.57 3,800 3,883 2,330 5,462 3,785 5,490 5,170 2,494,009 1,050 2,489,741 1,000 2,395,192 1,003 2,332,758 938 2,163,076 939 34.4 141,279 17,892 4,424 46 33.2 137,170 17,950 5,188 34 28.0 137,485 18,474 5,029 22 26.7 145,400 18,865 5,442 16 23.2 139,177 22,785 4,692 27 77,408 30 64,460,000 72,000,000 73,118 866 69,480 88,466 20,832 77,626 28 61,920,000 72,000,000 73,712 868 70,179 85,257 21,096 79,278 26 64,790,000 72,000,000 74,606 869 70,667 86,557 20,680 79,766 27 64,710,000 72,000,000 75,564 890 71,269 83,950 21,046 80,401 28 64,400,000 72,000,000 76,492 911 71,860 84,209 22,442 2,506,602 977 35.2 157,039 18,474 3,891 49 77,596 29 66,020,000 60,000,000 71,880 857 67,902 89,408 24,596 2,592,243 335 (1) 31.8 146,508 16,904 3,208 43 76,894 31 70,700,000 72,000,000 (2) 73,042 862 68,362 85,160 22,245 175 CITY OF CHANDLER, ARIZONA CAPITAL ASSET STATISTICS BY FUNCTION / PROGRAM LAST TEN FISCAL YEARS Fiscal Year Function/Program Community Services Developed parks Developed acres Undeveloped acres Swimming pools Other recreational facilities (lighted fields) Library bookstock Transportation and Development Total miles streets (center line) Street lights Signalized intersections Public Safety Police stations Fire stations General Government Based aircraft Municipal Utilities Water mains (miles) Fire hydrants Average daily treament (mgd) 2006 2007 53 889 535 (1) 2008 2009 54 959 468 58 1,099 455 59 1,133 407 5 5 5 6 33 469,000 34 483,128 34 469,023 34 472,266 785 25,100 189 812 25,307 192 822 26,326 200 832 26,500 205 2 9 2 10 3 10 3 10 457 499 442 449 1,063 10,952 22 1,080 12,291 24 1,117 13,033 24 1,189 13,750 24 Source: City of Chandler Departments (1) The 2006 increase in Undeveloped Acres is due to the purchasing of more land at the following sites: Tumbleweed, Landfill and Veteran Oasis (2) The 2010 decrease in Fire Hydrants is due to the City adjusting the count to include only hydrants owned and maintained by the City 176 Schedule 18 Fiscal Year 2010 2011 2012 2013 2014 2015 61 1,198 336 61 1,192 342 61 1,196 338 61 1,198 336 62 1,208 325 64 1,232 309 6 6 6 6 6 6 34 446,675 34 429,604 34 555,924 39 550,857 39 595,969 41 396,773 829 26,600 208 829 26,600 208 829 26,600 212 831 26,900 216 838 27,100 216 841 27,700 218 3 10 3 10 3 10 3 10 3 10 3 10 449 437 399 388 415 425 1,223 12,925 24 1,227 10,877 24 1,227 12,553 26 1,227 12,717 26 1,278 13,118 28 1,194 12,318 (2) 22 177 178