CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 Jay Tibshraeny, Mayor Jack Sellers, Vice-Mayor Rick Heumann, Councilmember Kevin Hartke, Councilmember Nora Ellen, Councilmember Rene‘ Lopez, Councilmember Terry Roe, Councilmember Executive Staff Marsha Reed, City Manager Nachie Marquez, Assistant City Manager Prepared by Management Services Department Dawn Lang, Management Services Director Penny Malia, Accounting Manager CITY OF CHANDLER, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016 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, 2016 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 Museum Special Revenue ................................................................................................................... 113 Library Special Revenue ...................................................................................................................... 114 General Government Capital Projects ............................................................................................... 115 Public Buildings Capital Projects ....................................................................................................... 116 Grants Capital Projects ........................................................................................................................ 117 Community Services Capital Projects ............................................................................................... 118 Public Safety Buildings and Improvements Capital Projects ......................................................... 119 Vehicle and Capital Equipment Capital Projects ............................................................................. 120 Special Assessments Capital Projects ................................................................................................ 121 Technology Replacement Capital Projects ........................................................................................ 122 Municipal Arts Capital Projects ......................................................................................................... 123 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, 2016 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, 2016 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, 2016, 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 Uniform Guidance. 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. Chandler 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 2015, the City’s population increased by over 140 percent, from 100,416 to 244,687. The City’s growth for nearly two decades prior to the recession was attributable to the growth in its manufacturing sector, which is led by high-tech industrial companies such as Intel, Orbital ATK, Microchip Technology and NXP Semiconductors (Formerly Freescale Semiconductor). These four companies combine to employ over 15,000 people in the City. A rapidly growing industry within the City in recent years has been financial services with companies such as Wells Fargo, Bank of America, PayPal, Toyota Financial Services and GM Financial Services employing over 11,000 people. 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 boasts a strong labor market serving the high technology field’s demand for skilled workers. Chandler’s median age is 34.9 years and median household incomes are $75,633. In addition, approximately 75 percent of the population has a college degree or some college education. Over 80 percent of the City's manufacturing employees are in high technology fields while the national average is 23 percent, according to data from the Maricopa Association of Governments and Bureau of Labor Statistics. The City’s unemployment rate averaged 4.5 percent for calendar year 2015 compared with 5.2 percent for Maricopa County and 6.1% for the State of Arizona. The City’s sales tax revenues, which comprise over 50 percent of its general fund, increased by 3.5 percent for 2015-16 from the prior year actuals. The City continues to strengthen its financial position and has benefitted from one-time revenues created by new developments. With only slow and steady operating revenue growth anticipated, managing costs of services and maintaining existing infrastructure continues to be critical. 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. 2015-2016 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; • Conducted the fifth online budget meeting, “Budget Connect” enhancing citizen involvement in the budget process; • Wrote Chandler Insider articles distributed to 35,000 households monthly and published the Chandler News and Events pages monthly in two local newspapers that are distributed to 65,000 households. Both are 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 over 1,000,000 square feet of completed office and industrial development, including Mach One, Park Place Building 10, Chandler Corporate Center IV, Ascend at Chandler Airport, Willis/AZ Avenue Corporate Park, Tiburon at Chandler Airport, Kyrene 202 Building VI, and Metro Chandler Airport Center; • Entered into a partnership with the Export-Import Bank of the United States through its Regional Export Promotion Program to facilitate access to export financing for Chandler companies; • Entered into a contract with Northern Arizona Center for Entrepreneurship and Technology (NACET) to provide an array of programming and services for startups, entrepreneurs and small businesses in Chandler; • Completed development agreements with Ryan Companies to bring needed office space into the Downtown area and with Vintage Partners to bring additional retail/entertainment into the core of the Historic Square; • Designed a pilot mentoring program to further the City’s emphasis on professional development; • Negotiated four contracts with labor and trades (SEIU), Fire, Police Officer and Police Sergeant bargaining groups; • Chandler Public Library installed digital signage on screens at all four locations using free open source RiseVision software and will showcase programming, info-graphics and subscription database information; 2 • Constructed Citrus Vista Park and the Downtown State. Completed upgrades at Folley Park, Americans with Disabilities Act improvements at Desert Oasis Aquatic Center, installed artificial turf at Nozomi Aquatic Center and installed ball field shade at Desert Breeze and Espee Parks; • Chandler earned the national designation of Playful City USA for the tenth consecutive year; • The Arizona Parks and Recreation Association (APRA) awarded Mayor Jay Tibshraeny the 2015 Outstanding Public Official award and the Chandler Tennis Center received the United States Tennis Association’s highest tennis facility honor, being named the 2015 Featured Facility Award winner; • Saved 15,772,000 gallons of water through the Water Conservation Residential Audit Program; • Implemented special event recycling for City events via the purchase of recycling containers and a specialized roll-off used specifically for special events; • Implemented a Veterans Affairs pilot program utilizing Chandler Fire, Health & Medical Community Paramedics. Service increased healthcare access to veterans living in Chandler by treating and evaluating in their home using innovative technology; • Recipient of the American Heart Association Mission: Lifeline Gold Award. This distinguished award recognizes exceptional evaluation and treatment times for cardiac patients. Chandler Fire, Health & Medical was a Silver Award recipient last year, one of only two municipalities in the State of Arizona; and • The Crime Analysis and Research Unit introduced a new crime-fighting instrument called Real-time Electronic Area Canvassing Tool (REACT), which provides a continuously updated map for police canvassing efforts related to searches, notifications and evacuations. 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 continue to strengthen the City. The City Council’s new strategic goals are: • Be the Most Connected City Connect our community using enhanced communication technologies to share information by increasing electronic availability of City information. Continually strive to utilize new technology that enhances citizen engagement, technological capabilities, and efficiency. Connect our community by increasing connectivity through enhanced intermodal transportation. • Be a Leader in Transparency Provide timely and accurate data and reports to maintain accountability and provide support for effective decision making. Promote opportunities that encourage city engagement and input. • Maintain Fiscal Sustainability Manage the City’s diverse portfolio of revenue sources to maximize and expand them. Continue adherence to and improve upon fiscal policies. Maintain strong bond ratings with all three rating agencies for all types of debt. Manage expenditure growth through periodic review of programs and services. • Attract a Range of Private Sector Businesses Position Chandler to be recognized by corporate real estate executives, site selectors, regional partners, and the development industry as a premiere location for new investment. Coordinate and facilitate the revitalization of the City core. 3 • Possess a Contemporary Culture to Capitalize on Cultural and Ethnic Diversity Promote Chandler as a contemporary and inclusive community that values its rich diversity, history, and culture. Continue to implement City employment practices that highlight and promote diversity. Invest in employees, support systems, and innovation strategies that ensure Chandler remains a leader in the delivery of high quality services. • Be Safe and Beautiful Implement a multifaceted approach to address the needs of aging neighborhoods from the physical, safety, and community perspectives. Construct and maintain public infrastructure in an aesthetically pleasing manner. Ensure Chandler remains a safe community by employing best practices. 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 2015-16, $ $910,614,017). 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 4 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 Uniform Guidance. Auditing standards generally accepted in the United States of America and the standards set forth in the General Accountability 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, 2015, marking the thirty fourth 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, 2016 from the GFOA, marking the twenty-eighth 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; 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, 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 Manager City Magistrate Law City Clerk Assistant City Managers Community & Neighborhood Services Neighborhood Resources Code Enforcement Aquatics Park Dev. & Operations Recreation General Government Planning Innovations Building and Facilities Airport Cultural Affairs Sports & Fitness Nature & Recreation Housing & Redevelopment Community Development (Admin., Library, Museum, Center for the Arts) Municipal Utilities Municipal Utilities Admin. Solid Waste Services Water Distribution Water Treatment Plant Environmental Resources Wastewater Collection Ocotillo Brine Reduction Facility Lone Butte Wastewater Treatment Water Quality Water Systems Maintenance San Tan Vista Water Treatment Meter Services Wastewater Quality Airport Water Reclamation Ocotillo Water Reclamation Chandler Water Reclamation Police Admin. Professional Standards Property & Evidence Forensic Services Human Resources Information Technology (Serv. Delivery Mgmt. & Admin., Applications Support Infrastructure & Client Support) Police Field Operations Criminal Investigations Planning & Research Communications Police Technology Records Detention Services Community Resources & Training Communications & Public Affairs Video Production, Print, Mail & Graphics Fire Operations Prevention & Preparedness Fire Support Services Transportation & Development Development Services Trans. & Dev. Admin. Engineering Streets (Downtown Redevelopment, Tourism) Police Department Fire, Health & Medical Fleet Services Fire Admin. Health & Medical Services Economic Development Management Services Traffic Engineering Transit Services Street Sweeping 7 Management Services Admin. Budget Purchasing Central Supply Accounting Tax and License Utility Services Environmental Management 8 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, 2016, 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, 2016, 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 Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, for the year ended June 30, 2016, 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: All 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: All 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: All 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, 2016, 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. Phoenix, Arizona December 16, 2016 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, 2016 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, 2016. 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 2016 as follows:      The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $1.33 billion (net position) which represents an increase of $45.8 million from the prior year; due to changes in both governmental and business type activities. The governmental activities liabilities decreased primarily from the savings achieved from refunding of general obligation debt resulting in an increase in net position. Additionally, the business-type activities increased investment in capital assets. Of this amount, $252.9 million (unrestricted net position) may be used to meet the City’s obligations to citizens and creditors. However, $59.3 million is invested in a joint venture with the Town of Gilbert, and not available for obligations. At June 30, 2016, the City’s governmental funds reported combined ending fund balances of $289 million, an increase of $12.4 million in comparison with the prior year. Approximately 57.6 percent of the total amount, $166.6 million, is available for spending at the City’s discretion (assigned or unassigned). At June 30, 2016, total fund balance for the General Fund was $181 million which represents an decrease of $4.1 million from the prior year; this is primarily due to planned use of General Fund balance for streets and park infrastructure maintenance and other one-time capital improvements. General revenues from governmental activities accounted for $231.9 million, or 70 percent, of all revenues from governmental activities. Program specific revenues in the form of charges for services and grants and contributions accounted for $98.7 million or 30 percent of total governmental activity revenues. The City had $157 million of program revenues and $5.3 million in general revenues and transfers related to business-type activities. At June 30, 2016, the City’s proprietary funds reported combined total net position of $632.4 million, and total unrestricted net position of $258.8 million. A total of $134.7 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, 2016 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 22 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 19 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, 2016 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 $1.33 billion as of June 30, 2016. 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 (69.4 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 (11.5 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position (19.1 percent) includes $59.3 million which is invested in a joint venture with the Town of Gilbert that may not be used to meet the City’s 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. The same situation held true for the prior fiscal year. There was an increase of $41 million in unrestricted net position reported in connection with the City’s business-type activities. This was due primarily from the investment in capital assets. 15 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2016 The following table presents a condensed statement of the City’s net position for the fiscal years ended June 30, 2016 and 2015. Current assets Capital assets, net Long-term assets Total assets Total deferred outflows of resources Total assets and deferred outflows of resources Governmental Activities 2016 2015 $ 378,883,237 $ 380,261,643 788,225,613 805,630,969 1,167,108,850 1,185,892,612 53,383,415 49,156,931 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 2016 2015 $ 305,201,545 $ 239,034,348 687,329,244 666,905,029 59,722,774 63,235,221 1,052,253,563 969,174,598 10,521,835 11,255,258 Total (Primary Govt.) 2016 2015 $ 684,084,782 $ 619,295,991 1,475,554,857 1,472,535,998 59,722,774 63,235,221 2,219,362,413 2,155,067,210 63,905,250 60,412,189 1,220,492,265 1,235,049,543 1,062,775,398 980,429,856 2,283,267,663 2,215,479,399 49,357,879 464,164,254 513,522,133 11,483,506 64,642,692 460,027,117 524,669,809 26,662,630 50,284,970 377,807,391 428,092,361 2,258,251 42,588,983 335,211,119 377,800,102 4,258,428 99,642,849 841,971,645 941,614,494 13,741,757 107,231,675 795,238,236 902,469,911 30,921,058 525,005,639 551,332,439 430,350,612 382,058,530 955,356,251 933,390,969 579,591,241 121,767,847 (5,872,464) 695,486,624 567,041,560 108,965,994 7,709,550 683,717,104 342,252,306 31,365,801 258,806,679 $ 632,424,786 380,427,606 119,075 217,824,645 $ 598,371,326 921,843,547 153,133,648 252,934,215 $ 1,327,911,410 947,469,166 109,085,069 225,534,195 $ 1,282,088,430 $ 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, 2016 Changes in net position. The City’s total revenues for the fiscal year ended June 30, 2016 were $492.5 million. The total cost of all programs and services was $446.7 million, which results in an increase in net position of $45.8 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2016 and 2015. Governmental Activities 2016 Business-type Activities 2015 Total (Primary Govt.) 2016 2015 2016 2015 67,665,580 3,514,714 13,133,637 $ 118,637,861 5,784,021 32,690,364 $ 109,739,794 5,862,477 35,357,741 29,214,103 112,250,883 15,303,635 6,100,475 3,344,817 60,712,442 3,834,840 1,124,559 330,623,274 28,708,033 108,657,130 14,633,470 10,106,891 3,300,129 59,236,588 1,763,585 1,197,215 311,916,972 10,391 2,180,447 2,632,460 161,935,544 10,865 819,556 2,475,760 154,266,193 29,214,103 112,261,274 15,303,635 6,100,475 3,344,817 60,712,442 6,015,287 3,757,019 492,558,818 28,708,033 108,667,995 14,633,470 10,106,891 3,300,129 59,236,588 2,583,141 3,672,975 466,183,165 General government Public safety Transportation and development Community services Interest and fiscal charges Water Wastewater Solid waste Airport Housing authority Total expenses 112,514,903 111,568,323 55,012,081 31,441,019 7,884,146 318,420,472 104,456,315 102,050,425 51,714,085 31,784,321 6,986,490 296,991,636 54,075,742 51,034,921 13,925,017 2,011,880 7,267,806 128,315,366 55,470,724 50,823,497 14,087,780 1,860,057 7,433,284 129,675,342 112,514,903 111,568,323 55,012,081 31,441,019 7,884,146 54,075,742 51,034,921 13,925,017 2,011,880 7,267,806 446,735,838 104,456,315 102,050,425 51,714,085 31,784,321 6,986,490 55,470,724 50,823,497 14,087,780 1,860,057 7,433,284 426,666,978 Excess (deficiency) before transfers 12,202,802 14,925,336 33,620,178 24,590,851 45,822,980 39,516,187 433,282 123,350 - - 34,053,460 24,714,201 45,822,980 39,516,187 Revenues: Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Property taxes Sales taxes Highway user taxes Other taxes Franchise fees State shared revenues Investment income Miscellaneous Total revenues $ 76,823,271 5,188,787 16,725,462 $ $ 195,461,132 10,972,808 49,415,826 $ 177,405,374 9,377,191 48,491,378 Expenses: Transfers in (out) (433,282) Change in net position 11,769,520 Beginning net position Ending net position $ (123,350) 14,801,986 683,717,104 668,915,118 598,371,326 573,657,125 1,282,088,430 1,242,572,243 695,486,624 $ 683,717,104 $ 632,424,786 $ 598,371,326 $ 1,327,911,410 $ 1,282,088,430 17 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2016 Other taxes 1.24% Highway user taxes 3.11% Revenue Sources - Fiscal Year 2016 State shared revenues 12.33% Investment income 1.22% Miscellaneous 0.76% Charges for services 39.68% Franchise fees 0.68% Operating grants and contributions 2.23% Sales taxes 22.79% Property taxes 5.93% Capital grants and contributions 10.03% Functional Expenses - Fiscal Year 2016 Solid waste 3.12% Airport 0.45% Wastewater 11.42% Housing authority 1.63% General government 25.19% Water 12.10% Interest expense on long-term debt 1.76% Community services 7.04% Transportation & development 12.31% Public safety 24.97% Governmental activities. The increase in governmental net position totaled $11.8 million for the year ended June 30, 2016 compared with an increase of $14.8 million in the prior year. This reflects continued increases in charges for services and local and state shared sales tax as consumer confidence remains strong and development continues in Chandler, as the economy continues to strengthen. At the same time, increased spending reflects the City’s use of one-time funds towards maintaining existing infrastructure (i.e., 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, 2016 Business-type activities. The increase in business-type net position totaled $34.1 million for the year ended June 30, 2016 compared with an increase of $24.7 million in the prior year. This is primarily due to wastewater and reclaimed water utility rate increases implemented October, 2015 and higher water consumption. As evident in the previous graph, the largest financing source for the City is charges for services at 39.68 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 22.79 percent and 12.33 percent, respectively, of the total revenues with capital grants and contributions accounting for an additional 10.03 percent of the City’s total revenues. The City as a whole uses the largest amount of resources for general government functions at 25.19 percent of the total functional expenses of the City. The next largest users of resources are public safety and transportation and development at 24.97 percent and 12.31 percent, respectively, with water services accounting for 12.1 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 $289 million, an increase of $12.4 million in comparison with the prior year. Approximately $166.6 million (57.6 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 $167.1 million represents a slight decrease of $403.6 thousand. The remainder of the fund balance comprising of non-spendable and restricted balances amounts to $122.7 million (42.4 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 $109.9 million represents an increase of $12.8 million. This increase is due to the increase in assigned general fund balance for one-time capital improvements. 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 $178.5 million, while total fund balance reached $181 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 .91 coverage of total annual general fund expenditures. This is still within 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 decreased by $4.1 million during the current fiscal year primarily due to planned use of General Fund balance for streets and park infrastructure maintenance and other one-time capital improvements. 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 $44.5 million. The fund balance of the City’s street fund increased by $8.1 million during the current fiscal year due to accumulated Arterial Street Impact Fee revenues and reimbursements from the Proposition 400 Arterial Life Cycle program for projects in process. 19 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2016 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 increased by $371.8 thousand during the current fiscal year. The increase is due to the fact that the secondary property tax rate remained at $0.88 per $100 of assessed valuation in FY 2015-16 to partially offset the impact of increased median homeowner property values. 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 $632.4 million and $38 million, respectively, compared to $598.4 million and $36.1 million in the prior fiscal year. The enterprise funds net position after net investment in capital assets is 40.9 percent unrestricted compared to 36.4 percent in the prior fiscal year. Unrestricted net position of the water fund at the end of the year amounted to $134.7 million, and those for the wastewater fund amounted to $112.8 million, compared to $144.8 million and $63.5 million in the prior fiscal year. BUDGETARY HIGHLIGHTS For the 2015-16 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 2015-16 that included higher planned operating and capital expenditures based upon anticipated increases to the ongoing revenue streams and using one-time revenues for select capital projects. Most local revenue sources were forecasted to improve, and expectations were met during the year. The City’s major sources of General Fund revenues include Local Sales Tax, State Shared Sales Tax, and Urban Revenue Sharing (State Shared Income Tax). Continued increases in the largest General Fund revenue categories allowed the City Council to increase the General Fund budget by 7.6% from the previous year, and the total City budget increased by 16.2% over 2014-15. As has been the City’s practice, the budget and revenue forecast distinguished between ongoing and one-time revenues and ensured related spending was also aligned. The City’s 2015-16 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 maintain the General Fund contingency reserve at 15% of anticipated annual General Fund 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, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets. As of June 30, 2016, the City had invested $921.8 million in capital assets net of related debt, including buildings, facilities, vehicles, computers, equipment, and infrastructure assets. Total depreciation expense for the year was $95.6 million. The City completed several improvement projects including completion of solar array projects at the cost of $2.2 million, Citrus Vista park site construction at a cost of $1.7 million, Valencia Park site construction at a cost $1.4 million, Airport Runway Erosion Control at a cost of $821 thousand and construction of a water system maintenance building at a cost of $1 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, 2016 and 2015: Additional information on the City’s capital assets can be found in Note 4 of the financial statements. Governmental Business-type Activities 2016 Activities 2015 Land $ 85,355,474 Land improvements Infrastructure 368,754,379 System improvements Buildings and improvements 235,599,631 Vehicles, machinery $ and equipment Construction in progress Total 28,727,474 61,541,490 $ 805,630,969 29,865,648 68,650,481 $ 788,225,613 Total 85,355,474 385,600,420 244,406,111 2016 $ 48,980,747 400,599 551,925,122 9,471,903 4,246,188 72,304,685 $ 687,329,244 21 (Primary Govt.) 2015 $ 49,829,747 490,716 575,513,084 8,561,616 3,872,052 28,637,814 $ 666,905,029 2016 $ 134,336,221 400,599 368,754,379 551,925,122 245,071,534 34,111,836 140,955,166 $ 1,475,554,857 2015 $ 135,185,221 490,716 385,600,420 575,513,084 252,967,727 32,599,526 90,179,304 $ 1,472,535,998 CITY OF CHANDLER, ARIZONA Management’s Discussion and Analysis (MD&A) Year Ended June 30, 2016 Long-term Debt. At the end of the current fiscal year, the City of Chandler had total bonded debt outstanding of $575.8 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, 2016 and 2015. General obligation bonds Revenue bonds Excise tax revenue obligations Special assessment bonds Issuance premiums Governmental Business-type Total Activities Activities (Primary Govt.) 2016 2015 2016 2015 2016 2015 $ 205,088,000 $ 222,143,000 $ 127,782,000 $ 140,072,000 $ 332,870,000 $ 362,215,000 10,055,000 14,025,000 24,850,000 31,610,000 34,905,000 45,635,000 204,090,000 142,200,000 204,090,000 142,200,000 3,960,000 4,440,000 3,960,000 4,440,000 - - 16,165,290 17,898,207 22,910,886 20,931,905 39,076,176 38,830,112 Total bonds & obligations payable $ 235,268,290 $ 258,506,207 $ 379,632,886 $ 334,813,905 $ 614,901,176 $ 593,320,112 15,978 30,978 34,022 29,022 6,432,298 5,642,383 - - Arbitrage payable Claims payable Landfill closure/post closure Compensated absences Net Pension Liability Post employment benefits Total long term liabilities - - 50,000 60,000 6,432,298 5,642,383 4,340,000 4,340,000 4,340,000 4,340,000 10,342,377 9,819,302 1,096,093 1,073,631 11,438,470 10,892,933 215,115,571 195,607,344 20,499,330 19,019,081 235,614,901 214,626,425 22,067,044 18,839,333 1,853,589 1,644,965 23,920,633 20,484,298 $ 489,241,558 $ 488,445,547 $ 407,455,920 $ 360,920,604 $ 896,697,478 $ 849,366,151 The City of Chandler’s total long term liabilities increased by $47.3 million during the current fiscal year. The key factors in the increase were the issuance of $66.7 million in Excise Tax bonds, an increase in net pension liabilities of $21 million off-set by principal payments made on long-term 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 $633.4 million. The City has $323.4 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 $190.0 million. The City has $9.4 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, 2016 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET Adopting a balanced budget for the next fiscal year (2016-17) required the combined efforts of citizens, the City Council, Executive Leadership team, and staff members throughout the organization. The City’s overall budget reflects continued slow but steady economic growth for both the City and State. The budget increased from $910 million in 2015-16 to $971 million (+6.7%) in 2016-17, with the increase due to higher expenditures for department spending, including capital projects. Overall increases in the largest General Fund revenue categories and use of fund balance helped support a 7.6% increase in the General Fund budget for 2016-17, with the largest portion of the increase due to increases in capital spending ($28 million) for pay-as-you-go projects. With a 7.3% increase in Limited Property Values (including new growth), the City Council chose to reduce the primary property tax rate from $0.2992 to $0.29 and the secondary property tax rate from $0.88 to $0.87 per $100 of assessed valuation. The rate reductions will help minimize the impact of higher values on property owners tax payment. 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 2016-17 budget does not include any anticipated bond sales, although refunding opportunities for outstanding bonds are evaluated continuously. As a result, the City Council maintained the Infrastructure Maintenance Reserve to supplement the Street Repaving and other capital improvement program. This appropriation will exhaust the Reserve. 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. The 2016-17 budget also includes supplemental payments to the Public Safety Personnel Retirement System to accelerate pay down of the City’s unfunded liability. 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, 2016 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 360,128,282 1,127,109 660,838 349,553 25,595 9,726,038 907,594 22,590 812,817 3,607,536 448,503 1,066,782 378,883,237 286,784,314 17,421,223 (25,595) 42,035 167,995 341,672 416,053 53,848 305,201,545 $ 646,912,596 18,548,332 660,838 349,553 9,768,073 1,075,589 364,262 1,228,870 3,607,536 448,503 1,120,630 684,084,782 $ 758,853 758,853 $ 1,229,140 6,752 19,215 1,255,107 - 336,450 59,317,819 68,505 336,450 59,317,819 68,505 - 1,411,004 6,000 154,005,955 634,219,658 788,225,613 788,225,613 1,167,108,850 121,285,432 566,043,812 687,329,244 747,052,018 1,052,253,563 275,291,387 1,200,263,470 1,475,554,857 1,535,277,631 2,219,362,413 758,853 55,122 55,122 1,472,126 2,727,233 41,682,882 11,700,533 53,383,415 2,282,894 8,238,941 10,521,835 43,965,776 19,939,474 63,905,250 - - 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 8,375,174 2,216,244 8,577,907 4,313,016 798,234 5,000 118,834 19,156,902 5,796,568 49,357,879 9,514,139 259,599 3,326,333 7,112,564 423,806 10,000 12,594 29,531,489 94,446 50,284,970 17,889,313 2,475,843 11,904,240 11,425,580 798,234 423,806 15,000 131,428 48,688,391 94,446 5,796,568 99,642,849 - 100,095 297,764 397,859 10,978 10,223,543 216,111,388 215,115,571 22,067,044 635,730 464,164,254 24,022 1,083,499 350,101,397 20,499,330 1,853,589 4,245,554 377,807,391 35,000 11,307,042 566,212,785 235,614,901 23,920,633 4,245,554 635,730 841,971,645 - - 513,522,133 428,092,361 941,614,494 - 397,859 11,483,508 2,258,251 13,741,759 - - 579,591,241 342,252,306 921,843,547 - 55,122 61,381,249 20,454,178 21,730,085 453,023 16,182,694 1,566,618 121,767,847 (5,872,464) 28,718,784 2,581,560 65,457 31,365,801 258,806,679 61,381,249 20,454,178 21,730,085 453,023 44,901,478 4,148,178 65,457 153,133,648 252,934,215 758,853 1,411,004 1,411,004 863,248 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 $ 695,486,624 See accompanying Notes to Basic Financial Statements. 27 $ 632,424,786 $ 1,327,911,410 $ 758,853 $ 2,329,374 City of Chandler Statement of Activities For the year ended June 30, 2016 Program Revenues Functions/Programs Expenses Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ $ Total Primary government: Governmental activities: General government $ 112,514,903 Public safety $ 42,021,638 317,657 1,013,056 $ 43,352,351 111,568,323 7,471,344 1,427,562 - 8,898,906 Transportation and development 55,012,081 16,538,175 1,186,977 15,636,901 33,362,053 Community services 31,441,019 10,792,114 2,256,591 75,505 13,124,210 7,884,146 - - - - 318,420,472 76,823,271 5,188,787 16,725,462 98,737,520 Water 54,075,742 50,483,097 - 13,047,701 63,530,798 Wastewater 51,034,921 51,321,346 - 18,110,124 69,431,470 Solid waste Interest on long-term debt Total governmental activities Business-type activities: 13,925,017 14,940,591 - - 14,940,591 Airport 2,011,880 946,419 - 1,030,989 1,977,408 Chandler housing authority 7,267,806 946,408 5,784,021 501,550 7,231,979 128,315,366 118,637,861 5,784,021 32,690,364 157,112,246 $ 446,735,838 $ 195,461,132 $ $ 255,849,766 $ $ $ Total business-type activities Total primary government 10,972,808 $ 49,415,826 - $ - Component units Chandler Industrial Development Authority Chandler Cultural Foundation Total component units 36,209 1,403,970 $ 1,440,179 62,039 1,306,004 $ 1,368,043 316,494 $ 316,494 $ 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 Net position - end of year See accompanying Notes to Basic Financial Statements. 28 $ - 62,039 1,622,498 $ 1,684,537 Net (Expense) Revenue and Changes in Net Position Primary Government Component Units Chandler Industrial Governmental Business-Type Activities Activities $ (69,162,552) $ - $ (69,162,552) Cultural Authority Foundation $ - $ - (102,669,417) - (102,669,417) - - (21,650,028) - (21,650,028) - - (18,316,809) - (18,316,809) - - (7,884,146) - (7,884,146) - - (219,682,952) - (219,682,952) - - - 9,455,056 9,455,056 - - - 18,396,549 18,396,549 - - - 1,015,574 1,015,574 - - - (34,472) (34,472) - - - (35,827) (35,827) - - - 28,796,880 28,796,880 - - (219,682,952) 28,796,880 (190,886,072) - - - - - 25,830 - - - - - 218,528 - - - 25,830 218,528 - 29,214,103 - 29,214,103 - 112,250,883 10,391 112,261,274 - - 15,303,635 - 15,303,635 - - 6,100,475 - 6,100,475 - - 162,869,096 10,391 162,879,487 - - 3,344,817 - 3,344,817 - - 60,712,442 - 60,712,442 - - 3,834,840 2,180,447 6,015,287 1,361 15,534 1,124,559 2,632,460 3,757,019 - - 433,282 - - - 231,452,472 5,256,580 236,709,052 1,361 15,534 11,769,520 34,053,460 45,822,980 27,191 234,062 683,717,104 598,371,326 1,282,088,430 731,662 2,095,312 (433,282) $ Total Chandler Development 695,486,624 $ 632,424,786 $ 1,327,911,410 $ 758,853 29 $ 2,329,374 City of Chandler Balance Sheet Governmental Funds June 30, 2016 Major Funds General Obligation Other Streets Bonds Governmental General Capital Projects Debt Service Funds 168,247,535 $ Total ASSETS Equity in pooled cash and investments $ Accounts receivable 1,044,062 Prepaid items - Privilege license tax receivable 47,511,872 $ 32,724,476 67,151,104 $ 315,634,987 - - $ 11,016 1,055,078 - - 22,590 22,590 660,838 660,838 - - - Property taxes receivable 92,387 - 257,166 - 349,553 Advances to other funds 18,685,809 - - - 18,685,809 Due from other funds 3,908,375 - - - 3,908,375 Due from other governments 2,444,761 - - 7,281,277 9,726,038 Inventories 907,594 - - - 907,594 Accrued interest receivable 406,066 107,810 54,099 154,533 722,508 - - - 3,607,536 3,607,536 - - - 448,503 448,503 1,063,874 - - 2,908 1,066,782 $ 356,796,191 Special assessments receivable Notes receivable Other receivables Total assets $ 197,461,301 $ 47,619,682 $ 5,952,359 $ 306,169 $ 33,035,741 $ 78,679,467 - $ 2,063,050 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable $ $ 8,321,578 Accrued payroll 2,117,603 2,939 - 72,141 2,192,683 Trust liabilities and deposits 7,562,557 - - 1,015,350 8,577,907 Accrued interest - - 4,045,991 267,025 4,313,016 Due to other funds - - - 3,882,780 3,882,780 - 2,814,300 - 15,871,509 18,685,809 792,064 - - - 792,064 Arbitrage liability - - - 5,000 5,000 Bonds payable (matured) - - 13,615,000 3,370,000 16,985,000 16,424,583 3,123,408 17,660,991 26,546,855 63,755,837 Advances from other funds Unearned revenue Total liabilities Deferred inflows of resources: Unavailable revenues - special assessments Unavailable revenues - property taxes Total deferred inflows of resources - - - 3,586,598 3,586,598 36,509 - 92,968 - 129,477 36,509 - 92,968 3,586,598 3,716,075 907,594 - - - 907,594 1,566,618 44,496,274 15,281,782 60,423,173 121,767,847 - - - - - 109,958,162 - - - 109,958,162 68,567,835 - - 181,000,209 44,496,274 15,281,782 (11,877,159) 48,546,014 289,324,279 Fund balances: Nonspendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities, deferred inflows and fund balances See accompanying Notes to Basic Financial Statements. $ 197,461,301 $ 30 47,619,682 $ 33,035,741 $ 78,679,467 56,690,676 $ 356,796,191 City of Chandler Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June 30, 2016 Total Fund Balances - Total Governmental Funds $ 289,324,279 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 154,005,955 Depreciable buildings, property, equipment and infrastructure, net 634,219,658 Total capital assets 788,225,613 Certain revenues are not available to pay for current period expenditures and, therefore, are unavailable in the funds. 3,716,075 Deferred charges on refundings are not financial resources and, therefore, are not reported in the funds. 11,700,533 Deferred outflows related to pensions are not financial resources and, therefore, are not reported in the funds. 41,682,882 Deferred inflows related to pensions represent a future acquisition of net position that is not reported in the funds. (11,483,508) 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. 37,997,411 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 $6,173,245 which are included above, the long-term liabilities were adjusted as follows: Bonds payable (218,283,290) Net pension liability (215,115,571) OPEB liability (21,991,782) Arbitrage liability (10,978) Compensated absences (10,275,040) Total long-term liabilities (465,676,661) Net Position of Governmental Activities $ See accompanying Notes to Basic Financial Statements. 31 695,486,624 City of Chandler Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the year ended June 30, 2016 Major Funds General General Obligation Other Streets Bonds Governmental Capital Projects Debt Service Funds Total REVENUES: Property taxes $ Sales taxes 7,410,739 $ - 112,250,883 $ - 21,826,868 $ - $ 29,237,607 - - 112,250,883 Highway user taxes - - - 15,303,635 15,303,635 Regional transportation taxes - 6,100,475 - - 6,100,475 3,344,817 - - - 3,344,817 60,712,442 - - - 60,712,442 Franchise fees State shared Grants and entitlements System development fees Special assessments 132,935 - - 16,026,129 16,159,064 - 7,436,964 - 8,780,040 16,217,004 - - - 606,757 606,757 Licenses and permits 6,634,161 - - - 6,634,161 Charges for services 19,503,120 16,157 - 186,509 19,705,786 Fines and forfeitures 3,112,774 - - 1,715,400 4,828,174 Rentals 974,192 - - - 974,192 Contributions 200,000 - - - 200,000 1,902,896 508,017 251,878 746,274 3,409,065 Interest revenue Miscellaneous 371,995 14,061,613 216,550,954 Total revenues - 525,107 897,102 22,078,746 43,889,851 296,581,164 EXPENDITURES: Current: 48,117,743 - - 4,020,641 52,138,384 101,856,226 - - 2,749,437 104,605,663 Transportation and development 16,149,528 358,797 - 8,962,829 25,471,154 Community services 24,404,630 - - 584,214 24,988,844 5,200,491 5,626,169 - 39,182,583 50,009,243 General government Public safety Capital outlay Debt service: Principal - - 13,615,000 3,850,000 17,465,000 Interest and fiscal charges - - 8,091,981 543,650 8,635,631 195,728,618 5,984,966 21,706,981 59,893,354 283,313,919 20,822,336 8,076,647 371,765 (16,003,503) 13,267,245 Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES): Proceeds from disposal of capital assets - - - 463,709 463,709 Transfers in - - - 27,885,557 27,885,557 (29,252,060) Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE (24,930,401) - - (4,321,659) (24,930,401) - - 24,027,607 (4,108,065) 8,076,647 371,765 8,024,104 (902,794) 12,364,451 FUND BALANCES: Beginning of year End of year 185,108,274 $ 181,000,209 36,419,627 $ See accompanying Notes to Basic Financial Statements. 32 44,496,274 40,521,910 14,910,017 $ 15,281,782 $ 48,546,014 276,959,828 $ 289,324,279 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, 2016 Net Change in Fund Balances - Total Governmental Funds $ 12,364,451 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. 26,522,928 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. (49,237,709) 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 17,465,000 Pension related items 878,510 Other postemployment benefits obligation (3,208,049) Loss on disposal of capital assets (578,692) 14,556,769 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. 5,000 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. (525,406) 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. (477,718) 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. 5,888,117 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. 1,921,603 Change in Net Position of Governmental Activities $ See accompanying Notes to Basic Financial Statements. 33 11,769,520 City of Chandler Statement of Net Position Proprietary Funds June 30, 2016 Other Major Funds Water Governmental Proprietary Wastewater Activities: Internal Funds Total Service Fund ASSETS Current assets: Equity in pooled cash and investments $ 115,160,119 $ 152,041,686 $ 19,582,509 $ 286,784,314 $ 44,493,295 Accounts receivable 7,264,901 8,152,987 2,003,335 17,421,223 72,031 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 - - 42,035 42,035 146,865 - 21,130 167,995 - - - 341,672 341,672 - 218,951 162,703 34,399 416,053 90,309 - - 53,848 53,848 - 126,690,836 160,357,376 22,078,928 309,127,140 44,655,635 Long-term assets: Notes receivable Investment in joint venture Other assets - - 336,450 336,450 - 59,317,819 - - 59,317,819 - 40,007 28,498 - 68,505 - Capital assets: Non-depreciable 22,158,405 69,662,570 29,464,457 121,285,432 - Depreciable, net 197,966,641 343,153,518 24,923,653 566,043,812 - Total capital assets 220,125,046 412,816,088 54,388,110 687,329,244 - Total long-term assets 279,482,872 412,844,586 54,724,560 747,052,018 - Total assets 406,173,708 573,201,962 76,803,488 1,056,179,158 44,655,635 Deferred outflows of pension plan items 1,141,448 634,138 507,308 2,282,894 - Deferred amounts on refundings Total deferred outflow of resources 5,192,839 6,334,287 3,046,102 3,680,240 507,308 8,238,941 10,521,835 - DEFERRED OUTFLOWS OF RESOURCES 34 LIABILITIES Current liabilities: Accounts payable Accrued payroll 1,229,829 120,639 7,353,996 86,372 930,314 9,514,139 52,588 259,599 53,596 23,561 Trust liabilities and deposits 2,149,538 773,912 402,883 3,326,333 - Accrued interest 2,811,449 4,299,959 1,156 7,112,564 - - - 25,595 25,595 - Due to other funds Unearned revenue Customer advances Arbitrage liability Compensated absences payable - 109,753 156,283 423,806 6,170 157,770 4,880 5,120 - 10,000 774 - 6,545 3,773 2,276 12,594 15,812,283 13,694,010 25,196 29,531,489 - Landfill closure and postclosure liability - - 94,446 94,446 - Claims and judgements payable - - - - 5,796,568 22,292,933 26,326,895 1,690,737 50,310,565 5,880,669 8,410 15,612 - 24,022 - 563,113 324,624 195,762 1,083,499 66,563 - 3,900,000 - 3,900,000 - 137,976,548 212,071,694 53,155 350,101,397 - 10,249,664 5,694,258 4,555,408 20,499,330 - 972,393 614,868 266,328 1,853,589 75,262 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 - - - - 635,730 Total long-term liabilities 149,770,128 222,621,056 9,316,207 381,707,391 777,555 Total liabilities 172,063,061 248,947,951 11,006,944 432,017,956 6,658,224 1,129,126 627,293 501,832 2,258,251 - Net investment in capital assets 87,909,990 199,961,155 54,381,161 342,252,306 - Restricted 16,723,680 14,576,664 65,457 31,365,801 - 134,682,138 112,769,139 11,355,402 258,806,679 37,997,411 DEFERRED INFLOWS OF RESOURCES Deferred inflows of pension plan items NET POSITION Unrestricted Total net position $ 239,315,808 $ 327,306,958 See accompanying Notes to Basic Financial Statements. 35 $ 65,802,020 $ 632,424,786 $ 37,997,411 City of Chandler Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the year ended June 30, 2016 Major Funds Water Wastewater Other Governmental Proprietary Activities: Internal Funds Total Service Fund OPERATING REVENUES: Service fees $ 50,483,097 $ 51,321,346 $ 15,887,010 $ 117,691,453 $ 48,673 Grants and entitlements - - 5,784,021 5,784,021 - Rentals - - 946,408 946,408 - Sales taxes - - 10,391 10,391 - Self insurance premiums - - - - 27,929,802 74,540 276,629 187,393 538,562 227,458 50,557,637 51,597,975 22,815,223 124,970,835 28,205,933 Miscellaneous Total operating revenues OPERATING EXPENSES: General and administrative 3,288,000 2,869,415 1,065,648 7,223,063 - Personal services 8,651,464 6,508,502 3,745,455 18,905,421 2,414,393 Contractual services 6,566,274 3,870,803 10,463,764 20,900,841 2,104,923 Commodities 8,402,042 9,805,798 1,687,262 19,895,102 1,878,766 - - - 21,240,246 Claims expense Housing assistance payments Depreciation and amortization expense Total operating expenses OPERATING INCOME (LOSS) - - 4,382,996 4,382,996 - 19,452,697 25,047,859 1,840,265 46,340,821 - 46,360,477 48,102,377 23,185,390 117,648,244 27,638,328 4,197,160 3,495,598 (370,167) 7,322,591 567,605 1,116,460 861,929 202,058 2,180,447 420,777 NONOPERATING REVENUES (EXPENSES): Interest revenue 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 (5,954,707) (7,715,227) (2,313) (13,672,247) - 1,037,717 (125,118) (72,947) 1,730,862 1,055,985 (93,973) (659,931) 5,536,587 196 (17,000) 2,093,898 (219,091) (732,878) 7,250,449 - - (3,293,355) - (6,392,777) 420,777 (3,293,355) - Total nonoperating revenues (expenses) (5,561,088) (1,014,630) 182,941 (1,363,928) 2,480,968 (187,226) 13,047,701 18,110,124 1,532,539 32,690,364 - - 382,185 625,040 1,007,225 950,000 (156,355) (111,702) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 929,814 988,382 CAPITAL CONTRIBUTIONS AND TRANSFERS: Capital contributions Transfers in Transfers out (305,886) (573,943) (16,779) Total capital contributions and transfers 12,741,815 18,335,954 2,045,877 33,123,646 933,221 Change in Net Position 11,377,887 20,816,922 1,858,651 34,053,460 1,921,603 227,937,921 306,490,036 63,943,369 598,371,326 36,075,808 NET POSITION: Beginning of year End of year $ 239,315,808 $ See accompanying Notes to Basic Financial Statements. 36 327,306,958 $ 65,802,020 $ 632,424,786 $ 37,997,411 37 City of Chandler Statement of Cash Flows Proprietary Funds For the year ended June 30, 2016 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 sales 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 $ 50,456,187 (18,120,182) (9,120,647) 23,215,358 $ 49,277,405 (13,685,937) (6,662,935) 28,928,533 $ Total 16,792,378 5,780,488 (17,726,419) (3,835,117) 1,011,330 $ 116,525,970 5,780,488 (49,532,538) (19,618,699) 53,155,221 Governmental Activities: Internal Service Fund $ 28,239,706 (24,446,299) (2,446,551) 1,346,856 (305,886) (305,886) 382,185 (156,355) 225,830 625,040 (111,702) 513,338 1,007,225 (573,943) 433,282 950,000 (16,779) 933,221 (11,444,223) 126,000 (40,691,529) 34,000 (834,217) 17,000 (52,969,969) 177,000 - 7,935,904 60,597,244 68,533,148 - - (13,863,696) (7,952,128) (25,001) (21,840,825) - (6,073,306) (6,737,983) (2,626) (12,813,915) - 11,677,323 (11,641,998) 13,789,873 19,039,477 25,968,746 7,054,185 - 1,058,266 1,058,266 12,325,740 795,220 795,220 48,989,060 2,046,638 2,046,638 62,689,326 420,816 420,816 2,700,893 102,834,379 115,160,119 38 $ 103,052,626 152,041,686 501,550 (343,294) 193,152 193,152 1,374,526 $ 18,207,983 19,582,509 $ 224,094,988 286,784,314 $ 41,792,402 44,493,295 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 $ $ $ 4,197,160 $ 3,495,598 $ (370,167) $ 7,322,591 19,452,697 25,047,859 1,840,265 46,340,821 (745,475) 47,062 125,118 89,072 (276,074) 372,168 146,739 (258,961) 65,852 19,018,198 23,215,358 (2,311,787) 93,974 2,860,079 (133,934) (204,836) 102,079 (143,867) 123,368 25,432,935 28,928,533 (189,049) (2,570) (25,748) (206,243) (39,978) 111,909 (11,177) (115,316) 19,404 1,381,497 1,011,330 (3,246,311) 44,492 193,344 2,742,908 (449,986) 279,241 237,641 (518,144) 208,624 45,832,630 53,155,221 1,370,378 (1,730,862) 1,037,717 125,118 See accompanying Notes to Basic Financial Statements. 39 $ $ 4,320,251 (5,536,587) 1,055,985 93,973 $ $ 1,030,989 17,000 196 - $ $ 5,690,629 1,030,989 (7,250,449) 2,093,898 219,091 $ 567,605 - $ $ 34,622 (12,279) (51,820) 789,915 (849) 19,662 779,251 1,346,856 - City of Chandler Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 Volunteer Firemen's Pension and Relief Trust Fund Agency Funds ASSETS Equity in pooled cash and investments $ 19,114 45 $ 5,000 - $ 19,159 $ 5,000 $ - $ - Accrued interest receivable Total assets LIABILITIES Due to others Total liabilities 5,000 $ 5,000 NET POSITION Assets held in trust for pension benefits 19,159 Total net position $ See accompanying Notes to Basic Financial Statements. 40 19,159 $ - City of Chandler Statement of Changes in Fiduciary Net Position Fiduciary Funds - Trust Funds For the year ended June 30, 2016 Volunteer Firemen's Pension and Relief Trust Fund ADDITIONS: Net investment income $ Total additions 202 202 DEDUCTIONS: Benefits paid to plan members - Change in net position 202 NET POSITION: Beginning of year 18,957 End of year $ See accompanying Notes to Basic Financial Statements. 41 19,159 42 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2016 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, 2016 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, 2016 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 $16,299,017 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 $5,508,506, for the streets capital projects fund are $2,439,859, for water enterprise fund are $19,738,794, for wastewater enterprise fund are $118,096,301, and for nonmajor governmental funds are $18,918,399. 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, 2016 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, 2016 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: Years 20-40 20 12-50 25 4-7 5-15 Assets Buildings Building improvements Infrastructure System improvements Vehicles Machinery and equipment J. 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, 2016 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, 2016 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, 2016, the City implemented the provision of GASB Statement No. 72, Fair Value Measurement and Application. This Statement generally requires investments to be measured at fair value and requires disclosures to be made about fair value measurements including the level of fair value hierarchy and the valuation techniques utilized by the government. 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 $9,653,875, and the bank balance was $17,558,765. Of the bank balance, $11,466,800 was covered by federal depository insurance and $6,091,965 was covered by collateral held in the pledging bank’s trust department in the City’s name. In addition, at year ended June 30, 2016, the City had $139,720,741 of restricted cash held by paying agent consisting of $56,180,579 in July 1, 2016 debt service payments and $83,540,162 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. Fair Value Measurements. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.    Level 1 inputs are quoted prices in active markets for identical assets Level 2 inputs are significant other observable inputs Level 3 inputs are significant unobservable inputs 50 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 2 – Cash and Investments, continued At June 30, 2016, 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 ING (US) Funding LLC Rabobank Nederland NV NY Corporate Bonds: American Honda Finance Corp Apple Inc Global Bank of America Bank of New York Mellon Berkshire Hathaway Inc Blackrock Inc Branch Banking and Trust Chevron Corp Cisco Systems Inc Coca-Cola Co Exxon Mobile Corp General Electric Capital Corp IBM Corp John Deere Capital Johnson & Johnson JP Morgan Chase Met Life Glob Funding Inc Paccar Financial Corp PNC Bank INA Toyota Motor Credit Corp Note Union Bank INA US Bankcorp Volkswagen Group America Wells Fargo Municipal Bonds: Arizona School Facilities Board Money Market Certificate of Deposit Money Market U.S. Treasuries & Agencies Cash and cash equivalents Total Category Fair Value Less than 1 Year 1-5 Years Level 2 $ 110,705,155 $ 1,149,551 $ 109,555,604 Level 2 Level 2 Level 2 Level 2 17,761,973 116,106,110 2,689,479 83,747,719 18,496,697 2,006,558 3,272,215 Level 2 Level 2 Level 2 299,126 244,323 3,296,063 299,126 244,323 3,296,063 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 Level 2 7,881,910 2,029,351 3,757,533 7,616,274 3,715,732 1,595,156 4,014,195 5,488,501 4,318,422 1,156,533 6,969,943 115,889 4,383,534 1,573,369 100,540 7,632,723 3,017,292 2,007,978 3,813,261 5,843,287 1,001,118 1,006,903 1,998,612 2,507,693 1,026,890 3,002,699 2,099,756 4,014,195 2,506,200 115,889 3,813,261 1,001,118 - Level 2 N/A N/A N/A 1,355,000 46,904,582 29,658,512 1,202,664 $ 497,516,455 51 17,761,973 97,609,413 682,921 80,475,504 - Concentration of Credit Risk % Credit Rating 22.25 % Aaa/AA+/AAA 3.57 23.34 0.54 16.83 Aaa/AA+/AAA Aaa/AA+/AAA Aaa/AA+/AAA Aaa/AA+/AAA 0.06 0.05 0.66 P-1/A-1 P-1/A-1 P-1/A-1 7,881,910 1,002,461 754,834 7,616,274 1,615,976 1,595,156 5,488,501 1,812,222 1,156,533 6,969,943 4,383,534 1,573,369 100,540 7,632,723 3,017,292 2,007,978 5,843,287 1,006,903 1,998,612 2,507,693 1.58 0.41 0.76 1.53 0.75 0.32 0.81 1.10 0.87 0.23 1.40 0.02 0.88 0.32 0.02 1.53 0.61 0.40 0.77 1.17 0.20 0.20 0.40 0.50 A+/A1 AA+/Aa1 A/A1/A+ A/A1/AAAA/Aa2/A+ AA-/A1 A/A1/A+ AA-/Aa2 AA-/A1 AA-/Aa3/A+ AA+/Aaa AA-/Aa3 A/A2 A-/A3/A+ AAA/Aaa A-/A3/A+ AA-/Aa3/AAA+/A1 A/A2/A+ AA-/Aa3/A A+/A2/A AA-/A1/AA BBB+/A3 A/A2 1,355,000 22,717,715 29,658,512 1,202,664 24,186,867 - 0.27 9.43 5.96 0.24 A-1/P-1 $ 101,278,432 $ 396,238,023 100.00 % AA+/Aaa CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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 Aaa 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-, BBB+ and AAAm by Standard & Poor’s respectively as of June 30, 2016. 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 2015-16, current property tax collections were $28,972,604 or 99 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 2016 are not available for fiscal year 2015-16; accordingly, such taxes will not be recognized as revenue until fiscal year 2016-17. 52 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 4 – Capital Assets A summary of changes in capital assets for governmental activities is as follows: Governmental Activities Capital assets, not being depreciated: Land Construction in progress Balance June 30, 2015 $ 85,355,474 61,541,490 Additions and Transfers In Deletions and Transfers Out $ $ 22,204,961 Balance June 30, 2016 (15,095,970) 85,355,474 68,650,481 Total capital assets not being depreciated 146,896,964 22,204,961 (15,095,970) 154,005,955 Capital assets, being depreciated: Infrastructure Building and improvements Machinery and equipment 657,725,995 381,607,870 78,538,352 8,637,545 8,587,656 8,076,853 (2,333,365) 666,363,540 390,195,526 84,281,840 1,117,872,217 25,302,054 (2,333,365) 1,140,840,906 (272,125,575) (137,201,759) (49,810,878) (25,483,586) (17,394,136) (6,359,987) 1,754,673 (297,609,161) (154,595,895) (54,416,192) (459,138,212) (49,237,709) 1,754,673 (506,621,248) Total capital assets, being depreciated, net 658,734,005 (23,935,655) (578,692) Governmental activities capital assets, net $ 805,630,969 (1,730,694) $ (15,674,662) Total capital assets being depreciated Less accumulated depreciation for: Infrastructure Building and improvements Machinery and equipment Total accumulated depreciation $ Construction in progress in the governmental activities capital assets is comprised of the following: Expended to June 30, 2016 Streets $ Parks and recreation Buildings and related improvements Total $ 53 51,430,608 Remaining Commitments $ 11,677,880 3,694,541 622,776 13,525,332 7,273,557 68,650,481 $ 19,574,213 634,219,658 $ 788,225,613 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 4 – Capital Assets, continued A summary of changes in capital assets for business-type activities is as follows: Balance June 30, 2015 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 49,829,747 28,637,814 78,467,561 1,142,265,579 22,491,140 18,361,280 2,442,722 1,185,560,721 (566,752,495) (13,929,524) (14,489,228) (1,952,006) (597,123,253) 588,437,468 $ 666,905,029 Additions and Transfers In $ 63,076,393 63,076,393 Deletions and Transfers Out Balance June 30, 2016 $ $ (849,000) (19,409,522) (20,258,522) 21,326,956 1,524,637 1,272,574 24,124,167 (499,786) (499,786) (44,914,918) (614,350) (721,436) (90,117) (46,340,821) (22,216,654) 322,784 322,784 (177,002) $ 40,859,739 $ (20,435,524) 48,980,747 72,304,685 121,285,432 1,163,592,535 24,015,777 19,134,068 2,442,722 1,209,185,102 (611,667,413) (14,543,874) (14,887,880) (2,042,123) (643,141,290) 566,043,812 $ 687,329,244 Construction in progress in the business-type activities capital assets is comprised of the following: Expended to June 30, 2016 Remaining Commitments Sewer system improvements $ 56,053,046 $ 119,188,629 Water system improvements 14,506,011 13,905,119 233,076 51,721 1,390,803 812,671 121,749 133,117 $ 72,304,685 $ 134,091,257 Solid waste system improvements Airport improvements Chandler housing authority Total 54 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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 $ 6,425,349 6,472,772 9,683,129 26,656,459 $ 49,237,709 $ 19,452,697 25,047,859 480,807 845,584 513,874 $ 46,340,821 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 $332,870,000 in outstanding general obligation bonds and are payable through July 1, 2028. Proceeds of the bonds were used for governmental and business-type activities. Governmental Activities General Obligation Bonds Annual principal and interest payments on the government activities bonds are expected to require approximately 74 percent of total 2015-16 ad valorem taxes. The total principal and interest remaining to be paid on the governmental activities portion of the bonds is $259,631,952. Principal and interest paid for the current year and total ad valorem property taxes were $21,706,981 and $29,237,607 respectively. 55 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued General obligation bonds outstanding as reported in governmental and business-type activities at June 30, 2016 were as follows: Outstanding Governmental Activities General Obligation Bonds: June 30, 2016 $16,265,000 Refunding Bonds, Series 2003, due in an annual installment of $1,050,000 on 7/1/16; interest at 4.25 percent. 1,050,000 $30,905,000 Capital Improvement Bonds, Series 2006, due in annual installments of $5,000,000 to $6,675,000 through 7/1/17; interest at 4 percent to 4.5 percent. 11,675,000 $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. 15,100,000 $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. 15,735,000 $252,000,000 Capital Improvement Bonds, Series 2009, due in annual installments of $1,500,000 to $17,000,000 through 7/1/28; interest at 3 percent to 4.25 percent. 24,254,000 $9,925,000 Capital Improvement Bonds, Series 2011A, due in annual installments of $550,000 to $3,300,000 through 7/1/20; interest at 3 percent to 4 percent. 9,425,000 $10,360,000 Refunding Bonds, Series 2011B, due in annual installments of $795,000 to $835,000 through 7/1/18; interest at 3 percent to 4 percent. 1,630,000 $214,540,000 Refunding Bonds, Series 2014, due in annual installments of $275,000 to $16,210,000 through 7/1/18; interest at 1.5 percent to 5 percent. 126,219,000 Total Governmental Activities General Obligation Bonds $ 205,088,000 Business-Type Activity General Obligation Bonds Annual principal and interest payments on the business-type activities bonds are expected to require less than 29 percent of total 2015-16 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 $161,312,176. Principal and interest paid for the current year and total net water and wastewater system and airport revenues and were $14,522,662 and $51,624,581 respectively. 56 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued Business-Type Activities General Obligation Bonds: Outstanding June 30, 2016 $111,045,000 Capital Improvement Bonds, Series 2007, due in annual installments of $2,100,000 to $3,275,000 through 7/1/26; 10,700,000 interest at 3 percent to 5 percent. $252,000,000 Capital Improvement Bonds, Series 2009, due in annual installments of $7,425,000 to $9,500,000 through 7/1/27; interest 32,176,000 at 3 percent to 4.25 percent. $214,540,000 Refunding Bonds, Series 2014, due in annual installments of $185,000 to $11,036,000 through 7/1/28 84,906,000 interest at 1.5 percent to 5 percent. Total Business-Type Activities General Obligation Bonds $ 127,782,000 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 $10,055,000 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 25 percent of total 2015-16 street and highway user revenues. The total principal and interest remaining to be paid on the bonds is $10,742,450. Principal and interest paid for the current year and street and highway user revenue taxes were $3,745,650 and $15,303,635, respectively. 57 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued Street and highway revenue bonds outstanding as reported in governmental activities at June 30, 2016 were as follows: Outstanding June 30, 2016 Governmental Activities Revenue Bonds: $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; 2,620,000 interest at 2.75 percent to 3.5 percent. $8,660,000 Street & Highway User Refunding Bonds, Series 2014, due in annual installments of $645,000 to $1,685,000 through 7/1/19; 5,435,000 interest at 3 percent to 4 percent. Total Governmental Activities Revenue Bonds $ 10,055,000 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 $24,850,000 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 32 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 2015-16 water and wastewater system The total principal and interest remaining to be paid on the bonds is $26,313,675. Principal and interest paid for the current year and net water and wastewater system revenues were $16,190,150 and $51,842,145 respectively. 58 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued Water and sewer revenue bonds outstanding as reported in business-type activities at June 30, 2016 were as follows: Business-Type Activities Revenue Bonds: $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, 2016 1,975,000 7,475,000 15,400,000 $ 24,850,000 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 20 percent of net 2015-16 system revenues. The total principal and interest to be paid on the obligations is $296,376,445. Principal and interest paid for the current year and net water and wastewater system revenues were $9,998,019 and $51,842,145, respectively. Total excise tax revenues collected were $175,820,443. Principal and interest paid in 2015-16 equal less than 6 percent of total excise tax revenues collected. 59 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued Business-Type Actvities Excise Tax Revenue Obligations: $34,040,000 Water & Sewer Excise Tax Revenue Obligations, Series 2009, due in annual installments of $1,300,000 to $2,120,000 through 7/1/28; interest at 2.75 percent to 4.375 percent. $15,000,000 Water & Sewer Excise Tax Revenue Obligations, Series 2011, due in annual installments of $755,000 to $1,210,000 through 7/1/28; interest at 3 percent to 5 percent. $104,500,000 Water & Sewer Excise Tax Revenue Obligations, Series 2013, due in annual installments of $750,000 to $12,000,000 through 7/1/33; interest at 4 percent to 5 percent. $66,660,000 Water & Sewer Excise Tax Revenue Obligations, Series 2015, due in annual installments of $500,000 to $5,620,000 through 7/1/35; interest at 3 percent to 5 percent. Total Business-Type Activities Excise Tax Revenue Obligations Outstanding June 30, 2016 $ 21,255,000 12,175,000 104,000,000 66,660,000 $ 204,090,000 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, 2016, 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, 2016 were as follows: Outstanding Governmental Activities Special Assessment Bonds: June 30, 2016 $7,370,000 Spectrum Improvement District Bonds, due in annual installments of $500,000 to $635,000 through 1/1/23; interest at 4 percent. Total Special Assessment Bonds with Governmental Commitment 60 $ 3,960,000 $ 3,960,000 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 5 - Long-Term Liabilities, continued Changes in Long-Term Liabilities Governmental Activities: Balance June 30, 2015 Compensated absences $ 9,819,302 Additions $ Reductions 1,666,144 $ (1,143,069) Balance June 30, 2016 Due Within One Year $ $ 10,342,377 118,834 Bonds payable: General obligation bonds 222,143,000 - (17,055,000) 205,088,000 13,615,000 Revenue bonds Special assessment bonds 14,025,000 4,440,000 - (3,970,000) (480,000) 10,055,000 3,960,000 3,370,000 500,000 17,898,207 258,506,207 - (1,732,917) (23,237,917) 16,165,290 235,268,290 1,671,902 19,156,902 30,978 5,642,383 20,978,682 (15,000) (20,188,767) 15,978 6,432,298 5,000 5,796,568 195,607,344 18,839,333 19,508,227 3,227,711 215,115,571 22,067,044 - $ 489,241,558 $ 25,077,304 Balance June 30, 2016 Due Within One Year Issuance premiums Total bonds payable Arbitrage liability Claims payable Net pension liability Post employment benefits Totals Business-Type Activities: Compensated absences Bonds & obligations payable: General obligation bonds $ 488,445,547 $ Balance July 1, 2015 $ 1,073,631 45,380,764 $ Additions $ (44,584,753) Reductions 176,905 $ (154,443) $ 1,096,093 $ 12,594 140,072,000 - (12,290,000) 127,782,000 9,710,000 Revenue bonds Excise tax revenue obligations 31,610,000 142,200,000 66,660,000 (6,760,000) (4,770,000) 24,850,000 204,090,000 15,255,000 2,805,000 Issuance premiums Total bonds & obligations payable 20,931,905 334,813,905 4,072,878 70,732,878 (2,093,897) (25,913,897) 22,910,886 379,632,886 1,761,489 29,531,489 29,022 19,019,081 10,704 1,480,249 (5,704) - 34,022 20,499,330 10,000 - 1,644,965 4,340,000 208,624 - 1,853,589 4,340,000 94,446 $ 407,455,920 $ 29,648,529 Arbitrage liability Net pension liability Post employment benefits Landfill closure/post closure Totals $ 360,920,604 $ 72,609,360 $ (26,074,044) 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 full cash property 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 full cash property assessed valuation for all other purposes (e.g., library, museum, center for the arts). At June 30, 2016, the 6 percent debt limitation was $190,024,847, providing a debt margin of $180,597,597 and the 20 percent debt limitation was $633,416,159, providing a debt margin of $309,973,409. The assessed valuation method used was changed in fiscal year 2015-16 from secondary assessed valuation to the full cash valuation based on advice of bond council. 61 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2016: Years Ended June 30 2017 2018 2019 2020 2021 2022-2026 2027-2029 Total GOVERNMENTAL ACTIVITIES Highway Highway Users Improvement Improvement Users General Revenue Districts Districts Revenue Obligation Interest Principal Interest Principal Interest General Obligation Principal 13,615,000 14,215,000 16,719,000 16,845,000 17,495,000 77,565,000 48,634,000 7,808,794 7,218,469 6,665,337 6,128,422 5,554,350 18,443,480 2,725,100 3,370,000 2,415,000 2,220,000 2,050,000 - $ 205,088,000 $ 54,543,952 $ 10,055,000 $ 316,044 210,212 121,594 39,600 - 500,000 520,000 545,000 565,000 585,000 1,245,000 - 687,450 $ 3,960,000 $ Total 158,400 138,400 117,600 95,800 73,200 75,200 - 25,768,238 24,717,081 26,388,531 25,723,822 23,707,550 97,328,680 51,359,100 658,600 $ 274,993,002 BUSINESS-TYPE ACTIVITIES Years Ended June 30 General Obligation Principal General Obligation Interest Revenue Principal Revenue Interest Excise Tax Principal Excise Tax Interest Total 2017 9,710,000 4,656,512 15,255,000 668,225 2,805,000 8,368,207 41,464,944 2018 10,015,000 4,328,137 1,750,000 357,550 4,105,000 8,180,025 28,735,712 2019 9,806,000 4,020,407 3,160,000 250,600 6,165,000 7,978,731 31,380,738 2020 9,640,000 3,740,300 2,345,000 140,500 7,485,000 7,684,538 31,035,338 2021 9,325,000 3,455,825 2,340,000 46,800 8,045,000 7,327,162 30,539,787 2022-2026 48,225,000 11,527,345 - - 48,850,000 30,248,050 138,850,395 2027-2031 31,061,000 1,801,650 - - 64,065,000 18,232,419 115,160,069 2032-2036 - - - - 62,570,000 4,267,313 66,837,313 $ 127,782,000 $ 33,530,176 $ 24,850,000 $ 1,463,675 $ 204,090,000 $ 92,286,445 $ 484,002,296 Total 62 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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 June 30, 2015 Balance Due Within Incurred Satisfied June 30, 2016 One Year Governmental Activities Compensated Absences $ 9,819,302 $ 1,666,144 $ (1,143,069) $ 10,342,377 $ 118,834 $ 1,073,631 $ $ $ $ Business-Type Activities Compensated Absences 176,905 (154,443) 1,096,093 12,594 NOTE 6 - Defeased Debt 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, 2016: 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, 2016, the City estimates total costs related to landfill closure and postclosure care is $15,554,381 and has recognized that entire amount since the landfill no longer accepts waste. To date, $11,214,381 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 long-term liability on the City’s financial statements. 63 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 7 – Landfill Closure and Postclosure Costs, concluded The estimated total current cost of the landfill closure and postclosure, $15,554,381, 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, 2016. 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, 2015. 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. 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 $2,750,107 (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 Development Developer Government Fees Contributions Contributions $ 11,677,323 $ 13,789,873 $ 1,370,378 Airport Housing Authority Water Wastewater Total Total - $ 25,467,196 4,320,251 - 5,690,629 - - 1,030,989 1,030,989 - - 501,550 501,550 $ 13,047,701 $ 18,110,124 1,532,539 $ 32,690,364 64 $ CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2016 NOTE 9 – Fund Equity, concluded As of June 30, 2016 the constraints placed on fund balance for the major governmental funds and other non-major governmental funds are presented in the following table: Streets G.O. Bonds Capital Debt Other General Projects Service Governmental Total 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 $ 907,594 $ - $ - $ - $ 907,594 907,594 - - - 907,594 1,231,202 335,416 - 44,496,274 - 15,281,782 - 16,884,975 900,912 453,023 21,730,085 20,454,178 1,231,202 335,416 61,381,249 16,182,694 453,023 21,730,085 20,454,178 1,566,618 44,496,274 15,281,782 60,423,173 121,767,847 - - - - - - - - - - 136,576 396,555 216,939 10,850,000 90,375,183 7,982,909 - - - 136,576 396,555 216,939 10,850,000 90,375,183 7,982,909 109,958,162 - - - 109,958,162 68,567,835 - - (11,877,159) 56,690,676 68,567,835 - - (11,877,159) 56,690,676 $ 181,000,209 $ 44,496,274 $ 15,281,782 Committed to: Total committed Assigned to: Domestic violence prevention Self-insurance purposes Traffic safety reserve Infrastructure maintenance Capital improvement projects Economic development projects Total assigned Unassigned Total unassigned Total fund balances $ 48,546,014 $ 289,324,279 The City’s General Fund Reserve Policy requires an amount equal to 15 percent of adopted General Fund operating revenues, excluding one-time transfers in for fiscal year 2016-17. This amounts to $31,623,000 and is included in unassigned above. 66 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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 $19,260,182 and $1,378,265 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 30 years age 55 Sum of years and age equals 80 25 years age 60 10 years age 62 10 years age 62 5 years age 50* 5 years age 50* Any years age 65 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, 2016 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 11.47 percent (11.35 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 11.47 percent (10.85 percent for retirement, 0.50 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 2016 399,310 84,433 2015 393,591 80,598 2014 384,872 154,188 D. Pension Liability At June 30, 2016, the City of Chandler reported a liability of $113,885,153 for its proportionate share of the net pension liability of the ASRS. The net pension liability was measured as of June 30, 2015. 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, 2014, to the measurement date of June 30, 2015. 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, 2015, the City of Chandler’s proportion was 0.73 percent, which was a increase of 0.02 percent from its proportion measured as of June 30, 2014. E. Pension Expense and Deferred Outflows/Inflows of Resources For the year ended June 30, 2016, the City of Chandler recognized pension expense for ASRS of $4,757,463 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, 2016 NOTE 10 - Retirement and Pension Plans, continued Deferred Outflows of Resources $ 3,107,679 - 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 $ 5,967,697.00 - - $ 1,940,276 7,634,805 12,682,760 3,649,767 $ 2,928,387 12,545,851 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, 2017. 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 $ (3,787,543) (3,884,084) (2,460,943) 2,634,674 - F. 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, 2014 June 30, 2015 Entry age normal 8.0% 3.0-6.75% 3.0% Included 1994 GAM Scale BB The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2013. 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, 2014, 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, 2016 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 58% 25% 2% 10% 5% 100% Asset Class Equity Fixed income Commodities Real estate Multi-asset class Total Long-Term Expected Arithmetic Real Rate of Return 6.79% 3.70% 3.93% 4.25% 3.41% 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%) 149,228,468 113,885,153 1% Increase (9.0%) City of Chandler's proportionate share of the net pension liability I. 89,663,399 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, 2016 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, 2016, 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, 2016 NOTE 10 – Retirement and Pension Plans, continued PSPRS - Police PSPRS - Fire Inactive employees or beneficiaries currently receiving benefits 109 51 39 20 305 186 453 257 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, 2016, are indicated below. Rates are a percentage of active members’ annual covered payroll. PSPRS - Police Active members - pension PSPRS - Fire 11.65% 11.65% 31.04% 26.48% 0.54% 0.36% City of Chandler Pension Health Insurance In addition, the City of Chandler was required by statute to contribute at the actuarially determined rate of 28.62 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 $ 8,561,143 $ 4,438,495 Health insurance premium benefit: Annual OPEB costs 264,778 90,582 Contributions made 264,778 90,582 E. Pension Liability At June 30, 2016, the City of Chandler reported $83,151,112 in net pension liability for police and $38,578,636 in net pension liability for fire. The net pension liabilities were measured as of June 30, 2015, 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, 2015, 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, 2016 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 Asset valuation Discount rate Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2015 Entry age normal 7-Year smoothed market, 20% corridor 7.85% 4.5 - 8.5% 3.0 - 4.0% Included RP-2000 mortality table, adjusted by 105% for both males and females Actuarial assumptions used in the June 30, 2015 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 Risk parity Absolute return Fixed income Real assets GTAA Real estate Private equity Credit opportunities Non-U.S. equity U.S. equity Total Target Allocation 2% 4% 5% 7% 8% 10% 10% 11% 13% 14% 16% 100% 73 Long-Term Expected Real Rate of Return 0.75% 5.13% 4.11% 2.92% 4.77% 4.38% 4.48% 9.50% 7.08% 8.25% 6.23% CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2015 $ 176,848,516 $ 103,829,327 $ 73,019,189 Changes for the year: Service cost $ Interest on the total pension liability 4,583,770 - 13,839,509 - Changes of benefit terms - $ 4,583,770 13,839,509 - - Differences between expected and actual experience in the measurement of the pension liability 4,879,849 - 4,879,849 Changes of assumptions or other inputs - Contributions – employer - 6,155,142 (6,155,142) Contributions – employee - 3,308,265 (3,308,265) Net investment income - 3,873,466 (3,873,466) Benefit payments, including refunds of employee contributions Administrative expense - (5,681,836) - Other changes - - (5,681,836) (94,891) 94,891 (70,777) 70,777 Net changes $ 17,621,292 $ 7,489,369 $ 10,131,923 Balances at June 30, 2016 $ 194,469,808 $ 111,318,696 $ 83,151,112 74 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 10 – Retirement and Pension Plans, continued Increase/Decrease Plan Fiduciary Net Position Total Pension Liability PSPRS - Fire Balances at June 30, 2015 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 changes Balances at June 30, 2016 $ 105,634,896 $ 2,915,603 8,264,915 - $ - (1,037,307) - $ $ 69,689,214 (3,614,319) 6,528,892 112,163,788 Net Pension Liability $ 35,945,682 $ 2,915,603 8,264,915 - 3,222,291 1,837,291 2,568,880 $ $ (3,614,319) (63,063) (55,142) 3,895,938 73,585,152 (1,037,307) (3,222,291) (1,837,291) (2,568,880) $ $ 63,063 55,142 2,632,954 38,578,636 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% $ 107,762,644 7.85% $ 83,151,112 8.85% $ 62,788,551 PSPRS - Fire: Rate Net pension liability 6.85% $ 52,765,346 75 7.85% $ 38,578,636 8.85% $ 26,754,129 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2016, the City of Chandler recognized the following as pension expense: Pension Expense PSPRS - Police $ PSPRS - Fire 10,188,278 4,526,392 K. Pension Deferred Outflows/Inflows of Resources At June 30, 2016, 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 4,365,921 Deferred Inflows of Resources $ - 8,375,249 - 486,093 - 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 - 8,561,143 $ 21,788,406 $ Deferred Outflows of Resources PSPRS - Fire Differences between expected and actual experience $ Changes of assumptions or other inputs - Deferred Inflows of Resources $ 1,195,908 4,725,413 - 330,702 - 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 4,438,495 $ 76 - 9,494,610 $ 1,195,908 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 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, 2017. 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 2017 $ 3,200,122 PSPRS - Fire $ 587,650 2018 3,200,122 2019 3,200,122 587,651 2020 3,132,878 1,265,099 2021 494,019 674,337 Thereafter - 587,650 157,820 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, 2016 264,778 100% June 30, 2015 350,985 100% - June 30, 2014 307,173 100% - June 30, 2016 90,582 100% - June 30, 2015 200,061 100% - June 30, 2014 175,987 100% - Fiscal Year End PSPRS - Police: Net OPEB Obligation $ - PSPRS - Fire: 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, 2016 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 2016 contribution requirements are as follows: Actuarial valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Payroll growth June 30, 2014 Entry age normal Level percentage of payroll, closed 22 years, if the actuarial value of assets exceeded the actuarial accrued liability, the excess was amortized over an open period of 20 years and applied as a credit to reduce the normal cost which otherwise would be payable. 7-year smoothed market value (80%/120% market) 7.85%, net of investment and administrative expenses 4.0%-8.0% 4.0% The funded status of the PSPRS health insurance premium benefit plan in the June 30, 2016, 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, 2016 Entry age normal Level percent of pay closed Remaining amortization period 20 years for underfunded 20 years for overfunded Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Payroll growth 7-year smoothed market value (80%/120% market) 7.50% 4.0%-8.0% 4.0% 78 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 10 – Retirement and Pension Plans, concluded 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, 2016. PSPRS - Police Actuarial value of assets $ 4,045,877 Actuarial accrued liability PSPRS - Fire $ 2,496,239 5,293,061 2,857,019 1,247,184 360,780 Unfunded actuarial accrued liability (funding excess) Funded ratio 76.40% Annual covered payroll 27,682,071 87.40% 16,673,663 Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll 4.51% 2.16% 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, 2016, 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. B. Funding Policy There were no contributions to the Volunteer Firemen's Pension and Relief Fund by the City in fiscal year 2015-16. 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. 79 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 11 – Post-Employment Benefits Other Than Pensions, continued 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, 2016, retirees contributed $1,439,099 and the City contributed $2,021,919 (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. 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, 2016: 80 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 11 – Post-Employment Benefits Other Than Pensions, continued Annual Required Contribution (ARC) ARC Adjustment Interest Adjustment to Net OPEB Obligation $ 5,528,213 (991,752) 921,793 Annual OPEB Cost Contributions Made $ 5,458,254 (2,021,919) Increase in Net OPEB Obligation $ 3,436,335 Net OPEB Obligation - Beginning of year 20,484,298 Net OPEB Obligation - End of year $ 23,920,633 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2016 were as follows: Percentage of Fiscal Year Annual Employer OPEB Cost Net OPEB Ended June, 30 2016 OPEB Cost $ 5,458,254 Contributions $ 2,021,919 Contributed 37.04% Obligation $ 23,920,633 2015 $ 5,720,055 $ 1,645,573 28.77% $ 20,484,299 2014 $ 5,743,316 $ 1,352,308 23.55% $ 16,409,817 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, 2016 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 $1,750,000 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 workers’ 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, 2016 NOTE 13 - Risk Management, concluded In fiscal year 2015-16, 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 $1,000,000 in Public Safety and up to $600,000 in all other classifications of workers’ 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 2015-16, 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 $6,432,298 reported as claims payable in the Self-Insurance Fund at June 30, 2016, 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 2015 and 2016 were: Years Ended June 30, 2015 Risk of Loss Workers' compensation $ Property and liability 1,198,989 $ 2,542,528 Claim Payments $ Balance at Fiscal Year End (2,267,111) $ 1,474,406 962,170 421,672 (111,545) 1,272,297 Health 2,297,992 17,012,979 (16,553,159) 2,757,812 Dental 143,820 1,718,117 (1,724,070) 137,867 $ 2016 Current Year Claims and Changes in Estimates Beginning of Fiscal Year Balance Workers' compensation $ 4,602,971 $ 21,695,296 $ (20,655,885) $ 1,474,406 $ 2,755,244 $ 5,642,382 (1,801,919) $ 2,427,731 Property and liability 1,272,297 212,973 (133,231) 1,352,039 Health 2,757,812 16,077,826 (16,370,182) 2,465,456 Dental 137,867 $ 5,642,382 83 1,932,639 $ 20,978,682 (1,883,434) $ (20,188,766) $ 187,072 6,432,298 CITY OF CHANDLER, ARIZONA Notes to the Financial Statements June 30, 2016 NOTE 14 – Interfund Transfers The interfund transfers in and out at June 30, 2016 are as follows: Fund General Transfer Detail Non-major governmental Non-major enterprise Internal service Total general fund Transfers In $ - 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 Total water fund Transfers Out $ 23,355,361 625,040 950,000 24,930,401 23,355,361 3,939,474 305,886 156,355 111,702 16,779 27,885,557 3,939,474 382,185 4,321,659 - 305,886 - 305,886 Wastewater Non-major governmental Total wastewater fund 382,185 382,185 156,355 156,355 Non-major enterprise General Non-major governmental Total non-major enterprise funds 625,040 625,040 111,702 111,702 Internal service General Non-major governmental Total internal service fund 950,000 950,000 16,779 16,779 Total $ 29,842,782 $ 29,842,782 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, 2016 NOTE 15 – Interfund Receivables and Payables A. Interfund Advances To/Advances From Advances From Total Capital projects-public safety buildings & improvements $ 12,782,082 Advances To General Capital projects-streets 2,814,300 Capital projects-public buildings 3,089,427 Total general fund 18,685,809 Enterprise Water Enterprise-wastewater 3,900,000 Total $ 22,585,809 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 $300,000 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-public buildings General Capital projects-grants General Special revenue-community development General Non-major enterprise-chandler housing authority Total $ 39,119 3,385,732 457,929 25,595 $ 3,908,375 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, 2016 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, 2016, 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, 2016, was: City of Chandler's Share $59,317,819 Town of Gilbert's Share 65,622,092 $124,939,911 NOTE 17 – Deficit in Fund Balances The police confiscated property special revenue fund had a deficit fund balances of $68,745. The deficit 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 $3,128,331 and $8,680,083 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, 2016 Non-GAAP Budgeted Amounts Original Final Over Actual (Under) Amounts Final Budget REVENUES: Property taxes $ Sales taxes 7,272,000 $ 7,272,000 $ 7,410,739 $ 138,739 104,178,750 104,178,750 112,250,883 8,072,133 3,186,000 3,186,000 3,344,817 158,817 60,260,300 60,260,300 60,712,442 242,000 242,000 132,935 Licenses and permits 4,488,000 4,488,000 6,634,161 Charges for services 19,451,312 19,451,312 19,503,120 51,808 Fines and forfeitures 3,662,700 3,662,700 3,106,667 (556,033) Rentals 745,750 745,750 974,192 Contributions 200,000 200,000 200,000 - 1,094,000 1,094,000 1,902,905 808,905 100,000 100,000 371,995 271,995 204,880,812 204,880,812 216,544,856 11,664,044 29,811,473 31,335,825 30,158,629 1,177,196 617,010 638,364 592,740 45,624 Communications and public affairs 2,301,799 2,525,933 2,306,381 219,552 Law 3,475,487 3,566,335 3,503,105 63,230 City magistrate 4,306,286 4,371,229 4,162,482 208,747 62,928,147 48,287,312 12,970,031 35,317,281 835,637 849,942 839,825 10,117 Franchise fees State shared Grants and entitlements Interest revenue Miscellaneous Total revenues 452,142 (109,065) 2,146,161 228,442 EXPENDITURES: General government City manager City clerk Management services Mayor and council Public safety Fire 32,656,530 33,847,529 33,758,702 88,827 Police 65,378,425 69,371,737 69,527,935 (156,198) Transportation and development 19,468,818 22,594,526 21,625,436 969,090 Community services 20,337,316 21,603,181 20,493,948 1,109,233 242,116,928 238,991,913 199,939,214 39,052,699 (37,236,116) (34,111,101) 16,605,642 50,716,743 Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in - Transfers out - - - (49,087,383) (49,089,343) (24,930,401) 24,158,942 (49,087,383) (49,089,343) (24,930,401) 24,158,942 Net change in fund balance (86,323,499) (83,200,444) (8,324,759) 74,875,685 Fund balance, July 1, 2015 185,108,274 185,108,274 Total other financing sources (uses) Fund balance, June 30, 2016 $ 98,784,775 See accompanying notes to this schedule. 88 $ 101,907,830 185,108,274 $ 176,783,515 $ 74,875,685 City of Chandler Schedule for the Proportionate Share of the Net Pension Liability Arizona State Retirement System For the year ended June 30, 2016 2016 2015 City's proportion of the net pension liability (asset) 0.73% 0.71% City's proportionate share of the net pension liability (asset) City's covered-employee payroll $ 113,885,153 $ 105,661,552 $ 67,230,465 $ 64,263,236 City's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 161.85% 164.42% 68.35% 69.49% Plan fiduciary net position as a percentage of the total pension liability 89 City of Chandler Schedule of Contributions All Pension Plans For the year ended June 30, 2016 2016 2015 Arizona State Retirement System: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 7,634,805 $ 7,634,805 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll 70,362,938 7,323,872 7,323,872 $ $ 11.35% 67,230,465 10.89% Public Safety Personnel Retirement System - Police: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 8,561,143 $ 8,561,143 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll 27,946,237 6,083,333 6,083,333 $ $ 31.58% 26,187,641 23.23% Public Safety Personnel Retirement System - Fire: Actuarially determined contribution $ Contributions in relation to the actuarially determined contribution 4,438,495 $ 4,438,495 Contribution deficiency (excess) $ City's covered-employee payroll $ Contributions as a percentage of covered-employee payroll 16,874,362 26.84% 90 3,193,139 3,193,139 $ $ 15,671,133 20.38% City of Chandler Schedule of Funding Progress Last Three Actuarial Valuations For the year ended June 30, 2016 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: 1,247,184 76.40% 27,682,071 4.51% 2015 2016 $ 3,836,997 4,045,877 4,834,826 5,293,061 997,829 79.36% 26,432,406 3.78% 2014 3,466,256 4,500,038 1,033,782 77.03% 24,120,110 4.29% 360,780 87.40% 16,473,663 2.16% PSPRS - Fire: 2016 $ 2,496,239 $ 2,857,019 $ $ 2015 2,363,835 2,659,680 295,845 88.88% 15,789,534 1.87% 2014 2,155,271 2,503,120 347,849 86.10% 15,201,535 2.29% Post Employment Benefits Other than Pensions(1): 50,002,842 - 103,252,770 48.45% 2013 2015 $ - - $ 52,300,279 50,002,842 $ 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, 2016 2016 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability—beginning Total pension liability—ending $ 4,583,770 13,839,509 $ 4,879,849 (5,681,836) 17,621,292 176,848,516 194,469,808 $ $ 4,602,603 11,841,118 1,741,535 567,380 13,082,165 (7,054,499) 24,780,302 152,068,214 176,848,516 Plan fiduciary net position Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending Net pension liability—ending $ $ 6,155,142 3,308,265 3,873,466 (5,681,836) (94,891) (70,777) 7,489,369 103,829,327 111,318,696 $ (2,733,237) 10,682,366 93,146,961 103,829,327 $ 83,151,112 $ 73,019,189 Plan fiduciary net position as a percentage of the total pension liability Covered-employee payroll Net pension liability as a percentage of coveredemployee payroll 92 $ 5,465,059 2,675,724 12,329,319 (7,054,499) 57.24% 58.71% 26,432,406 24,120,118 314.58% 302.73% 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, 2016 2016 2015 Total pension liability Service cost Interest Changes of benefit terms Differences between expected and actual experience Changes of assumptions Benefit payments, including refunds Net change in total pension liability Total pension liability—beginning Total pension liability—ending $ 2,915,603 8,264,915 $ (1,037,307) (3,614,319) 6,528,892 105,634,896 112,163,788 $ $ 2,949,507 7,191,487 930,663 (409,426) 6,465,545 (3,258,846) 13,868,930 91,765,966 105,634,896 Plan fiduciary net position Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending $ Net pension liability—ending $ $ 3,222,291 1,837,291 2,568,880 (3,614,319) (63,063) (55,142) 3,895,938 69,689,214 73,585,152 $ (1,798,718) 8,088,281 61,600,933 69,689,214 $ 38,578,636 $ 35,945,682 Plan fiduciary net position as a percentage of the total pension liability 65.61% Covered-employee payroll 15,789,534 Net pension liability as a percentage of coveredemployee payroll 244.33% 93 3,152,694 1,775,319 8,217,832 (3,258,846) 65.97% 15,201,530 236.46% CITY OF CHANDLER, ARIZONA Required Supplementary Information June 30, 2016 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 $ (4,108,065) Reserved encumbrances at June 30, 2016 recognized as budgetary expenditures in fiscal year ended June 30, 2016 Budgetary Comparison Schedule for the General Fund (4,216,694) $ (8,324,759) 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, 2014 valuation were based on the results of an actuarial experience study for the five-year period ended June 30, 2013. 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, 2014, 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, 2015 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, 2016 Non-GAAP Budgeted Amounts Original Final Over Actual (Under) Amounts Final Budget REVENUES: Interest revenue $ 283,000 $ 283,000 $ 508,015 $ 225,015 System development fees 4,328,500 4,328,500 7,436,964 3,108,464 Regional transportation tax 2,279,800 2,279,800 6,100,475 3,820,675 - - - - 6,891,300 6,891,300 14,045,454 7,154,154 4,200,000 2,758,198 - 2,758,198 Miscellaneous Total revenues EXPENDITURES: General government Transportation and development Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 18,038,562 2,216,366 395,470 1,820,896 1,755,624 18,181,596 8,029,354 10,152,242 23,994,186 23,156,160 8,424,824 14,731,336 (17,102,886) (16,264,860) 5,620,630 21,885,490 2,286,800 2,286,800 - (2,286,800) (2,286,800) (2,286,800) - 2,286,800 - - Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) - Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ - (17,102,886) (16,264,860) 5,620,630 21,885,490 36,419,627 36,419,627 36,419,627 - 19,316,741 96 $ 20,154,767 $ 42,040,257 $ 21,885,490 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, 2016 Over Budgeted Amounts Original Final Actual (Under) Amounts Final Budget REVENUES: Property taxes $ Interest revenue Total revenues 21,148,000 $ 21,148,000 $ 21,826,868 $ 678,868 164,000 164,000 251,878 87,878 21,312,000 21,312,000 22,078,746 766,746 14,100,000 14,048,194 13,615,000 433,194 8,040,176 8,091,982 8,091,981 1 - - - - 22,140,176 22,140,176 21,706,981 433,195 371,765 1,199,941 EXPENDITURES: Principal Interest and fiscal charges Bond issuance costs Total expenditures Excess (deficiency) of revenues over expenditures (828,176) (828,176) Other financing sources (uses): Bond premium - - - - Face amount of bonds issued - - - - Payment to escrow agent - - - - - - - - 371,765 1,199,941 14,910,017 - Total other financing sources (uses) Net change in fund balance (828,176) Fund balance, July 1, 2015 Fund balance, June 30, 2016 (828,176) 14,910,017 $ 14,081,841 97 14,910,017 $ 14,081,841 $ 15,281,782 $ 1,199,941 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, state and local 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 Used to account for donations for park improvements and programs restricted pursuant to donor covenants. Museum Used to account for donations for museum 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, state and local 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, 2016 Special Revenue Local Police Highway Transportation User Assistance Grants $ 3,863,526 $ 1,064,037 - - 6,016 - - - - - Community Confiscated Property Development Parks and Recreation Museum $ 253,639 $ 30,418 - - - - - - ASSETS Equity in pooled cash and investments $ 9,613,606 Receivables (net of allowance for uncollectible): Accounts Special assessments Notes - $ 622,824 - - - 448,503 - - 27,193 9,235 3,380 - 872 612 - 1,434,908 - 468,149 22,590 539,490 2,908 401,050 - - $ 11,075,707 $ 3,872,761 $ 1,541,582 $ 1,010,583 $ 1,027,654 $ 254,251 $ 30,418 $ $ $ $ $ $ - Accrued interest Other Prepaids Due from other governments Total assets $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued payroll 69,065 52,607 10 - 5,995 12,890 94,861 4,766 81,188 - $ - Trust liabilities and deposits - - - 4 1,015,211 - 135 Accrued interest - - - - - - - Due to other funds Advances from other funds Arbitrage liability - current Bonds payable - current - - - 457,929 - - - - - - - - - - 121,672 10 18,885 557,560 1,096,399 - 135 - - - - - - - - - - - - - - 10,954,035 - 3,872,751 - 1,522,697 - 453,023 - (68,745) 254,251 - 30,283 - 10,954,035 3,872,751 1,522,697 453,023 (68,745) 254,251 30,283 $ 11,075,707 $ 3,872,761 $ 1,541,582 $ 1,010,583 254,251 $ 30,418 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 101 $ 1,027,654 $ City of Chandler Combining Balance Sheet Non-Major Governmental Funds June 30, 2016 Debt Service Special Revenue Capital Projects Special Library Highway User Assessment General Public Revenue Bonds Bonds Government Buildings ASSETS Equity in pooled cash and investments $ 24,295 $ 3,789,678 $ 738,676 $ 527,771 $ - Receivables (net of allowance for uncollectible): Accounts - - - - - Special assessments - - 3,607,536 - - Notes Accrued interest Other Prepaids Due from other governments Total assets - - - - - 56 - 1,651 - 215 - - - - - $ 24,351 $ 3,789,678 $ 4,347,863 $ 527,771 $ 215 $ - $ - $ 8,006 - $ 527,771 - $ - LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued payroll Trust liabilities and deposits - - - - - Accrued interest - 187,825 79,200 - - Due to other funds Advances from other funds Arbitrage liability - current Bonds payable - current - - - - 39,119 - 5,000 3,370,000 - - 3,089,427 - - 3,562,825 87,206 527,771 3,128,546 - - 3,586,598 - - - - 3,586,598 - - 24,351 - 226,853 - 674,059 - - (3,128,331) 24,351 226,853 674,059 - (3,128,331) 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 $ 24,351 $ 3,789,678 102 $ 4,347,863 $ 527,771 $ 215 Capital Projects Public Safety Community Grants $ Services Vehicle and Total Other Buildings and Capital Equipment Improvements - $ 21,319,105 $ 4,601,815 5,000 - - - - - Replacement $ 12,771,849 Special Technology Municipal Governmental Assessments Replacement Arts Funds $ 4,519,278 $ 3,346,324 $ 64,263 $ 67,151,104 - - - - 11,016 - - - - 3,607,536 - - - - - - - 448,503 - 50,389 11,764 30,127 10,696 8,288 55 154,533 4,437,680 - - - - - - 2,908 22,590 7,281,277 $ 4,442,680 $ 21,369,494 $ 4,613,579 $ 12,801,976 $ 4,529,974 $ 3,354,612 $ 64,318 $ 78,679,467 $ $ $ 511,395 185 $ 182,457 - $ 28 773 $ $ - $ 2,063,050 520,573 883 12,575 37 49,126 - 72,141 - - - - - - - - - - - - - - 267,025 3,385,732 - - - - - - - - 12,782,082 - - - - - 3,882,780 15,871,509 5,000 3,370,000 3,907,188 12,612 13,293,662 182,457 801 49,126 - 26,546,855 - - - - - - - 3,586,598 - - - - - - - 3,586,598 535,492 - 21,356,882 - (8,680,083) 12,619,519 - 4,529,173 - 3,305,486 - 64,318 - 60,423,173 (11,877,159) 535,492 21,356,882 (8,680,083) 12,619,519 4,529,173 3,305,486 64,318 48,546,014 $ 4,442,680 $ 21,369,494 4,529,974 $ 3,354,612 $ 4,613,579 $ 12,801,976 $ 103 $ 64,318 1,015,350 $ 78,679,467 (Concluded) City of Chandler Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds For the year ended June 30, 2016 Special Revenue Local Police Highway Transportation User Assistance Grants Community Confiscated Parks and Development Property Recreation Museum REVENUES: Highway user taxes $ 15,303,635 $ - $ - $ - $ - $ - $ - Grants and entitlements - 711,502 2,451,884 1,908,048 - 92,188 6,720 System development fees - - - - - - - Special assessments - - - - - - - Charges for services - 104,389 - - - - - Fines and forfeitures - - - - 1,715,400 - - 134,727 42,372 17,163 3 - 2,951 - 80,529 181,814 - - - - 11,382 15,518,891 1,040,077 2,469,047 1,908,051 1,715,400 95,139 18,102 General government - - 332,806 1,902,959 - - - Public safety - - 1,124,274 - 624,875 - - 7,855,334 499,980 - - - - - - - 199,755 - - 76,611 8,544 4,095,685 169,548 814,029 - 1,099,606 493 - Interest revenue Miscellaneous Total revenues EXPENDITURES: Current: Transportation and development Community services Capital outlay Debt service: Principal Interest and fiscal charges - - - - - - - - - - - - - 11,951,019 669,528 2,470,864 1,902,959 1,724,481 77,104 8,544 3,567,872 370,549 9,558 Proceeds from disposal of capital assets - - Transfers in - - Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,817) 5,092 (9,081) 18,035 - - (6,455) - - - - - - 20,725 - OTHER FINANCING SOURCES (USES): Transfers out (3,914,748) (4,001) - - Total other financing sources (uses) (3,914,748) (4,001) - - NET CHANGE IN FUND BALANCE (346,876) 366,548 (1,817) (20,725) - (6,455) (20,725) 20,725 5,092 (15,536) (2,690) 30,283 447,931 (53,209) FUND BALANCES (DEFICITS): Beginning of year End of year 11,300,911 $ 10,954,035 $ 3,506,203 1,524,514 3,872,751 $ 1,522,697 104 $ 453,023 $ (68,745) 256,941 $ 254,251 $ 30,283 Debt Service Special Revenue Capital Projects Special Library $ - Highway User Assessment General Public Revenue Bonds Bonds Government Buildings $ 18,445 $ - $ - - $ - - $ Community Grants - - - $ Services - $ - 10,837,342 6,494,791 - - - - 304,361 - - - 606,757 - - - - - - - - - - - - - - - - - - 295 - 8,169 - 2,153 - 237,802 - 20,500 - 203,756 - - - 18,740 20,500 614,926 203,756 306,514 10,837,342 6,732,593 - - - 1,113,162 - 30,839 - - - - 363,420 - - - - - - 481,206 - 126,309 - 8,043 - - 155,396 - 60,745 25,777 46,476 - - 16,543,479 - 7,221,018 2,220,412 - 3,370,000 480,000 - - - - - 375,650 168,000 - - - - 54,519 3,745,650 648,000 18,656,663 - 7,438,911 2,246,189 (35,779) (3,725,150) (33,074) (18,452,907) 306,514 3,398,431 4,486,404 - - - - - - - - 3,745,650 - 18,452,907 - - - - - - - - - - - 3,745,650 - 18,452,907 - - - 306,514 3,398,431 4,486,404 (2,862,939) 16,870,478 (35,779) 20,500 (33,074) - 60,130 206,353 707,133 - 24,351 $ 226,853 $ 674,059 $ - (3,434,845) $ (3,128,331) $ 535,492 $ 21,356,882 (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, 2016 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 System development fees - $ - - - $ - $ - - $ - $ 15,303,635 - - 16,026,129 8,780,040 1,980,888 - - - - Special assessments - - - - - 606,757 Charges for services - - - - 82,120 186,509 1,715,400 Fines and forfeitures Interest income Miscellaneous Total revenues - - - - - 60,000 148,524 51,415 40,580 120 746,274 - 27,126 - - - 525,107 2,040,888 175,650 51,415 40,580 82,240 43,889,851 EXPENDITURES: Current: General government - - 65,201 575,674 - 4,020,641 636,868 - - - - 2,749,437 Transportation and development - - - - - 8,962,829 Community services - - - - 49,343 584,214 1,112,836 3,568,317 - 2,290,684 - 39,182,583 - - - - - 3,850,000 - - - - - 543,650 1,749,704 3,568,317 65,201 2,866,358 49,343 59,893,354 (3,392,667) (13,786) (2,825,778) 32,897 (16,003,503) Public safety Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES 291,184 OTHER FINANCING SOURCES (USES): Proceeds from disposal of capital assets - 470,164 - - - 463,709 Transfers in - 2,964,535 - 2,701,740 - 27,885,557 Transfers out - - - - (4,321,659) - 2,701,740 - 24,027,607 32,897 8,024,104 Total other financing sources (uses) (382,185) - FINANCING USES 3,052,514 291,184 (340,153) (13,786) (124,038) FUND BALANCES (DEFICITS): Beginning of year End of year (8,971,267) $ (8,680,083) 12,959,672 $ 12,619,519 4,542,959 $ 4,529,173 3,429,524 $ 3,305,486 31,421 $ 64,318 40,521,910 $ 48,546,014 (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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Highway user taxes $ 14,000,000 $ 14,000,000 - - - - 79,000 79,000 134,727 55,727 - - 80,529 80,529 14,079,000 14,079,000 15,518,891 1,439,891 General government 3,991,800 3,059,449 - 3,059,449 Transportation and development 9,278,668 9,151,897 8,748,713 403,184 Capital outlay 2,605,364 4,881,201 4,647,019 234,182 15,875,832 17,092,547 13,395,732 3,696,815 (1,796,832) (3,013,547) 2,123,159 5,136,706 (3,914,748) (3,914,748) (3,914,748) - (3,914,748) (3,914,748) (3,914,748) - Net change in fund balance (5,711,580) (6,928,295) (1,791,589) 5,136,706 Fund balance, July 1, 2015 11,300,911 11,300,911 11,300,911 5,589,331 $ 4,372,616 Charges for services Interest revenue Miscellaneous Total revenues $ 15,303,635 $ 1,303,635 EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers out Total other financing sources (uses) Fund balance, June 30, 2016 $ 107 $ 9,509,322 $ 5,136,706 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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ 696,693 $ 696,693 $ 711,502 $ 14,809 Charges for services 90,000 90,000 104,389 Interest revenue 29,000 29,000 42,372 13,372 - - 181,814 181,814 815,693 815,693 1,040,077 224,384 2,134,300 2,000,200 - 2,000,200 Transportation and development 939,994 755,885 524,784 231,101 Capital outlay 272,750 466,999 169,548 297,451 3,347,044 3,223,084 694,332 2,528,752 (2,531,351) (2,407,391) 345,745 2,753,136 (4,001) (4,001) (4,001) - (4,001) (4,001) (4,001) - (2,535,352) (2,411,392) 3,506,203 3,506,203 Miscellaneous Total revenues 14,389 EXPENDITURES: General government Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 970,851 108 $ 1,094,811 $ 341,744 2,753,136 3,506,203 - 3,847,947 $ 2,753,136 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Grants Special Revenue For the year ended June 30, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ Interest revenue 5,154,611 $ 5,154,611 $ 2,451,884 $ (2,702,727) 16,000 16,000 17,163 5,170,611 5,170,611 2,469,047 865,009 498,649 332,806 165,843 3,133,331 3,002,099 1,124,274 1,877,825 Transportation and development 500,000 - - - Community services 594,602 622,966 205,856 417,110 2,361,000 3,203,824 860,521 2,343,303 Total expenditures 7,453,942 7,327,538 2,523,457 4,804,081 Net change in fund balance (2,283,331) (2,156,927) 1,524,514 1,524,514 Total revenues 1,163 (2,701,564) EXPENDITURES: General government Public safety Capital outlay Fund balance, July 1, 2015 Fund balance (deficit), June 30, 2016 $ (758,817) 109 $ (632,413) (54,410) 2,102,517 1,524,514 $ 1,470,104 $ 2,102,517 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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ 2,940,000 Interest revenue Total revenues $ 2,940,000 $ 1,908,048 $ (1,031,952) - - 3 3 2,940,000 2,940,000 1,908,051 (1,031,949) 3,649,481 3,273,144 2,305,034 968,110 3,649,481 3,273,144 2,305,034 968,110 EXPENDITURES: General government Total expenditures Excess (deficiency) of revenues over expenditures (709,481) (333,144) (396,983) (63,839) Net change in fund balance (709,481) (333,144) (396,983) (63,839) 447,931 447,931 447,931 Fund balance, July 1, 2015 Fund balance (deficit), June 30, 2016 $ (261,550) 110 $ 114,787 $ 50,948 $ (63,839) 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, 2016 Non-GAAP Budgeted Amounts Original Final Over Actual (Under) Amounts Final Budget REVENUES: Fines and forfeitures $ Total revenues 6,000,000 $ 6,000,000 6,000,000 $ 6,000,000 1,715,401 $ 1,715,401 (4,284,599) (4,284,599) EXPENDITURES: General government 390,000 - - - Public safety 1,200,000 1,876,413 872,598 1,003,815 Capital outlay 4,800,000 4,499,368 1,101,606 3,397,762 6,390,000 6,375,781 1,974,204 4,401,577 Total expenditures Excess (deficiency) of revenues over expenditures (390,000) (375,781) (258,803) (8,686,176) Other financing sources (uses): Proceeds from disposal of capital assets - - (6,455) 6,455 Total other financing sources (uses) - - (6,455) 6,455 Net change in fund balance Fund balance, July 1, 2015 Fund balance (deficit), June 30, 2016 $ (390,000) (375,781) (265,258) (53,209) (53,209) (53,209) (443,209) 111 $ (428,990) $ (318,467) (8,679,721) $ (8,679,721) 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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ Interest revenue Total revenues 93,710 $ 93,710 $ 92,188 $ (1,522) 2,000 2,000 2,951 951 95,710 95,710 95,139 (571) 190,188 190,188 76,611 - - 493 190,188 190,188 77,104 113,084 (94,478) (94,478) 18,035 (113,655) (18,000) (18,000) (20,725) 2,725 (18,000) (18,000) (20,725) 2,725 (112,478) (112,478) (2,690) 256,941 256,941 EXPENDITURES: Community services Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 113,577 (493) Other financing sources (uses): Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 144,463 112 $ 144,463 (110,930) 256,941 $ 254,251 $ (110,930) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Museum Special Revenue For the year ended June 30, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ 25,000 Miscellaneous Total revenues $ 25,000 $ 6,720 $ (18,280) - - 11,382 11,382 25,000 25,000 18,102 (6,898) 39,469 39,469 8,544 30,925 39,469 39,469 8,544 30,925 (14,469) (14,469) 9,558 (37,823) 18,000 18,000 20,725 2,725 18,000 18,000 20,725 2,725 3,531 3,531 30,283 (35,098) - - - - EXPENDITURES: Community services Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 3,531 113 $ 3,531 $ 30,283 $ (35,098) City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Library Special Revenue For the year ended June 30, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ 120,000 Interest revenue $ 1,000 Miscellaneous Total revenues 120,000 $ 1,000 18,445 $ 295 (101,555) (705) - - - - 121,000 121,000 18,740 (102,260) 120,000 120,196 8,043 112,153 - - 493 120,000 120,196 8,536 111,660 1,000 804 10,204 9,400 60,130 60,130 60,130 - EXPENDITURES: Community services Capital outlay Total expenditures Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 61,130 114 $ 60,934 $ 70,334 (493) $ 9,400 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, 2016 Total Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Miscellaneous $ Total revenues 450,000 $ 450,000 $ 203,755 $ (246,245) 450,000 450,000 203,755 (246,245) General government Public safety Transportation and development Community services 17,311,111 1,942,971 3,876,960 2,733,487 7,046,273 559,562 1,695,589 73,715 1,827,784 549,042 1,015,263 163,510 Capital outlay 24,711,997 43,300,129 21,726,843 21,573,286 50,576,526 52,675,268 25,282,442 27,392,826 (50,126,526) (52,225,268) (25,078,687) (27,639,071) 50,126,526 50,126,526 18,452,907 (31,673,619) 50,126,526 50,126,526 18,452,907 (31,673,619) EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures $ 5,218,489 10,520 680,326 (89,795) Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balance - (2,098,742) (6,625,780) (59,312,690) Fund balance, July 1, 2015 - - - - Fund balance (deficit), June 30, 2016 $ - 115 $ (2,098,742) $ (6,625,780) $ (59,312,690) 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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: System development fees $ 251,500 Interest revenue Total revenues $ 251,500 $ 304,361 $ 52,861 2,200 2,200 2,153 (47) 253,700 253,700 306,514 52,814 11,000 11,000 - 11,000 11,000 11,000 - 11,000 242,700 242,700 306,514 63,814 (157,300) (157,300) 306,514 463,814 (3,434,845) (3,434,845) EXPENDITURES: General government Total expenditures Excess (deficiency) of revenues over expenditures Net change in fund balance Fund balance, July 1, 2015 Fund balance (deficit), June 30, 2016 $ (3,592,145) 116 $ (3,592,145) (3,434,845) $ (3,128,331) $ 463,814 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Grants Capital Projects For the year ended June 30, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: Grants and entitlements $ Total revenues 7,932,558 $ 7,932,558 7,932,558 $ 7,932,558 10,837,345 $ 2,904,787 10,837,345 2,904,787 EXPENDITURES: General government 1,128,607 425,028 30,839 394,189 Transportation and development 3,964,121 1,088,788 126,309 962,479 Community services 1,922,508 96,293 69,751 26,542 Capital outlay 7,932,558 21,320,390 13,375,496 7,944,894 Total expenditures 14,947,794 22,930,499 13,602,395 9,328,104 Net change in fund balance (7,015,236) (14,997,941) (2,765,050) 12,232,891 Fund balance, July 1, 2015 (2,862,939) (2,862,939) (2,862,939) - Fund balance (deficit), June 30, 2016 $ (9,878,175) 117 $ (17,860,880) $ (5,627,989) $ 12,232,891 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, 2016 Non-GAAP Budgeted Amounts Original Final Over Actual (Under) Amounts Final Budget REVENUES: System development fees $ Interest revenue Total revenues 2,100,000 $ 2,100,000 $ 6,494,791 $ 4,394,791 134,400 134,400 237,802 103,402 2,234,400 2,234,400 6,732,593 4,498,193 6,084,200 3,283,887 6,084,200 531,671 25,777 (6,084,200) (505,894) EXPENDITURES: General government Community services Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 1,810,000 3,933,077 2,611,112 (1,321,965) 11,178,087 10,548,948 2,636,889 (7,912,059) (8,943,687) (8,314,548) 4,095,704 (3,413,866) (12,098,687) (11,469,548) 4,095,704 15,565,252 16,870,478 16,870,478 16,870,478 - 4,771,791 118 $ 5,400,930 $ 20,966,182 $ 15,565,252 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, 2016 Budgeted Amounts Original Final Non-GAAP Over Actual (Under) Amounts Final Budget REVENUES: System development fees $ 1,637,800 $ 1,637,800 65,000 65,000 60,000 1,702,800 1,702,800 2,040,888 338,088 General government 1,165,000 1,165,000 - 1,165,000 Public safety 1,860,787 1,495,594 1,081,869 413,725 Capital outlay 3,702,677 4,214,488 2,338,140 1,876,348 6,728,464 6,875,082 3,420,009 3,455,073 Excess (deficiency) of revenues over expenditures (5,025,664) (5,172,282) (1,379,121) 3,793,161 Net change in fund balance (5,025,664) (5,172,282) (1,379,121) 3,793,161 Fund balance, July 1, 2015 (8,971,267) (8,971,267) (8,971,267) - (13,996,931) $ (14,143,549) Interest revenue Total revenues $ 1,980,888 $ 343,088 (5,000) EXPENDITURES: Total expenditures Fund balance (deficit), June 30, 2016 $ 119 $ (10,350,388) $ 3,793,161 City of Chandler Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Vehicle and Capital Equipment Replacement Capital Projects For the year ended June 30, 2016 Non-GAAP Over Actual (Under) Amounts Final Budget Budgeted Amounts Original Final REVENUES: Interest revenue $ Miscellaneous Total revenues 117,000 $ 117,000 $ 148,524 $ 31,524 15,000 15,000 27,126 12,126 132,000 132,000 175,650 43,650 833,100 567,342 - 567,342 6,492,659 9,194,282 5,278,836 3,915,446 7,325,759 9,761,624 5,278,836 4,482,788 (7,193,759) (9,629,624) (5,103,186) 4,526,438 EXPENDITURES: General government Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Proceeds from disposal of capital assets 200,000 200,000 470,164 270,164 2,808,810 2,808,810 2,964,535 155,725 3,008,810 3,008,810 3,434,699 425,889 Net change in fund balance (4,184,949) (6,620,814) (1,668,487) Fund balance, July 1, 2015 12,959,672 12,959,672 12,959,672 8,774,723 $ 6,338,858 $ 11,291,185 Transfers in Total other financing sources (uses) Fund balance (deficit), June 30, 2016 $ 120 4,952,327 $ 4,952,327 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, 2016 Over Budgeted Amounts Original Final Actual (Under) Amounts Final Budget REVENUES: Interest revenue $ Total revenues 35,000 $ 35,000 $ 51,415 $ 16,415 35,000 35,000 51,415 16,415 64,656 65,048 65,201 (153) 64,656 65,048 65,201 (153) Excess (deficiency) of revenues over expenditures (29,656) (30,048) (13,786) 16,262 Net change in fund balance (29,656) (30,048) (13,786) 16,262 EXPENDITURES: General government Total expenditures Fund balance, July 1, 2015 Fund balance, June 30, 2016 4,542,959 $ 4,513,303 121 4,542,959 $ 4,512,911 4,542,959 $ 4,529,173 $ 16,262 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, 2016 Non-GAAP Over Actual (Under) Amounts Final Budget Budgeted Amounts Original Final REVENUES: Interest revenue $ Total revenues 40,000 $ 40,000 40,000 40,000 General government 1,708,663 Capital outlay 2,542,898 $ 40,580 $ 580 40,580 580 1,041,088 709,418 331,670 3,038,019 2,340,143 697,876 4,251,561 4,079,107 3,049,561 1,029,546 (4,211,561) (4,039,107) (3,008,981) (1,028,966) 2,685,474 2,685,474 2,701,740 16,266 2,685,474 2,685,474 2,701,740 16,266 (1,526,087) (1,353,633) 3,429,524 3,429,524 3,429,524 2,075,891 $ 3,122,283 EXPENDITURES: Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balance Fund balance, July 1, 2015 Fund balance, June 30, 2016 $ 1,903,437 122 $ (307,241) (1,012,700) $ (1,012,700) 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, 2016 Over Budgeted Amounts Original Final Actual (Under) Amounts Final Budget REVENUES: Charges for services $ - Interest revenue Total revenues $ - $ 82,120 $ 82,120 100 100 120 20 100 100 82,240 82,140 EXPENDITURES: Community services 50,000 50,000 49,843 157 Total expenditures 51,000 51,000 49,843 1,157 Net change in fund balance (50,900) (50,900) 32,397 83,297 31,421 31,421 31,421 - Fund balance, July 1, 2015 Fund balance (deficit), June 30, 2016 $ (19,479) 123 $ (19,479) $ 63,818 $ 83,297 124 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, 2016 Solid Waste Airport Chandler Total Other Housing Proprietary Authority Funds ASSETS Current assets: Equity in pooled cash and investments $ 14,436,182 $ 124,777 $ 5,021,550 $ 19,582,509 1,943,816 38,575 20,944 2,003,335 Due from other governments - - 42,035 42,035 Inventories - 21,130 - 21,130 Prepaid items - - 341,672 341,672 Accrued interest receivable 34,228 171 - 34,399 Other receivables 53,848 - - 53,848 16,468,074 184,653 5,426,201 22,078,928 - - 336,450 336,450 Non-depreciable 7,321,994 20,269,179 1,873,284 29,464,457 Depreciable, net 7,637,464 9,783,661 7,502,528 24,923,653 14,959,458 30,052,840 9,375,812 54,388,110 14,959,458 30,052,840 9,712,262 54,724,560 31,427,532 30,237,493 15,138,463 76,803,488 126,827 126,827 253,654 507,308 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 879,938 22,814 27,562 Accrued payroll 21,308 7,978 23,302 930,314 52,588 Trust liabilities and deposits 15,527 43,454 343,902 402,883 Accrued interest - 1,156 - 1,156 Due to other funds - - 25,595 122,955 19,651 13,677 25,595 156,283 820 486 970 2,276 - 25,196 - 25,196 94,446 - - 94,446 1,134,994 120,735 435,008 1,690,737 70,512 41,827 83,423 195,762 - 53,155 - 53,155 1,138,852 1,138,852 2,277,704 4,555,408 193,611 72,717 - 266,328 4,245,554 - - 4,245,554 5,648,529 1,306,551 2,361,127 9,316,207 6,783,523 1,427,286 2,796,135 11,006,944 125,458 125,458 250,916 501,832 14,959,458 30,045,891 9,375,812 54,381,161 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 $ - - 65,457 65,457 9,685,920 (1,234,315) 2,903,797 11,355,402 24,645,378 $ 28,811,576 127 $ 12,345,066 $ 65,802,020 City of Chandler Combining Statement of Revenues, Expenses, and Changes in Net Position Non-Major Proprietary Funds For the year ended June 30, 2016 Solid Waste Airport Chandler Total Other Housing Proprietary Authority Funds OPERATING REVENUES: Service fees $ 14,940,591 $ 946,419 $ - $ 15,887,010 Grants and entitlements - - 5,784,021 5,784,021 Rentals - - 946,408 946,408 Sales taxes - 10,391 - 10,391 Miscellaneous - 7,652 179,741 187,393 14,940,591 964,462 6,910,170 22,815,223 1,065,648 Total operating revenues OPERATING EXPENSES: General and administrative 965,648 100,000 - 1,585,939 555,051 1,604,465 3,745,455 10,130,852 55,805 277,107 10,463,764 Commodities Housing assistance payments 744,772 453,127 489,363 - - 4,382,996 1,687,262 4,382,996 Depreciation and amortization expense 480,806 845,584 513,875 1,840,265 13,908,017 2,009,567 7,267,806 23,185,390 1,032,574 (1,045,105) Personal services Contractual services Total operating expenses OPERATING INCOME (LOSS) (357,636) (370,167) 41,640 202,058 NONOPERATING REVENUES (EXPENSES): Interest revenue 159,603 Interest expense - 815 (2,313) - Accretion of bond premium Gain (loss) on disposal of capital assets (17,000) Total nonoperating revenues (expenses) INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS - (2,313) 196 - - - 196 (17,000) 142,603 (1,302) 41,640 182,941 1,175,177 (1,046,407) (315,996) (187,226) CAPITAL CONTRIBUTION AND TRANSFERS: Capital contributions - 1,030,989 501,550 Transfers in - 340,040 285,000 Transfers out (95,829) Total transfers (15,873) (95,829) Change in net position 1,532,539 625,040 - (111,702) 1,355,156 786,550 2,045,877 1,079,348 308,749 470,554 1,858,651 23,566,030 28,502,827 11,874,512 63,943,369 NET POSITION Beginning of year End of year $ 128 24,645,378 $ 28,811,576 $ 12,345,066 $ 65,802,020 129 City of Chandler Combining Statement of Cash Flows Non-Major Proprietary Funds For the year ended June 30, 2016 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 Net cash provided (used) by operating activities $ 14,608,148 (11,843,602) (1,646,735) Chandler Housing Authority Airport $ 1,117,811 968,117 (630,041) (572,375) $ 1,216,113 5,780,488 (5,252,776) (1,616,007) (234,299) 127,818 Total Other Proprietary Funds $ 16,792,378 5,780,488 (17,726,419) (3,835,117) 1,011,330 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in Transfers out (95,829) 340,040 (15,873) 285,000 - 625,040 (111,702) Net cash provided (used) by noncapital financing activities (95,829) 324,167 285,000 513,338 (114,424) (96,495) (623,298) (834,217) Principal paid on bond maturities - (25,001) - (25,001) Interest paid on bonds Capital contributions - (2,626) - 501,550 (2,626) 501,550 (97,424) (124,122) (121,748) (343,294) 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 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 150,716 796 41,640 193,152 150,716 796 41,640 193,152 332,710 1,374,526 18,207,983 1,075,274 (33,458) 13,360,908 158,235 4,688,840 124,777 $ 5,021,550 $ 14,436,182 130 $ $ 19,582,509 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 $ 1,032,574 $ $ (370,167) 513,875 1,840,265 (331,798) (2,330) (42,511) (645) (28,773) 10,488 85,237 12,713 (2,570) (18,539) 2,533 1,474 (10,532) (28,773) 8,916 810,806 130,036 (25,748) (185,374) 110,435 (189,049) (2,570) (25,748) (206,243) (39,978) 111,909 (11,177) (115,316) 19,404 1,381,497 $ $ 131 (357,636) 845,584 $ Accretion of bond premiums $ 480,806 $ 1,117,811 Loss on disposal of assets (1,045,105) - (234,299) 1,030,989 (57,770) 485,454 $ 127,818 $ 1,011,330 $ - $ 1,030,989 17,000 - - 17,000 - 196 - 196 City of Chandler Statement of Changes in Assets and Liabilities - Agency Fund Fiduciary Funds For the year ended June 30, 2016 Balance Balance July 1, 2015 Additions Deletions June 30, 2016 Miscellaneous Deposit Fund Assets: Equity in pooled cash and investments Total assets $ 8,000 $ - $ (3,000) $ 5,000 $ 8,000 $ - $ (3,000) $ 5,000 $ 8,000 $ - $ (3,000) $ 5,000 $ 8,000 $ - $ (3,000) $ 5,000 Liabilities: Due to others Total liabilities 132 133 134 City of Chandler Financial Data Schedule Housing and Redevelopment For the year ended June 30, 2016 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, 2016 Low Rent Public Housing Combining Statement of Net Position - All HUD Programs AMP 1 14.850a FDS Line # AMP 2 14.850a All AMPs 14.850a Account description ASSETS 111 113 114 115 122 124 125 126 126.1 142 161 162 164 166 167 171 200 Cash - unrestricted Cash - restricted for FSS escrow accounts Cash - security deposits Cash-restricted for payment of current liabilities Accounts receivable - HUD other projects Accounts Receivable-Other Government Accounts receivable - miscellaneous Accounts receivable - tenants - dwelling rents Allowance for doubtful accounts - dwelling rents Prepaid expenses and other assets Land Buildings Furniture, equipment, machinery - admin Accumulated depreciation Construction in Progress Notes and mortgages receivable - non-current Deferred outflow of resources $ TOTAL ASSETS AND DEFERRED OUTFLOW OF RESOURCES 1,703,715 46,246 63,477 6,947 8,914 (5,247) 2,299,730 5,641,708 161,884 (6,033,226) 81,170 $ 1,477,100 20,959 62,126 11,470 (9,225) 1,590,642 9,645,924 69,163 (5,579,182) 40,584 $ 3,180,815 67,205 125,603 6,947 20,384 (14,472) 3,890,372 15,287,632 231,047 (11,612,408) 121,754 3,975,318 7,329,561 11,304,879 19,072 5,847 209 63,477 7,320 46,246 17,976 728,865 80,294 6,168 4,309 169 62,126 6,357 20,959 14,543 364,433 40,146 25,240 10,156 378 125,603 13,677 67,205 32,519 1,093,298 120,440 969,306 519,210 1,488,516 Net investment in capital assets Restricted net position Unrestricted net position 2,070,096 935,916 5,726,547 1,083,804 7,796,643 2,019,720 TOTAL NET POSITION 3,006,012 6,810,351 9,816,363 LIABILITIES 312 321 322 341 345 353 354 357 400 Accounts payable Accrued wage/payroll taxes payable Accrued compensated absences - current Tenant security deposits Other current liabilities 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 3,975,318 $ 7,329,561 $ 11,304,879 Business Activities Central Office 14.850a $ $ 144,535 32,718 (25,718) 78,633 Other Business $ 1,361,636 5,950 353,640 1,227,704 129,671 (260,593) 121,747 336,450 - Housing Choice Vouchers 14.871 Total Business Activities $ 1,506,171 5,950 353,640 1,227,704 162,389 (286,311) 121,747 336,450 78,633 $ 120,213 15,593 9,493 15,032 341,672 35,470 (35,470) 53,267 Total $ 4,686,986 187,418 131,553 15,593 16,440 15,032 20,384 (14,472) 341,672 4,244,012 16,515,336 428,906 (11,934,189) 121,747 336,450 253,654 230,168 3,276,205 3,506,373 555,270 15,366,522 370 7,801 415 35,665 706,088 77,784 162 197 5,950 25 - 532 7,998 415 5,950 35,690 706,088 77,784 1,790 5,148 177 15,593 129,551 15,214 478,318 52,692 27,562 23,302 970 147,146 13,677 196,756 83,423 2,277,704 250,916 828,123 6,334 834,457 698,483 3,021,456 7,000 (604,955) 1,572,169 1,697,702 1,579,169 1,092,747 65,457 (208,670) 9,375,812 65,457 2,903,797 (597,955) 3,269,871 2,671,916 (143,213) 12,345,066 230,168 $ 3,276,205 $ 3,506,373 $ 555,270 $ 137 15,366,522 City of Chandler Financial Data Sheet Housing and Redevelopment For the year ended June 30, 2016 Statement of Revenues, Expenses, and Changes in Fund Net Position - All HUD Programs FDS Line # Low Rent Public Housing AMP 1 AMP 2 All AMPs 14.850a 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 419,470 36,155 690,352 316,754 16,695 225 $ 1,479,651 443,201 25,060 348,448 184,796 14,231 - $ 1,015,736 862,671 61,215 1,038,800 501,550 30,926 225 2,495,387 EXPENSES 91100 91200 91300 91310 91400 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 Advertising and Marketing 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 113,577 2,595 118,906 14,378 40,802 12,201 4,950 19,560 363 28,792 55,001 372 36,916 158,185 74,951 129,455 62,388 9,811 9,432 18,185 10,272 921,092 36,797 11,179 1,907 16,800 275 2,699 7,767 70 3,894 112,341 54,933 83,338 50,749 14,717 13,521 14,712 12,524 632,886 190,454 4,718 222,081 26,866 77,599 23,380 6,857 36,360 638 31,491 62,768 442 40,810 270,526 129,884 212,793 113,137 24,528 22,953 32,897 22,796 1,553,978 178,454 1,099,546 304,728 937,614 483,182 2,037,160 380,105 78,122 458,227 (5,372) (5,372) (11,347) (11,347) 374,130 72,750 446,880 2,631,882 6,737,601 9,369,483 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES BEFORE OTHER FINANCING SOURCES (USES) $ 76,877 2,123 103,175 12,488 $ OTHER FINANCING SOURCES (USES) 10030 11040 Operating transfers in from primary government Prior period adjustments and equity transfers TOTAL OTHER FINANCING SOURCES (USES) (5,975) (5,975) CHANGE IN NET POSITION TOTAL NET POSITION, BEGINNING OF YEAR RESTATED NET POSITION, END OF YEAR $ 3,006,012 $ 6,810,351 $ 9,816,363 OTHER MEMORANDUM AMOUNTS 11170 11180 11190 11210 11270 11620 11640 11650 Administrative fee equity Hosing assistance payment equity Unit months available Number of unit months leased Excess cash Building purchases Furniture & equipment - administrative purchases Leashold improvement purchases 1,956 1,921 1,613,533 267,001 49,753 138 1,680 1,663 1,414,349 184,796 - 3,636 3,584 3,027,882 451,797 49,753 14.850a $ 298,436 36,360 71,926 1,226 - $ 407,948 $ $ Other Total Business Housing Choice Vouchers PIH Family Self-Sufficiency Program Business Activities 14.871 14.896 Business Activities Central Office 356,209 247 131,574 803 23,772 36,080 548,685 83,737 871 5,250 11,555 $ 144,738 $ 17,472 5,555 810 9,869 2,917 435 2,193 31,530 23,641 25 1,273 95,720 83,737 871 298,436 36,360 71,926 6,476 11,555 $ 552,686 $ 373,681 5,555 810 247 141,443 803 26,689 435 2,193 31,530 23,641 36,105 1,273 644,405 4,621,137 4,238 12,548 50,002 $ 4,687,925 $ 157,404 3,538 70,800 44,250 71,744 30,407 52,392 9,264 15,391 455,190 124,084 - Eliminations $ 124,084 $ 89,198 34,886 124,084 (298,436) (36,360) (71,926) - Total $ (406,722) $ (298,436) (71,926) (36,360) (406,722) 946,408 62,086 5,784,021 501,550 41,640 12,548 61,782 7,453,360 $ 810,737 8,256 247 325,672 54,590 85,938 638 31,491 63,203 442 40,810 270,526 132,077 244,323 113,137 24,528 55,858 84,393 24,069 2,370,935 548,685 30,693 126,413 30,693 675,098 4,341,467 41,529 4,838,186 124,084 (406,722) 4,341,467 41,529 513,875 7,267,806 (140,737) 18,325 (122,412) (150,261) - - 185,554 135,000 (817) 134,183 (2,366) (2,366) 135,000 (3,183) 131,817 150,000 (1,671) 148,329 - - 285,000 (16,201) 268,799 (6,554) 15,959 9,405 (1,932) - - 454,353 (591,401) 3,253,912 2,662,511 (141,281) - - 11,890,713 (597,955) - $ 3,269,871 108 107 - $ 2,671,916 108 107 - $ (143,213) (206,999) 65,457 9,576 9,591 - $ - $ - - - 139 $ 12,345,066 (206,999) 65,457 13,320 13,282 3,027,882 451,797 49,753 140 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 2007 2008 2009 2010 Governmental activities Net investment in capital assets $ 288,893,354 $ 353,996,843 $ 433,851,899 $ 537,576,346 Restricted 115,343,816 56,979,639 117,712,539 94,440,806 Unrestricted 265,645,323 341,971,306 271,690,158 198,059,181 669,882,493 752,947,788 823,254,596 830,076,333 298,938,820 Total governmental activities net position Business-type activities Net investment in capital assets 347,306,362 427,130,654 387,401,986 Restricted 57,835,328 24,319,427 - - Unrestricted 78,718,941 45,300,009 98,413,928 163,103,784 483,860,631 496,750,090 485,815,914 462,042,604 Net investment in capital assets 636,199,716 781,127,497 821,253,885 836,515,166 Restricted 173,179,144 81,299,066 117,712,539 94,440,806 Unrestricted 344,364,264 387,271,315 370,104,086 361,162,965 Total business-type activities net position Primary government Total primary government net position $ 1,153,743,124 142 $ 1,249,697,878 $ 1,309,070,510 $ 1,292,118,937 Schedule 1 Fiscal Year 2011 $ $ 2012 534,292,488 $ 2013 545,926,100 $ 2014 558,279,485 $ 2015 563,033,503 $ 567,041,560 2016 $ 579,591,241 41,906,129 44,047,942 112,307,412 105,723,768 108,965,994 260,307,288 259,783,598 179,518,042 183,088,676 7,709,550 836,505,905 849,757,640 850,104,939 851,845,947 683,717,104 695,486,624 281,936,017 280,440,445 355,015,004 388,837,444 380,427,606 342,252,306 - - - - 119,075 31,365,801 168,164,942 179,339,498 176,961,822 206,284,498 217,824,645 258,806,679 450,100,959 459,779,943 531,976,826 595,121,942 598,371,326 632,424,786 816,228,505 826,366,545 913,294,489 951,870,947 947,469,166 921,843,547 41,906,129 44,047,942 112,307,412 105,723,768 109,085,069 153,133,648 428,472,230 439,123,096 356,479,864 389,373,174 225,534,195 1,286,606,864 $ 1,309,537,583 $ 1,382,081,765 $ 1,446,967,889 143 $ 1,282,088,430 121,767,847 (5,872,464) 252,934,215 $ 1,327,911,410 CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 Expenses Governmental activities: General government $ Public safety Community development Public works Transportation and development Community services Interest and fiscal charges 42,317,392 $ 54,459,719 $ 52,293,004 $ 48,920,813 76,200,082 80,860,917 87,609,165 92,421,801 9,154,407 11,692,559 10,429,826 11,715,276 32,402,242 39,241,652 47,180,197 56,155,939 - - - - 29,464,039 33,086,565 34,278,998 35,299,676 11,479,112 14,880,604 12,938,524 13,541,708 201,017,274 234,222,016 244,729,714 258,055,213 Water 40,687,283 53,554,653 53,201,379 62,556,496 Wastewater 27,230,862 30,657,939 36,079,767 38,227,999 Solid waste 9,843,824 6,845,979 12,076,998 14,605,448 Airport 1,757,279 1,602,268 2,269,691 1,797,991 Chandler housing authority 9,133,427 7,593,242 7,239,185 7,654,449 88,652,675 100,254,081 110,867,020 124,842,383 Total governmental activities expenses Business-type activities: Total business-type activities expenses Total primary government expenses $ 289,669,949 $ 334,476,097 $ 355,596,734 $ 382,897,596 (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 2011 $ 2012 67,808,567 $ 90,738,477 $ 2013 88,876,901 $ 2014 90,143,339 $ 2015 99,231,501 $ 2016 104,456,315 $ 112,514,903 89,141,559 95,974,126 94,738,371 102,050,425 111,568,323 - - (1) - - - - - (1) - - - - - 50,909,361 (1) 52,111,019 55,846,316 52,183,052 51,714,085 55,012,081 28,919,560 28,966,271 30,979,208 32,331,286 31,784,321 31,441,019 12,767,934 12,425,819 11,777,701 10,044,363 6,986,490 7,884,146 251,143,899 271,521,569 284,720,690 288,528,573 296,991,636 318,420,472 57,452,876 56,277,327 55,440,712 55,877,774 55,470,724 54,075,742 37,896,180 38,804,360 40,401,849 41,969,764 50,823,497 51,034,921 13,443,102 13,756,352 13,974,858 14,131,202 14,087,780 13,925,017 2,107,354 1,941,752 1,960,788 1,980,706 1,860,057 2,011,880 7,580,783 7,642,503 7,473,891 7,616,301 7,433,284 7,267,806 118,480,295 118,422,294 119,252,098 121,575,747 129,675,342 128,315,366 369,624,194 $ 389,943,863 $ 403,972,788 $ 410,104,320 145 $ 426,666,978 $ 446,735,838 CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 Program Revenues Governmental activities: Charges for services: General government $ Public safety 12,793,179 $ 12,629,779 $ 14,349,483 $ 16,621,003 4,178,941 4,317,843 4,802,272 Community development 10,405,425 5,488,535 3,581,458 3,336,188 Public works 13,145,192 15,831,165 5,226,726 6,025,846 Transportation and development Community services Operating grants and contributions Capital grants and contributions Total governmental activities program revenues 7,110,304 - - - - 2,272,826 2,699,469 5,235,864 4,515,980 3,707,115 1,897,300 2,337,910 5,510,710 26,428,112 36,104,151 23,902,360 8,159,960 72,930,790 78,968,242 59,436,073 51,279,991 Business-type activities: Charges for services: Water 39,054,531 40,613,727 39,707,910 42,276,145 Wastewater 21,083,587 25,145,258 25,922,530 28,406,808 Solid waste 12,769,423 12,979,695 12,762,120 12,891,628 974,190 773,449 741,556 815,751 661,509 1,061,658 595,420 521,404 6,312,438 6,114,138 6,225,928 6,367,024 Airport Community services - housing authority Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues 28,014,518 19,782,193 9,110,319 8,484,239 108,870,196 106,470,118 95,065,783 99,762,999 $ 181,800,986 $ 185,438,360 $ 154,501,856 $ 151,042,990 $ (128,086,484) $ (155,253,774) $ (185,293,641) $ (206,775,222) $ 20,217,521 (107,868,963) $ 6,216,037 (149,037,737) $ (15,801,237) (201,094,878) $ (25,079,384) (231,854,606) Net (expense)/revenue Governmental activities Business-type activities Total primary government net (expense) (1) In FY 2011 the City changed its functional categories to eliminate "Community development" and "Public works" and add "Transportation and development." 146 Schedule 2b Fiscal Year 2011 $ 2012 22,548,679 $ 5,658,628 2013 31,381,062 $ 2014 35,898,378 $ 2015 38,832,217 $ 2016 39,207,061 5,794,329 7,375,050 5,861,044 6,469,215 $ 42,021,638 7,471,344 - (1) - - - - - - (1) - - - - - 11,884,554 (1) 27,905,311 10,150,102 16,145,692 14,438,138 16,538,175 4,136,285 8,240,732 7,744,507 7,551,166 10,792,114 4,079,359 5,890,147 6,162,320 3,999,536 4,744,636 3,514,714 5,188,787 16,041,213 11,016,136 9,116,635 10,170,236 13,133,637 16,725,462 66,102,580 86,395,443 74,780,433 83,498,332 84,313,931 98,737,520 43,708,974 49,565,071 48,258,282 49,588,376 48,045,103 50,483,097 31,610,009 35,907,085 37,690,400 40,509,289 45,666,777 51,321,346 13,277,403 13,890,957 13,836,363 14,034,894 14,140,246 14,940,591 995,307 996,605 976,102 961,067 1,010,288 946,419 457,781 466,556 637,329 806,540 877,380 946,408 6,297,200 6,341,087 5,785,335 5,457,991 5,862,477 5,784,021 8,659,772 19,118,567 81,572,568 72,176,582 35,357,741 32,690,364 105,006,446 126,285,928 188,756,379 183,534,739 150,960,012 157,112,246 $ 171,109,026 $ 212,681,371 $ 263,536,812 $ 267,033,071 $ 235,273,943 $ (185,041,319) $ (185,126,126) $ (209,940,257) $ (205,030,041) $ (212,677,705) $ (13,473,849) (198,515,168) $ 7,863,634 (177,262,492) $ 69,504,281 (140,435,976) $ 61,958,992 (143,071,049) $ 21,284,670 (191,393,035) 147 $ 255,849,766 (219,682,952) $ 28,796,880 (190,886,072) CITY OF CHANDLER, ARIZONA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 Governmental Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes $ 26,921,292 $ 34,063,123 $ 38,957,986 $ 40,617,269 Sales taxes 95,410,460 97,226,841 85,897,334 83,019,726 Highway user taxes 16,490,129 15,856,863 13,849,284 13,116,481 Other taxes 3,481,086 3,786,677 7,921,275 13,965,973 Franchise fees 3,230,429 3,937,952 3,264,093 3,174,390 State shared revenues 57,716,644 62,970,459 61,211,289 54,492,427 Investment income 17,868,181 20,823,059 10,045,274 3,487,145 1,822,070 767,221 995,606 850,191 469,201 534,086 223,409,492 239,966,281 Miscellaneous Transfers in (out) Total governmental activities (1,542,346) 873,357 220,599,795 213,596,959 Business-type activities: Sales tax - - - - Investment income 6,876,399 5,906,545 2,536,237 756,641 Miscellaneous Transfers in (out) 1,043,407 (469,200) 1,792,816 (534,086) 788,478 1,542,346 1,422,790 (873,357) 7,450,606 7,165,275 4,867,061 1,306,074 Total business-type activities: Total primary government $ 230,860,098 $ 247,131,556 $ $ 95,323,008 $ 84,712,507 $ 225,466,856 $ 35,306,154 $ 214,903,033 Change in Net Position Governmental activities Business-type activities Total primary government 27,668,127 $ 122,991,135 13,381,312 $ 148 98,093,819 (10,934,176) $ 24,371,978 6,821,737 (23,773,310) $ (16,951,573) Schedule 2c Fiscal Year 2011 $ 2012 36,158,574 $ 29,656,415 $ 28,348,952 $ 2016 28,708,033 $ 29,214,103 102,200,517 103,880,801 108,657,130 112,250,883 13,287,878 11,823,280 12,929,504 13,352,622 14,633,470 15,303,635 88,561 5,979,715 6,295,212 3,243,937 10,106,891 6,100,475 2,819,521 2,988,456 2,936,533 3,145,449 3,300,129 3,344,817 47,732,614 45,958,627 51,347,206 55,423,759 59,236,588 60,712,442 1,841,244 1,221,923 2,843,417 1,869,128 1,763,585 3,834,840 3,071,588 1,116,832 2,181,627 819,766 1,197,215 1,124,559 (74,075) (102,875) 198,377,861 (132,082) 210,287,556 (123,350) 209,952,332 (433,282) 227,479,691 231,452,472 - - - 70,065 10,865 10,391 533,313 389,446 1,180,290 788,025 819,556 2,180,447 946,507 244,702 1,351,829 74,075 1,409,437 102,875 1,683,332 132,082 2,475,760 123,350 2,632,460 433,282 1,724,522 1,815,350 2,692,602 2,673,504 3,429,531 5,256,580 193,003,095 $ 200,193,211 $ 6,237,254 $ 13,251,735 $ (11,749,327) $ $ 2015 97,485,387 191,278,573 $ 31,877,716 2014 86,523,295 (244,702) $ 2013 (5,512,073) 9,678,984 $ 22,930,719 212,980,158 $ 347,299 $ 72,196,883 $ 72,544,182 212,625,836 $ 230,909,222 4,922,291 $ 14,801,986 64,632,496 $ 149 69,554,787 $ 11,769,520 24,714,201 $ 39,516,187 236,709,052 34,053,460 $ 45,822,980 CITY OF CHANDLER, ARIZONA FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2007 General fund Reserved $ Unreserved 2008 12,349,638 $ 2009 28,237,521 $ 2010 30,482,311 $ 62,149,646 189,087,760 196,093,067 194,457,561 137,041,044 Nonspendable - - - - Restricted - - - - Assigned - - - - Unassigned - - - Total general fund - $ 201,437,398 $ 224,330,588 $ 224,939,872 $ 199,190,690 $ 109,777,210 $ 43,039,742 $ 97,267,450 $ 61,355,662 All other governmental funds Reserved Unreserved, reported in: Special revenue funds 14,064,542 17,752,306 18,786,740 18,103,651 Capital projects funds 9,158,971 11,608,190 7,868,412 7,379,375 Restricted - - - - Unassigned - - - - Total all other governmental funds $ 133,000,723 $ 72,400,238 $ 123,922,602 (1) In FY 2011 the City implemented GASB statement No. 54, thus changing how fund balance is categorized. 150 $ 86,838,688 Schedule 3 Fiscal Year 2011 $ 2012 - (1) $ $ $ - $ 2014 - $ 2015 - $ 2016 - $ - - (1) - - - - - 893,067 (1) 947,804 938,549 892,533 941,359 907,594 844,754 (1) 939,867 939,867 1,166,105 1,792,180 1,566,618 61,733,537 (1) 102,635,587 101,115,766 95,185,696 102,222,466 109,958,162 98,872,954 (1) $ 2013 162,344,312 69,223,074 66,077,714 82,453,462 80,152,269 68,567,835 $ 173,746,332 $ 169,071,896 $ 179,697,796 $ 185,108,274 $ 181,000,209 - (1) $ - $ - $ - $ - $ - - (1) - - - - - - (1) - - - - - 105,756,072 (1) 111,378,788 111,367,545 104,557,663 107,173,814 120,201,229 (12,315,197) (1) (12,798,348) (13,646,428) (11,034,021) (15,322,260) (11,877,159) 93,440,875 $ 98,580,440 $ 97,721,117 $ 151 93,523,642 $ 91,851,554 $ 108,324,070 CITY OF CHANDLER, ARIZONA GOVERNMENTAL FUNDS REVENUES LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2007 Property taxes $ 2008 26,909,841 $ 2009 33,844,181 $ 2010 38,677,156 $ 40,259,579 Sales taxes 95,410,460 97,226,841 85,897,334 83,019,726 Highway user taxes 16,490,129 15,856,863 13,849,284 13,116,481 13,965,973 Other taxes 3,481,086 3,786,677 7,921,275 Franchise fees 3,230,429 3,937,952 3,264,093 3,174,390 57,716,644 62,970,459 61,211,289 54,492,427 Grants and entitlements 7,610,807 10,553,680 18,168,904 10,377,502 System development fees 11,871,969 8,111,597 4,475,029 4,768,306 Special assessments 309,386 426,428 863,747 663,209 License and permits 6,728,309 3,894,368 2,667,720 2,758,392 18,216,653 17,254,859 19,492,740 19,420,434 4,058,090 4,342,621 4,912,159 5,336,294 Rentals 89,875 94,575 138,667 101,322 Contributions 50,000 50,000 50,000 50,000 15,589,318 18,334,581 8,825,695 3,171,308 1,830,328 1,255,681 1,661,772 1,913,571 State shared revenues Charges for current services Fines and forfeitures Investment income Miscellaneous Total revenues $ 269,593,324 $ 152 281,941,363 $ 272,076,864 $ 256,588,914 Schedule 4 Fiscal Year 2011 $ $ 2012 36,301,709 $ 32,329,560 2013 $ 29,841,739 2014 $ 28,442,823 2015 $ 28,899,684 2016 $ 29,237,607 86,523,295 97,485,387 102,200,517 103,880,801 108,657,130 13,287,878 11,823,280 12,929,504 13,352,622 14,633,470 112,250,883 6,100,475 88,561 5,979,715 6,295,212 3,243,937 10,106,891 3,344,817 2,819,521 2,988,456 2,936,533 3,145,449 3,300,129 15,303,635 47,732,614 45,958,627 51,347,206 55,423,759 59,236,588 60,712,442 14,759,620 13,826,606 9,480,090 10,187,895 10,638,831 16,159,064 6,739,920 11,724,823 7,781,083 11,846,275 10,585,623 16,217,004 673,064 678,027 676,127 678,843 573,438 606,757 3,208,944 6,955,605 4,887,466 5,479,384 5,146,556 6,634,161 18,002,168 19,938,566 19,786,513 20,269,976 20,110,036 19,705,786 4,697,317 4,700,430 5,825,098 4,622,215 4,601,501 4,828,174 387,952 455,842 570,638 732,807 751,163 974,192 100,000 100,000 100,000 100,000 150,000 200,000 1,635,258 1,034,895 2,529,078 1,623,973 1,562,241 3,409,065 4,593,104 1,392,691 1,384,123 650,117 572,252 897,102 241,550,925 $ 257,372,510 $ 258,570,927 $ 153 263,680,876 $ 279,525,533 $ 296,581,164 CITY OF CHANDLER, ARIZONA GOVERNMENTAL FUNDS EXPENDITURES AND DEBT SERVICE RATIO LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2007 General government $ Public safety 2008 38,124,478 $ 2009 51,261,849 $ 2010 40,503,113 $ 44,663,091 75,800,634 78,306,604 84,493,816 85,390,303 8,989,308 11,593,642 10,509,467 11,614,214 22,987,692 19,306,381 19,283,643 17,664,633 - - - - Community services 25,714,032 28,830,926 29,916,002 30,078,856 Capital improvements 75,524,840 104,836,442 124,680,957 106,366,737 Principal retirement 12,374,500 16,659,500 15,275,000 17,260,000 Interest and fiscal charges 10,669,877 14,437,346 13,059,295 13,646,479 189,840 179,201 961,100 183,969 Community development Public works Transportation and development Debt service: Bond issuance costs Total expenditures Debt service as a percentage of noncapital expenditures $ 270,375,201 $ 12.1% 325,411,891 14.1% $ 338,682,393 12.5% (1) In FY 2011 the City changed its functional categories to eliminate "Community development" and "Public works" and add "Transportation and development." 154 $ 326,868,282 13.3% Schedule 5 Fiscal Year 2011 $ 2012 43,636,784 $ 84,007,752 $ 2013 48,894,811 $ 2014 44,512,533 $ 2015 46,807,747 $ 2016 46,895,106 $ 52,138,384 82,820,106 89,587,613 90,068,218 93,773,306 104,605,663 - (1) - - - - - - (1) - - - - - 22,126,233 (1) 25,532,739 24,807,578 23,418,175 24,769,553 25,471,154 22,836,317 23,255,568 23,554,854 23,771,925 24,569,283 24,988,844 67,299,941 29,787,069 41,793,319 45,657,265 56,539,116 50,009,243 15,090,000 15,970,000 26,870,000 15,955,000 21,490,000 17,465,000 12,901,616 12,550,323 11,908,025 10,682,206 7,737,974 8,635,631 278,512 - - 145,970 722,293 - 268,177,155 13.3% $ 238,810,616 13.5% $ 263,033,922 $ 256,506,506 16.4% 11.6% 155 $ 276,496,631 11.7% $ 283,313,919 10.2% 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 2007 2008 2009 2010 Other Financing Sources (Uses) Bond premium $ Face amount of bonds issued Proceeds from sale of capital assets Payment to escrow agent $ Transfers out Total other financing sources and (uses) $ 165,431 $ 2,348,878 7,370,000 120,513,000 173,742 280,969 219,793 - - (24,335,292) Transfers in Net change in fund balances 1,975,876 88,405,000 $ 290,569 10,450,000 97,609 (10,556,600) 31,525,563 38,442,603 40,593,319 46,309,016 (34,246,951) (41,108,342) (44,937,903) (39,144,322) 63,497,938 5,150,661 118,737,087 7,446,272 62,716,055 156 $ (38,319,867) $ 52,131,648 $ (62,833,096) Schedule 6 Fiscal Year 2011 $ 1,047,424 2012 $ - $ 2014 - $ 562,052 2015 $ 17,045,635 2016 $ - 20,285,000 - - 8,660,000 128,254,000 - 108,929 89,007 76,381 161,126 103,964 463,709 (10,816,839) $ 2013 - - (9,061,800) (143,635,520) 41,605,646 20,576,188 32,849,979 24,586,418 28,717,990 27,885,557 (56,040,439) (22,685,504) (33,997,394) (25,653,741) (29,776,581) (29,252,060) (3,810,279) (2,020,309) (1,071,034) (745,945) (30,436,509) $ 16,541,585 $ (5,533,759) $ 6,428,425 157 - 709,488 $ 3,738,390 (902,794) $ 12,364,451 CITY OF CHANDLER, ARIZONA TAXABLE REVENUE BY CATEGORY LAST TEN FISCAL YEARS Schedule 7 Fiscal Year 2007 2008 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 Amusements Contracting General Retail Hotel/Motel Miscellaneous Related Revenue 1 Publishing Rentals - Personal Property Rentals - Real Property Restaurant/Bar Telecommunications Use Tax Utilities $ 679,666 15,665,738 41,719,797 1,938,442 2,765,527 723,532 1,935,981 7,883,794 7,655,093 3,709,781 1,044,225 9,688,886 $ 660,985 15,519,590 41,253,934 2,103,714 3,329,891 492,770 2,177,125 8,449,059 7,908,883 3,978,715 950,808 10,401,302 $ 623,159 9,352,480 36,851,140 1,672,893 2,774,033 389,046 2,474,464 8,520,878 7,267,718 4,057,982 930,636 10,982,905 $ 602,027 6,573,348 36,560,075 1,611,912 2,911,821 382,080 2,389,241 8,921,788 7,436,900 3,974,448 869,092 10,786,994 $ 673,666 6,380,957 38,741,270 1,973,790 2,551,354 351,250 2,462,219 9,479,850 7,971,183 3,524,076 1,000,342 11,413,338 $ 714,641 10,869,566 42,844,871 2,255,786 2,334,179 352,550 2,606,371 10,025,726 8,670,199 3,628,007 1,054,968 12,128,475 $ 717,442 10,408,518 45,331,307 2,288,989 2,937,426 334,981 2,884,618 10,817,611 9,069,109 3,731,350 1,315,599 12,363,565 $ 728,110 9,780,645 47,454,682 2,472,754 2,660,201 258,547 2,949,421 11,058,203 9,542,714 3,533,636 1,090,428 12,421,526 $ 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 $ 1,019,939 8,855,057 51,191,162 2,957,685 2,745,130 248,433 3,125,459 13,217,561 10,752,479 3,234,369 1,127,257 13,786,741 Total Sales and Use Taxes $ 95,410,462 $ 97,226,776 $ 85,897,334 $ 83,019,726 $ 86,523,295 $ 97,485,337 $ 102,200,515 $ 103,950,867 $ 108,667,995 $ 112,261,274 City Direct Sales Tax Rate 2 1.72% 1.72% 1.75% 1.75% 1.77% 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 1.76% 1.75% 1.75% 1.76% 1.76% 159 CITY OF CHANDLER, ARIZONA DIRECT AND OVERLAPPING SALES AND USE TAX RATES LAST TEN FISCAL YEARS Schedule 8 Overlapping Rates City Direct Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Tax Rate 1.72% 1.72% 1.75% 1.75% 1.77% 1.76% 1.75% 1.75% 1.76% 1.76% 1 Maricopa County Tax Rate 0.68% 0.68% 0.67% 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 5.12% 5.09% 5.10% 5.86% 5.85% 5.90% 5.80% 4.99% 4.96% 4.92% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.03% 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 2016 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 Utility Department Store Grocery Store Department Store Home Improvement Utility Vehicle Dealer Department Store Telecommunications Vehicle Dealer Grocery Department Store Retailer Sales and Use Tax Payments $ $ 10,316,152 3,800,880 2,304,583 2,056,347 1,679,477 1,343,433 1,339,282 1,303,090 1,302,120 1,166,884 Fiscal Year 2007 Rank Percentage of Total Sales and Use Tax Payments 1 2 3 4 5 6 7 8 9 10 9.19% 3.39% 2.05% 1.83% 1.50% 1.20% 1.19% 1.16% 1.16% 1.04% 26,612,249 23.71% Rank Percentage of Total Sales and Use Tax Payments 6,864,197 2,355,806 2,187,964 1,375,940 1,583,078 1,079,987 1 2 3 7 4 10 7.19% 2.47% 2.29% 1.44% 1.66% 1.13% 1,433,659 6 1.50% 1,491,515 1,354,688 1,161,560 5 8 9 1.56% 1.42% 1.22% Sales and Use Tax Payments $ $ 20,888,393 21.89% 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Obligation Bonds 197,075,000 187,645,000 294,588,000 282,888,000 279,968,000 268,148,000 256,288,000 233,678,000 222,143,000 205,088,000 Revenue Bonds 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 10,055,000 Special Assessment Bonds Accrued Interest - Capital Appreciation Bonds 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 3,960,000 34,505,099 35,000,654 - Issuance Premiums 4,346,195 17,898,207 16,165,290 Business-type Activities Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Obligation Bonds 62,410,000 60,395,000 188,612,000 185,032,000 179,747,000 170,987,000 161,567,000 150,972,000 140,072,000 127,782,000 Revenue Bonds 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 24,850,000 Excise Tax Revenue Obligations Intergovernmental Loans Issuance Premiums 34,040,000 34,040,000 48,540,000 47,440,000 45,695,000 148,380,000 142,200,000 204,090,000 16,304 - 12,429,175 20,931,905 22,910,886 Percentage of Estimated Actual Taxable Value of Property Fiscal Year General Bonded Debt Less Amount Available in Debt Service Fund Net General Bonded Debt Outstanding Estimated Actual Taxable Value of Property 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 259,485,000 248,040,000 483,200,000 467,920,000 459,715,000 439,135,000 417,855,000 384,650,000 362,215,000 332,870,000 18,321,538 19,258,684 16,419,386 16,186,172 14,910,017 15,281,782 259,485,000 248,040,000 483,200,000 467,920,000 441,393,462 419,876,316 401,435,614 368,463,828 347,304,983 317,588,218 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 31,514,093,091 Percentage of Total Primary Personal Income 1 Government 2 1.71% 0.95% 1.58% 1.51% 1.97% 1.99% 1.87% 1.56% 1.19% 1.01% 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. 162 436,680,903 422,040,654 636,165,000 608,655,000 603,345,000 570,770,000 535,685,000 608,805,370 593,320,112 614,901,176 7.23% 6.22% 9.20% 9.35% 9.22% 7.84% 6.71% 7.76% 7.15% 7.35% Per Capita 1 1,877 1,804 2,704 2,578 2,535 2,383 2,213 2,521 2,397 2,465 CITY OF CHANDLER, ARIZONA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF JUNE 30, 2016 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 Chandler Unified School District No. 80 Kyrene Elementary School District No. 28 Mesa Unified School District No. 4 Gilbert Unified School District No. 41 East Valley Institute of Technology None None $ 654,190,000 176,680,000 176,750,000 249,810,000 101,545,000 None 5.09% 6.86 6.86 71.87 21.07 5.24 1.83 13.52 None None $ Subtotal, overlapping debt 44,854,024 126,982,672 37,231,625 13,077,315 1,854,459 None 224,000,095 City direct debt 332,870,000 Total direct and overlapping debt 100.00 332,870,000 $ 556,870,095 Source: Piper Jaffray & Co. Note: The applicable percentage of overlap for each type of debt was computed on the net limited property assessed valuation as calculated for fiscal year 2015-16 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 2007 2008 2009 2010 6% General Obligation Bond Limitation Debt limit $ Total net debt applicable to limit Legal debt margin 179,351,393 $ 66,460,000 $ 207,310,517 $ 7,795,000 112,891,393 $ 199,515,517 210,484,297 $ 10,934,000 $ 199,550,297 210,484,297 9,494,000 $ 200,990,297 Total net debt applicable to the limit as a percentage of the debt limit 37% (1) 4% 5% 5% 20% General Obligation Bond Limitation Debt limit $ Total net debt applicable to limit Legal debt margin 597,837,975 $ 193,025,000 $ 691,035,056 $ 240,245,000 404,812,975 $ 450,790,056 701,614,322 $ 472,266,000 $ 229,348,322 701,614,322 458,426,000 $ 243,188,322 Total net debt applicable to the limit as a percentage of the debt limit 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, public safety and emergency services, streets, transportation, playgrounds and recreational facilities up to an amount not to exceed 20 percent of parks, 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. Prior to Fiscal Year 2016, the Assessed Valuation was based on the Net Assessed Secondary Value . Due to a change in the legislation (Proposition 117), in Fiscal Year 2016, the City is required to use the Limited Property Value. 164 65% Schedule 12 Legal Debt Margin Calculation for Fiscal Year 2016 Full Cash Assessed Valuation as of June 30, 2016 $ Debt limit (6% of assessed value) 3,167,080,795 190,024,847 Debt applicable to limit: 6% general obligation bonds 9,427,250 Legal 6% debt margin $ 180,597,597 Debt limit (20% of assessed value) $ 633,416,159 $ 309,973,409 Debt applicable to limit: 20% general obligation bonds 323,442,750 Legal 20% debt margin Fiscal Year 2011 $ 148,117,597 2012 $ 13,361,000 $ 134,756,597 493,725,323 $ 47,371,323 90% 123,470,758 $ 451,035,860 $ 23,740,860 95% $ 119,653,600 $ 435,075,335 $ 28,089,335 $ 132,697,404 $ 476,318,016 $ 94% 101,866,016 79% 165 $ 132,979,078 $ 476,091,596 $ 123,724,996 74% 180,597,597 5% $ 352,366,600 $ 190,024,847 9,427,250 7% 374,452,000 $ 142,827,478 2016 9,848,400 7% 406,986,000 $ 142,895,404 2015 10,198,000 8% 427,295,000 $ 130,522,600 2014 10,869,000 9% 446,354,000 $ $ 11,840,000 9% $ 135,310,758 2013 633,416,159 323,442,750 $ 309,973,409 51% CITY OF CHANDLER, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Schedule 13a Street & Highway Revenue Bonds Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Highway User Taxes 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 15,303,635 Less: Operating Expenses 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 11,951,019 Net Available Revenue 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 3,352,616 Debt Service Principal Interest 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 3,370,000 1,735,306 1,628,797 1,572,829 1,198,194 1,176,009 936,975 833,475 515,175 462,047 375,650 Coverage 1.75 1.65 0.70 0.94 0.98 0.85 0.44 0.62 1.44 0.90 Water Revenue Bonds Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utility Service Charges 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 50,483,097 Less: Operating Expenses 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 26,907,780 Net Available Revenue 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 23,575,317 Debt Service Principal Interest 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 8,408,500 2,881,971 2,700,799 2,419,526 2,205,623 1,875,330 1,641,612 1,375,854 869,064 730,854 566,680 Coverage 2.08 1.06 1.19 1.45 2.14 2.85 2.87 5.22 5.18 2.63 Excise Tax Revenue Obligations Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Excise Tax Collections 148,768,677 141,025,083 136,164,353 148,885,867 156,621,139 162,664,325 170,432,597 175,820,443 Less: Operating Expenses Net Available Revenue - 148,768,677 141,025,083 136,164,353 148,885,867 156,621,139 162,664,325 170,432,597 175,820,443 Debt Service Principal 500,000 1,100,000 1,745,000 1,815,000 6,180,000 4,770,000 2,805,000 Interest 462,667 1,133,063 1,118,063 1,703,358 1,584,863 4,483,662 6,044,175 7,193,019 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 0.00 321.55 86.36 61.39 43.18 46.07 15.25 15.76 17.59 CITY OF CHANDLER, ARIZONA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Schedule 13b Wastewater Revenue Bonds Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Utility Service Charges 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 51,321,346 Less: Operating Expenses 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 23,054,518 Net Available Revenue 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 28,266,828 Debt Service Principal 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 6,846,500 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 1,691,169 1,554,504 1,341,752 1,104,530 947,148 874,363 809,286 585,029 548,545 368,470 Coverage 1.26 1.35 1.57 2.63 6.22 8.31 6.26 12.28 5.55 3.92 168 CITY OF CHANDLER, ARIZONA PRINCIPAL EMPLOYERS CURRENT YEAR AND TEN YEARS AGO Schedule 15 2016 Employer Employees Rank Percentage of Total City Employment Intel Corporation 11,000 1 7.91% Chandler Unified School District 4,900 2 3.52% Wells Fargo 4,500 3 3.24% Bank of America 3,800 4 2.73% Verizon Wireless 2,400 5 1.73% Chandler Regional Hospital 2,100 6 1.51% Paypal 1,750 7 1.26% Orbital ATK 1,650 8 1.19% Microchip Technology 1,625 9 1.17% City of Chandler 1,590 10 1.14% Freescale Semiconductors - - - Countrywide Home Mortgage - - - Total 35,315 25.40% 2007 Employer Intel Corporation Chandler Unified School District Wells Fargo Bank of America Verizon Wireless Chandler Regional Hospital Paypal Orbital ATK Microchip Technology City of Chandler Freescale Semiconductors Countrywide Home Mortgage Total Employees 11,400 2,400 2,200 1,695 1,784 1,525 1,485 1,701 1,450 2,350 27,990 Rank 1 2 4 7 5 8 9 6 10 3 Source: City's Economic Development Division and Arizona Office of Employment and Population Statistics. 170 Percentage of Total City Employment 8.48% 1.79% 1.64% 1.26% 1.33% 1.13% 1.11% 1.27% 1.08% 1.75% 20.84% 171 CITY OF CHANDLER, ARIZONA EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS Fiscal Year 2007 2008 2009 2010 Full Time Equivalent Personnel Mayor and council 5 5 5 5 City clerk City manager Communications/public affairs 6 79 17 6 104 18 6 103 18 6 96 15 City magistrate Law Management services 44 27 101 48 29 106 43 28 105 41 27 95 Total General Government 279 316 308 285 Total Planning and Development # 111 114 103 80 - - - - 219 243 207 226 3 59 3 64 3 57 3 50 Total Transportation and Development Total Community Services Public works administration Streets (1) Airport Engineering, development and Real estate Total Public Works 6 6 6 6 76 144 85 158 80 146 74 133 Police Fire Total Public Safety 487 219 706 496 228 724 483 223 706 478 219 697 Municipal utilities administration Water Wastewater Solid waste Total Municipal Utilities Total Primary Government 5 5 5 6 85 42 21 153 88 43 20 156 86 41 18 150 80 42 20 148 1,612 1,711 1,620 1,569 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. (4) The significant change in this year is a result of Library, Museum and Center for the Arts moving from Commmunity Services to City Manager 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 (2) (2) (2) Schedule 16 Fical Year 2011 2012 2013 2014 2015 2016 5 6 4 4 4 4 5 122 12 4 124 14 5 178 19 6 174 13 6 176 13 6 240 15 40 27 85 38 30 72 39 29 72 35 29 66 37 31 69 39 31 67 296 288 346 327 336 402 - (3) - - - - 172 (3) 170 163 159 165 150 231 192 199 198 156 229 - (3) (3) - - - - - - (3) - - - - - - (3) - - - - - 467 238 705 468 234 702 467 224 691 483 237 720 490 240 730 467 218 685 5 5 4 5 5 8 88 42 20 155 89 42 19 155 85 46 18 153 87 46 16 154 87 62 20 174 87 65 21 181 1,537 1,549 1,556 1,530 1,593 1,619 173 (4) (4) CITY OF CHANDLER, ARIZONA OPERATING INDICATORS BY FUNCTION / PROGRAM LAST TEN FISCAL YEARS Fiscal Year Function/Program General Government Privilege tax licenses Meeting notices posted City council actions and agenda items prepared Grant awards received Inventory turnover ratio 2007 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) 2009 2010 20,652 721 1,292 57 3.32 22,980 470 1,188 61 3.94 23,460 479 1,055 66 2.50 22,715 481 977 40 2.10 6,474 5,750 3,800 3,883 2,082,000 1,024 2,349,232 989 2,506,602 977 38.0 160,355 16,682 4,878 74 34.9 159,535 16,709 3,585 57 35.2 157,039 18,474 3,891 49 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 77,596 29 66,020,000 60,000,000 71,880 857 67,902 89,408 24,596 Transportation & Development Building permits issued Community Services Library circulation Center for the Arts events & exhibits 2008 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 Source: City of Chandler Departments (1) The 2010 decrease in 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 2011 2012 2013 2014 2015 2016 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 29,582 565 844 46 1.74 2,330 5,462 3,785 5,490 5,170 5,142 2,494,009 1,050 2,489,741 1,000 2,395,192 1,003 2,332,758 938 2,163,076 939 2,101,421 985 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 25.9 145,466 23,966 5,814 30 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 83,089 28 66,300,000 72,000,000 78,144 917 73,162 81,653 22,102 175 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 2007 2008 2009 2010 54 959 468 58 1,099 455 59 1,133 407 61 1,198 336 5 5 6 6 34 483,128 34 469,023 34 472,266 34 446,675 812 25,307 192 822 26,326 200 832 26,500 205 829 26,600 208 Public Safety Police stations Fire stations 2 10 3 10 3 10 3 10 General Government Based aircraft 499 442 449 449 1,080 12,291 24 1,117 13,033 24 1,189 13,750 24 Swimming pools Other recreational facilities (lighted fields) Library bookstock Transportation and Development Total miles streets (center line) Street lights Signalized intersections Municipal Utilities Water mains (miles) Fire hydrants Average daily treament (mgd) Source: City of Chandler Departments (1) The 2010 decrease in Fire Hydrants is due to the City adjusting the count to include only hydrants owned and maintained by the City (2) The 2015 decrease in Library Bookstock is due to less demand from the increase usage of digital materials and removal of damaged, outdated and obsolete material no longer being circulated. 176 1,194 12,318 (1) 22 Schedule 18 Fiscal Year 2011 2012 2013 2014 2015 2016 61 1,192 342 61 1,196 338 61 1,198 336 62 1,208 325 64 1,232 309 65 1,236 302 6 6 6 6 6 6 34 429,604 34 555,924 39 550,857 39 595,969 829 26,600 208 829 26,600 212 831 26,900 216 838 27,100 216 841 27,700 218 855 27,700 218 3 10 3 10 3 10 3 10 3 10 3 10 437 399 388 415 425 427 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 1,196 13,207 29 177 41 396,773 (2) 41 341,073 178