City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2010 City Council: Hugh Hallman, Mayor Shana Ellis, Vice Mayor P. Ben Arredondo Mark Mitchell Joel Navarro Onnie Shekerjian Corey Woods Administrative Staff: Charles W. Meyer, City Manager Presented by: Jerry Hart, CPA, Financial Services Manager Tom Duensing, CPA, Deputy Financial Services Manager Karen Huffman, CPA, Controller City of Tempe, Arizona 2 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona TABLE OF CONTENTS Exhibit Page INTRODUCTORY SECTION Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting List of Principal Officials City Organizational Chart 7 12 13 14 FINANCIAL SECTION Independent Auditors' Report 15 Management’s Discussion and Analysis (required supplementary information) 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities 33 34 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual - Transit Special Revenue Fund Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements 36 38 40 42 43 44 46 48 49 51 Combining Fund Financial Statements: Non-Major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 108 Internal Service Funds: Combining Statement of Net Assets Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Combining Statement of Cash Flows 114 115 116 3 104 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona TABLE OF CONTENTS Exhibit Page FINANCIAL SECTION (CONTINUED) Other Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual: General, Debt Service, Special Revenue and Enterprise Fund Types General Obligation Debt Service Fund Performing Arts Fund Highway User Revenue Fund Local Transportation Assistance Fund Community Development Fund Housing Assistance Fund Rio Salado Fund Community Facilities District Fund Water and Wastewater Fund Solid Waste Fund Golf Fund Cemetery Fund 121 122 123 124 125 126 127 128 129 130 131 132 133 Financial Data Schedules: Housing Assistance Fund Balance Sheet Revenues and Expenses 136 137 STATISTICAL SECTION Net Assets by Component - Last Nine Fiscal Years (accrual basis of accounting) Changes in Net Assets - Last Nine Fiscal Years (accrual basis of accounting) Fund Balances, Governmental Funds - Last Nine Fiscal Years (modified accrual basis of accounting) Changes in Fund Balance, Governmental Funds – Last Nine Fiscal Years (modified accrual basis of accounting) Taxable Sales and Percentage of Taxable Sales by Category – Last Ten Fiscal Years (cash basis) Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years General Property Tax Information Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property - Last Nine Fiscal Years Property Tax Rates - All Direct and Overlapping Governments Last Ten Fiscal Years Property Tax Levies – All Direct and Overlapping Governments – Last Ten Fiscal Years Property Tax Levies and Collections - Last Ten Fiscal Years Principal Tax Payers – Current Year and Nine Years Prior Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 4 S-1 S-2 141 142 S-3 145 S-4 146 S-5 S-6 S-7 148 149 151 S-8 152 S-9 154 S-10 S-11 S-12 S-13 156 158 159 161 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona TABLE OF CONTENTS Exhibit Page S-14 S-15 S-16 S-17 S-18 S-19 162 163 164 165 166 167 S-20 S-21 S-22 S-23 168 169 170 171 S-24 S-25 S-26 172 173 174 STATISTICAL SECTION (CONTINUED) Percent of Net Direct Debt to Assessed Valuation and Net Direct Debt Per Capita - Last Ten Fiscal Years Net Direct and Overlapping General Obligation Bonded Debt Legal Debt Margin Information – Last Ten Fiscal Years Remaining General Obligation Bond Authorizations Pledged-Revenue Coverage – Last Ten Fiscal Years Pledged Revenue, Projected Debt Service and Estimated Coverage – Excise Tax Obligation Pledged Revenue, Projected Debt Service and Estimated Coverage – Transit Excise Tax Obligations Excise Tax Collections – Last Ten Fiscal Years Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers – Current Fiscal Year and Nine Years Prior Full-Time Equivalent City Government Employees by Function Last Seven Fiscal Years Operating Indicators by Function/Program - Last Five Fiscal Years Capital Asset Statistics by Function/Program - Last Five Fiscal Years 5 City of Tempe, Arizona 6 This section provides general information on the government’s structure and information useful in assessing the City’s financial condition. Intr oductor y Section CITY OF TEMPE P.O. BOX 5002 20 EAST SIXTH STREET TEMPE, AZ 85281 480.350.8350 FINANCE & TECHNOLOGY November 29, 2010 To the Honorable Mayor, Members of the City Council and Citizens of the City of Tempe, Arizona: The Comprehensive Annual Financial Report, including the Independent Auditors’ Report, for the fiscal year ended June 30, 2010 is submitted in accordance with Article V of the City Charter for your review. Responsibility for the accuracy and completeness of the presented data, including all disclosures, rests with management. To the best of our knowledge and belief, this report is accurate in all material respects and is presented in a manner designed to fairly set forth the financial position and results of operations of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. This Comprehensive Annual Financial Report (CAFR) represents management's report to its governing body, constituents, legislative and oversight bodies, investors and creditors. Copies of this report will be sent to elected officials, City management personnel, bond rating agencies, Nationally Recognized Municipal Securities Information Repositories and other agencies that have expressed an interest in Tempe's financial condition. Copies of this financial report will also be placed in the City library and on the City’s web site at http://www.tempe.gov/accounting/ for use by the general public. Management 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 that adequate accounting data are compiled to allow for the preparation of the basic financial statements in conformity with generally accepted accounting principles (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 the cost of a control should not exceed the benefits likely to be derived and the valuation of costs and benefits requires estimates and judgments by management. The accounting firm of Heinfeld, Meech & Co., P.C., an independent certified public accounting firm, performed the City’s annual financial statement audit. The auditors' unqualified (“clean”) Independent Auditors’ Report on the financial statements is included in the financial section of this report. The City’s independent auditors also perform the Single Audit of the City's federal grant programs. The Single Audit Reporting Package is issued separately from this financial report and is available upon request. Generally Accepted Accounting Principles (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 MD&A can be found immediately following the Independent Auditors’ Report. 7 CITY OF TEMPE PROFILE History - Tempe’s history dates back to 1867 when Mr. Charles T. Hayden, father of former U.S. Senator Carl Hayden, constructed a cable ferry on the then uncontrollable waters of the Salt River. In 1871, Mr. Hayden and four others organized the Hayden Milling operations and related agricultural enterprises. Soon after, the Town of Hayden’s Ferry was founded. The name of the town was changed from Hayden’s Ferry to Tempe in 1880 and was incorporated in 1894. Current Profile - The boundaries of Tempe encompass an area approximately 40.1 square miles with an estimated population of 175,000 residents. Tempe offers more than 330 days of sunshine each year with rainfall amounts of approximately 7 inches a year. The City is located in Maricopa County, Arizona and is bordered by the cities of Phoenix, Scottsdale, Mesa, Chandler and the Town of Guadalupe. Tempe is surrounded by five major freeways and is only minutes away from Phoenix Sky Harbor International Airport, making it the most accessible city in the metropolitan Phoenix area. Government and Organization - On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government. The Mayor is elected for four years and six council members are elected at large on a non-partisan ballot for staggered fouryear terms. The City Council appoints the City Manager who has full responsibility for carrying out Council policies and administering City operations. The City provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, community development and general administration. The Rio Salado Community Facilities District is a separate component unit of the City and facilitates the development around Tempe Town Lake. Budgetary Controls - The City maintains budgetary controls that are designed to ensure compliance with budgetary and legal provisions embodied in the annually appropriated operating budget approved by the City Council. Activities of the General Fund, Special Revenue Funds (except for the Grant and Court Awards), General Obligation Debt Service Fund, and Proprietary Funds are included in the annually appropriated operating budget. Project-length budgets are also prepared for the Capital Projects Funds. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is the total operating budget, as adopted by the City Council. However, for budget administrative purposes, the City maintains budgeting controls at department appropriation levels. In addition to maintaining budgetary control via a formal appropriation, the City maintains an encumbrance accounting system. Encumbrances are made against appropriations upon the issuance of a purchase order. As part of the annual budgeting process, encumbrances outstanding at each fiscal year end are re-appropriated through City Council action in order to be carried forward at the end of each fiscal year. LOCAL ECONOMY & LONG-TERM FINANCIAL PLANNING The City continues to face unprecedented financial challenges in the wake of the most severe economic recession experienced in nearly a century. For the second consecutive fiscal year, due to broad-based structural problems in both the national and state economies, the city experienced significant declines in some of its major revenues sources including local sales taxes, state shared revenues, and investment earnings. Total taxable sales were 8.5% below the prior year reflecting continued weakness in retail sales and construction activity. General Fund sales tax revenues declined by $5.4 million (compared to a $9.5 million decline the prior year); state shared income tax decreased by $3.4 million; investment earnings decreased by $5.5 million. This in turn has led to the need for planned service delivery reductions across several of the City’s operating funds due to a sustained environment of reduced operating revenues as reflected in our long term projections. In particular, for those operating funds that rely on sales taxes as a major source of revenue (General Fund, Transit Special Revenue Fund and Performing Arts Special Revenue Fund), the City continued to develop strategies centered on long-term financial sustainability. 8 In an effort to address the significant financial issues and attempt to minimize the impact on service levels, the City again proceeded with putting together a comprehensive plan to address the budgetary challenges. The City Council held a number of special budget meetings to set financial policy and identify City Council priorities to properly size operations. A series of public meetings was also held to provide residents the opportunity to propose solutions and/or communicate priorities. As part of this effort, a number of Budget Results Teams were organized for the purpose of identifying budget balancing recommendations for consideration as follows: • • • • • Alternative Services Delivery Team Employee/Community Input Team Health Care Team Operational Reduction Team Organizational Consolidation Team In addition to recommendations from the Budget Results Teams, City departments were also tasked with developing budget balancing solutions necessary to achieve their designated budgetary reduction targets. All of these efforts resulted in a set of comprehensive budget balancing plans covering each of the major operating funds of the City. These plans were reviewed and approved by the City Council and subsequently incorporated as part of the adopted budget for fiscal year (FY) 2010/11. Key components of the budget balancing plan adopted as part of the FY 2010/11 budget for the General Fund are as follow: • • • • • • • • Continuation of a freeze of employee compensation and benefits at fiscal year 2008-09 levels Consolidation of the city organizational structure from 13 to 9 departments Employee furloughs Elimination or transfer of 125 positions Generation of additional revenues through new and increased fees Reduction of non-personnel operating budgets Deferral of other post-employment benefit (OPEB) contributions Temporary increase in the local sales tax rate from 1.8% to 2% In the General Fund, the City Council has established a reserve coverage (the amount of General Fund unreserved fund balance) ratio of 25% of fund revenues but allows for a range of 20% to 30% to adjust to economic uncertainty. At June 30, 2010, the General Fund unreserved, undesignated fund balance totaled $29.0 million (19.7% of total General Fund revenues). In addition to the 25% reserve policy, the City has designated financial reserves to absorb other potential obligations. At June 30, 2010, the General Fund unreserved, designated fund balance totaled $13.8 million. Included in this amount are capital projects reserves ($1.3 million), self-insurance reserves ($8.8 million) and other reserves ($3.6 million). Total fund balance for the General Fund is $43.8 million at June 30, 2010. We believe these fund balances are sufficient to help the City in its continuing response to the challenging economic conditions. MAJOR INITIATIVES The City continues it efforts to make significant investments in its transportation infrastructure to improve transportation flow and spur economic development. In December 2008, construction on the initial 20-mile Light Rail project was completed. The system serves downtown Tempe, Arizona State University and the Apache Boulevard area and has enjoyed continuing growth in ridership since the inception of service. The City is in the early planning stages for a modern streetcar (the Mill Avenue Modern Streetcar) that will run for 2.6 miles. The streetcar is expected to: 9 • • • • • • • • Increase transit ridership along the Mill Avenue corridor Connect neighborhoods to downtown Tempe Encourage redevelopment of underutilized parcels Encourage reinvestment in neighborhoods Stimulate an urban living environment Attract a new rider market Provide seamless connection to the existing transit network Enhance mobility of employees, students, visitors and special event-attendees Construction of the modern streetcar is estimated to cost $163 million with funding coming from a mix of regional, Proposition 400 sales tax revenue, as designated in the Regional Transportation Plan, and a matching level of federal grant money. If constructed, it would be the start of a streetcar network in the metropolitan area. Tempe Town Lake provides both recreational and business opportunities for residents and visitors. Approximately 65% of Town Lake is dedicated to park space, open space and wildlife habitat. It is a regional and national destination welcoming millions of visitors each year. The lake is the second most visited attraction in the state behind the Grand Canyon. Tempe is home to Arizona State University, the largest educational institution in Arizona and one of the largest in the United States. ASU has in excess of 55,000 students at the local campus and is the largest employer in the City. Due to the selection of Phoenix metropolitan area as the headquarters for the International Genomics Consortium and Translational Research Institute, the Arizona State University campus is the site of the Arizona Biodesign Institute. The Institute’s goal is to improve human health and quality of life through biosystems research. The institute has generated millions of research dollars and launched hundreds of research projects. Additionally, the recently established Global Institute of Sustainability conducts research, education, and problemsolving related to sustainability, with a special focus on urban environments. Issues such as sustainable water supplies, energy independence and climate change are addressed at the institute. Despite the recent slowing economy and the fact that the City is approaching build-out, the City’s economic development and redevelopment efforts continue to be a priority. Therefore, higher density and in-fill development/redevelopment is predominant. As a result of this development approach, Tempe did not experience as large an increase in single family housing valuations during the recent housing boom as did some parts of the metropolitan area. Conversely, Tempe has not experienced as drastic a valuation decline in the ensuing regional housing market crash. However, the current economic conditions have significantly curtailed development activities causing many planned projects to be deferred. Notable developments occurring during the year include the following: • • • American Traffic Solutions, a leading provider of technology and business solutions for road safety camera and electronic toll enforcement programs worldwide, relocated to the city bringing over 600 jobs to the area. The Dump, a discount furniture store that occupies a 104,000 square foot retail store with an additional 125,000 warehouse located near the store, opened during the year along the Elliot corridor and adds to the mix of furniture retailers in the area. This store provides over 125 jobs to the city. The Sea Life Aquarium opened during the year in Tempe’s Arizona Mills Mall. The aquarium is a 26,000 square foot development with 12 different habitat zones housing over 30 separate display tanks. • Aurora Behavioral Healthcare opened a new, 65,534 square foot facility in Tempe offering a variety of inpatient and outpatient services along with aftercare and 12 Step programs. This facility provides approximately 100 jobs to the city. • Total Wine and Spirits opened their Tempe location at Emerald Center and is the largest independent fine wine retailer in the country and is the only major fine wine company to operate in multiple states. 10 The City also continues to be a regional draw for special events such as the P.F. Chang’s® Rock & Roll Marathon and Half Marathon, Insight.com Bowl and the Ford Ironman® Arizona triathlon. Additionally, the City is the spring training home to Major League Baseball’s Los Angeles Angels of Anaheim. These events continue to have a positive economic impact on city revenues and future development. A few of the notable City capital projects completed during the year are as follows: • • The Tempe Public Library is one of the busiest libraries in the Phoenix metropolitan area. A $7.8 million renovation was completed during the year. A $4 million renovation of the Tempe Historical Museum was completed and included the 8,000 square foot exhibit gallery and addition of 4,000 square feet of artifact storage. AWARDS AND ACKNOWLEDGEMENTS Certificates of Achievement 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 for its comprehensive annual financial report for the fiscal year ended June 30, 2009. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards in the preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last thirty-four consecutive years (fiscal years 1975-76 through 2008-09). We believe our current report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA for award consideration. In order to maintain its commitment to financial excellence, the City also received the GFOA's Distinguished Budget Presentation Award for the fiscal year 2009-10 annual budget and the National Purchasing Institute’s certificate of Achievement of Excellence in Procurement Award for 2010. Acknowledgment The preparation of this report could not have been accomplished without the dedicated service of the entire staff of the Accounting Division, the assistance of administrative personnel in the various departments, and the competent service of our independent auditors. Credit also must be given to the Mayor and City Council members for their continued support for maintaining the highest standards of professionalism in the management of the City of Tempe’s finances. For those involved, we express our sincerest appreciation. 11 12 City of Tempe, Arizona List of Principal Officials City Council Hugh Hallman, Mayor Shana Ellis, Vice Mayor P. Ben Arredondo Mark Mitchell Joel Navarro Onnie Shekerjian Corey Woods Administrative Staff For the Fiscal Year Ended June 30, 2010 Charles W. Meyer, City Manager Jeff Kulaga, Assistant City Manager Tom Ryff, Police Cliff Jones, Fire Kathy Berzins, Community Services Mark Richwine, Parks and Recreation Glen Kephart, Public Works Shelley Hearn, Community Relations Rosa Inchausti, Diversity Program Ken Jones, Internal Audit/Consulting Jan Hort, City Clerk and Elections Andrew Ching, City Attorney Louraine Arkfeld, Municipal Courts Chris Anaradian, Development Services Chris Salomone, Community Development Jerry Hart, Financial Services Renie Broderick, Human Resources Dave Heck, Information Technology Don Hawkes, Water Utilities 13 People of Tempe City Clerk & Elections City Attorney Mayor & City Council Municipal Courts City Manager Police Fire Community Services Development Services Public Works Water Utilities Diversity Program Community Relations Community Development Internal Audit/ Consulting Human Resources Financial Services Information Technology Parks and Recreation 14 This section contains the independent auditor’s report, management’s discussion and analysis, and basic financial statements. Also included is financial statements for individual funds and component units for which data are not provided separately in the basic financial statements, and other useful supplementary information. Financial Section HEINFELD, MEECH & CO., P.C. CERTIFIED PUBLIC ACCOUNTANTS 3033 N. Central Avenue, Suite 300 Phoenix, Arizona 85012 Tel (602) 277-9449 Fax (602) 277-9297 INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the City Council City of Tempe, Arizona We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of City of Tempe, Arizona (the City), as of and for the year ended June 30, 2010, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 remaining fund information of the City of Tempe, Arizona, as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the General Fund and the Transit Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2010, on our consideration of City of Tempe, 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 and should be considered in assessing the results of our audit. 15 TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 17 through 32 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s financial statements as a whole. The accompanying supplementary information such as the introductory section, combining statements, other supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The combining statements and other supplementary information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. HEINFELD, MEECH & CO., P.C. Certified Public Accountants November 29, 2010 16 Financial Services Department MANAGEMENT’S DISCUSSION AND ANALYSIS This section of the City of Tempe’s (the City) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2010. Readers are encouraged to consider the information presented here in conjunction with additional information that has been furnished in the letter of transmittal. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $1.194 billion (net assets). Of this amount, $343.9 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net assets decreased by $50.9 million during the fiscal year compared to a decrease of $28.0 million in the prior year. Due to the prolonged economic downturn, revenues continued to decline during the year while expenses increased, both of which contributed to a further decrease in net assets. In addition, in an effort to lessen the impact on City-provided services, the Mayor and City Council approved a $20.1 million planned drawdown of fund balance in the General Fund. • For the fiscal year ended June 30, 2010, revenues decreased by $11.6 million primarily due to reductions in a) citywide sales tax revenue, b) state shared income tax revenue, and c) unrestricted investment earnings. In response, expenses for most functions were reduced. The net $11.3 million increase in expenses was due predominately to an increase in the cost of providing services in the public works (predominately relating to light rail operations), community development, and water/wastewater functions. • At June 30, 2010, the City’s governmental funds reported combined ending fund balances of $209.0 million. Approximately 66.4% of this total amount ($138.7 million) is unreserved fund balance available for spending at the government’s discretion. • At June 30, 2010, total unreserved fund balance for the General Fund was $42.8 million which represents a decrease of $32.8 million from the prior year. This reduction was due primarily to a combination of a) a decrease in sales taxes of $5.4 million, b) a $5.5 million decrease in unrestricted investment earnings, c) a $3.4 million decrease in state shared income taxes, and d) $9.0 million of proceeds from the sale of City owned land that was recognized in the prior year and not in the current year. The undesignated portion of unreserved fund balance is $29.0 million, which is 19.7% of total General Fund revenues of $147.4 million. • At June 30, 2010, the City’s proprietary funds reported combined total net assets of $246.8 million, and total unrestricted net assets of $102.5 million. $99.2 million of the unrestricted net assets are in the Water and Wastewater Fund. • At June 30, 2010, the total long-term obligations of the City increased by $23.2 million due primarily to a) the issuance of $45.2 million in bonds for water/wastewater, public safety, community service/park and street improvements and b) a $13.3 million loan from the Water Infrastructure Financing Authority of Arizona for water/wastewater system improvements. 17 OVERVIEW OF THE 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 are comprised of three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements 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 assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed during the current fiscal year. All changes in net assets 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 periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. Both of the government-wide statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include police, fire, community services, parks and recreation, public works, community relations, mayor and council, city manager, diversity program, internal audit/consulting, city clerk and elections, city attorney, municipal courts, development services, community development, financial services, human resources, and information technology. The business-type activities of the City include water and wastewater, solid waste, golf and cemetery operations. Included within the government-wide financial statements are the operations of the Rio Salado Community Facilities District. Although legally separate from the City, this component unit is blended with the primary government (the City) because of its governance or financial relationships with the City. FUND FINANCIAL STATEMENTS The fund financial statements are designed to report information about groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. All of the funds of the City can be divided into the following two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Most of the City’s basic services are reported in governmental funds. These statements, however, focus on near term inflows and outflows of spendable resources and spendable resources available at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs. 18 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 government’s near-term financing decisions. 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. Other than the General Fund, the City maintains several individual governmental funds organized according to their type (special revenue, debt service, and capital projects). 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, Transit Special Revenue Fund, General Obligation Debt Service Fund, Special Assessment Debt Service Fund and the Transit Capital Projects Fund which are all considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for the General, Special Revenue (except Grants and Court Awards), General Obligation Debt Service, and Proprietary Funds. Budgetary comparison statements have been provided in the basic financial statements for the General and Transit Special Revenue Funds to demonstrate compliance with the budget. Budgetary comparison schedules for other Non-major Special Revenue, General Obligation Debt Service and Enterprise Funds are included in Other Supplementary Information. Proprietary funds. Proprietary funds are generally used to account for services provided to customers for which the City charges user fees that are designed to fully recover the cost of providing the service. Proprietary funds provide the same type of information shown in the government-wide financial statements, only in more detail. The City maintains the following two 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 and Wastewater, Solid Waste collection/disposal, Golf Course operations and Cemetery operations. All enterprise funds are considered to be major funds of the City. • Internal Service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal service funds to account for its employee and retiree health insurance programs and its risk management services including workers compensation, general liability and property liability claims. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. NOTES TO THE FINANCIAL STATEMENTS The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. COMBINING STATEMENTS The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the notes to the financial statements. 19 GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Net Assets- June 30, 2010 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 647,547,855 881,532,775 1,529,080,630 261,704,045 351,429,926 613,133,971 Total $ 909,251,900 1,232,962,701 2,142,214,601 Liabilities Long-term liabilities Other liabilities Total liabilities 510,843,317 70,959,309 581,802,626 326,531,412 39,845,336 366,376,748 837,374,729 110,804,645 948,179,374 Net Assets Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 562,958,494 142,947,736 241,371,774 947,278,004 144,245,429 102,511,794 246,757,223 707,203,923 142,947,736 343,883,568 $ 1,194,035,227 $ $ Net Assets- June 30, 2009 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 696,490,701 873,531,065 1,570,021,766 271,915,643 320,718,647 592,634,290 Total $ 968,406,344 1,194,249,712 2,162,656,056 Liabilities Long-term liabilities Other liabilities Total liabilities 504,708,001 71,729,474 576,437,475 309,446,067 31,839,892 341,285,959 814,154,068 103,569,366 917,723,434 Net Assets Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 574,872,877 181,241,102 237,470,312 993,584,291 151,096,394 100,251,937 251,348,331 725,969,271 181,241,102 337,722,249 $ 1,244,932,622 $ 20 $ ANALYSIS OF NET ASSETS As noted earlier, net assets may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $1.194 billion and $1.245 billion at June 30, 2010 and 2009, respectively. The largest portion of the City’s net assets reflects its investment in capital assets (e.g. land, buildings, infrastructure, improvements, machinery and equipment and construction in progress) less any related debt used to acquire those assets. The net assets invested in capital assets, net of related debt were $707.2 million and $726.0 million at June 30, 2010 and 2009, respectively. These totals represent 59.2% and 58.3% of total net assets at June 30, 2010 and 2009, respectively. The City uses these capital assets to provide services to 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 liquidated for these liabilities. An additional portion of the City’s net assets represents resources that are subject to external restriction on how they may be used. The net assets subject to external restrictions were $142.9 million (12.0% of total net assets) and $181.2 million (14.6% of total net assets) at June 30, 2010 and 2009, respectively. These restrictions are imposed by laws or regulations set by the City (transit and cultural and recreation), the State of Arizona (highways and streets and debt service) and federal agencies (housing assistance). The remaining balance of net assets is unrestricted, and may be used to meet the government’s ongoing obligations to citizens and creditors. The balance of unrestricted net assets was $343.9 million (28.8% of total net assets) and $337.7 million (27.1% of total net assets) at June 30, 2010 and 2009, respectively. At the end of each fiscal year, the City is able to report positive balances in all three categories of net assets for the governmental as well as for the business-type activities as a whole. ANALYSIS OF CHANGE IN NET ASSETS The City’s net assets decreased by $50.9 million during the current fiscal year. These changes in net assets are explained in the governmental and business-type activities discussion below. Changes in Net Assets- June 30, 2010 Governmental Activities Business-type Activities Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues $ 41,376,338 18,222,849 38,709,299 $ 79,444,627 4,765,839 $ 120,820,965 18,222,849 43,475,138 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 97,660 3,429,435 17,160 294,749,390 10,698 332,955 96,986 84,651,105 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 108,358 3,762,390 114,146 379,400,495 21 Expenses Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal courts Development services Community development Financial services Human resources Information technology Unallocated depreciation Interest on long-term debt Water/Wastewater Solid waste Golf Cemetery Total expenses Decrease in net assets before transfers Transfers Change in net assets Net assets at beginning of year Net assets at end of year 78,283,021 30,542,829 21,891,886 21,238,479 115,283,119 4,210,261 387,723 369,153 531,651 427,828 739,884 3,101,845 5,245,105 7,107,213 23,494,471 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 340,940,020 73,045,936 13,730,227 2,269,182 312,525 89,357,870 78,283,021 30,542,829 21,891,886 21,238,479 115,283,119 4,210,261 387,723 369,153 531,651 427,828 739,884 3,101,845 5,245,105 7,107,213 23,494,471 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 73,045,936 13,730,227 2,269,182 312,525 430,297,890 (46,190,630) (115,657) (46,306,287) 993,584,291 $ 947,278,004 (4,706,765) 115,657 (4,591,108) 251,348,331 $ 246,757,223 (50,897,395) (50,897,395) 1,244,932,622 $1,194,035,227 Governmental Activities Business-type Activities Total $ $ Changes in Net Assets- June 30, 2009 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes State shared income taxes Property taxes Franchise taxes Auto-lieu taxes 45,642,402 16,052,299 35,955,254 134,382,181 24,832,128 35,891,803 3,976,956 6,024,595 22 72,547,138 59,867 - $ 118,189,540 16,052,299 36,015,121 134,382,181 24,832,128 35,891,803 3,976,956 6,024,595 Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues 7,410,643 4,348,126 1,491,079 316,007,466 1,940,956 262,728 231,811 75,042,500 9,351,599 4,610,854 1,722,890 391,049,966 Expenses Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal courts Development services Community development Financial services Human resources Information technology Unallocated depreciation Interest on long-term debt Water/Wastewater Solid waste Golf Cemetery Total expenses Decrease in net assets before transfers Transfers Change in net assets Net assets at beginning of year Net assets at end of year 86,126,079 30,850,700 30,402,447 20,431,433 101,674,714 3,137,349 418,851 265,531 583,563 484,460 684,875 2,933,734 5,496,374 6,338,984 20,445,243 4,458,557 3,157,288 1,817,517 1,297,669 16,247,598 337,252,966 (21,245,500) 615,463 (20,630,037) 1,014,214,328 $ 993,584,291 64,720,725 14,499,308 2,324,208 218,447 81,762,688 (6,720,188) (615,463) (7,335,651) 258,683,982 $ 251,348,331 86,126,079 30,850,700 30,402,447 20,431,433 101,674,714 3,137,349 418,851 265,531 583,563 484,460 684,875 2,933,734 5,496,374 6,338,984 20,445,243 4,458,557 3,157,288 1,817,517 1,297,669 16,247,598 64,720,725 14,499,308 2,324,208 218,447 419,015,654 (27,965,688) (27,965,688) 1,272,898,310 $1,244,932,622 Governmental activities. The decrease in governmental net assets totaled $46.3 million for the year ended June 30, 2010. Total revenues fell short of total expenses in the amount of $46.2 million. Compared with a decrease of $20.6 million in the prior year, the additional current year draw on net assets is due primarily to a decrease in revenue of $21.3 million coupled with increase in expenses of $3.7 million. The key factors for the additional decrease in net assets compared to the prior year are as follows: • Overall, citywide sales tax revenue decreased by $9.2 million or 6.8% from the prior year. This decrease was driven by the sustained economic downturn experienced during the fiscal year. • Furthermore, as a result of the economic downturn, state shared income taxes saw a decrease in the amount of $3.4 million or 13.8% from the prior year. 23 • Charges for services decreased by $4.3 million or 9.4%. This was due primarily to a decrease in demand for services relating to development and recreational fees. In addition, as part of a budget-balancing plan for the Transit Special Revenue Fund, local circulator and fixed route services were reduced resulting in a reduction in the corresponding revenue. • Finally, contributing to the revenue decrease is a $7.3 million or 98.7% decrease in unrestricted investment earnings from the prior year. The change is a result of the decrease in the investment portfolio returns due to the market conditions, the write down of a $2.1 million investment in the Local Government Investment Pool, and $2.3 million of interest from the sale of City-owned land recognized in the prior year and not in the current year. • In anticipation of the declining revenues, the Mayor and City Council approved a $20.1 million planned drawdown of fund balance in the General Fund in an effort to lessen the impact on City provided services. The following charts illustrate the City’s governmental expenses and program revenues by function and its revenues by source for the current fiscal year Fiscal Year 2009-10 Expenses and Program Revenues- Governmental Activities $120,000,000 Expenses $100,000,000 Program Revenues $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- P ublic wo rks P o lice Fire Co mmunity Co mmunity develo pment services P arks and recreatio n Co mmunity Develo pment relatio ns services M unicipal co urts Other Interest o n lo ng-term debt Fiscal Year 2009-10 Revenues by Source- Governmental Activities Sales taxes 2% 1% State shared income taxes, unrestricted Property taxes 33% 1% 13% Franchise taxes Auto-lieu taxes 7% Miscellaneous 43% Program revenues 24 A comparison of expenses by function and the percentage of total expenses, for the largest functions, are presented. In general, the majority of the City’s functions implemented a decrease in expenses in response to the anticipated reduction in revenues. Of the largest functions, two realized a net increase in expenses. The main reason for the increase in the public works expenses related to the recognition of a loss from the City’s participation in the Valley Metro Rail, Inc. joint venture and an increase in depreciation expense. Community development’s increase was the result of the expensing of costs associated with a development agreement. Fiscal Year Ended June 30, 2010 June 30, 2009 Public works Police Fire Community development Community services $115,283,119 78,283,021 30,542,829 23,494,471 21,891,886 33.8% 23.0 9.0 6.9 6.4 $101,674,714 86,126,079 30,850,700 20,445,243 30,402,447 30.1% 25.5 9.1 6.1 9.0 Fiscal Year 2009-10 Expenses by Function- Governmental Activities 7% 6% 9% Public works 6% Police 5% 23% 2% Fire 2% Community development 1% 10% Community services Parks and recreation Interest on long-term debt 5% Development services Municipal courts Community relations Other 34% General revenues such as sales taxes, state income taxes, property taxes, and other excise taxes are not shown by program, but are effectively used to support program activities citywide. For governmental activities overall, without regard to program, a comparison of the largest general revenues, and their percentage of total revenues (excluding transfers), is presented below. Again, significant changes in sales taxes and unrestricted investment income are due to the economic downturn experienced in the current fiscal year. Fiscal Year Ended June 30, 2010 June 30, 2009 Sales taxes Property taxes State shared income taxes, unrestricted Auto-lieu taxes Franchise taxes Unrestricted investment earnings $125,186,698 37,183,541 21,406,004 5,560,791 3,559,615 97,660 25 42.5% 12.6 7.3 1.9 1.2 0.03 $134,382,181 35,891,803 24,832,128 6,024,595 3,976,956 7,410,643 42.5% 11.4 7.9 1.9 1.3 2.3 Business-type activities. Business-type activities decreased the City’s net assets by $4.6 million for the year ended June 30, 2010 compared to a decrease of $7.3 million for the year ended June 30, 2009. The gap has been decreased primarily from water, wastewater and solid waste rate increases which were implemented in fiscal year 2009-10. The result was that charges for services increased by $6.9 million or 9.5%. In addition, the water and wastewater fund received capital grants and contributions of $4.8 million. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2010 Water and Wastewater Charges for services Capital grants and contributions Unrestricted investment earnings/other Total $ 62,511,102 4,765,839 Solid Waste Golf Cemetery Total $ 15,242,801 $1,574,081 $ 116,643 $ 79,444,627 - - - 4,765,839 411,786 $ 67,688,727 25,120 $ 15,267,921 3,733 $1,577,814 $ 116,643 440,639 $ 84,651,105 For the Year Ended June 30, 2009 Water and Wastewater Solid Waste Golf Cemetery Total $ 15,130,988 $1,813,578 $ 98,356 $ 72,547,138 Charges for services Capital grants and contributions Unrestricted investment earnings/other Total $ 55,504,216 59,867 2,034,775 $ 57,598,858 392,853 $ 15,523,841 7,867 $1,821,445 $ 98,356 59,867 2,435,495 $ 75,042,500 As shown in the Analysis of Change in Net Assets schedules presented previously, the largest of the City’s business-type activities, Water and Wastewater, had expenses of $73.0 million for the fiscal year, followed by Solid Waste with $13.7 million, Golf with $2.3 million and Cemetery with $0.3 million. Water and Wastewater expenses increased $8.3 million over prior year period due to the recognition of a loss from the City’s participation in the Subregional Operating Group joint venture and increased debt service costs. 26 FUND STATEMENTS FINANCIAL ANALYSIS 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 resources that are available for spending. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at each fiscal year end. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $209.0 million, a decrease of $21.9 million from the prior year. Approximately $138.7 million of this total amount constitutes unreserved fund balance, which is available for spending at the City’s discretion. This is a decrease in unreserved fund balance of $31.8 million over the prior year balance of $170.5 million. The decrease was due primarily to a planned usage of fund balance in the General Fund to balance the budget and smooth the effects of the economic downturn. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed, (1) to liquidate existing contracts and purchase orders ($26.3 million), (2) to pay debt service ($42.4 million), and (3) for other restricted purposes ($1.6 million). Revenues for governmental functions overall totaled $306.3 million in the fiscal year ended June 30, 2010, which represents a decrease of 13.8% or $49.0 million from the fiscal year ended June 30, 2009. This decrease is primarily due to the Transit Capital Projects revenue decrease of $27.7 million followed by the General Fund decreased revenue of $18.2 million. Anticipating the decrease in revenues, expenditures for governmental functions were decreased to $355.4 million as compared to $413.2 million for the prior year. An analysis of each individual major fund follows. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $43.8 million; the unreserved, undesignated portion equaled $29.0 million. As a measure of the General Fund’s liquidity, it may be useful to compare fund balances to total fund revenues. The total fund balance in the City’s General Fund decreased by $33.2 million during the current fiscal year. Unreserved, undesignated fund balance decreased by $25.0 million which was a result of expenditures in excess of revenues of $24.3 million. Included was a $20.1 million planned draw down of fund balance to allow for the gradual reduction in service delivery to the citizens. In addition, there was $7.7 million in planned transfers for capital projects. Fiscal Year Ended June 30, 2010 June 30, 2009 Revenues Total fund balance Unreserved fund balance Unreserved, undesignated fund balance Unreserved, designated fund balance $ 147,398,236 43,813,734 42,832,205 29,048,415 13,783,790 27 $ 165,580,882 27.9 % 29.1 19.7 9.4 76,969,944 75,647,216 54,012,203 21,635,013 46.5 % 45.7 32.6 13.1 Total revenues declined by $18.2 million from the prior year. Investment Income was the largest decrease resulting in $5.5 million less being realized in the current year. Although less than the $9.5 million decrease from the prior fiscal year, sales tax revenue continued to decline resulting in a $5.4 million decrease in the current year. The final primary contributing factor was a $3.4 million decrease in state income tax. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. As this fund is primarily sales tax funded and subject to economic conditions, the tax revenues declined by $2.0 million. In addition, there was a $1.7 million decrease in the alternative fuel credit received as the prior year credit represented two fiscal years. The unreserved fund balance totaled $20.0 million at June 30, 2010, compared to a $5.4 million unreserved fund balance at June 30, 2009. The net increase in fund balance for the year ended June 30, 2010 was due to a $30.0 million transfer from the Transit Capital Projects fund. The purpose of the transfer was to reimburse the special revenue fund for cash financing for primarily the light rail project. The General Obligation Debt Service Fund accounts for the accumulation of resources for and payments of general obligation debt. Total fund balance (restricted for general obligation debt service payments) increased from $31.8 million at June 30, 2009 to $38.1 million at June 30, 2010. The total debt service fund balance will be used for future debt service payments consistent with the City’s Debt Management Plan. The Special Assessment Debt Service Fund accounts for the accumulation of resources for and payments of special assessment debt to which the City acts as a trustee for the established improvement districts. Total fund balance (restricted for special assessment debt service payments) increased from a deficit of $45,374 at June 30, 2009 to a balance of $64,482 at June 30, 2010. The Transit Capital Projects Fund accounts for the acquisition of buses, the light rail system, construction of the Tempe Transportation Center and other traffic flow improvements. Total fund balance had a slight decrease from $56.2 million at June 30, 2009 to $54.5 million at June 30, 2010. Revenues decreased by $27.7 million and corresponding expenditures decreased by $27.3 million. This was due to the substantial completion of the light rail project in the prior fiscal year. PROPRIETARY FUNDS The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the fiscal year indicated, the unrestricted net assets for the proprietary funds were as indicated in the chart to the right. Fiscal Year Ended June 30, 2010 June 30, 2009 Water and wastewater fund Solid waste fund Golf fund Cemetery fund Internal service fund $99,151,060 4,244,331 (673,090) (210,507) 6,132,653 $97,257,972 3,383,272 (290,282) (99,025) 5,670,002 28 The Water and Wastewater Fund accounts for the provision of water and sewer services to the City and the adjoining Town of Guadalupe. In accordance with a planned draw down of net assets consistent with a rate study report, the fund experienced a decrease in total net assets of $5.3 million for the fiscal year ended June 30, 2010 versus a decrease in net assets of $7.9 million for the fiscal year ended June 30, 2009. This is due primarily to planned increases in charges for services as a result of rate adjustments which increased revenue by $7.0 million. The rate study calls for phased in rate increases. The next effective rate increase has been authorized and will become effective November 1, 2010 for this operation. The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. Operating expenses for the fiscal year ended June 30, 2010 were $13.7 million compared to $14.5 million for the fiscal year ended June 30, 2009 resulting in an increase in net assets of $1.5 million. Operating revenues remained fairly consistent. The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund recognized a $0.6 million reduction in total net assets due primarily to continued reduced rounds of play compared with prior fiscal years as a result of continued competition from courses in neighboring cities. The Cemetery Fund was established to account for the improvements, expansion and operations of the Double Butte Cemetery. Reduced demand for cemetery services resulted in a reduction in net assets of $0.2 million during the fiscal year ended June 30, 2010. The Internal Service Funds accounts for the risk and health insurance activities of the City. The $0.5 million increase in net assets is due primarily to lower than anticipated costs. BUDGET HIGHLIGHTS The City’s final General Fund expenditure budget of $184.6 million differs from the original budget of $185.9 million due to carry-forward appropriations for encumbrances rolled forward from the prior fiscal year and budget transfers to other funds. During the year, actual revenues were less than budgetary estimates by $15.4 million (9.5% of total budgeted revenue) in the General Fund. This is due primarily to the economic downturn and its affect on almost all revenue categories. Actual expenditures were less than budgetary estimates by $12.5 million (6.8% of final budgetary estimates) in the General Fund. This positive variance was attributable to cost reduction efforts in response to the economic downturn. CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2010 amount to $1.233 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total increase in the City’s capital assets for the current fiscal year was $38.7 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2010 and 2009, respectively. 29 Capital Assets, Net of Depreciation- June 30, 2010 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 64,319,443 239,789,213 395,661,174 106,212,327 47,816,947 27,733,671 $ 881,532,775 Business-type Activities $ 6,693,377 37,443,345 121,707,403 163,799,558 11,892,230 9,894,013 $ 351,429,926 Total $ 71,012,820 277,232,558 517,368,577 270,011,885 59,709,177 37,627,684 $ 1,232,962,701 Capital Assets, Net of Depreciation- June 30, 2009 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 62,569,443 250,282,192 366,414,002 88,154,178 38,852,839 67,258,411 $ 873,531,065 Business-type Activities $ 6,693,377 38,842,042 100,655,948 82,999,844 9,095,022 82,432,414 $ 320,718,647 Total $ 69,262,820 289,124,234 467,069,950 171,154,022 47,947,861 149,690,825 $ 1,194,249,712 Major capital asset events during the current fiscal year included the following: Governmental Activities • During the year ended June 30, 2010, several improvement projects were completed including the $7.8 million library renovation, the $4.0 million Historical Museum renovation and $10.1 million in various park improvements. Business-type Activities • Capital expenditures for the expansion of the Johnny G. Martinez Water Treatment Plant continued during the fiscal year. A total of $77.4 million of improvements were capitalized in the current year. • Infrastructure for several water line projects were completed and capitalized totaling $26.6 million. For government-wide financial statement presentation, all depreciable capital assets are depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Please refer to Note 8 of the Notes to the Financial Statements for further information regarding capital assets. 30 DEBT ADMINISTRATION At the end of the current fiscal year, the City had total long-term obligations outstanding of $837.4 million which is an increase of $23.2 million over the prior fiscal year. The increase is due in large part to the issuance of general obligation bonds primarily for water and wastewater, police and fire, community service (including park renovations), and streets capital projects. In addition, a loan was secured and received from the Water Infrastructure Financing Authority of Arizona to assist in financing projects such as the Johnny G. Martinez water treatment plant expansion, the Western Canal water transportation project along with various water line projects. Outstanding Long-term Obligations - June 30, 2010 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations HUD Section 108 loan Capital improvement notes WIFA loan Total debt payable $ 172,665,000 33,025,000 230,470,000 6,181,000 521,955 442,862,955 $ 289,895,000 18,144,740 13,273,706 321,313,446 $ 462,560,000 33,025,000 248,614,740 6,181,000 521,955 13,273,706 764,176,401 Capital leases Compensated absences Claims and judgments Net OPEB obligation Total long-term obligations 1,776,147 20,662,400 4,877,562 40,664,253 $ 510,843,317 147,089 5,070,877 $ 326,531,412 1,923,236 20,662,400 4,877,562 45,735,130 $ 837,374,729 Outstanding Long-term Obligations- June 30, 2009 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations HUD Section 108 loan Capital improvement notes Total debt payable $ 156,265,000 36,095,000 239,560,000 6,466,000 1,023,835 439,409,835 $ 285,735,000 18,786,056 304,521,056 $ 442,000,000 36,095,000 258,346,056 6,466,000 1,023,835 743,930,891 Capital leases Compensated absences Claims and judgments Net OPEB obligation Total long-term obligations 1,888,631 21,461,167 4,879,557 37,068,811 $ 504,708,001 194,416 4,730,594 $ 309,446,066 2,083,047 21,461,167 4,879,557 41,799,405 $ 814,154,067 31 The City’s issued $45.2 million in new general obligation debt during the current fiscal year for water and wastewater, public safety, community service/park improvements and street improvements in the amounts of $19.1 million, $8.3 million, $12.5 million and $5.3 million, respectively. The City’s total general obligation bonded debt outstanding increased by approximately $20.6 million from the fiscal year ended June 30, 2009 to the fiscal year ended June 30, 2010. The ratio of net general obligation bonded debt (total bonded debt less debt service reserves) for governmental purposes to taxable valuation and the amount of bonded debt per capita are useful indicators of the City’s debt position to management, citizens, oversight bodies and investors. A comparison of these indicators are noted in the chart to the right. Fiscal Year Ended June 30, 2010 June 30, 2009 Net general bonded debt Net general bonded debt per capita Ratio of net general bonded debt to net assessed value Debt service secondary tax rate per $100 of taxable valuation $ 134,538,607 770 4.9% $ 0.91 $ 124,420,812 721 4.7% $ 0.89 The State constitution imposes certain debt limitations on the City of 6% and 20% of the outstanding assessed valuation of the City. The City’s available debt margin at June 30, 2010 is $157.8 million and $58.7 million under the 6% and 20% limitation, respectively. Additional information on the statutory debt limitations may be found in Note 9 of the Notes to the Financial Statements and the Statistical Section (Exhibit S-16) of this report. During the year, the City’s ratings on its outstanding general obligation bonds were AAA from Standard & Poors Corporation, Aaa from Moody’s Investors Service, and AAA from Fitch Ratings. Additional information on the City’s long-term debt can be found in Note 9 of the Notes to the Financial Statements. OTHER MATTERS While the requirements of GASB Statements No. 43 and 45, related to financial reporting of other postemployment benefits (OPEB), had a material affect on the financial position of the City beginning with the fiscal year ended June 30, 2008, the Tempe Mayor and Council approved changes to the benefit plan which continued to reduce the annual OPEB cost from $10.4 million to $9.8 million from the fiscal year ended June 30, 2009 to the fiscal year ended June 30, 2010, respectively. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, city council, customers, investors and creditors with a general overview of the City’s finances. If you have questions about this report or need additional information, contact: City of Tempe Financial Services Department Accounting Division 20 E. Sixth Street Tempe, AZ 85281 (480) 350-8350 32 Statement of Net Assets June 30, 2010 City of Tempe, Arizona Governmental Activities Business-type Activities Total Assets Pooled cash and investments Receivables: Taxes Accounts, net Accrued interest Due from other governments Inventories Restricted cash and investments Special assessment receivables Capital improvement note receivable Equity in joint venture Capital assets not being depreciated: Land Construction in progress Capital assets (net of accumulated depreciation): Buildings Infrastructure Improvements Machinery and equipment Total assets $ 190,077,207 $ 64,958,574 $ 255,035,781 13,503,557 3,753,305 254,159 46,857,805 1,206,269 35,210,042 33,129,216 41,333,339 282,222,956 11,438,943 373,750 2,656,596 769,677 26,149,520 521,955 154,835,030 13,503,557 15,192,248 627,909 49,514,401 1,975,946 61,359,562 33,129,216 41,855,294 437,057,986 64,319,443 27,733,671 6,693,377 9,894,013 71,012,820 37,627,684 239,789,213 395,661,174 106,212,327 47,816,947 1,529,080,630 37,443,345 121,707,403 163,799,558 11,892,230 613,133,971 277,232,558 517,368,577 270,011,885 59,709,177 2,142,214,601 18,538,564 4,121,244 19,131,779 2,972,818 26,194,904 8,023,823 387,830 6,396,964 2,797,428 22,239,291 26,562,387 4,509,074 25,528,743 5,770,246 48,434,195 Liabilities Accounts payable Deposits Accrued expenses Deferred charges Liabilities payable from restricted assets Long-term liabilities: Special assessment debt with a governmental commitment: Due within one year Due in more than one year Other long-term liabilities: Due within one year Due in more than one year Total liabilities 3,150,000 29,875,000 - 3,150,000 29,875,000 36,820,367 440,997,950 581,802,626 17,750,177 308,781,235 366,376,748 54,570,544 749,779,185 948,179,374 562,958,494 144,245,429 707,203,923 89,510,937 7,741,782 6,807,208 696,934 38,190,875 241,371,774 947,278,004 102,511,794 246,757,223 89,510,937 7,741,782 6,807,208 696,934 38,190,875 343,883,568 $ 1,194,035,227 Net Assets Invested in capital assets, net of related debt Restricted for: Transit Cultural and recreation Highways and streets Housing assistance Debt service Unrestricted Total net assets $ $ The notes to the financial statements are an integral part of this statement. 33 Statement of Activities For the Fiscal Year Ended June 30, 2010 Program Revenues Charges for Services Expenses Operating Grants and Contributions Capital Grants and Contributions Functions/Programs Governmental activities: Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal courts Development services Community development Financial services Human resources Information technology Unallocated depreciation Interest on long-term debt Total governmental activities Business-type activities: Water and wastewater Solid waste Golf course Cemetery Total business-type activities Total government $ $ 78,283,021 30,542,829 21,891,886 21,238,479 115,283,119 4,210,261 387,723 369,153 531,651 427,828 739,884 3,101,845 5,245,105 7,107,213 23,494,471 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 340,940,020 73,045,936 13,730,227 2,269,182 312,525 89,357,870 430,297,890 $ $ 1,052,723 912,000 6,173,870 126,455 19,596,611 5,868,369 3,710,512 1,938,184 1,997,614 41,376,338 62,511,102 15,242,801 1,574,081 116,643 79,444,627 120,820,965 General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net assets Net assets- beginning Net assets- ending 34 $ $ 3,531,819 382,589 1,746,905 29,039 1,153,065 3,284 37,564 130 9,974 11,318,822 9,658 18,222,849 18,222,849 $ $ 183,044 114,000 628,568 37,032,251 751,436 38,709,299 4,765,839 4,765,839 43,475,138 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Assets Governmental Activities $ $ (73,515,435) (29,134,240) (13,971,111) (20,454,417) (57,501,192) (4,206,977) (387,723) (369,153) (531,651) (427,828) (739,884) (3,064,281) 623,394 (3,386,727) (9,486,029) (1,925,872) (3,443,660) (2,139,705) (2,383,904) (16,185,139) (242,631,534) Business-type Activities $ - Total $ (73,515,435) (29,134,240) (13,971,111) (20,454,417) (57,501,192) (4,206,977) (387,723) (369,153) (531,651) (427,828) (739,884) (3,064,281) 623,394 (3,386,727) (9,486,029) (1,925,872) (3,443,660) (2,139,705) (2,383,904) (16,185,139) (242,631,534) (242,631,534) (5,768,995) 1,512,574 (695,101) (195,882) (5,147,404) (5,147,404) (5,768,995) 1,512,574 (695,101) (195,882) (5,147,404) (247,778,938) 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 97,660 3,429,435 17,160 (115,657) 196,325,247 (46,306,287) 993,584,291 947,278,004 10,698 332,955 96,986 115,657 556,296 (4,591,108) 251,348,331 246,757,223 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 108,358 3,762,390 114,146 196,881,543 (50,897,395) 1,244,932,622 1,194,035,227 $ $ The notes to the financial statements are an integral part of this statement. 35 Balance Sheet Governmental Funds June 30, 2010 General Transit Special Revenue General Obligation Debt Service Special Assessment Debt Service Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other funds Due from other governments Inventories Restricted cash and investments Special assessments Capital improvement note receivable Total assets $ 40,643,280 $ 8,509,061 3,557,189 232,086 187,458 468,241 316,501 8,927,942 25,285,730 88,127,488 $ 16,844,705 $ 2,337,086 14,074,474 3,438,258 2,057,306 38,751,829 $ 37,652,154 $ 1,228,027 14,530,097 13,990,303 67,400,581 $ 293,185 $ 817,728 33,129,216 34,240,129 Liabilities and Fund Balances Liabilities Accounts payable Deposits Accrued expenditures Claims and judgements Due to other funds Deferred revenue Matured bonds payable Matured interest payable Total liabilities Fund Balances Fund balances: Reserved for: Encumbrances Inventories Capital improvements notes receivable Debt Service Unreserved, designated (see note 16): General fund Capital projects funds Unreserved, reported in: General fund Special revenue funds Capital projects funds Total fund balances Total liabilities and fund balances $ 3,798,060 3,154,888 7,010,539 1,458,546 28,891,721 44,313,754 $ 295,028 316,501 370,000 - $ 36 $ 4,220,265 13,783,790 29,048,415 43,813,734 88,127,488 8,771,023 238,714 34,548 2,057,306 2,735,000 697,683 14,534,274 $ $ 38,126,393 19,997,290 24,217,555 38,751,829 35,585 14,713,624 10,505,000 4,019,979 29,274,188 64,482 - $ 38,126,393 67,400,581 33,357,920 817,727 34,175,647 - $ 64,482 34,240,129 City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ 27,179,149 $ 27,840,959 203,541 55,223,649 $ 693,269 693,269 $ 51,585,417 $ 1,429,383 69,948 22,073 4,474,131 889,768 7,292,476 65,763,196 $ 2,357,423 - $ 52,172,957 54,530,380 55,223,649 $ 4,549,211 966,356 1,179,442 102,227 187,458 3,152,225 5,490,000 1,929,515 17,556,434 Total Governmental Funds $ 174,197,890 $ 13,503,557 3,627,137 254,159 187,458 46,857,805 1,206,269 35,210,042 33,129,216 41,333,339 349,506,872 $ 17,847,148 4,121,244 8,428,695 1,595,321 187,458 82,172,796 18,730,000 7,464,904 140,547,566 23,666,163 889,768 - 26,318,614 1,206,269 370,000 42,411,140 1,861,579 13,783,790 1,861,579 12,745,458 9,043,794 48,206,762 65,763,196 29,048,415 32,742,748 61,216,751 208,959,306 349,506,872 $ The notes to the financial statements are an integral part of this statement. 37 Reconciliation of the Balance Sheet to the Statement of Net Assets June 30, 2010 City of Tempe, Arizona Fund balances- total governmental funds $ 208,959,306 Amounts reported for the governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Accumulated depreciation 1,383,655,286 (502,122,511) 881,532,775 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 282,222,956 Other assets are not available to pay current-period expenditures and, therefore are offset by deferred/unearned revenue. Deferred special assessment revenue Deferred tax and other deferred revenue Deferred notes receivable revenue Deferred court revenue Capital grant and contribution monies not received within 60 days 33,357,920 1,539,895 41,240,353 2,882,301 3,152,226 82,172,695 Bond premium net of issuance costs are not financial resources and, therefore, are not reported in the funds. (2,972,716) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the governmental funds. Compensated absences Claims and judgments Other post employment benefits (excluding internal service) Bonds, capital improvement notes and capital leases (20,662,400) (4,877,562) (40,590,601) (444,639,102) (510,769,665) Internal service funds are used by management to charge the costs of self insurance to individual funds. The assets and liabilities of the internal service funds are reported with governmental activities. Net assets of governmental activities 6,132,653 $ The notes to the financial statements are an integral part of this statement. 38 947,278,004 City of Tempe, Arizona 39 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2010 General Special Assessment Debt Service General Obligation Debt Service Transit Special Revenue Revenues: Taxes: Sales taxes Property taxes Franchise taxes Intergovernmental: Federal grants State grants State sales tax State income tax Auto lieu tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues $ 68,278,677 12,842,669 3,559,615 $ 27,891,084 - 12,167,009 21,406,004 5,560,791 494,863 43,875 9,941,044 7,108,900 1,670,698 4,324,091 147,398,236 420,664 47,800 14,642,631 3,140,874 76,233 46,219,286 $ 24,913,392 - $ 92,885 25,006,277 2,783,916 2,783,916 Expenditures: Current: Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal court Development services Community development Financial services Human resources Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures 71,525,177 26,724,277 14,336,732 16,171,603 9,528,104 4,217,031 388,486 330,992 520,731 514,069 799,975 3,117,084 4,285,869 7,053,631 4,915,455 3,842,927 3,405,582 52,067,384 - 171,677,725 2,735,000 2,450,827 57,253,211 10,632,157 8,555,975 19,188,132 3,070,000 1,726,008 4,814,509 Excess (deficiency) of revenues over expenditures before other financing sources (uses) (24,279,489) (11,033,925) 5,818,145 (2,030,593) 251,812 (9,338,442) 27,986 181,923 (8,876,721) 30,184,119 (501,310) 29,682,809 8,144,500 (8,435,993) 755,553 464,060 2,140,449 2,140,449 (33,156,210) 18,648,884 6,282,205 76,969,944 43,813,734 5,568,671 24,217,555 31,844,188 38,126,393 - 18,501 - Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balance (deficit) at beginning of year Fund balance at end of year $ 40 $ $ 109,856 $ (45,374) 64,482 City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ - $ 2,451,596 239,582 40,833,998 20,942 58,635 43,604,753 $ 103,522,989 37,956,035 3,559,615 15,363,136 522,698 9,422,203 2,622,704 5,985 3,283,065 833,038 214,320 1,509,106 41,329,457 18,235,396 762,280 21,589,212 21,406,004 5,560,791 43,951,565 97,660 27,866,740 11,082,812 328,147 2,783,916 1,670,698 5,968,065 306,341,925 3,222,557 410,643 3,917,377 709,136 10,639,991 982,061 3,059 14,427,685 - 74,747,734 27,134,920 18,254,109 16,880,739 72,253,980 4,217,031 388,486 330,992 520,731 514,069 799,975 3,117,084 5,267,930 7,056,690 19,343,140 3,842,927 3,405,582 16,144,143 16,144,143 5,775,000 3,923,285 42,262,451 86,273,245 22,212,157 16,656,095 58,406,594 355,350,965 27,460,610 (44,943,788) (49,009,040) 850,050 (30,000,000) 28,989 (29,120,961) 17,734,573 (11,145,416) 26,040,000 151,988 32,781,145 59,305,503 (59,421,161) 26,040,000 755,553 27,986 362,900 27,070,781 (1,660,351) (12,162,643) (21,938,259) 56,190,731 54,530,380 60,369,405 48,206,762 230,897,565 208,959,306 - $ 7,353,228 199,974 - Total Governmental Funds $ $ The notes to the financial statements are an integral part of this statement. 41 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Net change in fund balances- total governmental funds $ (21,938,259) Amounts reported for the governmental activities in the statement of activities are different because: Certain expenditures reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences and long-term claims and judgements OPEB (excluding internal service) 800,762 (3,594,295) (2,793,533) Certain revenues in the statement of activities do not provide current financial resources and, therefore, are not reported as revenues in the governmental funds. Property tax and charges for services revenue Court revenue Capital grants and contributions Sale of Land financed by a note receivable Special assessments received/recognized (606,870) (962,303) (10,134,476) (92,885) (3,194,131) (14,990,665) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay Miscellaneous net capital expenditures Depreciation expense 58,406,594 (22,239,842) (39,615,985) (3,449,233) Lease payments are reported as expenditures in the governmental funds when paid. For the City as a whole, however, the principal portion of the payments serve to reduce the liability in the statement of net assets while the acquisition of new leases increase the liability. Principal payments made 140,470 Bond issuance costs are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net assets. Bond issuance costs Amortization of bond issuance costs 208,320 262,635 470,955 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental funds. Neither transaction, however, has any effect on net assets. General obligation bonds Premium on issuance of debt Principal payments made (26,040,000) (755,553) 22,586,880 (4,208,673) Internal service funds are used by management to charge the costs of self-insurance to individual funds. The adjustments for internal service funds close those funds by charging additional amounts to participating governmental activities to completely cover the internal service funds' costs. Changes in net assets of governmental activities 462,651 $ The notes to the financial statements are an integral part of this statement. 42 (46,306,287) Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Total revenues Expenditures Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal court Development services Community development Financial services Human resources Information technology Interdepartmental charges Non-departmental Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 93,818,127 41,102,655 3,000,000 10,480,611 9,880,662 1,662,750 3,185,119 163,129,924 $ 93,818,127 40,990,655 3,000,000 10,480,611 9,880,662 1,662,750 3,185,119 163,017,924 Actual Amounts (Budgetary Basis) $ 84,680,961 39,628,667 236,273 9,941,044 7,108,900 1,670,698 4,324,091 147,590,634 Variance with Final Budget Positive (Negative) $ (9,137,166) (1,361,988) (2,763,727) (539,567) (2,771,762) 7,948 1,138,972 (15,427,290) 74,667,301 28,726,772 16,560,705 17,215,609 10,079,427 2,962,104 400,337 339,673 554,394 502,431 884,219 2,955,464 4,259,174 6,519,803 4,249,509 4,501,411 3,222,042 15,197,184 (15,197,184) 7,292,146 185,892,521 73,919,405 28,078,849 15,698,365 17,234,239 10,312,265 4,438,600 398,607 338,182 552,541 519,157 1,063,166 3,115,161 4,376,653 7,316,505 5,052,481 4,021,344 3,423,706 15,716,660 (15,420,958) 4,492,190 184,647,118 71,487,450 26,849,390 14,422,781 16,343,436 9,584,682 4,216,777 386,866 322,387 521,078 514,087 799,953 3,115,216 4,289,893 7,045,911 4,934,589 3,826,113 3,387,415 14,910,970 (14,860,538) 172,098,456 2,431,955 1,229,459 1,275,584 890,803 727,583 221,823 11,741 15,795 31,463 5,070 263,213 (55) 86,760 270,594 117,892 195,231 36,291 805,690 (560,420) 4,492,190 12,548,662 120,000 120,000 $ (22,642,597) 120,000 120,000 $ (21,509,194) 251,812 (9,338,442) 181,923 (8,904,707) (33,412,529) 251,812 (9,338,442) 61,923 (9,024,707) $ (11,903,335) Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes encumbrances as expenditures for budgetary purposes but not for GAAP purposes The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures and changes in fund balances- governmental funds (192,398) 20,385 295,028 133,304 $ (33,156,210) The notes to the financial statements are an integral part of this statement. 43 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Taxes Charges for services Investment income Fines and forfeitures Miscellaneous Total revenues $ 29,957,000 44,978,488 212,386 513,220 300,000 75,961,094 59,848,270 59,912,032 52,068,963 7,843,069 2,735,000 6,242,169 68,825,439 2,735,000 6,242,169 68,889,201 2,735,000 2,450,827 57,254,790 3,791,342 11,634,411 $ 232,795 (460,720) (227,925) 6,907,730 $ $ 232,795 (460,720) (227,925) 6,843,968 Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 27,891,084 15,063,295 52,585 3,140,874 76,233 46,224,071 Variance with Final Budget Positive (Negative) $ 29,957,000 44,978,488 212,386 513,220 300,000 75,961,094 Expenditures Current: Public works Debt service: Principal retirement Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Total other financing sources (uses) Net change in fund balance Actual Amounts (Budgetary Basis) 30,184,119 (501,310) 29,682,809 18,652,090 (4,785) (410) 1,989 $ 18,648,884 The notes to the financial statements are an integral part of this statement. 44 $ (2,065,916) (29,915,193) (159,801) 2,627,654 (223,767) (29,737,023) 29,951,324 (40,590) 29,910,734 $ 11,808,122 City of Tempe, Arizona 45 Statement of Net Assets Proprietary Funds June 30, 2010 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Total Cemetery Governmental ActivitiesInternal Service Funds Assets Current assets: Pooled cash and investments Restricted cash and investments Accounts receivable Accrued interest receivable Due from other funds Due from other governments Inventories Total current assets Noncurrent assets: Notes receivable Equity in joint venture Capital assets: Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets $ 58,771,152 25,823,294 10,387,670 334,846 489,852 2,656,596 769,677 99,233,087 $ 340,053,181 495,410,166 $ 594,643,253 $ 1,051,273 20,646 7,094,361 - 521,955 154,835,030 6,330,829 55,734,289 237,381,551 228,118,693 28,697,731 9,847,061 (226,056,973) 6,022,442 $ - - 326,226 3,874 330,100 - $ 64,958,574 26,149,520 11,438,943 373,750 489,852 2,656,596 769,677 106,836,912 $ 15,879,317 126,168 16,005,485 521,955 154,835,030 - (14,079,032) 362,548 1,822,663 4,247,980 1,337,648 46,952 (5,521,186) 2,198,452 19,449 (105,222) 6,693,377 58,822,735 237,381,551 234,565,125 49,835,538 9,894,013 (245,762,413) - 6,967,461 6,967,461 2,296,605 2,296,605 2,112,679 2,112,679 351,429,926 506,786,911 - 2,442,779 $ 613,623,823 1,265,783 19,780,710 - $ 164,980 14,384 179,364 14,061,822 46 $ 2,475,969 $ $ 16,005,485 Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Total Cemetery Governmental ActivitiesInternal Service Funds Liabilities Current liabilities: Accounts payable Deposits Accrued expenses Due to other funds Deferred revenue Accrued interest payable General obligation bonds- current Excise tax revenue obligations- current WIFA loan payable- current Capital leases payable- current Total current liabilities Noncurrent liabilities: General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable Net OPEB obligation Unamortized premium Total noncurrent liabilities Total liabilities $ 7,608,086 386,261 4,841,766 $ - 357,183 1,569 1,148,442 $ - 2,797,428 6,593,710 14,965,000 545,000 1,309,211 - - 39,046,462 - - 321,370,218 1,342,836 97,439 392,318 489,757 360,416,680 2,850,030 999,543 135,075,513 99,151,060 $ 234,226,573 6,967,461 4,244,331 11,211,792 2,149,516 (673,090) 1,476,426 1,342,836 - - 69 5,105 489,852 45,581 90,000 630,607 - - 3,335,723 $ 49,650 509,786 1,507,194 289,895,000 16,175,000 11,964,495 58,485 401,651 - 1,875,000 $ 8,023,823 387,830 6,396,964 489,852 2,797,428 6,639,291 14,965,000 635,000 1,309,211 49,650 41,694,049 $ 691,416 9,107,764 9,799,180 - 94,740 1,969,740 289,895,000 18,050,000 11,964,495 97,439 5,070,877 94,740 325,172,551 2,600,347 366,866,600 9,872,832 144,245,429 102,511,794 $ 246,757,223 6,132,653 6,132,653 73,652 73,652 Net Assets Invested in capital assets, net of related debt Unrestricted Total net assets $ $ $ The notes to the financial statements are an integral part of this statement. 47 52,939 (210,507) (157,568) $ Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2010 City of Tempe, Arizona Total Governmental ActivitiesInternal Service Funds $ 79,444,627 332,955 79,777,582 $ 33,448,918 33,448,918 97,113 1,793 37,871 90,717 227,494 (110,851) 24,791,208 4,738,699 24,684,958 13,650,565 67,865,430 11,912,152 32,986,267 32,986,267 462,651 (292) 4,025 - (85,031) - 10,698 (12,960,509) 96,986 (8,531,931) 1,537,694 (691,368) (195,882) (9,472,604) 462,651 1,537,694 66,858 (624,510) (195,882) 4,765,839 6,023,674 (5,908,017) (4,591,108) 462,651 Business-type Activities - Enterprise Funds Water and Wastewater Operating revenues: Charges for services Miscellaneous Total operating revenues Operating expenses: Personal services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain on sale of capital asset Net loss from joint venture Income (loss) before contributions and operating transfers Capital contributions Transfers in Transfers out Change in net assets Total net assets- beginning Total net assets- ending $ Solid Waste Golf Course 62,511,102 320,464 62,831,566 $ 15,242,801 12,491 15,255,292 $ 17,849,480 4,188,938 17,245,719 12,354,390 51,638,527 11,193,039 5,729,199 341,750 6,695,522 963,756 13,730,227 1,525,065 1,115,416 206,218 705,846 241,702 2,269,182 (695,101) 9,750 (12,875,478) 81,572 (8,531,931) 1,240 11,389 - (10,123,048) 4,765,839 5,956,816 (5,908,017) (5,308,410) 239,534,983 $ 234,226,573 9,674,098 $ 11,211,792 $ 1,574,081 1,574,081 2,100,936 1,476,426 Cemetery $ 116,643 116,643 38,314 $ (157,568) The notes to the financial statements are an integral part of this statement. 48 251,348,331 $ 246,757,223 - $ 5,670,002 6,132,653 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2010 City of Tempe, Arizona Business-type Activities- Enterprise Funds Water and Wastewater Cash flows from operating activities: Receipts from customers Receipts from other funds Payments to employees for services Payments to suppliers for goods and services Payment for premiums and settlement of claims Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities Total noncash investing, capital, and financing activities: $ (1,640,391) 11,389 (1,629,002) 178,840 501,880 680,720 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 15,185,463 (5,345,177) (7,869,291) 1,970,995 Golf Course - 32,398,706 (13,755,000) (12,405,944) (42,721,452) 4,765,839 2,797,428 81,572 (10,455,721) (39,294,572) Cash flows from investing activities: Interest received Collection of notes receivable Net cash provided by investing activities Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in inventories Increase (decrease) in deposits Increase (decrease) in payables Increase (decrease) in accrued expenses Increase (decrease) in net OPEB obligation Net cash provided (used) by operating activities Noncash investing, capital, and financing activities: Net loss from joint venture $ (104,368) 5,956,816 (5,908,017) (55,569) Cash flows from capital and related financing activities: Proceeds from sale of bonds Principal paid on long-term debt Interest and fiscal fees Acquisition of capital assets Capital contributions Deferred revenue Proceeds from the sale of assets Investment in joint venture Net cash used by capital and related financing activities Cash and cash equivalents at end of year 57,814,880 (15,879,339) (19,883,141) 22,052,400 Solid Waste 18,413 18,413 (16,617,021) 101,211,467 1,574,081 (901,828) (892,175) (219,922) $ 116,643 (97,253) (39,948) (20,558) $ 74,691,067 (22,223,597) (28,684,555) 23,782,915 $ 33,558,854 (32,965,318) 593,536 66,858 66,858 104,368 104,368 6,023,674 (5,908,017) 115,657 - (47,328) 4,025 (43,303) (85,000) (93,879) (178,879) 32,398,706 (13,887,328) (12,499,823) (44,361,843) 4,765,839 - 96,986 (10,455,721) (43,943,184) - 167 167 360,406 5,662,036 Total Cemetery Governmental ActivitiesInternal Service Funds - (196,200) 361,180 197,420 501,880 699,300 (95,069) 421,295 - (16,547,884) 107,655,978 593,536 15,285,781 $ 84,594,446 $ 6,022,442 $ 164,980 $ 326,226 $ 91,108,094 $ 15,879,317 $ 11,193,039 $ 1,525,065 $ (695,101) $ (110,851) $ 11,912,152 $ 462,651 12,354,390 963,756 241,702 90,717 13,650,565 (5,016,686) (13,539) (267,355) 1,832,410 1,733,996 236,145 22,052,400 $ (69,829) 1,569 (833,588) 292,384 91,638 1,970,995 19,889 201,088 12,500 (219,922) (284) (140) (20,558) (5,086,515) (13,539) (265,786) 1,018,427 2,227,328 340,283 23,782,915 $ (8,531,931) $ - $ - $ - $ (8,531,931) $ - $ (8,531,931) $ - $ - $ - $ (8,531,931) $ - $ $ The notes to the financial statements are an integral part of this statement. 49 $ $ - $ 109,936 108,368 (88,566) 1,147 593,536 City of Tempe, Arizona 50 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona The City of Tempe, Arizona (the "City") was incorporated on November 26, 1894. On October 19, 1964, the electors in accordance with Arizona State Law ratified a Home Rule City Charter. The City operates under a Council-Manager form of government and provides services as authorized by its charter including: public safety (police, fire, building inspection), highways and streets, public transit, sanitation, water and wastewater, cultural-recreational, community development, and administrative. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying summary of the City's significant accounting policies is presented to assist the reader in interpreting the basic financial statements. The basic financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") as applied to governmental units. A. Reporting Entity The accompanying basic financial statements include the City and its component unit, collectively referred to as "the financial reporting entity". In accordance with the Governmental Accounting Standards Board's ("GASB") Statement 14, as amended, the component unit discussed below has been included in the City's financial reporting entity because of the significance of its financial relationships with the City. Rio Salado Community Facilities District: The Rio Salado Community Facilities District (CFD) was organized on February 20, 1997, under the laws of the State of Arizona to facilitate development of the Rio Salado Town Lake project. The board of the district is comprised of the same members as the City’s council. Data for this component unit has been included in the City's basic financial statements utilizing the "blending" method because their sole purpose is to finance public facilities and facilitate development for the City. Blending involves aggregating the component unit’s data and data from the City at the government-wide and fund financial statement level. Separately issued financial statements are not available for the City's component unit. B. Basic Financial Statements The basic financial statements include both government-wide (based on the City as a whole and its component unit) and fund financial statements. Both the government-wide and fund financial statements categorize activities as either governmental activities or business-type activities. Governmental activities are normally supported by taxes and intergovernmental revenues. Business-type activities rely to a significant extent, on fees and charges for support. All activities, both governmental and business-type, are reported in the government-wide financial statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets as well as long-term obligations. The government-wide financial statements focus more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The government-wide Statement of Activities demonstrates the degree to which the direct expenses, including depreciation, of the various departments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific department. Interest on long-term debt and depreciation expense on assets shared by multiple departments, are not allocated to the various departments. 51 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basic Financial Statements (Continued) Program revenues include revenues from fines and forfeitures, licenses and permit fees, special assessment taxes, certain intergovernmental grants, other entities participation and charges for services. Taxes and other items not properly included among program revenues are reported as general revenues. Generally, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. The City does not currently utilize an indirect cost allocation system. The General Fund charges certain administrative fees to departments within other operating funds to support general services used by those funds. The expenditures/expenses are recorded as a reduction of expense in the allocating fund. Therefore, no elimination is required from either the government-wide or fund level financial statements. The fund financial statements are, in substance, very similar to the financial statements presented prior to the adoption of GASB Statement 34. Emphasis here is on the major funds in either the governmental or business-type categories. Non-major funds are summarized into a single column. Unless an internal service fund is combined with the business-type activities (deemed to be an infrequent event), totals on the proprietary fund statement should directly reconcile to the business-type activity column presented in the government-wide statements. Internal service funds of a government (which traditionally provide services primarily to other funds of the City) are presented as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements of internal service funds are consolidated into the governmental activities column when presented at the government-wide level. To the extent possible, the costs of these services are reflected in the appropriate department. C. Basis of Presentation The City uses funds to report on its financial position and the results of its operations. A fund is a separate accounting entity with a self-balancing set of accounts. Fund accounting is designed to demonstrate legal compliance and to aid in the City's financial management by segregating transactions related to certain functions or activities. The following fund categories are used by the City: Governmental Funds Governmental Funds are those through which most of the governmental functions of the City are financed. The focus of Governmental Fund measurement, in the fund financial statements, is upon determination of financial position and changes in financial position rather than upon net income. 52 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Governmental Funds (Continued) Governmental Funds include the following fund types: General - The General Fund is the general operating fund of the City. It is used to account for all activities of the City not accounted for in some other fund. Special Revenue - Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally or otherwise restricted to expenditures for specified purposes. There is one special revenue fund presented as a major fund in the basic financial statements, it is as follows: Transit Special Revenue Fund - accounts for the receipt and expenditures of the Transit Tax monies. These monies are restricted to financing transit operations and improvements. Debt Service - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, long term debt not being accounted for in the Special Revenue Funds and Enterprise Funds. Both debt service funds are presented as major funds in the basic financial statements: General Obligation Debt Service Fund - accounts for the accumulation of resources and payments of general obligation debt. Special Assessment Debt Service Fund - accounts for the accumulation of resources and payments of special assessment debt. Capital Projects - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by Enterprise Funds). The following capital project fund is presented as a major fund in the basic financial statements: Transit Capital Projects Fund - used for the acquisition of buses, the light rail system, and other traffic flow improvements. Proprietary Funds Proprietary funds are used to account for the City's ongoing operations and activities, which are similar to those often found in the private sector. The focus of Proprietary Fund measurement is upon the determination of operating income, changes in net assets, financial position and cash flows. Each proprietary fund is reported as a major fund in the basic financial statements. 53 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Proprietary Funds (Continued) Proprietary funds include the following fund types: Enterprise - Enterprise Funds are used to account for operations, including debt service, (a) that are financed and operated in a manner similar to private businesses - where the intent of the government body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis is financed or recovered primarily through user charges; or (b) where the governing body has determined that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Equity in Joint Venture - The equity method is used to account for the City's equity interest in a joint venture (See Note 7). Under this method, the equity interest is recorded in the balance sheet as a single amount. In addition, the City's share of the net income or loss is reported in the Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds, as a nonoperating revenue or expense. The following enterprise funds are used by the City: Water and Wastewater Fund – accounts for the provision of water and sewer services to the residents of the City and some residents in the adjoining Town of Guadalupe. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing and related debt service, billing and collection. Solid Waste Fund – accounts for the provision of refuse collection and disposal services for both residential and commercial customers. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance, financing, billing and collection. Golf Course Fund - accounts for the operation of the Rolling Hills and Ken McDonald golf courses. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance and financing. Cemetery Fund – accounts for the operation of the Double Butte cemetery. All activities necessary to provide such services are accounted for in this fund, including but not limited to administration, operation, maintenance and financing. Internal Service - Internal Service Funds account for operations that provide services to other departments or agencies of the government, or to other governments, on a cost-reimbursement basis. Risk Management Fund – accounts for expenses incurred for worker’s compensation, automobile liability, general liability, and property claims under the City’s self-insurance program. Health Fund – accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to 1) demonstrate legal and covenant compliance, 2) demonstrate the source and use of liquid resources, and 3) demonstrate how the City’s actual experience conforms to the annual budget. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" is defined as collectible within the current period or within 60 days of the end of the current fiscal period. Expenditures, other than interest on long-term debt, are recorded when the related fund liability is incurred, if measurable. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgements, are recorded only when payment is due. Revenues susceptible to accrual include property tax, local sales tax, state-shared sales tax, highway user tax, vehicle license tax, franchise fees, special assessments and interest earned on pooled investments. Licenses and permits, charges for services, fines and forfeitures and miscellaneous revenues are generally recorded as revenues when received in cash because they are not measurable until actually received. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are, however, essentially two types of these revenues. In one, monies must be expended for a specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based upon the expenditures recorded. In the other, monies are virtually unrestricted as to the purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The City reports deferred revenues in the governmental funds if the potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the City before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. Since the governmental fund financial statements are presented on a basis different than the governmental activities column of the government-wide financial statements, a reconciliation is provided immediately following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the governmental fund financial statements into the governmental activities column of the government-wide financial statements. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. An exception to this rule is charges between the government’s water and sewer function and various functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the applicable functions. Amounts reported as program revenue include 1) charges to customers or users who purchase, use or directly benefit from goods or services provided by a particular department 2) operating grants and contributions that are restricted to meeting the operational requirements of a particular department and 3) capital grants and contributions that are restricted. Taxes, investment income and other revenues not identifiable with a particular department are included as general revenues. The general revenues support the net costs of the departments not covered by program revenues. 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting (Continued) When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources, as they are needed. GASB No. 20 requires that governments with proprietary activities apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board ("FASB") Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins. Governments are given the option whether or not to apply all FASB Statements and Interpretations issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements. Accounting Principles Board Opinion No. 22, Disclosure of Accounting Policies, require the same treatment for the government-wide financial statements. The City has elected not to implement FASB Statements and Interpretations issued after November 30, 1989 for the government-wide or enterprise fund financial statements. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing goods and services of the fund’s principal ongoing operations. Operating expenses include the cost of providing the goods and services, administrative expenses, and depreciation on capital assets. Non-operating revenues and expenses are items such as investment income and interest expense, which are not a result of the direct operations of the activity. E. Budgetary Data State law mandates that cities and towns adopt a budget annually. As a result, an operating budget is legally adopted each fiscal year for the General, Special Revenue (except Grants and Court Awards), Debt Service (except Special Assessments), and Proprietary Funds on a modified accrual basis plus encumbrances. The separately issued annual budget may be obtained from the City's Financial Services Department, Budget and Research Division, 20 East Sixth Street, Tempe, Arizona, 85281. Certain differences as described in Note 2 exist between the basis of accounting used for budgetary purposes and that used for reporting purposes in accordance with GAAP. The legal level of budgetary control is the total operating budget as adopted. Management may amend the budget at any level below the total operating budget as adopted. The total operating budget can only be amended by the City Council subject to limitations in the State law (see Note 1F). At the end of each fiscal year, all amounts encumbered are reappropriated as part of the following year’s operating budget. Any appropriations that are either unexpended or unencumbered, lapse at fiscal year-end. No supplemental appropriations were necessary during the year. The City adheres to the following procedures in establishing the budgetary data reflected in the basic financial statements: 1) Prior to May 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed revenues and expenditures. 2) Public hearings are conducted to obtain taxpayer comments. 3) Prior to July 1, the budget is legally enacted through passage of a resolution. 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Expenditure Limitation On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments, which restricts the annual growth of expenditures to a percentage determined by population and inflation. Certain types of expenditures are excluded from the limitation. Article 9, Sections 20 and 21 of the Arizona Constitution require the Economic Estimates Commission to determine each year the expenditure limitation for the following fiscal year for each city. The limitation is calculated based upon the amount of FY 1979-80 actual payments of local revenues, referred to as the “base limit”. Each year, the base limits for local jurisdictions are adjusted for population and inflation to reach the expenditure limitations. The City of Tempe’s 2009-10 Expenditure Limitation is $296,914,373. Local governments may carryforward to later years revenues, which are not subject to the expenditure limitation and were not expended in the year of receipt. G. Pooled Cash and Investments Cash resources of the City are combined to form a pool of cash and investments managed by the Accounting Division. Excluded from this pool are certain legally restricted cash resources. In accordance with the City’s legally adopted budget, the interest earned on pooled investments is recorded in the General Fund, except for the earnings of Enterprise Funds and other funds whose interest earnings are specifically mandated by law or an outside regulating agency to remain in those funds. Investments are stated at fair value. The City's investment policy permits investment in the following instruments: 1) Obligations of the United States Government, its agencies and instrumentalities; 2) Fully insured or collateralized certificates of deposit and other evidences of deposit at banks and savings and loan associations; 3) Bankers' acceptances issued by the 10 largest domestic banks and the 20 largest international banks, provided collateral meets the standards set by the Financial Services Manager; 4) A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by U.S. government securities; 5) Repurchase agreements whose underlying collateral consist of the foregoing; 6) Money market funds whose portfolios consist of the foregoing; and 7) The State of Arizona's Local Government Investment Pool. H. Receivables For accounts receivable (utility billing receivables), all amounts outstanding in excess of 120 days are included in the allowance. I. Inventories All inventories are valued using the average cost method. They consist of expendable supplies held for consumption and are accounted for using the consumption method. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Restricted Assets Certain proceeds of the City’s bonds, as well as certain resources set aside for their repayment, are classified as restricted on the Balance Sheet, or Statement of Net Assets, because they are maintained in trust accounts and their use is limited by applicable debt covenants. K. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 ($25,000 for infrastructure assets) and an estimated useful life greater 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 cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life, are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, if material. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives (land and construction-in-progress are not depreciated): Useful life (years) Assets Buildings Improvements Machinery and equipment Infrastructure 10-70 10-50 3-25 7-70 L. Compensated Absences Accumulated unpaid vacation, vested sick pay and vested "Mediflex" supplementary health maintenance benefits are accrued in the Government-wide and all Proprietary Fund statements. Compensated absences are only reported in the governmental funds if they have matured (i.e. unused reimbursable leave still outstanding following an employee’s resignation or retirement). These long-term liabilities of the governmental funds are not shown on the fund financial statements, as the benefits are not expected to be liquidated with expendable available financial resources. Vacation leave will be absorbed by time off from work or, within certain limitations, may be payable to the employees. Sick leave is accumulated at the rate of 96 hours (or a proportionate equivalent for employees with workweeks other than 40 hours) per year up to a maximum of 480 hours. Each year, hours accumulated in excess of 480 hours are either converted to cash at a 4-for-1 rate or accumulated in a “sick bank”. Upon retirement or resignation, employees with at least 10 years service are eligible for compensation of up to 50 percent of accumulated sick leave. Each employee with 3 years service receives a "Mediflex" allowance each year as reimbursement for all otherwise nonreimbursed health maintenance costs. Benefits are prorated based on length of service and increase up to a maximum of $650 a year. Unused credits are cumulative and upon employee termination are "banked" at the following rates: after 10 years, 50 percent; after 15 years, 75 percent; after 20 years, 100 percent. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type. Bond premiums, discounts, and issuance costs are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, in the period in which the bonds are issued. 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. N. Interfund Transactions Interfund transactions consist of identified services performed for other funds or costs billed to other funds and are recorded as expenditures in the fund receiving the services and as a reimbursement, reducing expenditures, in the fund performing the services except for sales of water, sewer and refuse services to other City departments and the internal service risk management or health charges which are recorded as revenue and expenditures in the appropriate funds. All other interfund transactions are reported as transfers. O. Fund Equity In the fund financial statements, reserved fund equity is defined as that portion of fund equity that has legally been segregated for specific purposes. Designated fund equity is defined as that portion of fund equity for which the City has made tentative plans for future use of financial resources. Unreserved/undesignated fund equity is defined as that portion of fund equity, which is available for use in a future period. 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. For the purposes of the statement of cash flows, all pooled cash and investments are also considered to be cash equivalents, although there are investments with maturities in excess of three months when purchased in the portfolio. This is due to the fact that the Proprietary funds may deposit or withdraw cash at any time without prior notice or penalty, having the characteristics of demand deposits. In a statement 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. Q. Use of Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses/expenditures, and the disclosure of contingent assets and liabilities at the date of the basic financial statements. Actual results could differ from those estimates. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 2 - BUDGET BASIS OF ACCOUNTING Arizona state statutes require accounting for certain transactions to be on a basis other than GAAP. The actual results of operations, in accordance with state statutes ("budget basis") are presented in the Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual for the General Fund and Transit Special Revenue Fund (major funds) to provide a meaningful comparison of actual results with the budget. Budgetary statements include a reconciliation of the adjustments required to convert the budgetary basis to GAAP basis. The major differences between the budget and GAAP bases are: 1) Encumbrances are recorded as the equivalent of expenditures (budget) as opposed to a reservation of fund balance (GAAP). 2) Certain revenues and expenditures not recognized in the budgetary year are accrued (GAAP). 3) Changes in the fair value of investments (GAAP) are not budgeted. NOTE 3 - PROPERTY TAXES Under Arizona law a two-tiered tax system exists: (1) a primary system for taxes levied to pay for current operation and maintenance expenses, and (2) a secondary system for taxes levied to pay principal and interest on bonded indebtedness as well as for the determination of the maximum permissible bonded indebtedness. Specific provisions are made under each system for determining full cash values of property, the basis of assessment, and the maximum annual tax levies on certain types of property and by certain taxing authorities. Under the primary system, the full cash value of locally assessed real property (consisting of residential, commercial, industrial, agricultural and unimproved property) may increase by more than 10% only under certain circumstances. Under the secondary system, there is no limitation on annual increases in full cash value of any property. Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. The City's property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments on October 1 and March 1, and become delinquent on November 1 and May 1, respectively. Delinquent amounts bear interest at the rate of 16%. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February following the May 1 date upon which the second installment becomes delinquent. The purchaser is given a Certificate of Purchase issued by the County Treasurer. Five years from the date of sale, the holder of a Certificate of Purchase, which has not been redeemed, may demand of the County Treasurer a County Treasurer's Deed. Additionally, a lien against property assessed attaches on the first day of January preceding the assessment and levy thereof. Using the accrual basis of accounting, property taxes are recognized as revenue when earned in the governmentwide financial statements. In the governmental funds, property taxes are recognized as revenue on the modified accrual basis, i.e., when both measurable and available. Property taxes levied in August 2010 are not available for the current year; accordingly, such taxes will not be recognized as revenue until the subsequent fiscal year. Prior year levies were recorded using these same principles, and remaining receivables from such levies are also recognized as revenue, when available. 60 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the Statement of Net Assets and on the Balance Sheet as "Pooled cash and investments." Pooled cash and investments are stated at fair value, with accrued interest shown under “Accrued interest receivable”. The change in fair value of the investments is recorded in investment income. Restricted cash and investments are amounts held separately by trustees and segregated due to their source and future intent. Amounts held by trustees are invested in money market securities, maturing within one year from the time of purchase, and are reported at amortized cost. Deposits At year-end, the carrying amount of the City's deposits with financial institutions was <$1,478,935> and the bank balance was $693,179. Of the bank balance, $250,000 was covered by federal depository insurance and $443,179 was covered by collateral held in the pledging bank's trust department in the City's name. Investments City Charter, Ordinance, and Trust Agreements authorize the City to invest in US treasury obligations, US agency obligations, certificates of deposit that are fully insured or collateralized, banker’s acceptances issued by the 10 largest domestic banks and the 20 largest international banks, A-1/P-1 rated commercial paper secured by an irrevocable line of credit or collateralized by US government securities, repurchase agreements whose underlying collateral consist of the foregoing, money market funds whose portfolios consist of the foregoing and the Arizona Local Government Investment Pools. The City’s investment in the State of Arizona Local Government Investment Pools (LGIP and LGIP-GOVT) is stated at fair value, which approximates the value of the City’s pool shares. The LGIP and LGIP-GOVT are operated by the Arizona State Treasurer’s Office, as authorized by Arizona Revised Statutes, §35-326. Arizona Revised Statutes, §35-312 and §35-313, regulate authorized investments. The Arizona State Legislature has created the Arizona Board of Investments which reviews the investment of state monies, serves as trustees of the Permanent Land Trust Funds, and approves the State Treasurer’s Office Investment Policy. Investment from the City’s participation in the LGIP resulted in a $2.8 million loss which was reported in investment income. Cash and investments as of June 30, 2010 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $317,874,278 (1,478,935) $316,395,343 Pooled cash and investments – unrestricted Restricted cash and investments Total pooled cash and investments $255,035,781 61,359,562 $316,395,343 The City had a net increase in the fair value of investments during fiscal year 2009-10 of $880,322. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) At June 30, 2010, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Repurchase agreements State investment pools Fair Value $ 128,566,460 130,203,626 6,826,688 2,519,843 49,757,661 $ 317,874,278 12 Months or Less $ 103,182,331 63,890,634 6,826,688 2,519,843 49,757,661 $ 226,177,157 13 - 24 Months $25,384,128 49,325,492 $74,709,620 25 - 36 Months $ $ 16,987,500 16,987,500 Interest rate risk. One of the ways the City limits its exposure to fair value losses arising from rising interest rates is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. The City limits all securities to a final maturity of no more than three years and assumes that its callable investments will not be called. In general, it is the City’s intent to hold investments to maturity. Credit risk. The City addresses credit risk through the investment policy by restricting the allowable investment instruments. The investments in the US agency obligations were rated A-1+ or AAA and money market funds were rated AAA by Standard & Poor’s. The repurchase agreements are between JP Morgan Chase and the City of Tempe, Arizona and are considered a short term debt obligation of the bank. The bank has a credit rating of A1+, P1 and F-1+ by Standard & Poor’s, Moody’s and Fitch, respectively. However, these repurchase agreements are backed by US Treasury and/or US Government Agency instruments which are considered AAA. The Arizona Local Government Investment Pool 5 is currently rated AAAf/S1+ by Standard & Poor’s. Concentration of Credit Risk. The City policy places no limit on the amount that the City may invest in any one issuer of the US treasury obligations and the US agency obligations. The investment policy does establish a maximum percentage of 10% in banker’s acceptances, 20% in commercial paper and 25% in repurchase agreements. The maximum investment in any one issuer for certificates of deposits is 33% and for repurchase agreements is 10%. The City is required to disclose if 5% or more of its investments are in securities of a single issuer. As of June 30, 2010, 25.96% of the City’s investments are in Federal Home Loan Bank securities, 21.42% of the City’s investments are in Fannie Mae, and 7.49% of the City’s investments are in Federal Home Loan Mortgage Corporation Securities. NOTE 5 - DUE TO/FROM OTHER FUNDS AND INTERFUND TRANSFERS Due to/from other funds consisted of the following at June 30, 2010: Due to 187,458 $ 187,458 Due from $ 187,458 $ 187,458 Due to 489,852 $ 489,852 Due from $ 489,852 $ 489,852 General fund Non-major governmental Total governmental funds $ Water and wastewater fund Cemetery fund Total proprietary funds $ 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS AND INTERFUND TRANSFERS (Continued) The interfund balances at June 30, 2010 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2010 are expected to be repaid within one year. Interfund balances between the governmental funds and interfund balances between the proprietary funds have been eliminated in the government-wide statement of net assets. Transfers Out Transit Special Revenue General Transfers In General $ - $ - General Obligation Debt Service $ - Transit Capital Projects $ - - - - - Special Assessment Debt Service - - - - Transit Capital Projects - 468,810 - - Golf Total 9,011,013 32,500 $ $ 30,000,000 - General Obligation Debt Service Non-major Governmental Water and Wastewater - Transit Special Revenue Water and Wastewater Non-major Governmental - 168,812 184,119 - 30,184,119 2,770,000 5,374,500 8,144,500 2,140,449 - 2,140,449 - 850,050 381,240 17,734,573 - 5,956,816 66,858 - 5,374,500 - 66,858 - - - - - $30,000,000 $11,145,415 $ 5,908,017 $ 501,310 $ 8,435,993 321,745 450,517 260,571 $ 9,338,442 Total $ 251,812 - 5,179,050 3,061,493 83,000 $65,329,177 The interfund transfers generally fall within one of the following categories: 1) pay-as-you-go financing transfers into capital project funds; 2) transfers to cover debt service payments; or 3) transfers to cover operating expenditures in accordance with City policy. There were no significant transfers during fiscal year 2009-10 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE On November 10, 2004 the City entered into an intergovernmental agreement with the Arizona Tourism and Sports Authority (“TSA”) for the renovation of the Tempe Diablo Stadium Complex. On September 1, 2005, the City funded the project through the issuance of municipal bonds (see note 9). The TSA agreed to reimburse the City $12,000,000 for their contribution, plus interest at the bond rate (3.50% to 5.00%). A note receivable was recorded in the General Obligation Debt Service Fund for the TSA’s portion. Payments are received semi-annually and any unpaid interest is capitalized. Due to capitalizing interest, at June 30, 2010 the note receivable balance is $13,990,303. At June 30, 2010, notes receivable totaled $521,955 in the Water and Wastewater Fund. The notes bear interest at 4.00% (see Note 9). Repayment of the receivable to the Water and Wastewater Fund will be made from the General and Highway User Special Revenue funds. On August 22, 2007 the City sold land valued at $42,142,823. A note receivable, bearing interest at 8.00%, was recorded in the General Fund in the amount of $33,714,306. Principal payments are received annually and interest payments are received semi-annually. At June 30, 2010, the note receivable balance is $25,285,730 and corresponding revenue has been deferred (see note 21). 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 6 – CAPITAL IMPROVEMENT NOTES RECEIVABLE (Continued) During the construction of the light rail, the City entered into two development agreements to add a light rail station at Washington and Center Parkway. Each agreement has a total contribution to the City of $1.3 million, payable at $130,000 annually over a ten year period with the option of a prepayment equal to the net present value of the unpaid balance calculated using a 4.5% discount rate. At June 30, 2010 the note receivable balance in the Transit Special Revenue fund is $2,057,306 and the corresponding revenue has been deferred. The terms are currently being renegotiated on both notes. NOTE 7 - JOINT VENTURE The City currently participates in two joint ventures, the Subregional Operating Group and Valley Metro Rail, Inc. Subregional Operating Group (SROG) The City participates with the cities of Phoenix, Mesa, Scottsdale, and Glendale in an intergovernmental agreement for the construction, operation and maintenance of jointly used facilities including the 91st Avenue Wastewater Treatment Plant, the Salt River Project Outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix is the management agency who has agreed to be responsible for the planning, designing, constructing, operating and maintaining of the jointly used sewage facilities and to perform the required accounting, administrative and other support functions. The agreement provides for the formation of a Multicity Subregional Operating Group Committee ("Multicity SROG"), whose members are composed of a representative officially appointed upon motion and order of each city, for the specific purpose of making recommendations concerning specific decisions or courses of action for the jointly used facilities. The Multicity SROG annually reviews and approves the capital improvements and replacements budget and also the operating budget for the jointly used facilities. As of June 30, 2009 (the latest information available), the City has a 16% equity interest or purchased capacity in the 91st Avenue Wastewater Treatment Plant and other varied, yet less significant percentages of equity interest in the other jointly used facilities. Purchased capacity is a measure of the right of use owned by the City in the total capacity of the wastewater treatment plant. The City contributes to capital improvements based upon equity interest and contributes to operating and maintenance expenses based upon proportional flow and sewage strength. The City has financed its share of capital improvement costs through the issuance of general obligation bonds, excise tax bonds, development fees and grants. The joint venture has not issued any debt. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2009 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net assets $ 964,455 (53,259) $ 911,196 Total revenues Total expenses Total non-operating revenues (expenses) Net increase in net assets $ 171,759 (66,537) 317 $ 105,539 The City's net investment and its share of operating and maintenance expenses are recorded in the Water and Wastewater Enterprise Fund. The City's equity in joint venture at June 30, 2010, was $154,835,030. The City’s net loss from joint venture was $8,531,931 for the fiscal year ended June 30, 2010. Separately audited financial statements for the jointly used wastewater treatment and transportation facilities may be obtained from the Arizona Municipal Water Users Associations, 4041 North Central, Suite 900, Phoenix, Arizona, 85012. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Valley Metro Rail, Inc. (VMRI) The City currently participates with the cities of Phoenix, Mesa and Glendale in a joint powers agreement for the design, construction and operation of a light rail transit system. Valley Metro Rail, Inc. (VMRI) is the management agency that was incorporated to administer the joint powers agreement between the cities. In addition, VMRI has oversight responsibility for the planning, designing, construction and operation of a regional mass transit light rail system. The agreement provides voting rights for members of the representative cities related to strategic initiatives including passage of an annual capital program and annual operating budget. As of June 30, 2010, the City has a 24.1% (unaudited) equity interest in the joint venture. The light rail project was completed and began operations in December 2008. Member contributions to the joint venture are offset by a Federal funding agreement from the U.S. Department of Transportation. These contributions are recognized as intergovernmental revenue in the Transit Capital Projects fund. Summary financial information on the joint venture (GAAP basis) as of and for the fiscal year ended June 30, 2009 (the latest information available) is as follows: Total assets Total liabilities Total net assets $ 1,380,401,385 (192,544,719) $ 1,187,856,666 Total revenues Total expenses Total non-operating revenues Total non-operating expenses Net increase in net assets $ 167,775,206 (43,395,181) 11,595,696 (31,680,898) $ 104,294,823 The City has an ongoing financial responsibility as a result of the joint powers agreement to participate in the cost to construct and operate the light rail project less any federal reimbursements and operating fares. The equity interests will be determined, and periodically adjusted, based on the number of rail mileage located within each city. The City expended $4,919,313 in the fiscal year ended June 30, 2010 toward the light rail project. These expenditures were included in the financial statements predominately as capital outlay in the Transit Capital Projects fund. The City’s equity in joint venture at June 30, 2010 was $282,222,956. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2010 is as follows: Balances June 30, 2009 Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 62,569,443 67,258,411 129,827,854 Additions $ $ 50,335,014 (5,132,205) 50,335,014 (5,132,205) Balances June 30, 2010 $ 1,750,000 $ 64,319,443 (84,727,549) 27,733,671 (82,977,549) 92,053,114 2,760,624 2,760,624 (91,117) (1,842,535) (1,933,652) (10,670,145) (14,727,961) (4,893,859) (9,324,020) 49,356 1,538,558 - (58,585,650) (294,621,947) (41,625,707) (107,289,207) Total accumulated depreciation (464,094,440) (39,615,985) 1,587,914 Governmental activities capital assets, net $ 873,531,065 $13,479,653 $ (5,477,943) - (502,122,511) Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment 298,247,053 646,307,988 124,886,026 138,356,584 1,207,797,651 Transfers in (out) Retirements (47,964,861) (279,893,986) (36,731,848) (99,503,745) 66 218,927 298,374,863 43,975,133 690,283,121 22,952,008 147,838,034 15,831,481 155,106,154 82,977,549 1,291,602,172 $ - $ 881,532,775 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2009 Business-type activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 6,693,377 82,432,414 89,125,791 $ Additions Retirements 41,991,375 41,991,375 $ 58,822,735 210,793,250 148,854,348 46,478,141 464,948,474 Accumulated depreciation: Buildings (19,980,693) Infrastructure (110,137,302) Improvements (65,854,504) Machinery and equipment (37,383,119) Total accumulated depreciation (233,355,618) Business-type activities capital assets, net $ 320,718,647 8,681 2,517,890 2,526,571 1,243,769 1,243,769 $ Balances June 30, 2010 $ $ 6,693,377 (114,529,776) 9,894,013 (114,529,776) 16,587,390 (1,399,872) (1,399,872) (1,398,697) (5,536,846) (4,911,063) (1,803,958) (13,650,564) $30,867,382 - Transfers in (out) (156,103) $ 26,588,301 85,702,096 2,239,379 114,529,776 58,822,735 237,381,551 234,565,125 49,835,538 580,604,949 - (21,379,390) (115,674,148) (70,765,567) (37,943,308) (245,762,413) - $351,429,926 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Police Fire Community services Parks and recreation Public works Community relations City manager Diversity program City clerk and elections City attorney Municipal courts Development services Community development Financial services Information technology Non-departmental Total depreciation expense 67 $ $ 2,964,930 2,000,985 3,261,093 2,950,472 23,262,443 18,059 11,127 997 404 659 48,941 46,105 1,129,996 185,900 1,128,447 2,605,427 39,615,985 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT 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 general government and proprietary activities. Bonds issued for proprietary activities are reported in the Proprietary Funds as they are to be repaid from proprietary revenues. In the current year, $45.165 million was issued to finance improvements for Water and Wastewater, Transportation, Public Safety Police, Public Safety Fire, and Parks. In prior years, general obligation bonds have been issued to refund previously issued 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 10-20 year serial bonds with varying amounts of principal maturing each year. General obligation bonds outstanding at June 30, 2010, were as follows: $17,305,000 1993A Capital Improvement Refunding Issue Serial Bonds due in annual installments of $80,000 to $5,035,000 through July 1, 2011; interest at 2.6% to 5.4% $12,755,000 1998 Capital Improvements Refunding Issue Serial Bonds due in annual installments of $90,000 to $2,450,000 through July 1, 2010; interest at 4.25% to 4.90% $37,500,000 1998A Capital Improvement Serial Bonds due in annual installments of $1,210,000 to $2,755,000 beginning July 1, 1999 through July 1, 2018; interest at 4.00% to 5.50% $24,000,000 2001A Capital Improvement Serial Bonds due in annual installments of $650,000 to $1,630,000 beginning July 1, 2002 through July 1, 2021; interest at 4.50% to 6.00% $11,045,000 2002 Capital Improvement Refunding Issue Serial Bonds due in annual installments of $40,000 to $1,145,000 through July 1, 2015; interest at 2.25% to 5.00% $22,000,000 2002A Capital Improvement Serial Bonds due in annual installments of $690,000 to $1,650,000 through July 1, 2022; interest at 3.5% to 5.0% $44,820,000 2003 Capital Improvement Serial Bonds due in annual installments of $955,000 to $3,340,000 through July 1, 2023; interest at 3.50% to 5.00% $19,900,000 2004 Capital Improvement Serial Bonds due in annual installments of $560,000 to $1,485,000 through July 1, 2024; interest at 3.5% to 5.5% $18,775,000 2004R Capital Improvement Refunding Issue Serial Bonds due in annual installments of $40,000 to $2,925,000 through July 1, 2017; interest at 2.00% to 5.00% $52,425,000 2005 Capital Improvement Serial Bonds due in annual installments of $1,740,000 to $3,860,000 through July 1,2024; interest at 3.50% to 5.00% $74,495,000 2006 Capital Improvement Serial Bonds due in annual installments of $2,150,000 to $5,900,000 through July 1, 2025; interest at 3.50% to 5.00% $20,690,000 2007 Capital Improvement Refunding Issue Serial Bonds due in annual installments of $20,000 to $5,860,000 through July 1, 2018; interest at 3.75% to 5.00% $76,485,000 2007A Capital Improvement Serial Bonds due in annual installments of $2,220,000 to $5,350,000 through July 1, 2026; interest at 3.50% to 4.50% $66,365,000 2008A Capital Improvement Serial Bonds due in annual installments of $1,870,000 to $5,080,000 beginning July 1, 2009 through July 1, 2028; interest at 3.375% to 4.375% $56,055,000 2009A Capital Improvement Serial Bonds due in annual installments of $1,760,000 to $4,200,000 beginning July 1, 2010 through July 1, 2029; interest at 3.00% to 4.375% $16,755,000 2010A Capital Improvement Serial Bonds due in annual installments of $500,000 to $2,160,000 beginning July 1, 2011 through July 1, 2019; interest at 2.50% to 5.00% $28,410,000 2010B Capital Improvement Serial Bonds due in annual installments of $2,250,000 to $2,295,000 beginning July 1, 2020 through July 1, 2030; interest at 4.21% to 5.719%, net of 35% federal credit Total general obligation bonds outstanding (excluding current portion of Enterprise Fund general obligation bonds outstanding) 68 $ 1,390,000 3,215,000 9,860,000 9,015,000 5,080,000 15,470,000 33,490,000 15,565,000 14,080,000 42,365,000 64,240,000 18,330,000 68,620,000 62,380,000 54,295,000 16,755,000 28,410,000 $ 462,560,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) General Obligation Bonds (Continued) The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 $ 27,335,000 27,140,000 26,665,000 27,860,000 29,185,000 139,375,000 135,175,000 49,830,000 $ 19,497,420 18,275,823 17,107,668 15,980,276 14,795,088 55,625,085 25,303,205 4,765,408 $ 46,832,420 45,415,823 43,772,668 43,840,276 43,980,088 195,000,085 160,473,205 54,595,408 $ 462,560,000 $ 171,349,974 $ 633,909,974 The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 Principal $ 10,980,000 10,965,000 10,470,000 10,945,000 11,445,000 50,060,000 45,215,000 22,585,000 $ 172,665,000 Interest $ 7,150,594 6,657,705 6,190,210 5,752,204 5,296,935 19,796,662 9,537,043 2,382,026 $ 62,763,379 Total $ 18,130,594 17,622,705 16,660,210 16,697,204 16,741,935 69,856,662 54,752,043 24,967,026 $ 235,428,379 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 $ 16,355,000 16,175,000 16,195,000 16,915,000 17,740,000 89,315,000 89,955,000 27,245,000 $ 12,346,826 11,618,118 10,917,458 10,228,072 9,498,153 35,828,423 15,766,162 2,383,382 $ 28,701,826 27,793,118 27,112,458 27,143,072 27,238,153 125,143,423 105,721,162 29,628,382 $ 289,895,000 $ 108,586,594 $ 398,481,594 69 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Special Assessment Bonds Payable 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, 2010, the special assessments receivable of $33,129,216, together with amounts paid in advance and interest to be received over the life of the assessment period, are adequate for the scheduled maturities of the bonds payable and the related interest. Improvement 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 improvement 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 at June 30, 2010, were as follows: $11,440,000 ID 170 Special Assessment Bonds Payable with Governmental Commitment issued June 1, 1992; maturing January 1, 2011; due in annual installments of $460,000 to $1,160,000; interest at 6.875% $7,070,000 ID 172 Special Assessment Bonds Payable with Governmental Commitment issued August 1, 1997; maturing January 1, 2013; due in annual installments of $470,000 to $475,000; interest at 5.10% $6,175,000 ID 175 Special Assessment Bonds Payable with Governmental Commitment issued May 6, 1999; maturing January 1, 2015; due in annual installments of $295,000 to $555,000; interest at 4.70% $4,405,000 ID 179 Special Assessment Bonds Payable with Governmental Commitment issued June 1, 2005; maturing January 1, 2021; due in annual installments of $220,000 to $385,000; interest at 4.10% $25,190,000 ID 180 Special Assessment Bonds Payable with Governmental Commitment issued February 27, 2008; maturing January 1, 2029; due in annual installments of $760,000 to $1,925,000; interest at 5.00% Total special assessment bonds outstanding $ 1,160,000 1,410,000 2,545,000 3,480,000 24,430,000 $ 33,025,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2029 $ 3,150,000 2,060,000 2,140,000 1,745,000 1,830,000 7,340,000 7,590,000 7,170,000 $ 1,547,441 1,409,611 1,308,085 1,214,850 1,129,758 4,585,055 2,736,018 738,750 $ 4,697,441 3,469,611 3,448,085 2,959,850 2,959,758 11,925,055 10,326,018 7,908,750 $33,025,000 $14,669,568 $47,694,568 70 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations. On April 1, 2000, the City issued $17,310,000 of Excise Tax Revenue Obligations. The proceeds were used to finance the improvements to the Papago Water Treatment Plant, the 91st Ave Treatment plant, the purchase of buses, the construction of a parking structure and office space and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. $17,310,000 2000A Excise Tax Revenue Obligations due in annual installments of $245,000 to $2,880,000 through July 1, 2020 (debt service ensuing fiscal year 2011 was refunded); interest at 4.825% to 5.625% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 Principal Interest Total $ 360,000 $ 18,450 $ 378,450 $ 360,000 $ 18,450 $ 378,450 71 $ 360,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Refunding Obligations. On February 1, 2003, the City issued $39,275,000 of Excise Tax Revenue Obligations. The proceeds were used to refund $40,500,000 of the 1998 Variable Rate Demand Excise Tax Revenue Obligations, and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. $39,275,000 2003 Excise Tax Revenue Refunding Obligations due in annual installments of $475,000 to $2,950,000 through July 1, 2023; interest at 2.00% to 5.25% $12,100,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2011 2012 2013 2014 2015 2016-2020 2020-2023 $ 1,675,000 1,760,000 1,830,000 1,905,000 1,980,000 2,950,000 $ 538,988 455,238 384,838 311,638 235,438 682,188 409,313 $ 2,213,988 2,215,238 2,214,838 2,216,638 2,215,438 682,188 3,359,313 $12,100,000 $ 3,017,641 $15,117,641 Interest Total Excise Tax Revenue Obligations. On June 1, 2004, the City issued $37,595,000 of Excise Tax Revenue Obligations. The proceeds were used to (i) refund $14,185,000 of the 2002 Variable Rate Demand Excise Tax Revenue Obligations related to the Tempe Center for the Performing Arts Project (Performing Arts Project), (ii) to fund a portion of the cost of the Performing Arts Project and (iii) to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.10% performing arts center tax, approved by voters on May 16, 2000, which are restricted to the Tempe Center for the Performing Arts Project. Additionally, the payments to be made by the City are secured by a subordinate lien pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing, including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. 72 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The City covenants and agrees that the Performing Arts Center Excise Taxes and the Excise Taxes which it presently imposes will continue to be imposed in each Fiscal Year so that the sum of (A) the Performing Arts Center Excise Taxes for such Fiscal Year plus (B) the excess of the Excise Taxes for such Fiscal Year over the Debt Service requirements on the Outstanding Senior Excise Tax Obligations for such Fiscal Year, shall be equal to at least three times the total of the Debt Service with respect to Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. The City further covenants and agrees that so long as any Special Parity Obligations are outstanding, the Performing Arts Center Excise Taxes, the Excise Taxes and the Special Excise Taxes will be imposed in each Fiscal Year so that the sum of (A) Performing Arts Center Excise Taxes for such Fiscal Year, plus (B) Special Excise Taxes for such Fiscal Year plus (C) the excess of the Excise Taxes for such Fiscal Year over the Debt Service on the Outstanding Senior Excise Tax Obligations for such Fiscal Year shall be equal to at least three times the total of the Debt Service with respect to the Parity Obligations and the Special Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year's actual Debt Service with respect to Parity Obligations and Special Parity Obligations, the City will either impose new Excise Taxes or Special Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations and Special Parity Obligations and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year’s Debt Service with respect to Parity Obligations and Special Parity Obligations. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. $37,595,000 2004 Excise Tax Revenue Obligations due in annual installments of $1,500,000 to $3,350,000 through July 1, 2020; interest at 2.25% to 5.25% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2011 2012 2013 2014 2015 2016-2020 $ 2,115,000 2,225,000 2,340,000 2,460,000 2,590,000 15,145,000 $ 1,410,938 1,299,900 1,183,088 1,060,238 931,088 2,467,240 $ 3,525,938 3,524,900 3,523,088 3,520,238 3,521,088 17,612,240 $26,875,000 $ 8,352,492 $ 35,227,492 73 $ 26,875,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations. On September 1, 2005, the City issued $21,315,000 of Excise Tax Revenue Obligations. The proceeds were used to finance the construction and renovation of various projects for Tempe Diablo Stadium, various cemetery improvements and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. $21,315,000 2005 Excise Tax Revenue Obligations due in annual installments of $345,000 to $2,135,000 through July 1, 2025; interest at 3.50% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 Principal $ Interest 395,000 410,000 425,000 450,000 460,000 7,615,000 9,700,000 $19,455,000 74 $ Total 938,700 924,875 909,500 888,250 870,250 3,589,100 1,502,750 $ 1,333,700 1,334,875 1,334,500 1,338,250 1,330,250 11,204,100 11,202,750 $ 9,623,425 $ 29,078,425 $ 19,455,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of governmental debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 Principal $ Interest 305,000 315,000 325,000 345,000 355,000 7,010,000 8,925,000 $17,580,000 $ Total 850,688 840,013 828,200 811,950 798,150 3,302,700 1,382,500 $ 1,155,688 1,155,013 1,153,200 1,156,950 1,153,150 10,312,700 10,307,500 $ 8,814,201 $ 26,394,201 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 Principal Interest $ $ 90,000 95,000 100,000 105,000 105,000 605,000 775,000 $1,875,000 88,013 84,863 81,300 76,300 72,100 286,400 120,250 $ 809,226 Total $ 178,013 179,863 181,300 181,300 177,100 891,400 895,250 $ 2,684,226 Excise Tax Revenue Obligations. On May 1, 2006 the City issued $22,265,000 of Excise Tax Revenue Obligations. The proceeds were used to fund a portion of the cost of the Tempe Center for the Arts Project and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.10% performing arts center tax, approved by voters on May 16, 2000, which are restricted to the Tempe Center for the Performing Arts Project. Additionally, the payments to be made by the City are secured by a subordinate lien pledge by the City of all unrestricted excise, transaction, franchise, privilege and business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing, including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. 75 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The City covenants and agrees that the Performing Arts Center Excise Taxes and the Excise Taxes which it presently imposes will continue to be imposed in each Fiscal Year so that the sum of (A) the Performing Arts Center Excise Taxes for such Fiscal Year plus (B) the excess of the Excise Taxes for such Fiscal Year over the Debt Service requirements on the Outstanding Senior Excise Tax Obligations for such Fiscal Year, shall be equal to at least three times the total of the Debt Service with respect to Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. The City further covenants and agrees that so long as any Special Parity Obligations are outstanding, the Performing Arts Center Excise Taxes, the Excise Taxes and the Special Excise Taxes will be imposed in each Fiscal Year so that the sum of (A) Performing Arts Center Excise Taxes for such Fiscal Year, plus (B) Special Excise Taxes for such Fiscal Year plus (C) the excess of the Excise Taxes for such Fiscal Year over the Debt Service on the Outstanding Senior Excise Tax Obligations for such Fiscal Year shall be equal to at least three times the total of the Debt Service with respect to the Parity Obligations and the Special Parity Obligations in such Fiscal Year. The City further covenants and agrees that if such revenues for any such Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year's actual Debt Service with respect to Parity Obligations and Special Parity Obligations, the City will either impose new Excise Taxes or Special Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations and Special Parity Obligations and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year’s Debt Service with respect to Parity Obligations and Special Parity Obligations. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. $22,265,000 2006 Excise Tax Revenue Obligations due in annual installments of $1,650,000 to $2,385,000 through July 1, 2016; interest at 4.00% to 4.50% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2011 2012 2013 2014 2015 2016 $ 1,935,000 2,015,000 2,100,000 2,190,000 2,280,000 2,385,000 $ 555,288 477,888 392,250 303,000 209,926 107,326 $ 2,490,288 2,492,888 2,492,250 2,493,000 2,489,926 2,492,326 $12,905,000 $2,045,678 $14,950,678 Interest 76 Total $ 12,905,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Variable Rate Demand Excise Tax Revenue Obligations. On June 21, 2006, the City entered into a purchase agreement with Royal Bank of Canada, acting by and through its New York branch, to pay costs associated with a portion of the City’s light rail project. These costs were financed through the issuance of $60,675,000 of variable rate demand excise tax revenue obligations (Obligations). The Obligations are remarketed by RBC Dain Rauscher, Inc., serving as the remarketing agent, at an interest rate which would cause the Obligations to have a market value on the commencement date of such rate period equal to the principal amount thereof plus accrued and unpaid interest, if any, not to exceed 12%. The interest rate on these Obligations is reset on a weekly basis and interest will be paid monthly. The City has the option of converting from the weekly rate to either a daily rate or term rates, including a term rate period through the final maturity of the Obligations. In the event that the Obligations are converted to a term rate (other than daily or weekly), the Obligations are subject to mandatory tender for purchase. The City has entered into a standby obligation purchase agreement with Royal Bank of Canada. The stated expiration date of the standby obligation purchase agreement is December 7, 2012, with extension request options available to the City thereafter. Royal Bank of Canada is providing liquidity and is obligated to purchase the Obligations that are tendered for purchase and not remarketed. The quarterly fee paid to Royal Bank of Canada for this liquidity support is an annualized rate of .70% of the average daily amount of available commitment for principal and interest. As of June 30, 2010 there were no draws outstanding or bonds presented for debt service payments under this standby obligation. If the standby obligation purchase agreement was to be exercised and all outstanding obligations were purchased by Royal Bank of Canada because they could not be remarketed, the maximum repayment liability would be the outstanding principal balance plus interest calculated at the greater of the Federal Funds Rate plus 2.5% or the Prime Rate plus 2.0%. The City has collateralized the bonds by a pledge of excise taxes collected and paid to the City under a 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which is restricted to public transit use. The City covenants and agrees that the excise taxes, which it presently imposes, will continue to be imposed so that the amount of excise taxes shall be equal to at least two times the total obligation debt service requirements for all outstanding parity obligations in each fiscal year. $60,675,000 2006 Variable Rate Excise Tax Revenue Obligations due in annual installments of $890,000 to $3,385,000 through July 1, 2036. 77 $56,260,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Variable Rate Demand Excise Tax Revenue Obligations (Continued) The average annualized interest rate paid on these Obligations during the fiscal year ended June 30, 2010 was 0.29%. The following is a summary of debt service cash requirements to maturity utilizing the interest rate in effect at June 30, 2010 of 0.24%. Fiscal Year Ending June 30, Principal 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036 $ 1,270,000 1,320,000 1,375,000 1,430,000 1,485,000 8,360,000 10,180,000 12,385,000 15,070,000 3,385,000 $ 67,512 65,988 64,404 62,754 61,038 276,996 222,648 156,480 75,984 4,062 $ 1,337,512 1,385,988 1,439,404 1,492,754 1,546,038 8,636,996 10,402,648 12,541,480 15,145,984 3,389,062 $56,260,000 $1,057,866 $57,317,866 Interest Total Excise Tax Revenue Refunding Obligations. On January 1, 2007, the City issued $21,310,000 of Excise Tax Revenue Obligations. The proceeds were used to refund $4,205,000 of the 2000A Excise Tax Revenue Obligations, $17,025,000 of the 2003 Excise Tax Revenue Refunding Obligations, and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, State-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. 78 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Refunding Obligations (Continued) $21,310,000 2007 Excise Tax Revenue Refunding Obligations due in annual installments of $25,000 to $3,100,000 through July 1, 2022; interest at 4.00% to 5.00% $21,235,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2022 Principal Interest Total $ 25,000 400,000 420,000 435,000 455,000 14,090,000 5,410,000 $ 1,017,350 1,016,350 1,000,350 983,550 966,150 3,399,750 367,875 $ 1,042,350 1,416,350 1,420,350 1,418,550 1,421,150 17,489,750 5,777,875 $21,235,000 $ 8,751,375 $ 29,986,375 Variable Rate Demand Excise Tax Revenue Obligations. On June 7, 2007, the City entered into a purchase agreement with Royal Bank of Canada, acting by and through its New York branch, to pay costs associated with a portion of the City’s light rail project. These costs were financed through the issuance of $50,000,000 of variable rate demand excise tax revenue obligations (Obligations). The Obligations are remarketed by RBC Dain Rauscher, Inc., serving as the remarketing agent, at an interest rate which would cause the Obligations to have a market value on the commencement date of such rate period equal to the principal amount thereof plus accrued and unpaid interest, if any, not to exceed 12%. The interest rate on these Obligations is reset on a weekly basis and interest will be paid monthly. The City has the option of converting from the weekly rate to either a daily rate or term rates, including a term rate period through the final maturity of the Obligations. In the event that the Obligations are converted to a term rate (other than daily or weekly), the Obligations are subject to mandatory tender for purchase. The City has entered into a standby obligation purchase agreement with Royal Bank of Canada. The stated expiration date of the standby obligation purchase agreement is December 7, 2012, with extension request options available to the City thereafter. Royal Bank of Canada is providing liquidity and is obligated to purchase the Obligations that are tendered for purchase and not remarketed. The quarterly fee paid to Royal Bank of Canada for this liquidity support is an annualized rate of 0.70% of the average daily amount of available commitment for principal and interest. As of June 30, 2010, there were no draws outstanding or bonds presented for debt service payments under this standby obligation. If the standby obligation purchase agreement was to be exercised and all outstanding obligations were purchased by Royal Bank of Canada because they could not be remarketed, the maximum repayment liability would be the outstanding principal balance plus interest calculated at the greater of the Federal Funds Rate plus 2.5% or the Prime Rate plus 2.0%. The City has collateralized the bonds by a pledge of excise taxes collected and paid to the City under a 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which is restricted to public transit use. The City covenants and agrees that the excise taxes, which it presently imposes, will continue to be imposed so that the amount of excise taxes shall be equal to at least two times the total obligation debt service requirements for all outstanding parity obligations in each fiscal year. 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Variable Rate Demand Excise Tax Revenue Obligations (Continued) $50,000,000 2007 Variable Rate Excise Tax Revenue Obligations due in annual installments of $760,000 to $2,790,000 through July 1, 2037. $47,345,000 The average annualized interest rate paid on these Obligations during the fiscal year ended June 30, 2010 was 0.29%. The following is a summary of debt service cash requirements to maturity utilizing the interest rate in effect at June 30, 2010 of 0.24%. Fiscal Year Ending June 30, Principal 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036-2037 $ 1,005,000 1,045,000 1,085,000 1,130,000 1,175,000 6,625,000 8,065,000 9,810,000 11,935,000 5,470,000 $ 56,814 55,608 54,354 53,052 51,696 236,148 193,074 140,670 76,902 9,912 $ 1,061,814 1,100,608 1,139,354 1,183,052 1,226,696 6,861,148 8,258,074 9,950,670 12,011,902 5,479,912 $47,345,000 $ 928,230 $ 48,273,230 Interest Total Excise Tax Revenue Obligations. On June 17, 2008 the City issued $30,170,000 of Excise Tax Revenue Obligations. The proceeds were used to fund the costs associated with a portion of the City’s light rail project and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of 0.50% transit excise tax revenues, approved by voters on September 10, 1996, which are restricted to public transit use. Such lien on and pledge of the transit excise taxes is on parity with that for the City’s Variable Rate Demand Transit Excise Tax Revenue Obligations, Series 2006 and the City’s Variable Rate Demand Transit Excise Tax Obligations, Series 2007. The City covenants and agrees that, so long as any of the Parity Obligations remain outstanding and the principal and interest shall be unpaid, it will not further encumber the Transit Excise Taxes on a parity basis unless the Transit Excise Taxes collected in the immediately preceding fiscal year shall have amounted to at least two times the highest combined principal and interest debt service payments, or any required deposits, for any succeeding fiscal year for with respect to the transit excise tax revenue Parity Obligations. $30,170,000 2008 Excise Tax Revenue Obligations due in annual installments of $480,000 to $1,120,000 through July 1, 2038; interest at 3.50% to 5.00% 80 $29,140,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036-2038 Principal Interest Total 565,000 585,000 605,000 630,000 650,000 3,660,000 4,490,000 5,610,000 7,160,000 5,185,000 $ 1,326,844 1,307,069 1,286,594 1,265,419 1,241,794 5,805,694 4,987,625 3,852,000 2,305,750 500,175 $ 1,891,844 1,892,069 1,891,594 1,895,419 1,891,794 9,465,694 9,477,625 9,462,000 9,465,750 5,685,175 $29,140,000 $23,878,964 $53,018,964 $ Excise Tax Revenue Obligations. On June 24, 2009, the City issued $23,615,000 of Excise Tax Revenue Obligations: $14,300,000 of tax-exempt obligations (Series 2009A) and $9,315,000 of taxable obligations (Series 2009B) referred to as Build America Bonds. As an issuer of Build America Bonds, the City qualifies, and intends to apply, for the interest subsidy payment directly from the US Treasury. The amount of the interest subsidy payment is thirty-five percent (35%) of the corresponding interest payable on the Series 2009B taxable obligations on any interest payment date. The proceeds were used to finance the construction of a public parking garage and various projects for the Tempe Water/Wastewater Department and to pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, state-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that the Excise Taxes which it presently imposes will continue to be imposed so that the amount of Excise Taxes for any fiscal year of the City shall be equal to at least three times the total of the Debt Service on all Parity Obligations in such Fiscal Year. The City further covenants and agrees that if receipts for any current Fiscal Year shall not equal three times such Debt Service or will not be sufficient to meet such Fiscal Year’s actual Debt Service with respect to Parity Obligations, the City will either impose new Excise Taxes or will increase the rates of such taxes currently imposed in order that (i) such revenues for the current Fiscal Year will be sufficient to meet such Fiscal Year's Debt Service with respect to Parity Obligations, and (ii) such revenues for the next succeeding Fiscal Year will be equal to at least three times the next succeeding Fiscal Year's Debt Service with respect to Parity Obligations. 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $14,300,000 2009A Excise Tax Revenue Obligations due in annual installments of $770,000 to $1,340,000 through July 1, 2023; interest at 3.00% to 5.00% $ 13,530,000 $9,315,000 2009B Excise Tax Revenue Obligations due in annual installments of $1,400,000 to $1,715,000 through July 1, 2029; interest at 4.23%, net of 35% federal credit 9,315,000 Total $ 22,845,000 The following is a summary of total debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2029 Principal $ Interest 815,000 840,000 860,000 905,000 935,000 5,315,000 6,715,000 6,460,000 $22,845,000 $ Total 977,871 953,421 928,221 885,221 858,071 3,633,169 2,239,169 696,069 $ 1,792,871 1,793,421 1,788,221 1,790,221 1,793,071 8,948,169 8,954,169 7,156,069 $ 11,171,212 $ 34,016,212 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2029 Principal $ Interest 240,000 245,000 250,000 265,000 275,000 1,550,000 1,960,000 1,885,000 $ 6,670,000 82 $ 285,462 278,273 270,922 258,413 250,468 1,060,232 653,614 203,011 $ 3,260,395 Total $ 525,462 523,273 520,922 523,413 525,468 2,610,232 2,613,614 2,088,011 $ 9,930,395 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) The following is a summary of enterprise debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2029 Principal $ Interest 575,000 595,000 610,000 640,000 660,000 3,765,000 4,755,000 4,575,000 $ 16,175,000 $ Total 692,409 675,148 657,299 626,809 607,604 2,572,937 1,585,555 493,057 $ 1,267,409 1,270,148 1,267,299 1,266,809 1,267,604 6,337,937 6,340,555 5,068,057 $ 7,910,818 $24,085,818 Section 108 Guaranteed Loan. In July 2004, the City entered into a Section 108 guaranteed loan agreement with the U.S. Department of Housing and Urban Development (HUD) for funding of $7,000,000 for on-site environmental remediation of the University/Hayden Butte Redevelopment Area 5 (Rio Salado Marketplace Redevelopment). The note requires interest only payments until August 2007. At that time the note will be due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 5.37% to 6.01%. The City has pledged its Community Development Block Grants as security for HUD’s guaranteed loan. The City was awarded a $1,000,000 HUD Brownfield Economic Development Initiative grant to be used to pay interest on the HUD Section 108 loan until such time the development generates sufficient tax revenue to cover the debt service of the development. $7,000,000 HUD Section 108 Guaranteed Loan due in annual installments of $261,000 to $549,000 through August 1, 2024; interest at 5.37% to 6.01% $ 6,181,000 The following discloses debt service requirements as of June 30, 2010 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 Principal 298,000 311,000 325,000 340,000 355,000 2,028,000 2,524,000 $ 6,181,000 $ Interest 336,170 321,912 306,404 289,708 271,860 1,044,158 389,045 $ 2,959,257 $ 83 Total 634,170 632,912 631,404 629,708 626,860 3,072,158 2,913,045 $ 9,140,257 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Water Infrastructure Finance Authority Loans. In September 2009, the City signed two capitalization grant agreements with the Water Infrastructure Finance Authority (WIFA). The funding from these agreements was derived from the United States Environmental Protection Agency pursuant to the federal American Recovery and Reinvestment Act (ARRA) of 2009, Public Law 111-5. The loan agreement for Loan #92A174-10 is in the principal amount of $4,084,503 of which $2,200,000 will be forgivable principal and the remaining balance bears interest and administrative fees at a combined rate of 3.06%. As of June 30, 2010, the amount drawn on the loan was $1,157,247. $1,884,503 Water Infrastructure Finance Authority Loan #92A174-10 due in annual installments of $69,678 to $123,631 through July 1, 2029; interest at 1.56% and administrative fee at 1.50% $ 1,157,247 The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2010 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2023 Principal $ 141,491 74,013 76,281 78,618 81,027 443,931 261,886 $ 1,157,247 Interest and Administrative Fee $ 42,306 31,123 28,855 26,518 24,109 81,748 15,055 $ 249,714 Total 183,797 105,136 105,136 105,136 105,136 525,679 276,941 $ 1,406,961 $ The loan agreement for Loan #92A175-10 is in the principal amount of $14,045,799 and bears interest and administrative fees at a reduced ARRA rate of 2.00%. As of June 30, 2010, the amount drawn on the loan was $12,116,459. $14,045,799 Water Infrastructure Finance Authority Loan #92A175-10 due in annual installments of $578,079 to $842,152.01 through July 1, 2029; interest at .50% and administrative fee at 1.50% $ 12,116,459 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2010 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2027 Principal $ 1,167,720 601,433 613,462 625,731 638,246 3,387,887 3,740,500 1,341,480 $ 12,116,459 Interest and Administrative Fee $ 306,649 218,975 206,946 194,677 182,162 714,154 361,540 37,788 $ 2,222,891 84 Total $ 1,474,368 820,408 820,408 820,408 820,408 4,102,041 4,102,041 1,379,268 $ 14,339,350 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Improvement Notes. Capital improvement notes represent borrowings to provide long-term financing for certain major capital improvement program projects (see Note 6). Capital improvement notes outstanding at June 30, 2010 were as follows: $11,440,000 capital improvement notes issued in 1990 due to the Water and Wastewater Enterprise Fund from the General Fund and Highway Users Special Revenue Fund and payable in equal annual installments through January 1, 2011; interest at 4.00% $ 521,955 The following discloses debt service requirements as of June 30, 2010 segregating principal and interest, to maturity: Fiscal Year Ending June 30, 2011 Principal $ 521,955 $ 521,955 Interest $ 20,878 $ 20,878 $ $ Total 542,833 542,833 Capital Leases. The City has entered into capital lease agreements for building and equipment. These lease agreements generally require annual payments and the lease term varies from 3 years to 20 years. The lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the date of inception. The governmental assets acquired through capital leases are as follows: Building Equipment Total Amount $ 6,434,335 55,637 $ 6,489,972 The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2010. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 2016-2019 Total minimum lease payments Less: interest at 4.72% to 8.50% $ Total 294,494 294,494 294,494 287,500 287,500 1,150,000 2,608,482 (832,335) Present value of future minimum lease payments $ 1,776,147 85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Leases (Continued) The proprietary assets acquired through capital leases are as follows: Amount $ 246,841 $ 246,841 Equipment Total The following is a schedule of future minimum lease payments, together with the net present value of the minimum lease payments as of June 30, 2010. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2011 2012 2013 Total minimum lease payments Less: interest at 4.48% $ Total 55,627 55,627 46,356 157,610 (10,521) Present value of future minimum lease payments $ 147,089 Statutory Debt Limitation. In the absence of more restrictive bond authorization ballot limitations, the City is subject to state statutory limitations on the amount of net bonded debt (exclusive of revenue and special assessment bonds and purchase contracts) it may have outstanding. The statutory debt limitation is 20 percent of the secondary assessed valuation for purposes of water, wastewater, open space preserves, artificial lighting, parks, playgrounds and recreational facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities and 6 percent of the secondary assessed valuation for all other purposes. At June 30, 2010, the 20 percent debt limitation was $553,497,773 with $492,153,706 of outstanding debt. This provided a 20 percent debt margin of $61,344,067. The 6 percent debt limitation was $166,049,332 with $8,285,000 of outstanding debt. This provided a 6 percent debt margin of $157,764,332. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2010, was $169,559,698. Bond Covenants. The various bond indentures contain certain 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. Arbitrage. Under U.S. Treasury Department regulations, all government tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. The requirements stipulate, in general, the earnings from the investment of tax exempt bond proceeds that exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City has evaluated each general obligation bond, certificates of participation, and revenue bond issue subject to the arbitrage rebate requirements and has determined that no liability exists at June 30, 2010. However, the City has designated $500,000 in the General Fund for this purpose. 86 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Debt Service Coverage for Governmental General Obligation Bonds. The governmental general obligations are payable from ad valorem tax revenues to be levied on all taxable property within the City. A total of $172,665,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2030. Annual principal and interest payments on the bonds are expected to require less than 66% of total 2009-10 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $235,428,379. Principal and interest paid for the current year and total ad valorem tax revenues were $16,318,073 and $24,913,392, respectively. Debt Service Coverage for Business-type Activities General Obligation Bonds. The business-type general obligations are paid from the water and wastewater utility system revenues of the City. A total of $289,895,000 is outstanding in business-type general obligation bonds. Proceeds of the bonds were used for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2030. Annual principal and interest payments on the bonds are expected to require less than 45% of 2009-10 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $398,481,594. Principal and interest paid for the current year and water and wastewater system revenues were $27,286,364 and $62,511,102, respectively. Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $57,945,000 in outstanding governmental excise tax obligations. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2029. Annual principal and interest payments on the bonds are expected to require less than 5% of total 2009-10 excise taxes. The total principal and interest remaining to be paid on the bonds is $81,959,932. Principal and interest paid for the current year and total excise taxes were $5,311,433 and $119,456,216, respectively. Debt Service Coverage for Business-type Activities Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $18,050,000 in outstanding business-type activities excise tax obligations. Proceeds of the bonds were used for improvements to the Double Butte Cemetery and for improvements and expansions to the City’s water and wastewater system. The bonds are payable through July 1, 2029. Annual principal and interest payments on the bonds are expected to require less than 2% of total 2009-10 excise taxes. The total principal and interest remaining to be paid on the bonds is $27,140,836. Principal and interest paid for the current year and total excise taxes were $1,448,705 and $119,456,216, respectively. Debt Service Coverage for Transit Excise Tax Obligations. For the repayment of transit excise tax obligation bonds, the City has pledged all future excise taxes collected and paid under the 0.50% transportation excise tax. Proceeds of the bonds were used for the construction of the City’s portion of the light rail system. The current balance outstanding is $132,745,000. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 17% of total 2009-10 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $158,610,060. Principal and interest paid for the current year and transit excise taxes were $4,345,570 and $27,891,084, respectively. Debt Service Coverage for Performing Arts Center Excise Taxes. For repayment of performing arts excise tax obligations, the City has pledged all future excise taxes collected and paid under a 0.10% performing arts center tax. Proceeds of the bonds were used for the construction of the Tempe Performing Arts Center. The bonds are payable primarily from performing arts excise taxes and are secured by a subordinate lien pledge of all future unrestricted excise taxes. The current balance outstanding is $39,780,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be 104% of total 2009-10 performing arts excise taxes. This difference will be covered by utilizing performing arts special revenue fund balance. The total principal and interest remaining to be paid on the bonds is $50,178,170. Principal and interest paid for the current year and total available excise taxes were $6,005,626 and $119,713,269, respectively. 87 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Changes in Long-term Liabilities. The following is a summary of changes in long-term liabilities for the fiscal year ended June 30, 2010: Beginning Balance Additions Governmental activities: Debt payable: General obligation bonds payable $ 156,265,000 Special assessments 36,095,000 2000A Excise tax obligations 700,000 2003 Excise tax refunding obligations 13,710,000 2004 Excise tax obligations 28,875,000 2005 Excise tax obligations 17,875,000 2006 Excise tax obligations 14,765,000 2006 Variable rate demand excise tax obligations 57,480,000 2007 Excise tax refunding obligations 21,260,000 2007 Variable rate demand excise tax obligations 48,310,000 2008 Excise tax obligations 2009 Excise tax obligations 2004 HUD Section 108 loan Capital improvement notes payable Total debt payable Capital leases Compensated absences Claims and judgments Net OPEB obligation Governmental activities long-term Business-type activities: General obligation bonds payable 2005 Excise tax obligations 2005 Excise tax obligation premium amortization 2009 Excise tax obligations 2010 WIFA Loan 2010 WIFA Loan Capital leases Net OPEB obligation Total debt payable Reductions $26,040,000 $ (9,640,000) (3,070,000) (340,000) (1,610,000) (2,000,000) (295,000) (1,860,000) 29,690,000 Ending Balance Amounts Due Within One Year $172,665,000 $10,980,000 33,025,000 3,150,000 360,000 360,000 12,100,000 1,675,000 26,875,000 2,115,000 17,580,000 305,000 12,905,000 1,935,000 - (1,220,000) (25,000) 56,260,000 21,235,000 1,270,000 25,000 - (965,000) 47,345,000 1,005,000 - (550,000) 29,140,000 565,000 6,895,000 6,466,000 1,023,835 439,409,835 1,888,631 21,461,167 4,879,557 37,068,811 $504,708,001 (225,000) (285,000) (501,880) 26,040,000 (22,586,880) 27,986 (140,470) 10,879,065 (11,677,832) 3,374,526 (3,376,521) 8,665,754 (5,070,312) $48,987,331 $(42,852,015) 6,670,000 240,000 6,181,000 298,000 521,955 521,955 442,862,955 24,449,955 1,776,147 132,229 20,662,400 12,595,007 4,877,562 2,798,176 40,664,253 $510,843,317 $39,970,367 $285,735,000 1,965,000 $19,125,000 $(14,965,000) (90,000) $ 289,895,000 $16,355,000 1,875,000 90,000 101,056 16,720,000 194,416 4,730,594 1,157,247 12,116,459 1,155,820 $ 309,446,066 (6,316) (545,000) (47,327) (815,537) $33,554,526 $(16,469,180) 94,740 16,175,000 1,157,247 12,116,459 147,089 5,070,877 6,316 575,000 141,491 1,167,720 49,650 - $ 326,531,412 $18,365,177 The long-term liabilities at June 30, 2010 have been reduced by deposits made with the City’s fiscal agent for July 1, 2010 maturities. For the governmental activities, claims and judgements and compensated absences are generally liquidated by the General Fund. 88 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST Advance Bond Refundings Future debt service on refunded bonds has been provided through advance refunding bond issues. Under an advance refunding arrangement, refunding bonds are issued and the net proceeds, plus any additional resources that may be required, are used to purchase securities issued or guaranteed by the United States government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. On January 1, 2007, the City issued $20,690,000 of general obligation refunding bonds with a premium of $718,251 to partially refund $3,680,000 of Series 1995; $750,000 of Series 1997; $8,890,000 of Series 1998A; and $7,370,000 of Series 2001A outstanding general obligation bonds. The bonds were issued with an average interest rate of 4.30%. The net proceeds of $21,162,165, after payment of $246,085 issuance costs and accrued interest of $19,313, were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Water/Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $700,471, which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $591,533. On January 1, 2007, the City issued $21,310,000 of excise tax revenue refunding obligation bonds with a premium of $1,387,396 to partially refund $4,205,000 of Series 2000A; and $17,025,000 of Series 2003 outstanding excise tax revenue obligation bonds. The bonds were issued with an average interest rate of 4.80%. The net proceeds of $22,436,893, after allocation of $260,503 of issuance costs and accrued interest of $22,674, were used to purchase State and local government securities. The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the City’s General Obligation Debt Service and Community Facilities District funds. As a result of the advance refunding, the City reduced its total debt service requirements by $946,355, which resulted in an economic gain of $701,966. Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2010 are as follows: $24,000,000 general obligation bonds issued in 2001 and partially refunded in 2007 $39,275,000 excise tax revenue obligation bonds issued in 2003 and partially refunded in 2007 Total bonds advance refunded 89 $ 7,370,000 17,025,000 $24,395,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 11 - COMMITMENTS In the Governmental fund financial statements, construction commitments are disclosed as reserves for encumbrances. At June 30, 2010 the City’s construction commitments are as follows: Governmental funds: Transit Streets Police Fire Parks and recreation Rio Salado Community development Signals Proprietary funds: Water/wastewater Golf Construction in Progress Commitment $ 8,865,147 7,239,961 1,184,000 823,972 7,771,683 1,848,908 $27,733,671 $ 2,357,423 3,382,499 3,757,418 5,427,277 745,584 8,753,261 779,888 148,279 $25,351,629 Construction in Progress Commitment $ 9,847,061 46,952 $ 9,894,013 $ 29,036,228 $ 29,036,228 In addition, there were non-construction related commitments in the General fund of $295,028 and the Grants and Court Awards fund of $671,957. NOTE 12 - OPERATING LEASES The City leases copiers under certain noncancelable leases accounted for as operating leases. Operating leases do not give rise to property rights or lease obligations, and therefore the results of the lease agreements are not reflected in the City’s Statement of Net Assets. Current year lease costs for the fiscal year ended June 30, 2010 was $182,870. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2011 2012 2013 2014 2015 Total minimum payments required $ $ 90 Amount 166,238 166,238 166,239 129,121 19,608 647,444 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 13 - RETIREMENT AND PENSION PLANS The City contributes to four separate defined benefit pension plans for the benefit of all full-time employees and elected officials. The Arizona Public Safety Personnel Retirement System administers separate agent multiple-employer retirement plans for all full-time police and fire personnel. The Arizona Public Safety Personnel Retirement System also acts as fund administrator for the Elected Officials Retirement Plan, a multiple-employer cost-sharing plan for elected officials of the City. The Arizona State Retirement System administers a multiple-employer cost-sharing plan for all other full-time employees. The City has met all required payment dates for these plans. Arizona Public Safety Personnel Retirement System (Full-time Police and Fire Employees) A. Plan Description The City contributes to the Arizona Public Safety Personnel Retirement System (“PSPRS”), an agent multipleemployer public safety employee retirement system that acts as a common investment and administrative agent for the various police and fire agencies within the state. All police and fire personnel are eligible to participate in the plan. The plan provides retirement, disability, and death benefits to plan members and beneficiaries. The PSPRS is jointly administered by the Fund Manager and 162 Local Boards and was established by Title 38, Chapter 5, Article 4 of the Arizona Revised Statutes (A.R.S). The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to Arizona Public Safety Personnel Retirement System, 1020 East Missouri, Phoenix, Arizona, 85014 or by calling 602-255-5575. B. Funding Policy The System is funded through a member contribution of 7.65 percent of gross payroll, an employer contribution set by an actuarial valuation expressed as a percent of gross payroll, and a distribution of the net earnings of the Fund. The City’s current aggregate contribution rate for fire is 24.07 percent of annual covered payroll, of which 0.43 percent was the health insurance premium portion. The current aggregate contribution rate for police is 22.23 percent of annual covered payroll, of which 0.43 percent was the health insurance premium portion. Benefit and contribution provisions are established by law and may be amended only by the State of Arizona Legislature (A.R.S. Section 38-843). C. Annual Pension Cost Police personnel contributed $2,207,341 and fire personnel $921,680 during fiscal year 2009-10. For 2010, the City’s annual pension cost was $6,414,273 for police and $2,899,979 for fire and was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2008 actuarial valuation determining contribution requirements for fiscal year 2009-10, using the projected unit credit method. The actuarial assumptions included (a) 8.50% investment rate of return (b) projected salary increases of 5.50% per year compounded annually, attributable to inflation and other across-the-board increases, (c) additional projected salary increases ranging from 5.50% to 8.50% per year, attributable to seniority/merit. The actuarial value of the PSPRS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a 4-year period. PSPRS’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at July 1, 2009 was 27 years. 91 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 13 - RETIREMENT AND PENSION PLANS (Continued) Arizona Public Safety Personnel Retirement System (Full-time Police and Fire Employees) (Continued) D. Three Year Trend Information (latest available information): Police Fiscal Year Ended June 30, 2007 2008 (Pension) 2008 (Health) 2009 (Pension) 2009 (Health) Annual Pension Cost (APC) $ 3,154,840 4,531,992 429,196 7,052,970 499,327 Percentage Contributed 100% 100 100 100 100 Net Pension Obligation - Fiscal Year Ended June 30, 2007 2008 (Pension) 2008 (Health) 2009 (Pension) 2009 (Health) Annual Pension Cost (APC) $ 1,600,734 2,245,903 261,528 3,239,601 243,925 Percentage Contributed 100% 100 100 100 100 Net Pension Obligation - Fire E. Schedule of Funding Progress (latest information available): Police Actuarial Valuation Date Value of June 30, Assets 2007 $ 84,586,242 2008 87,441,985 2009 93,234,582 Actuarial Accrued Liability (AAL) $ 142,121,830 147,095,432 153,895,111 Percent Unfunded Funded AAL 59.5% $ 57,535,588 59.4 59,653,447 60.6 60,660,529 Annual Unfunded AAL as Covered a % of Covered Payroll Payroll $ 22,621,598 254.3 28,052,053 212.7 29,489,537 205.7 Fire Actuarial Valuation Date Value of June 30, Assets 2007 $ 62,981,056 2008 66,550,238 2009 70,387,821 Actuarial Accrued Percent Unfunded Liability (AAL) Funded AAL $ 90,835,797 69.3% $ 27,874,741 92,632,556 71.8 26,082,318 96,683,646 72.8 26,295,825 92 Annual Covered Payroll $ 11,423,138 12,573,469 12,351,485 Unfunded AAL as a % of Covered Payroll 243.8 207.4 212.9 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 13 - RETIREMENT AND PENSION PLANS (Continued) Arizona State Retirement System (All Other Full-time Employees) A. Plan Description The City has elected to participate in the Arizona State Retirement System (ASRS or The System), a multiple-employer cost-sharing retirement plan, which provides retirement benefits for all full-time employees, except police and fire employees. The plan provides for retirement, disability, health insurance premium benefits, and death and survivor benefits. The System was established by the State of Arizona to provide pension benefits for employees of the state and employees of participating political subdivisions and school districts. The System is administered in accordance with Title 38, Chapter 5, of the Arizona Revised Statutes. The System issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the Arizona State Retirement System, 3300 North Central Avenue, Suite1300, Phoenix, AZ, 85012 or by calling 602-240-2000. B. Funding Policy The Arizona Revised Statutes provide statutory authority for determining the employees' and employers' contribution amounts as a percentage of covered payroll. Employers are required to contribute at the same rate as employees. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is able to change the contribution rate from that actuarially determined. The actuarially determined contribution rates for the year ended June 30, 2010 were 9.40 percent (9.0 percent for retirement and 0.40 percent for long-term disability) for active members and the City was required to contribute 9.40 percent (8.34 percent for retirement, 0.66 percent for health insurance premium and 0.40 percent for long-term disability) of the members’ annual covered payroll. The City’s contributions to the ASRS for the years ended June 30, 2010, 2009, and 2008 were $7,190,912, $7,247,303 and $6,957,969 respectively, equal to the annual required contributions for each year. Elected Officials Retirement Plan (Mayor and City Council) A. Plan Description The City's Mayor and Councilmembers participate in the Elected Officials Retirement Plan (“EORP”) a multiple employer, cost-sharing pension plan. The Fund Manager of the Arizona Public Safety Personnel Retirement System (“PSPRS”) is the administrator for the EORP which was established by Title 38, Chapter 5, Article 3 of the Arizona Revised Statutes to provide pension benefits for state and county elected officials, judges and certain city elected officials. EORP provides retirement benefits as well as death and disability benefits. The authority to amend Title 38, Chapter 5, Article 3 is reserved for the State Legislature. EORP issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Elected Officials Retirement Plan, 3010 East Camelback Road, Suite 200, Phoenix, Arizona, 85016 or by calling 602-255-5575. B. Funding Policy The retirement plan's funding policy (required by State Statutes) provides for periodic employer contributions at actuarially determined rates and employee contributions of 7.0 percent of their annual covered salary. The employer rate for 2009-10 was 26.25 percent of the members’ annual covered payroll, of which 0.85 percent was the health insurance premium portion. The City’s contributions to EORP for the fiscal years ended June 30, 2010, 2009 and 2008 were $57,841, $59,306, and $41,482 respectively, equal to the annual required contributions for each year. The City’s employees contributed $15,424, $14,826 and $14,368 for the same time period. 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 14 - OTHER POSTEMPLOYMENT BENEFITS Other post employment healthcare benefits, like the cost of pension benefits, constitute an exchange of compensation for employee services rendered. Similar to pension benefits, the cost of other postemployment benefits (OPEB) generally should be associated with the periods in which the exchange occurs rather than in future periods in which the benefits are provided. GASB Statement No. 45 requires the City to measure and recognize the OPEB cost while employee services are rendered, report the accumulated liability from prior years and provide information about the potential demands on the City’s future cash flows. Recognition of the liability, from the plan described below, accumulated from prior years, will be amortized over 30 years with the first period beginning with the fiscal year ending June 30, 2008. A. Plan Description The City offers the continuation of group health insurance benefits, in accordance with Resolution 2009.86 of the City Council, to all retired, benefitted employees who meet the following eligibility requirements: (a) have at least 10 years of service, (b) be enrolled in one of the City's group health insurance plans, and (c) at the time of retirement, be or have been eligible to receive benefits from one of the City sponsored state retirement plans. Due to changes effective July 1, 2009, benefitted employees hired after June 30, 1999 are not eligible to participate in the post employment benefit plan subject to the requirements of GASB Statement No. 45. As of June 30, 2010, 665 retirees meet those eligibility requirements to receive postemployment healthcare benefits. Total membership in the program is as follows: Retirees receiving benefits Active employees eligible Total 811 1,469 2,280 This OPEB provides medical coverage for qualified retired employees through a single-employer defined benefit plan. The plan provides benefits to eligible retirees (as outlined above), their spouses and dependents through the City’s group health insurance plans which covers both active and retired members. The plan benefits and contribution rates are determined by the City’s Human Resources Department based on claims experience and administrative costs of the plan. Because an irrevocable trust fund has not been established, the plan is not accounted for as a trust fund nor does the plan issue separate financial statements. B. Benefits Provided For those retirees who have not reached Medicare eligibility, the City offers two health plans to its retirees; Tempe Preferred Provider Organization (PPO), which are the City's self-insurance plans, and the CIGNA Health Maintenance Organization (HMO) plan. For those beneficiaries who have not reached Medicare eligibility, the benefits provided by the group health insurance plans are the same as those offered to active employees. For coverage to be continued for retirees and dependents reaching Medicare eligibility, beneficiaries are required to enroll in a City sponsored Medicare Supplemental Plan. C. Funding Policy The plan premium rates are determined annually by the City’s Human Resources Department. Premiums for retirees and active employees are calculated on an “unblended” basis, which means that the retirees and active rates are determined separately, based on their own demographics and historical experience. This eliminates any implicit rate subsidies. The City has not advance-funded any portion of the retiree health plan and covers the cost of the program on a pay-as-you-go basis. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 14 - OTHER POSTEMPLOYMENT BENEFITS (Continued) C. Funding Policy (Continued) Both the Arizona State Retirement and Arizona Public Safety Personnel Retirement systems subsidize the health insurance premium of eligible retirees depending on type of health plan chosen, coverage selected, and years of service. Approximately 71% of retiree premiums were subsidized by the City during the fiscal year resulting in expenditures of $8,101,582 that were recognized for post retirement health care. D. Annual OPEB Cost and Net OPEB Obligation The City’s annual OPEB cost is calculated based on the annual required contribution (ARC) which is an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The following table shows the components of the City’s annual OPEB cost for the year ended June 30, 2010, the amount actually contributed to the plan and changes in the City’s net OPEB obligation. Annual required contribution Adjustment to annual required contribution Interest on net OPEB obligation Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation – beginning of year Net OPEB obligation – end of year $ 10,561,624 (2,412,026) 1,671,976 9,821,574 (5,885,849) 3,935,725 41,799,405 $ 45,735,130 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the new OPEB obligation for the fiscal years ended June 30, 2008, 2009 and 2010 are as follows. Reductions in the fiscal year ended June 30, 2009 annual OPEB cost are due primarily to plan design changes. Fiscal Year Ended June 30, 2008 2009 2010 Annual OPEB Cost $ 39,404,362 $ 10,443,525 $ 9,821,574 Employer Contributions $5,628,327 $2,420,155 $5,885,849 Percentage of Annual OPEB Cost Contributed 14.3% 23.2% 59.9% E. Health Care Cost Trend Rate The following annual trend rates are applied on a select and ultimate basis: Benefit Medical/Rx Post 65 Administrative Stop Loss Select 9.0% 5.0% 11.0% Ultimate 5.0% 5.0% 5.0% Select trends are reduced 0.5% each year until reaching the ultimate trend. 95 Net OPEB Obligation $35,926,257 $41,799,405 $45,735,130 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 14 - OTHER POSTEMPLOYMENT BENEFITS (Continued) F. Funded Status and Funding Progress Actuarial Valuation Date 7/1/2007 7/1/2008 7/1/2009 Actuarial Value of Assets $ - Actuarial Accrued Liability Entry Unfunded AAL Age (UAAL) $ 398,306,209 $398,306,209 159,149,836 159,149,836 154,671,513 154,671,513 Unfunded AAL Funded Annual as a % of Ratio Covered Payroll Covered Payroll 0.0% $100,141,047 397.7% 0.0% 51,388,438 309.7% 0.0% 51,923,274 297.9% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions and actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress presents multi-year trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. G. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Significant methods and assumptions used for this fiscal year valuation were as follows: Actuarial valuation date Actuarial cost method Remaining amortization period Asset valuation method July 1, 2009 Entry age normal 28 years, closed N/A Actuarial assumptions: Healthcare inflation rate Investment rate of return Projected salary increases 9.0% initial rate, 5% ultimate rate, 8 year grade in period 4% Not applicable Amortization method Level dollar NOTE 15 - DEFERRED COMPENSATION PLANS The City offers its employees two compensation plans created in accordance with Internal Revenue Code, Section 457 and 401(K). The plans, available to all City employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The City’s fiduciary responsibility is that of exercising “due care” in selecting a third-party administrator. Federal legislation requires that Section 457 plan assets be held in trust for employees. As a result, the employee assets held in Section 457 plans are no longer the property of the City and subject to claims of the City’s general creditors. Therefore, the plan assets are not included in the City’s basic financial statements. 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 16 - FUND BALANCE /NET ASSETS RESERVATIONS AND DESIGNATIONS Reservations of Fund Balances At June 30, 2010, amounts were reserved on the fund financial statements for the following purposes: encumbrances - represent purchase obligations outstanding at the end of the fiscal year; inventories - the value of materials and supplies needed to maintain adequate levels of operating supplies; capital improvements notes receivable - represents amounts to be received that are not currently available; debt service - for payment of future amounts of principal and interest due. Designations of Fund Balances At June 30, 2010, amounts were designated for the following purposes: self-insurance - amount designated for payment of material, unanticipated claims against the City; Capital Projects - amounts designated for future capital projects; Rio Salado - amount designated for future operation and maintenance costs related to the Rio Salado Town Lake project; arbitrage rebate - amount designated for future arbitrage rebate; Rio Salado capital improvements fund- amount designated for dam replacements. Amount General fund: Self-insurance purposes Capital projects Rio Salado Arbitrage rebate Total General fund $ Rio Salado capital improvements fund Total governmental funds 8,841,391 1,321,408 3,120,991 500,000 13,783,790 1,861,579 $ 15,645,369 NOTE 17 - RISK FINANCING ACTIVITIES The City is exposed to risks arising from general liability, automobile liability (physical damage and bodily injury), property liability, workers compensation, and employee health claims. The City has established a Risk Management Fund (internal service fund) to account for and finance its uninsured risks of loss. Amounts are paid into the internal service fund by all other funds and are available to pay claims and to fund claim reserves. As with any risk retention program, the City is contingently liable in respect to claims beyond those actuarially projected. These interfund premiums are used to reduce the amount of claim expenditures reported in the internal service fund. The City is a self insured entity with excess commercial coverage purchased for general liability, automobile liability, property, workers' compensation and group health coverage. The coverage is as follows: for general liability the first $2.0 million is self insured and excess coverage of $40.0 million is provided; for automobile liability the deductible is $25,000 for comprehensive and collision with a policy limit of $5.0 million; for property the selfinsurance retention is the first $100,000 of all perils with a policy limit of $200.0 million; for workers' compensation and employers' liability the first $500,000 of each claim is self insured, with excess coverage of $2.0 million in employers' liability and the Arizona statutory workers' compensation coverage; and for group health the selfinsurance retention is $200,000 per occurrence, with an aggregate stop loss deductible of $21.2 million. During the year there were no significant reductions in the amounts of excess coverage purchased. 97 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) At fiscal year end, the estimated, unpaid insurance claims liability was based on a case-by-case review of actual pending claims and an estimated amount for incurred but not reported claims. A liability for a known claim was established if information indicated that it was probable that a loss had been incurred as of June 30, 2010, and that the amount was reasonably estimable. A liability for incurred but not reported claims was based on historical experience. The following is a summary of changes in insurance claims liabilities, accounted for in the governmental and proprietary funds, for the last two fiscal years: General liability Automobile liability Property liability Workers' compensation Health insurance General liability Automobile liability Property liability Workers' compensation Health insurance June 30, 2009 $ 6,858,870 596,578 45,888 1,680,816 1,901,708 $ 11,083,860 Claims Incurred Net of Change in Estimates $ 359,650 112,884 591,446 2,234,920 19,369,644 $ 22,668,544 Payments $ (141,174) (538,192) (585,477) (2,111,677) (19,376,054) $(22,752,574) June 30, 2010 $ 7,077,346 171,270 51,857 1,804,059 1,895,298 $ 10,999,830 June 30, 2008 $ 3,284,756 2,266,896 48,050 2,244,785 1,568,252 $ 9,412,739 Claims Incurred Net of Change in Estimates $ 3,990,976 (201,404) 205,647 955,566 19,622,697 $24,573,482 Payments $ (416,862) (1,468,914) (207,809) (1,519,535) (19,289,241) $(22,902,361) June 30, 2009 $ 6,858,870 596,578 45,888 1,680,816 1,901,708 $ 11,083,860 At June 30, 2010, the internal service fund accrued expenses totaled $9,107,764. This balance includes the general liability, automobile liability, property liability and worker’s compensation liability of $9,104,532 and other accrued expenses of $3,232. The health insurance claims liability at June 30, 2010 of $1,895,298 are deemed due and payable at June 30, 2010 and recorded as accrued expenditures/expense in the governmental and proprietary funds, respectively. Additionally, at June 30, 2010, the City had $8,841,391 of General Fund fund balance designated for self-insurance purposes. 98 Notes to the Financial Statements For Fiscal Year Ended June 30, 2010 City of Tempe, Arizona NOTE 18 - CONTINGENT LIABILITIES The City is subject to a number of lawsuits, investigations, and other claims that are incidental to the ordinary course of its operations. Although the City Attorney does not currently possess sufficient information to reasonably estimate the amounts of the liabilities to be recorded upon the settlement of such claims and lawsuits, some claims could be significant to the City’s operations. 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 materially adverse effect on the City’s financial position. The City participates in federally-funded and state-funded programs administered by various government agencies. The programs included in these financial statements may be subject to program compliance and/or financial monitoring by the granting agency or its representatives. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. NOTE 19 - RELATED ORGANIZATION The Industrial Development Authority (IDA) is a non-profit corporation established by the City in 1981 to promote industry and develop trade by inducing manufacturing, industrial and commercial enterprises to locate and remain in Tempe. The Board of Directors of the IDA is appointed by the City Council; however, the City does not have a financial benefit/burden relationship nor is the City able to impose its will on the IDA as defined in GASB Statement No. 14; therefore, data for the IDA is not included in the City’s basic financial statements. Separately issued financial statements are not available for the IDA. NOTE 20 - DEFICIT IN FUND BALANCE/NET ASSETS The Community Development Special Revenue Fund had a deficit fund balance of $12,486 at June 30, 2010. The deficit will be covered by future revenues that were deferred as of June 30, 2010. The Grants and Court Awards Special Revenue Fund had a deficit fund balance of $101,753 at June 30, 2010. The deficit will be covered by future revenues that were deferred as of June 30, 2010. The Risk Management Internal Service Fund had a negative net asset balance of $73,652 at June 30, 2010. The deficit will be covered by future transfers from operating funds. NOTE 21 – SUBSEQUENT EVENTS Subsequent to June 30, 2010 a settlement agreement amending the original development agreement was entered into in which the title to a portion of the land sold on August 22, 2007 was reconveyed to the City in exchange for the release of a capital improvement note receivable valued at $25,285,730 (see note 6). The developer has a five year option to reacquire the property. 99 City of Tempe, Arizona 100 City of Tempe, Arizona Combining Fund Financial Statements 101 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for specific revenues used to finance certain projects or activities as required by law or contractual agreement. ƒ Performing Arts Fund. To account for the receipt and expenditure of the Performing Arts Tax monies. These monies are restricted to financing the performing and visual arts center. ƒ Highway User Revenue Fund. To account for the receipt and expenditure of the City's share of the highway user taxes. State law restricts the use of these monies to maintenance, construction and reconstruction of streets, and repayment of transportation-related general obligation debt. ƒ Local Transportation Assistance Fund. To account for the receipt and expenditure of the City's share of state lottery allocations. These monies are restricted to transportation programs only. ƒ Community Development Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Community Development Block Grant and Home Program monies. ƒ Housing Assistance Fund. To account for the receipt and expenditure of U.S. Department of Housing and Urban Development Lower Income Housing Assistance Program grant monies. ƒ Rio Salado. To account for the receipt and expenditure of miscellaneous monies used to foster the development of Rio Salado. ƒ Grants and Court Awards. To account for the receipt and expenditure of miscellaneous grant monies and revenue received from court awarded confiscated property under both the Federal and State Organized Crime Acts. ƒ Community Facilities District. To account for the receipt and expenditure of monies for the Rio Salado Community Facilities District. 102 City of Tempe, Arizona NON-MAJOR GOVERNMENTAL FUNDS (continued) CAPITAL PROJECTS FUNDS Capital Projects Funds account for all current financial resources used for the acquisition of capital facilities except those financed by Enterprise Funds. Disbursements from these funds are primarily for property acquisition and the construction of permanent public improvements. The major sources of financing are derived from bond proceeds and special revenues. ƒ Streets Fund. Used for improving, constructing and reconstructing major streets, highways, collector and local streets within the City, and to acquire rights-of-way. ƒ Police Fund. Used for purchasing, constructing and equipping public safety buildings. ƒ Fire Fund. Used for purchasing, constructing and equipping fire stations. ƒ Performing Arts Fund. Used for constructing the performing and visual arts center. ƒ Storm Sewers Fund. Used for planning, constructing, extending and improving storm drain trunk lines and detention basins. ƒ Parks Fund. Used for acquiring, developing and equipping parks, playgrounds and recreation facilities. ƒ Rio Salado Fund. Used for consulting and engineering studies necessary for the design of the Rio Salado projects and for constructing a wildlife habitat. ƒ Community Development Fund. Used for acquiring, reconstructing, remodeling, renovating and equipping existing buildings that house municipal departments, and for acquiring and constructing housing for the elderly and the redevelopment of the downtown area. ƒ Signals Fund. Used for purchasing, constructing and equipping street light and traffic signal upgrades and for the planning of an overall transportation plan. 103 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2010 Special Revenue Performing Arts Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Claims and judgements Due to other funds Deferred revenue Matured bonds payable Matured interest payable Total liabilities Fund Balances Fund balance (deficit): Reserved for: Encumbrances Inventories Unreserved: Designated Undesignated Total fund balances (deficit) Total liabilities and fund balances $ 5,766,775 $ 484,717 4,932,813 11,184,305 $ 73,025 226,075 14,746 3,860,000 1,072,813 5,246,659 Highway User Revenue $ 4,654,467 $ 868,365 154,851 889,768 6,567,451 $ 208,555 757,025 67,704 1,033,284 - $ 5,937,646 5,937,646 11,184,305 Local Transportation Assistance $ 1,273,041 $ 1,273,041 $ 889,768 4,644,399 5,534,167 6,567,451 $ 104 - Community Development $ $ $ - $ 1,273,041 1,273,041 1,273,041 393,042 15,869 408,911 60,575 12,369 187,458 18,087 142,908 421,397 - $ (12,486) (12,486) 408,911 City of Tempe, Arizona Special Revenue Housing Assistance Rio Salado $ 730,765 $ 69,948 13,022 813,735 $ 7,683 109,118 116,801 $ 1,018,909 $ 76,301 22,073 1,117,283 $ - $ 696,934 696,934 813,735 45,622 72,250 19,777 137,649 Grants and Court Awards $ 2,000,656 $ 2,541,020 4,541,676 $ - $ 979,634 979,634 1,117,283 540,465 966,356 2,470 3,134,138 4,643,429 Community Facilities District $ 131,781 $ 2,343,794 2,475,575 $ 671,957 - $ (773,710) (101,753) 4,541,676 131,646 135 1,630,000 713,794 2,475,575 Total $ 15,576,394 $ 1,429,383 69,948 22,073 3,101,935 889,768 7,292,476 28,381,977 $ - $ (continued) 105 2,475,575 1,067,571 966,356 1,179,442 102,227 187,458 3,152,225 5,490,000 1,929,515 14,074,794 671,957 889,768 $ 12,745,458 14,307,183 28,381,977 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2010 Capital Projects Streets Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Restricted cash and investments Total assets Liabilities Accounts payable Deposits Accrued expenditures Claims and judgements Due to other funds Deferred revenue Matured bonds payable Matured interest payable Total liabilities Fund Balances Fund balance (deficit): Reserved for: Encumbrances Inventories Unreserved: Designated Undesignated Total fund balances (deficit) Total liabilities and fund balances $ 2,491,304 $ 439,930 2,931,234 $ $ 498,768 498,768 Police $ 5,673,968 $ 75,749 5,749,717 $ 824,593 824,593 Performing Arts Fire $ 5,526,025 $ 5,526,025 $ 450,886 450,886 $ - $ - $ - 3,382,499 - 3,757,418 - 5,427,277 - - (950,033) 2,432,466 2,931,234 1,167,706 4,925,124 5,749,717 (352,138) 5,075,139 5,526,025 - $ 106 $ $ Storm Sewers $ 1,792,092 $ 1,792,092 $ - - $ 1,792,092 1,792,092 1,792,092 City of Tempe, Arizona Capital Projects Parks $ 4,610,276 $ 4,610,276 $ 437,810 437,810 Rio Salado $ 5,217,382 $ 751,436 5,968,818 $ 745,584 - $ 3,426,882 4,172,466 4,610,276 207,669 207,669 Community Development $ 9,804,932 $ 9,804,932 $ 8,753,261 - $ 1,861,579 (4,853,691) 5,761,149 5,968,818 $ 963,859 963,859 Signals $ 893,044 $ 105,081 998,125 $ 98,055 98,055 Total Nonmajor Governmental Funds Total $ 36,009,023 $ 1,372,196 37,381,219 $ 3,481,640 3,481,640 $ 51,585,417 $ 1,429,383 69,948 22,073 4,474,131 889,768 7,292,476 65,763,196 $ $ 4,549,211 966,356 1,179,442 102,227 187,458 3,152,225 5,490,000 1,929,515 17,556,434 779,888 - 148,279 - 22,994,206 - 23,666,163 889,768 8,061,185 8,841,073 9,804,932 751,791 900,070 998,125 1,861,579 9,043,794 33,899,579 37,381,219 1,861,579 21,789,252 48,206,762 65,763,196 $ 107 $ $ Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2010 Special Revenue Local Transportation Assistance Highway User Revenue Performing Arts Community Development Revenues: Sales taxes Property taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income (loss) Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ 5,749,649 - $ - $ - $ 416,885 416,885 - (1,190) 646,227 10,083 6,404,769 315,516 9,422,203 54,778 2,054 9,794,551 1,421,984 24,254 40 629,006 2,075,284 2,788,293 - 10,639,991 - - 1,474,159 3,860,000 2,147,786 8,796,079 10,639,991 - 285,000 344,006 2,103,165 Expenditures: Current: Police Fire Community services Parks and recreation Public works Municipal court Development services Community development Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) (2,391,310) (845,440) 416,885 (27,881) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: General fund Special revenue funds Debt service funds Special assessment debt service Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) - Net change in fund balances Fund balance at beginning of year Fund balance (deficit) at end of year $ 761,451 - (27) (27) (2,770,000) (309,862) 143,718 (2,174,693) (2,391,337) (3,020,133) 8,328,983 8,554,300 5,937,646 $ 5,534,167 108 - - (184,119) (184,119) - 232,766 (27,881) 1,040,275 $ 1,273,041 15,395 $ (12,486) City of Tempe, Arizona Special Revenue Housing Assistance $ - Rio Salado $ Community Facilities District $ $ - - Total $ 7,353,228 199,974 9,674,069 1,096 10,500 22,047 9,707,712 5,185 1,966 75,917 1,886,621 2,088,517 238,698 2,181,565 854 420,083 822,538 597,063 6,349,318 1,843,913 56,518 1,900,431 13,500,086 238,698 9,422,203 2,622,704 5,985 2,966,967 833,038 1,392,688 38,535,571 9,339,303 231,581 594,964 1,096,771 2,990,976 410,643 1,129,084 114,172 982,061 3,059 177,917 2,339,535 3,222,557 410,643 3,917,377 709,136 10,639,991 982,061 3,059 14,427,685 9,339,303 1,923,316 5,807,912 1,630,000 1,431,493 5,401,028 5,775,000 3,923,285 44,010,794 (3,500,597) (5,475,223) 518,803 3,061,493 - 1,282,254 3,061,493 - (79,699) 3,500,597 (184,119) (2,770,000) (779,726) (309,862) 151,988 452,028 368,409 (36,695) 541,406 - - - 8,270 8,270 (700,000) (698,000) (28,425) (156,594) - (5,023,195) 54,841 - 19,330,378 368,409 328,525 $ 1,603,579 199,974 Grants and Court Awards 696,934 2,000 - 1,008,059 $ 979,634 $ (101,753) $ - (continued) 109 $ 14,307,183 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2010 Capital Projects Streets Police Fire Performing Arts Storm Sewers Revenues: Sales taxes Property taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ - $ 439,930 271,023 1,000 711,953 - $ 183,044 75,749 258,793 - $ 114,000 114,000 - $ - - - - - Expenditures: Current: Police Fire Community services Parks and recreation Public works Municipal courts Development services Community development Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures - Excess (deficiency) of revenues over expenditures before other financing sources (uses) - - 4,940,394 4,940,394 8,528,683 8,528,683 1,196,671 1,196,671 - 582,294 582,294 (4,228,441) (8,269,890) (1,082,671) - (582,294) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: General fund Special revenue funds Debt service fund Special assessment debt service Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) 225,660 - Net change in fund balances Fund balance (deficit) at beginning of year Fund balance (deficit) at end of year $ 399 700,000 - 5,277,920 - 27 - - 27 (85,493) 75,000 (10,493) (2,140,449) (1,492,591) (11,883) 4,284,002 864,739 (2,500,000) 7,352,300 5,552,699 890,896 6,168,816 (3,363,702) (2,717,191) 5,086,145 5,796,168 7,642,315 2,432,466 $ 4,925,124 110 27 (11,006) $ 5,075,139 (592,787) (27) $ - 2,384,879 $ 1,792,092 City of Tempe, Arizona Capital Projects Parks $ Rio Salado - $ 284,000 38,775 25,000 347,775 - $ 751,436 751,436 - - 4,150,330 4,150,330 13,632,211 13,632,211 (7,382,175) (3,398,894) (13,586,608) 225,500 79,699 1,500,000 - 2,224,940 32,500 2,621,039 447,861 (16,668) 5,559,505 5,598,118 (5,404) 1,799,795 (168,812) (556,909) 6,962,299 11,562,918 (1,784,057) (1,599,099) (2,023,690) 5,956,523 7,360,248 10,864,763 $ 5,761,149 $ $ 8,841,073 - $ - $ 1,863,050 284,000 316,098 214,320 116,418 2,793,886 - (937,592) (123,500) 915,998 792,498 (145,094) 1,045,164 900,070 111 $ 7,353,228 199,974 15,363,136 522,698 9,422,203 2,622,704 5,985 3,283,065 833,038 214,320 1,509,106 41,329,457 - 1,501,918 1,501,918 $ Total Nonmajor Governmental Funds Total 557,684 6,300 342 564,326 - 7,729,950 7,729,950 4,172,466 Signals 5,276 40,327 45,603 - 52,625 2,656 $ Community Development 3,222,557 410,643 3,917,377 709,136 10,639,991 982,061 3,059 14,427,685 42,262,451 42,262,451 5,775,000 3,923,285 42,262,451 86,273,245 (39,468,565) (44,943,788) 7,728,759 812,226 4,399,324 450,517 9,011,013 812,226 3,061,493 4,399,324 450,517 (168,812) (2,140,449) (4,780,565) (11,883) 26,040,000 32,329,117 (168,812) (184,119) (2,770,000) (2,140,449) (5,560,291) (321,745) 26,040,000 151,988 32,781,145 (7,139,448) (12,162,643) 41,039,027 60,369,405 33,899,579 $ 48,206,762 City of Tempe, Arizona 112 City of Tempe, Arizona INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government and to other government units, on a cost reimbursement basis. ƒ Risk Management Fund. Used to account for the costs of general liability, automobile liability, property liability and workers compensation claims by the City under a self-insurance program. ƒ Health Fund. Accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 113 Combining Statement of Net Assets Internal Service Funds June 30, 2010 City of Tempe, Arizona Risk Management Health Total Assets Current assets: Pooled cash and investments Accounts receivable $ 9,180,046 - Total assets Liabilities Current liabilities: Accounts payable Accrued expenses and claims payable Total current liabilities Noncurrent liabilities: Net OPEB Obligation Total noncurrent liabilities $ $ 15,879,317 126,168 9,180,046 6,825,439 16,005,485 72,282 9,107,764 9,180,046 619,134 619,134 691,416 9,107,764 9,799,180 73,652 73,652 Total liabilities 6,699,271 126,168 - 9,253,698 73,652 73,652 619,134 9,872,832 6,206,305 6,132,653 Net Assets Unrestricted Total net assets (73,652) $ 114 (73,652) $ 6,206,305 $ 6,132,653 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Internal Service Funds For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Risk Management Operating revenues: Contributions Total operating revenues $ Operating expenses: Claims incurred Total operating expenses Total 4,831,723 4,831,723 $ 28,617,195 28,617,195 4,832,870 4,832,870 28,153,397 28,153,397 32,986,267 32,986,267 (1,147) 463,798 462,651 (72,505) 5,742,507 5,670,002 Changes in net assets Total net assets- beginning Total net assets- ending Health $ (73,652) 115 $ 6,206,305 $ $ 33,448,918 33,448,918 6,132,653 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Risk Management Cash flows from operating activities: Receipts from other funds Payments for settlement of claims Net cash provided by (used) operating activities $ Net increase (decrease) in cash and cash equivalents 4,831,723 (4,916,920) (85,197) Health Total $ 28,727,131 (28,048,398) 678,733 $ 33,558,854 (32,965,318) 593,536 (85,197) Cash and cash equivalents, beginning of year 678,733 593,536 6,020,538 15,285,781 $ 6,699,271 $ 15,879,317 $ 463,798 $ 109,936 104,999 678,733 9,265,243 Cash and cash equivalents, end of year $ 9,180,046 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used) operating activities: Change in assets and liabilities: (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Increase (decrease) in accrued expenses Increase (decrease) in net OPEB obligation Net cash provided by (used) operating activities 116 $ (1,147) $ 3,369 (88,566) 1,147 (85,197) $ 462,651 $ 109,936 108,368 (88,566) 1,147 593,536 City of Tempe, Arizona Other Supplementary Information 117 City of Tempe, Arizona 118 City of Tempe, Arizona BUDGETARY COMPARISON SCHEDULES 119 City of Tempe, Arizona 120 Combined Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General, Debt Service, Special Revenue and Enterprise Fund Types For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Total revenues Expenditures Current: Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal court Development services Community development Financial Services Human resources Information technology Information technology interdept charges Water utilities Non-departmental Debt Service: Principal Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance Final Budget Amounts Actual Amounts (Budgetary Basis) $ 156,987,616 64,937,501 5,107,143 132,475,335 10,576,421 1,662,750 6,106,243 377,853,009 $ 145,038,639 60,914,078 537,263 104,693,767 10,249,774 1,670,698 5,352,359 328,456,578 Variance with Final Budget Positive (Negative) $ (11,948,977) (4,023,423) (4,569,880) (27,781,568) (326,647) 7,948 (753,884) (49,396,431) 73,919,405 28,078,849 18,781,629 19,581,733 100,847,231 4,438,600 398,607 338,182 552,541 519,157 1,063,166 3,115,161 4,376,653 7,316,505 23,834,435 4,021,344 3,423,706 15,716,660 (15,420,958) 39,577,535 4,492,190 71,487,450 26,849,390 17,209,454 18,523,215 86,755,354 4,216,777 386,866 322,387 521,078 514,087 799,953 3,115,216 4,289,893 7,045,911 20,010,302 3,826,113 3,387,415 14,910,970 (14,860,538) 41,064,768 - 2,431,955 1,229,459 1,572,175 1,058,518 14,091,877 221,823 11,741 15,795 31,463 5,070 263,213 (55) 86,760 270,594 3,824,133 195,231 36,291 805,690 (560,420) (1,487,233) 4,492,190 35,117,674 33,858,187 407,948,192 34,742,157 28,452,139 373,570,357 375,517 5,406,048 34,377,835 48,945,852 (27,527,469) 755,553 430,897 22,604,833 (22,508,946) 44,365,224 (26,076,231) 755,553 212,897 19,257,443 4,238,847 4,580,628 (1,451,238) 218,000 3,347,390 $ (26,747,793) 121 $ $ Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Revenues: Property taxes Other entities' participation Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) $ 25,192,451 185,458 25,377,909 $ 24,913,392 92,885 25,006,277 10,837,056 9,038,486 19,875,542 10,632,157 8,555,975 19,188,132 204,899 482,511 687,410 5,502,367 5,818,145 315,778 Expenditures: Debt service: Principal retirement Interest and fiscal fees Total expenditures Excess of revenues over expenditure Other financing sources (uses): Transfers in Transfers out Premium on issuance of debt Total other financing sources (uses) Excess of revenues and other sources over expenditures and other uses $ 2,770,000 8,272,367 8,144,500 (8,435,993) 755,553 $ 6,282,205 18,120,931 18,120,931 $ 26,393,298 $ 24,403,136 122 Variance with Final BudgetPositive (Negative) $ (279,059) (92,573) (371,632) 5,374,500 (8,435,993) 755,553 $ (1,990,162) - $ (1,990,162) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Community services Debt service: Principal retirement Interest and fiscal fees Total expenditures $ 6,295,038 182,539 386,000 2,500 6,866,077 $ 5,749,649 14,072 646,227 10,083 6,420,031 Variance with Final BudgetPositive (Negative) $ (545,389) (168,467) 260,227 7,583 (446,046) 3,083,264 2,786,673 296,591 3,860,000 2,155,626 9,098,890 3,860,000 2,147,786 8,794,459 7,840 304,431 (2,232,813) (2,374,428) (141,615) (27) (27) (27) (27) Deficiency of revenues over expenditures Other financing uses: Transfers out Total other financing uses Deficiency of revenues over expenditures and other uses - $ (2,232,813) 123 $ (2,374,455) $ (141,642) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants State sales tax Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures $ 10,019,765 180,000 10,199,765 14,656,500 14,656,500 $ 315,516 9,422,203 54,778 2,054 9,794,551 Variance with Final BudgetPositive (Negative) $ 10,289,625 10,289,625 315,516 (597,562) 54,778 (177,946) (405,214) 4,366,875 4,366,875 Excess (deficiency) of revenues over expenditures (4,456,735) (495,074) 1,035,000 (309,862) 725,138 761,451 (3,079,862) 143,718 (2,174,693) Excess (deficiency) of revenues and other sources over expenditures and other uses $ (3,731,597) $ (2,669,767) Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) 124 3,961,661 (273,549) (2,770,000) 143,718 (2,899,831) $ 1,061,830 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Local Transportation Assistance Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Final Budget Amounts Revenues: Intergovernmental: Other Total revenues $ Expenditures: Current: Public works Total expenditures 705,440 705,440 Actual Amounts (Budgetary Basis) $ - 416,885 416,885 - Variance with Final BudgetPositive (Negative) $ (288,555) (288,555) - Excess of revenues over expenditures Other financing uses: Transfers out Total other financing uses Excess (deficiency) of revenues over expenditures and other financing uses $ 705,440 416,885 (288,555) (232,795) (232,795) (184,119) (184,119) 48,676 48,676 472,645 125 $ 232,766 $ (239,879) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Revenues: Intergovernmental: Federal grants Other Investment income Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 4,241,825 50,000 4,291,825 $ 1,421,984 24,254 40 629,006 2,075,284 $ (2,819,841) (25,746) 40 629,006 (2,216,541) 4,290,403 1,474,283 2,816,120 4,290,403 285,000 344,006 2,103,289 (285,000) (344,006) 2,187,114 Expenditures: Current: Community development Debt service: Principal retirement Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures $ 1,422 126 $ (28,005) $ (29,427) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Charges for services Investment income Miscellaneous Total revenues $ 8,929,816 10,000 5,000 4,225 8,949,041 Expenditures: Current: Community development Total expenditures Excess of revenues over expenditures $ 8,944,784 8,944,784 $ 4,257 127 9,674,069 10,500 1,096 22,047 9,707,712 Variance with Final BudgetPositive (Negative) $ 9,338,216 9,338,216 $ 369,496 744,253 500 (3,904) 17,822 758,671 (393,432) (393,432) $ 365,239 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes Property taxes Investment income Charges for services Miscellaneous Total revenues $ 1,550,000 175,000 130,000 2,500 161,101 2,018,601 Expenditures: Current: Community development Total expenditures 2,431,457 2,431,457 Other financing sources: Proceeds from sale of capital assets Total other financing sources Deficiency of revenues and other financing sources over expenditures $ - $ (412,856) 128 $ 1,603,579 199,974 10,439 1,966 75,917 1,891,875 Variance with Final BudgetPositive (Negative) $ 53,579 24,974 (119,561) (534) (85,184) (126,726) 1,923,679 1,923,679 507,778 507,778 8,270 8,270 8,270 8,270 (23,534) $ 389,322 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 43,289 1,513,340 1,556,629 $ 1,843,913 56,518 1,900,431 $ 1,800,624 (1,456,822) 343,802 3,115,310 2,339,535 775,775 1,630,000 1,427,080 6,172,390 1,630,000 1,431,493 5,401,028 (4,413) 771,362 (4,615,761) (3,500,597) 1,115,164 3,580,296 (79,699) 3,500,597 3,580,296 (79,699) 3,500,597 Final Budget Amounts Revenues: Charges for services Miscellaneous Total revenues Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures $ Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Deficiency of revenues and other sources over expenditures and other uses - $ (4,615,761) 129 $ - $ 4,615,761 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Water utilities Debt service: Principal Interest and fiscal fees Total expenditures $ 1,143,387 59,311,760 574,500 61,029,647 $ Variance with Final BudgetPositive (Negative) 97,317 60,325,662 51,034 60,474,013 $ (1,046,070) 1,013,902 (523,466) (555,634) 39,577,535 41,064,768 (1,487,233) 15,957,458 14,893,750 70,428,743 15,510,000 13,430,392 70,005,160 447,458 1,463,358 423,583 (9,399,096) (9,531,147) (132,051) 542,833 (447,861) 94,972 5,956,816 (5,908,017) 81,572 130,371 5,413,983 (5,460,156) 81,572 35,399 $ (9,304,124) $ (9,400,776) Deficency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Deficiency of revenues and other sources over expenditures and other uses 130 $ (96,652) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 77,479 15,653,109 15,730,588 $ 8,652 15,242,801 12,491 15,263,944 $ 15,966,434 15,966,434 14,812,084 14,812,084 1,154,350 1,154,350 (235,846) 451,860 687,706 98,000 98,000 11,389 11,389 (86,611) (86,611) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues $ Expenditures: Current: Public works Total expenditures Excess (deficiency) of revenues over expenditures (68,827) (410,308) 12,491 (466,644) Other financing sources: Proceeds from sale of capital assets Total other financing sources Excess (deficiency) of revenues and other sources over expenditures $ (137,846) 131 $ 463,249 $ 601,095 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Total revenues $ Expenditures: Current: Parks and recreation Debt service: Principal Interest and fiscal fees Total expenditures 5,705 1,995,578 2,001,283 $ 146 1,574,081 1,574,227 Variance with Final BudgetPositive (Negative) $ (5,559) (421,497) (427,056) 2,152,143 2,040,343 111,800 8,160 9,913 2,170,216 2,040,343 8,160 9,913 129,873 Deficency of revenues over expenditures Other financing sources: Transfers in Proceeds from sale of capital assets Total other financing sources Deficiency of revenues and other sources over expenditures $ (168,933) (466,116) (297,183) - 66,858 4,025 70,883 66,858 4,025 70,883 (168,933) 132 $ (395,233) $ (226,300) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Cemetery Fund For the Fiscal Year Ended June 30, 2010 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Total revenues $ Expenditures: Current: Parks and recreation Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures $ 147,186 147,186 $ 116,643 116,643 Variance with Final BudgetPositive (Negative) $ (30,543) (30,543) 195,351 139,436 55,915 90,000 91,163 376,514 90,000 91,660 321,096 (497) 55,418 (229,328) 133 $ (204,453) $ 24,875 City of Tempe, Arizona 134 City of Tempe, Arizona FINANCIAL DATA SCHEDULES The Financial Data Schedules in this section are presented as required by the U.S. Department of Housing and Urban Development in accordance with the Uniform Financial Reporting Standards Rule as contained in the Federal Register (24CFR, Part 5, Subpart H). These schedules are presented on a modified accrual basis of accounting. 135 Other Supplementary Information - Financial Data Schedule Balance Sheet Housing Assistance Fund June 30, 2010 City of Tempe, Arizona Line Item # Section 8 Voucher Program Account Description Assets 111 115 124 124 128 Cash - unrestricted Cash - restricted Accounts receivable - other governments Accounts receivable - federal government Accounts receivable - fraud recovery Total assets $ $ 613,964 116,801 13,022 69,948 813,735 Liabilities 312 321 331 345 Accounts payable <= 90 days Accrued wage/payroll taxes payable Accounts payable - HUD PHA programs Other current liabilities Total liabilities $ 7,194 18,474 92,881 (1,748) 116,801 Equity 512 513 600 Undesignated fund balance Total equity Total liabilities and equity $ 136 696,934 696,934 813,735 Other Supplementary Information - Financial Data Schedule Revenues and Expenses Housing Assistance Fund For the Fiscal Year ended June 30, 2010 City of Tempe, Arizona Line Item # Section 8 Voucher Program Account Description 706 714 715 720 Revenues HUD PHA grants Fraud Recovery Other revenue Investment income - restricted Total revenues 911 912 914 915 916 973 Expenses Administrative salaries Auditing fees Compensated absences Employee benefit contributions - administrative Other operating - administrative Housing assistance payments Total expenses $ Excess of revenues over expenses 9,674,069 10,500 22,047 1,096 9,707,712 433,931 4,792 50,115 192,434 196,653 8,461,378 9,339,303 $ 368,409 $ $ 12,984 12,286 264,961 431,973 Memo Account Information 1120 1121 1117 1118 Unit months available Number of unit months leased Administrative Fee Equity Housing Assistance Payments Equity 137 City of Tempe, Arizona 138 This section provides a broad range of trend data covering key financial indicators including general governmental revenues and expenditures, property taxes, debt burden, demographics and miscellaneous data useful in assessing the City’s financial condition. Statis tical Section City of Tempe, Arizona STATISTICAL SECTION The Statistical Section presents detailed information as a context for understanding the information in the financial statements, note disclosures and required supplementary information in regards to the City’s overall financial health. ƒ Financial Trends. These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. ƒ Revenue Capacity. These schedules contain information to help the reader assess the City’s most significant local revenue sources, property tax and sale and use taxes. ƒ Debt Capacity. These schedules 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. ƒ Economic and Demographic Information. These schedules offer economic and demographic indicators to help the reader understand the environment within which the City’s financial activities take place. ƒ Operating Information. These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report 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. Note: The City implemented GASB 34 for the fiscal year ended June 30, 2002. Prior statements have not been restated to comply with the new requirements. These amounts are presented on the accrual basis of accounting. 139 City of Tempe, Arizona 140 Net Assets by Component (Exhibit S-1) Last Nine Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 Fiscal Year 2002-03 Fiscal Year 2003-04 Fiscal Year 2004-05 Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted $ 433,414,734 122,572,053 102,002,207 $ 440,494,223 135,314,124 73,239,199 $ 426,857,287 143,723,739 91,829,853 $ 425,257,427 137,183,741 153,918,478 $ 388,629,882 174,328,803 226,533,760 $ 397,087,925 114,918,257 414,023,370 $ 597,765,255 139,393,928 277,055,145 $ 574,872,877 181,241,102 237,470,312 $ 562,958,494 142,947,736 241,371,774 Total governmental activities net assets $ 657,988,994 $ 649,047,546 $ 662,410,879 $ 716,359,646 $ 789,492,445 $ 926,029,552 $ 1,014,214,328 $ 993,584,291 $ 947,278,004 Business-type activities Invested in capital assets, net of related debt Unrestricted $ 173,224,647 82,578,913 $ 171,881,978 89,985,585 $ 174,841,674 89,162,318 $ 191,670,395 74,678,567 $ 174,110,077 88,802,930 $ 177,682,915 88,554,746 $ 154,867,017 103,816,965 $ 151,096,394 100,251,937 $ 144,245,429 102,511,794 Total business-type activities net assets $ 255,803,560 $ 261,867,563 $ 264,003,992 $ 266,348,962 $ 262,913,007 $ 266,237,661 $ 258,683,982 $ 251,348,331 $ 246,757,223 Primary government Invested in capital assests, net of related debt Restricted Unrestricted $ 606,639,381 132,637,849 174,515,324 $ 612,376,201 143,444,919 155,093,989 $ 601,698,961 152,737,563 171,978,347 $ 616,927,822 137,183,741 228,597,045 $ 562,739,959 174,328,803 315,336,690 $ 574,770,840 114,918,257 502,578,116 $ 752,632,272 139,393,928 380,872,110 $ 725,969,271 181,241,102 337,722,249 $ 707,203,923 142,947,736 343,883,568 Total primary government net assets $ 913,792,554 $ 910,915,109 $ 926,414,871 $ 982,708,608 $ 1,052,405,452 Note: Information prior to fiscal year 2001-02 was not available in this format. 141 Fiscal Year 2005-06 Fiscal Year 2006-07 $ 1,192,267,213 Fiscal Year 2007-08 $ 1,272,898,310 Fiscal Year 2008-09 $ 1,244,932,622 Fiscal Year 2009-10 $ 1,194,035,227 Changes in Net Assets (Exhibit S-2a) Last Nine Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 Fiscal Year 2002-03 Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 $ 45,265,995 15,988,363 20,874,630 57,047,822 2,212,271 516,899 1,414,543 784,099 2,420,285 3,325,642 16,808,229 2,485,774 4,906,157 4,058,772 804,751 7,594,725 6,588,170 $ 47,729,305 15,103,049 20,307,801 57,917,031 2,845,176 579,089 918,556 433,922 2,027,045 3,230,817 18,760,209 3,245,906 5,404,942 3,762,782 4,185,163 14,852,873 6,956,107 $ 49,973,991 16,990,382 20,629,836 61,814,870 2,472,966 407,818 209,830 505,865 440,660 652,442 2,087,009 4,053,127 19,111,722 4,021,965 3,946,238 2,418,605 2,280,717 9,637,203 8,974,827 $ 51,928,073 17,679,667 21,116,067 61,853,194 2,312,548 400,549 312,882 544,872 446,333 443,255 2,262,903 3,655,280 21,449,181 3,187,992 4,102,556 2,561,746 1,854,603 6,895,583 9,033,035 $ 59,957,698 20,098,598 22,205,153 67,537,876 2,499,978 362,810 412,936 534,950 460,824 752,336 2,348,553 4,342,297 4,492,161 30,358,768 4,256,427 2,727,058 1,462,595 6,122,335 10,821,420 $ 60,929,075 22,563,083 16,072,936 20,015,034 56,869,440 2,816,030 362,281 445,531 548,552 476,089 528,493 2,903,028 4,708,606 8,611,601 21,444,736 4,597,029 2,877,320 889,443 8,127,073 13,996,681 $ 83,613,800 30,133,124 24,070,427 20,521,457 82,727,089 3,179,145 547,453 488,323 687,926 558,706 870,815 3,641,333 6,066,038 8,596,785 20,037,984 5,969,557 3,648,975 2,677,340 3,067,647 12,091,111 $ 86,126,079 30,850,700 30,402,447 20,431,433 101,674,714 3,137,349 418,851 265,531 583,563 484,460 684,875 2,933,734 5,496,374 6,338,984 20,445,243 4,458,557 3,157,288 1,817,517 1,297,669 16,247,598 $ 78,283,021 30,542,829 21,891,886 21,238,479 115,283,119 4,210,261 387,723 369,153 531,651 427,828 739,884 3,101,845 5,245,105 7,107,213 23,494,471 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 193,097,127 208,259,773 210,630,073 212,040,319 241,754,773 249,782,061 313,195,035 337,252,966 340,940,020 Business-type activities: Water/Wastewater Solid waste Golf course Cemetery 38,892,299 10,294,641 2,441,907 - 38,417,396 10,205,570 2,435,783 - 42,739,236 10,912,307 2,353,586 - 47,156,603 11,413,402 2,442,925 - 53,588,122 11,836,691 2,375,802 152,717 53,688,700 12,403,387 2,225,214 171,817 64,954,769 15,130,899 2,667,539 251,743 64,720,725 14,499,308 2,324,208 218,447 73,045,936 13,730,227 2,269,182 312,525 Total business-type activities expenses 51,628,847 51,058,749 56,005,129 61,012,930 67,953,332 68,489,118 83,004,950 81,762,688 89,357,870 $ 244,725,974 $ 259,318,522 $ 266,635,202 $ 273,053,249 $ 309,708,105 $ 318,271,179 $ 396,199,985 $ 419,015,654 $ 430,297,890 Expenses Governmental activities: Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal courts Development services Community development Financial services Human resources Information technology Non-departmental Interest on long-term debt Total governmental activities expenses Total primary government expenses 142 Changes in Net Assets (Exhibit S-2b) Last Nine Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 Fiscal Year 2002-03 Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Program Revenues Governmental activities: Charges for services: Police Fire Community services Parks and recreation Public works Community relations Municipal courts Development services Economic development Community development Financial services Non-departmental Operating grants and contributions Captital grants and contributions Total governmental activities program revenues $ Business-type activities: Charges for services: Water and wastewater Solid waste Golf course Cemetery Capital grants and contributions Total business-type activities program revenues 28,181 43,782 4,586,011 3,343,519 6,382,786 1,859,012 179,726 2,007,179 115,498 11,782,757 9,376,155 39,704,606 $ 40,890,844 9,979,359 2,124,037 2,033,578 55,027,818 Total primary government program revenues $ 94,732,424 Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense $ (153,392,521) 3,398,971 $ (149,993,550) $ 833,378 334,773 4,996,644 4,112,610 2,711,225 2,808,889 238,226 1,469,142 83,938 13,490,697 5,098,677 36,178,199 $ 836,081 305,964 5,213,032 5,261,301 5,857,804 2,881,155 238,417 1,378,148 59,598 14,346,903 12,589,817 48,968,220 $ 877,330 41,561 5,045,852 9,904,057 6,497,384 3,523,443 325,191 1,744,163 78,767 16,245,880 33,688,443 77,972,071 $ 877,704 566,505 5,098,319 6,594,229 7,179,554 5,566,289 637,445 1,932,684 92,827 19,903,398 54,935,929 103,384,883 $ 831,973 1,116,101 5,353,815 30,053 7,940,104 7,687,007 5,891,971 526,893 1,900,016 284,084 18,812,530 103,412,667 153,787,214 $ 1,110,714 303,824 6,924,685 27,844 11,305,217 8,211,574 6,175,963 451,535 1,728,472 79,536 15,625,633 79,670,490 131,615,487 $ 1,201,962 314,969 7,122,650 9,348 20,461,847 24,070 8,912,739 5,090,280 592,236 1,781,809 130,492 16,052,299 35,955,254 97,649,955 $ 1,052,723 912,000 6,173,870 126,455 19,596,611 5,868,369 3,710,512 1,938,184 1,997,614 18,222,849 38,709,299 98,308,486 43,315,681 10,496,774 1,920,699 179,754 55,912,908 42,604,532 11,014,949 2,020,132 751,525 56,391,138 44,443,764 12,054,563 1,954,278 2,835,223 61,287,828 47,012,596 12,989,827 1,971,031 18,943 506,593 62,498,990 50,922,496 13,820,128 1,912,286 18,339 4,782,425 71,455,674 53,208,327 14,669,542 1,984,429 231,960 472,928 70,567,186 55,504,216 15,130,988 1,813,578 98,356 59,867 72,607,005 62,511,102 15,242,801 1,574,081 116,643 4,765,839 84,210,466 92,091,107 $ 105,359,358 $ 139,259,899 $ 165,883,873 $ 225,242,888 $ 202,182,673 $ 170,256,960 $ 182,518,952 $ (161,661,853) 386,009 $ (161,275,844) $ (134,068,248) 274,898 $ (133,793,350) $ (138,369,890) (5,454,342) $ (143,824,232) $ (95,994,847) 2,966,556 $ (93,028,291) $ (181,579,548) (12,437,764) $ (194,017,312) $ (239,603,011) (9,155,683) $ (248,758,694) $ (242,631,534) (5,147,404) $ (247,778,938) $ (172,081,574) 4,854,159 $ (167,227,415) 143 Changes in Net Assets (Exhibit S-2c) Last Nine Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 Fiscal Year 2002-03 Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 $ 111,538,072 16,544,791 20,375,185 1,810,590 5,233,512 11,223,592 1,444,812 (68,770) 168,101,784 $ 112,724,512 16,882,535 21,269,140 1,476,718 6,247,543 2,898,356 1,469,345 171,977 163,140,126 $ 120,075,959 14,303,004 22,580,678 1,457,085 6,427,396 2,336,129 1,681,895 6,362,790 (199,750) 175,025,186 $ 131,256,519 14,582,117 24,872,388 1,678,437 6,791,043 4,537,422 2,126,029 2,004,326 168,734 188,017,015 $ 145,109,192 16,607,943 27,532,893 1,858,851 7,527,675 8,038,565 1,864,289 1,813,311 1,149,970 211,502,689 $ 157,488,587 18,823,759 26,826,227 2,693,256 6,870,739 13,337,247 2,780,229 3,711,910 232,531,954 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 General revenues and other changes in net assets Governmental activities: General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total governmental activities Business-type activites: Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total business-type activities Total primary government 3,745,272 325,906 408,156 68,770 4,548,104 900,524 481,297 (171,977) 1,209,844 959,081 567,189 24,400 199,750 1,750,420 1,408,251 438,447 392,108 (168,734) 2,070,072 1,909,727 993,233 265,397 (1,149,970) 2,018,387 $ 3,305,406 716,338 48,264 (3,711,910) 358,098 150,687,016 23,332,475 32,447,203 3,424,561 6,655,516 14,041,876 2,879,878 36,146,557 149,242 269,764,324 $ 4,618,383 344,449 70,495 (149,242) 4,884,085 $ 172,649,888 $ 164,349,970 $ 176,775,606 $ 190,087,087 $ 213,521,076 $ 232,890,052 $ $ 14,709,263 7,947,075 $ 22,656,338 $ $ 13,363,333 2,136,429 $ 15,499,762 $ 53,948,767 2,344,970 $ 56,293,737 $ 73,132,799 (3,435,955) $ 69,696,844 $ 136,537,107 3,324,654 $ 139,861,761 $ 274,648,409 134,382,181 24,832,128 35,891,803 3,976,956 6,024,595 7,410,643 4,348,126 1,491,079 615,463 218,972,974 $ 1,940,956 262,728 231,811 (615,463) 1,820,032 125,186,698 21,406,004 37,183,541 3,559,615 5,560,791 97,660 3,429,435 17,160 (115,657) 196,325,247 10,698 332,955 96,986 115,657 556,296 $ 220,793,006 $ 196,881,543 $ (20,630,037) (7,335,651) (27,965,688) $ (46,306,287) (4,591,108) (50,897,395) Changes in net assets Governmental activities Business-type activities Total primary government Note: $ (8,941,448) 6,064,003 (2,877,445) Information prior to fiscal year 2001-02 was not available in this format. 144 $ 88,184,776 (7,553,679) 80,631,097 $ $ Fund Balances, Governmental Funds (Exhibit S-3) Last Nine Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 General fund Reserved Unreserved Total general fund All other governmental funds Reserved Unreserved, reported in: Debt service funds (A) Special revenues funds Capital projects funds Total all other governmental funds Note: $ $ 2,201,123 75,249,138 77,450,261 $ 32,891,864 $ 59,551,110 39,530,059 131,973,033 Fiscal Year 2002-03 $ $ 2,949,516 63,670,728 66,620,244 $ 42,004,605 $ 67,312,797 29,984,703 139,302,105 Fiscal Year 2003-04 $ $ 1,963,029 72,823,641 74,786,670 $ 36,882,416 $ 64,835,343 36,375,643 138,093,402 Fiscal Year 2004-05 $ $ 3,275,943 78,064,176 81,340,119 $ 76,440,839 $ 55,470,121 21,153,248 153,064,208 Fiscal Year 2005-06 $ $ 2,376,818 94,648,961 97,025,779 $ 71,648,277 $ 66,938,765 53,752,477 192,339,519 Fiscal Year 2006-07 $ $ 4,299,060 96,883,636 101,182,696 $ 58,559,662 $ (66,826) 65,022,802 17,044,525 140,560,163 Information prior to fiscal year 2001-02 was not available in this format. (A) In fiscal years 2006-07 and 2008-09, the special assessment debt service fund is reported in unreserved fund balance due to the current year deficit balance. 145 Fiscal Year 2007-08 $ $ 4,449,843 92,432,479 96,882,322 $ 69,814,938 $ 36,228,348 28,848,898 134,892,184 Fiscal Year 2008-09 $ Fiscal Year 2009-10 $ 1,322,728 75,647,216 76,969,944 $ $ 981,529 42,832,205 43,813,734 $ 59,067,648 $ 69,324,494 $ (45,374) 23,220,030 71,685,317 153,927,621 $ 32,742,748 63,078,330 165,145,572 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Nine Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Revenues: Taxes Intergovernmental Investment earnings Charges for services Fines and forfeitures Other entities' participation Special assessments Licenses and permits Miscellaneous Total revenues Expenditures: Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal court Development services Community development Financial services Human resources Information technology Non-departmental Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Deficiency of revenues over expenditures before other financing sources (uses) Fiscal Year 2001-02 Fiscal Year 2002-03 Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 $ 111,252,263 65,143,039 11,223,592 6,550,017 4,980,777 817,041 2,845,691 1,105,145 3,676,606 207,594,171 $ 112,859,765 66,221,384 2,898,356 7,660,472 6,058,944 394,803 2,835,480 1,263,163 2,806,330 202,998,697 $ 119,673,043 68,292,581 2,336,129 14,027,946 7,230,067 2,781,314 1,131,517 3,669,815 219,142,412 $ 130,779,821 94,349,370 4,537,422 14,896,580 7,742,929 78,433 2,706,951 1,250,205 4,748,157 261,089,868 $ 146,084,925 109,213,832 8,038,565 18,304,846 8,261,486 2,382,056 2,705,348 1,389,130 3,973,800 300,353,988 $ 159,569,926 127,738,319 13,337,247 20,242,897 8,407,254 2,074,553 2,610,195 1,524,891 5,061,404 340,566,686 44,524,665 14,903,901 19,353,717 41,042,674 2,126,245 516,899 1,464,931 774,756 2,437,072 3,261,268 15,815,204 2,445,475 4,747,540 4,049,591 600,852 1,412,665 45,287,397 14,944,261 18,578,259 40,904,425 2,904,697 579,089 944,568 442,615 2,121,212 3,142,488 17,919,144 2,956,263 5,151,110 3,797,137 990,568 9,197,356 48,576,160 15,622,805 18,809,726 43,811,239 2,414,527 407,818 254,578 472,233 408,862 641,753 2,079,092 4,039,664 17,285,467 4,002,794 3,743,137 2,388,877 633,533 3,440,150 50,148,794 17,235,231 18,653,915 45,853,027 2,380,562 400,549 293,964 544,032 420,449 440,041 2,206,857 3,588,317 19,435,003 3,296,692 3,867,513 2,567,259 537,006 4,433,871 59,977,366 19,599,806 20,743,534 48,822,208 2,470,215 362,810 383,025 520,748 450,650 747,588 2,345,165 4,454,473 5,768,444 19,795,483 3,978,571 2,730,740 3,937,911 60,200,957 21,054,670 15,289,688 15,166,076 49,026,864 2,773,675 362,281 440,915 542,292 462,751 484,894 2,844,636 4,662,214 17,278,332 20,566,776 4,342,723 2,842,328 6,031,097 71,813,995 24,413,707 20,844,315 15,826,217 56,316,376 2,843,668 367,250 294,042 641,719 491,057 748,371 3,224,007 5,563,038 7,394,179 18,246,591 4,390,171 3,282,022 3,407,427 77,046,317 28,330,453 26,158,843 17,583,861 73,659,648 3,095,259 386,483 347,556 555,034 506,621 633,640 2,914,014 5,525,601 6,376,874 19,515,673 4,211,080 3,127,479 395,648 74,747,734 27,134,920 18,254,109 16,880,739 72,253,980 4,217,031 388,486 330,992 520,731 514,069 799,975 3,117,084 5,267,930 7,056,690 19,343,140 3,842,927 3,405,582 - 10,884,500 6,460,321 36,318,048 213,140,324 8,105,000 7,296,250 58,052,049 243,313,888 10,345,000 8,470,153 52,669,125 240,516,693 10,470,000 9,472,601 84,525,728 280,771,411 14,580,000 12,016,680 153,861,610 377,547,027 15,765,000 15,239,760 193,312,819 448,690,748 18,121,865 16,636,211 138,410,945 413,277,173 19,656,531 17,153,400 106,066,458 413,246,473 22,212,157 16,656,095 58,406,594 355,350,965 (40,315,191) (21,374,281) (19,681,543) (77,193,039) (108,124,062) (91,960,004) (57,857,946) (49,009,040) (5,546,153) 146 Fiscal Year 2007-08 $ 159,798,418 102,320,894 14,041,876 23,674,598 10,148,376 1,412,155 2,842,153 1,592,521 5,486,178 321,317,169 Fiscal Year 2008-09 $ 150,848,798 143,357,538 6,393,595 31,096,490 11,516,359 1,600,100 2,860,571 1,546,287 6,168,789 355,388,527 Fiscal Year 2009-10 $ 145,038,639 111,505,248 97,660 27,866,740 11,082,812 328,147 2,783,916 1,670,698 5,968,065 306,341,925 Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Nine Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Capital lease proceeds Proceeds from sale of capital assets Proceeds from loan Proceeds of refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) 54,810,989 (54,879,759) 8,000,000 686,109 5,970,000 (5,948,430) 8,638,909 Net change in fund balances $ 3,092,756 Debt service as a percentage of noncapital expenditures Note: 9.8% Fiscal Year 2002-03 32,447,621 (32,275,644) 35,220,000 990,569 40,931,700 (40,500,000) 36,814,246 $ (3,500,945) 8.3% Fiscal Year 2003-04 Fiscal Year 2004-05 35,261,611 (35,461,361) 30,560,000 1,861,088 633,533 8,492,867 24,945,000 (24,145,002) 42,147,736 $ 20,773,455 40,964,257 (40,795,523) 17,680,000 537,006 2,004,326 7,000,000 27,390,066 $ 10.0% 7,708,523 10.2% Information prior to fiscal year 2001-02 was not available in this format. 147 Fiscal Year 2005-06 23,839,365 (22,689,395) 125,845,000 1,847,396 220,940 3,090,704 132,154,010 $ 54,960,971 11.9% Fiscal Year 2006-07 Fiscal Year 2007-08 37,963,787 (34,250,777) 55,640,000 1,746,522 108,464 656,603 31,655,000 (33,017,976) 60,501,623 $ (47,622,439) 12.1% Fiscal Year 2008-09 71,362,599 (71,213,357) 71,170,000 1,242,369 9,430,040 81,991,651 $ (9,968,353) 12.6% $ Fiscal Year 2009-10 64,230,445 (63,614,982) 45,980,000 807,728 9,577,814 56,981,005 59,305,503 (59,421,161) 26,040,000 755,553 27,986 362,900 27,070,781 (876,941) $ (21,938,259) 12.0% 13.1% Taxable Sales and Percentage of Taxable Sales by Category (Exhibit S-5) Last Ten Fiscal Years Cash Basis City of Tempe, Arizona Taxable Sales Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Retail $ Utilities and Telecommunications Rental 2,952,902,588 2,742,441,556 2,719,123,222 2,859,897,505 3,143,763,590 3,602,528,301 3,732,944,444 3,511,222,222 3,050,222,222 2,976,388,889 $ 1,013,508,353 941,832,389 906,578,056 899,687,556 917,707,487 997,198,126 1,085,111,111 1,174,055,556 1,203,888,889 1,136,888,889 $ 629,601,294 499,078,556 467,647,889 497,207,351 501,110,558 545,661,301 571,722,222 608,388,889 590,555,556 536,611,111 Restaurant $ 410,577,353 382,886,889 368,798,222 377,852,500 412,292,532 465,230,507 484,500,000 519,555,556 504,611,111 472,666,667 Hotel and Motel Contracting $ 377,591,647 333,773,611 296,740,778 340,484,056 410,634,122 523,679,355 784,444,444 738,611,111 631,555,556 400,000,000 $ 124,502,176 103,032,222 106,429,056 107,090,645 122,425,842 136,971,401 132,888,889 150,222,222 123,611,111 110,944,444 City Direct Sales Tax Rate Amusements All Other Total $ 103,980,412 81,622,056 91,584,111 85,961,444 97,748,939 95,180,579 82,277,778 84,222,222 87,777,778 96,166,667 $ 99,680,412 85,321,167 92,733,667 98,812,889 109,532,310 109,300,426 116,722,222 100,722,222 88,166,667 66,055,556 $ 5,712,344,235 5,169,988,446 5,049,635,001 5,266,993,946 5,715,215,380 6,475,749,996 6,990,611,110 6,887,000,000 6,280,388,890 5,795,722,223 Percentage of Taxable Sales Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Retail 51.69 % 53.05 53.85 54.30 55.01 55.63 53.40 50.98 48.57 51.35 Rental 17.74 % 18.22 17.95 17.08 16.06 15.40 15.52 17.05 19.17 19.62 Utilities and Telecommunications 11.02 % 9.65 9.26 9.44 8.77 8.43 8.18 8.83 9.40 9.26 Restaurant Contracting 7.19 % 7.41 7.30 7.17 7.21 7.18 6.93 7.54 8.03 8.16 6.61 % 6.46 5.88 6.46 7.18 8.09 11.22 10.72 10.06 6.90 Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2000-01, City of Tempe, Arizona voters approved a 0.1% increase in the City sales tax. 148 Hotel and Motel 2.18 % 1.99 2.11 2.03 2.14 2.12 1.90 2.18 1.97 1.91 Amusements 1.82 % 1.58 1.81 1.63 1.71 1.47 1.18 1.22 1.40 1.66 All Other 1.75 % 1.64 1.84 1.89 1.92 1.68 1.67 1.48 1.40 1.14 Total 100 % 100 100 100 100 100 100 100 100 100 1.70 % 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 City Direct Sales Tax Rate 1.70 % 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 Maricopa County Sales Tax Rate State Sales Tax Rate 0.70 % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 5.60 % 5.60 5.60 5.60 5.60 5.60 5.60 5.60 5.60 6.60 Total Sales Tax Rate 8.00 % 8.10 8.10 8.10 8.10 8.10 8.10 8.10 8.10 9.10 Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2000-01, City of Tempe, Arizona voters approved a 0.1% increase in the City sales tax. In fiscal year 2009-10, State of Arizona voters approved a 1.0% increase in the State sales tax. 149 City of Tempe, Arizona 150 General Property Tax Information (Exhibit S-7) City of Tempe, Arizona Tax Levy Limitations Beginning in 1980-81, the total tax levy is comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy was limited to a 7% increase for 1980-81 and a 2% annual increase thereafter. In addition, the primary levy on residential property only is limited to an amount not more than 1% of market value. The secondary levy is unlimited. Assessments and Collections Since 1950-51, Maricopa County, at no charge to the cities, has assessed and collected all municipal property taxes. Remittances are made to the respective cities periodically as collections accrue. Taxes Due First installment is due October 1st; second installment is due March 1st. Taxes Payable City property taxes are payable at the office of the County Treasurer. Taxes for the first half of the year can be paid on the first of September through the first of November. Second half taxes can be paid on the first of March through the first of May. Taxes Delinquent The first half becomes delinquent on the first day of November at 5 p.m. The second half becomes delinquent on the first day of May at 5 p.m. Interest at the rate of 16% per annum attaches on the first and second installments following the delinquent dates. Tax Sale The sale of delinquent tax bills is begun on a date not earlier than February 1 nor later than March 1 following the May 1 date upon which the second half taxes become delinquent. The sale is made at public auction in the office of the County Treasurer. Tax bills are sold to the highest bidder who offers to pay the accumulated amount of tax and to charge thereon the lowest rate of interest. The maximum amount of interest allowed by law is 12% per annum. The purchaser is given a Certificate of Purchase for each parcel. Tax Deed Five years subsequent to the tax sale, the holder of a Certificate of Purchase which has not been redeemed by the delinquent property owner may demand a County Treasurer's Deed. However, at the end of three full years, a holder of a Certificate of Purchase may institute quiet title action and the court will instruct the County Treasurer to issue a County Treasurer's Deed if the suit is successful. Redemption Redemption may be made by the delinquent property owner or any interested party by payment in full of all accumulated charges at any time before issuance of the tax deed. Payment may be made to the County 151 Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property (Exhibit S-8) Last Nine Fiscal Years Rate per $100 of Assessed Value Commercial, Manufacturing, Telecommunications Property Fiscal Year Vacant, Agricultural & Governmental Property $ 31,186,396 38,657,266 Owner Occupied Residential Property $ $ 123,377,474 135,780,153 Railroad & Airlines Property 2001-02 Primary $ Secondary 834,642,415 887,301,591 2002-03 Primary Secondary 915,869,448 981,176,470 30,810,942 38,767,071 384,928,341 388,897,351 130,945,963 136,567,526 1,639,351 1,737,214 2003-04 Primary Secondary 935,290,666 1,016,813,162 28,432,421 40,528,635 461,432,599 466,917,457 139,596,174 153,014,453 1,695,416 1,829,752 2004-05 Primary Secondary 1,013,975,894 1,094,932,248 28,432,421 37,741,236 461,432,599 472,792,985 146,840,125 152,253,913 2,973,252 3,347,552 2005-06 Primary Secondary 1,245,827,301 1,303,026,577 238,624,198 282,897,988 499,989,878 528,444,640 163,440,750 175,658,220 2,770,242 3,046,217 2006-07 Primary Secondary 1,306,192,761 1,392,698,031 249,763,558 335,482,079 515,469,816 523,973,749 175,924,392 182,197,200 3,008,952 3,198,718 2007-08 Primary Secondary 1,369,975,785 1,487,353,047 287,255,556 386,956,732 587,620,345 782,035,308 191,632,935 240,647,400 3,284,085 3,652,041 2008-09 Primary Secondary 1,416,640,407 1,605,563,621 326,359,399 439,585,924 674,491,736 901,618,735 218,810,180 291,324,398 3,043,548 3,447,472 2009-10 Primary Secondary 1,518,486,978 1,746,634,264 443,398,023 610,147,603 747,601,586 840,563,032 265,780,915 326,620,717 2,656,174 3,162,023 Source: Maricopa County Assessor's Office Note 1: Information prior to fiscal year 2001-02 was not available in this format. Note 2: Beginning in 1980-81, the total tax levy is comprised of two elements: a primary levy for operating costs and a secondary levy for general obligation bond debt service requirements. The primary levy was limited to a 7% increase for 1980-81 and a 2% annual increase thereafter. In addition, the primary levy on residential property only is limited to an amount not more than 1% of market value. The secondary levy is unlimited. (A) Assessed values are shown net of tax-exempt property for fiscal year 2001-02 through 2004-05. 152 374,437,089 388,110,036 Rental Residential Property $ 1,710,226 1,811,596 City of Tempe, Arizona Non-commercial Historic Property $ 4,667,240 4,700,975 Less: Tax-Exempt Property (A) $ N/A N/A Total Taxable Assessed Value $ Estimated Actual Taxable Value Total Direct Tax Rate 1,370,020,840 $ 1,456,361,617 0.53 0.82 $ 9,756,507,857 9,197,839,943 Assessed Value as a Percentage of Actual Value 14.04 % 15.83 9,336,275 9,346,662 N/A N/A 1,473,530,320 1,556,492,294 0.52 0.83 10,505,677,932 9,669,307,443 14.03 16.10 9,128,538 9,348,956 N/A N/A 1,575,575,814 1,688,452,415 0.55 0.80 11,424,612,316 10,779,997,040 13.79 15.66 7,538,097 7,809,451 N/A N/A 1,661,192,388 1,768,877,385 0.53 0.82 12,379,112,416 11,034,323,885 13.42 16.03 1,229,232 1,426,854 350,861,051 390,074,308 1,801,020,550 1,904,426,188 0.52 0.88 13,289,932,548 14,207,441,131 13.55 13.40 1,341,770 1,448,936 356,496,779 432,295,381 1,895,204,470 2,006,703,332 0.52 0.88 13,995,714,438 15,035,677,275 13.54 13.35 5,569,454 6,404,967 413,757,218 505,151,029 2,031,580,942 2,401,898,466 0.51 0.89 15,428,450,636 18,964,996,979 13.17 12.66 5,628,185 7,346,018 480,062,120 591,937,974 2,164,911,335 2,656,948,194 0.51 0.89 17,268,165,844 21,784,820,579 12.54 12.20 5,489,270 7,160,219 601,138,220 766,798,994 2,382,274,726 2,767,488,864 0.49 0.91 19,944,626,693 23,547,502,463 11.94 11.75 153 Property Tax Rates - All Direct and Overlapping Governments (Exhibit S-9) Last Ten Fiscal Years Rate per $100 of Assessed Value Fiscal Year City of Tempe (A) Tempe Union Schools Tempe Elementary (B) East Valley Institute of Technology Maricopa County Community College 2000-01 Primary Secondary Total 0.55 0.80 1.35 2.05 1.26 3.31 3.40 1.01 4.41 0.07 0.07 1.17 0.12 1.29 0.97 0.15 1.12 2001-02 Primary Secondary Total 0.53 0.82 1.35 2.08 1.11 3.19 3.41 1.00 4.41 0.06 0.06 1.18 0.09 1.27 0.96 0.15 1.11 2002-03 Primary Secondary Total 0.52 0.83 1.35 2.19 1.13 3.32 3.32 0.95 4.27 0.06 0.06 1.21 0.08 1.29 0.96 0.15 1.11 2003-04 Primary Secondary Total 0.55 0.80 1.35 2.24 1.05 3.29 3.10 1.10 4.20 0.05 0.05 1.21 0.07 1.28 0.94 0.14 1.08 2004-05 Primary Secondary Total 0.53 0.82 1.35 2.05 0.99 3.04 2.90 1.09 3.99 0.05 0.05 1.21 1.21 0.92 0.12 1.04 2005-06 Primary Secondary Total 0.52 0.88 1.40 1.73 0.92 2.65 2.90 1.08 3.98 0.06 0.06 1.20 1.20 0.89 0.14 1.03 2006-07 Primary Secondary Total 0.52 0.88 1.40 1.74 0.89 2.63 2.61 1.38 3.99 0.05 0.05 1.18 1.18 0.88 0.18 1.06 2007-08 Primary Secondary Total 0.51 0.89 1.40 1.75 0.76 2.51 2.59 1.23 3.82 0.05 0.05 1.10 1.10 0.82 0.15 0.97 2008-09 Primary Secondary Total 0.51 0.89 1.40 1.76 0.52 2.28 2.43 1.08 3.51 0.05 0.05 1.03 1.03 0.78 0.16 0.94 2009-10 Primary Secondary Total 0.49 0.91 1.40 1.48 0.74 2.22 2.14 1.14 3.28 0.05 0.05 0.99 0.99 0.72 0.16 0.88 Source: Maricopa County Assessor's Office Maricopa County Tax Levies & Rates Publication (A) Primary levies are limited to a 2% increase annually plus levies attributable to assessed valuation added as a result of growth and annexation. Secondary tax levies do not have a limitation. (B) Tempe property owners residing within the Kyrene Elementary School District No. 28, Scottsdale Unified School District No. 48 or Mesa Unified School District No. 4 have combined rates of $9.16, $11.17 or $10.03, respectively. Also, see the Net Direct and Overlapping General Obligation Bonded Debt Schedule (Exhibit S15). 154 City of Tempe, Arizona County Ed Equalization Rate County-Wide Jurisdiction Fire Central Flood District Arizona District Assistance Project County Free Library District 0.51 0.51 0.25 0.25 0.13 0.13 0.01 0.01 - 0.50 0.50 0.23 0.23 0.13 0.13 0.01 0.01 - 0.49 0.49 0.21 0.21 0.13 0.13 0.01 0.01 - 0.47 0.47 0.21 0.21 0.12 0.12 0.01 0.01 - 0.46 0.46 0.21 0.21 0.12 0.12 0.01 0.01 - 0.44 0.44 0.21 0.21 0.12 0.12 0.01 0.01 - - 0.20 0.20 0.12 0.12 0.01 0.01 - - 0.15 0.15 0.10 0.10 0.01 0.01 - - 0.14 0.14 0.10 0.10 0.01 0.01 - 0.33 - 0.14 0.14 0.10 0.10 0.01 0.01 - Special Health Care District 0.04 0.04 - 8.65 3.84 12.49 0.04 0.04 - 8.66 3.64 12.30 0.04 0.04 - 8.69 3.59 12.28 0.05 0.05 - 8.51 3.60 12.11 0.05 0.05 - 8.07 3.46 11.53 0.05 0.05 0.12 0.12 7.68 3.59 11.27 0.12 0.12 6.93 3.88 10.81 0.09 0.09 6.77 3.47 10.24 0.09 0.09 6.51 3.08 9.59 0.09 0.09 6.15 3.38 9.53 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.04 155 Total Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years Fiscal Year City of Tempe Tempe Union Schools Tempe Elementary (A) East Valley Institute of Technology $ Maricopa County Community College 6,155,098 6,155,098 $ 225,396,514 24,051,128 249,447,642 $ 187,642,684 31,377,241 219,019,925 2000-01 Primary Secondary Total $ 6,956,983 10,812,099 17,769,082 $ 45,938,017 30,369,063 76,307,080 $ 35,072,934 11,339,936 46,412,870 2001-02 Primary Secondary Total 7,288,511 11,913,038 19,201,549 50,998,246 28,778,881 79,777,127 38,038,775 11,823,692 49,862,467 6,258,774 6,258,774 252,676,223 20,071,906 272,748,129 204,648,094 34,930,475 239,578,569 2002-03 Primary Secondary Total 7,682,987 12,897,095 20,580,082 56,994,879 31,162,656 88,157,535 40,319,642 12,272,916 52,592,558 6,175,823 6,175,823 277,949,612 19,565,638 297,515,250 221,156,802 36,526,312 257,683,114 2003-04 Primary Secondary Total 8,621,551 13,554,896 22,176,447 63,921,636 32,236,303 96,157,939 40,269,326 15,349,563 55,618,889 6,429,195 6,429,195 308,122,580 19,234,591 327,357,171 239,464,278 37,777,314 277,241,592 2004-05 Primary Secondary Total 8,792,691 14,517,177 23,309,868 62,191,787 32,057,837 94,249,624 39,486,342 15,894,306 55,380,648 6,507,464 6,507,464 339,882,099 339,882,099 258,560,787 34,904,190 293,464,977 2005-06 Primary Secondary Total 9,413,934 16,707,531 26,121,465 56,658,831 31,948,408 88,607,239 43,132,854 17,095,540 60,228,394 8,400,949 8,400,949 371,224,118 371,224,118 277,107,904 45,791,129 322,899,033 2006-07 Primary Secondary Total 9,822,845 17,693,103 27,515,948 59,625,270 32,003,893 91,629,163 40,935,824 22,931,797 63,867,621 7,877,526 7,877,526 398,725,245 398,725,245 298,014,922 66,462,148 364,477,070 2007-08 Primary Secondary Total 10,371,221 21,364,887 31,736,108 65,184,130 34,707,242 99,891,372 43,415,950 23,923,712 67,339,662 10,940,725 10,940,725 430,023,735 430,023,735 321,018,986 74,981,944 396,000,930 2008-09 Primary Secondary Total 10,976,100 23,726,547 34,702,647 71,503,299 26,355,087 97,858,386 42,985,150 23,151,705 66,136,855 12,032,028 12,032,028 463,492,311 463,492,311 347,905,170 95,293,956 443,199,126 2009-10 Primary Secondary Total 11,665,890 25,192,451 36,858,341 65,733,950 39,195,990 104,929,940 41,787,151 25,976,662 67,763,813 12,586,167 12,586,167 492,230,736 492,230,736 359,942,153 92,685,846 452,627,999 Source: Maricopa County Assessor's Office Maricopa County Tax Levies & Rates Publication (A) For levies for Tempe property owners residing within Kyrene, Scottsdale or Mesa School Districts, see the Net Direct and Overlapping General Obligation Bonded Debt Schedule (Exhibit S-15). (B) District which had its first secondary tax levy set in FY 2005-06. 156 City of Tempe, Arizona Flood District County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project Fire District Assistance $ 44,309,245 44,309,245 99,193,054 99,193,054 $ 27,141,030 27,141,030 $ 1,997,318 1,997,318 45,322,696 45,322,696 106,221,394 106,221,394 29,787,075 29,787,075 2,086,084 2,086,084 44,868,063 44,868,063 112,231,223 112,231,223 31,805,013 31,805,013 51,153,993 51,153,993 120,037,513 120,037,513 56,334,141 56,334,141 County Free Library District Special Health Care District (B) $ $ 8,789,518 8,789,518 Total - $ 600,200,186 196,341,676 796,541,862 9,646,430 9,646,430 - 659,871,243 200,619,051 860,490,294 1,859,466 1,859,466 10,296,417 10,296,417 - 716,335,145 207,429,399 923,764,544 33,010,980 33,010,980 1,931,237 1,931,237 14,316,032 14,316,032 - 780,436,884 224,994,104 1,005,430,988 128,003,169 128,003,169 36,112,556 36,112,556 2,084,229 2,084,229 15,664,900 15,664,900 - 836,916,875 214,076,800 1,050,993,675 62,733,411 62,733,411 135,142,821 135,142,821 39,800,085 39,800,085 2,276,200 2,276,200 17,295,751 17,295,751 40,000,000 40,000,000 892,680,462 282,049,004 1,174,729,466 67,096,622 67,096,622 - 43,585,607 43,585,607 2,466,637 2,466,637 18,401,410 18,401,410 40,000,000 40,000,000 807,124,106 318,518,743 1,125,642,849 70,422,870 70,422,870 - 49,730,785 49,730,785 2,631,597 2,631,597 19,368,018 19,368,018 46,310,880 46,310,880 870,014,022 354,382,660 1,224,396,682 74,674,333 74,674,333 - 58,315,605 58,315,605 3,105,495 3,105,495 20,581,183 20,581,183 49,923,129 49,923,129 936,862,030 387,159,068 1,324,021,098 74,996,804 74,996,804 164,225,937 - 58,113,465 58,113,465 3,324,489 3,324,489 20,468,370 20,468,370 53,018,363 53,018,363 1,135,585,817 405,558,607 1,541,144,424 157 Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Source: Collected within the Fiscal Year of the Levy % of Amount Levy Total Tax Levy For Fiscal Year $ 17,769,082 19,201,549 20,580,082 22,176,447 23,309,868 26,121,465 27,515,948 31,736,108 34,702,647 36,858,341 $ 15,795,257 18,543,839 19,789,415 21,283,933 22,921,016 25,519,585 26,185,044 30,686,950 33,987,393 35,581,096 88.9 % 96.6 96.2 96.0 98.3 97.7 95.2 96.7 97.9 96.5 Total Collections to Date % of Amount Levy Collections in Subsequent Years $ 303,290 319,446 253,847 274,988 262,939 (54,610) 328,446 486,934 866,844 - Maricopa County Treasurer 158 $ 16,098,547 18,863,285 20,043,262 21,558,921 23,183,955 25,464,975 26,513,491 31,173,884 34,854,237 35,581,096 90.6 % 98.2 97.4 97.2 99.5 97.5 96.4 98.2 100.4 96.5 Principal Tax Payers (Exhibit S-12a) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2009-10 Taxable Secondary Assessed Value Taxpayer Arizona Mills LLC Qwest Corporation (formerly US West) Arizona Public Service Company Tempe Fountainhead Corporate LLC Fly (CD) LLC / AWHQ LLC State Farm Mutual Auto Insurance Honeywell SRPAI&PD Breof Bnk2 Southwest LLC Target Corporation Motorola, Incorporated Amberjack (Commercial Property) Kimco Realty Corporation Wells Fargo Bank Phoenix Coca-Cola Micro-Rel $ Total $ 41,696,241 25,618,715 22,164,880 18,047,439 17,987,113 16,145,044 14,012,511 12,335,440 12,004,262 11,394,622 - Rank 1 2 3 4 5 6 7 8 9 10 191,406,267 Source 2009-10: RBC Capital Markets Source 2000-01: Maricopa County Assessor's Office 159 Fiscal Year 2000-01 Taxable Secondary Assessed Value Percentage of Total City Secondary Taxable Assessed Value 1.57 % 0.96 0.83 0.68 0.68 0.61 0.53 0.46 0.45 0.43 - $ 7.20 % $ 24,966,387 27,509,679 18,969,146 8,832,019 37,310,550 10,144,459 7,763,474 7,347,142 6,860,129 6,338,937 156,041,922 Rank 3 2 4 6 1 5 7 8 9 10 Percentage of Total City Secondary Taxable Assessed Value 1.84 % 2.03 1.40 0.65 2.75 0.75 0.57 0.54 0.51 0.47 11.51 % Principal Tax Payers (Exhibit S-12b) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2009-10 Taxpayer Business Type Taxpayer A Taxpayer B Taxpayer C Taxpayer D Taxpayer E Taxpayer F Taxpayer G Taxpayer H Taxpayer I Taxpayer J Taxpayer K Taxpayer L Taxpayer M Taxpayer N Utility Grocery Stores Mixed Retail Mixed Retail Mixed Retail Electronics/Software Electronics/Software Auto Sales Petroleum Products Utility Auto Sales Telecommunications Auto Sales Auto Sales Total Sales and Use Tax Payments $ $ 4,410,442 2,675,505 1,917,101 1,780,858 1,739,863 1,621,537 1,424,093 1,330,225 1,202,017 909,688 19,011,329 Rank 1 2 3 4 5 6 7 8 9 10 Fiscal Year 2000-01 Percentage of Total Sales and Use Tax Payments Sales and Use Tax Payments 3.28 % 1.99 1.43 1.33 1.29 1.21 1.06 0.99 0.89 0.68 $ 14.15 % $ 18,367,949 Rank Percentage of Total Sales and Use Tax Payments 3,975,140 2,153,242 1 2 4.48 % 2.43 1,688,113 1,541,058 5 7 1.90 1.74 - 1,690,067 4 1,834,082 1,622,866 1,242,813 1,491,649 1,128,919 3 6 9 8 10 2.07 1.83 1.40 1.68 1.27 Source: City of Tempe, Arizona Tax and License Division Note: The identities of the ten largest revenue payers are prohibited from disclosure per State Statute. The business type of the top ten taxpayers has been disclosed along with the appropriate data. 160 18.80 % Ratios of Outstanding Debt by Type (Exhibit S-13) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities General Obligation Bonds Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 $ 72,105,000 75,535,000 90,395,000 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 Special Assessment Bonds $ 21,925,000 20,250,000 18,520,000 16,725,000 19,345,000 17,490,000 15,345,000 38,310,000 36,095,000 33,025,000 Refunding Certificates of Participation $ 4,270,000 3,810,000 3,335,000 2,840,000 2,320,000 1,780,000 1,220,000 625,000 - Excise Tax Revenue Bonds $ 52,835,000 47,380,000 60,650,000 81,910,000 78,780,000 174,710,000 218,480,000 241,125,000 239,560,000 230,470,000 HUD Section 108 Loan $ 7,000,000 7,000,000 7,000,000 6,739,000 6,466,000 6,181,000 Capital Improvement Notes $ 5,309,952 3,980,206 3,654,755 3,258,112 2,845,604 2,416,596 1,970,427 1,506,411 1,023,835 521,955 Total Government Type Debt Capital Leases $ 8,602,330 7,861,086 7,436,279 7,186,712 7,209,396 6,732,171 4,923,764 3,351,733 1,888,630 1,776,147 $ 165,047,282 158,816,292 183,991,034 203,559,824 217,380,000 327,738,767 365,439,191 416,732,144 441,298,465 444,639,102 Business-Type Activities General Obligation Bonds Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Municipal Property Corporation Bonds $ 70,860,000 78,595,000 97,580,000 103,735,000 137,390,000 180,935,000 243,265,000 282,520,000 285,735,000 289,895,000 $ 735,000 630,000 520,000 400,000 275,000 140,000 - Excise Tax Revenue Bonds $ 2,330,004 2,130,000 2,050,000 18,685,000 18,050,000 Capital Improvement Notes $ 251,176 129,393 - WIFA Loans $ 13,273,706 161 Total Business Type Debt Capital Leases $ 194,416 147,089 $ 71,846,176 79,354,393 98,100,000 104,135,000 137,665,000 183,405,004 245,395,000 284,570,000 304,614,416 321,365,795 Total Primary Government $ 236,893,458 238,170,685 282,091,034 307,694,824 355,045,000 511,143,771 610,834,191 701,302,144 745,912,881 766,004,897 Percentage of Personal Income 6.65 % 6.65 7.78 8.38 9.48 13.09 14.91 15.98 18.05 16.43 Per Capita $ 1,477.00 1,493.84 1,769.43 1,927.73 2,207.72 3,082.97 3,665.92 4,187.93 4,320.60 4,381.35 Percent of Net Direct Debt to Assessed Valuation and Net Direct Debt per Capita (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 $ General Obligation Debt Less: Debt Service Reserves Net Direct Debt Secondary Assessed Valuation (A) 72,105,000 75,535,000 90,395,000 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 $ 9,135,690 12,123,427 13,471,704 13,335,706 15,991,147 18,547,848 17,607,767 23,858,992 31,844,188 38,126,393 $ 62,969,310 63,411,573 76,923,296 78,304,294 83,888,853 99,062,152 98,892,233 101,216,008 124,420,812 134,538,607 $ 1,356,429,397 1,456,361,617 1,556,492,294 1,688,452,415 1,768,877,385 1,904,426,188 2,006,703,332 2,401,898,466 2,656,948,194 2,767,488,864 Percent of Net Direct Debt To Assessed Valuation 4.6 % 4.4 4.9 4.6 4.7 5.2 4.9 4.2 4.7 4.9 Net Direct Debt Per Capita Population (B) 160,388 159,435 159,425 159,615 160,820 165,796 166,625 167,458 172,641 174,833 $ Note: General obligation debt for business-type activities is not paid by secondary property taxes and therefore is not included on this schedule. Source: (A) (B) Assessed valuation from Maricopa County Assessor's Office Estimate from City of Tempe, Arizona Budget Division 162 392.61 397.73 482.50 490.58 521.63 597.49 593.50 604.43 720.69 769.53 Net Direct and Overlapping General Obligation Bonded Debt (Exhibit S-15) City of Tempe, Arizona 2009-10 Secondary Assessed Valuation Jurisdiction Net Bonded Debt Portion Applicable To City of Tempe Percent Amount 2009-10 Secondary Tax Rate Per $100 Assessed Net Direct City of Tempe - General (net) Overlapping State of Arizona Maricopa County Maricopa County Community College Tempe Elementary School District No. 3 Mesa Unified School District No. 4 Kyrene Elementary School District No. 28 Scottsdale Unified School District No. 48 Tempe Union High School District No. 213 East Valley Institute of Technology Total overlapping debt $ 2,767,488,864 $ 86,504,734,898 57,984,051,718 57,984,051,718 2,276,858,300 4,635,741,096 2,858,289,015 7,201,679,605 5,135,147,315 25,172,333,447 Total net direct and overlapping debt 134,538,607 (A) None None 653,040,000 131,735,000 289,165,000 120,945,000 310,515,000 107,465,000 None 1,612,865,000 $ 1,747,403,607 100.00 % $ N/A N/A 4.77 74.86 0.62 26.69 0.24 48.05 N/A 134,538,607 None None 31,168,586 98,618,592 1,790,798 32,276,862 732,164 51,633,718 None 216,220,720 $ $ 0.91 N/A N/A 0.88 3.28 4.92 2.91 3.78 2.22 N/A 350,759,327 (B) Source: RBC Capital Markets and Maricopa County Assessor Note: The applicable percentage of each jurisdiction's assessed valuation which lies within the City's boundaries (see "Percent" column above) was derived from information obtained from the County Assessor's Office. (A) Total outstanding general obligation less debt service fund reserve. (B) Excludes the outstanding principal amount of Maricopa County Hospital District No.1 general obligation bonds, as this obligation has historically and is presently being paid from revenues generated from the operations of the District. 163 Legal Debt Margin Information (Exhibit S-16) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2000-01 Assessed Valuation $ 1,356,429,397 20% Limitation Debt limit equal to 20% of assessed valuation $ 271,285,879 Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) $ Total net debt applicable to the 6% limit as a percentage of 6% debt limit $ 1,556,492,294 $ $ 311,298,459 $ 81,385,764 $ 25,740,764 $ 178,047,323 $ 87,381,697 $ 35,066,697 59.87% Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 $ 1,688,452,415 $ 1,768,877,385 $ 1,904,426,188 $ 2,006,703,332 $ 2,401,898,466 $ $ $ $ $ 480,379,693 181,718,459 $ 93,389,538 $ 24,019,538 74.28% 195,505,483 $ 101,307,145 $ 35,617,145 64.84% 179,510,477 $ 106,132,643 32,597,643 69.29% Source: Maricopa County Assessor's Office City of Tempe, Arizona Accounting Division Note: Effective with fiscal years beginning 2006-07, general obligation bonded debt for transportation and public safety purposes became subject to the 20% debt limitation. Previously, general obligation debt issued for these purposes were subject to the 6% debt limitation. 164 $ 161,420,238 $ 114,265,571 $ 21,965,571 80.78% 29,375,666 $ 120,402,200 $ 117,337,200 $ Fiscal Year 2009-10 $ 2,656,948,194 $ 2,767,488,864 $ $ 55,704,693 $ 144,113,908 $ 142,658,908 $ 69,134,638 $ 159,416,891 $ 158,021,891 $ 61,344,067 88.92% $ 166,049,332 $ 157,764,332 1,395,000 0.88% 553,497,773 492,153,706 86.99% 1,455,000 1.01% 531,389,638 462,255,000 88.40% 3,065,000 2.55% Fiscal Year 2008-09 424,675,000 92.68% 92,300,000 $ 401,340,666 Fiscal Year 2007-08 371,965,000 57.62% 73,535,000 $ 380,885,238 219,465,000 49.26% 65,690,000 $ 353,775,477 174,265,000 42.11% 69,370,000 $ 337,690,483 142,185,000 41.63% 52,315,000 $ Fiscal Year 2003-04 129,580,000 38.87% 55,645,000 68.37% 291,272,323 113,225,000 35.89% Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 173,925,879 Fiscal Year 2002-03 $ 1,456,361,617 97,360,000 Total net debt applicable to the 20% limit as a percentage of 20% debt limit 6% Limitation Debt limit equal to 6% of assessed valuation Fiscal Year 2001-02 8,285,000 4.99% Remaining General Obligation Bond Authorizations (Exhibit S-17) City of Tempe, Arizona 2006 Water / Wastewater Prior Issues Authorization $ Streets / Transportation Police Protection Fire Protection Community Services/Park Improvements Subtotal 172,000,000 $ 172,000,000 Current Year Issue $ - WIFA Funding $ - Remaining Authorization $ - 8,000,000 2,565,000 5,200,000 - 235,000 14,000,000 12,500,000 1,500,000 - - 2,500,000 730,000 890,000 - 880,000 14,000,000 14,000,000 - - - 210,500,000 201,795,000 7,590,000 - 1,115,000 113,300,000 16,970,000 19,125,000 13,273,706 63,931,294 2008 Program Water / Wastewater Streets / Transportation/Storm Drains 44,200,000 - 75,000 - 44,125,000 Public Safety - Police/Fire 32,010,000 - 5,855,000 - 26,155,000 Community Services/Park Improvements 51,800,000 2,390,000 12,520,000 - 36,890,000 241,310,000 19,360,000 37,575,000 13,273,706 171,101,294 221,155,000 $ 45,165,000 $ 451,810,000 $ Source: City of Tempe, Arizona Financial Services Department 165 $ 13,273,706 $ 172,216,294 Pledged-Revenue Coverage (Exhibit S-18) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 $ 2,899,583 $ 2,849,998 2,839,171 2,781,576 2,709,851 2,705,348 2,610,195 2,842,153 2,860,571 2,783,916 Debt Service Excise Tax Revenue Obligations Excise Tax Revenue Collections (A) Debt Service (D) Coverage Coverage 2,955,829 2,908,056 2,861,902 2,821,905 2,704,827 2,866,617 3,023,174 4,066,900 4,094,274 4,796,008 0.98 0.98 0.99 0.99 1.00 0.94 0.86 0.70 0.70 0.58 $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (B) Fiscal Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 $ 2,607,541 $ 5,006,344 5,010,393 5,279,580 5,768,058 6,480,218 7,007,790 6,820,193 6,158,761 5,749,649 Debt Service (D) 891,432 710,448 3,524,316 6,017,247 6,021,476 6,014,245 6,012,725 6,007,786 108,721,712 $ 98,220,588 99,441,547 101,591,009 110,964,176 126,916,690 138,546,380 141,601,237 132,726,935 119,456,216 14,544,767 7,505,627 3,457,746 4,497,682 4,495,011 5,737,352 5,783,921 5,626,868 5,625,728 6,760,138 7.47 13.09 28.76 22.59 24.69 22.12 23.95 25.17 23.59 17.67 Transit Excise Tax Obligations 0.5% Privilege and Use Tax Collections (C) Coverage - $ 5.62 7.43 1.64 1.08 1.16 1.13 1.02 0.96 27,310,246 $ 25,229,927 25,140,826 26,740,623 28,848,493 32,440,082 34,971,294 32,449,710 29,850,942 27,891,084 Debt Service 3,301,829 5,517,667 6,019,311 5,185,827 Coverage 10.59 5.88 4.96 5.38 Source: City of Tempe, Arizona Accounting Division (A) Excise tax revenue collections include privilege and use tax, state shared privilege and use tax, state shared income tax, franchise tax, permits and fees, and fines and forfeitures. Note that the privilege and use tax exclude the 0.5% excise tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which are restricted to fund programs of the Tempe Convention and Visitor's Bureau. (B) The 0.1% privilege and use tax is a Performing Arts Center Tax approved by voters in September 2000. (C) The 0.5% privilege and use tax is a Transit Tax approved by voters in September 1996. (D) The debt service amount does not include fiscal agent fees. 166 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-19) Excise Tax Obligations (Excluding Transit Excise Tax Obligations) City of Tempe, Arizona Senior Excise Tax Obligations 2010 Pledged Excise Tax Revenues (A) Fiscal Year 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 $ 119,456,216 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (B) Coverage (C) 6,760,138 5,493,949 5,489,735 5,490,609 5,496,850 5,492,305 6,397,782 6,395,680 6,394,933 6,398,191 6,399,686 5,788,917 5,784,156 5,847,712 2,768,420 2,764,348 17.67 21.74 21.76 21.76 21.73 21.75 18.67 18.68 18.68 18.67 18.67 20.64 20.65 20.43 43.15 43.21 Revenue Available for Debt Service (D) $ Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (E) 118,445,727 Coverage (F) 6,007,786 6,016,226 6,017,788 6,015,338 6,013,238 6,011,013 6,012,438 3,522,050 3,521,375 3,522,825 3,525,875 - 19.88 19.86 19.85 19.86 19.87 19.87 19.87 33.92 33.92 33.91 33.88 - Source: (A) Excise Tax Revenues received by the City in fiscal year 2009-10. See Excise Tax Collection schedule (Exhibit S-21). (B) Includes the annual debt service requirements of the City of Tempe, Arizona, Excise Tax Refunding Obligations, Series 2003, currently outstanding in the principal amount of $12,100,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2000A, currently outstanding in the principal amount of $360,000, the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2005, currently outstanding in the principal amount of $19,455,000 and the City of Tempe Arizona Excise Tax Revenue Refunding Obligations, Series 2007, currently outstanding in the principal amount of $21,235,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2009A, currently outstanding in the principal amount of $13,530,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2009B, currently outstanding in the principal amount of $9,315,000. Debt service requirement include fiscal fees in the current year in order to tie to the financial statements. Ensuing years do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2009-10 excise tax revenues to total debt service requirements for the City's revenue bonds. (D) Consists of Performing Arts Center Excise Taxes and Excise Taxes (net of maximum annual debt service on Outstanding Senior Excise Tax Obligations) received in fiscal year 2009-10. (E) Includes the annual debt service requirements of the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2004, currently outstanding in the principal amount of $26,875,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2006, currently outstanding in the principal amount of $12,905,000. Debt service requirement include fiscal fees in the current year in order to tie to the financial statements. Ensuing years do not include fiscal fees. (F) Pursuant to the Purchase Agreement, the City agrees that the Performing Arts Center Excise Taxes and the Excise Taxes presently imposed will continue to be imposed so that the amount of Performing Arts Center Excise Taxes and the Excise Taxes (net of maximum annual debt service on the Outstanding Senior Excise Tax Obligations) collected for any fiscal year shall be equal to at least three times the total Debt Service requirements for the Obligations and other Parity Obligations in such fiscal year. 167 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-20) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations Fiscal Year 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 2010 Pledged Excise Tax Revenues (A) 27,891,084 Outstanding Senior Excise Tax Obligations Debt Service Requirements (B) Outstanding Senior Excise Tax Obligations Coverage (C) 5,185,827 4,415,496 4,500,261 4,589,110 4,687,031 4,777,262 4,881,503 4,982,855 5,092,755 5,201,367 5,318,503 5,449,139 5,576,401 5,701,439 5,843,547 5,983,544 6,126,432 6,285,854 6,447,368 6,605,724 6,785,922 6,962,664 7,150,950 7,350,506 7,551,058 7,761,344 7,982,540 4,689,609 1,895,975 5.38 6.32 6.20 6.08 5.95 5.84 5.71 5.60 5.48 5.36 5.24 5.12 5.00 4.89 4.77 4.66 4.55 4.44 4.33 4.22 4.11 4.01 3.90 3.79 3.69 3.59 3.49 5.95 14.71 Source: RBC Capital Markets (A) Excise Tax Revenues received by the City in Fiscal Year 2009-10. (B) Includes the annual debt service requirements of the City of Tempe Transit Variable Rate Revenue Bond Series 2006 and Series 2007 currently outstanding in the principal amount of $56,260,000 and $47,345,000 respectively. Interest is assumed at a rate of 0.24% per annum through maturity. Also includes annual debt service requirements for the Series 2008 City of Tempe Transit Excise Tax Revenue Obligations in the principal amount of $29,140,000. Debt service requirement include fiscal fees in the current year in order to tie to the financial statements. Ensuing years do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2009-10 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 168 Excise Tax Collections (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2000-01 Privilege and use tax (A) $ 66,121,741 State shared sales tax State shared income tax Fiscal Year 2001-02 Fiscal Year 2003-04 $ 68,533,088 14,695,069 16,810,760 15,758,491 15,237,310 13,191,255 12,167,009 17,890,338 16,544,791 16,882,535 14,303,004 14,582,117 16,607,943 18,823,759 25,401,762 24,832,128 21,406,004 Franchise tax 2,440,521 2,545,346 1,531,714 1,505,133 1,678,437 1,858,851 2,693,256 3,424,560 3,980,674 3,559,615 Permits and Fees (B) 3,750,761 3,081,194 3,731,523 3,722,079 4,643,117 6,708,183 7,300,676 7,812,768 7,227,027 6,171,045 Fines and forfeitures 4,566,819 4,601,758 5,510,476 5,831,133 6,651,934 7,287,717 7,219,328 8,616,319 9,200,777 7,108,900 98,220,588 $ 99,441,547 $ 101,591,009 $ 110,783,762 $ 126,353,704 $ 138,546,380 $ 141,601,237 $ 132,726,935 $ 119,456,216 (B) Amounts include all licenses and permits and Development Services fees and charges for services. 169 86,750,870 $ 81,108,518 $ 74,295,074 Fiscal Year 2009-10 13,345,152 Amounts exclude the 0.5% Excise Tax approved by voters on September 10, 1996 as a dedicated "transit tax", the 0.1% Performing Arts Center Tax approved by voters in September 2000, and the 1.0% increase in the transient lodging tax on hotels approved by the voters in September 2002, which are restricted to fund programs of the Tempe Convention and Visitor's Bureau. $ Fiscal Year 2008-09 12,405,713 (A) 77,080,250 Fiscal Year 2007-08 12,148,438 Source City of Tempe, Arizona Comprehensive Annual Financial Report City of Tempe, Arizona "Revenue and Expenditure by Account by Fund" report. $ Fiscal Year 2006-07 13,951,532 $ 62,884,508 Fiscal Year 2005-06 $ 59,379,586 $ 108,721,712 $ Fiscal Year 2004-05 59,299,061 Total $ Fiscal Year 2002-03 $ 69,043,642 Demographic and Economic Statistics (Exhibit S-22) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Population (A) 2000-01 160,388 2001-02 159,435 2002-03 Total Personal Income (B) $ Median Age (C) School Enrollment (D) ASU School Enrollment (E) Unemployment Rate (F)) N/A N/A 26,010 44,126 2.30 % 3,583,620,495 22,477 N/A N/A 26,056 47,359 3.30 159,425 3,626,440,475 22,747 N/A N/A 26,380 49,980 4.50 2003-04 159,615 3,673,858,455 23,017 N/A N/A 26,960 52,265 4.20 2004-05 160,820 3,745,015,340 23,287 N/A N/A 26,787 49,171 3.40 2005-06 165,796 3,906,153,760 23,560 58,000 30.9 26,800 61,033 3.50 2006-07 166,625 4,097,808,625 24,593 59,936 31.3 26,292 63,278 3.00 2007-08 167,458 4,387,734,516 26,202 66,864 29.7 25,929 64,394 2.80 2008-09 172,641 4,131,989,694 23,934 63,866 31.6 25,780 67,082 4.20 2009-10 174,833 4,661,747,112 26,664 67,971 31.8 25,857 68,064 6.70 (A) (B) (C) (D) (E) (F) 3,561,736,316 Average Household Income (C) 22,207 Source: $ Per Capita Personal Income (C) Estimate from City of Tempe, Arizona Budget Division Amount is calculated using population times per capita personal income Estimate from Sites USA for 2009 School Registration, Tempe Elementary and High School District ASU Enrollment History Employment Trends, Arizona Department of Commerce 170 Principal Employers (Exhibit S-23) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2009-10 Employers Employees (A) Arizona State University Motorola Wells Fargo SRP Honeywell Kyrene School District Chase Manhattan Corporation Bank One Telephone Banking Division US Airways City of Tempe America West Airlines Federated Stores Tempe Elementary School District Chase Bankcard Services Allied Signal 10,089 4,779 3,636 3,331 3,000 2,559 2,377 2,000 1,898 1,565 - Total 35,234 Rank 1 2 3 4 5 6 7 8 9 10 Fiscal Year 2000-01 Employment 28.63% 13.56% 10.32% 9.45% 8.51% 7.26% 6.75% 5.68% 5.39% 4.44% - 14,227 3,465 1,898 2,100 1,657 2,722 1,400 1,791 1,700 2,700 100.00% 33,660 Source: (A) City of Tempe, Arizona Economic Development Division, Major 100 Employers List (B) City of Tempe, Arizona Comprehensive Annual Financial Report, 2000-01 171 Employees (B) Rank Employment 1 2 6 42.27% 10.29% 5.64% 5 6.24% 9 3 10 7 8 4 4.92% 8.09% 4.16% 5.32% 5.05% 8.02% 100.00% Full-Time Equivalent City Government Employees by Function (Exhibit S-24) Last Seven Fiscal Years City of Tempe, Arizona Full-Time Equivalent Employees Fiscal Year 2003-04 Police Fire Community services Parks and recreation Public works Community relations Mayor and council City manager Diversity program Internal audit/consulting City clerk and elections City attorney Municipal court Development services Community development Economic development Financial services Human resources Information technology Water/wastewater Total Fiscal Year 2004-05 Fiscal Year 2005-06 522 157 305 522 157 308 535 171 340 377 20 7 3 3 4 5 25 37 87 12 70 19 73 131 1,857 377 18 7 3 4 4 5 25 38 89 13 69 19 72 131 1,861 380 18 7 4 4 4 5 26 41 52 53 69 19 72 135 1,935 Fiscal Year 2006-07 530 160 234 208 307 20 7 4 4 4 5 29 41 63 60 72 21 73 136 1,978 Fiscal Year 2007-08 577 187 230 208 323 20 7 4 5 4 5 29 46 63 62 72 23 76 138 2,079 Fiscal Year 2008-09 580 187 232 210 330 20 7 4 5 4 5 29 46 62 62 73 24 76 143 2,097 Source: City of Tempe, Arizona 2009-10 Annual Budget Note: Information prior to fiscal year 2003-04 was not available in this format. Note: In fiscal year 2009-10, the Parks & Recreation department and the Water/wastewater department were consolidated into the Public Works department; the Information Technology department and the Financial Services department were consolidated into the Finance and Technology department; and the Development Services department was consolidated into the Community Development department. 172 Fiscal Year 2009-10 568 185 308 535 27 7 3 4 4 5 25 42 106 139 20 1,977 Operating Indicators by Function/Program (Exhibit S-25) Last Five Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 Function /Program Police Crime rate (per 100,000 population) Traffic accidents Emergency service average response time (minimum) Citizen calls for police service Operating expenditures per citizen calls Fire Firefighters per capita (10,000) No. of fire calls No. of medical calls No. of other assistance calls Emergency service average response time (minimum) % of emergency responses taking 5.0 minutes or less Transportation On-time performance (bus) Annual boardings (bus) Number of square yards repaired Library Registered borrowers Circulation Development services # of permits issued for commercial /industrial Valuation of commercial/industrial permits # of permits issued for residential Valuation of residential permits # of permits issued other Valuation of other permits Water/wastewater Number of customer accounts Total water gallons treated (million gallons - mg) O&M per customer account Service calls responded to within 30 min. and repaired in 24 hours Total wastewater gallons treated (million gallons per day) Solid waste collection Residential container/recycling cost per ton # of residential accounts Residential recycling diversion rate # of commercial accounts Commercial collection cost per ton 8,269 5,562 8,000 6,729 6,700 5,895 6,100 (A) 4,920 6,800 (B) 4,595 4:43 124,923 $391.87 5:01 123,847 $353.37 5:07 112,409 $415.22 5:08 (A) 106,317 (A) $443.34 (A) 5:05 (B) 114,191 (B) $441.08 (B) 8.52 2,097 13,059 1,722 8.24 2,148 13,469 2,429 9.43 1,964 13,255 2,708 9.37 (A) 2,414 15,199 1,260 9.13 (B) 2,144 15,413 1,253 4:25 4:17 4:22 4:20 (A) 4:25 (B) 70% 72% 71% 72% 70% (B) 94% 6,805,383 1,884,102 92% 8,156,782 1,136,956 89% 7,387,024 1,391,711 90% 9,157,912 2,090,504 94% 8,877,964 74,471 141,509 1,404,318 142,323 1,246,650 142,524 1,257,336 142,500 (A) 1,250,000 (A) 142,500 (B) 1,250,000 (B) 69 $83,599,700 1,061 $250,869,200 715 $119,168,700 69 $170,983,900 700 $ 152,320,600 673 $89,884,365 46 $ 88,143,100 675 $ 96,512,400 653 $188,916,700 21 $ 109,851,600 508 $ 161,914,600 577 $105,413,500 18 86,704,700 425 $ 27,741,900 534 $68,502,500 $ 42,059 17,589 (C) $221 42,261 16,686 (C) $317 42,494 17,135 (C) $251 42,686 15,774 (C) $256 100% 21.5 (C) 100% 21.3 (C) 100% 20.9 (C) 100% 19.7 (C) 100% (B) 18.7 $71 (A) 32,916 28% (A) 1,875 $59 (A) $96 (B) 32,886 29% (B) 1,837 $61 (B) $73 33,021 34% 1,976 $57 $70 33,056 29% 1,861 $52 Source: City of Tempe, Arizona Budget and Research Division and other applicable City departments. Note: Information prior to fiscal year 2005-06 was not available in this format. (A) Numbers are updated to actual values as shown in City of Tempe, Arizona Annual Budget 2009-10. (B) Numbers are estimates as shown in City of Tempe, Arizona Annual Budget 2009-10. (C) Numbers revised by department to reflect change in methodology in tracking. 173 $102 32,964 28% 1,942 $59 42,453 15,606 $271 Capital Asset Statistics by Function/Program (Exhibit S-26) Last Five Fiscal Years City of Tempe, Arizona Fiscal Year 2005-06 Police Stations Patrol Units (Squads) Fire Stations Transportation Streets (miles) Streetlights Traffic Signals Buses Parks and recreation Acreage Playgrounds Sports Fields Community centers Golf Courses Water/Wastewater Water mains (miles) Water production capacity (million gallons per day) Water storage capacity (million gallons) Sanitary sewers (miles) Storm sewers (miles) Wastewater treatment capacity (million gallons per day) Solid waste collection Collection trucks Fiscal Year 2006-07 Fiscal Year 2007-08 Fiscal Year 2008-09 Fiscal Year 2009-10 2 22 6 2 22 6 3 22 6 3 22 6 3 22 6 1,241 11,754 193 123 1,241 11,774 199 115 1,241 11,810 217 148 1,241 12,021 219 198 1,241 12,428 219 188 1,684 44 195 4 2 1,684 44 195 4 2 1,872 45 200 4 2 1,872 45 200 4 2 1,872 45 200 4 2 852 852 823 825 839 120 53 502 174 120 53 502 174 120 53 500 193 120 53 497 193 129 53 498 195 32 32 32 38 38 68 56 60 58 58 Source: The City of Tempe, Arizona Budget and Research Division and other applicable City departments. Note: Information prior to fiscal year 2005-06 was not available in this format. 174