City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2011 City Council: Hugh Hallman, Mayor Joel Navarro, Vice Mayor Robin Arredondo-Savage Shana Ellis Mark Mitchell Onnie Shekerjian Corey Woods Administrative Staff: Charles W. Meyer, City Manager Presented by: Ken Jones, Finance and Technology Director Jerry Hart, CPA, Deputy Finance and Technology Director Karen Huffman, CPA, Controller City of Tempe, Arizona 2 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2011 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 35 36 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 50 51 Notes to the Financial Statements 53 38 40 42 44 45 46 48 Combining Fund Financial Statements: Non-Major Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 108 112 Internal Service Funds: Combining Statement of Net Assets Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Combining Statement of Cash Flows 3 118 119 120 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2011 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 Community Development Fund Housing Assistance Fund Rio Salado Fund Community Facilities District Fund Water and Wastewater Fund Solid Waste Fund Golf Fund Cemetery Fund 125 126 127 128 129 130 131 132 133 134 135 136 Financial Data Schedules: Housing Assistance Fund Balance Sheet Revenues and Expenses 138 139 STATISTICAL SECTION Net Assets by Component - Last Ten Fiscal Years (accrual basis of accounting) Changes in Net Assets - Last Ten Fiscal Years (accrual basis of accounting) Fund Balances, Governmental Funds - Last Ten Fiscal Years (modified accrual basis of accounting) Changes in Fund Balance, Governmental Funds – Last Ten 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 Ten 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 Excise Tax Collections – Last Ten Fiscal Years 4 S-1 S-2 143 144 S-3 147 S-4 148 S-5 S-6 S-7 150 151 152 S-8 154 S-9 156 S-10 S-11 S-12 S-13 158 160 161 162 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona TABLE OF CONTENTS Exhibit Page S-14 S-15 S-16 S-17 S-18 S-19 164 165 166 167 168 169 S-20 S-21 S-22 S-23 170 171 172 173 S-24 S-25 S-26 174 175 176 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 Ratios of Outstanding Debt by Type - 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 Eight Fiscal Years Operating Indicators by Function/Program - Last Six Fiscal Years Capital Asset Statistics by Function/Program - Last Six 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 30, 2011 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, 2011 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 162,000 residents as of the 2010 census. 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 During fiscal year 2010-11, the City began slowly recovering from the economic recession that had a significant impact on the City’s finances the prior two fiscal years. Growth occurred in the local sales tax base across many categories including retail, rentals, utilities/communication, hotel/motel and restaurants. Contracting activity was the only category to experience a decline during the year. Total taxable sales increased by 2.0%; retail taxable sales (comprising 51.0% of total taxable sales) grew by a robust 6.8%. As a result, General Fund sales tax revenues increased by $14.2 million (compared to a $5.4 million decline the prior year). A significant portion of the increased sales tax revenue in the General Fund is due to the implementation of the 0.2% (twotenths) temporary (four-year) sales tax rate increase effective July 1, 2010, which raised the overall sales tax rate from 1.8% to 2.0% on all taxable items except groceries. Additionally, the City permanently raised its transient lodging tax (or bed tax) rate from 3.0% to 5.0%, also effective July 1, 2010. When you exclude the effect of the temporary sales and transient lodging tax rate increase, General Fund sales tax revenues grew by $1.8 million (2.8%). 8 Sales tax revenue in the Transit and Performing Arts Special Revenue Funds grew by $1.1 million (2.8%) and $0.2 million (2.7%), respectively. State shared sales tax revenue increased by $0.5 million (4.0%). The City experienced an anticipated decline in state shared income tax of $5.3 million (25.0%). However, state shared income tax received during the fiscal year is from actual collections by the State for fiscal year 2008-09, the low point of the recession. The City anticipates a gradual economic recovery over time that will allow for the continued delivery of high quality services to its residents. LONG-TERM FINANCIAL PLANNING The City continued its proactive efforts to address the significant financial challenges through comprehensive, long-term financial planning. Important components of this planning are the periodic update of the long range forecast for each of the major operating funds (General, Water/Wastewater, Transit Special Revenue, Solid Waste, General Obligation Debt Service, etc.) and the update of the debt management plan, the key tool used in capital planning. Given the current economic environment both nationally and locally, the central focus of all of the City’s planning efforts is the achievement of long-term financial sustainability in order to continue the delivery of services. As mentioned previously, the City implemented a voter-approved, temporary sales tax increase that expires June 30, 2014. The additional revenues generated allowed the City to avoid additional planned service cuts totaling approximately $8.0 million in the General Fund. The temporary tax provides the City with the additional time to strategically make budget reductions/service cuts based upon more well defined community service priorities. We anticipate that General Fund budget reductions will be required in each of the next several fiscal years in advance of the expiration of the temporary tax. The economic downturn has had a significant impact on property valuation in the City. Full cash valuation has declined 31.0% from fiscal year 2009-10 to 2011-12, and is expected to decline by another 10.0% over the next two fiscal years. Historically, the City had maintained a relatively stable property tax rate; however, in an environment of declining property values, the continuation of a stable rate would have resulted in a significant decline in revenue collections. Recognizing that this situation would impair the city’s ability to service currently outstanding debt and maintain existing infrastructure, the City Council adopted a new property tax stabilization policy that produces a predictable revenue stream and limits future increases in total City property tax collections to a CPI inflationary index, not to exceed 3.3% annually, plus taxes collected from new property added to the tax rolls. This policy was adopted to deal with the unpredictable nature of assessed property valuation that the City experienced over the last several years and to ensure payment of existing and future planned debt as reflected in the debt management plan. MAJOR INITIATIVES Tempe Town Lake provides both recreational and business opportunities for residents and visitors. Approximately 65.0% 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. This community amenity was seriously threatened when in July 2010, a segment of the inflatable dam ruptured resulting in the complete draining of the lake. The City has installed new inflatable segments, for which it has incurred no liability or cost, and refilled and re-opened the lake for recreational and other uses within 91 days of the rupture. The City is currently in the process of evaluating four alternative technologies for the long-term replacement of the existing dams. Construction of the new pedestrian bridge at Tempe Town Lake has been substantially completed. The bridge connects the south and north shores near the western dam at the Tempe Center for the Arts. Not only is this bridge beautiful and useful for pedestrians and bicyclists, it also keeps the rubber bladders holding back 9 the waters of Town Lake cooler. The bridge shades the dam and a sprinkler system attached to the bridge moistens it. Completion of the bridge has added another amenity that will further enhance the regional attractiveness of the area. The $5.0 million cost was paid primarily with federal money and matching funds. During the year, the City began the initial implementation of an energy conservation program. In 2009, the City of Tempe was awarded a $1.8 million Energy Efficiency and Conservation Block Grant (EECBG) as part of the American Recovery and Reinvestment Act (ARRA). Approximately $930,000 of this grant, along with $7.3 million in Qualified Energy Conservation Bonds, is being used to retrofit and replace aging and energy inefficient equipment throughout 23 city buildings for a total of 600,000 square feet including city hall, police and fire stations, community centers, maintenance and water treatment facilities. An energy audit determined that retrofitting these 23 buildings would yield the greatest return on our investment. The goal of the program is to reduce energy consumption, reduce utility costs and promote environmental sustainability. The Centerpoint Condominiums project, an uncompleted, mixed-use development featuring one 22-story and three 30-story residential buildings with 375 units, was purchased out of bankruptcy by the Zaremba Group during the fiscal year. The project, now known as West Sixth (W6), has been transformed into a luxury apartment development. The 22-story tower has been completed and has been nearly fully leased. Completion of the second tower is anticipated by the end of calendar year 2011. This project will bring new residents to the City’s central core helping to stabilize and revive the Mill Avenue District. The City continues its efforts to make significant investments in its transportation infrastructure to improve transportation flow and spur economic development. Valley Metro Rail, the regional rail planning agency, received local and regional approval in 2010 to move forward with 2.6-miles of modern streetcar infrastructure in central Tempe. Tempe Streetcar will run in a one-way loop between Rio Salado Parkway and University Drive, going north on Mill Avenue and south on Ash Avenue. It will continue to travel north/south on Mill Avenue between University Drive and Southern Avenue. The modern streetcar project is a critical addition to developing a total transit network in this region. It supports the existing transit system and community with its ability to attract new riders, increase mobility, strengthen existing neighborhoods and create sustainable development. Modern streetcar vehicles operate on tracks, typically mixed with automobile traffic, and are powered by overhead power lines. They differ from light rail vehicles in their smaller vehicle size and single-car operation. Stops are also more simple and frequent than light rail. Construction of the modern streetcar is estimated to cost $160.0 million. The project is expected to be built by 2016 using a mixture of regional Proposition 400 funds and federal grant dollars. The City of Tempe is responsible for the operating funds. 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, 2010. 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-five consecutive years (fiscal years 1975-76 through 2009-10). 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. 10 11 12 City of Tempe, Arizona List of Principal Officials City Council Hugh Hallman, Mayor Joel Navarro, Vice Mayor Robin Arredondo-Savage Shana Ellis Mark Mitchell Onnie Shekerjian Corey Woods Administrative Staff For the Fiscal Year Ended June 30, 2011 Charles W. Meyer, City Manager Jeff Kulaga, Assistant City Manager Tom Ryff, Police Mark Simmons, Fire Kathy Berzins, Community Services Don Bessler, Public Works Chris Anaradian, Community Development Shelley Hearn, Community Relations Rosa Inchausti, Diversity Program Tom Duensing, Internal Audit/Consulting Gretchen Maynard, Tempe Learning Center Brigitta Kuiper, City Clerk and Elections Andrew Ching, City Attorney MaryAnne Majestic, Municipal Court Ken Jones, Finance and Technology Renie Broderick, Human Resources 13 City Organizational Chart Residents of Tempe Mayor and City Council City Clerk Brigitta Kuiper brigitta_kuiper@tempe.gov City Attorney City Manager andrew_ching@tempe.gov charlie_meyer@tempe.gov Charlie Meyer Andrew Ching Police City Court MaryAnne Majestic m_majestic@tempe.gov Assistant City Manager Chief of Police Tom Ryff Jeff Kulaga Jeff_Kulaga@tempe.gov tom_ryff@tempe.gov Community Relations Office Fire Fire Chief Mark Simmons mark_simmons@tempe.gov Community Relations Manager Shelley Hearn Finance and Technology Diversity Office ken_jones@tempe.gov rosa_inchausti@tempe.gov Community Development Internal Audit Office chris_anaradian@tempe.gov tom_duensing@tempe.gov shelley_hearn@tempe.gov Finance and Technology Director Ken Jones Community Development Director Chris Anaradian Public Works Diversity Manager Rosa Inchausti City Auditor Tom Duensing Tempe Learning Center Public Works Director Don Bessler Organizational Dev Administrator Gretchen Maynard don_bessler@tempe.gov gretchen_maynard@tempe.gov Community Services Community Services Director Kathy Berzins kathy_berzins@tempe.gov Human Resources Human Resources Director Renie Broderick renie_broderick@tempe.gov 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 CERTIFIED PUBLIC ACCOUNTANTS Hein f 25 versary th A nni 1986-2011 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 business-type 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, 2011, 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, 2011, 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. As described in Note 11, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for the year ended June 30, 2011, which represents a change in accounting principle. 15 3033 N. Central Ave., Suite 300, Phoenix, Arizona 85012 Tel: (602) 277-9449 Fax: (602) 277-9297 Co. HEINFELD, MEECH & CO., P.C. & , Meech eld In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2011, 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. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 17 through 33 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 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 30, 2011 16 Finance and Technology 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, 2011. 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, $332.3 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors. The City’s total net assets increased by $0.4 million during the fiscal year compared to a decrease of $50.9 million in the prior year. Due to the prolonged economic downturn, revenues continued to decline in the prior year while expenses increased, both of which contributed to the decrease in net assets. In the prior year, 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. In the current year, the City was able to reduce expenditures by $39.9 million while revenues increased by $4.5 million resulting in a slight net surplus. For the fiscal year ended June 30, 2011, the City’s governmental revenues increased by $4.5 million primarily due to an increase in citywide sales tax revenue, charges for services, and operating grants and contributions. In response to prior year declining revenues, expenses for most functions were reduced. The net $39.9 million decrease in expenses was due predominately to a decrease in the cost of services in public works, police, fire and community services. At June 30, 2011, the City’s governmental funds reported combined ending fund balances of $216.1 million. Approximately 64.0% of this total amount ($138.4 million) is for spending at the government’s discretion (committed, assigned, or unassigned). At June 30, 2011, total fund balance for the General Fund was $54.0 million which represents an increase of $10.2 million over the prior year’s. This is the net effect of a $14.2 million increase in sales and transient lodging (bed) tax revenues offset by a decrease in state shared income tax of $5.3 million. In addition, in response to the economic downturn expenditures were reduced by $26.0 million. The result was excess revenues over expenditures of $14.1 million. At June 30, 2011, the City’s proprietary funds reported combined total net assets of $248.6 million, and total unrestricted net assets of $73.0 million. $68.4 million of the unrestricted net assets are in the Water and Wastewater Fund. At June 30, 2011, the total long-term obligations of the City increased by $9.1 million due primarily to: a) the issuance of $5.4 million in general obligation bonds for public safety, community service and street improvements b) the issuance of $39.1 million in excise tax revenue obligations for water/wastewater projects as well as to finance the construction of energy retrofit improvements; and c) a $2.7 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, public works, community development, community relations, mayor and council, city manager, diversity program, internal audit/consulting, Tempe learning center, city clerk and elections, city attorney, municipal court, finance and technology, and human resources. 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 fund statements 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, Golf Course 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, 2011 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 623,225,269 892,786,857 1,516,012,126 261,613,606 366,693,931 628,307,537 Total $ 884,838,875 1,259,480,788 2,144,319,663 Liabilities Long-term liabilities Other liabilities Total liabilities 504,532,040 65,660,445 570,192,485 341,988,946 37,674,614 379,663,560 846,520,986 103,335,059 949,856,045 Net Assets Invested in capital assets, net of related debt Restricted Unrestricted Total net assets 571,925,061 114,643,888 259,250,692 945,819,641 175,625,967 73,018,010 248,643,977 747,551,028 114,643,888 332,268,702 $ 1,194,463,618 $ $ 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 $ 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 at both June 30, 2011 and 2010. 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 $747.6 million and $707.2 million at June 30, 2011 and 2010, respectively. These totals represent 62.6% and 59.2% of total net assets at June 30, 2011 and 2010, 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 their usage. The net assets subject to external restrictions were $114.6 million (9.6% of total net assets) at June 30, 2011. At June 30, 2010 restricted net assets were $142.9 million (12.0% of total net assets). With the implementation of Governmental Accounting Standards Board (GASB) No. 54, new categories were established and existing ones redefined. One new category represents non-spendable items which are inventories, prepaid items, and notes receivable. This category is considered unrestricted. The remaining balance of net assets is unrestricted (committed, assigned, and unassigned), and may be used to meet the government’s ongoing obligations to citizens and creditors. The total balance of unrestricted net assets was $332.3 million (27.8% of total net assets) and $343.9 million (28.8% of total net assets) at June 30, 2011 and 2010, 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 increased by $0.4 million during the current fiscal year. These changes in net assets are explained in the governmental and business-type activities discussion below. It should be noted that the City implemented organizational changes in fiscal year 2010-11 involving several departments in an effort to consolidate operations. The parks and recreation department was divided and the parks component was merged into public works and the recreation component was merged into community services. Development services was merged into community development. Financial services and information technology were merged into one department and titled “finance and technology”. Tempe learning center was disaggregated from human resources. The final change was that water and wastewater was merged into public works. These departmental changes are reflected in 2010 expenditures below in order to provide adequate comparative data. 21 Changes in Net Assets- June 30, 2011 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 (loss) on sale of capital assets Total revenues $ 45,331,333 22,131,520 24,708,317 $ 87,093,499 1,691,429 $ 132,424,832 22,131,520 26,399,746 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,229,447 2,991,971 133,677 299,255,958 459,759 1,976,132 (5,563,191) 85,657,628 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,689,206 4,968,103 (5,429,514) 384,913,586 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,463,790 316,531 556,354 447,287 477,080 467,763 403,792 2,659,312 4,179,694 8,321,853 2,037,261 5,733,128 18,453,487 301,007,739 67,505,481 13,784,106 2,011,316 176,553 83,477,456 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,463,790 316,531 556,354 447,287 477,080 467,763 403,792 2,659,312 4,179,694 8,321,853 2,037,261 5,733,128 18,453,487 67,505,481 13,784,106 2,011,316 176,553 384,485,195 (1,751,781) 293,418 (1,458,363) 947,278,004 $ 945,819,641 2,180,172 (293,418) 1,886,754 246,757,223 $ 248,643,977 428,391 428,391 1,194,035,227 $1,194,463,618 Expenses Police Fire Community services Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal court Finance and technology Human resources 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 22 Changes in Net Assets- June 30, 2010 Governmental Activities (as reclassified) 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 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 Expenses Police Fire Community services Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal court Finance and technology Human resources 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 35,020,875 123,392,609 30,601,684 4,210,261 387,723 369,153 531,651 427,828 636,550 739,884 3,101,845 5,245,105 6,072,849 2,807,110 2,383,904 16,185,139 340,940,020 (46,190,630) (115,657) (46,306,287) 993,584,291 $ 947,278,004 23 73,045,936 13,730,227 2,269,182 312,525 89,357,870 (4,706,765) 115,657 (4,591,108) 251,348,331 $ 246,757,223 78,283,021 30,542,829 35,020,875 123,392,609 30,601,684 4,210,261 387,723 369,153 531,651 427,828 636,550 739,884 3,101,845 5,245,105 6,072,849 2,807,110 2,383,904 16,185,139 73,045,936 13,730,227 2,269,182 312,525 430,297,890 (50,897,395) (50,897,395) 1,244,932,622 $1,194,035,227 Governmental activities. The decrease in governmental net assets totaled $1.5 million for the year ended June 30, 2011. Total revenues fell short of total expenses in the amount of $1.8 million compared with a deficit of $46.2 million in the prior year. The reduction in the deficit was due to the City’s implementation of cost saving and revenue enhancing measures in the fiscal year in response to the economic slowdown. The key factors contributing to the change in net assets compared to the prior year are as follows: Overall, citywide sales tax revenue increased by $16.7 million (13.3%) from the prior year. This was due in part to the 0.2% voter approved temporary sales tax and transient lodging (bed tax) rate increases. Unfortunately the increase in sales tax was offset by a further decrease in state shared income taxes in the amount of $5.3 million or 24.6% from the prior year. Additionally the State, as a part of their budget balancing plan, ceased distributing lottery proceeds for local transportation assistance to municipalities. Charges for services increased by $4.0 million (9.6%). Contributing factors to the increase were a new program implemented by the fire department to lease space to an ambulance company and an increase in police citation surcharges. Another component which reduced the deficit between years was a prior year decrease of $7.3 million in unrestricted investment earnings as a result of the decrease in the investment portfolio returns due to the market conditions, and the fiscal year 2009-10 write down of a $2.1 million investment in the Local Government Investment Pool. The portfolio was able to regain $1.1 million over prior year results. Finally, contributing to the stabilization of net assets was a reduction of $40.0 million in operating expenses. Public works decreased expenses by $28.7 million (23.3%) while community services reduced expenses by $8.0 million (22.8%). In addition, the police department reduced expenses by $5.8 million (7.4%) and the fire department reduced expenses by $3.0 million (10.0%). The following charts illustrate the City’s governmental expenses and program revenues by function and its revenues by source for the current fiscal year 24 A comparison of expenses by function and the percentage of total expenses, for the largest functions, is presented. In general, the majority of the City’s functions implemented a decrease in expenses in response to the anticipated reduction in revenues. In addition, public works experienced a further reduction in expenditures due to the recovery of a prior loss relating to the City’s participation in the Valley Metro Rail, Inc. joint venture. Finally, additional measures to reduce expenditures in the Transit special revenue fund were implemented in order to balance the fund. Fiscal Year Ended June 30, 2011 June 30, 2010 Public works Police Community development Fire Community services $94,687,386 72,492,475 30,778,689 27,499,884 27,031,973 25 31.5% 24.1 10.2 9.1 9.0 $123,392,609 78,283,021 30,601,684 30,542,829 35,020,875 33.8% 23.0 6.9 9.0 6.4 General revenues such as sales taxes, property taxes, state income 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. As stated previously, the increase in sales taxes ($16.7 million) is due, in part, to the temporary sales tax in effect and the transient lodging (bed) tax increase. The long term impact of the previous years’ economic downturn continues to effect the areas of property taxes ($1.7 million decrease) and state shared income taxes ($5.3 million decrease). The increase in unrestricted investment earnings is due to the recognition in the prior year of a loss of an investment in the Local Government Investment Pool, a similar loss did not occur in the current year. Fiscal Year Ended June 30, 2011 June 30, 2010 Sales taxes Property taxes State shared income taxes, unrestricted Auto-lieu taxes Franchise taxes Unrestricted investment earnings $141,844,739 35,501,233 16,137,383 5,424,902 3,821,436 1,229,447 47.4% 11.9 5.4 1.8 1.3 0.4 $125,186,698 37,183,541 21,406,004 5,560,791 3,559,615 97,660 42.5% 12.6 7.3 1.9 1.2 0.03 Business-type activities. Business-type activities increased the City’s net assets by $1.9 million for the year ended June 30, 2011 compared to a decrease of $4.6 million for the year ended June 30, 2010. The recovery has been primarily from water and wastewater rate increases. The result for the Water and Wastewater Fund was that charges for services increased by $7.6 million (12.1%) in the current year. In addition, the Water and Wastewater Fund received capital grants and contributions of $1.7 million. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2011 Water and Wastewater Charges for services Capital grants and contributions Unrestricted investment earnings/other Total $ 70,094,034 1,691,429 Solid Waste Golf Cemetery Total $ 15,326,780 $1,562,489 $ 110,196 $ 87,093,499 - - - 1,691,429 2,393,484 $ 74,178,947 84,904 $ 15,411,684 $1,562,489 $ 110,196 2,478,388 $ 91,263,316 For the Year Ended June 30, 2010 Water and Wastewater Solid Waste Golf Cemetery Total $ 15,242,801 $1,574,081 $ 116,643 $ 79,444,627 Charges for services Capital grants and contributions Unrestricted investment earnings/other Total $ 62,511,102 4,765,839 411,786 $ 67,688,727 25,120 $ 15,267,921 26 3,733 $1,577,814 $ 116,643 4,765,839 440,639 $ 84,651,105 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 $67.5 million for the fiscal year, followed by Solid Waste with $13.8 million, Golf with $2.0 million and Cemetery with $0.2 million. Water and Wastewater expenses and Solid Waste expenses increased minimally (less than $0.1 million) while Golf was able to reduce its expenses by $0.3 million (11.3%). Cemetery was able to reduce its expenses, but it was due to the public works department absorbing certain maintenance costs. 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. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds. Fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. The amount that represents available resources for spending is the total of Committed, Assigned, and Unassigned. The unrestricted fund balance, less the non-spendable portion, may serve as a useful measure of a government’s net resources available for spending at each fiscal year end. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $216.1 million, an increase of $7.1 million from the prior year. Approximately $138.4 million of this total amount fit into the category of committed, assigned or unassigned, all of which is available for spending at the City’s discretion. The total of these categories compare to prior year’s unreserved fund balance. The accumulation of these categories nets a decrease of $0.3 million over the prior year’s unreserved balance of $138.7 million. The remainder of fund balance contains two components: Non-spendable and Restricted. Non-spendable fund balance includes amounts that cannot be spent as they are not in a spendable form. At June 30, 2011 fiscal year end, the fund balance included amounts for inventories ($1.4 million), prepaid items ($0.7 million) and capital improvement notes receivable ($0.3 million). Restricted fund balance are amounts that have externally (outside the City) enforceable limitations or enabling legislation (changes in City Charter).The restricted portion of fund balance consists of amounts for debt service ($25.5 million), fire ($0.2 million), community services ($3.6 million), public works ($38.1 million) and community development ($7.8 million). Revenues for governmental functions overall totaled $299.0 million in the fiscal year ended June 30, 2011, which represents a decrease of 2.4% or $7.3 million from the fiscal year ended June 30, 2010. This decrease is primarily due to the Transit Capital Projects revenue decrease of $25.8 million which was offset by the General Fund increased revenue of $12.4 million and the Transit Special Revenue increase of $2.4 million. This represents an improvement over the prior year’s decrease of $49.0 million (13.8%). An analysis of each individual major fund follows. 27 The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $54.0 million; the fund did not have any restricted fund balance. 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 increased by $10.2 million during the current fiscal year. The increase is primarily due to revenues exceeding expenditures by $14.1 million. Fiscal Year Ended June 30, 2011 June 30, 2010 Revenues Total fund balance Assigned/designated fund balance $ 159,827,943 54,038,399 13,783,790 $ 147,398,236 33.8 % 8.6 43,813,734 13,783,790 27.9 % 9.4 Total revenues increased by $12.4 million from the prior year. Sales tax increased by $14.2 million over prior year with the City’s voter approved temporary sales tax contributing to $10.0 million of the increase and the bed tax increase resulting in a $1.6 million increase in additional revenue. The increase was offset with a $5.3 million decrease in state shared income tax. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues recovered in the current year by $2.4 million. As this fund is primarily sales tax funded, the increase in sales tax collections contributed to the increase in revenues by $1.1 million. In addition, charges for services increased by $3.4 million. This is due in part to the operations of the light rail now being in its second full year of operations and ridership continuing to increase. The fund balance totaled $21.4 million at June 30, 2011, compared to $24.2 million fund balance at June 30, 2010. The net decrease in total fund balance for the year ended June 30, 2011 was due to expenditures exceeding revenues by $2.8 million. This is down from prior year’s expenditures over revenues of $11.0 million. The Transit fund is currently in the second year of its three year budget balancing plan. 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) decreased from $38.1 million at June 30, 2010 to $34.7 million at June 30, 2011. The change in fund balance is due primarily to a $3.2 million decrease in secondary property tax revenues. 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) decreased from $64,482 at June 30, 2010 to a deficit of $775,691 at June 30, 2011. The deficit will be covered by future anticipated special assessment payments. The Transit Capital Projects Fund accounts for the acquisition of buses, the light rail system, construction of the Tempe Transportation Center, East Valley Bus Maintenance Facility and other traffic flow improvements. Total fund balance had an increase from $54.5 million at June 30, 2010 to $64.9 million at June 30, 2011, a $10.5 million change. This positive change in fund balance occurred despite a decrease in revenues of $25.8 million. The decrease in revenues was due to receiving the majority of the light rail federal reimbursements in the prior year. In the prior year, $30.0 million of these reimbursements were transferred to the Transit Special Revenue Fund. There was a reduction in expenditures by $8.8 million reflecting decreased light rail construction activity. 28 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 total net assets for the proprietary funds were as follows: Fiscal Year Ended June 30, 2011 June 30, 2010 Water and wastewater fund Solid waste fund Golf fund Cemetery fund Internal service fund $235,060,325 12,489,370 1,318,207 (223,925) 2,665,431 $234,226,573 11,211,792 1,476,426 (157,568) 6,132,653 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 the rate study report, the fund experienced an increase in total net assets of $0.8 million for the fiscal year ended June 30, 2011 versus a decrease in net assets of $5.3 million for the fiscal year ended June 30, 2010. This is due primarily to planned increases in charges for services as a result of rate adjustments which increased revenue by $7.6 million. The rate study calls for phased in rate increases. The second rate increase was implemented November 1, 2010 for this operation. The fund also incurred a $5.6 million loss due to the retirement of certain assets associated with the decommissioning of the Kyrene Water Reclamation Plant. The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. Revenues over expenditures remained fairly consistent between fiscal years resulting in an increase in net assets for fiscal year ended June 30, 2011 of $1.3 million compared to $1.5 million for fiscal year ended June 30, 2010. The Golf Fund accounts for the operation of the Rolling Hills and Ken McDonald golf courses. The Golf Fund recognized a $0.2 million reduction in total net assets for fiscal year ending June 30, 2011 which is less than prior year’s reduction of $0.6 million. The decrease in the loss is due to the City changing the golf course operations. 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 $66,357 during the fiscal year ended June 30, 2011. The Internal Service Funds accounts for the risk management and health insurance activities of the City. The $3.5 million decrease in net assets is due primarily to higher than anticipated claims cost. BUDGET HIGHLIGHTS The City’s final General Fund expenditure budget of $153.8 million differs from the original budget of $154.8 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 greater than budgetary estimates by $6.0 million (3.9% of total budgeted revenue) in the General Fund. This is due primarily to the increase in sales taxes. Actual expenditures were less than budgetary estimates by $5.7 million (3.7% of final budgetary estimates) in the General Fund. This positive variance was attributable to cost reduction efforts in response to the economic downturn. 29 CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2011 amount to $1.259 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 $26.5 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2011 and 2010, respectively. Capital Assets, Net of Depreciation- June 30, 2011 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 234,910,565 393,779,428 114,668,070 46,615,307 13,208,314 $ 892,786,857 Business-type Activities $ 6,693,377 36,054,109 124,156,242 153,156,745 11,399,169 35,234,289 $ 366,693,931 Total $ 96,298,550 270,964,674 517,935,670 267,824,815 58,014,476 48,442,603 $ 1,259,480,788 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 30 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 Major capital asset events during the current fiscal year included the following: Governmental Activities During the year ended June 30, 2011, the City reacquired land worth $25.3 million as a result of a renegotiation of a development agreement involving a special assessment improvement district. In addition, several improvement projects were completed including the $7.3 million police station renovation, the $2.8 million replacement of the Town Lake rubber dams, and $1.1 million in energy retrofits. There were also various infrastructure improvements to roadways, bike paths and street lights. Business-type Activities Capital expenditures for the South Tempe Water Treatment Plant continued during the fiscal year. A total of $26.1 million of improvements were incurred in the current year. Infrastructure for several water line projects were completed and capitalized totaling over $5.2 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. DEBT ADMINISTRATION At the end of the current fiscal year, the City had total long-term obligations outstanding of $846.5 million which is an increase of $9.1 million over the prior fiscal year. The increase is due in large part to the issuance of bonds for water and wastewater, police and fire, community service, and streets capital projects. In addition, the final drawdown of a loan was 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, 2011 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations HUD Section 108 loan WIFA loan Total debt payable $ 166,680,000 29,875,000 228,746,000 5,883,000 431,184,000 $ 273,000,000 48,827,424 14,621,092 336,448,516 $ 439,680,000 29,875,000 277,573,424 5,883,000 14,621,092 767,632,516 Capital leases Compensated absences Claims and judgments Net OPEB obligation Total long-term obligations 96,735 23,731,713 4,992,030 44,527,562 $ 504,532,040 97,439 5,442,991 $ 341,988,946 194,174 23,731,713 4,992,030 49,970,553 $ 846,520,986 31 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 The City’s issued $5.3 million in new general obligation debt during the current fiscal year for public safety, community service and street improvements in the amounts of $4.0 million, $0.1 million, and $1.2 million, respectively. In addition, the City issued $60.3 million of general obligation refunding bonds. The primary purpose of the refunding was to take advantage of lower interest rates thereby reducing future debt service payments which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $4.3 million in the City’s General Obligation Debt Service and Water/Wastewater funds. Furthermore, the City issued $39.1 million in excise tax obligations; $31.4 million was for water and wastewater projects and $7.7 million was for energy retrofits. The City’s total general obligation bonded debt outstanding decreased by approximately $22.9 million from the fiscal year ended June 30, 2010 to the fiscal year ended June 30, 2011. 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 follows: Fiscal Year Ended June 30, 2011 June 30, 2010 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 $ 131,961,748 816 5.3% $ 0.88 $ 134,538,607 770 4.9% $ 0.91 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, 2011 is $142.4 million and $27.7 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, Aa1 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. 32 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 reduced the annual OPEB cost. In October 2011, the City again implemented significant plan design changes for retiree healthcare benefits. The primary change included moving the retirees from the City’s self-insurance program to a City funded “healthcare reimbursement account”. City contribution changes are dependent upon premium increases or decreases in the Arizona State Retirement System Health Benefits Program. It has not been determined the effect on the City’s OPEB liability. Please refer to Note 15 of the Notes to the Financial Statements. An actuarial analysis will be performed in order to determine the financial impact for the fiscal year ending June 30, 2012. 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 Finance and Technology Department Accounting Division 20 E. Sixth Street Tempe, AZ 85281 480.350.8350 33 City of Tempe, Arizona 34 Statement of Net Assets June 30, 2011 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 Prepaid items Restricted cash and investments Special assessment receivables Capital improvement notes 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 $ 209,670,585 $ 35,070,288 $ 244,740,873 14,362,939 5,942,703 248,280 21,180,757 1,435,102 711,739 37,917,359 30,166,406 16,890,074 284,699,325 11,423,166 368,170 514,649 58,317,589 1,217,216 154,702,528 14,362,939 17,365,869 616,450 21,180,757 1,949,751 711,739 96,234,948 30,166,406 18,107,290 439,401,853 89,605,173 13,208,314 6,693,377 35,234,289 96,298,550 48,442,603 234,910,565 393,779,428 114,668,070 46,615,307 1,516,012,126 36,054,109 124,156,242 153,156,745 11,399,169 628,307,537 270,964,674 517,935,670 267,824,815 58,014,476 2,144,319,663 14,712,291 6,614,604 13,127,567 2,941,769 28,264,214 8,863,628 381,393 4,168,541 171,112 24,089,940 23,575,919 6,995,997 17,296,108 3,112,881 52,354,154 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 2,060,000 27,815,000 - 2,060,000 27,815,000 36,488,117 438,168,923 570,192,485 19,137,486 322,851,460 379,663,560 55,625,603 761,020,383 949,856,045 571,925,061 175,625,967 747,551,028 33,478,773 3,606,346 5,794,383 840,759 321,689 70,601,938 259,250,692 945,819,641 73,018,010 248,643,977 33,478,773 3,606,346 5,794,383 840,759 321,689 70,601,938 332,268,702 $ 1,194,463,618 Net Assets Invested in capital assets, net of related debt Restricted for: Transit Cultural and recreational Highways and streets Housing assistance Capital projects Debt service Unrestricted Total net assets $ $ The notes to the financial statements are an integral part of this statement. 35 Statement of Activities For the fiscal year ended June 30, 2011 Program Revenues Charges for Services Expenses Operating Grants and Contributions Capital Grants and Contributions Functions/Programs Governmental activities: Police Fire Community services Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal courts Finance and technology Human resources 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 $ 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,463,790 316,531 556,354 447,287 477,080 467,763 403,792 2,659,312 4,179,694 8,321,853 2,037,261 5,733,128 18,453,487 301,007,739 67,505,481 13,784,106 2,011,316 176,553 83,477,456 $ 384,485,195 $ 1,657,335 2,107,133 6,453,226 19,582,397 4,484,572 8,682 8,413,798 2,624,190 45,331,333 70,094,034 15,326,780 1,562,489 110,196 87,093,499 $ 132,424,832 General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain (loss) on sale of capital assets Transfers Total general revenues and transfers Change in net assets Net assets- beginning Net assets- ending 36 $ $ 2,889,138 865,638 1,436,121 1,129,168 13,109,106 2,531,397 49,067 71,885 50,000 22,131,520 22,131,520 $ $ 22,375,159 2,333,158 24,708,317 1,691,429 1,691,429 26,399,746 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Assets Governmental Activities $ $ (67,946,002) (24,527,113) (19,142,626) (51,600,662) (10,851,853) (1,932,393) (316,531) (556,354) (447,287) (477,080) (467,763) (403,792) (2,601,563) 4,305,989 (5,647,663) (2,037,261) (5,733,128) (18,453,487) (208,836,569) Business-type Activities $ - Total $ (67,946,002) (24,527,113) (19,142,626) (51,600,662) (10,851,853) (1,932,393) (316,531) (556,354) (447,287) (477,080) (467,763) (403,792) (2,601,563) 4,305,989 (5,647,663) (2,037,261) (5,733,128) (18,453,487) (208,836,569) (208,836,569) 4,279,982 1,542,674 (448,827) (66,357) 5,307,472 5,307,472 4,279,982 1,542,674 (448,827) (66,357) 5,307,472 (203,529,097) 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,229,447 2,991,971 133,677 293,418 207,378,206 (1,458,363) 947,278,004 945,819,641 459,759 1,976,132 (5,563,191) (293,418) (3,420,718) 1,886,754 246,757,223 248,643,977 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,689,206 4,968,103 (5,429,514) 203,957,488 428,391 1,194,035,227 $ 1,194,463,618 $ The notes to the financial statements are an integral part of this statement. 37 Balance Sheet Governmental Funds June 30, 2011 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 Prepaid items Restricted cash and investments Special assessments Capital improvement notes receivable Total assets $ 53,814,924 $ 9,237,106 5,690,732 224,702 1,694,869 320,506 2,006,164 330,000 73,319,003 $ 13,057,045 $ 2,559,463 15,000 13,240,410 3,515,514 2,057,306 34,444,738 $ 34,642,480 $ 1,047,627 16,469,752 14,502,768 66,662,627 $ $ 729,713 30,166,406 30,896,119 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: Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances $ $ 2,383,743 6,509,946 4,073,476 991,382 5,322,057 19,280,604 650,506 13,783,790 39,604,103 54,038,399 73,319,003 38 $ $ 7,357,999 83,000 23,514 2,057,306 2,840,000 675,514 13,037,333 16,487,760 4,220,265 699,380 21,407,405 34,444,738 $ $ 32,014 15,439,915 12,270,000 4,202,446 31,944,375 25,526,885 9,191,367 34,718,252 66,662,627 $ $ 600 530,668 30,410,829 729,713 31,671,810 (775,691) (775,691) 30,896,119 City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ 61,526,374 $ 4,143,708 65,670,082 $ $ 736,375 736,375 14,933,707 50,000,000 64,933,707 65,670,082 $ 36,096,734 $ 1,518,743 236,971 23,578 3,796,639 1,114,596 711,739 15,196,216 58,695,216 $ $ 4,029,813 104,658 286,949 49,379 1,164,201 3,731,881 5,745,000 1,801,541 16,913,422 1,826,335 18,327,386 21,225,893 723,584 (321,404) 41,781,794 58,695,216 Total Governmental Funds $ 199,137,557 $ 14,362,939 5,942,703 248,280 1,694,869 21,180,757 1,435,102 711,739 37,917,359 30,166,406 16,890,074 329,687,785 $ $ 14,540,544 6,614,604 4,443,425 1,064,275 1,694,869 56,961,988 20,855,000 7,409,214 113,583,919 2,476,841 75,275,738 75,446,158 24,398,121 38,507,008 216,103,866 329,687,785 The notes to the financial statements are an integral part of this statement. 39 Reconciliation of the Balance Sheet to the Statement of Net Assets June 30, 2011 City of Tempe, Arizona Fund balances- total governmental funds $ 216,103,866 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 1,434,215,303 (541,428,446) 892,786,857 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 284,699,325 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 30,410,829 1,673,512 16,518,772 4,626,994 3,731,881 56,961,988 Bond premium net of issuance costs are not financial resources and, therefore, are not reported in the funds. (2,941,770) 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 (23,731,713) (4,992,030) (44,451,578) (431,280,735) (504,456,056) 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 2,665,431 $ The notes to the financial statements are an integral part of this statement. 40 945,819,641 City of Tempe, Arizona 41 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2011 General General Obligation Debt Service Transit Special Revenue Special Assessment Debt Service 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 $ 82,476,886 13,301,107 3,821,436 $ 29,012,370 - $ 21,690,870 - 12,656,738 16,137,383 5,424,902 622,209 637,637 9,605,746 7,576,496 1,666,196 5,901,207 159,827,943 851,945 544,927 18,084,457 154,453 48,648,152 61,858,255 24,716,302 18,753,192 13,888,197 7,320,029 2,136,142 318,282 521,642 427,103 379,752 445,556 395,778 2,522,358 3,457,401 6,620,247 1,945,518 46,183,425 - 145,705,754 2,840,000 2,434,877 51,458,302 14,029,231 11,335,602 25,364,833 14,122,189 (2,810,150) (3,622,110) $ 51,853 21,742,723 3,867,979 3,867,979 Expenditures: Current: Police Fire Community services Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal court Finance and technology Human resources Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) - 8,431 3,150,000 1,549,721 4,708,152 (840,173) 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 Issuance of refunding bonds Payment to refunded bonds escrow agent Total other financing sources (uses) 353,000 (4,619,000) 110,617 257,859 (3,897,524) - 8,085,937 (8,377,213) 2,401,827 26,040,000 (27,936,582) 213,969 Net change in fund balances 10,224,665 (2,810,150) (3,408,141) Fund balance at beginning of year Fund balance (deficit) at end of year 43,813,734 54,038,399 24,217,555 21,407,405 38,126,393 34,718,252 $ 42 $ $ (840,173) $ 64,482 (775,691) City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ - $ 4,925,350 140,376 12,663,949 25,060 1,718 17,756,453 $ 119,684,531 35,243,366 3,821,436 19,793,299 204,535 9,503,470 4,256,757 47,402 2,595,124 658,941 545,630 1,152,187 47,204,009 25,570,594 344,911 22,160,208 16,137,383 5,424,902 17,542,915 1,229,966 30,285,327 8,235,437 622,543 3,867,979 1,666,196 7,209,565 299,047,259 3,431,740 922,986 3,256,956 7,918,314 15,626,220 2,196,276 41,925 594,116 - 65,289,995 25,639,288 22,010,148 67,998,367 22,946,249 4,332,418 318,282 521,642 427,103 379,752 445,556 395,778 2,564,283 4,051,517 6,620,247 1,945,518 7,355,871 7,355,871 6,043,000 3,669,478 27,992,649 71,693,660 26,062,231 18,989,678 35,348,520 306,286,572 10,400,582 (24,489,651) (7,239,313) 8,473,322 (3,572,628) 13,146,000 17,989 18,064,683 16,912,259 (16,618,841) 13,146,000 2,401,827 110,617 328,593 26,040,000 (27,936,582) 14,383,873 - (50,000) 52,745 2,745 $ 8,195,275 251,389 - Total Governmental Funds 10,403,327 (6,424,968) 54,530,380 64,933,707 48,206,762 41,781,794 $ 7,144,560 $ 208,959,306 216,103,866 The notes to the financial statements are an integral part of this statement. 43 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Net change in fund balances- total governmental funds $ 7,144,560 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) (3,183,781) (3,860,976) (7,044,757) 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 Special assessments received/recognized 133,617 1,744,693 1,143,803 (2,947,091) 75,022 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 35,348,520 (5,712,184) (41,302,232) (11,665,896) 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 1,790,029 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 305,725 230,466 536,191 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. Issuance of debt Premium on issuance of debt Principal payments made (11,249,418) (2,401,827) 24,824,955 11,173,710 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 (3,467,222) $ The notes to the financial statements are an integral part of this statement. 44 (1,458,363) Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Total revenues Budgeted Amounts Original Final $ 89,278,153 35,165,037 1,500,000 11,053,141 10,322,095 1,714,996 5,058,923 154,092,345 Expenditures Police Fire Community services Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal court Finance and technology Human resources Interdepartmental charges 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 $ 89,278,153 35,165,037 1,500,000 11,053,141 10,322,095 1,714,996 5,058,923 154,092,345 66,118,010 25,471,622 19,877,191 16,463,541 7,486,092 2,274,112 317,913 273,771 441,351 414,920 519,984 744,628 2,532,363 3,605,850 30,439,523 2,006,752 (24,176,321) 154,811,302 $ 120,000 120,000 (598,957) 65,258,984 25,645,848 20,027,142 15,989,705 7,403,492 2,316,070 317,413 273,771 457,481 383,192 511,484 452,031 2,508,023 3,524,959 18,771,807 1,816,552 (11,869,403) 153,788,551 $ 120,000 120,000 423,794 Actual Amounts (Budgetary Basis) Variance with Final Budget Positive (Negative) $ 99,599,429 34,841,232 914,801 9,605,746 7,576,496 1,666,196 5,901,207 160,105,107 $ 10,321,276 (323,805) (585,199) (1,447,395) (2,745,599) (48,800) 842,284 6,012,762 62,454,622 24,799,272 20,948,668 14,255,539 7,356,956 2,131,723 297,615 284,123 428,071 381,555 447,626 397,533 2,530,695 3,383,108 17,707,284 1,934,813 (11,678,801) 148,060,402 2,804,362 846,576 (921,526) 1,734,166 46,536 184,347 19,798 (10,352) 29,410 1,637 63,858 54,498 (22,672) 141,851 1,064,523 (118,261) (190,602) 5,728,149 353,000 (4,619,000) 257,859 (4,008,141) 8,036,564 353,000 (4,619,000) 137,859 (4,128,141) $ 7,612,770 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 (277,164) 167,837 46,400 2,251,028 $ 10,224,665 The notes to the financial statements are an integral part of this statement. 45 Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Special Revenue Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Revenues Taxes Intergovernmental revenue Investment income Charges for services Miscellaneous Total revenues Expenditures Current: Public works Debt service: Principal retirement Interest and fiscal fees Total expenditures Net change in fund balance Budgeted Amounts Original Final $ 25,012,100 212,386 18,613,425 43,837,911 $ 25,012,100 212,386 18,613,425 43,837,911 54,476,251 54,476,251 2,900,000 6,650,000 64,026,251 $ (20,188,340) Actual Amounts (Budgetary Basis) $ 46,223,650 2,900,000 6,650,000 64,026,251 $ (20,188,340) 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 29,012,370 851,945 430,238 18,084,457 154,453 48,533,463 2,840,000 2,434,877 51,498,527 (2,965,064) 114,689 (3,652) 34,045 9,832 $ (2,810,150) The notes to the financial statements are an integral part of this statement. 46 Variance with Final Budget Positive (Negative) $ 4,000,270 851,945 217,852 (528,968) 154,453 4,695,552 8,252,601 60,000 4,215,123 12,527,724 $ 17,223,276 City of Tempe, Arizona 47 Statement of Net Assets Proprietary Funds June 30, 2011 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Cemetery Total Governmental ActivitiesInternal Service Funds Assets Current assets: Pooled cash and investments Restricted cash and investments Accounts receivable Accrued interest receivable Due from other funds 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 $ 26,755,919 58,137,891 10,242,203 330,291 484,699 514,649 96,465,652 $ 355,637,014 511,556,758 $ 608,022,410 - $ 1,180,963 19,430 - 9,438,667 - 1,217,216 154,702,528 6,330,829 55,734,289 246,343,246 223,410,545 29,208,126 35,234,289 (240,624,310) 8,238,274 $ - - 179,698 3,875 183,573 - $ 35,070,288 58,317,589 11,423,166 368,170 484,699 514,649 106,178,561 $ 10,533,028 - - - 10,533,028 1,217,216 154,702,528 - (14,312,679) 362,548 1,822,663 4,247,980 1,322,648 (5,742,146) 2,261,330 19,449 (196,148) 6,693,377 58,822,735 246,343,246 229,919,855 50,555,712 35,234,289 (260,875,283) - 6,958,593 6,958,593 2,013,693 2,013,693 2,084,631 2,084,631 366,693,931 522,613,675 - 2,268,204 $ 628,792,236 1,265,783 - 20,005,489 - $ 76,095 14,574 90,669 16,397,260 48 $ 2,104,362 $ $ 10,533,028 Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Cemetery Total 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 OPEB- current Total current liabilities Noncurrent liabilities: General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable OPEB obligation Unamortized premium Total noncurrent liabilities Total liabilities $ 7,316,962 380,108 2,971,110 $ 315,848 126,951 48,003 233,151 52,086 35,839 35,786,520 2,591,179 369,079 618,705 39,365,483 1,785,000 88,424 1,873,424 273,000,000 48,739,000 13,945,646 45,353 4,964,353 88,424 340,782,776 2,492,129 380,148,259 7,867,597 175,625,967 73,018,010 $ 248,643,977 2,665,431 2,665,431 - 1,498,663 1,285 964,280 $ - 171,112 6,485,934 16,895,000 575,000 675,446 - - 273,000,000 46,954,000 13,945,646 3,275,919 1,316,711 337,175,565 1,316,711 45,353 371,723 417,076 372,962,085 3,907,890 786,155 166,629,913 68,430,412 $ 235,060,325 6,958,593 5,530,777 12,489,370 1,916,254 (598,047) 1,318,207 - - $ 484,699 44,006 90,000 - $ 8,863,628 381,393 4,168,541 484,699 171,112 6,529,940 16,895,000 665,000 675,446 52,086 478,638 $ 171,746 - 7,619,867 - 7,791,613 - 75,984 - 75,984 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. 49 121,207 (345,132) (223,925) - $ Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2011 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Cemetery Total Governmental ActivitiesInternal Service Funds Operating revenues: Charges for services Miscellaneous Total operating revenues $ 70,094,034 1,973,274 72,067,308 $ 15,326,780 2,858 15,329,638 $ 1,562,489 1,562,489 $ 110,196 110,196 $ 87,093,499 1,976,132 89,069,631 $ 25,411,364 25,411,364 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 14,635,025 4,069,201 16,461,841 16,414,839 51,580,906 20,486,402 5,521,405 195,566 6,932,010 1,135,125 13,784,106 1,545,532 783,931 288,871 702,554 235,960 2,011,316 (448,827) 301 90,926 91,227 18,969 20,940,361 4,553,939 24,096,405 17,876,850 67,467,555 21,602,076 420,210 (9,720,695) (5,603,226) (6,203,880) 42,011 40,035 - (2,462) - (85,326) - 459,759 (9,806,021) (5,563,191) (6,203,880) (621,189) 1,627,578 (451,289) (66,357) (350,000) 1,277,578 293,070 (158,219) (66,357) Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) 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 1,691,429 5,868,912 (6,105,400) 833,752 234,226,573 $ $ 235,060,325 11,211,792 $ 12,489,370 1,476,426 $ 1,318,207 (157,568) $ (223,925) The notes to the financial statements are an integral part of this statement. 50 488,743 1,691,429 6,161,982 (6,455,400) 1,886,754 246,757,223 $ 248,643,977 28,878,586 28,878,586 (3,467,222) (3,467,222) (3,467,222) 6,132,653 $ 2,665,431 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2011 City of Tempe, Arizona Business-type Activities- Enterprise Funds 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 Water and Wastewater $ Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from sale of bonds Payment to refunded bond escrow agent Proceeds from loan payable Principal paid on long-term debt Interest and fiscal fees Acquisition of capital assets Capital contributions Deferred revenue Loss from the sale of assets Investment in joint venture Net cash used by capital and related financing activities 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 Total noncash investing, capital, and financing activities: $ 15,199,948 (5,604,741) (5,986,380) 3,608,827 5,153 5,868,912 (6,105,400) (231,335) (350,000) (350,000) 65,594,000 (37,078,469) 2,656,596 (16,819,210) (6,990,002) (31,998,672) 1,691,429 (2,626,316) (5,603,226) (6,071,378) (37,245,248) (1,126,257) 40,035 (1,086,222) 424,765 (695,261) (270,496) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 74,869,371 (16,249,637) (20,573,291) 38,046,443 Solid Waste 299,364 84,594,446 Golf Course $ 1,562,489 (937,187) (1,001,907) (376,605) Cemetery $ 293,070 293,070 (2,698) (2,698) 43,227 43,227 (2,652) (2,652) 2,215,832 6,022,442 (88,885) 164,980 110,196 (5,105) (370) 104,721 Total $ 91,742,004 (22,796,670) (27,561,948) 41,383,386 Governmental ActivitiesInternal Service Funds $ 25,537,532 (30,883,821) (5,346,289) (5,153) (5,153) 6,161,982 (6,455,400) (293,418) - (90,000) (93,219) (62,877) (246,096) 65,594,000 (37,078,469) 2,656,596 (16,911,908) (7,083,221) (33,187,806) 1,691,429 (2,626,316) (5,563,191) (6,071,378) (38,580,264) - 465,340 (695,261) (229,921) - (146,528) 326,226 2,279,783 91,108,094 (5,346,289) 15,879,317 $ 84,893,810 $ 8,238,274 $ 76,095 $ 179,698 $ 93,387,877 $ 10,533,028 $ 20,486,402 $ 1,545,532 $ (448,827) $ 18,969 $ 21,602,076 $ (3,467,222) 16,414,839 1,135,125 235,960 90,926 17,876,850 $ 2,802,063 255,028 (6,153) (291,124) (1,870,656) 256,044 38,046,443 $ (129,690) (284) 1,141,480 (184,162) 100,826 3,608,827 (10,482) (168,500) 15,244 (376,605) (69) (5,105) 104,721 $ 2,672,373 255,028 (6,437) 839,805 (2,228,423) 372,114 41,383,386 $ $ (6,203,880) $ - $ - $ - $ (6,203,880) $ - $ (6,203,880) $ - $ - $ - $ (6,203,880) $ - 51 $ The notes to the financial statements are an integral part of this statement. $ 126,168 (519,670) (1,487,897) 2,332 (5,346,289) City of Tempe, Arizona 52 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 its 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. 53 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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. 54 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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. 55 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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. 56 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 Finance and Technology 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. 58 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 2010-11 Expenditure Limitation is $305,391,699. 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 Investment Advisory Committee; 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 Pools 5 and 7. H. Receivables For accounts receivable, 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. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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): Assets Useful life (years) Buildings Infrastructure Improvements Machinery and equipment 10-70 7-70 10-50 3-25 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. 60 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, businesstype 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, the classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent the “restricted” classifications and Committed, Assigned, and Unassigned represent the “unrestricted” classifications (see note 11). 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. 61 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 2011 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. 62 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, or US treasury obligations and are reported at amortized cost. Deposits At year-end, the carrying amount of the City's deposits with financial institutions was $169,448 and the bank balance was <$241,262>. 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 5 and 7. The City’s investment in the State of Arizona Local Government Investment Pool (LGIP) is stated at fair value, which approximates the value of the City’s pool shares. The LGIP is 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. Cash and investments as of June 30, 2011 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $340,806,373 169,448 $340,975,821 Pooled cash and investments – unrestricted Restricted cash and investments Total pooled cash and investments $244,740,873 96,234,948 $340,975,821 The City had a net increase in the fair value of investments during fiscal year 2010-11 of $536,001. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. 63 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) At June 30, 2011, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Cash held with trustee State investment pools Fair Value $ 142,481,006 107,817,655 2,620,684 41,952,952 45,934,076 $ 340,806,373 12 Months or Less $ 96,776,744 36,273,151 2,620,684 41,952,952 45,934,076 $ 223,557,607 13 - 24 Months $41,660,588 56,424,504 $98,085,092 25 - 36 Months $ $ 15,120,000 15,120,000 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 AAAm by Standard & Poor’s. 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, 2011, 6.45% of the City’s investments are in Federal Home Loan Bank securities, 20.29% of the City’s investments are in Fannie Mae, and 20.64% 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, 2011: General fund Special assessment debt service Non-major governmental Total governmental funds Due to 530,668 1,164,201 $ 1,694,869 Due from $ 1,694,869 $ 1,694,869 Water and wastewater fund Cemetery fund Total proprietary funds Due to $ 484,699 $ 484,699 Due from $ 484,699 $ 484,699 $ 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS AND INTERFUND TRANSFERS (Continued) The interfund balances at June 30, 2011 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2011 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 Transfers In General General General Obligation Debt Service Non-major Governmental Water and Wastewater Golf Total $ - General Obligation Debt Service $ - Transit Capital Projects $ - 50,000 4,362,962 3,061,276 232,968 5,315,937 - 23,070 - - $ 4,619,000 $ 8,377,213 $ Non-major Governmental 50,000 $ - 270,000 Water and Wastewater $ 83,000 Solid Waste $ Total - $ 353,000 - 8,085,937 2,770,000 5,315,937 212,621 436,463 320,007 - - 5,868,912 270,000 - 293,070 $ 3,572,628 $ 6,105,400 350,000 $ 350,000 8,473,322 $23,074,241 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 2010-11 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, 2011 the note receivable balance is $14,502,768. 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 five and six year period with the remaining balance due the following year. In addition, there is an option for a prepayment equal to the net present value of the unpaid balance calculated using a 4.5% discount rate. At June 30, 2011 the note receivable balance in the Transit Special Revenue fund is $2,057,306 and the corresponding revenue has been deferred. In accordance with a development agreement, the City has deferred certain water and sewer development fees. Commencing in August 2011, the City will receive $12,324 monthly over a 10 year period with an interest rate of 4.0%. The outstanding notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2011 was $1,217,216. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona 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, 2010 (the latest information available), the City has a 15.93% 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, 2010 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net assets $ 976,261 (43,434) $ 932,827 Total revenues Total expenses Total non-operating revenues (expenses) Net increase in net assets $ 108,546 (87,177) 262 $ 21,631 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, 2011, was $154,702,528. The City’s net loss from joint venture was $6,203,880 for the fiscal year ended June 30, 2011. 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. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011, the City has a 24.57% (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 were offset by a Federal funding agreement from the U.S. Department of Transportation. These contributions were 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, 2010 (the latest information available) is as follows: Total assets Total liabilities Total net assets $ 1,316,533,813 (137,801,285) $ 1,178,732,528 Total revenues Total expenses Total non-operating revenues Total non-operating expenses Net decrease in net assets $ 174,333,820 (82,190,208) 9,149,160 (110,416,910) $ (9,124,138) 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 and related improvements 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 $1,864,154 in the fiscal year ended June 30, 2011 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, 2011 was $284,699,325. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. 67 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011 is as follows: Balances June 30, 2010 Additions $ 64,319,443 27,733,671 92,053,114 $25,285,730 27,376,121 52,661,851 298,374,863 690,283,121 147,838,034 155,106,154 1,291,602,172 2,080,443 2,080,443 (2,191,213) (2,191,213) (10,689,188) (15,794,383) (5,693,633) (9,125,028) 1,996,297 - (69,274,838) (310,416,330) (47,319,340) (114,417,938) Total accumulated depreciation (502,122,511) (41,302,232) 1,996,297 Governmental activities capital assets, net $ 881,532,775 $13,440,062 $ (2,185,980) - (541,428,446) Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment (58,585,650) (294,621,947) (41,625,707) (107,289,207) 68 Transfers in (out) Retirements $ Balances June 30, 2011 $ $ 89,605,173 (1,991,064) (39,910,414) 13,208,314 (1,991,064) (39,910,414) 102,813,487 5,810,540 13,912,637 14,149,376 6,037,861 39,910,414 $ - 304,185,403 704,195,758 161,987,410 161,033,245 1,331,401,816 $ 892,786,857 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2010 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 9,894,013 16,587,390 $ Additions Retirements 38,340,734 38,340,734 $ 58,822,735 237,381,550 234,565,125 49,835,538 580,604,948 Accumulated depreciation: Buildings (21,379,390) Infrastructure (115,674,148) Improvements (70,765,567) Machinery and equipment (37,943,308) Total accumulated depreciation (245,762,413) Business-type activities capital assets, net $351,429,925 (1,056,219) (1,056,219) Transfers in (out) $ Balances June 30, 2011 $ 6,693,377 (11,944,239) 35,234,289 (11,944,239) 41,927,666 1,523,191 1,523,191 (7,428,671) (1,002,159) (8,430,830) (1,389,236) (6,512,857) (7,780,423) (2,194,334) (17,876,850) 1,782,881 981,099 2,763,980 - (22,768,626) (122,187,004) (76,763,110) (39,156,543) (260,875,283) $21,987,075 $ (6,723,069) $ - $366,693,931 8,961,696 2,783,401 199,142 11,944,239 58,822,735 246,343,246 229,919,855 50,555,712 585,641,548 Depreciation expense was charged to the governmental functions in the government-wide financial statements as follows: Police Fire Community services Public works Community development Community relations City manager Diversity program City attorney Municipal courts Finance and technology Unallocated depreciation Total depreciation expense 69 $ $ 4,193,746 2,009,510 3,760,457 26,327,265 1,286,563 18,052 11,127 997 3,417 43,664 1,164,480 2,482,954 41,302,232 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, $5.375 million was issued to finance improvements for Transportation, Public Safety, and Library. In addition, 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, 2011, were as follows: $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% $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, 2011 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 $60,280,000 2010C Capital Improvement Refunding Issue Serial Bonds due in annual installments of $1,225,000 to $7,735,000 through July 1, 2022; interest at 1.25% to 5.00% $5,375,000 2011A Capital Improvement Serial Bonds due in annual installments of $475,000 to $605,000 beginning July 1, 2012 through July 1, 2021; interest at 2.00% to 4.00% Total general obligation bonds outstanding (excluding current portion of general obligation bonds outstanding) 70 $ 4,165,000 15,980,000 6,550,000 11,525,000 40,090,000 61,270,000 18,310,000 65,605,000 60,160,000 52,335,000 15,240,000 28,410,000 54,665,000 5,375,000 $ 439,680,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 (net of 35% federal credit): Fiscal Year Ending June 30, Principal Interest Total 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2030 $ 27,715,000 27,235,000 28,455,000 29,750,000 27,620,000 143,635,000 122,180,000 33,090,000 $ 17,795,439 16,718,682 15,641,664 14,462,952 13,281,025 48,932,391 19,846,214 2,747,401 $ 45,510,439 43,953,682 44,096,664 44,212,952 40,901,025 192,567,391 142,026,214 35,837,401 $ 439,680,000 $ 149,425,768 $ 589,105,768 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2030 Principal $ 11,485,000 11,005,000 11,500,000 11,990,000 10,640,000 52,480,000 40,595,000 16,985,000 $ 166,680,000 Interest $ 6,501,687 6,067,629 5,643,235 5,184,642 4,737,987 17,498,840 7,757,951 1,460,242 $ 54,852,213 Total $ 17,986,687 17,072,629 17,143,235 17,174,642 15,377,987 69,978,840 48,352,951 18,445,242 $ 221,532,213 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2030 $ 16,230,000 16,230,000 16,955,000 17,760,000 16,980,000 91,155,000 81,585,000 16,105,000 $ 11,293,753 10,651,053 9,998,429 9,278,310 8,543,038 31,433,551 12,088,263 1,287,159 $ 27,523,753 26,881,053 26,953,429 27,038,310 25,523,038 122,588,551 93,673,263 17,392,159 $ 273,000,000 $ 94,573,556 $ 367,573,556 71 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011, the special assessments receivable of $30,166,406, 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, 2011, were as follows: $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 $ 940,000 2,080,000 3,225,000 23,630,000 $ 29,875,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 $ 2,060,000 2,140,000 1,745,000 1,830,000 1,335,000 7,695,000 7,565,000 5,505,000 $ 1,409,611 1,308,085 1,214,850 1,129,758 1,054,233 4,224,840 2,358,875 421,875 $ 3,469,611 3,448,085 2,959,850 2,959,758 2,389,233 11,919,840 9,923,875 5,926,875 $29,875,000 $13,122,127 $42,997,127 72 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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% $10,425,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2012 2013 2014 2015 2016 2017-2021 2022-2023 $ 1,760,000 1,830,000 1,905,000 1,980,000 2,950,000 $ 455,238 384,838 311,638 235,438 136,438 682,188 272,875 $ 2,215,238 2,214,838 2,216,638 2,215,438 136,438 682,188 3,222,875 $10,425,000 $ 2,478,653 $12,903,653 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. 73 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 2012 2013 2014 2015 2016 2017-2020 $ 2,225,000 2,340,000 2,460,000 2,590,000 2,725,000 12,420,000 $ 1,299,900 1,183,088 1,060,238 931,088 795,112 1,672,128 $ 3,524,900 3,523,088 3,520,238 3,521,088 3,520,112 14,092,128 $24,760,000 $ 6,941,554 $ 31,701,554 74 $ 24,760,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2012 2013 2014 2015 2016 2017-2021 2022-2025 Principal $ Interest 410,000 425,000 450,000 460,000 1,390,000 7,980,000 7,945,000 $19,060,000 75 $ Total 924,875 909,500 888,250 870,250 851,850 3,222,250 1,017,750 $ 1,334,875 1,334,500 1,338,250 1,330,250 2,241,850 11,202,250 8,962,750 $ 8,684,725 $ 27,744,725 $ 19,060,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2012 2013 2014 2015 2016 2017-2021 2022-2025 Principal $ Interest 315,000 325,000 345,000 355,000 1,280,000 7,345,000 7,310,000 $17,275,000 $ Total 840,013 828,200 811,950 798,150 783,950 2,965,000 936,250 $ 1,155,013 1,153,200 1,156,950 1,153,150 2,063,950 10,310,000 8,246,250 $ 7,963,513 $ 25,238,513 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2025 Principal Interest $ $ 95,000 100,000 105,000 105,000 110,000 635,000 635,000 $1,785,000 84,863 81,300 76,300 72,100 67,900 257,250 81,500 $ 721,213 Total $ 179,863 181,300 181,300 177,100 177,900 892,250 716,500 $ 2,506,213 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. 76 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 2012 2013 2014 2015 2016 $ 2,015,000 2,100,000 2,190,000 2,280,000 2,385,000 $ 477,888 392,250 303,000 209,926 107,326 $ 2,492,888 2,492,250 2,493,000 2,489,926 2,492,326 $10,970,000 $1,490,390 $12,460,390 Interest 77 Total $ 10,970,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011 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. 78 $54,990,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011 was 0.25%. The following is a summary of debt service cash requirements to maturity utilizing the interest rate in effect at June 30, 2011 of 0.10%. Fiscal Year Ending June 30, Principal 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 2032-2036 $ 1,320,000 1,375,000 1,430,000 1,485,000 1,545,000 8,695,000 10,585,000 12,880,000 15,675,000 Interest $ $54,990,000 Total 54,990 53,670 52,296 50,866 49,380 222,472 175,362 118,018 48,252 $ 1,374,990 1,428,670 1,482,296 1,535,866 1,594,380 8,917,472 10,760,362 12,998,018 15,723,252 $825,306 $55,815,306 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. 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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% $21,210,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022 Principal Interest Total 400,000 420,000 435,000 455,000 2,550,000 14,185,000 2,765,000 $ 1,016,350 1,000,350 983,550 966,150 947,950 2,695,250 124,425 $ 1,416,350 1,420,350 1,418,550 1,421,150 3,497,950 16,880,250 2,889,425 $21,210,000 $ 7,734,025 $ 28,944,025 $ 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, 2011, 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. 80 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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. $46,340,000 The average annualized interest rate paid on these Obligations during the fiscal year ended June 30, 2011 was 0.25%. The following is a summary of debt service cash requirements to maturity utilizing the interest rate in effect at June 30, 2011 of 0.10%. Fiscal Year Ending June 30, Principal 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 2032-2036 2037 $ 1,045,000 1,085,000 1,130,000 1,175,000 1,225,000 6,890,000 8,385,000 10,205,000 12,410,000 2,790,000 $ 46,340 45,296 44,210 43,080 41,906 190,166 152,832 107,418 52,152 2,790 $ 1,091,340 1,130,296 1,174,210 1,218,080 1,266,906 7,080,166 8,537,832 10,312,418 12,462,152 2,792,790 $46,340,000 $ 726,190 $ 47,066,190 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% 81 $28,575,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 2032-2036 2037-2038 Principal Interest Total 585,000 605,000 630,000 650,000 675,000 3,810,000 4,680,000 5,890,000 7,515,000 3,535,000 $ 1,307,069 1,286,594 1,265,419 1,241,794 1,217,419 5,659,294 4,793,706 3,571,500 1,955,438 253,888 $ 1,892,069 1,891,594 1,895,419 1,891,794 1,892,419 9,469,294 9,473,706 9,461,500 9,470,438 3,788,888 $28,575,000 $22,552,121 $51,127,121 $ 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 35.00% 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. 82 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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% $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 35.00% federal credit Total $ 12,715,000 9,315,000 $ 22,030,000 The following is a summary of total debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 Principal $ Interest 840,000 860,000 905,000 935,000 960,000 5,585,000 7,005,000 4,940,000 $22,030,000 $ Total 953,422 928,222 885,222 858,072 827,684 3,367,419 1,950,170 423,134 $ 1,793,422 1,788,222 1,790,222 1,793,072 1,787,684 8,952,419 8,955,170 5,363,134 $ 10,193,345 $ 32,223,345 The following is a summary of governmental debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 Principal $ Interest 245,000 250,000 265,000 275,000 280,000 1,630,000 2,045,000 1,440,000 $ 6,430,000 83 $ 278,273 270,922 258,413 250,468 241,544 982,717 569,226 123,370 $ 2,974,933 Total $ 523,273 520,922 523,413 525,468 521,544 2,612,717 2,614,226 1,563,370 $ 9,404,933 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 35.00% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 Principal $ Interest 595,000 610,000 640,000 660,000 680,000 3,955,000 4,960,000 3,500,000 $ 15,600,000 $ Total 675,148 657,299 626,809 607,604 586,140 2,384,702 1,380,943 299,764 $ 1,270,148 1,267,299 1,266,809 1,267,604 1,266,140 6,339,702 6,340,943 3,799,764 $ 7,218,409 $22,818,409 Excise Tax Revenue Obligations. On June 23, 2011, the City issued $39,125,000 of Excise Tax Revenue Obligations: $31,825,000 of tax-exempt obligations (Series 2011A) and $7,300,000 of taxable obligations (Series 2011B) referred to as Qualified Energy Conservation Bonds. As an issuer of these 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 72.38% of the corresponding interest payable on the Series 2011B taxable obligations on any interest payment date. The proceeds were used to finance the construction of energy retrofit improvements 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, stateshared 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. 84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $31,825,000 2011A Excise Tax Revenue Obligations due in annual installments of $1,030,000 to $2,375,000 through July 1, 2031; interest at 2.00% to 5.00% $7,300,000 2011B Excise Tax Revenue Obligations due in one installment of $7,300,000 on July 1, 2025; interest due semi-annually at 4.87%, net of 72.38% federal credit Total $ 31,825,000 7,300,000 $ 39,125,000 The following is a summary of total debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 Principal $ Interest 1,030,000 1,085,000 1,120,000 1,150,000 1,195,000 6,825,000 15,925,000 10,795,000 $39,125,000 $ Total 1,609,855 1,554,258 1,521,708 1,488,108 1,442,108 6,379,590 4,419,032 1,671,750 $ 2,639,855 2,639,258 2,641,708 2,638,108 2,637,108 13,204,590 20,344,032 12,466,750 $ 20,086,409 $ 59,211,409 The following is a summary of governmental debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 Principal $ Interest 25,000 25,000 30,000 30,000 30,000 165,000 7,466,000 $ 7,771,000 85 $ 121,500 118,358 117,608 116,708 115,508 557,590 414,182 $ 1,561,454 Total $ 146,500 143,358 147,608 146,708 145,508 722,590 7,880,182 $ 9,332,454 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2031 Principal $ Interest 1,005,000 1,060,000 1,090,000 1,120,000 1,165,000 6,660,000 8,459,000 10,795,000 $ 31,354,000 $ Total 1,488,356 1,435,900 1,404,100 1,371,400 1,326,600 5,822,000 4,004,850 1,671,750 $ 2,493,356 2,495,900 2,494,100 2,491,400 2,491,600 12,482,000 12,463,850 12,466,750 $ 18,524,956 $49,878,956 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% $ 5,883,000 The following discloses debt service requirements as of June 30, 2011 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2025 Principal 311,000 325,000 340,000 355,000 371,000 2,119,000 2,062,000 $ 5,883,000 $ Interest 321,912 306,404 289,708 271,860 252,705 927,461 253,037 $ 2,623,087 $ 86 Total 632,912 631,404 629,708 626,860 623,705 3,046,461 2,315,037 $ 8,506,087 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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%. $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% $ 1,743,013 The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2011 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 Principal $ 74,013 76,281 78,618 81,027 83,510 457,533 532,056 359,975 $ 1,743,013 Interest and Administrative Fee $ 53,406 51,138 48,801 46,392 43,909 179,561 105,038 22,281 $ 550,526 Total 127,419 127,419 127,419 127,419 127,419 637,094 637,094 382,256 $ 2,293,539 $ 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%. $14,045,799 Water Infrastructure Finance Authority Loan #92A175-10 due in annual installments of $578,079 to $842,152 through July 1, 2029; interest at .50% and administrative fee at 1.50% $ 12,878,079 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2011 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022-2026 2027-2029 Principal $ 601,433 613,462 625,731 638,246 651,011 3,455,644 3,815,310 2,477,242 $ 12,878,079 Interest and Administrative Fee $ 257,562 245,533 233,264 220,749 207,984 839,331 479,664 99,744 $ 2,583,831 87 Total $ 858,995 858,995 858,995 858,995 858,995 4,294,975 4,294,974 2,576,986 $ 15,461,910 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Leases. The City has entered into capital lease agreements for equipment. These lease agreements generally require annual payments and the lease term varies from 4 to 5 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: Equipment Total Amount 142,670 142,670 $ $ 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, 2011. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2012 2013 2014 $ Total minimum lease payments Less: interest at 4.84% to 11.85% Total 38,074 38,074 31,079 107,227 (10,492) Present value of future minimum lease payments $ 96,735 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, 2011. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2012 2013 Total minimum lease payments Less: interest at 4.66% $ Total 55,627 46,356 101,983 (4,544) Present value of future minimum lease payments $ 97,439 88 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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, 2011, the 20 percent debt limitation was $502,599,094 with $474,887,545 of outstanding debt. This provided a 20 percent debt margin of $27,711,549. The 6 percent debt limitation was $150,779,728 with $8,330,000 of outstanding debt. This provided a 6 percent debt margin of $142,449,728. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2011, was $166,841,294. 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 and revenue bond issue subject to the arbitrage rebate requirements and has determined that no liability exists at June 30, 2011. However, the City has assigned $500,000 in the General Fund for this purpose. 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 $166,680,000 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 83.7% of total 2010-11 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $221,532,213. Principal and interest paid for the current year and total ad valorem tax revenues were $18,146,948 and $21,690,870, 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 $273,000,000 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 41.7% of 2010-11 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $367,573,556. Principal and interest paid for the current year and water and wastewater system revenues were $28,658,192 and $70,094,034, respectively 89 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $63,111,000 in outstanding governmental excise tax obligations. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2031. Annual principal and interest payments on the bonds are expected to require less than 4.2% of total 2010-11 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $85,823,574. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $5,315,937 and $128,942,018, 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 $48,739,000 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 1.2% of total 2010-11 excise taxes. The total principal and interest remaining to be paid on the bonds is $75,203,578. Principal and interest paid for the current year and total excise taxes were $1,445,422 and $128,942,018, 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 $129,905,000. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 14.8% of total 2010-11 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $154,008,615. Principal and interest paid for the current year and transit excise taxes were $4,270,450 and $29,012,370, 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 $35,730,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be 100.6% of total 2010-11 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 $44,161,944. Principal and interest paid for the current year and total available excise taxes were $6,016,226 and $128,905,692, respectively. 90 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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, 2011 (the ending balance does not include 7/1/2011 “matured” payment for general or excise tax obligations): Beginning Balance Governmental activities: Debt payable: General obligation bonds payable Special assessments 2000A Excise tax obligations 2003 Excise tax refunding obligations 2004 Excise tax obligations 2005 Excise tax obligations 2006 Excise tax obligations 2006 Variable rate demand excise tax obligations 2007 Excise tax refunding obligations 2007 Variable rate demand excise tax obligations 2008 Excise tax obligations 2009 Excise tax obligations 2011 Excise tax obligations 2004 HUD Section 108 loan Capital improvement notes 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 2011 Excise tax obligations 2010 WIFA Loan 2010 WIFA Loan Capital leases Net OPEB obligation Total debt payable Additions $172,665,000 33,025,000 360,000 12,100,000 26,875,000 17,580,000 12,905,000 Reductions $31,415,000 $ (37,400,000) (3,150,000) (360,000) (1,675,000) (2,115,000) (305,000) (1,935,000) 56,260,000 21,235,000 - (1,270,000) (25,000) Ending Balance Amounts Due Within One Year $166,680,000 $11,485,000 29,875,000 2,060,000 10,425,000 1,760,000 24,760,000 2,225,000 17,275,000 315,000 10,970,000 2,015,000 54,990,000 21,210,000 1,320,000 400,000 47,345,000 29,140,000 6,670,000 6,181,000 521,955 442,862,955 1,776,147 20,662,400 4,877,562 40,664,253 $510,843,317 (1,005,000) (565,000) (240,000) 7,771,000 (298,000) (521,955) 39,186,000 (50,864,955) 110,617 (1,790,029) 10,902,273 (7,832,960) 3,675,555 (3,561,087) 8,943,336 (5,080,027) $62,817,781 $(69,129,058) 46,340,000 1,045,000 28,575,000 585,000 6,430,000 245,000 7,771,000 25,000 5,883,000 311,000 431,184,000 23,791,000 96,735 32,561 23,731,713 7,788,868 4,992,030 3,020,090 44,527,562 3,915,598 $504,532,040 $38,548,117 $289,895,000 1,875,000 $34,240,000 $(51,135,000) (90,000) $ 273,000,000 $16,230,000 1,785,000 95,000 94,740 16,175,000 1,157,247 12,116,459 147,089 5,070,877 31,354,000 727,256 1,929,340 1,189,213 $ 326,531,412 (6,316) (575,000) (141,490) (1,167,720) (49,650) (817,099) $69,439,809 $(53,982,275) 88,424 15,600,000 31,354,000 1,743,013 12,878,079 97,439 5,442,991 6,316 595,000 1,005,000 74,013 601,433 52,086 478,638 $ 341,988,946 $19,137,486 The long-term liabilities at June 30, 2011 have been reduced by deposits made with the City’s fiscal agent for July 1, 2011 maturities. For the governmental activities, claims and judgements and compensated absences are generally liquidated by the General Fund. 91 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 $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. On November 10, 2010, the City issued $60,280,000 of general obligation refunding bonds with a premium of $4,997,165 to refund $3,215,000 of Series 1998; $9,860,000 of Series 1998A; $9,015,000 of Series 2001A $14,475,000 of Series 2002A; and partially refund $15,530,000 of Series 2003 and $8,185,000 of Series 2004 of outstanding general obligation bonds. The bonds were issued with an average interest rate of 3.71%. The net proceeds of $64,670,397, after payment of $124,528 issuance costs and an underwriter’s discount of $482,240, 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 $4,858,809 which resulted in an economic gain (the difference between the present values of the debt service payment on the old and new debt) of $4,342,453. Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2011 are as follows: $39,275,000 excise tax revenue obligation bonds issued in 2003 and partially refunded in 2007 (final redemption date is 7/1/2013) 17,025,000 $44,820,000 general obligation bonds issued in 2003 and partially refunded in 2011 (final redemption date is 7/1/2013) 15,530,000 $19,900,000 general obligation bonds issued in 2004 and partially refunded in 2011 (final redemption date is 7/1/2014) 8,185,000 Total bonds advance refunded $40,740,000 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS During the year ended June 30, 2011, the City implemented the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB Statement No. 54 establishes standards for financial reporting, including note disclosure requirements, for fund balance classifications of the governmental funds, and clarifies existing governmental fund type definitions. In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Non-spendable, Restricted, Committed, Assigned, and Unassigned. Committed, Assigned, and Unassigned represent the amount that is available for discretionary spending. Non-spendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) legally or contractually required to be maintained intact. Restricted fund balance is externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). Committed fund balance is self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval (through ordnance or another type of formal action) is required to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. In June 2011, through resolution 2011.56, the Mayor and Council authorized the Chief Financial Officer to assign fund balance amounts for specific purposes. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. As of June 30, 2011, the fund balance details by classification are listed as follows: 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) General Fund balances: Non-spendable: Inventories Prepaid items Capital improvements notes receivable Restricted: Debt service reserve Fire Community services Public works Community development Committed to: Police Fire Community services Public works Community development Municipal court Debt service Assigned to: Self-insurance purposes Capital projects Rio Salado Arbitrage rebate Transit SRP in-lieu Unassigned: Total fund balances $ 320,506 $ 330,000 650,506 Transit Special Revenue - General Special Obligation Assessment Debt Service Debt Service $ - $ - Transit Capital Projects $ - Total Other Total Governmental Governmental Funds Funds $ 1,114,596 $ 711,739 1,826,335 1,435,102 711,739 330,000 2,476,841 - 16,487,760 - 25,526,885 - - 14,933,707 - 245,340 3,606,346 6,699,941 7,775,759 25,526,885 245,340 3,606,346 38,121,408 7,775,759 - 16,487,760 25,526,885 - 14,933,707 18,327,386 75,275,738 - 4,220,265 4,220,265 - 50,000,000 50,000,000 3,189,566 1,408,154 690,101 4,870,922 11,049,693 17,457 21,225,893 3,189,566 1,408,154 690,101 4,870,922 11,049,693 17,457 54,220,265 75,446,158 - 723,584 723,584 8,841,391 2,044,992 3,120,991 500,000 699,380 9,191,367 24,398,121 - (321,404) 38,507,008 8,841,391 1,321,408 3,120,991 500,000 13,783,790 39,604,103 699,380 699,380 - 9,191,367 9,191,367 - - $ 54,038,399 $ 21,407,405 $ 34,718,252 $ (775,691) (775,691) $ 64,933,707 $ 41,781,794 $ 216,103,866 The Mayor and Council have established a minimum aggregate committed, assigned, and unassigned fund balance policy for the General Fund of 20% to 30% of current year revenues. As of June 30, 2011, the aggregate balance is 33.4% of General Fund revenues. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 12 - COMMITMENTS In the Governmental fund financial statements, construction commitments are included in either the restricted or committed fund balances. At June 30, 2011 the City’s construction commitments are as follows: Governmental funds: Transit Streets Police Fire Storm drains Parks Rio Salado Community development Signals Proprietary funds: Water/wastewater Commitment Construction in Progress 1,007,024 615,079 1,123,993 896 19,975 159,483 2,137,740 8,261,671 81,619 $ 13,407,480 $ 6,318,234 40,507 34,697 4,027 792,575 5,115,689 834,208 68,377 $ 13,208,314 Commitment Construction in Progress $ 12,666,522 $ 12,666,522 $ 35,234,289 $ 35,234,289 $ In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Transit special revenue Non-major special revenue $ $ 46,400 34,045 651,073 731,518 Commitment Proprietary funds: Water/wastewater Solid waste Internal service $ $ 399,654 250,534 26,108 676,296 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 13 - 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, 2011 were $281,207. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 Total minimum payments required $ $ Amount 198,030 191,832 152,637 35,052 15,141 592,692 NOTE 14 - 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, PO Box 17670, Phoenix, Arizona, 85011-0670 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 24.21 percent of annual covered payroll, of which 0.45 percent was the health insurance premium portion. The current aggregate contribution rate for police is 21.87 percent of annual covered payroll, of which 0.46 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). 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) C. Annual Pension Cost Police personnel contributed $2,003,309 and fire personnel $898,058 during fiscal year 2010-11. For 2011, the City’s annual pension cost was $5,727,106 for police and $2,842,089 for fire and was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2009 actuarial valuation determining contribution requirements for fiscal year 2010-11, 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 7-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, 2010 was 26 years. D. Three Year Trend Information (latest available information): Police Fiscal Year Ended June 30, 2008 (Pension) 2008 (Health) 2009 (Pension) 2009 (Health) 2010 (Pension) 2010 (Health) Annual Pension Cost (APC) $ 4,531,992 429,196 6,912,410 499,327 6,415,283 401,144 Percentage Contributed 100% 100 100 100 100 100 Net Pension Obligation - Fiscal Year Ended June 30, 2008 (Pension) 2008 (Health) 2009 (Pension) 2009 (Health) 2010 (Pension) 2010 (Health) Annual Pension Cost (APC) $ 2,245,903 261,528 3,097,098 243,925 2,949,541 230,094 Percentage Contributed 100% 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 2008 $ 87,441,985 2009 93,234,582 2010 96,465,397 Actuarial Accrued Liability (AAL) $ 147,095,432 153,895,111 164,091,514 Percent Unfunded Funded AAL 59.4% $ 59,653,447 60.6 60,660,529 58.8 67,626,117 97 Annual Unfunded AAL as Covered a % of Covered Payroll Payroll $ 28,052,053 212.7 29,489,537 205.7 28,315,537 238.8 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) Arizona Public Safety Personnel Retirement System (Full-time Police and Fire Employees) (Continued) E. Schedule of Funding Progress (Continued): Fire Actuarial Valuation Date Value of June 30, Assets 2008 $ 66,550,238 2009 70,387,821 2010 70,868,109 Actuarial Accrued Percent Unfunded Liability (AAL) Funded AAL $ 92,632,556 71.8% $ 26,082,318 96,683,646 72.8 26,295,825 102,307,685 69.3 31,439,576 Annual Covered Payroll $ 12,573,469 12,351,485 11,965,093 Unfunded AAL as a % of Covered Payroll 207.4 212.9 262.8 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, 2011 were 9.85 percent (9.6 percent for retirement and 0.25 percent for long-term disability) for active members and the City was required to contribute 9.85 percent (9.01 percent for retirement, 0.59 percent for health insurance premium and 0.25 percent for longterm disability) of the members’ annual covered payroll. The City’s contributions to the ASRS for the years ended June 30, 2011, 2010, and 2009 were $6,586,650, $7,190,912, and $7,247,303 respectively, equal to the annual required contributions for each year. 98 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) 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 2010-11 was 29.79 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, 2011, 2010 and 2009 were $65,673, $57,841, and $59,306 respectively, equal to the annual required contributions for each year. The City’s employees contributed $15,432, $15,424 and $14,826 for the same time period. NOTE 15 - 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, is being amortized over 30 years with the first period beginning with the fiscal year ending June 30, 2008. A. Plan Description The City offers (single-employer plan) 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, 2011, 824 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 99 778 1,620 2,398 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 15 - OTHER POSTEMPLOYMENT BENEFITS (Continued) 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. 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 42% of retiree premiums were subsidized by the City during the fiscal year resulting in expenditures of $8,011,989 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, 2011, the amount actually contributed to the plan and changes in the City’s 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 100 $ 10,132,549 (5,897,126) 4,235,423 45,735,130 $ 49,970,553 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 15 - OTHER POSTEMPLOYMENT BENEFITS (Continued) 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, 2009, 2010 and 2011 are as follows. Fiscal Year Ended June 30, 2009 2010 2011 Annual OPEB Cost $ 10,443,525 $ 9,821,574 $ 10,132,549 Employer Contributions $2,420,155 $5,885,849 $5,897,126 Percentage of Annual OPEB Cost Contributed 23.2% 59.9% 58.2% Net OPEB Obligation $41,799,405 $45,735,130 $49,970,553 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. F. Funded Status and Funding Progress (most recent information available) 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. The City will obtain an actuarial valuation on a bi-annual basis. 101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 15 - OTHER POSTEMPLOYMENT BENEFITS (Continued) 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. The investment rate reflects the expected long term rate of return for the assets expected to pay the postemployment benefits. 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 16 - 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 neither the property of the City nor subject to claims of the City’s general creditors. Therefore, the plan assets are not included in the City’s basic financial statements. 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 insurance coverage purchased for general and automobile liability, property, workers' compensation/employers’ liability, crime and group health coverage. The coverage is as follows: for general and automobile liability the first $2.0 million per occurrence is self-insured and excess coverage of $40.0 million is provided; for property the self-insurance retention is the first $100,000 per occurrence of all perils with a policy limit of $815.4 million; for workers' compensation the first $750,000 for police, firefighters, and EMT and $500,000 for all others of each claim is self insured, with excess coverage per the Arizona statutory 102 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) workers' compensation requirements and $2.0 million per occurrence in employer’s liability; and for group health the self-insurance retention is $225,000 per occurrence, with an aggregate stop loss deductible of $26.6 million. During the year there were no significant reductions in the amounts of excess coverage purchased. 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, 2011, 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, 2010 $ 7,077,346 171,270 51,857 1,804,059 1,895,298 $ 10,999,830 Claims Incurred Net of Change in Estimates $ 1,132,020 63,427 153,680 695,299 18,105,476 $ 20,149,902 Payments $ (2,210,271) (176,930) (166,196) (1,007,690) (18,694,433) $(22,255,520) June 30, 2011 $ 5,999,095 57,767 39,341 1,491,668 1,306,341 $ 8,894,212 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 At June 30, 2011, the Risk Management Internal Service Fund accrued expenses totaled $7,619,867. This balance includes the general liability, automobile liability, property liability and worker’s compensation liability of $7,587,871 and other accrued expenses of $31,996. The health claims liability at June 30, 2011 of $1,306,341 are deemed due and payable at June 30, 2011 and recorded as accrued expenditures/expense in the governmental and proprietary funds, respectively. Additionally, at June 30, 2011, the City had $8,841,391 of General Fund fund balance assigned for self-insurance purposes. 103 Notes to the Financial Statements For Fiscal Year Ended June 30, 2011 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 Special Assessment Debt Service Fund had a deficit fund balance of $775,691 at June 30, 2011. The deficit will be covered by anticipated assessment payments. The Community Development Special Revenue Fund had a deficit fund balance of $321,404 at June 30, 2011. The deficit will be covered by future revenues. The Cemetery Fund had a negative net asset balance of $223,925 at June 30, 2011. The deficit will be covered by future transfers from operating funds. The Risk Management Fund had a negative net asset balance of $73,652. The deficit will be covered by future contributions to the fund. NOTE 21 – SUBSEQUENT EVENTS In October 2011, the City implemented significant plan design changes for retiree healthcare benefits. The primary change included moving the retirees from the City’s self-insurance program to a City funded “healthcare reimbursement account”. City contribution changes are dependent upon premium increases or decreases in the Arizona State Retirement System Health Benefits Program. The effect of these changes on the City’s OPEB liability has not been determined (see note 15). An actuarial analysis will be performed in order to determine the financial impact for the fiscal year ending June 30, 2012. In August 2011, the City issued $18.3 million in Performing Arts Center Excise Tax Revenue Refunding Obligations. The purpose of the issuance was to take advantage of lower interest rates, thereby reducing future debt service in the Performing Arts Fund. 104 City of Tempe, Arizona Combining Fund Financial Statements 105 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.  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.  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.  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.  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.  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.  Rio Salado. To account for the receipt and expenditure of miscellaneous monies used to foster the development of Rio Salado.  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.  Community Facilities District. To account for the receipt and expenditure of monies for the Rio Salado Community Facilities District. 106 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.  Streets Fund. Used for improving, constructing and reconstructing major streets, highways, collector and local streets within the City, and to acquire rights-of-way.  Police Fund. Used for purchasing, constructing and equipping public safety buildings.  Fire Fund. Used for purchasing, constructing and equipping fire stations.  Storm Sewers Fund. Used for planning, constructing, extending and improving storm drain trunk lines and detention basins.  Parks Fund. Used for acquiring, developing and equipping parks, playgrounds and recreation facilities.  Rio Salado Fund. Used for consulting and engineering studies necessary for the design of the Rio Salado projects and for constructing a wildlife habitat.  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.  Signals Fund. Used for purchasing, constructing and equipping street light and traffic signal upgrades and for the planning of an overall transportation plan. 107 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 Special Revenue Performing Arts Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items 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): Non-spendable Restricted Committed Assigned Unassigned Total fund balances (deficit) Total liabilities and fund balances $ 3,959,260 $ 526,153 5,033,113 9,518,526 $ $ 63,194 115,844 9,928 4,050,000 983,113 5,222,079 3,606,346 690,101 4,296,447 9,518,526 Highway User Revenue $ 4,227,959 $ 826,329 186,774 1,114,596 6,355,658 $ 412,125 81,370 39,451 186,774 719,720 1,114,596 4,521,342 5,635,938 6,355,658 $ 108 Local Transportation Assistance $ 1,273,041 $ 1,273,041 $ $ - 1,273,041 1,273,041 1,273,041 Community Development $ $ $ $ 1,372,208 15,909 1,388,117 89,839 15,709 1,164,201 302,538 137,234 1,709,521 (321,404) (321,404) 1,388,117 City of Tempe, Arizona Special Revenue Housing Assistance Rio Salado Grants and Court Awards Community Facilities District Total Assets $ 874,998 $ 37,589 711,739 1,624,326 $ 2,121,310 $ 166,261 23,578 2,311,149 $ 1,592,919 $ 170,888 1,772,460 3,536,267 $ 125,296 $ 28,494 2,376,194 2,529,984 $ 14,174,783 $ 1,518,743 236,971 23,578 3,331,442 1,114,596 711,739 7,425,216 28,537,068 Liabilities $ 1,927 69,901 71,828 $ 31,419 214 31,633 $ 167,672 104,658 3,911 3,242,569 3,518,810 $ 153,790 1,695,000 681,194 2,529,984 $ 919,966 104,658 286,949 49,379 1,164,201 3,731,881 5,745,000 1,801,541 13,803,575 Fund Balances $ 711,739 840,759 1,552,498 1,624,326 $ 2,279,516 2,279,516 2,311,149 $ 17,457 17,457 3,536,267 $ (continued) 109 2,529,984 $ 1,826,335 10,241,488 2,987,074 (321,404) 14,733,493 28,537,068 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2011 rizona Capital Projects Streets Assets Pooled cash and investments Receivables: Taxes Accounts Accrued interest Due from other governments Inventories Prepaid items 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): Nonspendable Restricted Committed Assigned Unassigned Total fund balances (deficit) Total liabilities and fund balances $ 2,767,823 $ 99,428 2,867,251 $ $ 1,439,171 1,439,171 829,209 206,068 392,803 1,428,080 2,867,251 Police $ 3,654,941 $ 75,749 3,730,690 $ $ 504,634 504,634 3,189,566 36,490 3,226,056 3,730,690 110 Fire Storm Sewers $ 1,684,089 $ 1,766,992 $ 1,684,089 $ 1,766,992 $ $ 30,595 30,595 245,340 1,408,154 1,653,494 1,684,089 $ $ 4,012 4,012 1,761,780 1,200 1,762,980 1,766,992 Parks $ 2,229,219 $ 2,229,219 $ $ 164,549 164,549 76,349 1,967,052 21,269 2,064,670 2,229,219 City of Tempe, Arizona Capital Projects Rio Salado $ 1,517,894 $ 290,020 1,807,914 $ $ 511,756 511,756 1,296,158 1,296,158 1,807,914 Community Development $ 7,285,723 $ 7,771,000 15,056,723 $ $ 395,289 395,289 6,935,000 7,474,019 252,415 14,661,434 15,056,723 Signals $ 1,015,270 $ 1,015,270 $ $ 59,841 59,841 936,022 19,407 955,429 1,015,270 Total Nonmajor Governmental Funds Total $ 21,921,951 $ 465,197 7,771,000 30,158,148 $ $ 3,109,847 3,109,847 8,085,898 18,238,819 723,584 27,048,301 30,158,148 111 $ 36,096,734 $ 1,518,743 236,971 23,578 3,796,639 1,114,596 711,739 15,196,216 58,695,216 $ $ 4,029,813 104,658 286,949 49,379 1,164,201 3,731,881 5,745,000 1,801,541 16,913,422 $ 1,826,335 18,327,386 21,225,893 723,584 (321,404) 41,781,794 58,695,216 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2011 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 Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ 5,979,900 - $ - $ - $ - 20,341 635,935 6,731 6,642,907 9,503,470 50,783 1,253 9,555,506 - 2,715,276 92,062 40 628,496 3,435,874 2,261,400 - 7,827,865 - - 3,116,296 - 4,050,000 1,972,706 8,284,106 7,827,865 - 298,000 330,496 3,744,792 (1,641,199) 1,727,641 - - 1,096,113 350,000 - - - (2,770,000) (10,107) (309,865) 17,989 (1,625,870) - - Expenditures: Current: Police Fire Community services Public works Community development Community relations City attorney Municipal court Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures before other financing sources (uses) (308,918) 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 Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances (1,641,199) Fund balance (deficit) at beginning of year Fund balance (deficit) at end of year 101,771 5,937,646 $ 4,296,447 - 5,534,167 $ 5,635,938 112 (308,918) 1,273,041 $ 1,273,041 (12,486) $ (321,404) City of Tempe, Arizona Special Revenue Housing Assistance $ $ - Rio Salado $ 2,215,375 251,389 Grants and Court Awards Community Facilities District $ $ - - Total $ 8,195,275 251,389 9,760,470 1,357 17,952 11,306 9,791,085 25,145 1,736 42,891 2,536,536 2,689,159 108,011 4,164,695 519 458,133 640,989 394,593 8,456,099 974,516 56,400 1,030,916 15,164,905 108,011 9,503,470 4,256,757 47,402 2,121,103 658,941 1,141,670 41,448,923 8,935,521 - 189,030 1,026,624 - 3,242,710 922,986 995,556 90,449 252,871 2,196,276 41,925 594,116 2,294,908 - 3,431,740 922,986 3,256,956 7,918,314 15,626,220 2,196,276 41,925 594,116 8,935,521 1,215,654 8,336,889 1,695,000 1,366,276 5,356,184 6,043,000 3,669,478 43,701,011 855,564 1,320,882 119,210 (4,325,268) (2,252,088) - - - 1,249,163 3,061,276 14,829 - 2,345,276 3,061,276 14,829 350,000 - (20,000) (1,000) (21,000) - 4,325,268 (20,000) (2,770,000) (11,107) (309,865) 17,989 2,678,398 855,564 1,299,882 696,934 979,634 1,552,498 $ 2,279,516 $ 119,210 - 426,310 (101,753) - 14,307,183 17,457 $ - (continued) 113 $ 14,733,493 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2011 Capital Projects Streets Police Fire Storm Sewers Parks 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 $ - $ - 1,574,925 164,017 1,738,942 $ - - $ 273,814 273,814 - $ - 96,524 36,190 103,033 235,747 Expenditures: Current: Police Fire Community services Public works Community development Community relations City attorney Municipal court Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures - Excess (deficiency) of revenues over expenditures before other financing sources (uses) - - - - 3,884,508 3,884,508 4,614,431 4,614,431 5,377,645 5,377,645 29,112 29,112 2,332,221 2,332,221 (2,145,566) (4,614,431) (5,103,831) (29,112) (2,096,474) 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 Capital projects funds Enterprise funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) 61,322 - Net change in fund balances Fund balance (deficit) at beginning of year Fund balance (deficit) at end of year $ 25,363 - 552,186 - - - (150,000) (10,142) 1,240,000 1,141,180 2,890,000 2,915,363 1,130,000 1,682,186 - (11,322) (11,322) (1,004,386) (1,699,068) (3,421,645) 2,432,466 4,925,124 5,075,139 1,428,080 $ 3,226,056 114 $ 1,653,494 (29,112) (2,107,796) 1,792,092 $ 1,762,980 4,172,466 $ 2,064,670 City of Tempe, Arizona Capital Projects Community Development Rio Salado $ - $ 2,121,168 250,000 2,371,168 $ 475,604 98,407 10,517 584,528 - $ - Signals Total - 456,697 94,190 550,887 - Total Nonmajor Governmental Funds - $ - $ 4,628,394 96,524 474,021 545,630 10,517 5,755,086 8,195,275 251,389 19,793,299 204,535 9,503,470 4,256,757 47,402 2,595,124 658,941 545,630 1,152,187 47,204,009 - 3,431,740 922,986 3,256,956 7,918,314 15,626,220 2,196,276 41,925 594,116 6,999,330 6,999,330 4,099,767 4,099,767 655,635 655,635 27,992,649 27,992,649 6,043,000 3,669,478 27,992,649 71,693,660 (4,628,162) (3,515,239) (104,748) (22,237,563) (24,489,651) 427,000 1,000 - 1,038,500 436,463 10,107 150,000 - 2,017,686 11,107 236,685 436,463 4,362,962 11,107 3,061,276 251,514 786,463 (250,000) (14,829) 163,171 (25,363) 7,886,000 9,335,600 160,107 (250,000) (14,829) (186,685) (10,142) 13,146,000 15,386,285 (270,000) (14,829) (2,770,000) (197,792) (320,007) 13,146,000 17,989 18,064,683 (4,464,991) 5,820,361 55,359 (6,851,278) (6,424,968) 5,761,149 8,841,073 900,070 33,899,579 48,206,762 955,429 $ 27,048,301 1,296,158 $ 14,661,434 $ 115 $ 41,781,794 City of Tempe, Arizona 116 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.  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.  Health Fund. Accounts for the expenses incurred for employee health related costs under the City’s self-insurance program. 117 Combining Statement of Net Assets Internal Service Funds June 30, 2011 City of Tempe, Arizona Risk Management Health Total Assets Current assets: Pooled cash and investments $ 7,674,246 Total assets Liabilities Current liabilities: Accounts payable Accrued expenses and claims payable Total current liabilities Noncurrent liabilities: Net OPEB obligation Total noncurrent liabilities Total net assets 118 10,533,028 10,533,028 52,047 7,619,867 7,671,914 119,699 119,699 171,746 7,619,867 7,791,613 - (73,652) 75,984 75,984 119,699 (73,652) $ $ 2,858,782 7,747,898 Net Assets 2,858,782 7,674,246 75,984 75,984 Total liabilities Unrestricted $ 7,867,597 2,739,083 $ 2,739,083 2,665,431 $ 2,665,431 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Internal Service Funds For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Operating revenues: Contributions Total operating revenues Risk Management $ Operating expenses: Fees and services Total operating expenses Total 3,424,513 3,424,513 $ 21,986,851 21,986,851 3,424,513 3,424,513 25,454,073 25,454,073 28,878,586 28,878,586 (3,467,222) (3,467,222) Changes in net assets Total net assets- beginning Total net assets- ending Health - (73,652) (73,652) $ 119 $ 6,206,305 2,739,083 $ $ 25,411,364 25,411,364 6,132,653 2,665,431 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Risk Management Cash flows from operating activities: Receipts from other funds Payments for settlement of claims Net cash provided by operating activities $ Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ Health Total 3,424,513 (4,930,313) (1,505,800) $ 22,113,019 (25,953,508) (3,840,489) $ 25,537,532 (30,883,821) (5,346,289) (1,505,800) (3,840,489) (5,346,289) 9,180,046 6,699,271 15,879,317 2,858,782 $ 10,533,028 7,674,246 $ Reconciliation of operating loss to net cash used by operating activities: Operating loss Adjustments to reconcile operating loss to net cash used by 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 used operating activities $ - (20,235) (1,487,897) 2,332 $ (1,505,800) 120 $ (3,467,222) $ (3,467,222) 126,168 (499,435) $ (3,840,489) 126,168 (519,670) (1,487,897) 2,332 $ (5,346,289) City of Tempe, Arizona Other Supplementary Information 121 City of Tempe, Arizona 122 City of Tempe, Arizona BUDGETARY COMPARISON SCHEDULES 123 City of Tempe, Arizona 124 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, 2011 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 Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center City clerk and elections City attorney Municipal court Finance and technology Human resources Interdepartmental charges Debt Service: Principal Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Proceeds of refunding bonds Payment to refunded bond escrow agent Proceeds (loss) from sale of capital assets Total other financing sources (uses) Net change in fund balance Final Budget Amounts Actual Amounts (Budgetary Basis) $ 143,544,592 79,632,238 2,983,439 93,747,396 10,579,830 1,714,996 5,889,573 338,092,064 $ 158,749,333 57,764,455 2,141,817 113,375,022 7,576,496 1,666,196 8,830,722 350,104,041 Variance with Final Budget Positive (Negative) $ 15,204,741 (21,867,783) (841,622) 19,627,626 (3,003,334) (48,800) 2,941,149 12,011,977 65,258,984 25,645,848 22,478,270 134,893,213 27,737,578 2,316,070 317,413 273,771 457,481 383,192 511,484 452,031 2,508,023 3,524,959 18,771,807 1,816,552 (11,869,403) 62,454,622 24,799,272 23,213,750 117,141,667 22,929,709 2,131,723 297,615 284,123 428,071 381,555 447,626 397,533 2,530,695 3,383,108 17,707,284 1,934,813 (11,678,801) 2,804,362 846,576 (735,480) 17,751,546 4,807,869 184,347 19,798 (10,352) 29,410 1,637 63,858 54,498 (22,672) 141,851 1,064,523 (118,261) (190,602) 38,798,500 34,011,880 368,287,653 41,781,441 30,025,152 340,590,958 (2,982,941) 3,986,728 27,696,695 20,372,300 (22,541,585) 26,040,000 (27,936,582) (5,305,332) (6,969,372) 2,543,711 16,816,476 (19,025,260) 26,040,000 (27,936,582) (5,475,332) (7,178,871) 32,529,801 3,555,824 (3,516,325) 170,000 209,499 $ (29,986,090) 125 $ $ Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Revenues: Property taxes Other entities' participation Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) $ 22,164,620 16,520 22,181,140 $ 21,690,870 51,853 21,742,723 12,462,500 9,600,000 22,062,500 14,029,231 11,335,602 25,364,833 (1,566,731) (1,735,602) (3,302,333) (3,622,110) (3,740,750) 8,085,937 (8,377,213) 2,401,827 26,040,000 (27,936,582) $ 213,969 5,315,937 (8,328,213) 2,401,827 26,040,000 (27,936,582) $ (2,507,031) $ (3,408,141) $ (6,247,781) Expenditures: Debt service: Principal retirement Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures 118,640 Other financing sources (uses): Transfers in Transfers out Premium on issuance of debt Proceeds of refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) $ 2,770,000 (49,000) 2,721,000 Net change in fund balance $ 2,839,640 126 Variance with Final BudgetPositive (Negative) $ (473,750) 35,333 (438,417) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2011 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 Net change in fund balance $ 5,175,519 45,349 572,250 3,250 5,796,368 $ 5,979,900 47,435 635,935 6,731 6,670,001 Variance with Final BudgetPositive (Negative) $ 804,381 2,086 63,685 3,481 873,633 2,451,128 2,265,082 186,046 4,050,000 2,010,000 8,511,128 4,050,000 1,972,706 8,287,788 37,294 223,340 $ (2,714,760) 127 $ (1,617,787) $ 1,096,973 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: State sales tax Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 9,445,879 75,000 9,520,879 $ 9,503,470 50,783 1,253 9,555,506 Variance with Final BudgetPositive (Negative) $ 57,591 50,783 (73,747) 34,627 8,577,689 8,577,689 7,726,395 7,726,395 851,294 851,294 943,190 1,829,111 885,921 1,446,113 (3,089,972) 17,989 (1,625,870) 660,289 (10,110) (32,011) 618,168 785,824 (3,079,862) 50,000 (2,244,038) $ (1,300,848) 128 $ 203,241 $ 1,504,089 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2011 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) $ 5,769,897 25,000 5,794,897 $ 2,715,276 92,062 40 628,496 3,435,874 $ (3,054,621) 67,062 40 628,496 (2,359,023) 5,794,897 3,116,236 2,678,661 5,794,897 298,000 330,496 3,744,732 (298,000) (330,496) 2,050,165 Expenditures: Current: Community development Debt service: Principal retirement Interest and fiscal fees Total expenditures Net change in fund balance $ - 129 $ (308,858) $ (308,858) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Charges for services Investment income Miscellaneous Total revenues $ 10,613,000 10,052 10,623,052 Expenditures: Current: Community development Total expenditures Net change in fund balance $ 10,623,052 10,623,052 $ - 130 9,760,470 17,952 1,357 11,306 9,791,085 Variance with Final BudgetPositive (Negative) $ 8,934,833 8,934,833 $ 856,252 (852,530) 7,900 1,357 11,306 (831,967) 1,688,219 1,688,219 $ 856,252 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Sales taxes Property taxes Investment income Charges for services Miscellaneous Total revenues $ 1,739,200 175,000 95,000 107,930 2,117,130 Expenditures: Current: Community development Total expenditures Net change in fund balance $ 1,379,543 1,379,543 $ 737,587 131 $ Variance with Final BudgetPositive (Negative) 2,215,375 251,389 32,109 1,736 42,891 2,543,500 476,175 76,389 (62,891) 1,736 (65,039) 426,370 1,226,776 1,226,776 152,767 152,767 1,316,724 $ 579,137 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona 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: Transfers in Total other financing sources Net change in fund balance $ 1,062,773 53,450 1,116,223 Actual Amounts (Budgetary Basis) $ 974,516 56,400 1,030,916 Variance with Final BudgetPositive (Negative) $ (88,257) 2,950 (85,307) 2,536,594 2,294,908 241,686 1,695,000 1,361,880 5,593,474 1,695,000 1,366,276 5,356,184 (4,396) 237,290 (4,477,251) (4,325,268) 151,983 $ (4,477,251) 132 $ 4,325,268 4,325,268 4,325,268 4,325,268 - $ 4,477,251 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 64,721,072 671,769 574,500 65,967,341 $67,115,697 562,217 1,973,274 69,651,188 $ 2,394,625 (109,552) 1,398,774 3,683,847 40,003,659 34,564,563 5,439,096 17,600,000 14,300,000 71,903,659 18,779,210 12,496,686 65,840,459 (1,179,210) 1,803,314 6,063,200 (5,936,318) 3,810,729 9,747,047 (436,463) (436,463) 5,868,912 (6,105,400) (5,603,226) (5,839,714) 5,868,912 (5,668,937) (5,603,226) (5,403,251) $ (6,372,781) $ (2,028,985) Revenues: Charges for services Investment income Miscellaneous Total revenues Expenditures: Current: Public works Debt service: Principal Interest and fiscal fees Total expenditures Excess (deficency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance 133 $ 4,343,796 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers out Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ Variance with Final BudgetPositive (Negative) 15,189,163 15,189,163 $ 46,580 15,326,780 2,858 15,376,218 14,114,556 14,114,556 12,606,249 12,606,249 1,508,307 1,508,307 1,074,607 2,769,969 1,695,362 - (350,000) 40,035 (309,965) $ 1,074,607 $ 2,460,004 134 $ 46,580 137,617 2,858 187,055 (350,000) 40,035 (309,965) $ 1,385,397 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Revenues: Charges for services Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 1,711,195 1,711,195 $ 1,561,420 1,561,420 (149,775) (149,775) 1,731,353 1,731,353 1,763,735 1,763,735 (32,382) (32,382) Expenditures: Current: Public works Total expenditures Deficency of revenues over expenditures Other financing sources: Transfers in Total other financing sources Net change in fund balance $ (20,158) (202,315) (182,157) - 293,070 293,070 293,070 293,070 (20,158) 135 $ 90,755 $ 110,913 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Cemetery Fund For the Fiscal Year Ended June 30, 2011 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Total revenues $ Expenditures: Current: Public works Debt service: Principal Interest and fiscal fees Total expenditures Net change in fund balance 144,420 144,420 $ - $ 1,536 91,000 90,000 181,000 $ 107,040 107,040 Variance with Final BudgetPositive (Negative) (1,536) 90,000 88,509 180,045 (36,580) 136 $ (73,005) (37,380) (37,380) 1,000 1,491 955 $ (36,425) 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. 137 Other Supplementary Information - Financial Data Schedule Balance Sheet Housing Assistance Fund June 30, 2011 City of Tempe, Arizona Line Item # Section 8 Voucher Program Account Description Assets 111 113 115 128 142 Cash - unrestricted Cash - other restricted Cash- restricted for payment of current liabilites Accounts receivable - fraud recovery Prepaid Expense Total assets $ $ 248,444 591,682 34,872 37,589 711,739 1,624,326 Liabilities 312 321 345 353 Accounts payable <= 90 days Accrued wage/payroll taxes payable Other current liabilities Non-current liabilites Total liabilities $ 1,927 20,028 15,001 34,872 71,828 Equity 509 511.2 512 513 600 Fund balance reserved Unreserved, designated fund balance Undesignated fund balance Total equity Total liabilities and equity 138 $ 591,682 710,604 250,212 1,552,498 1,624,326 Other Supplementary Information - Financial Data Schedule Revenues and Expenses Housing Assistance Fund For the Fiscal Year ended June 30, 2011 City of Tempe, Arizona Line Item # Section 8 Voucher Program Account Description 706 714 715 711 720 Revenues HUD PHA grants Fraud Recovery Other revenue Investment income - unrestricted Investment income - restricted Total revenues 911 912 914 915 916 925 973 Expenses Administrative salaries Auditing fees Advertising and Marketing Employee benefit contributions - administrative Other operating - administrative Tenant Services Housing assistance payments Total expenses $ Excess of revenues over expenses 9,760,470 17,952 11,306 503 854 9,791,085 403,481 4,792 441 138,470 132,933 80,102 8,175,302 8,935,521 $ 855,564 $ $ 12,984 12,543 250,211 591,682 Memo Account Information 1120 1121 1117 1118 Unit months available Number of unit months leased Administrative Fee Equity Housing Assistance Payments Equity 139 City of Tempe, Arizona 140 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.  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.  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.  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.  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.  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. 141 City of Tempe, Arizona 142 Net Assets by Component (Exhibit S-1) Last Ten 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 Governmental activities Invested in capital assets, net of related debt Restricted (A) 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 $ 571,925,061 114,643,888 259,250,692 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 $ 945,819,641 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 $ 175,625,967 73,018,010 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 $ 248,643,977 Primary government Invested in capital assests, net of related debt Restricted (A) 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 $ 747,551,028 114,643,888 332,268,702 Total primary government net assets $ 913,792,554 $ 910,915,109 $ 926,414,871 $ 982,708,608 $ 1,052,405,452 $ 1,192,267,213 Fiscal Year 2007-08 $ 1,272,898,310 Fiscal Year 2008-09 $ 1,244,932,622 (A) With the implementation of GASB No. 54 in fiscal year 2010-11, Restricted fund balance has been redefined to include only amounts that have externally enforceable limitations or enabling legislation. 143 Fiscal Year 2009-10 $ 1,194,035,227 Fiscal Year 2010-11 $ 1,194,463,618 Changes in Net Assets (Exhibit S-2a) Last Ten 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 Fiscal Year 2010-11 $ 45,265,995 15,988,363 20,874,630 57,047,822 2,485,774 2,212,271 516,899 1,414,543 - 6,588,170 $ 47,729,305 15,103,049 20,307,801 57,917,031 3,245,906 2,845,176 579,089 918,556 433,922 2,027,045 3,230,817 18,760,209 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 4,021,965 2,472,966 407,818 209,830 505,865 440,660 652,442 2,087,009 4,053,127 19,111,722 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 3,187,992 2,312,548 400,549 312,882 544,872 446,333 443,255 2,262,903 3,655,280 21,449,181 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 30,358,768 2,499,978 362,810 412,936 534,950 460,824 752,336 2,348,553 4,342,297 4,492,161 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 21,444,736 2,816,030 362,281 445,531 548,552 476,089 528,493 2,903,028 4,708,606 8,611,601 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 20,037,984 3,179,145 547,453 488,323 687,926 558,706 870,815 3,641,333 6,066,038 8,596,785 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 20,445,243 3,137,349 418,851 265,531 583,563 484,460 684,875 2,933,734 5,496,374 6,338,984 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 23,494,471 4,210,261 387,723 369,153 531,651 427,828 739,884 3,101,845 5,245,105 7,107,213 3,923,486 3,443,660 2,149,363 2,383,904 16,185,139 $ 72,492,475 27,499,884 27,031,973 94,687,386 30,778,689 4,463,790 316,531 556,354 447,287 477,080 467,763 403,792 2,659,312 4,179,694 8,321,853 2,037,261 5,733,128 18,453,487 193,097,127 208,259,773 210,630,073 212,040,319 241,754,773 249,782,061 313,195,035 337,252,966 340,940,020 301,007,739 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 67,505,481 13,784,106 2,011,316 176,553 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 83,477,456 $ 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 $ 384,485,195 Expenses Governmental activities: Police Fire Community services Parks and recreation (A) Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center (D) City clerk and elections City attorney Municipal court Development services (B) Finance and technology Financial services (C) © Human resources Information technology (C)© Non-departmental Unallocated depreciation Interest on long-term debt Total governmental activities expenses Total primary government expenses Note: (A) (B) (C) (D) 784,099 2,420,285 3,325,642 16,808,229 4,906,157 4,058,772 804,751 7,594,725 In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Development Services department was merged into Community Development. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In fiscal year 2010-11, Tempe Learning Center was disaggregated from Human Resources. 144 Changes in Net Assets (Exhibit S-2b) Last Ten 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 Fiscal Year 2010-11 Program Revenues Governmental activities: Charges for services: Police Fire Community services Parks and recreation (B) Public works Community development Community relations City attorney Municipal court Development services (C)© Economic development (A) Finance and technology Financial services (D) 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 $ Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense $ (153,392,521) 3,398,971 $ (149,993,550) (A) (B) (C) (D) $ 94,732,424 $ 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 6,594,229 637,445 7,179,554 5,566,289 1,932,684 92,827 19,903,398 54,935,929 103,384,883 $ 831,973 1,116,101 5,353,815 30,053 7,940,104 526,893 7,687,007 5,891,971 1,900,016 284,084 18,812,530 103,412,667 153,787,214 $ 1,110,714 303,824 6,924,685 27,844 11,305,217 451,535 8,211,574 6,175,963 1,728,472 79,536 15,625,633 79,670,490 131,615,487 $ 1,201,962 314,969 7,122,650 9,348 20,461,847 592,236 24,070 8,912,739 5,090,280 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 1,938,184 5,868,369 3,710,512 1,997,614 18,222,849 38,709,299 98,308,486 $ 1,657,335 2,107,133 6,453,226 19,582,397 4,484,572 8,682 8,413,798 2,624,190 22,131,520 24,708,317 92,171,170 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 70,094,034 15,326,780 1,562,489 110,196 1,691,429 88,784,928 92,091,107 $ 105,359,358 $ 139,259,899 $ 165,883,873 $ 225,242,888 $ 202,182,673 $ 170,256,960 $ 182,518,952 $ 180,956,098 $ (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) $ (208,836,569) 5,307,472 $ (203,529,097) $ (172,081,574) 4,854,159 $ (167,227,415) In fiscal year 2004-05, Economic Development merged into Community Development. In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Development Services department was merged into Community Development. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. 145 Changes in Net Assets (Exhibit S-2c) Last Ten 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 (A) Fiscal Year 2010-11 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 (loss) 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 $ (8,941,448) 6,064,003 $ (2,877,445) $ 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 96,986 115,657 556,296 141,844,739 16,137,383 35,501,233 3,821,436 5,424,902 1,229,447 2,991,971 133,677 293,418 207,378,206 459,759 1,976,132 (5,563,191) (293,418) (3,420,718) $ 220,793,006 $ 196,881,543 $ $ (20,630,037) (7,335,651) (27,965,688) $ (46,306,287) (4,591,108) (50,897,395) $ 203,957,488 Changes in net assets Governmental activities Business-type activities Total primary government (A) Due to the prolonged economic downturn, in 2009-10 the City had planned drawdown of fund balance. 146 $ 88,184,776 (7,553,679) 80,631,097 $ $ $ (1,458,363) 1,886,754 428,391 Fund Balances, Governmental Funds (Exhibit S-3) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2001-02 General fund Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Debt service funds (A) Special revenues funds Capital projects funds Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds $ Fiscal Year 2002-03 $ $ 2,201,123 75,249,138 77,450,261 $ 32,891,864 $ 59,551,110 39,530,059 131,973,033 Fiscal Year 2003-04 $ $ 2,949,516 63,670,728 66,620,244 $ 42,004,605 $ 67,312,797 29,984,703 139,302,105 Fiscal Year 2004-05 $ $ 1,963,029 72,823,641 74,786,670 $ 36,882,416 $ 64,835,343 36,375,643 138,093,402 Fiscal Year 2005-06 $ $ 3,275,943 78,064,176 81,340,119 $ 76,440,839 $ 55,470,121 21,153,248 153,064,208 Fiscal Year 2006-07 $ $ 2,376,818 94,648,961 97,025,779 $ 71,648,277 $ 66,938,765 53,752,477 192,339,519 Fiscal Year 2007-08 $ $ 4,299,060 96,883,636 101,182,696 $ 58,559,662 $ (66,826) 65,022,802 17,044,525 140,560,163 $ $ 4,449,843 92,432,479 96,882,322 $ 69,814,938 $ 36,228,348 28,848,898 134,892,184 (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. (B) In fiscal year 2010-11, GASB No. 54 was implemented requiring additional classifications of fund balance. A deficit fund balance is reported in "unassigned". 147 Fiscal Year 2008-09 Fiscal Year 2009-10 $ $ 1,322,728 75,647,216 76,969,944 $ 59,067,648 $ (45,374) 23,220,030 71,685,317 153,927,621 Fiscal Year 2010-11 $ $ 981,529 42,832,205 43,813,734 $ 69,324,494 $ $ 32,742,748 63,078,330 165,145,572 $ $ 650,506 13,783,790 39,604,103 54,038,399 1,826,335 75,275,738 75,446,158 10,614,331 (1,097,095) 162,065,467 Changes in Fund Balance, Governmental Funds (Exhibit S-4a) Last Ten 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 (A) Public works Community development Community relations Mayor and council City manager Diversity program Internal audit/consulting Tempe learning center (D) City clerk and elections City attorney Municipal court Development services (B) Finance and technology Financial services (C)© Human resources Information technology (C)© Non-departmental Debt service: Principal retirement Interest and fiscal fees Capital outlay Total expenditures Deficiency of revenues over expenditures before other financing sources (uses) (A) (B) (C) (D) 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 2,445,475 2,126,245 516,899 1,464,931 774,756 2,437,072 3,261,268 15,815,204 4,747,540 4,049,591 600,852 1,412,665 45,287,397 14,944,261 18,578,259 40,904,425 2,956,263 2,904,697 579,089 944,568 442,615 2,121,212 3,142,488 17,919,144 5,151,110 3,797,137 990,568 9,197,356 48,576,160 15,622,805 18,809,726 43,811,239 4,002,794 2,414,527 407,818 254,578 472,233 408,862 641,753 2,079,092 4,039,664 17,285,467 3,743,137 2,388,877 633,533 3,440,150 50,148,794 17,235,231 18,653,915 45,853,027 3,296,692 2,380,562 400,549 293,964 544,032 420,449 440,041 2,206,857 3,588,317 19,435,003 3,867,513 2,567,259 537,006 4,433,871 59,977,366 19,599,806 20,743,534 48,822,208 19,795,483 2,470,215 362,810 383,025 520,748 450,650 747,588 2,345,165 4,454,473 5,768,444 3,978,571 2,730,740 3,937,911 60,200,957 21,054,670 15,289,688 15,166,076 49,026,864 20,566,776 2,773,675 362,281 440,915 542,292 462,751 484,894 2,844,636 4,662,214 17,278,332 4,342,723 2,842,328 6,031,097 71,813,995 24,413,707 20,844,315 15,826,217 56,316,376 18,246,591 2,843,668 367,250 294,042 641,719 491,057 748,371 3,224,007 5,563,038 7,394,179 4,390,171 3,282,022 3,407,427 77,046,317 28,330,453 26,158,843 17,583,861 73,659,648 19,515,673 3,095,259 386,483 347,556 555,034 506,621 633,640 2,914,014 5,525,601 6,376,874 4,211,080 3,127,479 395,648 74,747,734 27,134,920 18,254,109 16,880,739 72,253,980 19,343,140 4,217,031 388,486 330,992 520,731 514,069 799,975 3,117,084 5,267,930 7,056,690 3,842,927 3,405,582 - 65,289,995 25,639,288 22,010,148 67,998,367 22,946,249 4,332,418 318,282 521,642 427,103 379,752 445,556 395,778 2,564,283 4,051,517 6,620,247 1,945,518 - 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 26,062,231 18,989,678 35,348,520 306,286,572 (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) 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 In fiscal year 2010-11, the Parks and Recreation department was split; the Parks component was merged into Public Works and the Recreation component was merged into Community Services. In fiscal year 2010-11, the Development Services department was merged into Community Development. In fiscal year 2010-11, the Financial Services department and the Information Technology department were merged into one department, Finance and Technology. In fiscal year 2010-11, Tempe Learning Center was disaggregated from Human Resources. 148 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 Fiscal Year 2010-11 $ 158,749,333 87,180,913 1,229,966 30,285,327 8,235,437 622,543 3,867,979 1,666,196 7,209,565 299,047,259 (7,239,313) Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten 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 Issuance 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 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 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 10.0% Fiscal Year 2004-05 40,964,257 (40,795,523) 17,680,000 537,006 2,004,326 7,000,000 27,390,066 $ 7,708,523 10.2% 149 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% 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 2008-09 64,230,445 (63,614,982) 45,980,000 807,728 9,577,814 56,981,005 $ Fiscal Year 2009-10 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% Fiscal Year 2010-11 16,912,259 (16,618,841) 13,146,000 2,401,827 110,617 328,593 26,040,000 (27,936,582) 14,383,873 $ 14,383,873 16.6% 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 Retail Rental 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 $ 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 3,117,950,000 $ 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 1,133,200,000 Utilities and Telecommunications $ 499,078,556 467,647,889 497,207,351 501,110,558 545,661,301 571,722,222 608,388,889 590,555,556 536,611,111 515,000,000 Restaurant Contracting Hotel and Motel $ 382,886,889 368,798,222 377,852,500 412,292,532 465,230,507 484,500,000 519,555,556 504,611,111 472,666,667 479,150,000 $ 333,773,611 296,740,778 340,484,056 410,634,122 523,679,355 784,444,444 738,611,111 631,555,556 400,000,000 298,450,000 $ 103,032,222 106,429,056 107,090,645 122,425,842 136,971,401 132,888,889 150,222,222 123,611,111 110,944,444 112,600,000 Restaurant Contracting City Direct Sales Tax Rate Amusements All Other Total $ 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 89,850,000 $ 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 68,550,000 $ 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 5,814,750,000 Percentage of Taxable Sales Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Retail 53.05 % 53.85 54.30 55.01 55.63 53.40 50.98 48.57 51.35 53.62 Rental 18.22 % 17.95 17.08 16.06 15.40 15.52 17.05 19.17 19.62 19.49 Utilities and Telecommunications 9.65 % 9.26 9.44 8.77 8.43 8.18 8.83 9.40 9.26 8.86 7.41 % 7.30 7.17 7.21 7.18 6.93 7.54 8.03 8.16 8.24 6.46 % 5.88 6.46 7.18 8.09 11.22 10.72 10.06 6.90 5.13 Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2010-11, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. 150 Hotel and Motel 1.99 % 2.11 2.03 2.14 2.12 1.90 2.18 1.97 1.91 1.94 Amusements 1.58 % 1.81 1.63 1.71 1.47 1.18 1.22 1.40 1.66 1.55 All Other 1.64 % 1.84 1.89 1.92 1.68 1.67 1.48 1.40 1.14 1.17 Total 100 % 100 100 100 100 100 100 100 100 100 1.80 % 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 2.00 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 City Direct Sales Tax Rate 1.80 % 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 2.00 Maricopa County Sales Tax Rate 0.70 % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 State Sales Tax Rate 5.60 % 5.60 5.60 5.60 5.60 5.60 5.60 5.60 6.60 6.60 Total Sales Tax Rate 8.10 % 8.10 8.10 8.10 8.10 8.10 8.10 8.10 9.10 9.30 Source: City of Tempe, Arizona Tax and License Division Note: In fiscal year 2009-10, State of Arizona voters approved a 1.0% increase in the State sales tax. In fiscal year 2010-11, City of Tempe, Arizona voters approved a 0.2% temporary (4 years) increase in the City sales tax. 151 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 Treasurer. 152 City of Tempe, Arizona 153 Primary and Secondary Assessed Value and Estimated Actual Value of Taxable Property (Exhibit S-8) Last Ten 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 2010-11 Primary Secondary 1,516,407,070 1,634,522,147 491,365,479 598,845,876 714,116,748 718,136,239 297,885,542 321,946,932 2,487,354 2,984,727 Source: Maricopa County Assessor's Office Note 1: 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. 154 374,437,089 388,110,036 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 $ Total Direct Tax Rate 1,370,020,840 $ 1,456,361,617 0.53 0.82 Estimated Actual Taxable Value $ 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 6,031,888 8,869,602 664,036,520 772,654,291 2,364,257,561 2,512,651,232 0.52 0.88 20,571,191,970 22,071,142,609 11.49 11.38 155 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) Cou East Valley Institute of Technology Maricopa County Community College 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 2010-11 Primary Secondary Total 0.52 0.88 1.40 1.47 0.83 2.30 2.31 1.29 3.60 0.05 0.05 1.05 1.05 0.79 0.18 0.97 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 $9.75, $10.29 or $11.76, respectively. Also, see the Net Direct and Overlapping General Obligation Bonded Debt Schedule (Exhibit S15). 156 City of Tempe, Arizona County Ed Equalization Rate County-Wide Jurisdiction Central Fire Flood Arizona District District Project Assistance County Free Library District 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 - 0.15 0.15 0.10 0.10 0.01 0.01 - 0.36 0.36 157 Special Health Care District Total 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 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 - - - - - - 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 0.11 0.11 6.50 3.64 10.14 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 6,258,774 6,258,774 $ 252,676,223 20,071,906 272,748,129 $ 204,648,094 34,930,475 239,578,569 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 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 2010-11 Primary Secondary Total 12,238,972 22,174,672 34,413,644 64,028,512 38,435,006 102,463,518 44,984,350 26,867,644 71,851,994 10,970,238 10,970,238 492,224,342 492,224,342 371,276,183 89,482,591 460,758,774 Source: Maricopa County Assessor's Office Maricopa County Tax Levies and 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. 158 City of Tempe, Arizona Flood District County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project Fire District Assistance County Free Library District Special Health Care District (B) $ 2,086,084 2,086,084 $ 9,646,430 9,646,430 $ $ 45,322,696 45,322,696 $106,221,394 106,221,394 $ 29,787,075 29,787,075 44,868,063 44,868,063 112,231,223 112,231,223 31,805,013 31,805,013 1,859,466 1,859,466 51,153,993 51,153,993 120,037,513 120,037,513 33,010,980 33,010,980 56,334,141 56,334,141 128,003,169 128,003,169 62,733,411 62,733,411 Total - $ 659,871,243 200,619,051 860,490,294 10,296,417 10,296,417 - 716,335,145 207,429,399 923,764,544 1,931,237 1,931,237 14,316,032 14,316,032 - 780,436,884 224,994,104 1,005,430,988 36,112,556 36,112,556 2,084,229 2,084,229 15,664,900 15,664,900 - 836,916,875 214,076,800 1,050,993,675 135,142,821 135,142,821 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 49,581,306 49,581,306 3,265,310 3,265,310 20,479,676 20,479,676 55,722,300 55,722,300 1,151,700,166 384,998,335 1,536,698,501 68,019,592 68,019,592 166,947,807 166,947,807 159 Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Source: Total Tax Levy For Fiscal Year (A) $ 19,127,781 20,453,121 22,154,599 23,739,716 26,366,507 27,385,069 31,520,944 35,130,400 37,081,738 34,455,730 Adjustments $ (231,396) (380,418) (564,888) (676,646) (947,724) (857,294) (321,729) (291,576) (489,398) (229,335) Collected within the Fiscal Year of the Levy % of Collections in Amount Original Levy Subsequent Years (B) Adjusted Tax Levy For Fiscal Year $ 18,896,386 20,072,703 21,589,712 23,063,070 25,418,783 26,527,775 31,199,214 34,838,824 36,592,340 34,226,395 $ 18,543,839 19,789,415 21,283,933 23,122,629 25,519,585 26,185,044 30,686,950 33,987,393 35,581,096 33,299,312 96.9 % 96.8 96.1 97.4 96.8 95.6 97.4 96.7 96.0 96.6 $ 322,263 254,749 276,408 (81,396) (127,426) 318,162 497,301 799,577 941,743 - Maricopa County Treasurer (A) The amounts listed in this column do not tie directly to the amount listed in Exhibit S-10 for City of Tempe for total of Primary and Secondary Property Tax Levy. Due to a timing difference, the amount listed on the Maricopa County Secured Tax Levy Report, from the Maricopa County Treasurer's office, is at the time the levy is placed on the Tax Levy report (in May/June when the property tax rate is set). The amount listed on the Secured Tax Levy Report, from the Maricopa County Treasurer's office, is at the time the levy is placed on the actual tax rolls in August. (B) Negative collections are due to successful tax protests being higher than actual tax payments being made. 160 Total Collections to Date % of Amount Adjusted Levy $ 18,866,101 20,044,164 21,560,341 23,041,233 25,392,159 26,503,206 31,184,252 34,786,970 36,522,840 33,299,312 99.8 99.9 99.9 99.9 99.9 99.9 100.0 99.9 99.8 97.3 Principal Tax Payers (Exhibit S-12a) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Taxable Secondary Assessed Value Taxpayer Arizona Mills LLC Arizona Public Service Company Qwest Corporation (formerly US West) Honeywell Tempe Fountainhead Corporate LLC State Farm Mutual Auto Insurance Verizon Wireless St. Paul Properties Fly (CD) LLC / AWHQ LLC Breof Bnk2 Southwest LLC Motorola, Incorporated Britcher Arizona Safeway Stores Microchip Technology Allied Signal Tempe Commerce Park $ Total $ 39,107,974 21,974,623 19,193,511 16,500,274 14,111,013 13,655,256 12,142,093 11,420,499 10,226,585 9,639,000 - Fiscal Year 2010-11 Rank 1 2 3 4 5 6 7 8 9 10 167,970,828 Source 2010-11: RBC Capital Markets Source 2001-02: Maricopa County Assessor's Office 161 Percentage of Total City Secondary Taxable Assessed Value Taxable Secondary Assessed Value 1.56 % 0.87 0.76 0.66 0.56 0.54 0.48 0.45 0.41 0.38 - $ 6.69 % $ 24,886,431 18,638,492 29,805,596 10,346,243 35,078,202 14,444,750 9,666,654 9,501,053 8,641,079 7,667,095 168,675,595 Fiscal Year 2001-02 Rank 3 4 2 6 1 5 7 8 9 10 Percentage of Total City Secondary Taxable Assessed Value 1.71 % 1.28 2.05 0.71 2.41 0.99 0.66 0.65 0.59 0.53 11.58 % Principal Tax Payers (Exhibit S-12b) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2010-11 Taxpayer Business Type Taxpayer A Taxpayer B Taxpayer C Taxpayer D Taxpayer E Taxpayer F Taxpayer G Taxpayer H Taxpayer I Taxpayer J Taxpayer K Taxpayer L Taxpayer M Taxpayer N Taxpayer O Utility Grocery Stores Petroleum Products Mixed Retail Mixed Retail Mixed Retail Electronics/Software Auto Sales Electronics/Software Construction Auto Sales Auto Sales Telecommunications Auto Sales Auto Sales Total Sales and Use Tax Payments $ $ 4,880,674 2,794,195 2,343,853 2,233,102 2,024,110 1,933,721 1,877,817 1,525,196 1,396,938 1,389,376 Rank 1 2 3 4 5 6 7 8 9 10 22,398,982 Fiscal Year 2001-02 Percentage of Total Sales and Use Tax Payments Sales and Use Tax Payments 13.75 % 7.87 1.74 6.29 5.70 5.45 5.29 4.30 3.93 3.91 $ 58.23 % $ Rank Percentage of Total Sales and Use Tax Payments 3,233,861 2,341,421 1 2 3.65 % 2.64 1,496,487 7 1.69 1,852,725 1,723,149 4 5 2.09 1.94 1,894,398 1,597,785 1,087,732 1,056,543 1,019,013 3 6 8 9 10 2.14 1.80 1.23 1.19 1.15 17,303,114 19.52 % Source: City of Tempe, Arizona Tax and License Division Notes: 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. 162 Excise Tax Collections (Exhibit S-13) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2001-02 Privilege and use tax (A) Fiscal Year 2003-04 62,884,508 $ 68,533,088 Fiscal Year 2005-06 $ 77,080,250 Fiscal Year 2006-07 13,345,152 14,695,069 16,810,760 15,758,491 15,237,310 13,191,255 12,167,009 12,656,738 State shared income tax 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 16,137,383 Franchise tax 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 3,821,436 Permits and Fees (B) 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 5,491,077 Fines and forfeitures 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 7,576,496 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 $ 128,942,018 (B) Amounts include all licenses/permits and Community Development and Public Works fees/charges for services. 163 81,108,518 $ 74,295,074 $ 69,043,642 Fiscal Year 2010-11 12,405,713 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 2009-10 12,148,438 (A) 86,750,870 Fiscal Year 2008-09 State shared sales tax Source: City of Tempe, Arizona Comprehensive Annual Financial Report City of Tempe, Arizona "Revenue and Expenditure by Account by Fund" report. $ Fiscal Year 2007-08 $ 59,379,586 $ $ Fiscal Year 2004-05 59,299,061 Total $ Fiscal Year 2002-03 $ 83,258,888 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 General Obligation Debt Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 $ 75,535,000 90,395,000 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,680,000 Less: Debt Service Reserves Net Direct Debt $ 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 34,718,252 $ 63,411,573 76,923,296 78,304,294 83,888,853 99,062,152 98,892,233 101,216,008 124,420,812 134,538,607 131,961,748 Secondary Assessed Valuation (A) $ 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 2,512,995,468 Percent of Net Direct Debt To Assessed Valuation 4.4 4.9 4.6 4.7 5.2 4.9 4.2 4.7 4.9 5.3 Net Direct Debt Per Capita Population (B) 159,435 159,425 159,615 160,820 165,796 166,625 167,458 172,641 174,833 161,719 $ 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) Assessed valuation from Maricopa County Assessor's Office (B) Estimate Population from estimates City of Tempe, from Maricopa ArizonaAssociation Budget Division of Governments 164 397.73 482.50 490.58 521.63 597.49 593.50 604.43 720.69 769.53 815.99 Net Direct and Overlapping General Obligation Bonded Debt (Exhibit S-15) City of Tempe, Arizona 2010-11 Secondary Assessed Valuation Jurisdiction Net Bonded Debt Portion Applicable To City of Tempe Percent Amount 2010-11 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 $ 2,512,995,468 $ 75,664,423,588 49,707,952,123 49,707,952,123 2,076,984,341 3,941,158,715 2,544,397,180 6,319,354,438 4,621,381,521 21,940,476,566 Total net direct and overlapping debt 131,961,748 (A) None None 737,930,000 139,120,000 271,845,000 137,785,000 298,630,000 85,410,000 None 1,670,720,000 $ 1,802,681,748 100.00 % $ N/A N/A 5.06 82.07 0.73 29.98 0.27 53.39 11.45 131,961,748 None None 37,339,258 114,175,784 1,984,469 41,307,276 80,301 45,599,089 None 240,486,177 $ $ 0.88 N/A N/A 0.97 3.60 5.22 3.20 3.75 2.30 0.05 372,447,925 (B) Source: RBC Capital Markets and Maricopa County Assessor City of Tempe, Arizona Budget Division 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. 165 Legal Debt Margin Information (Exhibit S-16) Last Ten Fiscal Years 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 Assessed Valuation $ 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 20% Limitation Debt limit equal to 20% of assessed valuation $ $ $ $ $ $ $ 480,379,693 Total net debt applicable to 20% limit Legal 20% debt margin (available borrowing capacity) 113,225,000 $ 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 Total net debt applicable to the 6% limit as a percentage of 6% debt limit 178,047,323 $ 87,381,697 $ 35,066,697 59.87% 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% 161,420,238 $ 114,265,571 21,965,571 80.78% 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. 166 $ 29,375,666 $ 120,402,200 $ 117,337,200 2.55% Fiscal Year 2009-10 Fiscal Year 2010-11 $ 2,656,948,194 $ 2,767,488,864 $ 2,512,995,468 $ $ $ 55,704,693 $ 144,113,908 $ 142,658,908 1.01% 69,134,638 $ 159,416,891 $ 158,021,891 0.88% 61,344,067 $ 166,049,332 $ 157,764,332 4.99% 27,711,549 94.49% $ 8,285,000 $ 502,599,094 474,887,545 88.92% 1,395,000 $ 553,497,773 492,153,706 86.99% 1,455,000 $ 531,389,638 462,255,000 88.40% 3,065,000 $ Fiscal Year 2008-09 424,675,000 92.68% 92,300,000 $ 401,340,666 371,965,000 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 $ 311,298,459 129,580,000 38.87% Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 291,272,323 Fiscal Year 2007-08 150,779,728 8,330,000 $ 142,449,728 5.52% Remaining General Obligation Bond Authorizations (Exhibit S-17) City of Tempe, Arizona 2006 Water / Wastewater Prior Issues Authorization $ Streets / Transportation 172,000,000 $ 172,000,000 8,000,000 7,765,000 14,000,000 14,000,000 2,500,000 1,620,000 14,000,000 Current Year Issue $ - WIFA Funding $ $ - - - - - 880,000 - - 13,885,000 115,000 - - 210,500,000 209,270,000 1,230,000 - - 113,300,000 36,095,000 - 15,930,302 61,274,698 Streets / Transportation/Storm Drains 44,200,000 75,000 1,005,000 - 43,120,000 Public Safety - Police/Fire 32,010,000 5,855,000 3,140,000 - 23,015,000 Community Services/Park Improvements 51,800,000 15,025,000 - - 36,775,000 241,310,000 57,050,000 4,145,000 15,930,302 164,184,698 451,810,000 $ 266,320,000 Police Protection Fire Protection Community Services/Park Improvements Subtotal 235,000 - Remaining Authorization - 2008 Program Water / Wastewater $ Source: City of Tempe, Arizona Finance and Technology Department 167 $ 5,375,000 $ 15,930,302 $ 164,184,698 Pledged-Revenue Coverage (Exhibit S-18) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 $ 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 3,867,979 Debt Service (D) Excise Tax Revenue Obligations Excise Tax Revenue Collections (A) Coverage 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 4,697,441 0.98 0.99 0.99 1.00 0.94 0.86 0.70 0.70 0.58 0.82 $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (B) Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 $ 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 5,979,900 Debt Service (D) 891,432 710,448 3,524,316 6,017,247 6,021,476 6,009,925 6,012,725 6,005,626 6,016,226 Coverage 7,505,627 3,457,746 4,497,682 4,495,011 5,737,352 5,783,921 5,626,868 6,177,704 6,760,138 6,761,359 13.09 28.76 22.59 24.65 22.02 23.95 25.17 21.48 17.67 19.07 Transit Excise Tax Obligations 0.5% Privilege and Use Tax Collections (C) Coverage - 98,220,588 $ 99,441,547 101,591,009 110,783,762 126,353,704 138,546,380 141,601,237 132,726,935 119,456,216 128,942,018 Debt Service (D) $ 5.62 7.43 1.64 1.08 1.16 1.13 1.02 0.96 0.99 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 29,012,370 Debt Service (D) Coverage 3,301,829 5,092,190 5,449,867 4,356,904 4,428,049 10.59 6.37 5.48 6.40 6.55 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. 168 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 2010-11 Pledged Excise Tax Revenues (A) Fiscal Year 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 $ 128,942,018 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (B) Coverage (C) $ 6,761,359 9,399,739 9,397,167 9,405,367 9,398,017 10,301,029 10,302,129 10,305,829 10,304,579 10,308,829 9,700,329 9,692,054 9,755,529 6,674,567 13,967,167 4,284,935 4,283,465 4,278,960 4,281,959 2,491,750 2,493,750 19.07 13.72 13.72 13.71 13.72 12.52 12.52 12.51 12.51 12.51 13.29 13.30 13.22 19.32 9.23 30.09 30.10 30.13 30.11 51.75 51.71 Revenue Available for Debt Service (D) $ Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (E) 128,160,559 $ Coverage (F) 6,016,226 6,017,788 6,015,338 6,013,238 6,011,014 6,012,438 3,522,050 3,521,376 3,522,826 3,525,876 - 21.30 21.30 21.31 21.31 21.32 21.32 36.39 36.40 36.38 36.35 - Source: City of Tempe, Arizona Accounting Division (A) Excise Tax Revenues received by the City in fiscal year 2010-11. See Excise Tax Collection schedule (Exhibit S-13). (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 $10,425,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2005, currently outstanding in the principal amount of $19,060,000 and the City of Tempe, Arizona Excise Tax Revenue Refunding Obligations, Series 2007, currently outstanding in the principal amount of $21,210,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2009A+B, currently outstanding in the principal amount of $22,030,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2011A+B, currently outstanding in the principal amount of $39,125,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2010-11 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 2010-11. (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 $24,760,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2006, currently outstanding in the principal amount of $10,970,000. Debt service requirements 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. 169 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-20) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations 2010 Pledged Excise Tax Revenues (A) Fiscal Year 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 $ 29,012,370 Outstanding Senior Excise Tax Obligations Debt Service Requirements (B) $ Outstanding Senior Excise Tax Obligations Coverage (C) 4,270,450 4,358,399 4,450,560 4,551,925 4,645,740 4,753,705 4,858,935 4,972,859 5,085,665 5,207,155 5,342,319 5,474,299 5,604,245 5,751,449 5,896,752 6,045,156 6,210,312 6,377,796 6,542,360 6,729,006 6,912,462 7,107,726 7,314,540 7,522,646 7,740,786 7,970,144 4,685,703 1,895,975 6.79 6.66 6.52 6.37 6.24 6.10 5.97 5.83 5.70 5.57 5.43 5.30 5.18 5.04 4.92 4.80 4.67 4.55 4.43 4.31 4.20 4.08 3.97 3.86 3.75 3.64 6.19 15.30 Source: RBC City ofCapital Tempe, Markets Arizona Accounting Division (A) Excise Tax Revenues received by the City in Fiscal Year 2010-11. (B) Includes the annual debt service requirements of the City of Tempe, Arizona Transit Variable Rate Revenue Bond Series 2006 and Series 2007 currently outstanding in the principal amount of $54,990,000 and $46,340,000 respectively. Interest is assumed at a rate of 0.10% per annum through maturity. Also includes annual debt service requirements for the Series 2008 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $28,575,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2010-11 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 170 Ratios of Outstanding Debt by Type (Exhibit S-21) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities General Obligation Bonds Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 $ $ 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 29,875,000 $ 78,595,000 97,580,000 103,735,000 137,390,000 180,935,000 243,265,000 282,520,000 285,735,000 289,895,000 273,000,000 Refunding Certificates of Participation $ $ 630,000 520,000 400,000 275,000 140,000 - 3,810,000 3,335,000 2,840,000 2,320,000 1,780,000 1,220,000 625,000 - Excise Tax Revenue Bonds $ 47,380,000 60,650,000 81,910,000 78,780,000 174,710,000 218,480,000 241,125,000 239,560,000 230,470,000 228,746,000 HUD Section 108 Loan $ 7,000,000 7,000,000 7,000,000 6,739,000 6,466,000 6,181,000 5,883,000 Capital Improvement Notes $ 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 - Capital Leases $ Business-Type Activities Municipal Property Corporation Bonds General Obligation Bonds Fiscal Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 75,535,000 90,395,000 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,680,000 Special Assessment Bonds Excise Tax Revenue Bonds $ 2,330,004 2,130,000 2,050,000 18,685,000 18,050,000 48,827,424 Capital Improvement Notes $ 129,393 - WIFA Loans $ 13,273,706 14,621,092 171 Total Business Type Debt Capital Leases $ 194,416 147,089 97,439 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 96,735 $ 79,354,393 98,100,000 104,135,000 137,665,000 183,405,004 245,395,000 284,570,000 304,614,416 321,365,795 336,545,955 Total Government Type Debt $ 158,816,292 183,991,034 203,559,824 217,380,000 327,738,767 365,439,191 416,732,144 441,298,465 444,639,102 431,280,735 Total Primary Government $ 238,170,685 282,091,034 307,694,824 355,045,000 511,143,771 610,834,191 701,302,144 745,912,881 766,004,897 767,826,690 Percentage of Personal Income 6.65 % 7.78 8.38 9.48 13.09 14.91 15.98 18.05 16.43 14.96 Per Capita $ 1,494 1,769 1,928 2,208 3,083 3,666 4,188 4,321 4,381 4,748 Demographic and Economic Statistics (Exhibit S-22) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Population (A) Total Personal Income (B) 2001-02 159,435 $ 3,583,620,495 $ 22,477 N/A N/A 26,056 47,359 3.30 % 2002-03 159,425 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 2010-11 161,719 5,133,769,655 31,745 68,427 35.2 26,670 70,440 8.00 Source: (A) (B) (C) (D) (E) (F) Per Capita Personal Income (C) Average Household Income (C) Median Age (C) Estimate from City of Tempe, Arizona Budget Division Amount is calculated using population times per capita personal income Estimate from Sites USA for 2010 (latest available) Arizona Department of Education (Azed.gov) ASU Enrollment History Employment Trends, Arizona Department of Commerce 172 School Enrollment (D) ASU School Enrollment (E) Unemployment Rate (F)) Principal Employers (Exhibit S-23) Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2010-11 Employers Arizona State University Maricopa Community Colleges Wells Fargo Safeway Inc. SRP Motorola Honeywell Kyrene School District Chase Manhattan Corporation US Airways Bank One Telephone Banking Division Wells Fargo Banking Division Motorola SPS Division Total Source: Employees (A) 10,089 4,703 4,236 3,996 3,331 3,000 3,000 2,559 2,377 1,898 - Rank Fiscal Year 2001-02 Employment 1 2 3 4 5 6 7 8 9 10 25.74 % 12.00 10.81 10.20 8.50 7.66 7.66 6.53 6.07 4.84 12,569 4,168 3,331 2,604 3,000 2,205 2,377 2,000 2,433 2,175 100.00 % 36,862 - 39,189 Employees (B) (A) City of Tempe, Arizona Community Development Department, Major 100 Employers List (B) City of Tempe, Arizona Comprehensive Annual Financial Report, 2001-02 173 Rank 1 2 3 5 4 8 7 10 6 9 Employment - 34.10 % 11.31 9.04 7.06 8.14 5.98 6.45 0.00 5.43 6.60 5.90 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-24) Last Eight 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 Tempe learning center City clerk and elections City attorney Municipal court Development services Community development Economic development Finance and technology Financial services Human resources Information technology Water/wastewater Total Fiscal Year 2004-05 522 157 305 377 20 7 3 3 4 5 25 37 87 12 70 19 73 131 1,857 522 157 308 377 18 7 3 4 4 5 25 38 89 13 69 19 72 131 1,861 Fiscal Year 2005-06 535 171 340 380 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 Fiscal Year 2009-10 568 185 308 535 27 7 3 4 4 5 25 42 106 139 20 1,977 Fiscal Year 2010-11 499 182 289 489 25 7 4 3 3 3 5 25 42 88 132 17 1,813 Source: City of Tempe, Arizona 2011-12 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 was split, with Parks consolidated into Public Works and Recreation consolidated into Community Services. The Information Technology department and the Financial Services department were consolidated into the Finance and Technology department. The Development Services department was consolidated into Community Development. 174 Operating Indicators by Function/Program (Exhibit S-25) Last Six 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 Fiscal Year 2010-11 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 4,920 5,500 (A) 4,595 5,898 (B) 4,693 4:43 124,923 $391.87 5:01 123,847 $353.37 5:07 112,409 $415.22 5:08 106,317 $443.34 5:17 (A) 86,074 (A) $432.95 (A) 5:30 (B) 85,673 (B) $748.69 (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 2,414 15,199 1,260 9.13 (A) 2,144 15,413 1,253 8.95 (B) 2,208 15,264 1,275 4:25 4:17 4:22 4:20 4:20 (A) 4:20 (B) 70% 72% 71% 72% 74% 74% (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 95% 7,971,817 478 (D) 141,509 1,404,318 142,323 1,246,650 142,524 1,257,336 142,500 1,250,000 147,914 (A) 1,089,174 (A) 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 $68,502,500 140,600 (B) 937,500 (B) 8 6,874,200 314 $ 18,260,624 521 $77,951,841 $ 42,059 17,589 (C) $221 42,261 16,686 (C) $317 42,494 17,135 (C) $251 42,686 15,774 (C) $256 42,453 15,606 (C) $181 (A) 42,218 15,877 $217 (B) 100% 21.5 (C) 100% 21.3 (C) 100% 20.9 (C) 100% 19.7 (C) 100% (A) 18.7 (C) 100% (B) 18.6 $114 (A) 32,886 28% (A) 1,837 $77 (A) $112 (B) 33,927 29% (B) 1,940 $73 (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 2010-11 (B) Numbers are estimates as shown in City of Tempe, Arizona Annual Budget 2010-11 (C) Numbers revised by department to reflect change in methodology in tracking. (D) Number changed due to decrease in CIP Budget 175 $102 32,964 28% 1,942 $59 $71 32,916 28% 1,875 $59 Capital Asset Statistics by Function/Program (Exhibit S-26) Last Six 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 Fiscal Year 2010-11 2 22 6 2 22 6 3 22 6 3 22 6 3 22 6 3 20 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 1,241 11,778 221 188 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 1,872 45 200 5 2 852 852 823 825 839 839 120 53 502 174 120 53 502 174 120 53 500 193 120 53 497 193 129 53 498 195 125 42 498 194 32 32 32 38 38 33 68 56 60 58 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. 176