City of Tempe, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2013 City Council: Mark Mitchell, Mayor Onnie Shekerjian, Vice Mayor Robin Arredondo-Savage Shana Ellis Kolby Granville Joel Navarro Corey Woods Administrative Staff: Andrew Ching, City Manager Presented by: Kenneth Jones, Finance and Technology Director Jerry Hart, CPA, Deputy Finance and Technology Director Karen Huffman, CPA, Controller 1 City of Tempe, Arizona 2 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2013 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 Auditor’s Report 15 Management’s Discussion and Analysis (required supplementary information) 17 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities 35 36 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund 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 Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Net Position - Fiduciary Fund Statement of Changes in Net Position - Fiduciary Fund 50 51 52 52 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 Internal Service Funds: Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows 3 108 112 118 119 120 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2013 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, Capital Projects and Enterprise Fund Types General Obligation Debt Service Fund Performing Arts Fund Highway User Revenue Fund Local Transportation Assistance Fund Community Development Fund Housing Assistance Fund Grants and Court Awards Fund Community Facilities District Fund Transit Capital Projects Fund Streets Capital Projects Fund Police Capital Projects Fund Fire Capital Projects Fund Storm Sewers Capital Projects Fund Parks Capital Projects Fund Rio Salado Capital Projects Fund Community Development Capital Projects Fund Signals Capital Projects Fund Water and Wastewater Fund Solid Waste Fund Golf Fund Cemetery Fund 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 Financial Data Schedules: Housing Assistance Fund Balance Sheet Revenues and Expenses 148 149 STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years (accrual basis of accounting) Changes in Net Position - 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) S-1 S-2 153 154 S-3 157 S-4 159 S-5 S-6 S-7 160 161 162 S-8 163 Revenue Capacity 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 4 Comprehensive Annual Financial Report For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona TABLE OF CONTENTS Exhibit Page STATISTICAL SECTION (CONTINUED) Revenue Capacity (continued) 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 S-9 164 S-10 S-11 S-12 165 166 167 S-13 S-14 S-15 S-16 S-17 S-18 S-19 S-20 169 170 171 172 173 174 175 176 S-21 177 S-22 S-23 178 179 S-24 S-25 S-26 180 181 182 Debt Capacity Excise Tax Collections - Last Ten Fiscal Years Ratios of Net General Bonded Debt Outstanding - Last Ten Fiscal Years Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Direct and Overlapping Governmental Activities 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 (Excluding Transit Excise Tax Obligations) Pledged Revenue, Projected Debt Service and Estimated Coverage - Transit Excise Tax Obligations Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Prior Operating Information Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years Operating Indicators by Function/Program - Last Eight Fiscal Years Capital Asset Statistics by Function/Program - Last Eight 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 December 5, 2013 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 Auditor’s Report, for the fiscal year ended June 30, 2013 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 auditor’s unmodified “clean” Independent Auditor’s 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 and capital project budgets approved by the City Council. Activities of the General Fund, Special Revenue Funds, General Obligation Debt Service Fund, and Proprietary Funds are included in the annually appropriated operating budget. Projectlength budgets are developed for capital projects and appropriated annually in the Capital Projects Funds. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is at the city-wide level consisting of the total operating budget and the total capital projects 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 National economic indicators show a slower recovery than originally projected, with Arizona’s economy lagging behind the nation as a whole. However, Tempe appears to be outpacing the Phoenix metro region and the State in terms of development activity, which should provide for a somewhat faster recovery in the near term. The projected permit and inspection fees, as well as construction sales taxes associated with scheduled developments should enable the City to recognize revenue growth slightly above what we originally projected in February 2013. While slower growth statewide will negatively impact total State-shared revenues, it will also slow the inevitable reduction in Tempe’s percentage share of State-shared revenue, which is based on the City’s percentage of the State’s population. The City, like most of the State of Arizona and nation, continued its gradual recovery from the economic recession during the fiscal year. Improvement was experienced in all major categories of revenue including sales taxes and property taxes. Another positive trend was the reduction in the City’s unemployment rate from an estimated ten-year high of 8.2% in fiscal year 2011-12 to 6.8% in 2012-13. 8 Sales Tax Growth occurred in the local sales tax base across many categories including retail, rentals, utilities/communication, contracting, hotel/motel and restaurants. Total taxable sales increased by 5.7%. Retail taxable sales (comprising 52.7% of total taxable sales) grew by 4.3%. As a result, General Fund gross sales tax revenues (exclusive of bed tax) increased by $3 million (3.1%) to $88.3 million; $10.9 million of this sales tax revenue is from the 0.2% (two-tenths of one percent) temporary (four-year) sales tax that became effective July 1, 2010. Sales tax revenue represented 53% of total General Fund revenues for the year. State-Shared Revenue State-shared sales tax revenue ($13.2 million) increased by 5% compared to the prior year, reflecting increased taxable sales throughout the state and minimal impact of the U.S. Census. The 2010 Census counts are used in the distribution formula for state-shared revenues. As the City’s proportionate share of total state population continues to decline over time due to its landlocked status, the percentage of state-shared revenues allocated to the City also declines. Despite this decline in the percentage proportionate share, the City experienced an increase in state-shared income tax of $2.9 million (21.0%) due to the significant growth in the pool of state income tax revenues shared with cities and towns. State shared income tax received during the fiscal year ($16.5 million) is from actual collections by the State for fiscal year 2010-11. Auto lieu tax ($5.1 million) also remained relatively flat compared to the prior year. These state-shared revenues combined represented about 20% of General Fund revenue for the year. Property Tax Property tax revenues grew by $1.2 million (to $15.8 million) and $1.1 million (to $23 million) over the prior year in the General Fund and General Obligation Debt Service Fund, respectively. The modest increases are reflective of the property tax revenue stabilization policy implemented by the City during the prior year to mitigate the impact of the decline in property valuation due to the recession. This stabilization has ensured the City’s ability to service currently outstanding debt and maintain basic infrastructure. Property tax comprised approximately 9% of General Fund revenues for the year. LONG-TERM FINANCIAL PLANNING The central focus of the City’s current planning efforts continues to be the achievement of long-term financial sustainability in order to continue the delivery of quality services. While the long range outlook reflects relative stability for most of the City’s operating funds, challenges still remain as we continue the gradual recovery from the recession. One of the biggest challenges is the pending expiration of the temporary sales tax in June 2014 resulting in an estimated $12 million annual reduction in revenue to the General Fund beginning in fiscal year 2014-15. The City has planned for this since the tax was originally implemented in July 2010 and, through prudent decision-making, is well positioned to continue current levels of service. However, this loss of revenue does significantly reduce the future availability of funding for any expansion of existing programs, addition of new programs, or large employee compensation increases. The City has stepped up to challenge to continue to make available a retiree health plan, otherwise known as an Other Post-Employment Benefit (OPEB) plan. In response to escalating costs, the city, working with the various stakeholders, has made many significant changes to the plan over the last few years with the goal of reducing costs, ensuring affordability, and enhancing long range sustainability. During the fiscal year, the City made its first contribution to an irrevocable trust for the purpose of fully funding this commitment to current employees and retirees. The annual contribution is now included in the City’s annually adopted budget. Finally, the City was able to significantly approve the long range finances of the Transit Special Revenue Fund during the year with the defeasance of $53.7 million in transit excise tax debt. The debt was issued for construction of the light rail project and financed a portion of the construction costs in advance of the receipt of federal grant reimbursements. The planned defeasance resulted in the City reducing its outstanding transit debt by 42% and debt service costs by approximately $1.5 million. 9 RELEVANT FINANCIAL POLICIES During the year, the City conducted a review of its existing financial policies with the goal of making necessary improvements to enhance transparency, accountability and long-range sustainability. One of the improvements was the establishment of minimum fund balance policies for operating funds where none previously existed – specifically the Transit, Highway User Revenue and Performing Arts special revenue funds. Minimum fund balance policies are now as follows: Fund Minimum Balance General Transit Highway User Revenue Performing Arts General Obligation Debt Service Water/Wastewater Between 20% and 30% of operating revenues 25% of current year operating revenues 10% of current year operating revenues 10% of current year operating revenues Between 4% and 8% of outstanding debt supported by property taxes 25% of current year operating revenues plus 2% of the gross book value of tangible assets 15% of current year operating revenues 15% of current year operating revenues Solid Waste Golf Another improvement was the inclusion of all operating funds in the formally adopted budget. In prior years the activities of the Grant and Court Award funds were not part of the adopted budget. Additionally, the City began including as part of the formal budget process the re-appropriation of all unspent capital project funding as of the end of each fiscal year that is to be carried forward to the succeeding year. These changes resulted in a more comprehensive presentation of the total budget. MAJOR INITIATIVES The State of Arizona enacted a new law during the spring 2013 legislative session mandating that the State Department of Revenue (DOR) would be responsible for all privilege tax licensing, collection, and auditing in the state beginning January 1, 2015. While the DOR currently performs these services for the majority of cities/towns in the state, approximately eighteen of the largest jurisdictions (including the cities of Phoenix, Tucson, Mesa, Scottsdale, Chandler, and Tempe) in the state provide these services directly to taxpayers located within their boundaries. The intent of the legislation is to streamline the tax reporting and remitting process for taxpayers throughout the state without any loss of revenue and tax data for each of the jurisdictions. It remains to be seen if the proposed changes can be implemented by the effective date. Due to this uncertainty, the City is unable to estimate the potential impact of the change at this time. Included in the 2012-13 Capital Improvement Projects budget is initial funding for the replacement of the Tempe Town Lake downstream dam. The original dam, consisting of four rubber bladders constructed over 10 years ago, experienced a rupture in one of the bladders in July of 2010. All four bladders were replaced under an agreement with the manufacturer that required the dam to be replaced by December 31, 2015. The City has decided that the new structure would feature steel-hinged crest gates. Replacement of the dam is critical to continuing economic development of the area around the lake. The total estimated cost of completing the replacement of the dam is $40.8 million. Construction is anticipated to begin during fiscal year 2013-14. Significant projects were announced during Fiscal Year 2012-13. The largest “Class A” office project in the history of the State of Arizona, “Marina Heights,” is planned for development in Tempe. The significant $600 million development in downtown Tempe is to be anchored by a State Farm Insurance regional headquarters. The entire project is estimated at 1.9 million square feet in five office buildings on a 20-acre site north of Arizona State University’s Sun Devil Stadium. The project is expected to become a job hub that will draw thousands of employees at various skill levels. The much-anticipated hotel and conference center at the intersection of Mill Avenue and University Drive was also announced. The $350 million development will feature a 330-room luxury hotel and a 30,000-square-foot conference center, both operated by Omni Hotels and Resorts, as well as apartments above office and retail space on the site. Construction is anticipated to break ground later this year and open by the end of 2015. The 10 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Text38: City of Tempe Arizona For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2012 Executive Director/CEO 12 City of Tempe, Arizona List of Principal Officials City Council Mark Mitchell, Mayor Onnie Shekerjian, Vice Mayor Robin Arredondo-Savage Shana Ellis Kolby Granville Joel Navarro Corey Woods Administrative Staff For the Fiscal Year Ended June 30, 2013 Andrew Ching, City Manager Jeff Kulaga, Assistant City Manager Tom Ryff, Police Gregory Ruiz, Fire Kathy Berzins, Community Services Don Bessler, Public Works Lisa Collins, Community Development Shelley Hearn, Community Relations Rosa Inchausti, Diversity Program Barbara Blue, Internal Audit/Consulting Brigitta Kuiper, City Clerk and Elections Judith R. Baumann, City Attorney MaryAnne Majestic, Municipal Court Kenneth Jones, Finance and Technology Renie Broderick, Human Resources 13 City Organizational Chart Residents of Tempe Mayor and City Council City Clerk City Attorney City Manager City Court Brigitta Kuiper Judith R. Baumann Andrew Ching MaryAnne Majestic brigitta_kuiper@tempe.gov judi_baumann@tempe.gov andrew_ching@tempe.gov m_majestic@tempe.gov Assistant City Manager Police Chief of Police Tom Ryff Jeff Kulaga tom_ryff@tempe.gov Jeff_Kulaga@tempe.gov Fire Community Relations Office Fire Chief Greg Ruiz greg_ruiz@tempe.gov Community Relation Director Shelley Hearn Finance and Technology Diversity Office Finance and Technology Director Ken Jones Diversity Director Rosa Inchausti ken_jones@tempe.gov rosa_inchausti@tempe.gov shelley_hearn@tempe.gov Community Development Interim Community Development Director Lisa Collins Internal Audit Office City Auditor Barbara Blue barbara_blue@tempe.gov lisa collins@tempe.gov Public Works Public Works Director Don Bessler don_bessler@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 3033 N. Central Ave., Suite 300 Phoenix, Arizona 85012 Tel (602) 277-9449 Fax (602) 277-9297 INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and Members of the City Council City of Tempe, Arizona Report on the Financial Statements 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, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Tempe, Arizona, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows 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. 15 TUCSON • PHOENIX • FLAGSTAFF www.heinfeldmeech.com Change in Accounting Principle As described in Note 1, the City implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, for the year ended June 30, 2013, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 17 through 34 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining fund financial statements, other supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining fund financial 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining fund financial statements and other supplementary information is fairly stated in all material respects in relation to the basic 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 5, 2013, on our consideration of City of Tempe’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Tempe’s internal control over financial reporting and compliance. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 5, 2013 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, 2013. 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 $1.177 billion (net position). Of this amount, $358.5 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors. • The City’s total net position decreased by $13.0 million during the fiscal year compared to a decrease of $4.6 million in the prior year. The governmental funds experienced a decrease in net position of $12.3 million and the enterprise funds experienced a decrease of $0.7 million. The reason for the decrease in current year net position for the governmental funds was due in part to a decrease in capital grants and contributions while expenses increased. • For the fiscal year ended June 30, 2013, the City’s governmental revenues overall increased by $2.2 million. Even though there was a decrease in capital grants and contributions of $9.4 million, there was an offsetting increase of $4.8 million in operating grants and contributions as well as a $6.1 million increase in sales taxes which resulted a net increase. Expenses increased in the current year primarily in the Fire and Public Works functions. • At June 30, 2013, the City’s governmental funds reported combined ending fund balances of $172.0 million. Approximately 54.7% of this total amount ($94.1 million) is for spending at the government’s discretion (committed, assigned, or unassigned). • At June 30, 2013, total fund balance for the General Fund was $61.4 million which represents a slight decrease of $0.1 million over the prior year’s fund balance. Revenues continued to exceed expenditures by $3.7 million; however it was less than prior year’s amount of $7.9 million. Although revenues increased by $6.9 million, General Fund expenditures increased by $11.1 million. • At June 30, 2013, the City’s proprietary funds reported combined total net position of $255.0 million, and total unrestricted net position of $105.2 million. $100.1 million of the unrestricted net position was in the Water and Wastewater Fund. • At June 30, 2013, the total long-term obligations of the City decreased by $55.9 million due primarily to the defeasance of $53.7 million in excise tax variable obligations (Series 2006) in the Transit Fund. In addition, the City refunded $45.3 million in excise tax variable obligations (Series 2007) along with $41.1 million of general obligation refunding bonds for both general governmental and enterprise debt. The City issued new money general obligation bonds in the amount of $13.7 million for streets, public safety, parks, and municipal infrastructure preservation and excise tax obligations in the amount of $27.2 million for water/wastewater projects. 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 position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether or not the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the current fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future 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 three categories: governmental funds, proprietary funds, and fiduciary fund. 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 funds balance sheet and the governmental funds 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 funds balance sheet and in the governmental funds 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, General Obligation Debt Service, and Proprietary Funds along with a Capital Improvement Program Budget for the Capital Projects Funds. The legal level of budgetary control is at the citywide level (incorporating both the operating and capital budgets). 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, Capital Projects, 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. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The City uses a fiduciary fund to account for other post-employment benefits provided to retirees. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs 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. 19 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. GOVERNMENT-WIDE STATEMENTS FINANCIAL ANALYSIS Net position- June 30, 2013 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 559,670,178 864,673,547 1,424,343,725 268,181,635 362,387,474 630,569,109 Total $ 827,851,813 1,227,061,021 2,054,912,834 Liabilities Long-term liabilities Other liabilities Total liabilities 380,945,756 121,509,918 502,455,674 333,506,370 42,073,092 375,579,462 714,452,126 163,583,010 878,035,136 Net position Net Investment in capital assets Restricted Unrestricted Total net position 548,739,169 119,845,935 253,302,947 921,888,051 149,782,240 105,207,407 254,989,647 698,521,409 119,845,935 358,510,354 $ 1,176,877,698 $ $ Net position- June 30, 2012 Assets Current and other assets Capital assets, net Total assets Governmental Activities Business-type Activities $ $ 621,890,987 879,865,525 1,501,756,512 254,186,363 368,915,555 623,101,918 Total $ 876,077,350 1,248,781,080 2,124,858,430 Liabilities Long-term liabilities Other liabilities Total liabilities 494,350,690 73,241,585 567,592,275 332,645,131 34,730,635 367,375,766 826,995,821 107,972,220 934,968,041 Net position Net Investment in capital assets Restricted Unrestricted Total net position 560,427,507 124,800,333 248,936,397 934,164,237 162,774,388 92,951,764 255,726,152 723,201,895 124,800,333 341,888,161 $ 1,189,890,389 $ 20 $ ANALYSIS OF NET POSITION As noted earlier, net position may serve as a useful indicator of a government’s financial position. For the City, assets exceeded liabilities by $1.177 billion and $1.190 billion as of June 30, 2013 and 2012, respectively. The largest portion of the City’s net position 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 position invested in capital assets, net of related debt were $698.5 million and $723.2 million at June 30, 2013 and 2012, respectively. These totals represent 59.3% and 60.8% of total net position at June 30, 2013 and 2012, 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 position represents resources that are subject to external restriction on their usage. The net position subject to external restrictions was $119.8 million (10.2% of total net position) at June 30, 2013. At June 30, 2012 restricted net position was $124.8 million (10.5% of total net position). With the implementation of Governmental Accounting Standards Board (GASB) No. 54, new categories of net position 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 position is also 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 position was $358.5 million (30.5% of total net position) and $341.9 million (28.7% of total net position) at June 30, 2013 and 2012, respectively. At the end of each fiscal year, the City is able to report positive balances in all three categories of net position for the governmental as well as for the business-type activities as a whole. ANALYSIS OF CHANGE IN NET POSITION The City’s net position decreased by $13.0 million during the current fiscal year. These changes in net position are explained in the governmental and business-type activities discussion below. 21 Changes in Net Position- June 30, 2013 Governmental Activities Business-type Activities $ $ Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues 42,581,855 27,287,325 6,551,849 91,801,711 - $ 134,383,566 27,287,325 6,551,849 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 278,102 2,987,769 261,764 292,608,444 115,362 923,413 21,149 92,861,635 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 393,464 3,911,182 282,913 385,470,079 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 7,039,462 223,472 615,451 449,428 393,471 354,866 481,374 2,963,058 3,900,928 4,063,048 2,036,621 3,662,321 14,347,644 308,647,885 (16,039,441) 72,352,330 14,758,133 2,724,422 89,834,885 3,026,750 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 7,039,462 223,472 615,451 449,428 393,471 354,866 481,374 2,963,058 3,900,928 4,063,048 2,036,621 3,662,321 14,347,644 72,352,330 14,758,133 2,724,422 398,482,770 (13,012,691) 3,763,255 (12,276,186) 934,164,237 $ 921,888,051 (3,763,255) (736,505) 255,726,152 $ 254,989,647 (13,012,691) 1,189,890,389 $ 1,176,877,698 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 Total expenses Increase(decrease) in net position before transfers Transfers Change in net position Net position at beginning of year Net position at end of year 22 Changes in Net Position- June 30, 2012 Governmental Activities Business-type Activities Total Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Total revenues $ 46,068,709 22,450,002 15,961,785 $ 90,747,206 1,988,550 $ 136,815,915 22,450,002 17,950,335 142,985,910 13,649,203 35,899,010 3,428,125 5,437,201 822,900 3,199,954 496,911 290,399,710 335,297 3,032,990 40,582 96,144,625 142,985,910 13,649,203 35,899,010 3,428,125 5,437,201 1,158,197 6,232,944 537,493 386,544,335 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 7,456,756 356,468 78,458 476,011 338,059 462,817 910,616 2,854,168 3,934,716 5,325,401 2,102,617 2,301,194 14,894,293 301,546,309 (11,146,599) 72,156,412 14,626,578 2,658,416 129,849 89,571,255 6,573,370 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 7,456,756 356,468 78,458 476,011 338,059 462,817 910,616 2,854,168 3,934,716 5,325,401 2,102,617 2,301,194 14,894,293 72,156,412 14,626,578 2,658,416 129,849 391,117,564 (4,573,229) (508,805) (11,655,404) 945,819,641 $ 934,164,237 508,805 7,082,175 248,643,977 $ 255,726,152 (4,573,229) 1,194,463,618 $1,189,890,389 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 Increase(decrease) in net position before transfers Transfers Change in net position Net position at beginning of year Net position at end of year 23 Governmental activities. The decrease in governmental net position totaled $12.3 million and $11.7 million for the fiscal years ended June 30, 2013 and 2012, respectively. Although overall revenues increased by $2.2 million, the increase in the deficit was predominately due to the City receiving $9.4 million less in the current year in capital grants and contributions while expenditures increased by $7.1 million. The key factors contributing to the change in net position compared to the prior year are as follows: • The largest component contributing to the decrease in net position was a decrease in capital grants and contributions of $9.4 million (59.0%). In prior year, the City received $3.0 million as a contribution for the Town Lake Dam replacement due to the unexpected rupture in fiscal year 2011. In addition, in the prior year the City received approximately $3.5 million more in Transit related grants. • Overall, citywide sales tax revenue increased by $6.1 million (4.3%) from the prior year. This is a result of the gradual economic recovery with the leading category of growth being retail sales. • In addition, State shared income taxes increased in the amount of $2.9 million (21.0%) from the prior year. • The final increase in general revenues was in the area of property taxes. The increase of $2.7 million (7.7%) is due to the property tax stabilization policy implemented by the City in fiscal year 2011-12. • Another component which increased the deficit in the current year was total expenses which were up $7.1 million (2.4%). The increase was mostly attributed to the discontinuation of the furlough program that was necessary during the economic downturn. The following charts, over the next few pages, 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 below. Total expenses for the City’s governmental activities increased over prior year by $7.1 million or 2.4%. Within the functions, there was an increase in expenses for Public Works, Fire, and Community Development which were moderately offset with a decrease in expenses for Community Services. Fiscal Year Ended June 30, 2013 June 30, 2012 Public works Police Fire Community services Community development $103,586,986 76,585,163 32,594,512 28,592,571 26,757,509 25 33.6% 24.8 10.6 9.3 8.7 $98,915,390 76,799,591 28,156,863 31,069,618 25,113,273 32.8% 25.5 9.3 10.3 8.3 General revenues such as sales taxes, property taxes, State shared 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, sales taxes, State shared income taxes, and property taxes each displayed growth by increasing by $6.1 million, $2.9 million and $2.7 million, respectively. Fiscal Year Ended June 30, 2013 June 30, 2012 Sales taxes Property taxes State shared income taxes, unrestricted Auto-lieu taxes Franchise taxes $149,078,044 38,644,241 16,519,248 5,165,072 3,253,175 26 50.9% 13.2 5.6 1.8 1.1 $142,985,910 35,899,010 13,649,203 5,437,201 3,428,125 49.2% 12.4 4.7 1.9 1.2 Business-type activities. Business-type activities decreased the City’s net position by $0.7 million for the year ended June 30, 2013 compared to an increase of $7.1 million for the year ended June 30, 2012. The prior year increase was derived primarily from water and wastewater rate increases which resulted in charges for services increasing by $3.3 million (4.7%) in the Water and Wastewater Fund. In addition, in the prior year the water and wastewater fund sold effluent for $1.0 million and had $2.0 million in ARRA funding that was not available in the current year. Finally in the current year, the Water and Wastewater Fund incurred a loss on the transfer of assets of $3.1 million. For the business-type activities a comparison of revenues by source is provided for each activity. For the Year Ended June 30, 2013 Water and Wastewater Solid Waste Golf $ 74,979,069 $ 14,341,827 $2,480,815 $ - $ 91,801,711 1,060,341 $ 76,039,410 5,738 $ 14,347,565 501 $2,481,316 $ 528 528 1,067,108 $ 92,868,819 For the Year Ended June 30, 2012 Water and Wastewater Solid Waste Golf Cemetery Total $ 14,866,281 $2,344,355 $ 144,242 $ 90,747,206 Charges for services Unrestricted investment earnings/other Total Charges for services Capital grants and contributions Unrestricted investment earnings/other Total $ 73,392,328 1,988,550 3,343,872 $ 78,724,750 67,823 $ 14,934,104 $2,344,355 Cemetery $ 144,242 Total 1,988,550 3,411,695 $ 96,147,451 As shown in the Analysis of Change in Net Position schedules presented previously, the largest of the City’s business-type activities, Water and Wastewater, had expenses of $72.4 million for the fiscal year, followed by Solid Waste with $14.8 million and Golf with $2.7 million. Due to revenues consistently not being sufficient to cover expenses, the Cemetery fund was consolidated into the General fund on 7/1/2012. Expenses for the Enterprise Funds were fairly consistent between years. The Water and Wastewater had a slight increase of $0.2 million (0.3%), Solid Waste increased by $0.1 million (0.9%) and Golf increased less than $0.1 million (2.5%). 27 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 $172.0 million, a decrease of $44.6 million from the prior year. Approximately $94.1 million of this total amount pertained to the categories of committed, assigned or unassigned, all of which is available for spending at the City’s discretion. The combination of these categories nets a decrease of 44.0 million over the prior year’s combined balance of $138.1 million. The significant decrease is due to the planned defeasance of the Series 2006 Variable Rate Excise Tax Obligiations in the amount of $53.7 million. See the Debt Administration section for additional discussion. 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, 2013 fiscal year end, the fund balance included amounts for inventories ($1.5 million), prepaid items ($0.7 million) and capital improvement notes receivable ($0.3 million). Restricted fund balances 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 ($33.3 million), public works ($39.6 million) and community development ($2.7 million). Revenues for governmental functions overall totaled $298.0 million in the fiscal year ended June 30, 2013, which represents a increase of 2.7% or $7.8 million from the fiscal year ended June 30, 2012. This change is primarily due to the increase in the following areas: $4.8 million (3.9%) in sales taxes, $2.9 million (21.0%) in State income taxes, and $2.3 million (6.2%) in property taxes. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the total fund balance was $61.4 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 experienced only a slight change in the current year, which was a decrease of $0.1 million. In the prior year the net increase was $7.5 million. In the current year however, expenditures increased greater than revenues resulting in only a slight net change to fund balance. 28 Fiscal Year Ended June 30, 2013 June 30, 2012 Revenues Total fund balance Unassigned fund balance $ 169,962,203 61,429,953 52,658,705 $ 163,034,772 36.1 % 31.0 61,556,364 50,954,570 37.8 % 31.3 Total revenues increased by $6.9 million (4.2%) from the prior year. Sales taxes increased by $4.8 million (5.6%) over prior year due to the modest recovery in the economy. As mentioned earlier, retail sales was the source of the greatest increase in sales taxes. Property taxes also increased by $1.2 million (7.9%) which was due to maximizing the increase in the levy as allowed by State statute and the continual recovery of the housing market. The final major increase was an additional $2.9 million (21.0%) in State income taxes. The increase in revenues was offset with an $11.1 million increase in expenditures. The increase in expenditures was mainly due to the discontinuation of the furlough program. The Transit Special Revenue Fund is used to account for revenues and expenditures utilized to provide related transit services. Revenues continued to increase in the current year by $4.1 million. Predominately the increase relates to additional federal grants for the bus operations preventative maintenance. The fund balance totaled $27.6 million at June 30, 2013, compared to a $23.0 million fund balance at June 30, 2012. The fund balance was able to grow by $4.6 million despite the defeasance of $53.7 million of variable rate debt (see Debt Administration for further discussion) due to a $54.0 million transfer from the Transit Capital Projects fund. The General Obligation Debt Service Fund accounts for the accumulation of resources for and payments of general obligation debt. Total fund balance (which other than the $5 million assigned, is restricted for general obligation debt service payments) increased from $35.4 million at June 30, 2012 to $38.3 million at June 30, 2013. The change in fund balance is due primarily to an increase in property tax revenues ($1.1 million) along with $1.1 million received from other entities for their portion of an excise debt issuance. 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) improved from a deficit of $1.7 million at June 30, 2012 to a deficit of $0.6 million at June 30, 2013. The reduction of the deficit was due to receiving certain delinquent receivables. The remaining delinquent receivables will be covered by future anticipated special assessment payments (refer to Note 9 of the Notes to the Financial Statements). The Transit Capital Projects Fund accounts for the acquisition of buses, streetscapes, the East Valley Bus Maintenance Facility upgrades and other traffic flow improvements. Total fund balance had a $52.6 million decrease from $64.5 million at June 30, 2012 to $11.9 million at June 30, 2013 due to the planned transfer of $54 million to the Transit Special Revenue Fund for the defeasance of the Series 2006 Variable Rate Excise Tax Obligations. Bonds were issued in conjunction with the construction of the light rail system in anticipation of receiving federal funding approved for the project but that would not be reimbursed until future years. As final reimbursement has occurred, the funds were transferred to the Transit Special Revenue fund for payoff of the related debt. 29 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 position for the proprietary funds were as follows: Fiscal Year Ended June 30, 2013 June 30, 2012 Water and wastewater fund Solid waste fund Golf fund Cemetery fund Internal service funds $242,600,089 11,489,099 900,459 1,239,840 $242,420,029 12,440,335 1,076,749 (210,961) (970,747) The Water and Wastewater Fund accounts for the provision of water and sewer services to the City and the adjoining Town of Guadalupe. Although a rate increase was implemented on January 1, 2013, in the current year the fund experienced only a slight increase in total net position of $0.2 million for the fiscal year ended June 30, 2013 versus a more substantial increase in net position of $7.4 million for the fiscal year ended June 30, 2012. The prior year increase was due primarily to a $1.9 million grant which was received and a planned increase in charges for services as a result of rate adjustments which were implemented November 1, 2011 for this operation. In addition, in the current year the Water and Wastewater Fund incurred a $3.1 million loss for the transfer of assets to the Governmental Funds. The Solid Waste Fund accounts for the provision of solid waste collection and disposal services for both residential and commercial customers. Revenues decreased in the current year by $0.5 million while expenditures increased by $0.1 million. With the transfer of $0.5 million, the net position resulted in a decrease of $1.0 million verses a decrease less than $0.1 million in net position in prior year. 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 position for fiscal year ending June 30, 2013 which was similar to prior year’s reduction. In an effort to stabilize the fund, an improved operating model has been implemented at the golf courses. In addition, initiatives are being explored to reduce costs, such as converting the Rolling Hills irrigation system from treated water to raw water. The Cemetery Fund was established to account for the improvements, expansion and operations of the Double Butte Cemetery. Due to reduced demand for cemetery services, the fund was unable to cover the costs of operations. As such, all operational costs were moved to the general fund. The fund was closed out as of 7/1/2012 and the capital assets and associated debt were moved to the governmental funds. The Internal Service Funds account for the risk management and health insurance activities of the City. The $2.2 million increase in net position is due primarily to a $2.0 million transfer from the general fund out of the fund balance from the self-insurance assigned category. FIDICIARY FUND The Other Post Employment Benefits Trust Fund accounts for activities of the Other Post Employment Benefits Plan, which accumulates resources for health care benefit payments to qualified retirees. The trust was established in the current year and an initial contribution of $4.3 million was made. 30 BUDGET HIGHLIGHTS The City’s final General Fund expenditure budget of $170.5 million differs from the original budget of $170.3 million due to budget transfers to other funds. During the year, actual revenues were greater than budgetary estimates by $2.1 million (1.3% of total budgeted revenue) in the General Fund. This is due primarily to the increase in charges for services. Actual expenditures were less than budgetary estimates by $4.3 million (2.5% of final budgetary estimates) in the General Fund. This positive variance was attributable to continual cost reduction efforts in preparations of the sunset of the temporary sales tax on June 30, 2014. CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The City’s capital assets for its governmental and business-type activities as of June 30, 2013 amount to $1.2 billion (net of accumulated depreciation). Capital assets include land, buildings, infrastructure, improvements, machinery and equipment, and construction in progress. The total decrease in the City’s capital assets for the current fiscal year was $21.7 million. The tables below reflect the capital assets at the end of the fiscal year June 30, 2013 and 2012, respectively. Capital Assets, Net of Depreciation- June 30, 2013 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 217,639,287 378,181,671 128,870,936 44,640,224 5,736,256 $ 864,673,547 Business-type Activities $ 6,693,377 29,135,082 171,745,005 136,320,010 13,524,170 4,969,830 $ 362,387,474 Total $ 96,298,550 246,774,369 549,926,676 265,190,946 58,164,394 10,706,086 $ 1,227,061,021 Capital Assets, Net of Depreciation- June 30, 2012 Governmental Activities Land Buildings Infrastructure Improvements Machinery and equipment Construction in progress Total $ 89,605,173 224,043,994 390,370,114 116,511,676 45,008,581 14,325,987 $ 879,865,525 31 Business-type Activities $ 6,693,377 34,664,872 165,532,252 145,674,832 14,040,681 2,309,541 $ 368,915,555 Total $ 96,298,550 258,708,866 555,902,366 262,186,508 59,049,262 16,635,528 $ 1,248,781,080 Major capital asset events during the current fiscal year included the following: Governmental Activities • The City completed several improvement projects including $8.3 million in bus maintenance facility additions, $1.6 million in arterial roadways, $1.5 million in energy retrofits and $3.7 million in police equipment acquisitions. There were also various other infrastructure and improvement projects for parks and street lights. Business-type Activities • The Water and wastewater fund incurred $2.4 million in capital infrastructure improvements for the South Tempe Water Treatment Plant during the fiscal year. In addition, there were $7.2 million in capital infrastructure improvements for the Johnny G. Martinez water treatment plant. The final major project was $2.1 million for metering and water main systems. In addition, the Golf fund entered into golf maintenance equipment and cart leases for $0.9 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 $714.5 million which is a decrease of $55.9 million over the prior fiscal year. A significant portion of the decrease is due to the defeasance of variable rate debt as discussed below. The remainder of the decrease is due to the annual principal payment being more than the new money debt issued in the current year. Outstanding Long-term Obligations - June 30, 2013 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations Capital improvement note payable HUD Section 108 loan WIFA loan Total debt payable $ 164,235,000 25,675,000 154,081,000 1,009,612 5,247,000 350,247,612 $ 240,505,000 79,034,000 13,255,904 332,794,904 $ 404,740,000 25,675,000 233,115,000 1,009,612 5,247,000 13,255,904 683,042,516 Capital leases Compensated absences Claims and judgments Total long-term obligations 29,645 25,391,538 5,276,961 $ 380,945,756 711,466 $ 333,506,370 741,111 25,391,538 5,276,961 $ 714,452,126 32 Outstanding Long-term Obligations- June 30, 2012 Governmental Activities Business-type Activities Total General obligation bonds Special assessment bonds Excise tax obligations HUD Section 108 loan WIFA loan Total debt payable $ 162,200,000 27,815,000 218,522,900 5,572,000 414,109,900 $ 256,770,000 55,505,432 13,945,646 326,221,078 $ 418,970,000 27,815,000 274,028,332 5,572,000 13,945,646 740,330,978 Capital leases Compensated absences Claims and judgments Total long-term obligations 57,921 25,327,942 4,597,033 $ 444,092,796 45,352 $ 326,266,430 103,273 25,327,942 4,597,033 $ 770,359,226 The City’s issued $54.8 million in general obligation debt during the current fiscal year which consisted of $13.7 million of new money and $41.1 million to refund existing general obligation debt. The new money was for public safety, parks, municipal infrastructure preservation and street improvements in the amounts of $4.4 million, $2.5 million, $2.3 million, and $4.5 million, respectively. The primary purpose of refunding $41.1 million of existing debt 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 $1.6 million in the City’s General Obligation Debt Service and Water/Wastewater funds. In the area of Transit, the City defeased $53.7 million of Series 2006 Variable Rate Excise Tax Obligations associated with the construction of the Transit light rail project. As mentioned earlier, the reimbursement from the federal funds provided the opportunity to pay off the debt needed for cash flow during the construction of the project. In addition to the defeasance, the City also refunded $45.3 million of the Series 2007 Variable Rate Excise Tax Obligations in order to fix the interest rate. Finally, the City issued $27.2 million in excise tax obligations of new money for water related projects. The City’s total net general obligation bonded debt (total bonded debt, including the Enterprise Funds and WIFA loans, less debt service reserves) outstanding decreased by approximately $17.8 million from the fiscal year ended June 30, 2012 to the fiscal year ended June 30, 2013. The ratio of net general obligation bonded debt 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, 2013 June 30, 2012 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 33 $ 379,720,902 2,294 22.4% $ 1.35 $ 397,555,176 2,424 20.3% $ 1.13 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, 2013 is $73.5 million under the 6% limitation. Due to the fall in property values, the City currently does not have any available borrowing capacity under the 20% limitation. 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-17) 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. 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. 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 34 Statement of Net Position June 30, 2013 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 $ 169,392,980 $ 57,490,683 $ 226,883,663 14,818,480 5,788,160 1,462,222 17,043,315 1,460,087 667,643 32,441,621 25,592,686 17,021,394 273,981,590 12,312,390 366,985 543,780 54,423,396 2,583,358 140,461,043 14,818,480 18,100,550 1,829,207 17,043,315 2,003,867 667,643 86,865,017 25,592,686 19,604,752 414,442,633 89,605,173 5,736,256 6,693,377 4,969,830 96,298,550 10,706,086 217,639,287 378,181,671 128,870,936 44,640,224 1,424,343,725 29,135,082 171,745,005 136,320,010 13,524,170 630,569,109 246,774,369 549,926,676 265,190,946 58,164,394 2,054,912,834 15,566,571 6,272,970 11,826,424 7,911,398 27,773,142 52,159,413 5,629,313 600,754 4,472,278 95,299 24,909,590 6,365,858 21,195,884 6,873,724 16,298,702 8,006,697 52,682,732 58,525,271 Liabilities Accounts payable Deposits Accrued expenses Deferred charges Liabilities payable from restricted assets OPEB 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 1,745,000 23,930,000 - 1,745,000 23,930,000 37,506,862 317,763,894 502,455,674 20,851,339 312,655,031 375,579,462 58,358,201 630,418,925 878,035,136 548,739,169 149,782,240 698,521,409 30,300,147 9,276,907 475,827 281,358 917,932 5,096,424 73,497,340 253,302,947 921,888,051 105,207,407 254,989,647 30,300,147 9,276,907 475,827 281,358 917,932 5,096,424 73,497,340 358,510,354 $ 1,176,877,698 Net Position Net investment in capital assets Restricted for: Transit Cultural and recreational Highways and streets Community development Housing assistance Court enhancements Capital projects Debt service Unrestricted Total net position $ $ 35 The notes to the financial statements are an integral part of this statement. Statement of Activities For the fiscal year ended June 30, 2013 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 court 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 $ 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 7,039,462 223,472 615,451 449,428 393,471 354,866 481,374 2,963,058 3,900,928 4,063,048 2,036,621 3,662,321 14,347,644 308,647,885 72,352,330 14,758,133 2,724,422 89,834,885 $ 398,482,770 $ 1,506,807 153,903 6,988,375 18,536,983 6,815,190 13,310 6,426,389 2,140,898 42,581,855 74,979,069 14,341,827 2,480,815 91,801,711 $ 134,383,566 General revenues: Sales taxes State shared income taxes, unrestricted Property taxes Franchise taxes Auto-lieu taxes Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending 36 $ $ 3,516,223 1,048,709 1,700,928 7,622,634 11,620,880 1,685,167 67,205 25,579 27,287,325 27,287,325 $ $ 9,320 6,072,180 470,349 6,551,849 6,551,849 City of Tempe, Arizona Net (Expense) Revenue and Changes in Net Position Governmental Activities $ $ (71,562,133) (31,382,580) (19,903,268) (71,355,189) (7,851,090) (5,354,295) (223,472) (615,451) (449,428) (393,471) (354,866) (481,374) (2,882,543) 2,551,040 (1,922,150) (2,036,621) (3,662,321) (14,347,644) (232,226,856) Business-type Activities $ - Total $ (71,562,133) (31,382,580) (19,903,268) (71,355,189) (7,851,090) (5,354,295) (223,472) (615,451) (449,428) (393,471) (354,866) (481,374) (2,882,543) 2,551,040 (1,922,150) (2,036,621) (3,662,321) (14,347,644) (232,226,856) (232,226,856) 2,626,739 (416,306) (243,607) 1,966,826 1,966,826 2,626,739 (416,306) (243,607) 1,966,826 (230,260,030) 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 278,102 2,987,769 261,764 3,763,255 219,950,670 (12,276,186) 934,164,237 921,888,051 115,362 923,413 21,149 (3,763,255) (2,703,331) (736,505) 255,726,152 254,989,647 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 393,464 3,911,182 282,913 217,247,339 (13,012,691) 1,189,890,389 $ 1,176,877,698 $ The notes to the financial statements are an integral part of this statement. 37 Balance Sheet Governmental Funds June 30, 2013 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 $ 59,687,683 $ 9,744,776 5,443,283 254,604 1,089,340 393,981 2,964,144 250,000 79,827,811 $ 15,619,517 $ 2,732,644 11,670 14,183,679 2,527,739 1,888,325 36,963,574 $ 35,702,272 $ 924,100 17,503,613 14,883,069 69,013,054 $ $ 1,192,050 628,188 25,592,686 27,412,924 Liabilities and Fund Balances Liabilities Accounts payable Deposits Accrued expenditures 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 $ $ 3,496,277 5,895,696 3,892,885 5,113,000 18,397,858 643,980 8,127,268 52,658,705 61,429,953 79,827,811 38 $ $ 4,883,041 97,427 1,888,325 1,035,000 1,489,088 9,392,881 16,540,410 9,280,064 1,750,219 27,570,693 36,963,574 $ $ 87,300 13,809,570 12,735,000 4,106,182 30,738,052 33,262,194 5,012,808 38,275,002 69,013,054 $ $ 1,583 357,578 26,996,875 628,187 27,984,223 (571,299) (571,299) 27,412,924 City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ 12,186,106 $ 12,186,106 $ $ 314,694 314,694 11,871,412 11,871,412 12,186,106 $ 37,006,853 $ 1,416,960 286,144 3,898 2,859,636 1,066,106 667,643 8,817,937 52,125,177 $ $ 6,219,932 377,274 423,106 731,762 3,138,372 6,395,000 1,384,685 18,670,131 1,733,749 13,892,708 9,774,067 8,054,522 33,455,046 52,125,177 Total Governmental Funds $ 160,202,431 $ 14,818,480 5,729,427 1,462,222 1,089,340 17,043,315 1,460,087 667,643 32,441,621 25,592,686 17,021,394 277,528,646 $ $ 15,002,827 6,272,970 4,413,418 1,089,340 50,946,142 20,165,000 7,608,142 105,497,839 2,377,729 75,566,724 19,054,131 22,944,817 52,087,406 172,030,807 277,528,646 The notes to the financial statements are an integral part of this statement. 39 Reconciliation of the Balance Sheet to the Statement of Net Position June 30, 2013 City of Tempe, Arizona Fund balances- total governmental funds $ 172,030,807 Amounts reported for the governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets Accumulated depreciation 1,491,463,509 (626,789,962) 864,673,547 The equity in joint venture is not a financial resource and, therefore, is not reported in the funds. 273,981,590 Other assets are not available to pay current-period expenditures and, therefore are offset by deferred/unavailable 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 26,996,875 1,465,972 15,205,035 4,234,623 3,043,637 50,946,142 Bond premium net of issuance costs are not financial resources and, therefore, are not reported in the funds. (7,911,396) 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 (25,391,538) (5,276,961) (52,126,723) (350,277,257) (433,072,479) 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 position of governmental activities 1,239,840 $ The notes to the financial statements are an integral part of this statement. 40 921,888,051 City of Tempe, Arizona 41 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2013 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 $ 90,660,981 15,753,138 3,253,175 $ 30,087,229 - $ 22,983,109 - $ 1,762,947 13,016 24,759,072 - 13,236,998 16,519,248 5,165,072 593,629 203,239 11,350,780 8,132,195 1,931,776 3,161,972 169,962,203 7,147,075 475,559 55,982 16,205,687 281,620 54,253,152 4,442,862 183,632 4,626,494 68,756,282 27,020,233 20,892,043 18,235,903 11,267,870 5,418,161 244,837 617,384 441,212 388,263 418,396 511,960 2,738,041 3,525,766 3,760,937 2,045,707 45,183,799 - 166,282,995 100,000,000 3,212,089 148,395,888 13,735,000 7,949,288 21,684,288 2,140,000 1,311,035 3,464,374 3,679,208 (94,142,736) 3,074,784 1,162,120 (4,035,897) 230,278 (3,805,619) 54,000,000 (959,366) 4,326,390 41,390,000 98,757,024 6,500,331 (8,261,603) 2,066,578 12,520,000 (12,985,558) (160,252) 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) - 13,339 - Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Issuance of refunding bonds Payment to refunded bonds escrow agent Total other financing sources (uses) Net change in fund balance Fund balance (deficit) at beginning of year Fund balance (deficit) at end of year (126,411) $ 61,556,364 61,429,953 42 $ - 4,614,288 2,914,532 1,162,120 22,956,405 27,570,693 35,360,470 38,275,002 (1,733,419) (571,299) $ $ City of Tempe, Arizona Other Governmental Funds Transit Capital Projects $ - $ 2,953,722 15,856 2,969,578 2,607,747 2,607,747 361,831 959,366 (54,000,000) 36,708 (53,003,926) (52,642,095) $ 64,513,507 11,871,412 6,236,879 - Total Governmental Funds $ 15,420,165 228,211 8,855,957 4,293,153 5,865 4,551,189 404,883 180,250 1,281,690 41,458,242 25,520,962 703,770 22,092,955 16,519,248 5,165,072 6,649,729 278,102 32,107,656 8,537,078 196,106 4,442,862 1,931,776 4,908,914 298,028,741 3,953,252 1,035,916 3,659,032 7,351,439 13,985,837 1,670,321 299,175 304,742 - 72,709,534 28,056,149 24,551,075 70,784,480 25,253,707 7,088,482 244,837 617,384 441,212 388,263 418,396 511,960 3,037,216 3,830,508 3,760,937 2,045,707 6,720,000 2,842,823 18,266,951 60,089,488 122,595,000 15,315,235 20,874,698 402,524,780 (18,631,246) (104,496,039) 5,978,923 (1,549,441) 13,675,000 3,360 18,107,842 67,438,620 (68,806,307) 13,675,000 6,392,968 270,346 53,910,000 (12,985,558) 59,895,069 (523,404) $ 126,985,089 38,736,247 3,253,175 33,978,450 33,455,046 (44,600,970) $ 216,631,777 172,030,807 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, 2013 City of Tempe, Arizona Net change in fund balances- total governmental funds $ (44,600,970) 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) (743,524) (1,899,671) (2,643,195) 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 19,892 (1,368,901) (1,146,201) (3,186,850) (5,682,060) 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 20,874,698 (5,273,773) (42,890,872) (27,289,947) Gain on Movement of Asset 3,130,942 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 position while the acquisition of new leases increase the liability. Principal payments made 28,276 Bond issuance costs are expended in the governmental funds when paid, and are capitalized and amortized in the statement of net position. Bond issuance costs Amortization of bond issuance costs 659,132 308,459 967,591 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 position. Issuance of debt Premium on issuance of debt Principal payments made (54,599,442) (6,392,968) 122,595,000 61,602,590 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. Change in net position of governmental activities 2,210,587 $ The notes to the financial statements are an integral part of this statement. 44 (12,276,186) Statement of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Budgeted Amounts Original Final Revenues Taxes Intergovernmental Investment income Charges for services Fines and forfeitures Licenses and permits Miscellaneous Total revenues $ 108,792,855 35,532,408 464,983 9,534,265 7,375,168 1,527,000 4,856,312 168,082,991 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 Contingency Interdepartmental charges Total expenditures Other financing sources (uses) Transfers to other funds Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ $ 108,792,855 35,532,408 464,983 9,541,865 8,195,568 1,527,000 4,028,312 168,082,991 Actual Amounts (Budgetary Basis) $ 109,667,294 35,514,947 457,208 11,350,780 8,132,195 1,931,776 3,161,972 170,216,172 Variance with Final Budget Positive (Negative) $ 874,439 (17,461) (7,775) 1,808,915 (63,373) 404,776 (866,340) 2,133,181 67,833,501 27,325,938 21,506,827 19,036,303 9,593,822 5,430,131 372,531 349,826 477,433 423,408 546,676 561,728 2,770,028 3,791,700 19,408,324 2,336,150 1,000,000 (12,452,069) 170,312,257 68,667,708 27,950,007 21,712,356 17,803,279 11,798,340 5,468,502 382,698 358,959 481,212 426,011 551,256 570,890 2,802,484 3,818,092 16,831,949 2,354,078 1,000,000 (12,452,069) 170,525,752 68,153,145 27,572,838 20,875,440 18,037,608 11,257,158 5,441,478 224,268 757,055 441,893 388,686 419,285 512,991 2,743,024 3,527,415 15,696,897 2,076,986 (11,902,278) 166,223,889 514,563 377,169 836,916 (234,329) 541,182 27,024 158,430 (398,096) 39,319 37,325 131,971 57,899 59,460 290,677 1,135,052 277,092 1,000,000 (549,791) 4,301,863 (1,746,879) 100,000 (1,646,879) (3,876,145) (1,746,879) 100,000 (1,646,879) $ (4,089,640) (4,035,897) 230,278 (3,805,619) 186,664 (2,289,018) 130,278 (2,158,740) $ 4,276,304 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 (253,969) (144,661) 99,646 (14,091) $ (126,411) 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, 2013 City of Tempe, Arizona Budgeted Amounts Original Final 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 Other financing sources (uses) Transfers from other funds Transfers to other funds Premium on issuance of debt Proceeds of refunding bonds Total other financing sources (uses) Net change in fund balance Actual Amounts (Budgetary Basis) Variance with Final Budget Positive (Negative) $ $ $ 30,905,796 19,779,424 120,000 3,744,366 312,646 54,862,232 $ 30,905,796 6,301,116 120,000 17,222,674 312,646 54,862,232 48,151,659 48,151,659 45,182,678 2,968,981 1,690,000 56,164,544 106,006,203 55,690,000 2,164,544 106,006,203 100,000,000 3,212,089 148,394,767 (44,310,000) (1,047,545) (42,388,564) (959,366) (959,366) $ (52,103,337) (959,366) (959,366) $ (52,103,337) Explanation of differences between budgetary revenues and expenditures, and GAAP revenues and expenditures: The City does not budget for the change in the fair value of investment, but recognizes the change for GAAP purposes The City budgets for claims and other accrued expenses on a cash basis, rather than on a modified accrual basis The City recognizes certain other expenditures on a cash basis, rather than on a modified accrual basis Net change in fund balance as reported on the statement of revenues, expenditures, and changes in fund balances- governmental funds 30,087,229 7,622,634 177,876 16,205,687 281,620 54,375,046 54,000,000 (959,366) 4,326,390 41,390,000 98,757,024 4,737,303 (121,894) 553 (1,674) $ 4,614,288 The notes to the financial statements are an integral part of this statement. 46 (818,567) 1,321,518 57,876 (1,016,987) (31,026) (487,186) 54,000,000 4,326,390 41,390,000 99,716,390 $ 56,840,640 City of Tempe, Arizona 47 Statement of Net Position Proprietary Funds June 30, 2013 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 $ 49,833,190 54,423,396 11,261,391 329,313 250,417 543,780 116,641,487 $ 7,657,493 $ 1,050,999 23,568 8,732,060 - 2,583,358 140,461,043 14,104 14,104 - - 6,330,829 49,444,840 308,729,093 223,492,952 33,084,497 4,969,830 (271,667,530) (15,650,887) 362,548 1,822,663 4,247,980 2,018,600 (6,035,566) 354,384,511 497,428,912 5,586,738 5,586,738 2,416,225 2,416,225 $ 614,070,399 1,265,783 19,971,842 - $ $ 14,318,798 48 $ 2,430,329 $ - $ 57,490,683 54,423,396 12,312,390 366,985 250,417 543,780 125,387,651 $ 9,190,549 58,733 9,249,282 - 2,583,358 140,461,043 - - 6,693,377 52,533,286 308,729,093 227,740,932 55,074,939 4,969,830 (293,353,983) - - 362,387,474 505,431,875 - - $ 630,819,526 $ 9,249,282 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 Total current liabilities Noncurrent liabilities: General obligation bonds payable Excise tax revenue obligations WIFA loan payable Capital leases payable OPEB obligation Total noncurrent liabilities Total liabilities $ 5,275,607 600,754 3,269,153 $ - 301,604 1,006,222 $ - 95,299 6,694,590 16,265,000 1,950,000 704,349 34,854,752 1,307,826 - 240,505,000 79,034,000 12,551,555 52,102 196,903 250,417 211,990 $ - $ 5,629,313 600,754 4,472,278 250,417 95,299 6,694,590 16,265,000 1,950,000 704,349 211,990 $ 563,746 7,413,006 - 711,412 - 36,873,990 7,976,752 - 240,505,000 79,034,000 12,551,555 499,476 6,365,858 338,955,889 32,690 32,690 - 4,525,003 336,615,558 1,521,873 1,521,873 499,476 318,982 818,458 371,470,310 2,829,699 1,529,870 - 375,829,879 8,009,442 142,490,743 100,109,346 $ 242,600,089 5,586,738 5,902,361 11,489,099 1,704,759 (804,300) 900,459 - 149,782,240 105,207,407 $ 254,989,647 1,239,840 1,239,840 - Net Position Net investment in capital assets Unrestricted Total net position $ $ $ The notes to the financial statements are an integral part of this statement. 49 $ Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2013 City of Tempe, Arizona Business-type Activities - Enterprise Funds Water and Wastewater Solid Waste Golf Course Operating revenues: Charges for services Miscellaneous Total operating revenues $ 74,979,069 922,912 75,901,981 $ 14,341,827 14,341,827 $ 2,480,815 501 2,481,316 Operating expenses: Personnel services Supplies and materials Fees and services Depreciation Total operating expenses Operating income (loss) 15,477,214 4,094,996 16,190,491 17,475,129 53,237,830 22,664,151 Nonoperating revenues (expenses): Investment income (loss) Interest and fiscal fees Gain (loss) on sale of capital assets Loss on transfer of capital assets Net loss from joint venture Income (loss) before contributions and operating transfers Transfers in Transfers out Change in net position Total net position- beginning Total net position- ending 140,910 (11,076,632) (3,481) (3,130,942) (8,037,868) 556,138 5,265,445 (5,641,523) 180,060 242,420,029 $ $ 242,600,089 Total Governmental ActivitiesInternal Service Funds - $ 91,801,711 923,413 92,725,124 $ 28,211,275 22,322 28,233,597 - 21,640,860 5,049,145 25,035,497 18,994,883 70,720,385 22,004,739 28,023,010 28,023,010 210,587 Cemetery $ 5,514,614 482,382 7,557,140 1,203,997 14,758,133 (416,306) 649,032 471,767 1,287,866 315,757 2,724,422 (243,106) (18,892) 24,630 - (7,184) - 528 - 115,362 (11,076,632) 21,149 (3,130,942) (8,037,868) (410,568) (250,290) 528 (104,192) 210,587 (540,668) (951,236) 74,000 (176,290) 210,433 210,961 5,549,878 (6,182,191) (736,505) 2,000,000 2,210,587 12,440,335 $ 11,489,099 $ 1,076,749 900,459 $ (210,961) - The notes to the financial statements are an integral part of this statement. 50 255,726,152 $ 254,989,647 - (970,747) $ 1,239,840 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2013 City of Tempe, Arizona Business-type Activities- Enterprise Funds Water and Wastewater Cash flows from operating activities: Receipts from customers Receipts from other funds Payments to employees for services Payments to suppliers for goods and services Payment for premiums and settlement of claims Net cash provided (used) by operating activities $ Cash flows from noncapital financing activities: Advances from/(to) other funds Transfers in Transfers out Net cash provided (used) by noncapital financing activities Cash flows from capital and related financing activities: Proceeds from sale of bonds Principal paid on long-term debt Interest and fiscal fees Change in capital assets Deferred revenue Gain from the sale of assets Loss on transfer of asset Net cash provided (used) by capital and related financing activities Cash flows from investing activities: Interest received Collection of notes receivable Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided (used) 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 75,913,245 (15,711,924) (18,665,489) 41,535,832 Solid Waste $ $ 2,484,461 (700,585) (1,754,279) 29,597 343,024 5,265,445 (5,641,523) (33,054) (540,668) (540,668) 101,550 74,000 175,550 27,240,000 (18,519,742) (11,278,992) (13,544,714) (51,066) (3,481) (3,130,942) (19,288,937) (49,279) 24,630 (24,649) 666,114 (7,184) (864,208) (205,278) 134,702 (860,209) (725,507) (19,210) (19,210) 21,488,334 82,768,252 104,256,586 $ $ 22,664,151 $ 17,475,129 11,264 154,518 95,339 1,370,141 (241,844) 7,134 41,535,832 Noncash investing, capital, and financing activities: Net loss from joint venture Capital leases $ (8,037,868) - Total noncash investing, capital, and financing activities: $ (8,037,868) 7,657,493 (416,306) $ $ $ $ $ - (243,106) (5,165) (5,165) Total $ 92,744,836 (22,037,832) (28,563,539) 42,143,465 $ 28,174,864 (26,303,999) 1,870,865 (444,574) 210,433 (234,141) 5,549,878 (6,182,191) (632,313) (1,753,100) (145,763) 1,991,399 92,536 27,240,000 (19,606,728) (11,431,939) (14,458,201) (51,066) 2,012,548 (3,130,942) (19,426,328) - 119,797 (860,209) (740,412) - 4,174 4,174 - 1,203,997 5,303 (99,084) (120,624) 9,915 583,201 Cemetery 131 131 (1,326) 7,658,819 $ $ 14,347,130 (5,625,323) (8,138,606) 583,201 Golf Course Governmental ActivitiesInternal Service Funds (142,596) 142,596 2,000,000 2,000,000 21,344,412 90,569,667 3,870,865 5,319,684 $ - $ 111,914,079 $ 9,190,549 $ - $ 22,004,739 $ 210,587 315,757 - 18,994,883 3,145 5,354 (21,661) (29,892) 29,597 (5,165) (5,165) 19,712 154,518 95,339 1,271,246 (384,129) (12,843) 42,143,465 $ $ - $ (58,733) 199,340 1,517,824 1,847 1,870,865 $ - $ 861,649 $ - $ (8,037,868) 861,649 $ - $ - $ 861,649 $ - $ (7,176,219) $ - 51 The notes to the financial statements are an integral part of this statement. Statement of Net Position Fiduciary Fund June 30, 2013 City of Tempe, Arizona Other Post Employment Benefits Trust Assets Cash and investments Total assets $ Net Position Held in trust for other post employment benefits Total net position $ 4,530,000 4,530,000 4,530,000 4,530,000 Statement of Changes In Net Position Fiduciary Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Other Post Employment Benefits Trust Additions: Contributions Employer $ Total additions 4,530,000 4,530,000 Deductions: Benefits - Total deductions Change in net position 4,530,000 Net position at beginning of year Net position at end of year $ 4,530,000 The notes to the financial statements are an integral part of these statements. 52 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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. During the year ended June 30, 2013, the City implemented the provisions of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. GASB Statement No. 63 establishes reporting guidance for certain elements of the financial statements which are distinct from assets and liabilities. 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 financial statements exclude the fiduciary fund. 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, 2013 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, business-type or fiduciary 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, 2013 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 and other 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 and improvements (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, 2013 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 Postion - 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. Due to the Cemetery Fund consistently not producing sufficient revenues to cover expenses, on 7/1/2012 the assets and liabilities were absorbed into the General Fund. 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. The following internal service funds are used by the City: 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, 2013 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation (Continued) Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside of the City. fiduciary fund is reported by fund type. The following fiduciary fund is used by the City. The Other Post Employment Benefits Trust Fund – accounts for activities of the Other Post Employment Benefits Plan, which accumulates resources for health care benefit payments to qualified retirees. D. Measurement Focus and Basis of Accounting The government-wide, proprietary and fiduciary 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. 57 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Measurement Focus and Basis of Accounting (Continued) 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. 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. 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, 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 at the city-wide level consisting of the total operating budget and the total capital projects budget, as adopted. Management may amend the budget at any level below the total 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 or capital projects 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, 2013 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 2012-13 Expenditure Limitation is $298,088,986. 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 and Prepaid Items 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. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 59 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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 Position, because they are maintained in trust accounts and their use is limited by applicable debt covenants. In addition, the Industrial Commission of Arizona requires a restricted security for self-insured entities. As the City is self-insured, a security of $2.9 million is included in restricted assets in the General Fund. 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 of service are eligible for compensation of up to 50 percent of accumulated sick leave. Each employee with 3 years of 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, 2013 City of Tempe, Arizona NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type. Bond premiums, discounts, and issuance costs are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, in the period in which the bonds are issued. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. N. Interfund Transactions Interfund transactions consist of identified services performed for other funds or costs billed to other funds and are recorded as expenditures in the fund receiving the services and as a reimbursement, reducing expenditures, in the fund performing the services except for sales of water, sewer and refuse services to other City departments and the internal service risk management or health charges which are recorded as revenue and expenditures in the appropriate funds. All other interfund transactions are reported as transfers. O. Fund Equity In the fund financial statements, 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, 2013 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 2013 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, 2013 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 Position 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 <$1,677,241> and the bank balance was $217,103. 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. Cash and investments as of June 30, 2013 are classified in the accompanying financial statements as follows: Carrying amount of investments Carrying amount of cash deposits Total pooled cash and investments $319,955,920 (1,677,240) $318,278,680 Pooled cash and investments – unrestricted Restricted cash and investments Investments in OPEB trust Total pooled cash and investments $226,883,663 86,865,017 4,530,000 $318,278,680 The City had a net increase in the fair value of investments during fiscal year 2012-13 of $93,279. 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, 2013 City of Tempe, Arizona NOTE 4 - CASH AND INVESTMENTS (Continued) Investments (Continued) At June 30, 2013, the City maintained the following investments and maturities: Remaining Maturity in Months Investment Type US government treasuries US government agencies Money market Repurchase agreements Cash held with trustee Investments in OPEB trust State investment pool Fair Value 12 Months or Less $ 131,115,621 119,209,685 1,647,200 3,146,893 30,626,952 4,530,000 29,679,569 $ 319,955,920 $ 77,202,059 60,317,987 1,647,200 3,146,893 30,626,952 4,530,000 29,679,569 $ 207,150,660 13 - 24 Months 25 - 36 Months 40,957,659 $ 40,957,659 $53,913,562 17,934,039 $71,847,601 $ 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. Although the City’s formal investment policy allows for investment maturities up to 5 years from the date of purchase, in general, 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 AA+ and money market funds were rated AAAm by Standard & Poor’s. The repurchase agreements are between JP Morgan and the City of Tempe, Arizona and are considered a short term debt obligation of the bank. 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, 2013, 38.85% of the City’s investments are in US Treasuries, 28.60% of the City’s investments are in Fannie Mae, 26.56% of the City’s investments are in Federal Home Loan Mortgage Corporation Securities and 5.74% of the City’s investments are in Federal Home Loan Bank securities. Custodial Credit Risk. 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. 64 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 5 - DUE TO/FROM OTHER FUNDS AND INTERFUND TRANSFERS Due to/from other funds consisted of the following at June 30, 2013: Due to 357,578 731,762 $ 1,089,340 General fund Special assessment debt service fund Non-major governmental funds Total governmental funds $ Water and wastewater fund Golf fund Total enterprise funds $ Due to 250,417 $ 250,417 Due from $ 1,089,340 $ 1,089,340 Due from 250,417 $ 250,417 $ The interfund balances at June 30, 2013 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2013 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 position. Transfers Out General Transit Special Revenue Transfers In General Obligation Debt Service Transit Capital Projects Non-major Governmental $ 648,831 1,176,633 Transit General Obligation Transit Capital Special Non-major Water and Revenue Debt Service Projects Governmental Wastewater Solid Waste $ - $ - $ 54,000,000 - - - - - 2,996,158 - 959,366 $ 503,472 1,045,969 $ 5,344,604 222,919 3,424 537,244 Total $ 54,000,000 6,500,331 959,366 5,978,923 Water and Wastewater - - 5,265,445 - - Golf - - - - - 210,433 - - - - - - 210,433 2,000,000 - - - - - - 2,000,000 Cemetery Risk Management Total $ 4,035,897 $ 959,366 $ 8,261,603 $ 54,000,000 $ 1,549,441 - $ 74,000 $ 5,641,523 - 5,265,445 - 74,000 $ 540,668 $ 74,988,498 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. Other than the cemetery transfer (see Note 1C and Note 9), there were no significant transfers during fiscal year 2012-13 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. 65 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona 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, 2013 the note receivable balance is $14,883,069. In August 2008, the City advanced to the Downtown Tempe Community (DTC) $250,000 to begin operations. The DTC is to repay the advance at zero percent interest rate when the district is terminated. 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 4.50% discount rate. At June 30, 2013 the note receivable balance in the Transit Special Revenue fund is $1,888,325 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 receives $12,324 monthly over a 10 year period with an interest rate of 4.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2013 was $1,028,848. In August 2011, in accordance with a development agreement, the City has deferred certain water and sewer development fees. The City will use the sales tax rebate due to the developer to pay for the deferred development fees. The outstanding fees accrue at an interest rate of 2.00%. The notes receivable balance in the Water and Wastewater Enterprise Fund at June 30, 2013 was $544,898. The City executed a loan from the Water and Wastewater Fund to the General Fund for the construction of a municipal building which would be occupied primarily by departments residing in the General Fund. The interest rate ranges from 2% to 5%. The Water and Wastewater Capital Improvement Note Receivable balance at June 30, 2013 was $1,009,612. See Note 9 for the corresponding Capital Improvement Note Payable and Note 8 for the corresponding asset transfer. 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. 66 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Subregional Operating Group (SROG) (Continued) As of June 30, 2012 (the latest information available), the City has a 15.74% 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, 2012 (the latest information available) is as follows (in thousands): Total assets Total liabilities Total net assets $ 913,834 (35,952) $ 877,882 Total revenues Total expenses Total non-operating revenues (expenses) Net decrease in net assets $ 51,133 (102,532) 24,860 ($ 26,539) The City's net investment and its share of operating and maintenance expenses are recorded in the Water and Wastewater Enterprise Fund. The City's equity in joint venture at June 30, 2013, was $140,461,043. The City’s net loss from joint venture was $8,037,868 for the fiscal year ended June 30, 2013. Separately audited financial statements for the jointly used wastewater treatment and transportation facilities may be obtained from the Arizona Municipal Water Users Associations, 3003 North Central, Suite 1550, Phoenix, Arizona, 85012. 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, 2013, the City has a 23.92% (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, 2012 (the latest information available) is as follows: Total assets Total liabilities Total net assets $ 1,199,149,547 (60,283,116) $ 1,138,866,431 67 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 7 - JOINT VENTURE (Continued) Valley Metro Rail, Inc. (VMRI) (Continued) Total revenues Total expenses Total non-operating revenues Total non-operating expenses Net decrease in net assets $ 58,715,521 (76,225,953) 7,552,809 (9,548,583) $ (19,506,206) 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’s equity in joint venture at June 30, 2013 was $273,981,590. Separate financial statements may be obtained from Valley Metro Rail, Inc., 411 North Central Avenue, Suite 200, Phoenix, Arizona 85004. NOTE 8 - CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the fiscal year ended June 30, 2013 is as follows: Balances June 30, 2012 Governmental activities: Non-depreciable assets: Land Construction-in-progress Total non-depreciable assets Depreciable assets: Buildings Infrastructure Improvements Machinery and equipment Total depreciable assets $ 89,605,173 14,325,987 103,931,160 Additions $ 20,874,698 20,874,698 (1,699,599) (1,699,599) Balances June 30, 2013 $ $ 89,605,173 (27,764,830) 5,736,256 (27,764,830) 95,341,429 6,334,222 4,445,149 19,547,892 6,629,270 36,956,533 310,876,270 721,495,207 189,662,830 174,087,773 1,396,122,080 (10,919,929) (16,633,592) (6,914,765) (8,422,586) 9,220 1,365,425 (2,148,895) (273,867) (636,988) (93,236,983) (343,313,536) (60,791,894) (129,447,549) Total accumulated depreciation (582,213,985) (42,890,872) Governmental activities capital assets, net $ 879,865,525 $(19,615,750) 1,374,645 (3,059,750) (626,789,962) (80,177,379) (326,679,944) (53,603,262) (121,753,400) 332,675 2,067,749 2,400,424 $ Transfers in (out) (12,000) (1,371,227) (1,383,227) Accumulated depreciation: Buildings Infrastructure Improvements Machinery and equipment 304,221,373 717,050,058 170,114,938 166,761,981 1,358,148,350 Retirements 68 $ (1,708,181) $ 6,131,953 $ 864,673,547 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 8 - CAPITAL ASSETS (Continued) Balances June 30, 2012 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 2,309,541 9,002,918 $ Additions Retirements 18,029,262 18,029,262 $ 58,822,735 294,617,266 229,984,369 55,083,983 638,508,353 Accumulated depreciation: Buildings (24,157,863) Infrastructure (129,085,014) Improvements (84,309,537) Machinery and equipment (41,043,302) Total accumulated depreciation (278,595,716) Business-type activities capital assets, net $ 368,915,555 1,819,005 1,819,005 (1,187,125) (1,187,125) (1,389,236) (7,899,074) (7,385,252) (2,321,319) (18,994,881) $ 853,386 (1,239,253) (1,239,253) 1,176,865 1,176,865 Transfers in (out) $ Balances June 30, 2013 $ 6,693,377 (14,129,720) 4,969,830 (14,129,720) 11,663,207 (6,289,449) 14,111,827 (2,243,437) (640,924) 4,938,017 52,533,286 308,729,093 227,740,932 55,074,939 644,078,250 2,148,895 (23,398,204) (136,984,088) 273,867 (91,420,922) 636,987 (41,550,769) 3,059,749 (293,353,983) $(1,249,513) $ (6,131,954) $362,387,474 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 Diversity program City attorney Municipal court Finance and technology Unallocated depreciation Total depreciation expense 69 $ $ 4,702,388 2,438,322 3,899,228 27,653,272 1,307,759 26,275 997 659 34,291 540,515 2,287,166 42,890,872 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, $13.675 million was issued to finance improvements for Street Improvements and Infrastructure Preservation, Community Services, Parks, and Public Safety. 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, 2013, were as follows (the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated): $19,900,000 2004 Capital Improvement Serial Bonds due in annual installments of $560,000 to $1,485,000 through July 1, 2014; 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, 2013 through July 1, 2021; interest at 2.00% to 4.00% $7,005,000 2012A Capital Improvement Serial Bonds due in annual installments of $635,000 to $765,000 beginning July 1, 2013 through July 1, 2022; interest at 2.00% to 2.25% $12,765,000 2012B Capital Improvement Refunding Serial Bonds due in annual installments of $1,055,000 to $3,320,000 beginning July 1, 2013 through July 1, 2023; interest at 2.00% to 3.50% $13,675,000 2013A Capital Improvement Serial Bonds due in annual installments of $515,000 to $940,000 beginning July 1, 2014 through July 1, 2033; interest at 1.00% to 4.00% $41,070,000 2013B Capital Improvement Refunding Serial Bonds due in annual installments of $90,000 to $8,205,000 beginning July 1, 2014 through July 1, 2024; interest at 1.00% to 5.00% Total general obligation bonds outstanding (excluding current portion of general obligation bonds outstanding) 70 $ 930,000 6,120,000 19,230,000 35,915,000 14,060,000 59,150,000 55,375,000 48,205,000 11,855,000 28,410,000 48,260,000 4,405,000 6,370,000 11,710,000 13,675,000 41,070,000 $ 404,740,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 Principal Interest 29,690,000 31,040,000 28,935,000 30,175,000 30,275,000 148,665,000 91,850,000 14,110,000 $ 17,605,258 16,268,506 15,119,149 12,928,849 11,725,712 34,859,332 12,270,386 1,022,270 $ $ 404,740,000 $ 121,799,462 $ 526,539,462 $ Total 47,295,258 47,308,506 44,054,149 43,103,849 42,000,712 183,524,332 104,120,386 15,132,270 The following is a summary of governmental debt service cash requirements to maturity (net of 35% federal credit): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 Principal $ 12,680,000 13,225,000 11,895,000 12,290,000 12,160,000 55,750,000 35,950,000 10,285,000 $ 164,235,000 Interest $ Total 6,626,779 6,102,749 5,657,624 4,957,786 4,517,942 14,197,260 6,109,897 823,403 $ 19,306,779 19,327,749 17,552,624 17,247,786 16,677,942 69,947,260 42,059,897 11,108,403 $ 48,993,440 $ 213,228,440 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 Principal Interest Total 17,010,000 17,815,000 17,040,000 17,885,000 18,115,000 92,915,000 55,900,000 3,825,000 $ 10,978,479 10,165,757 9,461,526 7,971,063 7,207,770 20,662,072 6,160,489 198,866 $ 27,988,479 27,980,757 26,501,526 25,856,063 25,322,770 113,577,072 62,060,489 4,023,866 $ 240,505,000 $ 72,806,022 $ 313,311,022 $ 71 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, 2013, the special assessments receivable of $25,592,686, 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. As of June 30, 2013, there is $882,543 in delinquent receivables. 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, 2013, were as follows (the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated): $6,175,000 ID 175 Special Assessment Bonds Payable with Governmental Commitment issued May 6, 1999; maturing January 1, 2015; due in annual installments of $295,000 to $555,000; interest at 4.70% $4,405,000 ID 179 Special Assessment Bonds Payable with Governmental Commitment issued June 1, 2005; maturing January 1, 2021; due in annual installments of $220,000 to $385,000; interest at 4.10% $25,190,000 ID 180 Special Assessment Bonds Payable with Governmental Commitment issued February 27, 2008; maturing January 1, 2029; due in annual installments of $760,000 to $1,925,000; interest at 5.00% Total special assessment bonds outstanding $ 1,085,000 2,680,000 21,910,000 $ 25,675,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 $ 1,745,000 1,830,000 1,335,000 1,395,000 1,465,000 7,640,000 8,340,000 1,925,000 $ 1,214,850 1,129,758 1,054,233 988,863 920,355 3,483,997 1,564,250 48,125 $ 2,959,850 2,959,758 2,389,233 2,383,863 2,385,355 11,123,997 9,904,250 1,973,125 $25,675,000 $10,404,431 $36,079,431 72 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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 noted above 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. 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. 73 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $37,595,000 2004 Excise Tax Revenue Obligations due in annual installments of $1,500,000 to $3,350,000 through July 1, 2014; interest at 2.25% to 5.25% $ 2,460,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal 2014 $ 2,460,000 Interest $ 129,150 Total $ 2,589,150 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $21,315,000 2005 Excise Tax Revenue Obligations due in annual installments of $345,000 to $2,135,000 through July 1, 2016; interest at 3.50% to 5.00% The following is a summary of the service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 Principal $ Interest 450,000 460,000 1,390,000 $ 2,300,000 74 $ 92,000 74,000 55,600 $ 221,600 Total $ 542,000 534,000 1,445,600 $ 2,521,600 $ 2,300,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) 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. 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $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% 75 $ 6,855,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, Principal 2014 2015 2016 $ 2,190,000 2,280,000 2,385,000 $ 303,000 209,926 107,326 $ 2,493,000 2,489,926 2,492,326 $ 6,855,000 $ 620,252 $ 7,475,252 Interest Total Excise Tax Revenue Refunding Obligations. On January 1, 2007, the City issued $21,310,000 of Excise Tax Revenue Obligations. The proceeds were used to refund $4,205,000 of the 2000A Excise Tax Revenue Obligations, $17,025,000 of the 2003 Excise Tax Revenue Refunding Obligations, and pay costs incurred to issue the obligations. The City has collateralized the obligations by a pledge of all unrestricted excise taxes (transaction, franchise, privilege, business taxes, State-shared sales and income taxes, fees for licenses and permits, and state revenue sharing), including all fines and forfeitures, which the City presently or in the future validly imposes or receives from other entities and which are not earmarked by the contributor for a contrary or inconsistent purpose. The Excise Taxes do not include the 0.10% Performing Arts Center Excise Taxes, the excise taxes collected and paid to the City under the 0.50% transportation excise tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, or the excise taxes collected under the 1.00% increase in the transient lodging tax on hotels approved by the voters on September 10, 2002, which are restricted to fund programs of the Tempe Convention and Visitor’s Bureau. The City covenants and agrees that, so long as any of the obligations remain outstanding and the principal and interest thereon shall be unpaid or unprovided for, it will not further encumber the excise taxes on a parity basis unless the excise taxes collected in the next preceding fiscal year of the City shall have amounted to at least three times the highest combined debt service requirements for any succeeding fiscal year for all obligations and outstanding parity obligations, including the additional parity obligations proposed to be secured by a pledge or the excise taxes. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $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% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2022 Principal Interest 435,000 455,000 2,550,000 2,675,000 2,810,000 11,465,000 Total $ $ 983,550 966,150 947,950 820,450 686,700 1,312,525 $ 1,418,550 1,421,150 3,497,950 3,495,450 3,496,700 12,777,525 $20,390,000 $ 5,717,325 $ 26,107,325 76 $20,390,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) 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. 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $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% $27,385,000 The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 Principal Interest Total 630,000 650,000 675,000 705,000 730,000 4,130,000 5,110,000 6,495,000 8,260,000 $ 1,265,419 1,241,794 1,217,419 1,190,419 1,162,219 5,342,844 4,356,969 2,967,750 1,213,625 $ 1,895,419 1,891,794 1,892,419 1,895,419 1,892,219 9,472,844 9,466,969 9,462,750 9,473,625 $27,385,000 $19,958,458 $47,343,458 $ 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 77 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $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 $ 11,015,000 9,315,000 $ 20,330,000 The following is a summary of total debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Principal $ Interest 905,000 935,000 960,000 1,010,000 1,060,000 6,145,000 7,600,000 1,715,000 $20,330,000 78 $ Total 885,222 858,072 827,684 779,684 729,184 2,807,819 1,351,577 72,459 $ 1,790,222 1,793,072 1,787,684 1,789,684 1,789,184 8,952,819 8,951,577 1,787,459 $ 8,311,701 $ 28,641,701 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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 (net of 35.00% federal credit): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Principal $ Interest 265,000 275,000 280,000 295,000 310,000 1,790,000 2,220,000 500,000 $ 5,935,000 $ 258,413 250,468 241,544 227,543 212,795 819,448 394,404 21,125 $ 2,425,740 Total $ 523,413 525,468 521,544 522,543 522,795 2,609,448 2,614,404 521,125 $ 8,360,740 The following is a summary of enterprise debt service cash requirements to maturity (net of 35.00% federal credit): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Principal $ Interest 640,000 660,000 680,000 715,000 750,000 4,355,000 5,380,000 1,215,000 $ 14,395,000 $ Total 626,809 607,604 586,140 552,142 516,389 1,988,371 957,174 51,334 $ 1,266,809 1,267,604 1,266,140 1,267,142 1,266,389 6,343,371 6,337,174 1,266,334 $ 5,885,963 $20,280,963 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, 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 79 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $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 $ 29,710,000 7,300,000 $ 37,010,000 The following is a summary of total debt service cash requirements to maturity (net of 72.38% federal credit): Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2031 Principal $ Interest 1,120,000 1,150,000 1,195,000 1,245,000 1,300,000 7,500,000 16,710,000 6,790,000 $ 37,010,000 80 $ Total 1,521,708 1,488,108 1,442,108 1,394,308 1,344,508 5,699,290 3,342,266 690,000 $ 2,641,708 2,638,108 2,637,108 2,639,308 2,644,508 13,199,290 20,052,266 7,480,000 $ 16,922,296 $ 53,932,296 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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 (net of 72.38% federal credit): Fiscal Year Ending June 30, Principal Interest 2014 2015 2016 2017 2018 2019-2023 2024-2028 $ 30,000 30,000 30,000 30,000 30,000 185,000 7,386,000 2029-2031 $ 7,721,000 $ 117,608 116,708 115,508 114,308 113,108 541,290 203,066 $ 1,321,596 Total $ 147,608 146,708 145,508 144,308 143,108 726,290 7,589,066 $ 9,042,596 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2031 Principal $ Interest 1,090,000 1,120,000 1,165,000 1,215,000 1,270,000 7,315,000 9,324,000 6,790,000 $ 29,289,000 $ Total 1,404,100 1,371,400 1,326,600 1,280,000 1,231,400 5,158,000 3,139,200 690,000 $ 2,494,100 2,491,400 2,491,600 2,495,000 2,501,400 12,473,000 12,463,200 7,480,000 $ 15,600,700 $44,889,700 Excise Tax Revenue Obligations. On August 31, 2011, the City issued $18,300,000 of Excise Tax Revenue Refunding Obligations. The Obligations were issued for the purpose of providing funds (i) to refund in advance of maturity portions of certain outstanding Performing Arts Center Excise Tax Revenue Obligations (the “Obligations Being Refunded”) and (ii) to pay the costs and expenses relating to the issuance of 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 general 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. 81 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $18,300,000 2011 Excise Tax Revenue Refunding Obligations due in annual installments of $100,000 to $3,295,000 through July 1, 2020; interest at 2.00% to 5.00% The following is a summary of debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2020 Principal $ Interest 100,000 2,695,000 2,825,000 2,880,000 3,025,000 6,440,000 $ 17,965,000 82 $ 736,100 734,100 604,350 547,850 403,850 421,950 $ 3,448,200 Total $ 836,100 3,429,100 3,429,350 3,427,850 3,428,850 6,861,950 $ 21,413,200 $ 17,965,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Excise Tax Revenue Obligations. On June 11, 2012, the City issued $30,500,000 of Excise Tax Revenue and Revenue Refunding Obligations: $8,390,000 of revenue obligations and $22,110,000 of revenue refunding obligations. The proceeds were used (i) to refund in advance of maturity certain outstanding Excise Tax Revenue Obligations of the City, (ii) finance the construction and acquisition of certain water and wastewater improvements, and (iii) to pay the costs of execution and delivery of 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 taxes collected and paid to the City under the 0.50% transportation privilege (sales) and use tax approved by the voters of the City on September 10, 1996 which are restricted to public transit use, the 0.10% Performing Arts Center Excise Taxes approved by voters of the City on May 16, 2000, which are restricted to the Tempe Center for the Arts Project, 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. In the following outstanding balance, the 7/1/2013 principal payment was deducted as the fiscal year 2013 resources were dedicated. $30,500,000 2012 Excise Tax Revenue and Refunding Obligations due in annual installments of $280,000 to $5,125,000 through July 1, 2032; interest at 1.50% to 5.00% The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2032 $ 2,135,000 2,220,000 305,000 1,735,000 1,805,000 13,300,000 6,475,000 2,245,000 $ 1,327,675 1,242,275 1,208,975 1,196,775 1,127,375 4,188,625 949,150 196,963 $ 3,462,675 3,462,275 1,513,975 2,931,775 2,932,375 17,488,625 7,424,150 2,441,963 $30,220,000 $ 11,437,813 $ 41,657,813 83 $30,220,000 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, 2014 2015 2016 2017 2018 2019-2023 2024-2027 Principal $ Interest Total 1,845,000 1,920,000 1,415,000 1,475,000 11,390,000 4,065,000 $ 1,005,700 931,900 903,100 903,100 846,500 3,048,500 307,250 $ 2,850,700 2,851,900 903,100 2,318,100 2,321,500 14,438,500 4,372,250 $ 22,110,000 $ 7,946,050 $ 30,056,050 The following is a summary of enterprise debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2032 Principal $ Interest 290,000 300,000 305,000 320,000 330,000 1,910,000 2,410,000 2,245,000 $ 8,110,000 $ 321,975 310,375 305,875 293,675 280,875 1,140,125 641,900 196,963 $ 3,491,763 Total $ 611,975 610,375 610,875 613,675 610,875 3,050,125 3,051,900 2,441,963 $11,601,763 Excise Tax Revenue Refunding Obligations. On September 12, 2012, the City issued $41,390,000 of Excise Tax Revenue Obligations. The proceeds (including the premium) were used to refund $45,295,000 of the 2007 Variable Rate Demand Excise Tax Revenue Obligations and pay costs incurred to issue the obligations. The payments required to be made by the City to the Trustee under the Purchase Agreement are payable from and secured by a pledge of revenues from an excise tax collected by 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 “Transit Excise Taxes”). Such tax is levied by the City upon persons on account of their business activities within the City. The amount of taxes due are calculated by applying the 0.50% tax rate against the gross proceeds of sales or gross income derived from the business activities. Such taxes are collected by the City on a monthly basis. 84 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) Such lien on and pledge of the Transit Excise Taxes is on parity with that for the City’s Transit Excise Tax Revenue Obligations, Series 2008, currently outstanding in the aggregate principal amount of $27,990,000. $41,390,000 2012 Excise Tax Revenue Refunding Obligations due in annual installments of $430,000 to $2,645,000 through July 1, 2037; interest at 1.50% to 5.00% $40,960,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, Principal Interest Total 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2037 $ 1,070,000 1,095,000 1,130,000 1,150,000 1,170,000 6,610,000 8,405,000 10,415,000 9,915,000 $ 1,690,294 1,668,894 1,636,044 1,613,444 1,596,194 7,201,019 5,419,219 3,412,044 1,138,969 $ 2,760,294 2,763,894 2,766,044 2,763,444 2,766,194 13,811,019 13,824,219 13,827,044 11,053,969 $40,960,000 $ 25,376,121 $ 66,336,121 Excise Tax Revenue Obligations. On June 26, 2013, the City issued $27,240,000 of Excise Tax Revenue Refunding Obligations to finance the construction and acquisition of various water and wastewater improvements for the City and to pay the costs of execution and delivery of the Obligations. The payments to be made by the City will be secured by a 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 now or hereafter validly imposed by the City or contributed, allocated and paid over to the City and not earmarked by the contributor for a contrary or inconsistent purpose, including, without limitation, all fines and forfeitures (all such taxes and receipts herein referred to as “Excise Taxes”), but not (i) excise taxes collected and paid to the City under the 0.50% transaction privilege (sales) and use tax approved by the voters of the City on September 10, 1996, which are restricted to improvement and operation of the public transit system (such taxes and receipts herein referred to as “Transit Excise Taxes”), (ii) excise taxes collected and paid to the City under the 0.10% transaction privilege (sales) and use tax approved by the voters of the City on May 16, 2000, the use of which is restricted to the construction and operation of a performing arts center (such taxes and receipts herein referred to as the “Performing Arts Center Excise Taxes”), (iii) excise taxes collected and paid to the City under the 1.00% increase in the transient lodging tax on hotels approved by the voters of the City on September 10, 2002, which are restricted to funding programs of the Tempe Convention and Visitor’s Bureau (such taxes and receipts herein referred to as “Convention and Visitor’s Bureau Taxes”) or (iv) any other similar tax restricted as to its use. The pledge of the Excise Taxes is on a parity pledge with the Existing Obligations. 85 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Excise Tax Revenue Obligations (Continued) $27,240,000 2013 Excise Tax Revenue Obligations due in annual installments of 905,000 to $2,025,000 through July 1, 2033; interest at 1.75% to 5.00% $27,240,000 The following is a summary of total debt service cash requirements to maturity: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 Principal Interest Total 905,000 1,000,000 970,000 1,010,000 1,030,000 5,735,000 7,315,000 9,275,000 $ 1,207,009 1,172,375 1,142,375 1,103,575 1,085,900 4,834,675 3,261,875 1,297,925 $ 2,112,009 2,172,375 2,112,375 2,113,575 2,115,900 10,569,675 10,576,875 10,572,925 $27,240,000 $ 15,105,709 $ 42,345,709 $ Capital Improvement Notes. Capital improvement notes represent borrowings to provide long-term financing for certain major capital improvement program projects (see Note 6). Capital improvement note outstanding at June 30, 2013 was as follows: $7,400,000 capital improvement notes issued in 1995 due to the Water and Wastewater Enterprise Fund from the General Fund payable in equal annual installments through January 1, 2015; interest ranging from 2.00% to 5.00% $ 1,009,612 The following discloses debt service requirements as of June 30, 2013 segregating principal and interest, to maturity: Fiscal Year Ending June 30, 2014 2015 Principal 499,808 509,804 $ 1,009,612 Interest $ 20,192 10,196 $ 30,388 $ Total 520,000 520,000 $ 1,040,000 $ 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 was 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. 86 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Section 108 Guaranteed Loan (Continued) $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% $ 5,247,000 The following discloses debt service requirements as of June 30, 2013 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2025 Principal 340,000 355,000 371,000 387,000 405,000 2,313,000 1,076,000 $ 5,247,000 $ Interest 289,708 271,860 252,705 232,158 210,234 672,884 65,222 $ 1,994,771 $ Total 629,708 626,860 623,705 619,158 615,234 2,985,884 1,141,222 $ 7,241,771 $ 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% $ 1,592,719 The following discloses debt service requirements on WIFA Loan #92A174-10 as of June 30, 2013 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Principal $ 78,618 81,027 83,510 86,068 88,705 486,000 565,160 123,631 $ 1,592,719 Interest and Administrative Fee $ 48,801 46,392 43,909 41,351 38,714 151,094 71,935 3,788 $ 445,984 87 Total 127,419 127,419 127,419 127,419 127,419 637,094 637,095 127,419 $ 2,038,703 $ Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Water Infrastructure Finance Authority Loans (Continued) 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% $ 11,663,184 The following discloses debt service requirements on WIFA Loan #92A175-10 as of June 30, 2013 segregating principal and interest, for the next five years and five-year increments thereafter: Fiscal Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029 Principal $ 625,731 638,246 651,011 664,031 677,312 3,595,252 3,969,449 842,152 $ 11,663,184 Interest and Administrative Fee $ 233,264 220,749 207,984 194,964 181,683 699,723 325,526 16,843 $ 2,080,736 Total 858,995 858,995 858,995 858,995 858,995 4,294,975 4,294,975 858,995 $ 13,743,920 $ 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 for equipment with an original cost of $110,617. 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, 2013. These amounts will be paid for by the General Fund. Fiscal Year Ending June 30, 2014 $ Total 31,080 (1,435) $ 29,645 Less: interest at 4.84% to 11.85% Present value of future minimum lease payments 88 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Capital Leases (Continued) The proprietary assets acquired through capital leases are for equipment with an original cost of $892,699. 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, 2013. These amounts will be paid for by the Golf Fund. Fiscal Year Ending June 30, 2014 2015 2016 2017 Total minimum lease payments Less: interest at 3.05% to 3.13% Total $ 223,175 223,175 223,175 63,966 733,491 (22,025) Present value of future minimum lease payments $ 711,466 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, 2013, the 20 percent debt limitation was $339,447,408 with $418,225,647 of outstanding debt. Due to the decline in property values, there is no additional capacity in the 20 percent debt margin category. The 6 percent debt limitation was $101,834,222 with $28,365,000 of outstanding debt. This provided a 6 percent debt margin of $73,469,222. The authorized, unissued debt subject to the statutory limitations of 20 percent and 6 percent at June 30, 2013, was $171,104,698. Bond Covenants. The various bond indentures contain certain limitations and restrictions on annual debt service requirements, maintenance and flow of monies through various restricted accounts, minimum amounts to be maintained in various sinking funds, and minimum revenue bond coverages. Arbitrage. Under U.S. Treasury Department regulations, all government tax-exempt debt issued after August 31, 1986 is subject to arbitrage rebate requirements. The requirements stipulate, in general, the earnings from the investment of tax exempt bond proceeds that exceed related interest expenditures on the bonds must be remitted to the Federal government on every fifth anniversary of each bond issue. The City has evaluated each general obligation bond and revenue bond issue subject to the arbitrage rebate requirements and has determined that no liability exists at June 30, 2013. 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 $164,235,000 is outstanding in governmental general obligation bonds. Proceeds of the bonds were used for general governmental purposes. The bonds are payable through July 1, 2033. Annual principal and interest payments on the bonds are expected to require less than 78.75% of total 2012-13 ad valorem taxes. The total principal and interest remaining to be paid on the bonds is $213,228,440. Principal and interest paid for the current year and total ad valorem tax revenues were $18,098,391 and $22,983,109, respectively. 89 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) 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 $240,505,000 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 36.13% of 2012-13 water and wastewater utility system revenue. The total principal and interest remaining to be paid on the bonds is $313,311,022. Principal and interest paid for the current year and water and wastewater system revenues were $27,088,886 and $74,979,067, respectively Debt Service Coverage for Governmental Excise Tax Obligations. The City has pledged all future unrestricted excise taxes to repay a total of $58,456,000 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 3.89% of total 2012-13 pledged excise taxes. The total principal and interest remaining to be paid on the bonds is $76,088,308. Principal and interest (net of Federal subsidy) paid for the current year and total pledged excise taxes were $5,556,849 and $142,917,848, 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 $79,034,000 in outstanding business-type activities excise tax obligations. 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, 2033. Annual principal and interest payments on the bonds are expected to require less than 3.06% of total 2012-13 excise taxes. The total principal and interest remaining to be paid on the bonds is $119,118,133. Principal and interest paid for the current year and total excise taxes were $4,374,414 and $142,917,848, 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 $68,345,000. The bonds are payable through July 1, 2038. Annual principal and interest payments on the bonds are expected to require less than 12.25% of total 2012-13 transit excise taxes. The total principal and interest remaining to be paid on the bonds is $113,679,575. Principal and interest paid for the current year and transit excise taxes were $3,685,428 and $30,087,229, 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 $27,280,000 and the bonds are payable through July 1, 2020. Annual principal and interest payments on the bonds are expected to be less than 94.96% of total 2012-13 performing arts excise taxes. The total principal and interest remaining to be paid on the bonds is $31,477,602. Principal and interest paid for the current year and total available excise taxes were $5,922,350 and $139,223,465, respectively. 90 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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, 2013 (the ending balance does not include 7/1/2013 “matured” payment for general or excise tax obligations): Beginning Balance Governmental activities: Debt payable: General obligation bonds payable Special assessments 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 2011 Excise tax refunding obligations 2012 Excise tax obligations 2012 Excise tax refunding obligations 2013 Capital Improvement note payable 2004 HUD Section 108 loan Capital leases Compensated absences Claims and judgments 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 2012 Excise tax obligations 2012 Excise tax obligation premium amortization 2013 Excise tax obligations 2010 WIFA Loan 2010 WIFA Loan Capital leases Total debt payable Additions $162,200,000 27,815,000 1,830,000 4,800,000 2,305,000 8,955,000 Reductions $26,195,000 $ (24,160,000) (2,140,000) (1,830,000) (2,340,000) 420,000 (425,000) (2,100,000) 53,670,000 20,810,000 - 45,295,000 27,990,000 6,185,000 7,746,000 18,065,000 20,871,900 1,238,100 41,390,000 - Ending Balance Amounts Due Within One Year $164,235,000 25,675,000 2,460,000 2,300,000 6,855,000 $12,680,000 1,745,000 2,460,000 450,000 2,190,000 (53,670,000) (420,000) 20,390,000 435,000 (45,295,000) (605,000) (250,000) (25,000) (100,000) (430,000) 27,385,000 5,935,000 7,721,000 17,965,000 22,110,000 40,960,000 630,000 265,000 30,000 100,000 1,845,000 1,070,000 5,572,000 414,109,900 57,921 25,327,942 4,597,033 $444,092,796 1,009,612 (325,000) 70,252,712 (134,115,000) (28,276) 11,002,370 (10,938,774) 2,594,391 (1,914,463) $83,849,473 $(146,996,513) 1,009,612 499,808 5,247,000 340,000 350,247,612 24,739,808 29,645 29,645 25,391,538 11,311,867 5,276,961 3,170,542 $380,945,756 $39,251,862 $256,770,000 420,000 $28,550,000 $ (44,815,000) (420,000) $240,505,000 $17,010,000 - 25,264 15,005,000 30,349,000 9,628,100 - 78,068 1,669,000 12,276,646 45,352 $326,266,430 (25,264) (610,000) (1,060,000) (1,518,100) (78,068) 27,240,000 (76,281) (613,461) 861,649 (195,535) $56,651,649 $ (49,411,710) 91 14,395,000 29,289,000 8,110,000 640,000 1,090,000 290,000 27,240,000 905,000 1,592,719 78,618 11,663,185 625,731 711,466 211,990 $333,506,370 $20,851,339 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 9 - LONG-TERM DEBT (Continued) Changes in Long-term Liabilities (Continued) The long-term liabilities at June 30, 2013 have been reduced by deposits made with the City’s fiscal agent for July 1, 2013 maturities. For the governmental activities, claims and judgments and compensated absences are generally liquidated by the General Fund. On July 1, 2012, the Cemetery Fund ceased operating as an Enterprise Fund and was absorbed into the General Fund. The related debt (2005 and 2012 excise tax obligations) which was associated with this fund was transferred from a Business-type activity into the Governmental activities. 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 (the difference between the present values of the debt service payment on the old and new debt) 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 of $4,342,453. On August 31, 2011, the City issued $18,300,000 of excise tax revenue refunding obligation bonds with a premium of $2,322,676 to partially refund $17,735,000 of Series 2004 outstanding excise tax revenue obligation bonds. The bonds were issued with an average interest rate of 2.11%. The net proceeds of $20,384,744, after allocation of $100,683 of issuance costs and an underwriter’s discount of $137,250 were used to purchase State and local government securities. 92 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) The primary purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service in the Performing Arts fund. As a result of the advance refunding, the City reduced its total debt service requirements by $819,224, which resulted in an economic gain of $751,095. On June 11, 2012, the City issued $22,110,000 of excise tax revenue refunding obligation bonds with a premium of $3,992,095 to partially refund $6,835,000 of Series 2003 and $15,925,000 of Series 2005 outstanding excise tax revenue obligation bonds. The bonds were issued with an average interest rate of 2.50%. The net proceeds of $25,258,908 after transferring $553,944 to the debt service fund, the payment of $123,418 in issuance costs and an underwriter’s discount of $165,825, 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, Community Facilities District, and Cemetery funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,616,232, which resulted in an economic gain of $1,462,225. On June 21, 2012, the City issued $12,765,000 of general obligation refunding bonds with a premium of $775,588 to refund $3,205,000 of Series 2002R and partially refund $9,560,000 of Series 2003 outstanding general obligation bonds. The bonds were issued with an average interest rate of 2.36%. The net proceeds of $13,090,453, after transferring $239,463 to the debt service fund, the payment of $114,066 in issuance costs and an underwriter’s discount of $96,606, 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 $635,751 which resulted in an economic gain of $697,681. On June 19, 2013, the City issued $41,070,000 of general obligation refunding bonds with a premium of $4,318,047 to partially advance refund $3,865,000 of Series 2004, $16,030,000 of Series 2005 and $18,945,000 of Series 2006 outstanding general obligation bonds. In addition, the proceeds were utilized for a current refunding of $2,230,000 of Series 2003 bonds. The bonds were issued with an average interest rate of 3.90%. The net proceeds of $44,958,214 after the payment of $146,450 in issuance costs and an underwriter’s discount of $283,383 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 and Wastewater funds. As a result of the advance refunding, the City reduced its total debt service requirements by $1,720,519, which resulted in an economic gain of $1,552,184. 93 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 10 - BONDS TO BE PAID FROM ASSETS HELD IN TRUST (Continued) Advance Bond Refundings (Continued) Bonds which have been advance refunded (and thus not included in the debt of the City) and are still outstanding as of June 30, 2013 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 $37,595,000 excise tax revenue obligation bonds issued in 2004 and partially refunded in 2012 (final redemption date is 7/1/2014) 17,735,000 $44,820,000 general obligation bonds issued in 2003 and partially refunded in 2012 (final redemption date is 7/1/2013) 9,560,000 $39,275,000 excise tax revenue obligation bonds issued in 2003 and partially refunded in 2012 (final redemption date is 7/1/2013) 6,835,000 $21,315,000 excise tax revenue obligation bonds issued in 2005 and partially refunded in 2012 (final redemption date is 7/1/2015) 15,925,000 $19,900,000 general obligation bonds issued in 2004 and partially refunded in 2013 (final redemption date is 7/1/2014) 3,865,000 $52,425,000 general obligation bonds issued in 2005 and partially refunded in 2013 (final redemption date is 7/1/2015) 16,030,000 $74,495,000 general obligation bonds issued in 2005 and partially refunded in 2013 (final redemption date is 7/1/2016) 18,945,000 Total bonds advance refunded $129,635,000 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 ordinance or another type of formal action) is required to commit resources or to rescind the commitment. 94 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) 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, 2013, the fund balance details by classification are listed as follows: 95 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 11 – FUND BALANCE CLASSIFICATIONS (Continued) The Mayor and Council have established a minimum unassigned fund balance policy for the General Fund of 20% to 30% of current year operating revenues. As of June 30, 2013, the aggregate balance is 31.05% of General Fund revenues. NOTE 12 - COMMITMENTS In the Governmental fund financial statements, construction commitments are included in either the restricted or committed fund balances. At June 30, 2013 the City’s construction commitments are as follows: Governmental funds: Transit Streets Fire Storm drains Parks Rio Salado Community development Signals Commitment Construction in Progress $ 1,726,322 783,254 84,963 29,186 631,225 1,142,948 287,029 $ 4,684,927 $ 1,533,394 207,728 31,809 27,160 20,055 2,967,278 855,732 93,105 $ 5,736,261 Construction in Progress Commitment Proprietary funds: Water/wastewater $ 4,684,662 $ 4,684,662 $ 4,969,830 $ 4,969,830 In addition, there were non-construction related commitments as follows: Commitment Governmental funds: General Non-major special revenue $ $ 99,646 55,728 155,374 Commitment Proprietary funds: Water/wastewater Solid waste $ 8,745 1,649,609 $ 1,658,354 96 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 13 - OPERATING LEASES The City leases copiers under certain non-cancelable 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 Position. Current year lease costs for the fiscal year ended June 30, 2013 were $245,655. The following is a schedule by year of future minimum lease payments: Fiscal Year Ending June 30, 2014 2015 2016 2017 Total minimum payments required Amount $ 208,744 91,159 69,857 2,029 $ 371,789 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, 850110670 or by calling 602-255-5575. B. Funding Policy The System is funded through a member contribution of 9.55 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 32.94 percent of annual covered payroll, of which 0.26 percent was the health insurance premium portion. The current aggregate contribution rate for police is 29.86 percent of annual covered payroll, of which 0.33 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). 97 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 14 - RETIREMENT AND PENSION PLANS (Continued) C. Annual Pension Cost Police personnel contributed $2,672,297 and fire personnel $1,180,501 during fiscal year 2012-13. For 2013, the City’s annual pension cost was $8,329,160 for police and $4,071,802 for fire and was equal to the City’s required contributions. The required contribution was determined as part of the June 30, 2011 actuarial valuation determining contribution requirements for fiscal year 2012-13, using the projected unit credit method. The actuarial assumptions included (a) 8.00% investment rate of return (b) projected salary increases of 5.00% per year compounded annually, attributable to inflation and other across-the-board increases, (c) additional projected salary increases ranging from 5.00% to 8.00% 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, 2013 was 23 years. D. Three Year Trend Information : Police Fiscal Year Ended June 30, 2011 (Pension) 2011 (Health) 2012 (Pension) 2012 (Health) 2013 (Pension) 2013 (Health) Annual Pension Cost (APC) $ 6,749,378 415,632 7,185,625 447,526 8,042,003 458,323 Percentage Contributed 100% 100 100 100 100 100 Net Pension Obligation - Fiscal Year Ended June 30, 2011 (Pension) 2011 (Health) 2012 (Pension) 2012 (Health) 2013 (Pension) 2013 Health Annual Pension Cost (APC) $ 3,107,361 231,319 3,393,286 230,392 3,836,999 223,096 Percentage Contributed 100% 100 100 100 100 100 Net Pension Obligation - Fire E. Schedule of Funding Progress: Police Actuarial Valuation Date Value of Actuarial Accrued June 30, Assets Liability (AAL) 2011 $101,406,476 $ 181,662,671 2012 103,346,360 200,736,814 2013 106,886,995 214,790,355 Percent Unfunded Funded AAL 55.8% $ 80,255,925 51.5 97,390,454 49.8 107,903,360 98 Annual Unfunded AAL Covered as a % of Payroll Covered Payroll $ 25,820,652 310.8% 26,046,499 373.9 28,346,961 380.7 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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 2011 $ 73,698,685 2012 76,211,736 2013 77,456,500 Actuarial Accrued Percent Unfunded Liability (AAL) Funded AAL $ 112,778,109 65.3% $ 39,079,424 123,125,911 61.9 46,914,175 130,242,089 59.5 52,785,589 Annual Covered Payroll $ 11,179,799 11,373,929 12,538,385 Unfunded AAL as a % of Covered Payroll 349.6% 412.5 421.0 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, 2013 were 11.14 percent (10.90 percent for retirement and 0.24 percent for long-term disability) for active members and the City was required to contribute 11.14 percent (10.25 percent for retirement, 0.65 percent for health insurance premium and 0.24 percent for long-term disability) of the members’ annual covered payroll. The City’s contributions to the ASRS for the years ended June 30, 2013, 2012, and 2011 were $7,654,272, $7,104,490 and $6,586,650 respectively, equal to the annual required contributions for each year. 99 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 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 10.00 percent of their annual covered salary. The employer rate for 2012-13 was 36.44 percent of the members’ annual covered payroll, of which 0.74 percent was the health insurance premium portion. The City’s contributions to EORP for the fiscal years ended June 30, 2013, 2012 and 2011 were $84,054, $72,692, and $65,673, respectively, equal to the annual required contributions for each year. The City’s employees contributed $26,526, $22,035, and $15,432, respectively, for the same time period. NOTE 15 - OTHER POST EMPLOYMENT 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 post employment 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, 2013, 775 retirees meet those eligibility requirements to receive post employment healthcare benefits. Total membership in the program is as follows: Retirees receiving benefits Active employees eligible Total 100 775 550 1,325 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) A. Plan Description (Continued) Effective with changes implemented on October 1, 2011, this OPEB plan provides medical coverage for qualified, pre-Medicare retired employees through a single-employer defined contribution plan; prior to this change, coverage was provided through a defined benefit plan. (With this change, active employees are the only group participating in a defined benefit plan for health benefits.) The plan provides benefits to eligible retirees (as outlined above), their spouses and dependents through monthly City contributions to a health reimbursement account established for each retiree. The plan benefits and contribution rates are determined by the City’s Human Resources Department based on the costs of coverage that is available through the health plan offered by the ASRS. Coverage for Medicare-eligible retirees is provided through fully-insured, Citysponsored Medicare Supplemental plans. B. Basis of accounting and valuation of investments The Other Post Employment Benefit Trust financial statements are prepared on the accrual basis of accounting. The City’s contributions are recognized when due and a formal commitment to provide the contribution has been made. Benefits are recognized when due and payable in accordance with the terms of the plan. All trust investments are reported at fair value. Fair value is determined based on quoted market prices. C. Benefits Provided For those retirees/dependents who have not reached Medicare eligibility, the City makes monthly contributions to the retiree/dependents’ health reimbursement account. For coverage to be continued for retirees and dependents reaching Medicare eligibility, beneficiaries are required to enroll in a City sponsored Medicare Supplemental Plan. D. Funding Policy The pre-Medicare plan contributions are determined annually by the City’s Human Resources Department. Contributions for retirees/dependents are determined based on a review of the premiums (and changes thereto) for health care coverage that is available through the ASRS. For the City sponsored Medicare supplemental plans, premiums are determined annually by the outside insurance company. Retirees/ dependents are not required to enroll in the health plan offered through the ASRS. The current employer contribution rate is 20.1% of annual covered payroll. Because retired employees and their dependents are enrolled in a completely separate plan than active employees, there are no implicit rate subsidies. An irrevocable trust fund (Other Post Employment Benefit Trust) has been established for the purpose of advance funding the obligation; the city made an initial contribution of $4,530,000 during the fiscal year. 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. For both the governmental and proprietary activities, the corresponding fund is used to liquidate the OPEB liability. E. 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. 101 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) E. Annual OPEB Cost and Net OPEB Obligation (Continued) The following table shows the components of the City’s annual OPEB cost for the year ended June 30, 2013, the amount actually contributed to the plan and changes in the City’s net OPEB obligation ARC ARC adjustment Interest on the net OPEB obligation Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation – beginning of year Net OPEB obligation – end of year $ 12,288,177 (3,117,641) 2,265,465 11,436,001 (9,547,324) 1,888,677 56,636,594 $ 58,525,271 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, 2013, 2012, and 2011 are as follows: Fiscal Year Ended June 30, 2011 2012 2013 Annual OPEB Cost $ 10,132,549 11,280,697 11,436,001 Employer Contributions $ 5,897,126 4,614,656 9,547,324 Percentage of Annual OPEB Cost Contributed 58.2% 41.0 83.5 Net OPEB Obligation $ 49,970,553 56,636,594 58,525,271 F. Health Care Cost Trend Rate The following annual trend rates are applied on a select and ultimate basis: Benefit Medical/Rx Pre 65 Medical/Rx Post 65 Select 10.0% 7.5 Ultimate 5.0% 5.0 Select trends are reduced 0.5% each year until reaching the ultimate trend. G. Funded Status and Funding Progress (most recent information available) Actuarial Valuation Date 7/1/2008 7/1/2009 7/1/2011 Actuarial Actuarial Accrued Value of Liability Entry Assets Age $ $ 159,149,836 154,671,513 166,968,101 Unfunded AAL (UAAL) $159,149,836 154,671,513 166,968,101 102 Unfunded AAL Funded Annual as a % of Ratio Covered Payroll Covered Payroll 0.0% $ 51,388,438 309.7% 0.0 51,923,274 297.9 0.0 47,378,802 352.4 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 15 - OTHER POST EMPLOYMENT BENEFITS (Continued) G. Funded Status and Funding Progress (Continued) 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. H. 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 post employment 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 Actuarial assumptions: Healthcare inflation rate Investment rate of return Projected salary increases Amortization method July 1, 2011 Entry age normal 26 years, closed N/A 10.0% select rate, 5% ultimate rate, 8 year grade in period 4% Not applicable 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. 103 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona 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 and Health Fund (both internal service funds) to account for and finance its uninsured risks of loss. Amounts are paid into the internal service funds 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 funds. 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 $811.1 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 workers' compensation requirements and $2.0 million per occurrence in employer’s liability; and for group health the self-insurance retention is $250,000 per occurrence, with an aggregate stop loss deductible of $18.5 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, 2013, 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, 2012 $ 3,707,500 102,977 75,840 1,992,511 1,431,940 $ 7,310,768 Claims Incurred Net of Change in Estimates $ 577,781 773,343 141,220 835,523 13,737,052 $ 16,064,919 Payments $ (339,489) (130,220) (92,159) (1,352,595) (14,057,519) $(15,971,982) June 30, 2013 $ 3,945,792 746,100 124,901 1,475,439 1,111,473 $ 7,403,705 June 30, 2011 $ 5,999,095 57,767 39,341 1,491,668 1,306,341 $ 8,894,212 Claims Incurred Net of Change in Estimates $ (202,183) 176,874 203,183 1,500,606 15,022,310 $ 16,700,790 Payments $ (2,089,412) (131,664) (166,684) (999,763) (14,896,711) $(18,284,234) June 30, 2012 $ 3,707,500 102,977 75,840 1,992,511 1,431,940 $ 7,310,768 104 Notes to the Financial Statements For Fiscal Year Ended June 30, 2013 City of Tempe, Arizona NOTE 17 - RISK FINANCING ACTIVITIES (Continued) At June 30, 2013, the Risk Management Internal Service Fund accrued expenses totaled $6,301,535. This balance includes the general liability, automobile liability, property liability and worker’s compensation liability of $6,292,232 and other accrued expenses of $9,303. The health claims liability at June 30, 2013 of $1,111,471 is deemed due and payable at June 30, 2013 and recorded as accrued expenditures/expense in the Health Internal Service Fund. Additionally, at June 30, 2013, the City had $6,841,391 of General Fund fund balance assigned for self-insurance purposes. 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 $571,299 at June 30, 2013. The deficit will be covered by anticipated assessment payments. The Health Fund had a negative asset balance of $731,649. The deficit will be covered by future transfers from operating funds. 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.  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, 2013 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 Due to other funds Deferred revenue Matured bonds payable Matured interest payable Total liabilities Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Total fund balances Total liabilities and fund balances $ 1,101,089 $ 579,464 16,508 309 5,231,175 6,928,545 $ $ 69,128 167,267 4,540,000 691,175 5,467,570 1,460,975 1,460,975 6,928,545 Highway User Revenue $ 7,602,226 $ 837,496 1,066,106 9,505,828 $ 219,857 99,488 319,345 1,066,106 8,120,377 9,186,483 9,505,828 $ 108 Local Transportation Assistance $ 1,156,530 $ 1,156,530 $ $ - 1,156,530 1,156,530 1,156,530 Community Development $ $ $ $ 1,227,239 15,950 1,243,189 271,738 8,996 731,762 61,162 124,310 1,197,968 45,221 45,221 1,243,189 City of Tempe, Arizona Special Revenue Housing Assistance $ 386,176 $ 37,589 667,643 1,091,408 $ $ 1,145 141,262 142,407 667,643 281,358 949,001 1,091,408 Grants and Court Awards $ 2,897,595 $ 3,589 1,632,397 4,533,581 $ $ 249,807 377,274 6,093 2,982,475 3,615,649 917,932 917,932 4,533,581 Community Facilities District $ 558,940 $ 2,424,224 2,983,164 $ $ Total 128,358 1,855,000 569,200 2,552,558 $ 13,702,556 $ 1,416,960 54,097 3,898 2,859,636 1,066,106 667,643 7,671,349 27,442,245 $ 430,606 430,606 2,983,164 $ (continued) 109 940,033 377,274 423,106 731,762 3,043,637 6,395,000 1,384,685 13,295,497 1,733,749 10,952,024 1,460,975 14,146,748 27,442,245 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2013 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 Due to other funds Deferred revenue Matured bonds payable Matured interest payable Total liabilities Fund Balances Fund balance: Non-spendable Restricted Committed Assigned Total fund balances Total liabilities and fund balances $ 6,059,680 $ 6,059,680 $ $ 2,537,108 2,537,108 615,058 1,398,453 1,509,061 3,522,572 6,059,680 Police $ 3,809,246 $ 3,809,246 $ $ 1,817,025 1,817,025 680,082 1,312,139 1,992,221 3,809,246 110 Fire Storm Sewers $ 1,174,204 $ 909,596 $ 1,174,204 $ 909,596 $ $ 946 946 845,616 327,642 1,173,258 1,174,204 $ $ 20,300 20,300 51,129 717,507 120,660 889,296 909,596 Parks $ 3,288,051 $ 94,735 3,382,786 $ $ 176,092 94,735 270,827 1,206,139 876,632 1,029,188 3,111,959 3,382,786 City of Tempe, Arizona Capital Projects Rio Salado $ 2,855,918 $ 2,855,918 $ $ 195,372 195,372 2,471,070 189,476 2,660,546 2,855,918 Community Development $ 4,083,668 $ 1,146,588 5,230,256 $ $ 464,660 464,660 997,170 502,312 3,266,114 4,765,596 5,230,256 Signals $ 1,123,934 $ 137,312 1,261,246 $ $ 68,396 68,396 71,188 821,420 300,242 1,192,850 1,261,246 Total Nonmajor Governmental Funds Total $ 23,304,297 $ 232,047 1,146,588 24,682,932 $ $ 5,279,899 94,735 5,374,634 2,940,684 8,313,092 8,054,522 19,308,298 24,682,932 111 $ 37,006,853 $ 1,416,960 286,144 3,898 2,859,636 1,066,106 667,643 8,817,937 52,125,177 $ $ 6,219,932 377,274 423,106 731,762 3,138,372 6,395,000 1,384,685 18,670,131 $ 1,733,749 13,892,708 9,774,067 8,054,522 33,455,046 52,125,177 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2013 Special Revenue Local Transportation Assistance Highway User Revenue Performing Arts Community Development Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ 6,236,879 $ - $ - $ - 1,899 782,233 7,037 7,028,048 8,855,957 122,849 2,952 8,981,758 - 2,434,635 16 624,687 3,059,338 2,505,124 - 7,351,439 - - 2,434,681 - 4,540,000 1,401,978 8,447,102 7,351,439 - 325,000 299,687 3,059,368 (1,419,054) 1,630,319 - (30) 1,176,633 24,478 350,000 - - 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) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) (116,622) (116,622) Net change in fund balances (1,535,676) Fund balance at beginning of year Fund balance at end of year 2,996,651 $ 1,460,975 (503,304) (24,297) 3,360 1,026,870 (116,511) (116,511) - 2,657,189 (116,511) (30) 6,529,294 $ 9,186,483 112 1,273,041 $ 1,156,530 45,251 $ 45,221 City of Tempe, Arizona Special Revenue Housing Assistance $ - Grants and Court Awards Community Facilities District $ $ - $ 6,236,879 8,902,737 1,160 14,359 8,918,256 2,536,097 227,431 4,283,833 727 606,025 390,524 613,520 8,658,157 2,247,506 2,247,506 13,873,469 227,431 8,855,957 4,283,833 3,802 3,758,613 404,883 1,248,196 38,893,063 9,193,166 - 3,953,252 1,035,916 1,153,908 216,295 1,670,321 299,175 304,742 2,141,695 - 3,953,252 1,035,916 3,659,032 7,351,439 13,985,837 1,670,321 299,175 304,742 9,193,166 8,633,609 1,855,000 1,141,158 5,137,853 6,720,000 2,842,823 41,822,537 24,548 (2,890,347) (2,929,474) - 748,344 - 2,996,158 110 - 1,176,633 2,996,158 772,932 350,000 - 748,344 (5) (5,751) 2,990,512 (503,309) (263,181) 3,360 4,532,593 772,892 100,165 1,603,119 (274,910) (274,910) 1,223,911 $ - Total 949,001 - 145,040 $ 917,932 330,441 $ 430,606 12,543,629 $ 14,146,748 (continued) 113 Combining Statement of Revenues, Expenditures and Changes in Fund Balance Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2013 Capital Projects Streets Police Fire Storm Sewers Parks Revenues: Sales taxes Intergovernmental: Federal grants State grants State sales tax Other Investment income Charges for services Fines and forfeitures Other entities' participation Miscellaneous Total revenues $ - $ - 216,305 239 424,377 2,857 643,778 $ 98 98 - $ 9,320 9,320 - $ 379 379 1,240 368,199 49,281 418,720 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) - - - - 3,186,501 3,186,501 4,507,402 4,507,402 141,007 141,007 170,044 170,044 1,665,753 1,665,753 (2,542,723) (4,507,304) (131,687) (169,665) (1,247,033) Other financing sources (uses): Transfers in: General fund Special revenue funds Debt service funds Capital projects funds Enterprise funds Transfers out: Special revenue funds Debt service funds Capital projects funds Issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) 24,297 (12,149) 3,731,925 3,744,073 Net change in fund balances 3,522,572 1,992,221 114 1,173,258 (65) (12) 1,766,264 1,776,027 (169,665) 1,203,945 $ 9,840 - - (30,687) 1,995,327 $ - 101,000 101,000 (3,106) 2,321,222 $ - (98) 4,254,000 4,504,198 1,201,350 Fund balance at beginning of year Fund balance at end of year 250,296 528,994 1,058,961 $ 889,296 2,582,965 $ 3,111,959 City of Tempe, Arizona Capital Projects Community Development Rio Salado $ - $ 470,349 470,349 $ 195,063 780 99 28,085 30,637 254,664 2,074,856 2,074,856 5,477,066 5,477,066 (1,604,507) (5,222,402) Total - 664,979 8 102,884 767,871 - 1,044,322 1,044,322 (276,451) - $ 1,546,696 780 9,320 2,063 792,576 180,250 33,494 2,565,179 6,236,879 15,420,165 228,211 8,855,957 4,293,153 5,865 4,551,189 404,883 180,250 1,281,690 41,458,242 - 3,953,252 1,035,916 3,659,032 7,351,439 13,985,837 1,670,321 299,175 304,742 18,266,951 18,266,951 6,720,000 2,842,823 18,266,951 60,089,488 (15,701,772) (18,631,246) 116,622 13 159,870 (110) 768,736 890,888 (748,344) (3) (9,840) 2,275,000 1,793,318 (12,330) 778,075 765,745 (772,933) (166) (9,852) 13,675,000 13,575,249 (772,933) (503,475) (273,033) 13,675,000 3,360 18,107,842 (713,619) (3,429,084) 489,294 (2,126,523) (523,404) 2,660,546 - $ 122,262 - 3,374,165 $ - Signals Total Nonmajor Governmental Funds 8,194,680 $ 4,765,596 $ 263,181 9,853 410,166 703,556 21,434,821 1,192,850 $ 19,308,298 115 1,176,633 263,181 2,996,158 782,785 760,166 33,978,450 $ 33,455,046 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 Position Internal Service Funds June 30, 2013 City of Tempe, Arizona Risk Management Health Total Assets Current assets: Pooled cash and investments Accounts receivable $ 8,321,185 58,733 Total assets $ 869,364 - $ 9,190,549 58,733 8,379,918 869,364 9,249,282 74,204 6,301,535 6,375,739 489,542 1,111,471 1,601,013 563,746 7,413,006 7,976,752 Liabilities Current liabilities: Accounts payable Accrued expenses and claims payable Total current liabilities Noncurrent liabilities: Net OPEB obligation Total noncurrent liabilities 32,690 32,690 Total liabilities - 6,408,429 32,690 32,690 1,601,013 8,009,442 Net Position Unrestricted Total net position 1,971,489 $ 1,971,489 118 (731,649) $ (731,649) 1,239,840 $ 1,239,840 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Risk Management Health Total Operating revenues: Contributions Miscellaneous Total operating revenues $ 3,934,753 22,322 3,957,075 $ 24,276,522 24,276,522 $ 28,211,275 22,322 28,233,597 Operating expenses: Fees and services Total operating expenses 3,957,075 3,957,075 24,065,935 24,065,935 28,023,010 28,023,010 210,587 210,587 210,587 2,000,000 2,210,587 Income before operating transfers - Transfers in Changes in net position 2,000,000 2,000,000 Total net position - beginning Total net position - ending (28,511) $ 1,971,489 119 $ (942,236) (731,649) (970,747) $ 1,239,840 Combining Statement of Cash Flows Internal Service Funds For the Fiscal Year Ended June 30, 2013 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 $ Cash flows from noncapital financing activities: Advances from (to) other funds Transfers in Net cash provided (used) by noncapital financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year 3,898,342 (3,559,778) 338,564 Health Total $ 24,276,522 (22,744,221) 1,532,301 $28,174,864 (26,303,999) 1,870,865 662,937 2,000,000 2,662,937 (662,937) (662,937) 2,000,000 2,000,000 3,001,501 869,364 3,870,865 5,319,684 Cash and cash equivalents, end of year $ 8,321,185 - 5,319,684 $ 869,364 $ 9,190,549 $ 210,587 $ $ 210,243 1,111,471 1,532,301 Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments to reconcile operating income to net cash provided (used) by operating activities: Change in assets and liabilities: Increase (decrease) in receivables Increase (decrease) in accounts payable Increase (decrease) in accrued expenses Increase (decrease) in net OPEB obligation Net cash provided by operating activities $ $ 120 - (58,733) (10,903) 406,353 1,847 338,564 210,587 (58,733) 199,340 1,517,824 1,847 $ 1,870,865 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, Capital Projects and Enterprise Fund Types For the Fiscal Year Ended June 30, 2013 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 Contingency Interdepartmental charges Debt Service: Principal Interest and fiscal fees Total expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Issuance of debt Premium on issuance of debt 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) $ 169,074,479 84,385,388 857,723 122,896,769 9,531,743 1,527,000 12,725,623 400,998,725 $ 169,342,710 76,686,707 937,939 123,739,257 9,191,062 1,931,776 6,474,944 388,304,395 Variance with Final Budget Positive (Negative) $ 268,231 (7,698,681) 80,216 842,488 (340,681) 404,776 (6,250,679) (12,694,330) 79,726,898 30,293,739 28,998,125 208,830,594 34,473,355 8,594,378 382,698 358,959 481,212 426,011 551,256 570,890 3,122,484 5,032,557 16,831,949 2,354,078 7,034,728 (12,452,069) 76,669,527 28,749,761 26,230,128 162,600,837 27,948,912 7,111,799 224,268 757,055 441,893 388,686 419,285 512,991 3,042,199 3,832,157 15,696,897 2,076,986 (11,902,278) 3,057,371 1,543,978 2,767,997 46,229,757 6,524,443 1,482,579 158,430 (398,096) 39,319 37,325 131,971 57,899 80,285 1,200,400 1,135,052 277,092 7,034,728 (549,791) 98,102,397 27,814,274 541,528,513 139,359,743 28,298,800 512,459,646 (41,257,346) (484,526) 29,068,867 72,988,498 (74,988,498) 13,675,000 6,392,968 53,910,000 (12,985,558) 294,976 59,287,386 (64,867,865) 58,136,201 (60,136,201) (3,901,944) 6,392,968 53,910,000 4,950,677 40,112 59,391,813 75,766,350 14,852,297 (14,852,297) 17,576,944 (17,936,235) 254,864 (104,427) $ (140,634,215) 125 $ $ Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual General Obligation Debt Service Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Revenues: Property taxes Intergovernmental-other Investment income Total revenues Expenditures: Debt service: Principal retirement Interest and fiscal fees Total expenditures Excess (deficiency) of revenues over expenditures 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) Net change in fund balance Final Budget Amounts Actual Amounts (Budgetary Basis) $ 23,000,956 657,625 23,658,581 $ 22,983,109 1,762,947 13,016 24,759,072 18,622,397 10,000,976 28,623,373 13,735,000 7,949,288 21,684,288 4,887,397 2,051,688 6,939,085 (4,964,792) 3,074,784 8,039,576 6,540,953 (5,304,190) (17,936,235) (16,699,472) 6,500,331 (8,261,603) 2,066,578 12,520,000 (12,985,558) (160,252) (40,622) (2,957,413) 2,066,578 12,520,000 4,950,677 16,539,220 $ (21,664,264) 126 $ 2,914,532 Variance with Final BudgetPositive (Negative) $ (17,847) 1,105,322 13,016 1,100,491 $ 24,578,796 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Performing Arts Fund For the Fiscal Year Ended June 30, 2013 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 Deficiency of revenues over expenditures Other financing uses: Transfers out Total other financing uses Net change in fund balance $ 6,374,872 19,582 601,500 5,550 7,001,504 $ 6,236,879 14,999 782,233 7,037 7,041,148 Variance with Final BudgetPositive (Negative) $ (137,993) (4,583) 180,733 1,487 39,644 2,593,105 2,505,841 87,264 4,540,000 1,392,350 8,525,455 4,540,000 1,401,978 8,447,819 (9,628) 77,636 (1,523,951) (1,406,671) (116,622) (116,622) (116,622) (116,622) $ (1,640,573) $ (1,523,293) 127 117,280 - $ 117,280 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Highway User Revenue Fund For the Fiscal Year Ended June 30, 2013 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 $ 9,101,143 71,000 9,172,143 $ 8,855,957 122,849 2,952 8,981,758 Variance with Final BudgetPositive (Negative) $ (245,186) 51,849 2,952 (190,385) 8,184,087 8,184,087 7,673,741 7,673,741 510,346 510,346 988,056 1,308,017 319,961 1,446,000 (503,304) 942,696 1,551,111 (527,601) 3,360 1,026,870 105,111 (24,297) 3,360 84,174 1,930,752 128 $ 2,334,887 $ 404,135 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Local Transportation Assistance Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Final Budget Amounts Revenues: Intergovernmental: Other Total revenues $ Expenditures: Current: Public works Total expenditures Excess of revenues over expenditures Other financing uses: Transfers out Total other financing uses Net change in fund balance $ - Actual Amounts (Budgetary Basis) $ - - - - - - (116,511) (116,511) - $ (116,511) 129 Variance with Final BudgetPositive (Negative) $ - - (116,511) (116,511) $ (116,511) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Revenues: Intergovernmental: Federal grants Other Investment income Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) $ 4,107,574 50,000 631,404 4,788,978 $ 2,434,635 16 624,687 3,059,338 $ (1,672,939) (50,000) 16 (6,717) (1,729,640) 4,157,574 2,434,636 1,722,938 325,000 306,404 4,788,978 325,000 299,687 3,059,323 6,717 1,729,655 Expenditures: Current: Community development Debt service: Principal retirement Interest and fiscal fees Total expenditures Net change in fund balance $ - 130 $ 15 $ 15 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Housing Assistance Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Investment income Fines and forfeitures Miscellaneous Total revenues $ 10,887,316 10,000 137,026 11,034,342 Expenditures: Current: Community development Total expenditures Net change in fund balance $ 11,034,342 11,034,342 $ - 131 8,902,737 1,160 14,359 8,918,256 Variance with Final BudgetPositive (Negative) $ (1,984,579) 1,160 4,359 (137,026) (2,116,086) 9,193,047 9,193,047 $ (274,791) 1,841,295 1,841,295 $ (274,791) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Grants and Court Awards Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental Federal grants State grants Other Investment income Charges for services Fines and forfeitures Miscellaneous Total revenues $ 4,004,884 388,002 3,544,040 293 1,002,004 1,326,175 6,873,629 17,139,027 Expenditures: Current: Police Fire Community services Community development Community relations City attorney Municipal court Contingency Total expenditures 4,417,986 774,386 1,400,801 599,129 3,125,876 320,000 1,214,465 6,034,728 17,887,371 Excess (deficiency) of revenues over expenditures (748,344) Other financing sources: Transfers in Total other financing sources Net change in fund balance $ $ (748,344) 132 $ Variance with Final BudgetPositive (Negative) 1,981,844 347,145 4,753,344 538 654,711 1,044,508 1,243,663 10,025,753 $ (2,023,040) (40,857) 1,209,304 245 (347,293) (281,667) (5,629,966) (7,113,274) 4,008,980 1,035,916 1,153,908 216,295 1,670,321 299,175 304,742 8,689,337 409,006 (261,530) 246,893 382,834 1,455,555 20,825 909,723 6,034,728 9,198,034 1,336,416 2,084,760 748,344 748,344 748,344 748,344 2,084,760 $ 2,833,104 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Facilities District Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Variance with Final BudgetPositive (Negative) 969,808 969,808 $ 2,247,506 2,247,506 $ 1,277,698 1,277,698 2,338,044 2,141,695 196,349 2,338,044 1,855,000 1,141,158 5,137,853 (1,855,000) (1,141,158) (2,799,809) (1,368,236) (2,890,347) (1,522,111) 2,996,268 (5,756) 2,990,512 2,996,268 (5,756) 2,990,512 Final Budget Amounts Revenues: Charges for services Total revenues Expenditures: Current: Community development Debt service: Principal Interest and fiscal fees Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance $ - $ (1,368,236) 133 $ 100,165 $ 1,468,401 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Transit Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Other entities' participation Total revenues Expenditures: Current: Public works Total expenditures Deficiency 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 $ 7,678,267 7,678,267 $ 2,953,722 15,856 2,969,578 Variance with Final BudgetPositive (Negative) $ (4,724,545) 15,856 (4,708,689) 12,082,807 12,082,807 4,334,069 4,334,069 7,748,738 7,748,738 (4,404,540) (1,364,491) 3,040,049 959,366 (54,000,000) 36,708 (53,003,926) (54,000,000) 36,708 (53,963,292) $ (54,368,417) $ (50,923,243) 959,366 959,366 $ (3,445,174) 134 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Streets Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Final Budget Amounts Revenues: Intergovernmental: Federal grants Investment income Charges for services Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures $ 611,174 611,174 Actual Amounts (Budgetary Basis) $ 216,305 239 424,377 2,857 643,778 Variance with Final BudgetPositive (Negative) $ (394,869) 239 424,377 2,857 32,604 5,595,639 5,595,639 3,969,755 3,969,755 1,625,884 1,625,884 (4,984,465) (3,325,977) 1,658,488 3,091,085 3,091,085 24,297 (12,149) 3,731,925 3,744,073 Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ (1,893,380) 135 $ 418,096 24,297 (12,149) 640,840 652,988 $ 2,311,476 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Police Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ Expenditures: Current: Police Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ - $ 98 98 Variance with Final BudgetPositive (Negative) $ 98 98 6,641,204 6,641,204 4,507,402 4,507,402 2,133,802 2,133,802 (6,641,204) (4,507,304) 2,133,900 250,296 5,707,720 5,958,016 250,296 (98) 4,254,000 4,504,198 (98) (1,453,720) (1,453,818) (683,188) 136 $ (3,106) $ 680,082 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Fire Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Other Total revenues $ Expenditures: Current: Fire Total expenditures Deficiency of revenues over expenditures Other financing sources: Issuance of debt Total other financing sources Net change in fund balance - $ $ 9,320 9,320 1,569,346 1,569,346 141,007 141,007 1,428,339 1,428,339 (1,569,346) (131,687) 1,437,659 615,600 615,600 $ 9,320 9,320 Variance with Final BudgetPositive (Negative) 101,000 101,000 (953,746) 137 $ (30,687) (514,600) (514,600) $ 923,059 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Storm Sewers Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Variance with Final BudgetPositive (Negative) Revenues: Investment income Total revenues $ Expenditures: Current: Public works Total expenditures Net change in fund balance - $ 938,680 938,680 $ 379 379 $ 255,007 255,007 (938,680) 138 $ (254,628) 379 379 683,673 683,673 $ 684,052 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Parks Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Investment income Other entities' participation Total revenues Expenditures: Current: Community services Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 47,500 47,500 $ 368,199 1,240 49,281 418,720 Variance with Final BudgetPositive (Negative) $ 368,199 1,240 1,781 371,220 3,291,863 3,291,863 1,694,939 1,694,939 1,596,924 1,596,924 (3,244,363) (1,276,219) 1,968,144 2,095,000 2,095,000 9,840 (77) 1,766,264 1,776,027 $ (1,149,363) 139 $ 499,808 9,840 (77) (328,736) (318,973) $ 1,649,171 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Rio Salado Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Total revenues Expenditures: Current: Community development Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 470,349 470,349 $ 470,349 470,349 Variance with Final BudgetPositive (Negative) $ - 4,545,926 4,545,926 2,706,081 2,706,081 1,839,845 1,839,845 (4,075,577) (2,235,732) 1,839,845 768,736 768,736 122,262 (110) 768,736 890,888 $ (3,306,841) 140 $ (1,344,844) 122,262 (110) 122,152 $ 1,961,997 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Community Development Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants State grants Investment income Miscellaneous Total revenues Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ 64,556 64,556 $ 195,063 780 99 58,722 254,664 Variance with Final BudgetPositive (Negative) $ 195,063 780 99 (5,834) 190,108 9,513,806 9,513,806 6,620,014 6,620,014 2,893,792 2,893,792 (9,449,250) (6,365,350) 3,083,900 276,492 4,688,803 4,965,295 276,505 (758,187) 2,275,000 1,793,318 13 (758,187) (2,413,803) (3,171,977) $ (4,483,955) 141 $ (4,572,032) $ (88,077) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Signals Capital Projects Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Intergovernmental: Federal grants Investment income Other entities' participation Total revenues $ 1,051,490 1,051,490 Expenditures: Current: Public works Total expenditures 1,876,891 1,876,891 Deficiency of revenues over expenditures Other financing sources (uses) : Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balance $ $ 664,979 8 102,884 767,871 Variance with Final BudgetPositive (Negative) $ 1,331,351 1,331,351 (386,511) 8 102,884 (283,619) 545,540 545,540 (825,401) (563,480) 261,921 610,000 610,000 (12,330) 778,075 765,745 (12,330) 168,075 155,745 (215,401) 142 $ 202,265 $ 417,666 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Water and Wastewater Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Charges for services Investment income Miscellaneous Total revenues Expenditures: Current: Public works Debt service: Principal Interest and fiscal fees Total expenditures Deficiency of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Issuance of debt Premium on issuance of debt Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balance $ 76,251,566 223,495 625,000 77,100,061 $ Variance with Final BudgetPositive (Negative) 75,128,472 271,063 922,912 76,322,447 $ (1,123,094) 47,568 297,912 (777,614) 85,932,812 57,355,302 28,577,510 18,925,000 13,950,000 118,807,812 18,904,743 14,294,600 90,554,645 20,257 (344,600) 28,253,167 (41,707,751) (14,232,198) 27,475,553 5,304,190 (5,681,268) 57,933,006 49,864 57,605,792 5,265,445 (5,641,523) 27,240,000 3,217,968 30,081,890 (38,745) 39,745 (30,693,006) 3,217,968 (49,864) (27,523,902) $ 15,898,041 $ 143 15,849,692 $ (48,349) Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Solid Waste Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Charges for services Total revenues Expenditures: Current: Public works Total expenditures Deficiency 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 $ 29,370 14,842,352 14,871,722 $ 14,341,827 14,341,827 16,237,017 16,237,017 15,255,617 15,255,617 Variance with Final BudgetPositive (Negative) $ (29,370) (500,525) (529,895) 981,400 981,400 (1,365,295) (913,790) 451,505 (540,668) 105,000 (435,668) (540,668) 24,630 (516,038) (80,370) (80,370) $ (1,800,963) $ (1,429,828) 144 $ 371,135 Schedule of Revenues, Expenditures and Changes in Fund BalanceBudget to Actual Golf Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Revenues: Charges for services Miscellaneous Total revenues Final Budget Amounts Actual Amounts (Budgetary Basis) $ 2,394,000 2,394,000 $ 2,480,815 501 2,481,316 2,513,917 2,513,917 2,585,695 2,585,695 Expenditures: Current: Public works Total expenditures Deficiency of revenues over expenditures Other financing sources: Transfers in Total other financing sources Net change in fund balance $ Variance with Final BudgetPositive (Negative) $ 86,815 501 87,316 (71,778) (71,778) (119,917) (104,379) 15,538 75,000 75,000 74,000 74,000 (1,000) (1,000) (44,917) 145 $ (30,379) $ 14,538 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual Cemetery Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Actual Amounts (Budgetary Basis) Final Budget Amounts Revenues: Investment income Total revenues $ Expenditures: Current: Public works Total expenditures Excess of revenues over expenditures Other financing sources: Transfers in Total other financing sources Net change in fund balance - $ $ - - - - - - - - $ - Variance with Final BudgetPositive (Negative) 210,433 210,433 - $ 146 210,433 210,433 210,433 $ 210,433 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. 147 Other Supplementary Information - Financial Data Schedule Balance Sheet Housing Assistance Fund June 30, 2013 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 Liabilities Accounts Receivable - Fraud Recovery Prepaid Expense Total Assets $ $ 6,814 301,395 77,967 37,589 667,643 1,091,408 Liabilities 312 321 345 353 Accounts Payable ≤ 90 Days Accrued Wages / Payroll Taxes Payable Other Current Liabilities Non-Current Liabilities Total Liabilities $ 1,145 49,207 27,617 64,438 142,407 Equity 509 511.2 512 513 600 Fund Balance Reserved Unreserved, Designated Fund Balance Undesignated Fund Balance Total Equity Total Liabilities and Equity 148 $ 301,395 710,603 (62,997) 949,001 1,091,408 Other Supplementary Information - Financial Data Schedule Revenues and Expenses Housing Assistance Fund For the Fiscal Year Ended June 30, 2013 City of Tempe, Arizona Line Item # 706 714 711 720 Revenues: HUD PHA Grants Fraud Recovery Investment Income - Unrestricted Investment Income - Restricted Total Revenues 911 912 915 916 925 973 Expenses: Administrative Salaries Auditing Fees Employee Benefit Contributions - Administrative Other Operating - Administrative Tenant Services Housing Assistance Payments Total Expenses $ Excess of Revenues Over Expenses 1120 1121 1117 1118 Section 8 Voucher Program Account Description Memo Account Information: Unit Months Available Number of Unit Months Leased Administrative Fee Equity Housing Assistance Payments Equity 149 8,902,737 14,359 1,090 70 8,918,256 462,718 5,416 155,278 157,771 132,480 8,279,503 9,193,166 $ (274,910) $ $ 12,984 11,849 (62,997) 969,038 City of Tempe, Arizona 150 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. 151 City of Tempe, Arizona 152 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 Net Position by Component (Exhibit S-1) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 Governmental activities Net investment in capital assets Restricted (A) Unrestricted $ 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 $ 560,427,507 124,800,334 248,936,397 $ 548,739,169 119,845,935 253,302,947 Total governmental activities net position $ 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 $ 934,164,237 $ 921,888,051 Business-type activities Net investment in capital assets Unrestricted $ 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 $ 162,774,388 92,951,764 $ 149,782,240 105,207,407 Total business-type activities net position $ 264,003,992 $ 266,348,962 $ 262,913,007 $ 266,237,661 $ 258,683,982 $ 251,348,331 $ 246,757,223 $ 248,643,977 $ 255,726,152 $ 254,989,647 Primary government Net investment in capital assets Restricted (A) Unrestricted $ 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 $ 723,201,895 124,800,334 341,888,161 $ 698,521,409 119,845,935 358,510,354 Total primary government net position $ 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 Fiscal Year 2009-10 $ 1,194,035,227 Fiscal Year 2010-11 $ 1,194,463,618 (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. 153 Fiscal Year 2011-12 $ 1,189,890,389 Fiscal Year 2012-13 $ 1,176,877,698 Changes in Net Position (Exhibit S-2a) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona 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 Fiscal Year 2011-12 Fiscal Year 2012-13 $ 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 $ 76,799,591 28,156,863 31,069,618 98,915,390 25,113,273 7,456,756 356,468 78,458 476,011 338,059 462,817 910,616 2,854,168 3,934,716 5,325,401 2,102,617 2,301,194 14,894,293 $ 76,585,163 32,594,512 28,592,571 103,586,986 26,757,509 7,039,462 223,472 615,451 449,428 393,471 354,866 481,374 2,963,058 3,900,928 4,063,048 2,036,621 3,662,321 14,347,644 210,630,073 212,040,319 241,754,773 249,782,061 313,195,035 337,252,966 340,940,020 301,007,739 301,546,309 308,647,885 Business-type activities: Water and wastewater Solid waste Golf course Cemetery (E) 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 72,156,412 14,626,578 2,658,416 129,849 72,352,330 14,758,133 2,724,422 - Total business-type activities expenses 56,005,129 61,012,930 67,953,332 68,489,118 83,004,950 81,762,688 89,357,870 83,477,456 89,571,255 89,834,885 $ 266,635,202 $ 273,053,249 $ 309,708,105 $ 318,271,179 $ 396,199,985 $ 419,015,654 $ 430,297,890 $ 384,485,195 $ 391,117,564 $ 398,482,770 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 (C) © 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 (A) (B) (C) (D) (E) 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. In fiscal year 2012-13, the Cemetery Fund was closed into the General Fund. 154 Changes in Net Position (Exhibit S-2b) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona 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 Fiscal Year 2011-12 Fiscal Year 2012-13 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 (E) Capital grants and contributions Total business-type activities program revenues $ 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 $ 1,649,775 1,642,702 7,101,043 18,136,860 7,088,168 7,826,823 2,623,338 22,450,002 15,961,785 84,480,496 $ 1,506,807 153,903 6,988,375 18,536,983 6,815,190 13,310 6,426,389 2,140,898 27,287,325 6,551,849 76,421,029 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 73,392,328 14,866,281 2,344,355 144,242 1,988,550 92,735,756 74,979,069 14,341,827 2,480,815 91,801,711 Total primary government program revenues $ 105,359,358 $ 139,259,899 $ 165,883,873 $ 225,242,888 $ 202,182,673 $ 170,256,960 $ 182,518,952 $ 180,956,098 $ 177,216,252 $ 168,222,740 Net (expense)/revenue Governmental activities Business-type activities Total primary government net expense $ (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) $ (217,065,813) 3,164,501 $ (213,901,312) $ (232,226,856) 1,966,826 $ (230,260,030) (A) (B) (C) (D) (E) 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. In fiscal year 2012-13, the Cemetery Fund was closed into the General Fund. 155 Changes in Net Position (Exhibit S-2c) Last Ten Fiscal Years Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 $ 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 Fiscal Year 2011-12 Fiscal Year 2012-13 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 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 $ 176,775,606 $ 190,087,087 $ 213,521,076 $ 232,890,052 $ $ 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 $ 142,985,910 13,649,203 35,899,010 3,428,125 5,437,201 822,900 3,199,954 496,911 (508,805) 205,410,409 $ 335,297 3,032,990 40,582 508,805 3,917,674 149,078,044 16,519,248 38,644,241 3,253,175 5,165,072 278,102 2,987,769 261,764 3,763,255 219,950,670 115,362 923,413 21,149 (3,763,255) (2,703,331) $ 209,328,083 $ 217,247,339 $ (11,655,404) 7,082,175 $ (4,573,229) $ (12,276,186) (736,505) (13,012,691) Changes in net position 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. 156 $ 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 2003-04 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 $ $ 1,963,029 72,823,641 74,786,670 $ 36,882,416 $ 64,835,343 36,375,643 138,093,402 Fiscal Year 2004-05 $ $ 3,275,943 78,064,176 81,340,119 $ 76,440,839 $ 55,470,121 21,153,248 153,064,208 Fiscal Year 2005-06 $ $ 2,376,818 94,648,961 97,025,779 $ 71,648,277 $ 66,938,765 53,752,477 192,339,519 Fiscal Year 2006-07 $ $ 4,299,060 96,883,636 101,182,696 $ 58,559,662 $ (66,826) 65,022,802 17,044,525 140,560,163 Fiscal Year 2007-08 $ $ 4,449,843 92,432,479 96,882,322 $ 69,814,938 $ 36,228,348 28,848,898 134,892,184 Fiscal Year 2008-09 $ $ 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 2009-10 $ $ 981,529 42,832,205 43,813,734 $ $ 69,324,494 $ $ 32,742,748 63,078,330 165,145,572 (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". 157 Fiscal Year 2010-11 (B) $ $ 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 Fiscal Year 2011-12 $ $ $ $ 634,526 9,967,268 50,954,570 61,556,364 1,765,739 76,139,830 67,195,597 11,707,666 (1,733,419) 155,075,412 Fiscal Year 2012-13 $ $ $ $ 643,980 8,127,268 52,658,705 61,429,953 1,733,749 75,566,724 19,054,131 14,817,549 (571,299) 110,600,854 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 Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 Fiscal Year 2007-08 $ 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 $ 159,798,418 102,320,894 14,041,876 23,674,598 10,148,376 1,412,155 2,842,153 1,592,521 5,486,178 321,317,169 Fiscal Year 2008-09 $ 150,848,798 143,357,538 6,393,595 31,096,490 11,516,359 1,600,100 2,860,571 1,546,287 6,168,789 355,388,527 Fiscal Year 2009-10 $ 145,038,639 111,505,248 97,660 27,866,740 11,082,812 328,147 2,783,916 1,670,698 5,968,065 306,341,925 Fiscal Year 2010-11 $ Fiscal Year 2011-12 Fiscal Year 2012-13 158,749,333 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 $ 162,157,488 72,701,235 822,900 31,615,115 8,198,638 3,542,185 2,526,283 1,650,907 7,021,832 290,236,583 $ 168,974,511 76,651,736 278,102 32,107,656 8,537,078 196,106 4,442,862 1,931,776 4,908,914 298,028,741 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 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 - 67,325,484 25,871,390 23,473,722 66,845,601 23,572,565 7,180,324 440,161 101,885 457,292 393,958 415,447 899,917 2,648,388 3,874,634 3,572,392 2,087,079 - 72,709,534 28,056,149 24,551,075 70,784,480 25,253,707 7,088,482 244,837 617,384 441,212 388,263 418,396 511,960 3,037,216 3,830,508 3,760,937 2,045,707 - 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 25,756,000 15,494,153 29,512,675 299,923,067 122,595,000 15,315,235 20,874,698 402,524,780 Deficiency of revenues over expenditures before other financing sources (uses) (21,374,281) (19,681,543) (77,193,039) (108,124,062) (91,960,004) (57,857,946) (49,009,040) (A) (B) (C) (D) (7,239,313) 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. 158 (9,686,484) (104,496,039) Changes in Fund Balance, Governmental Funds (Exhibit S-4b) Last Ten Fiscal Years Modified Accrual Basis of Accounting City of Tempe, Arizona Fiscal Year 2003-04 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 Net change in fund balances Debt service as a percentage of noncapital expenditures 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 9.8% 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 10.0% 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 11.7% 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) 12.0% 71,362,599 (71,213,357) 71,170,000 1,242,369 9,430,040 81,991,651 $ (9,968,353) 12.5% 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) 11.8% 12.9% 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 $ Fiscal Year 2011-12 Fiscal Year 2012-13 18,104,564 (18,613,369) 7,005,000 6,668,536 534,963 45,181,900 (48,667,199) 10,214,395 67,438,620 (68,806,307) 13,675,000 6,392,968 270,346 53,910,000 (12,985,558) 59,895,069 527,911 16.5% (A) In fiscal year 2012-13 the substantial increase in the Debt Service as a Percentage of Non-capital Expenditures was due to debt service expenditures containing the Transit Fund defeasance of the 2006 Variable Rate Demand Excise Tax Revenue Obligations ($53,670,000) and a current refunding of the 2007 Variable Rate Demand Excise Tax Revenue Obligations ($45,295,000). 159 15.1% $ (44,600,970) 36.0% (A) 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 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Retail $ Utilities and Telecommunications Rental 2,859,898,000 3,143,764,000 3,602,528,000 3,732,944,000 3,511,222,000 3,050,222,000 2,976,389,000 3,117,950,000 3,248,736,000 3,387,223,000 $ 899,688,000 917,707,000 997,198,000 1,085,111,000 1,174,056,000 1,203,889,000 1,136,889,000 1,133,200,000 1,175,200,000 1,200,932,000 $ 497,207,000 501,111,000 545,661,000 571,722,000 608,389,000 590,556,000 536,611,000 515,000,000 522,095,000 533,915,000 Restaurant $ 377,853,000 412,293,000 465,231,000 484,500,000 519,556,000 504,611,000 472,667,000 479,150,000 514,519,000 524,813,000 Hotel and Motel Contracting $ 340,484,000 410,634,000 523,679,000 784,444,000 738,611,000 631,556,000 400,000,000 298,450,000 341,542,000 340,870,000 $ 107,091,000 122,426,000 136,971,000 132,889,000 150,222,000 123,611,000 110,944,000 112,600,000 123,981,000 123,629,000 Amusements $ 85,961,000 97,749,000 95,181,000 82,278,000 84,222,000 87,778,000 96,167,000 89,850,000 87,663,000 78,580,000 All Other City Direct Sales Tax Rate Total $ 98,813,000 109,532,000 109,300,000 116,722,000 100,722,000 88,167,000 66,056,000 68,550,000 66,141,000 80,020,000 $ 5,266,995,000 5,715,216,000 6,475,749,000 6,990,610,000 6,887,000,000 6,280,390,000 5,795,723,000 5,814,750,000 6,079,877,000 6,269,982,000 Percentage of Taxable Sales Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Retail 54.30 % 55.01 55.63 53.40 50.98 48.57 51.35 53.62 53.43 54.04 Rental 17.08 % 16.06 15.40 15.52 17.05 19.17 19.62 19.49 19.33 19.15 Utilities and Telecommunications 9.44 % 8.77 8.43 8.18 8.83 9.40 9.26 8.86 8.59 8.52 Restaurant Contracting 7.17 % 7.21 7.18 6.93 7.54 8.03 8.16 8.24 8.46 8.37 6.46 % 7.18 8.09 11.22 10.72 10.06 6.90 5.13 5.60 5.40 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. 160 Hotel and Motel 2.03 % 2.14 2.12 1.90 2.18 1.97 1.91 1.94 2.04 1.97 Amusements 1.63 % 1.71 1.47 1.18 1.22 1.40 1.66 1.55 1.44 1.25 All Other 1.89 % 1.92 1.68 1.67 1.48 1.40 1.14 1.17 1.11 1.30 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 2.00 2.00 2.00 Direct and Overlapping Sales Tax Rates (Exhibit S-6) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 City Direct Sales Tax Rate Maricopa County Sales Tax Rate 1.80 % 1.80 1.80 1.80 1.80 1.80 1.80 2.00 2.00 2.00 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 6.60 6.60 6.60 5.60 Total Sales Tax Rate 8.10 % 8.10 8.10 8.10 8.10 8.10 9.10 9.30 9.30 8.30 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. In fiscal year 2012-13, State of Arizona decreased the State sales tax rate by 1.0%, effective June 1, 2013. 161 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. 162 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 City of Tempe, Arizona Commercial, Manufacturing, Telecommunications Property Fiscal Year Vacant, Agricultural & Governmental Property $ 28,432,421 40,528,635 Owner Occupied Residential Property $ 461,432,599 466,917,457 Rental Residential Property $ 139,596,174 153,014,453 Railroad & Airlines Property $ 1,695,416 1,829,752 Non-commercial Historic Property $ $ N/A N/A Total Taxable Assessed Value 1,575,575,814 $ 1,688,452,415 0.55 0.80 1,661,192,388 1,768,877,385 350,861,051 390,074,308 1,341,770 1,448,936 3,284,085 3,652,041 218,810,180 291,324,398 747,601,586 840,563,032 491,365,479 598,845,876 1,215,073,855 1,225,527,325 1,134,332,461 1,140,686,523 Estimated Actual Taxable Value Primary $ Secondary 935,290,666 1,016,813,162 $ 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 7,538,097 7,809,451 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 1,229,232 1,426,854 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 2008-09 Primary Secondary 1,416,640,407 1,605,563,621 326,359,399 439,585,924 674,491,736 901,618,735 2009-10 Primary Secondary 1,518,486,978 1,746,634,264 443,398,023 610,147,603 2010-11 Primary Secondary 1,516,407,070 1,634,522,147 2011-12 Primary Secondary 2012-13 Primary Secondary Source: Arizona Departmart of Revenue - State and Country Abstract of the Assessment Roll Maricopa County Tax Levy Note: 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 2003-04 through 2004-05. Assessed Value as a Percentage of Actual Value 11,424,612,316 10,779,997,040 13.79 % 15.66 0.53 0.82 12,379,112,416 11,034,323,885 13.42 16.03 1,801,020,550 1,904,426,188 0.52 0.88 13,289,932,548 14,207,441,131 13.55 13.40 356,496,779 432,295,381 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 3,043,548 3,447,472 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 12.20 265,780,915 326,620,717 2,656,174 3,162,023 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 11.75 714,116,748 718,136,239 297,885,542 321,946,932 2,487,354 2,984,727 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 11.38 507,897,174 558,393,732 601,231,081 601,912,854 260,011,506 261,295,232 2,447,610 2,740,384 5,848,137 7,897,668 652,320,790 700,438,585 1,940,188,573 1,957,328,610 0.66 1.13 18,005,315,382 18,381,762,798 10.78 10.65 474,229,052 492,511,871 499,166,936 499,439,182 222,440,746 222,488,879 2,784,852 2,839,643 5,609,483 7,054,535 650,548,735 667,783,593 1,688,014,795 1,697,237,040 0.79 1.35 15,987,591,189 16,128,348,415 10.56 10.52 N/A N/A $ Total Direct Tax Rate 2003-04 163 9,128,538 9,348,956 Less: Tax-Exempt Property (A) Property Tax Rates - All Direct and Overlapping Governments (Exhibit S-9) Last Ten Fiscal Years Rate per $100 of Assessed Value City of Tempe, Arizona Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 City of Tempe (A) Tempe Union Schools Tempe Elementary (B) East Valley Institute of Technology Maricopa County Community College County Ed Equalization Rate County-Wide Jurisdiction Central Fire Flood Arizona District District Project Assistance County Free Library District 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 0.47 0.47 0.21 0.21 0.12 0.12 0.01 0.01 - 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 0.46 0.46 0.21 0.21 0.12 0.12 0.01 0.01 - 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 0.44 0.44 0.21 0.21 0.12 0.12 0.01 0.01 - 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 - 0.20 0.20 0.12 0.12 0.01 0.01 - 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 - 0.15 0.15 0.10 0.10 0.01 0.01 - 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 - 0.14 0.14 0.10 0.10 0.01 0.01 - 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 0.33 - 0.14 0.14 0.10 0.10 0.01 0.01 - 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 0.36 0.36 0.15 0.15 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.66 1.13 1.79 1.61 0.96 2.57 2.65 1.34 3.99 0.05 0.05 1.24 1.24 1.01 0.20 1.21 0.43 0.43 0.18 0.18 0.10 0.10 0.01 0.01 - Primary Secondary Total 0.79 1.35 2.14 1.81 0.61 2.42 3.18 2.39 5.57 0.05 0.05 1.24 1.24 1.16 0.22 1.38 0.47 0.47 0.18 0.18 0.10 0.10 0.01 0.01 - Total 0.05 0.05 - 8.51 3.60 12.11 0.05 0.05 - 8.07 3.46 11.53 0.05 0.05 0.12 0.12 7.68 3.59 11.27 0.12 0.12 6.93 3.88 10.81 0.09 0.09 6.77 3.47 10.24 0.09 0.09 6.51 3.08 9.59 0.09 0.09 6.15 3.38 9.53 0.11 0.11 6.50 3.64 10.14 0.15 0.15 7.60 4.17 11.77 0.17 0.17 8.65 5.13 13.78 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.05 0.05 0.05 0.05 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 $9.49, $10.00 or $12.44, respectively. Also, see the Net Direct and Overlapping General Obligation Bonded Debt Schedule (Exhibit S-15). 164 Special Health Care District Property Tax Levies - All Direct and Overlapping Governments (Exhibit S-10) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year City of Tempe Tempe Union Schools Tempe Elementary (A) East Valley Institute of Technology $ County-Wide Jurisdictions County Ed Central Equalization Arizona Rate Project Maricopa County Community College Flood District 6,429,195 6,429,195 $ 308,122,580 19,234,591 327,357,171 $ 239,464,278 37,777,314 277,241,592 $ 51,153,993 51,153,993 $ 120,037,513 120,037,513 $ 33,010,980 33,010,980 Fire District Assistance County Free Library District Special Health Care District (B) $ 1,931,237 1,931,237 $ 14,316,032 14,316,032 $ 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 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 56,334,141 56,334,141 128,003,169 128,003,169 36,112,556 36,112,556 2,084,229 2,084,229 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 62,733,411 62,733,411 135,142,821 135,142,821 39,800,085 39,800,085 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 67,096,622 67,096,622 - 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 70,422,870 70,422,870 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 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 2011-12 Primary Secondary Total 12,751,029 22,100,197 34,851,226 58,076,820 34,886,097 92,962,917 41,459,414 21,157,373 62,616,787 2012-13 Primary Secondary Total 13,271,172 23,000,956 36,272,128 56,711,827 19,078,254 75,790,081 42,911,003 32,431,353 75,342,356 Total - $ 780,436,884 224,994,104 1,005,430,988 15,664,900 15,664,900 - 836,916,875 214,076,800 1,050,993,675 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 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 - 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 1,324,021,098 359,942,153 92,685,846 452,627,999 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 1,541,144,424 492,224,342 492,224,342 371,276,183 89,482,591 460,758,774 68,019,592 68,019,592 166,947,807 166,947,807 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 8,672,478 8,672,478 477,571,468 477,571,468 389,655,514 75,935,239 465,590,753 62,401,172 62,401,172 163,937,848 163,937,848 38,781,832 38,781,832 3,251,752 3,251,752 19,070,066 19,070,066 57,895,470 57,895,470 1,143,452,093 344,151,676 1,487,603,769 7,428,442 7,428,442 425,111,491 425,111,491 396,192,808 76,200,590 472,393,398 54,584,578 54,584,578 161,622,544 161,622,544 34,465,535 34,465,535 3,782,401 3,782,401 16,925,024 16,925,024 57,895,470 57,895,470 670,709,354 750,904,094 1,421,613,448 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. 165 Property Tax Levies and Collections (Exhibit S-11) Last Ten Fiscal Years City of Tempe, Arizona Collected within the Fiscal Year of the Levy Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Source: Total Tax Levy For Fiscal Year (A) $ 22,154,599 23,739,716 26,366,507 27,385,069 31,520,944 35,130,400 37,081,738 34,455,730 34,856,232 36,402,794 Adjustments $ (564,888) (678,783) (950,618) (860,618) (328,615) (358,256) (686,613) (604,321) (318,630) (170,121) Adjusted Tax Levy For Fiscal Year $ 21,589,711 23,060,933 25,415,889 26,524,451 31,192,329 34,772,144 36,395,125 33,851,409 34,537,602 36,232,673 Amount $ 21,283,933 23,122,629 25,519,585 26,185,044 30,686,950 33,987,393 35,581,096 33,299,312 33,860,185 35,627,136 % of Original Levy 96.1 % 97.4 96.8 95.6 97.4 96.7 96.0 96.6 97.1 97.9 Total Collections to Date Collections in Subsequent Years (B) $ 276,410 (83,145) (129,582) 315,584 492,269 739,454 772,083 526,937 646,893 - Amount $ 21,560,343 23,039,484 25,390,003 26,500,628 31,179,219 34,726,847 36,353,179 33,826,249 34,507,078 35,627,136 % of Adjusted Levy 99.9 % 99.9 99.9 99.9 100.0 99.9 99.9 99.9 99.9 98.3 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 ofice, 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 Treasuer'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. 166 Principal Tax Payers (Exhibit S-12a) Property Tax Current Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2012-13 Taxable Secondary Assessed Value Taxpayer: Arizona Mills LLC Arizona Public Service Company Verizon Wireless Qwest Corporation KBSII Fountainhead LLC Honeywell International Inc Tempe Fountainhead Corporate LLC State Farm Mutual Automobile Insurance Co BreofBnk2 Southwest LLC T-Mobile Motorola Incorporated AT&T Britcher Arizona Allied Signal Phoenix Coco-Cola Microchip Technology $ 24,609,104 22,154,504 16,681,774 12,794,159 10,878,779 9,966,855 9,243,000 7,285,008 7,005,964 6,606,203 - Total $ 127,225,350 Rank 1 2 3 4 5 6 7 8 9 10 - Source 2012-13: RBC Capital Markets Source 2003-04: Maricopa County Assessor's Office 167 Fiscal Year 2003-04 Percentage of Total City Secondary Taxable Assessed Value Taxable Secondary Assessed Value 1.04 % 0.93 0.70 0.54 0.46 0.42 0.39 0.31 0.30 0.28 - $ 25,796,278 19,554,733 35,570,239 12,052,915 28,790,439 17,532,301 14,482,874 10,590,408 8,046,582 7,922,058 5.37 % $ 180,338,827 Rank 3 4 1 7 2 5 6 8 9 10 Percentage of Total City Secondary Taxable Assessed Value 1.53 % 1.16 2.11 0.71 1.71 1.04 0.86 0.63 0.48 0.47 10.70 % Principal Tax Payers (Exhibit S-12b) Sales and Use Tax Current Fiscal Year and Nine Years Prior City of Tempe, Arizona Fiscal Year 2012-13 Taxpayer 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 Total Sales and Use Tax Payments Business Type Utility Grocery Stores Electronics/Software Mixed Retail Mixed Retail Mixed Retail Auto Sales Auto Sales Hotel Electronics/Software Auto Sales Auto Sales Electronics/Software $ 5,318,587 2,994,825 2,821,155 2,694,449 2,501,032 2,131,429 1,775,766 1,142,272 1,123,742 1,090,904 Rank 1 2 3 4 5 6 7 8 9 10 $ 23,594,161 Fiscal Year 2003-04 Percentage of Total Sales and Use Tax Payments Sales and Use Tax Payments 3.57 % 2.01 1.89 1.81 1.68 1.43 1.19 0.77 0.75 0.73 - $ 15.83 % $ Rank Percentage of Total Sales and Use Tax Payments 5,216,305 2,541,316 1 2 4.34 % 2.12 1,153,581 8 0.96 2,064,029 2,324,005 1,124,741 4 3 9 1.72 1.94 0.94 1,768,587 1,527,510 1,191,769 906,359 5 6 7 10 1.47 1.27 0.99 0.75 19,818,202 16.50 % Source: City of Tempe, Arizona Tax and License Division Note: The identities of the ten largest revenue payers are prohibited from disclosure per State Statute. The business type of the top ten taxpayers has been disclosed along with the appropriate data. 168 Excise Tax Collections (Exhibit S-13) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2003-04 Privilege and use tax (A) $ 62,884,508 Fiscal Year 2004-05 $ 68,533,088 Fiscal Year 2005-06 $ 77,080,250 Fiscal Year 2006-07 $ 86,750,870 Fiscal Year 2007-08 $ 81,108,518 Fiscal Year 2008-09 $ 74,295,074 Fiscal Year 2009-10 $ 69,043,642 Fiscal Year 2010-11 $ 83,258,888 Fiscal Year 2011-12 $ 84,937,373 Fiscal Year 2012-13 $ 89,714,946 State shared sales tax 13,345,152 14,695,069 16,810,760 15,758,491 15,237,310 13,191,255 12,167,009 12,656,738 12,636,771 13,236,998 State shared income tax 14,303,004 14,582,117 16,607,943 18,823,759 25,401,762 24,832,128 21,406,004 16,137,383 13,649,203 16,519,248 Franchise tax 1,505,133 1,678,437 1,858,851 2,693,256 3,424,560 3,980,674 3,559,615 3,821,436 3,428,125 3,253,175 Vehicle license tax 6,427,396 6,791,043 7,527,675 6,870,739 6,655,516 6,024,595 5,560,791 5,424,902 5,437,201 5,165,072 Permits and Fees (B) 3,722,079 4,643,117 6,708,183 7,300,676 7,812,768 7,227,027 6,171,045 5,491,077 7,139,843 6,896,214 Fines and forfeitures 5,831,133 6,651,934 7,287,717 7,219,328 8,616,319 9,200,777 7,108,900 7,576,496 7,731,585 8,132,195 $ 108,018,405 $ 117,574,805 $ 133,881,379 $ 145,417,119 $ 148,256,753 $ 138,751,530 $ 125,017,007 $ 134,366,920 $ 134,960,101 $ 142,917,848 Total Source: City of Tempe, Arizona Comprehensive Annual Financial Report City of Tempe, Arizona "Revenue and Expenditure by Account by Fund" report. (A) 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. (B) Amounts include all licenses/permits and Community Development and Public Works fees/charges for services. 169 Ratios of Net General Bonded Debt Outstanding (Exhibit S-14) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Governmental General Obligation Debt Enterprise General Obligation Debt and WIFA $ $ 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,680,000 162,200,000 164,235,000 103,735,000 137,390,000 180,935,000 243,265,000 282,520,000 285,735,000 303,168,706 287,621,092 270,715,646 253,760,904 Less: Debt Service Reserves Secondary Assessed Valuation (A) Total $ 13,335,706 15,991,147 18,547,848 17,607,767 23,858,992 31,844,188 38,126,393 34,718,252 35,360,470 38,275,002 $ 182,039,294 221,278,853 279,997,152 342,157,233 383,736,008 410,155,812 437,707,313 419,582,840 397,555,176 379,720,902 $ 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 1,957,328,610 1,697,237,040 Percentage of Governmental Debt to Assessed Value 4.6 % 4.7 5.2 4.9 4.2 4.7 4.9 5.3 6.5 7.4 Percentage of Total Assessed Value of Property 10.8 % 12.5 14.7 17.1 16.0 15.4 15.8 16.7 20.3 22.4 Source: (A) Assessed valuation from Maricopa County Assessor's Office Note: General obligation debt for business-type activities is not paid by secondary property taxes and therefore the "Percentage of Governmental Debt to Assessed Value " is disclosed. 170 Net Direct Debt Per Capita $ 1,140 1,376 1,689 2,053 2,292 2,376 2,504 2,595 2,424 2,294 Ratios of Outstanding Debt by Type (Exhibit S-15) Last Ten Fiscal Years City of Tempe, Arizona Governmental Activities General Obligation Bonds Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 $ 91,640,000 99,880,000 117,610,000 116,500,000 125,075,000 156,265,000 172,665,000 166,580,000 162,200,000 164,235,000 Special Assessment Bonds $ 16,725,000 19,345,000 17,490,000 15,345,000 38,310,000 36,095,000 33,025,000 29,875,000 27,815,000 25,675,000 Refunding Certificates of Participation $ 2,840,000 2,320,000 1,780,000 1,220,000 625,000 - Excise Tax Revenue Bonds $ HUD Section 108 Loan 81,910,000 78,780,000 174,710,000 218,480,000 241,125,000 239,560,000 230,470,000 228,746,000 218,522,900 154,081,000 $ 7,000,000 7,000,000 7,000,000 6,739,000 6,466,000 6,181,000 5,883,000 5,572,000 5,247,000 Capital Improvement Notes $ 3,258,112 2,845,604 2,416,596 1,970,427 1,506,411 1,023,835 521,955 1,009,612 Capital Leases $ 7,186,712 7,209,396 6,732,171 4,923,764 3,351,733 1,888,630 1,776,147 96,735 57,921 29,645 Total GovernmentType Debt $ 203,559,824 217,380,000 327,738,767 365,439,191 416,732,144 441,298,465 444,639,102 431,180,735 414,167,821 350,277,257 Business-Type Activities General Obligation Bonds Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Municipal Property Corporation Bonds $ 103,735,000 137,390,000 180,935,000 243,265,000 282,520,000 285,735,000 289,895,000 273,000,000 256,770,000 240,505,000 $ 400,000 275,000 140,000 - Excise Tax Revenue Bonds $ 2,330,004 2,130,000 2,050,000 18,685,000 18,050,000 48,827,424 55,505,432 79,034,000 WIFA Loans $ Capital Leases 13,273,706 14,621,092 13,945,646 13,255,904 $ 171 194,416 147,089 97,439 45,352 711,466 Total BusinessType Debt $ 104,135,000 137,665,000 183,405,004 245,395,000 284,570,000 304,614,416 321,365,795 336,545,955 326,266,430 333,506,370 Total Primary Government $ 307,694,824 355,045,000 511,143,771 610,834,191 701,302,144 745,912,881 766,004,897 767,726,690 740,434,251 683,783,627 Per Capita 1,928 2,208 3,083 3,666 4,188 4,321 4,381 4,747 4,515 4,132 Percentage of Personal Income 8.38 % 9.48 13.09 14.91 15.98 18.05 16.43 14.95 16.57 16.27 Direct and Overlapping Governmental Activities Debt (Exhibit S-16) City of Tempe, Arizona Governmental Unit: Debt Outstanding Portion Applicable To City of Tempe Percent Amount Debt repaid with property taxes: 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 State of Arizona Maricopa County East Valley Institute of Technology Subtotal overlapping debt (A) $ 766,085,000 114,010,000 256,315,000 122,330,000 287,045,000 40,470,000 None None None City direct debt $ 350,277,257 Total direct and overlapping debt 4.93 % 66.13 1.12 31.55 1.66 52.66 N/A N/A N/A $ 100.00 37,767,991 75,394,813 2,870,728 38,595,115 4,764,947 21,311,502 None None None 180,705,096 350,277,257 $ 530,982,353 Source: RBC Capital Markets and Maricopa County Assessor Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Tempe. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. 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) 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. 172 Legal Debt Margin Information (Exhibit S-17) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 Fiscal Year 2006-07 Assessed Valuation $ 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) 142,185,000 $ 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 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% 29,375,666 $ 120,402,200 $ 117,337,200 2.55% 55,704,693 $ 144,113,908 Fiscal Year 2010-11 Fiscal Year 2011-12 Fiscal Year 2012-13 $ 2,656,948,194 $ 2,767,488,864 $ 2,512,995,468 $ 1,957,328,610 $ 1,697,237,040 $ $ $ $ $ $ 142,658,908 1.01% 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 was subject to the 6% debt limitation. 531,389,638 462,255,000 $ 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 $ 150,779,728 $ 142,449,728 5.52% - $ 117,439,717 $ 102,409,717 12.80% - 123.21% $ 15,030,000 $ 339,447,408 418,225,647 114.00% 8,330,000 $ 391,465,722 446,276,092 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 Source: 173 Fiscal Year 2009-10 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% Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) 337,690,483 Fiscal Year 2007-08 101,834,222 28,365,000 $ 73,469,222 27.85% Remaining General Obligation Bond Authorizations (Exhibit S-18) City of Tempe, Arizona WIFA Funding (A) Authorization Prior Issues Current Year Issue Remaining Authorization 2008 Program: Water/Wastewater $ 113,300,000 $ 18,130,302 $ 36,095,000 $ - $ 59,074,698 Streets/Transportation/Storm Drains 44,200,000 - 3,995,000 4,510,000 35,695,000 Public Safety - Police/Fire 32,010,000 - 11,170,000 4,355,000 16,485,000 Community Services/Park Improvements 51,800,000 - 16,940,000 2,535,000 32,325,000 Total 2008 Program 241,310,000 18,130,302 68,200,000 11,400,000 143,579,698 2012 Program: Water/Wastewater - - - - - Streets/Transportation/Storm Drains - - - - - 6,400,000 - - - 6,400,000 Community Services/Park Improvements 10,500,000 - - - 10,500,000 Municipal Infrastructure Preservation 12,900,000 - - 2,275,000 10,625,000 29,800,000 - - 2,275,000 27,525,000 Public Safety - Police/Fire Total 2012 Program Grand Total $ 271,110,000 $ 18,130,302 $ 68,200,000 $ 13,675,000 $ 171,104,698 Source: City of Tempe, Arizona Finance and Technology Department (A) The WIFA funding includes a "forgivable" principal portion of $2.2 million. Per the loan agreement, the forgivable portion could be added back should the City not comply with the terms of the agreement. As some of the terms are not fulfilled until the end of the loan period, the forgivable portion will continue to utilize authorization until the loan is paid off (FY 2028-29). At that time, the authorization will be restored. 174 Pledged-Revenue Coverage (Exhibit S-19) Last Ten Fiscal Years City of Tempe, Arizona Special Assessment Bonds Special Assessment Collections Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 $ 2,781,576 $ 2,709,851 2,705,348 2,610,195 2,842,153 2,860,571 2,783,916 3,867,979 2,526,283 4,442,862 Excise Tax Revenue Obligations Debt Service (D) Coverage 2,821,905 2,704,827 2,866,617 3,023,174 4,066,900 4,094,274 4,796,008 4,697,441 3,469,611 3,448,085 0.99 1.00 0.94 0.86 0.70 0.70 0.58 0.82 0.73 1.29 Excise Tax Revenue Collections (A) $ Performing Arts Excise Tax Obligations 0.1% Privilege and Use Tax Collections (B) Fiscal Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 $ 5,279,580 $ 5,768,058 6,480,218 7,007,790 6,820,193 6,158,761 5,749,649 5,979,900 6,236,500 6,236,879 101,591,009 $ 110,783,762 126,353,704 138,546,380 141,601,237 132,726,935 119,456,216 128,942,018 129,522,900 142,917,848 Debt Service (D) Coverage 4,497,682 4,495,011 5,737,352 5,783,921 5,626,868 6,177,704 6,760,138 6,761,359 9,399,739 9,931,262 22.59 24.65 22.02 23.95 25.17 21.48 17.67 19.07 13.78 14.39 Transit Excise Tax Obligations Debt Service (D) Coverage 710,448 3,524,316 6,017,247 6,021,476 6,009,925 6,012,725 6,005,626 6,016,226 5,377,764 5,922,350 7.43 1.64 1.08 1.16 1.13 1.02 0.96 0.99 1.16 1.05 0.5% Privilege and Use Tax Collections (C) $ 26,740,623 $ 28,848,493 32,440,082 34,971,294 32,449,710 29,850,942 27,891,084 29,012,370 30,172,338 30,087,229 Debt Service (D)(E) Coverage 3,301,829 5,092,190 5,449,867 4,356,904 4,428,049 4,410,547 3,685,428 10.59 6.37 5.48 6.40 6.55 6.84 8.16 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 is 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. (E) Not included in the debt service amount above is the 2006 Variable Rate Demand Excise Tax Revenue Obligations defeasance in the amount of $53,670,000 or the current refunding on the 2007 Variable Rate Demand Excise Tax Revenue Obligations in the amount of $45,295,000. 175 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-20) Excise Tax Obligations (Excluding Transit Excise Tax Obligations) City of Tempe, Arizona Senior Excise Tax Obligations 2012-13 Pledged Excise Tax Revenues (A) Fiscal Year 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 $ 142,917,848 Subordinate Excise Tax Obligations Outstanding Senior Excise Tax Outstanding Obligations Senior Excise Tax Debt Service Obligations Requirements (B) Coverage (C) $ 9,931,262 11,967,164 12,020,979 12,994,692 12,969,792 12,978,667 12,974,892 12,982,092 12,368,092 12,366,067 12,296,792 9,344,767 16,636,617 7,009,385 7,005,365 7,008,735 7,009,334 5,217,238 5,215,800 2,723,850 2,116,125 14.39 11.94 11.89 11.00 11.02 11.01 11.01 11.01 11.56 11.56 11.62 15.29 8.59 20.39 20.40 20.39 20.39 27.39 27.40 52.47 67.54 Revenue Available for Debt Service (D) $ Outstanding Subordinate Excise Tax Obligations Debt Service Requirements (E) 139,223,465 $ 5,922,350 5,918,250 5,919,026 5,921,676 3,427,850 3,428,850 3,428,100 3,433,850 Coverage (F) 23.51 23.52 23.52 23.51 40.62 40.60 40.61 40.54 Source: City of Tempe, Arizona Accounting Division (A) Excise Tax Revenues received by the City in fiscal year 2012-13. 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 2005, currently outstanding in the principal amount of $2,300,000 and the City of Tempe, Arizona Excise Tax Revenue Refunding Obligations, Series 2007, currently outstanding in the principal amount of $20,390,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2009A+B, currently outstanding in the principal amount of $20,330,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2011A+B, currently outstanding in the principal amount of $37,010,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2012, currently outstanding in the principal amount of $30,220,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2013, currently outstanding in the principal amount of $27,240,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2012-13 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 current year annual debt service on Outstanding Senior Excise Tax Obligations) received in fiscal year 2012-13. (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 $4,800,000; the City of Tempe, Arizona Excise Tax Revenue Obligations, Series 2006, currently outstanding in the principal amount of $8,955,000; the City of Tempe, Arizona Excise Tax Refunding Obligations, Series 2011, currently outstanding in the principal amount of $18,065,000. 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. 176 Pledged Revenue, Projected Debt Service and Estimated Coverage (Exhibit S-21) Transit Excise Tax Obligations City of Tempe, Arizona Senior Excise Tax Obligations Pledged Excise Tax Revenues (A) Fiscal Year 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 $ 30,087,229 Outstanding Senior Excise Tax Obligations Debt Service Requirements (B)(D) $ Outstanding Senior Excise Tax Obligations Coverage (C) 3,685,428 4,655,713 4,655,688 4,658,463 4,658,863 4,658,413 4,657,413 4,658,413 4,656,213 4,656,063 4,655,763 4,659,356 4,657,450 4,660,044 4,655,294 4,659,044 4,655,544 4,659,194 4,659,319 4,656,806 4,658,931 4,657,913 4,657,625 4,659,119 4,656,963 1,895,975 8.16 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 6.46 15.87 Source: City of Tempe, Arizona Accounting Division (A) Excise Tax Revenues received by the City in Fiscal Year 2012-13. (B) Includes annual debt service requirements for the Series 2008 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $27,385,000 and the Series 2012 City of Tempe, Arizona Transit Excise Tax Revenue Obligations in the principal amount of $40,960,000. Debt service requirements do not include fiscal fees. (C) The estimated coverage figures shown reflect the ratio of actual fiscal year 2012-13 excise tax revenues to total debt service requirements for the City's Transit excise tax bonds. 177 Demographic and Economic Statistics (Exhibit S-22) Last Ten Fiscal Years City of Tempe, Arizona Fiscal Year Population (A) Total Personal Income (B) 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 2011-12 163,989 4,469,848,173 27,257 63,881 31.3 28,136 72,254 8.20 2012-13 165,499 4,203,343,602 25,398 61,201 31.5 25,510 73,378 6.80 Source: (A) (B) (C) (D) (E) (F) Per Capita Personal Income (C) Average Household Income (C) Median Age (C) Estimate provided by Sites USA (June 2012) Amount is calculated using population times per capita personal income Estimate provided by Sites USA (June 2012) Arizona Department of Education (Azed.gov) ASU.edu/enrollment-summary workforce.az.gov 178 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 2012-13 Employers: Employees (A) Arizona State University Maricopa Community Colleges SRP Safeway Inc. Wells Fargo Banking Division Motorola Honeywell Kyrene School District Chase Manhattan Corporation US Airways Bank One Telephone Banking Division City of Tempe Phillips 66 Company 11,185 4,611 4,374 3,996 3,576 3,000 3,000 2,401 2,377 1,898 - Total 40,418 Source: Rank Fiscal Year 2003-04 Employment 1 2 3 4 5 6 7 8 9 10 27.67 % 11.41 10.82 9.89 8.85 7.42 7.42 5.94 5.88 4.70 - 12,569 3,331 6,601 4,779 3,000 2,205 2,377 2,000 1,679 1,500 100.00 % 40,041 (A) www.tempe.gov/Economic Development/Tempe's Top Employers (B) City of Tempe, Arizona Comprehensive Annual Financial Report, 2003-04 179 Employees (B) Rank 1 4 2 3 5 7 6 8 9 10 Employment 31.39 % 8.32 16.49 11.94 7.49 5.51 5.94 4.99 4.19 3.75 100.00 % Full-Time Equivalent City Government Employees by Function (Exhibit S-24) Last Ten Fiscal Years City of Tempe, Arizona Full-Time Equivalent Employees 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 2003-04 Fiscal Year 2004-05 Fiscal Year 2005-06 522 157 305 522 157 308 535 171 340 377 20 7 3 3 4 5 25 37 87 12 70 19 73 131 1,857 377 18 7 3 4 4 5 25 38 89 13 69 19 72 131 1,861 380 18 7 4 4 4 5 26 41 52 53 69 19 72 135 1,935 Fiscal Year 2006-07 530 160 234 208 307 20 7 4 4 4 5 29 41 63 60 72 21 73 136 1,978 Fiscal Year 2007-08 577 187 230 208 323 20 7 4 5 4 5 29 46 63 62 72 23 76 138 2,079 Fiscal Year 2008-09 580 187 232 210 330 20 7 4 5 4 5 29 46 62 62 73 24 76 143 2,097 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 Fiscal Year 2011-12 Fiscal Year 2012-13 499 182 289 489 25 7 4 3 3 3 5 25 42 88 132 17 1,813 494 182 287 485 25 7 4 3 3 3 5 25 42 83 132 17 1,797 497 182 288 484 24 7 4 3 3 3 5 25 42 82 132 17 1,798 Source: City of Tempe, Arizona 2012-13 Annual Budget 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. 180 Operating Indicators by Function/Program (Exhibit S-25) Last Eight 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 Fiscal Year 2011-12 Fiscal Year 2012-13 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 4,595 5,898 4,693 5,800 (A) 4,834 5,288 (B) 4,825 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 86,074 432.95 5:30 85,673 748.69 6:35 (A) 87,730 725.33 5:00 (B) 86,996 829.91 $ $ $ $ $ $ $ 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 2,144 15,413 1,253 8.95 2,208 15,264 1,275 9.45 (A) 2,167 17,156 1,336 9.44 (B) 2,002 17,411 2,033 4:25 4:17 4:22 4:20 4:20 4:20 4:10 (A) 4:07 (B) 70% 72% 71% 72% 74% 74% 76% (A) 76% (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 64,665 141,509 1,404,318 142,323 1,246,650 142,524 1,257,336 142,500 1,250,000 147,914 1,089,174 140,600 937,500 69 83,599,700 1,061 $ 250,869,200 715 $ 119,168,700 69 $ 170,983,900 700 $ 152,320,600 673 $ 89,884,365 46 $ 88,143,100 675 $ 96,512,400 653 $ 188,916,700 21 $ 109,851,600 508 $ 161,914,600 577 $ 105,413,500 18 $ 86,704,700 425 $ 27,741,900 534 $ 68,502,500 $ $ $ $ 42,059 17,589 (C) 221.20 $ 42,261 16,686 (C) 316.56 $ 42,494 17,135 (C) 251.00 $ 42,686 15,774 (C) 256.46 $ 100% 21.5 (C) 100% 21.3 (C) 100% 20.9 (C) 100% 19.7 (C) 73 33,021 34% 1,976 57 $ $ 70 33,056 29% 1,861 52 $ $ 102 32,964 28% 1,942 59 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 2011-12 (B) Numbers are estimates as shown in City of Tempe, Arizona Annual Budget 2012-13 (C) Numbers revised by department to reflect change in methodology in tracking. 181 $ $ 71 32,916 28% 1,875 59 42,453 15,606 181.33 8 6,874,200 314 $ 18,260,624 521 $ 77,951,841 $ $ 100% 18.7 $ $ 114 32,886 28% 1,837 77 42,218 15,877 217.49 95% 8,430,857 569,600 145,948 (A) 1,015,578 (A) 18 $ 88,812,800 297 $ 68,954,800 600 $ 99,407,953 $ 100% 18.6 $ $ 112 33,927 29% 1,940 73 93% 8,168,990 412,739 $ 18 $ 26,619,100 271 $ 96,518,351 647 $ 54,339,500 42,398 (A) 16,700 (A) 249.00 (A) $ 100% (A) 18.6 $ 140,523 (B) 933,824 (B) 115 (A) 33,759 15% (A) 2,030 78 (A) 42,351 (B) 16,900 (B) 278.00 (B) 100% 18.5 0 $121 33,405 15% 2,133 $81 (B) (B) (B) (B) Capital Asset Statistics by Function/Program (Exhibit S-26) Last Eight 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 Fiscal Year 2011-12 Fiscal Year 2012-13 2 22 6 2 22 6 3 22 6 3 22 6 3 22 6 3 20 6 3 20 6 3 21 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 1,241 11,778 221 140 1,241 11,797 221 135 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 1,872 45 200 5 2 1,872 45 200 5 2 852 852 823 825 839 839 839 833 120 53 502 174 120 53 502 174 120 53 500 193 120 53 497 193 129 53 498 195 125 42 498 194 125 42 498 194 125 42 496 173 32 32 32 38 38 33 33 19 68 56 60 58 58 58 58 51 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. 182