N AVA J O CO U N T Y Arizona C O M P R E H E N S I V E A N N U A L F I N A N C I A L R E P O RT F i s c a l Ye a r E n d e d J u n e 3 0 , 2 0 1 7 We Are Navajo County Since 1895 Board of Supervisors Vice Chairman Steve Williams District IV Lee Jack Sr. District I Navajo County, Arizona Jason E. Whiting District III Dawnafe Whitesinger District V Chairman Jesse Thompson District II Fiscal Year Ended June 30, 2017 Navajo County, Arizona Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2017 Prepared by Navajo County Finance Department County Manager Glenn Kephart Assistant County Managers Bryan Layton Paul Watson Navajo County, Arizona Finance Team Paige M. Peterson, Finance Director Scott Flake, Accountant Rebecca Robertson, Finance Operations Supervisor Deborah Bailey, Senior Accountant Fiscal Year Ended June 30, 2017 Navajo County, Arizona Fiscal Year Ended June 30, 2017 INTRODUCTORY SECTION Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Comprehensive Annual Financial Report Year Ended June 30, 2017 Table of Contents Page Introductory Section Table of Contents Letter of Transmittal Organizational Chart Certificate of Achievement for Excellence in Financial Reporting i iv x xi Financial Section Independent Auditors’ Report 1 Required Supplementary Information—Management’s Discussion and Analysis 5 Basic Financial Statements Government-wide Statements Statement of Net Position Statement of Activities 16 17 Fund Statements Governmental Funds Balance Sheet Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Fiduciary Funds Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Notes to Financial Statements Note 1 – Summary of Significant Accounting Policies Note 2 – Corrections of Misstatement—Prior Period Adjustments Note 3 – Stewardship, Compliance, and Accountability Note 4 – Deposits and Investments Note 5 – Due From Other Governments Note 6 – Capital Assets Note 7 – Long-Term Liabilities Note 8 – Risk Management Note 9 – Operating Lease Note 10 – Fund Balance Classifications of the Governmental Funds Note 11 – Pensions and Other Postemployment Benefits Note 12 – Interfund Balances and Activity Note 13 – County Treasurer’s Investment Pool i 18 19 20 21 22 23 24 30 31 31 34 34 35 37 39 39 40 62 62 Navajo County Comprehensive Annual Financial Report Year Ended June 30, 2017 Table of Contents Page Other Required Supplementary Information Budgetary Comparison Schedules General Fund Public Works/HURF Fund Flood Control District Fund Public Health District Fund Notes to Budgetary Comparison Schedules Pension Plan Schedules Schedule of the County’s Proportionate Share of the Net Pension Liability– Cost-Sharing Pension Plans Schedule of Changes in the County’s Net Pension Liability and Related Ratios–Agent Pension Plans Schedule of County Pension Contributions Notes to Pension Plan Schedules Schedule of Agent OPEB Plans’ Funding Progress 66 69 70 71 72 74 75 78 79 80 Supplementary Information List of Nonmajor Governmental Funds 84 Combining and Individual Fund Statements and Schedules Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds Budgetary Comparison Schedules – Nonmajor Governmental Funds Special Revenue – Administration Special Revenue – County Attorney Special Revenue – Courts Special Revenue – Environmental and Conservation Special Revenue – Housing Special Revenue – Library District Special Revenue – Probation Special Revenue – Public Defense Special Revenue – Recreation District Special Revenue – Sheriff’s Office Special Revenue – Special Districts Special Revenue – Workforce Innovation and Opportunity Act Capital Projects – Other Debt Service – General Government Debt Service – Special Districts 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 Statement of Changes in Assets and Liabilities – Agency Funds 112 ii 86 91 Navajo County Comprehensive Annual Financial Report Year Ended June 30, 2017 Table of Contents Page Statistical Section Financial Trends Changes in Net Position Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Net Position by Component 114 116 118 120 Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections 121 122 123 124 Debt Capacity Ratios of Outstanding Debt by Type Pledged Revenue Coverage Legal Debt Margin Information 125 126 127 Demographic and Economic Information Demographic and Economic Statistics Employment by Sector and Major Employers 128 129 Operating Information Full-Time Equivalent Employees by Function Operating Indicators by Function Capital Asset Statistics by Function 131 132 134 iii NAVAJO COUNTY Administration Bryan Layton Assistant County Manager Glenn Kephart County Manager Paige Peterson Finance Director We are Navajo County December 18, 2017 To the Honorable Board of Supervisors and Citizens of Navajo County, Arizona: We are pleased to provide you with the Comprehensive Annual Financial Report (CAFR) for fiscal year 2017. The CAFR provides in-depth information regarding the County’s financial position. Navajo County presents the CAFR prepared in compliance with generally accepted accounting principles (GAAP) and audited by the Arizona Office of the Auditor General using generally accepted auditing standards and Government Auditing Standards. This report consists of management’s representations concerning the finances of Navajo County. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, County management has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for preparation of the County’s financial statements in conformity with generally accepted accounting principles. Because the cost of internal controls should not exceed the anticipated benefits, the objective of this framework is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The Arizona Office of the Auditor General has audited the County’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements for fiscal year 2017 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Based upon the audit, the independent auditor concluded that there was a reasonable basis for rendering an unmodified opinion that the County’s financial statements for fiscal year 2017 are fairly presented in conformity with GAAP. The Independent Auditors’ Report is presented at the beginning of the Financial Section of this report. Navajo County ‐ For Official Use Only This report is prepared in accordance with generally accepted accounting principles, in conformity with standards of financial reporting established by the Governmental Accounting Standards Board (GASB), and using the guidelines established by the Government Finance Officers Association (GFOA) of the United States and Canada. GAAP requires that management provide an overview and analysis to accompany the basic financial statements called the 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 immediately follows the Independent Auditors’ Report in the Financial Section of this report. NAVAJO COUNTY PROFILE Navajo County was formed on March 21, 1895, and encompasses 9,953 square miles. Navajo County’s diversity is evident not only in its population, but also in its landscape. Northern Navajo County is home to the Navajo and Hopi Tribes, and is known for scenic attractions such as Monument Valley. Historic Route 66 runs through central Navajo County which is now one of the most significant transportation corridors in the United States. Holbrook, in central Navajo County, became the county seat in 1871. Southern Navajo County is home to the White Mountain Apache Tribe and resort communities with many picturesque lakes and forests. The 2015 population of the County was estimated to be 108,277. The principal industries are tourism, coal mining, manufacturing, timber production, and ranching. Navajo County’s government consists of an elected Board of Supervisors. There are five districts with one supervisor representing each district. As required by statute, the Board of Supervisors is responsible for the overall management and approval of the departmental budgets and county tax rates. The Board appoints a County Manager and each department is managed by an elected official, appointed official, or a department director. Elected offices are statutorily mandated and include the assessor, clerk of the superior court, constables, county attorney, sheriff, recorder, superintendent of schools, treasurer, and the judiciary. Navajo County provides a full range of services, including law enforcement and public safety, judicial and detention services, health services, highway construction and maintenance, education, and library services. The financial reporting entity includes all the funds of the primary government and its component units. Component units are legally separate entities for which the primary government is financially accountable. Blended component units, although legally separate entities, are in substance part of the County’s operations. Additional information on Navajo County’s blended component units can be found in the notes to the financial statements Note 1. The Board of Supervisors and the County Manager use the financial policies, budget management policies and strategic plan to guide the overall development of the budget. On an v Navajo County - For Official Use Only annual basis, beginning in January, the finance department, under the County Manager’s direction, meets with each elected official and department director to outline the Board’s adopted budget priorities. Each department must provide revenue and expenditure estimates for the remainder of the current fiscal year and planned revenues and expenditures for the following year. The budget team uses these estimates to help update the 5-year financial plan. The Board of Supervisors must adopt the final budget on or before the third Monday in August. The tax rate and levy must also be set on or before the third Monday in August. FACTORS AFFECTING NAVAJO COUNTY’S FINANCIAL CONDITION The information presented in the financial statements is best understood when it is considered from the broader perspective of the specific environment within which the County operates. Local Economy – Navajo County has experienced a 10.2 percent growth in population from 2000 through 2010. The incorporated cities and towns in the southern portion of Navajo County accounted for the largest portion of the overall increase. Communities Navajo County Heber/Overgaard Holbrook Joseph City Pinetop-Lakeside Show Low Snowflake Taylor Winslow 2000 97,470 2010 107,398 % Change 10.2% 2,722 4,917 N/A 3,582 7,695 4,460 3,176 9,520 2,822 5,053 1,386 4,282 10,660 5,590 4,112 9,655 3.7% 2.8% N/A 19.5% 38.5% 25.3% 29.5% 1.4% Navajo Nation 8,394 9,368 11.6% (Chilchinbito, Dilkon, Greasewood, Jeddito, Kayenta, Oljato, Pinon, and Shonto) Hopi Tribe 4,113 5,051 22.8% (First Mesa, Hotevilla, Kykotsmovi, Second Mesa, and Shongopovi) White Mountain Apache Tribe 7,431 (Cibecue, East Fork, Whiteriver) 6,516 (12.3%) (source: The 2000 and 2010 U.S. Census—2010 is the latest census data available) Some of the major employers in Navajo County include Arizona Public Service (utilities), Joseph City, Burlington Northern Santa Fe (railway), Winslow, Summit Healthcare (medical facility), Show Low, and Northland Pioneer College (post-secondary education), Holbrook, pork production, alternative energy, Snowflake, Fort Apache Timber Company (timber processing), White River, and tourism related business, Kayenta (Monument Valley), Hondah, Show Low, Pinetop/Lakeside, and Heber/Overgaard. vi Navajo County - For Official Use Only Because of the rural nature of Navajo County, the local economy continues to be impacted by the stagnant, slowly recovering state and national economies. The County’s unemployment rate (7.4 percent for July 2017) has been significantly higher than the State’s (4.9 percent for July 2017). To address the economic challenges, Navajo County has reduced expenses through reductions in workforce, outsourced juvenile detention services, discontinued child support services, position vacancies from attrition, and reductions in operating expenses while maintaining excellent customer service. Expenditure Limitation – In November 2006, Navajo County voters approved Proposition 400, which restated the base year expenditure limitation. The expenditure limit is a constraint on the County’s annual spending that was added to the Arizona Constitution in 1980. The limit is based on the County’s actual 1980 expenditures and is adjusted each year for population growth and inflation. Basically, the service levels provided in 1980, the base year, is the benchmark for spending on today’s essential services. Navajo County elected officials agreed that the expenditure limit, based on 1980 service levels, was not sufficient to meet the current demand for basic public services. Proposition 400 allowed the County to restate the base year expenditure limit, which allowed for the allocation of resources to: • • • • Public Safety–Increased law enforcement coverage and availability. Transportation–Additional investment in transportation infrastructure. Access to Services–Improvement of facilities and satellite office to provide more accessible government services. Quality Work Force–Focus on retention of staff, which reduced training and operating costs as employee turnover was reduced. The Board of Supervisors’ proactive decision making has allowed Navajo County to better plan for the County’s long-term financial sustainability. Sound fiscal and budget management policies allow the County to better respond to the economic challenges that we face currently and in the future. The recession of 2008-2009 continues to have a significant negative impact on the County. At the worst point of the recession, the County saw monthly revenues from state-shared sales tax, county sales tax, and vehicle license tax drop by as much as 27 percent, 38 percent, and 26 percent, respectively. As a rural county, the negative effects of the recession have been severe and long-lasting. Beginning in February 2011, nearly two years after the recession officially ended, the county began to see a modest economic recovery through nominal increases in sales tax revenues. However, after APS closed its Unit II generator in 2016 at the Cholla Power Plant, its declined assessed property value caused a decrease of $240,000 property tax for Navajo County. vii Navajo County - For Official Use Only Impact of State Economic Conditions – The downturn in the local economy corresponded to economic declines at the state and national levels. As the State of Arizona struggled to balance its budget and reduce expenses counties have been significantly impacted by the shifting of revenues away from counties while mandating that counties pay for state programs. The uncertainty of these impacts from year to year requires Navajo County to budget conservatively to allow for these cost shifts, reductions in program funding, and reduced revenue allocations. Navajo County continues to work with state legislators, the County Supervisors Association, the Arizona Association of Counties, and the Arizona City/County Managers Association to find solutions to the state budget crisis with the least impact to counties. Additionally, Navajo County continues to seek alternate funding sources to increase revenues. Cost analysis is ongoing, and the County is seeking to find additional ways to further reduce spending while continuing to provide for mandated functions with excellent customer service. Economic Outlook – State and local revenues are increasing; however, they cannot keep up with on-going increases in medical insurance, retirement pensions and unfunded state mandates. Environmental and economic changes directly related to the coal industry will have a negative impact on county revenues. The uncertainty of the coal industry and the state budget require continual monitoring, evaluation and planning for Navajo County. We will continue to address these challenges through the strategic budget planning process in coordination with our elected officials and department directors. SIGNIFICANT FINANCIAL POLICIES Navajo County has developed a set of fiscal management policies that guide the budget process. These policies consist of an Operating Budget Policy, Capital Budget Policy, Revenue Policy, Reserve Policy, Debt Policy, and the Budget Management Policy. The policies have been developed to: • • • • Provide accountability to the citizens and the Board of Supervisors. Provide guidelines for long-term financial stability, enhancing the County’s ability to withstand fiscal fluctuations at the national, state, and local levels. Provide an overall financial picture of the County as a whole. Provide a basis for incorporating long-term policies into day-to-day operations. viii Navajo County - For Official Use Only AWARDS The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to Navajo County, Arizona for its comprehensive annual financial report for the fiscal year ended June 30, 2016. This was the seventh consecutive year that Navajo County has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement Award is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program and Budget Presentation Award requirements and we are submitting them to the GFOA to determine their eligibility for another certificate. ACKNOWLEDGMENTS Preparation of this report could be accomplished only through the coordinated efforts of the finance department, the cooperative and willing assistance provided by our elected officials and department directors and their staff, and the services provided by the Arizona Office of the Auditor General. We express appreciation to all who have contributed to this report. We wish to thank the Navajo County Board of Supervisors for their leadership and commitment to Navajo County and our citizens. Respectfully submitted, Glen Kephart County Manager Bryan Layton Assistant County Manager ix Navajo County - For Official Use Only Paige Peterson Finance Director Voters Navajo County Board of Supervisors Constables Elected Officials County Manager Holbrook Assessor Clerk of the Superior Court Winslow County Attorney Recorder Finance Director Elections Director Public Health Services District Director Snowflake Kayenta Sheriff Show Low Treasurer Pinetop-Lakeside Superintendent of Schools Assistant County Manager Economic/Workforce Director NEAZIWS Executive Director Courts Presiding Judge Superior Court Judge Superior Court Judge Superior Court Judge Court Administrator Clerk of the Board Emergency Management Director Juvenile Operations Supervisor Chief Probation Officer Facilities Management Director Information Technology Director Justice of the Peace— Holbrook Justice of the Peace— Winslow Legal Defender Library District Director Justice of the Peace— Snowflake Justice of the Peace— Kayenta Public Defender Public Fiduciary Justice of the Peace— Show Low Justice of the Peace— Pinetop-Lakeside Public Works Director Tribal Government Relations Director FINANCIAL SECTION Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County, Arizona Fiscal Year Ended June 30, 2017 Independent auditors’ report Members of the Arizona State Legislature The Board of Supervisors of Navajo County, Arizona Report on the financial statements We have audited the accompanying financial statements of the governmental activities, each major fund, and aggregate remaining fund information of Navajo County as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the County’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 U.S. generally accepted accounting principles; 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. Auditors’ responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 auditors’ 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 auditors consider internal control relevant to the County’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 County’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. 2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and aggregate remaining fund information of Navajo County as of June 30, 2017, and the respective changes in financial position for the year then ended in accordance with U.S. generally accepted accounting principles. Emphasis of matter As described in Note 2, the County restated the financial statements for the year ended June 30, 2016, to correct misstatements in its previously issued financial statements. Our opinions are not modified with respect to this matter. Other matters Required supplementary information U.S. generally accepted accounting principles require that the management’s discussion and analysis on pages 5 through 13, budgetary comparison schedules on pages 66 through 71, schedule of the County’s proportionate share of the net pension liability—cost-sharing pension plans on page 74, schedule of changes in the County’s net pension liability and related ratios—agent pension plans on pages 75 through 77, schedule of county pension contributions on pages 78 through 79, schedule of agent OPEB plans’ funding progress on page 81 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 U.S. generally accepted auditing standards, 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. Supplementary and other information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The combining and individual fund statements and schedules and the introductory and statistical sections listed in the table of contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The combining and individual fund statements and schedules are management’s responsibility 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 U.S. generally accepted auditing standards. In our opinion, the combining and individual fund statements and schedules are 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. Compliance over the use of highway user revenue fund and other dedicated state transportation revenue monies In connection with our audit, nothing came to our attention that caused us to believe that the County failed to use highway user revenue fund monies the County received pursuant to Arizona Revised Statutes Title 28, Chapter 18, Article 2, and any other dedicated state transportation revenues the County received solely for the authorized transportation purposes, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the County’s noncompliance with the use of highway user revenue fund monies and other dedicated state transportation revenues, insofar as they relate to accounting matters. The communication related to compliance over the use of highway user revenue fund and other dedicated state transportation revenue monies in the preceding paragraph is intended solely for the information and use of the members of the Arizona State Legislature, the Board of Supervisors, management, and other responsible parties within the County and is not intended to be and should not be used by anyone other than these specified parties. Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we will issue our report on our consideration of the County’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 at a future date. The purpose of that report is solely 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 effectiveness of the County’s 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 the County’s internal control over financial reporting and compliance. Debbie Davenport Auditor General December 18, 2017 Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Management’s Discussion and Analysis June 30, 2017 As management of Navajo County, we offer readers of Navajo County’s financial statements this narrative overview and analysis of the financial activities of Navajo County for the fiscal year ended June 30, 2017. We encourage readers to consider the information presented here in conjunction with the financial statements. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the County exceeded its liabilities and deferred inflows of resources at the close of the current fiscal year by $29.2 million (net position). Of this amount, $60.2 million is the net investment in capital assets (e.g., land, buildings, improvements, machinery and equipment, infrastructure and construction in progress); $27 million is restricted for specific purposes (restricted net position); and $(58) million is the unrestricted net position deficit balance that is primarily a result of recognizing long-term liabilities related to pensions. • At June 30, 2017, total assets were $112.3 million, a decrease of $3.8 million or 3.3 percent in comparison with the prior fiscal year’s restated balance of $116.1 million. • At June 30, 2017, total liabilities were $90.9 million, an increase of $3.3 million or 3.8 percent in comparison with the prior fiscal year’s balance of $87.6 million. • At June 30, 2017, the County reported total deferred outflows of resources related to pensions of $14.7 million and deferred inflows of resources related to pensions of $6.9 million. • At June 30, 2017, the governmental funds reported combined fund balances of $34.2 million, an increase of $734 thousand or 2.2 percent in comparison with the prior year’s restated combined fund balances of $33.4 million. • At June 30, 2017, $24.9 million or 73 percent of governmental fund balances were restricted, $4.9 million or 14.4 percent were assigned, $2.5 million or 7.3 percent were unassigned, and $1.8 million or 5.3 percent were nonspendable. Restricted fund balances have externally imposed restrictions on their usage by creditors, such as through debt covenants, grantors, contributors, or laws and regulations; or by constitutional provisions or enabling legislation. The assigned and unassigned fund balances are considered unrestricted. The unrestricted fund balances are available for spending at the County’s discretion. However, the assigned fund balances are designated by management. The nonspendable fund balances include amounts that cannot be spent because they are not in spendable form, such as inventory. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements comprise three components: 1. Government-wide financial statements, 2. Fund financial statements, and 3. Notes to the financial statements. 5 Navajo County Management’s Discussion and Analysis June 30, 2017 This report also contains other required supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances in a manner similar to a private sector business. One of the most important questions asked about the County’s finances is, “Is the County as a whole better off or worse as a result of this year’s activities?” The Statement of Net Position and the Statement of Activities report information about the County as a whole and about its activities in a way that helps answer this question. These statements include all nonfiduciary assets and liabilities using the accrual basis of accounting. The Statement of Net Position presents information on all of the County’s assets, deferred outflows and inflows of resources, and liabilities, with the difference between assets and deferred outflows and liabilities and deferred inflows reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. In addition to this change, other nonfinancial factors will need to be considered. The Statement of Activities presents information showing how net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation leave. All of the County’s basic services are considered to be governmental activities, including general government, public safety, highways and streets, health and welfare, culture and recreation, education, environmental and conservation, and urban redevelopment and housing. Sales taxes, property taxes, intergovernmental revenues, and user fees finance most of these activities. The government-wide financial statements can be found on pages 16 and 17 of this report. Fund financial statements The fund financial statements provide detailed information about the most significant county funds—not the County as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by federal or state law, contractual provisions, or by bond covenants. However, the Board of Supervisors established many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other monies. All of the County’s funds can be divided into two categories: governmental and fiduciary. Governmental funds—Most of the County’s basic services are reported in governmental funds, which focus on near-term inflows and outflows of spendable resources and the balances of spendable resources available at year-end. These funds are reported using an accounting method called the modified accrual basis of accounting, which measures cash and all other financial assets that can be 6 Navajo County Management’s Discussion and Analysis June 30, 2017 readily converted to cash. The governmental fund statements provide a detailed short-term view of the County’s operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the County’s programs. 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 the governmental funds with similar information presented for the governmental activities in the government-wide financial statements. Reconciliations between governmental activities, as reported in the Statement of Net Position and the Statement of Activities, and the governmental funds, as reported in the fund financial statements, are provided to facilitate this comparison. The County maintains numerous individual governmental funds. 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, Public Works/HURF Fund, Flood Control District Fund, and Public Health District Fund, which are considered major funds. Data from the other governmental funds is combined into a single aggregated presentation. The governmental fund financial statements can be found on pages 18 through 21 of this report. Fiduciary funds—Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s programs. The fiduciary funds financial statements can be found on pages 22 and 23 of this report. Notes to the financial statements—The notes to the financial statements provide additional information that is essential to fully understand the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24 through 63 of this report. Required supplementary information—In addition to the basic financial statements and accompanying notes, the report presents required supplementary information on the County’s budgeting and budgetary control and the County’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 66 through 80 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position Net position may serve over time as a useful indicator of a County’s financial position. The following table reflects the condensed Statement of Net Position of the County as of June 30, 2017, compared to the prior year. Current and other assets and unrestricted deficit were restated for fiscal year 2016, and as a result, these amounts will not agree to the prior-year audited financial statements. Additional information on restated balances for fiscal year 2016 can be found in Note 2 on pages 28 and 29. 7 Navajo County Management’s Discussion and Analysis June 30, 2017 Governmental Activities 2016 2017 (as restated) $ 37,559,325 $ 37,888,553 74,746,244 78,223,967 112,305,569 116,112,520 Current and other assets Capital assets Total assets Deferred outflows of resources Total deferred outflows of resources 14,741,687 10,664,977 Other liabilities Long-term liabilities outstanding Total liabilities 2,609,663 88,330,213 90,939,876 3,879,451 83,705,985 87,585,436 6,905,432 4,891,561 60,217,341 26,973,194 (57,988,587) $ 29,201,948 62,361,145 24,226,548 (52,287,193) $ 34,300,500 Deferred inflows of resources Total deferred inflows of resources Net Position: Net investment in capital assets Restricted Unrestricted (deficit) Total net position Overall, total assets and deferred outflows of resources increased by $270 thousand or 0.2 percent and total liabilities and deferred inflows of resources increased by $5.4 million or 5.8 percent in the current fiscal year. The following summarizes the significant changes in deferred outflows/inflows of resources and liabilities compared to the prior year. • As a result of an actuarial valuation of the total pension liability performed as of June 30, 2016 and a measurement date of June 30, 2016, deferred outflows and inflows of resources related to pensions increased by $4.1 million and $2 million, respectively. • Other liabilities—the net decrease of $1.3 million was primarily due to fewer payroll days accrued at the end of the current fiscal year. A large portion of the County’s net position, $60.2 million, reflects its investment in capital assets net of accumulated depreciation and related debt. The County uses these assets to provide services to citizens and, therefore, they are not available for future spending. The County’s restricted net position of $27 million is subject to external restrictions on how they may be used. The County’s deficit of $58 million was an increase of $5.7 million from the prior year’s unrestricted deficit in net position due primarily to an increase of net pension liability of $5.1 million. 8 Navajo County Management’s Discussion and Analysis June 30, 2017 Changes in Net Position The Statement of Activities presents information on how the County’s net position changed during the most current fiscal year. The following table reflects the condensed Statement of Activities of the County for the fiscal year 2017 compared to the prior year. Sales taxes and state shared revenues for fiscal year 2016 were restated, and as a result, these amounts will not agree to the prior-year audited financial statements. Additional information on restated balances for fiscal year 2016 can be found in Note 2 on pages 28 and 29. Governmental Activities 2016 2017 (as restated) Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Total program revenues General revenues: Property taxes Sales taxes State shared revenues Payments in lieu of taxes Investment earnings Capital contributions Gain on disposal of capital assets Miscellaneous Total general revenues Total revenues Program expenses: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Interest on long-term debt Total program expenses Change in net position Net position, beginning Net position, ending $ 6,867,117 15,562,327 12,240,772 34,670,216 $ 7,882,611 17,099,421 11,571,167 36,553,199 12,131,695 6,534,686 13,730,314 1,532,361 164,425 9,600 1,666,058 35,769,139 70,439,355 12,531,782 6,921,427 13,822,349 1,547,382 165,384 6,980 2,995 1,341,167 36,339,466 72,892,665 $32,717,374 17,730,173 10,710,700 8,362,293 790,379 4,297,521 303,270 165,114 461,083 75,537,907 (5,098,552) 34,300,500 $29,201,948 $29,716,664 17,512,220 12,008,267 8,350,410 798,683 5,479,786 247,622 16,887 503,684 74,634,223 (1,741,558) 36,042,058 $34,300,500 Overall revenues decreased by $2.5 million or 3.4 percent and program expenses increased by $904 thousand or 1.2 percent in the current fiscal year. The following summarizes the significant changes in revenues compared to the prior year. 9 Navajo County Management’s Discussion and Analysis June 30, 2017 • Charges for services decreased by $1 million or 12.9 percent primarily due to the decreases of healthcare insurance premiums for the County’s self-insured health benefits program and fines and forfeits for the Sheriff’s Office programs. • Operating grants and contributions decreased by $1.5 million or 9 percent due largely to the Superintendent of Schools Fund received $870 thousand of national forest fees and $598 thousand of other grants and contributions less than prior year. • Highways and streets expenditures decreased by $1.3 million or 10.8 percent in the current year due primarily to the reduction of road constructions and the consumption of the related supplies inventory. FINANCIAL ANALYSIS OF THE COUNTY’S FUNDS The County reported four major funds for this fiscal year: the General Fund, Public Works/HURF Fund, Flood Control District Fund, and Public Health District Fund. At the end of the current fiscal year, the County’s governmental funds reported combined fund balances of $34.2 million, which is an increase of $734 thousand or 2.2 percent. Of the total, $7.4 million constitutes unrestricted fund balances. For governmental funds, overall revenues decreased $2.9 million or 3.7 percent and expenditures decreased $971 thousand or 1.3 percent. Governmental fund revenues exceeded expenditures by $319 thousand in the current fiscal year. The General Fund is the County’s primary operating fund. At the end of the current fiscal year, fund balances of the General Fund totaled $8.5 million. Fund balances represent 20.3 percent of total General Fund expenditures. This ratio indicates a strong fund balance position in comparison to expenditures. The following provides an explanation of major funds’ activities that changed significantly over the prior year: General Fund • Cash and investments decreased by $2.5 million or 35.9 percent in the current year largely due to an increase of prepaid items of $900 thousand and an increase of due from other governments of $1.6 million even though intergovernmental revenues remained relatively unchanged over the prior year. • Due from other funds increased by $590 thousand or 133.6 percent due largely to an increase of negative cash balance at fiscal year-end in Public Health District and Housing Funds. • Prepaid items increased by $900 thousand solely due to a rental agreement with City of Show Low that required the County to prepay four $225,000 rental payments. • Accrued payroll and employee benefits decreased by $748 thousand or 54.6 percent in the current year largely due to fewer payroll days accrued at fiscal year-end. 10 Navajo County Management’s Discussion and Analysis June 30, 2017 • Charges for services decreased by $973 thousand or 11.6 percent in the current year largely due to a decrease in employee healthcare insurance premiums collected for the County’s self-insured health benefits program. Public Works/HURF Fund • Cash and investments increased by $2.1 million solely due to excess of revenues over expenditures in the current year while receivables and payables remained relatively unchanged over the prior year. • Inventories increased by $300 thousand or 48.4 percent in the current year largely due to restocking of road project materials. • Accounts payable increased by $151 thousand or 55.2 percent in the current year largely due to an increase of purchases near current fiscal year-end. • Accrued payroll and employee benefits decreased by $161 thousand or 67 percent in the current year largely due to fewer payroll days accrued at fiscal year-end. Flood Control District Fund • Accounts payable increased by $17.8 thousand or 92.7 percent in the current year largely due to an increase of purchases near fiscal year-end. • Due to other governments increased by $12.4 thousand or 412.8 percent in the current year solely due to a payable to United States Department of the Interior for April to June 2017 services was reclassified from accounts payable as previously reported. • Public safety expenditures decreased by $493 thousand or 37.5 percent primarily due to a decrease in repair and maintenance costs spent on flood control projects. • Capital outlay expenditures increased by $257 thousand or 198.4 percent due mainly to additional construction costs spent on the Winslow Levee rehabilitation feasibility study and Pinetop Country Club drainage improvements projects. Public Health District Fund • Due from other governments increased by $95 thousand or 14.7 percent in the current year because additional federal and state grant reimbursements were received after fiscal year-end. • Due to other funds increased by $519 thousand or 245.5 percent in the current year largely due to an increase of negative cash balance at fiscal year-end. Revenues in the health department did not perform as expected. The County reduced expenses to help mitigate the shortfall. The fiscal year 2018 budget includes a transfer to cover the negative cash balance. • Unavailable intergovernmental revenues increased by $81 thousand or 186.9 because additional federal and state grant reimbursements were received after the 60-day availability period than prior year. 11 Navajo County Management’s Discussion and Analysis June 30, 2017 • Intergovernmental revenues decreased by $336 thousand or 11.5 percent primarily due to a reduction of federal and state grants received in the current fiscal year and an increase of federal and state grant reimbursements received after the 60-day availability period. GENERAL FUND BUDGETARY HIGHLIGHTS For the General Fund, actual revenues were less than the original and final budget amounts by $599 thousand, while the actual expenditures were $7.2 million less than the amount budgeted. The budget variance for revenues was largely due to the receipt of less property taxes and charges for services than anticipated. The budget variance for expenditures was primarily due to conservative budgeting practices and minimal spending due to continued poor economic conditions. The County eliminated 33 General Fund positions during fiscal year 2017. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The County’s investment in capital assets as of June 30, 2017, totaled $74.7 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings and improvements, infrastructure, and machinery and equipment. The following provides the major changes in capital assets during the current fiscal year: • Machinery and equipment increased $1.3 million for new additions. • Accumulated depreciation increased $5.1 million for annual depreciation expense. Additional information on capital assets can be found in Note 6 on page 33 of this report. Debt Administration At the end of the current fiscal year, the County had total long-term liabilities outstanding of $88.3 million and consists of the following: • $69.4 million is net pension liability which increased by $5.1 million in the current fiscal year. • $14.7 million in pledged revenue obligations that financed the acquisition, construction, and improvements of county buildings and facilities and financed the construction of new facilities and the remodel of existing facilities at the Navajo County jail. • $1.6 million for the future payment of compensated absences for unused employee vacation and sick leave. • $1.2 million of incurred but not reported healthcare claims payable for the County’s self-insured employee health benefits program. 12 Navajo County Management’s Discussion and Analysis June 30, 2017 • $884 thousand of claims and judgments payable that includes $183,372 of deductible reserves on reported claims and $700,389 of refunds for PSPRS and EORP employee contributions. • $246 thousand of landfill closure and post-closure care costs payable for the Lone Pine Landfill. • $130 thousand of special assessment debt with governmental commitment. • The remaining balance included $94 thousand of installment purchase contracts payable for office equipment and $15 thousand of capital leases payable for a vehicle. There were no significant changes to the County’s credit ratings or debt limitations during the current fiscal year. Additional information on long-term debt can be found in Note 7 on pages 33 through 36 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET State and local revenues are increasing; however, they cannot keep up with on-going increases in medical insurance, retirement pensions and un-funded state mandates. Environmental and economic changes directly related to the coal industry will have a negative impact on county revenues. The uncertainty of the coal industry and the state budget requires continual monitoring, evaluation and planning for Navajo County. We will continue to address these challenges through the strategic budget planning process in coordination with our elected officials and department directors. The County continues to budget conservatively for revenue estimates and other factors affecting the County. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the County’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Navajo County Finance Department, P.O. Box 668, 100 Code Talker Drive, Holbrook, AZ 86025. 13 Navajo County, Arizona Fiscal Year Ended June 30, 2017 BASIC FINANCIAL STATEMENTS Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Statement of Net Position June 30, 2017 Governmental Activities Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from other governments Prepaid items Inventories Capital assets, not being depreciated Capital assets, being depreciated, net Total assets Deferred Outflows of Resources Deferred outflows related to pensions Total deferred outflows of resources Liabilities Accounts payable Accrued payroll and employee benefits Due to other governments Interest payable Noncurrent liabilities Due within 1 year Due in more than 1 year Total liabilities Deferred Inflows of Resources Deferred inflows related to pensions Total deferred inflows of resources Net Position Net investment in capital assets Restricted for: Highways and streets Public safety Judicial activities Education and economic opportunity Law enforcement Environment, library, and community services Health and welfare Flood control projects Road and other capital projects Debt service Other purposes Unrestricted (Deficit) Total net position See accompanying notes to financial statements. 16 $ 28,972,318 466,679 125,651 157,104 6,018,409 900,000 919,164 9,322,463 65,423,781 $ 112,305,569 $ $ 14,741,687 14,741,687 $ 1,327,222 785,251 366,699 130,491 $ 4,521,593 83,808,620 90,939,876 $ $ 6,905,432 6,905,432 $ 60,217,341 11,279,347 1,031,716 3,131,008 928,031 1,206,377 1,098,302 950,812 6,732,715 403,581 185,844 25,461 (57,988,587) $ 29,201,948 Navajo County Statement of Activities Year Ended June 30, 2017 Functions/Programs Primary government: Governmental activities: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Interest on long-term debt Total governmental activities Expenses $ 32,717,374 17,730,173 10,710,700 8,362,293 790,379 4,297,521 303,270 165,114 461,083 $ 75,537,907 Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions Net (Expense) Revenue and Changes in Net Position $ 4,780,321 1,285,569 330,585 319,505 151,137 $ 3,794,242 4,571,216 $ 6,867,117 $ 15,562,327 $ (24,142,811) (11,806,082) 1,793,351 (5,141,740) (570,854) (846,665) 14,482 293,711 (461,083) $ (40,867,691) 67,306 12,173,466 2,901,048 68,388 3,450,856 317,752 458,825 General revenues: Taxes: Property taxes, levied for general purpose Property taxes, levied for flood control Property taxes, levied for public health district Property taxes, levied for library district General county sales tax Shared revenues - state sales tax Shared revenues - state vehicle license tax Payments in lieu of taxes Investment earnings Gain on sale of capital assets Miscellaneous Total general revenues Change in net position Net position as restated, July 1, 2016 Net position, June 30, 2017 See accompanying notes to financial statements. 17 $ $ 12,240,772 $ 7,540,151 1,785,895 2,006,151 799,498 6,534,686 11,362,457 2,367,857 1,532,361 164,425 9,600 1,666,058 35,769,139 (5,098,552) 34,300,500 $ 29,201,948 Navajo County Balance Sheet Governmental Funds June 30, 2017 Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Prepaid items Inventories Total assets Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources Fund balances: Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances General Fund Public Works/ HURF Fund Flood Control District Fund $ 4,463,459 $ 9,452,430 $ 6,766,618 279,092 73,237 $ 28,972,318 4,099 74,278 26,425 29,079 21,890 157,104 466,679 125,651 157,104 2,550 944,374 335 737,292 70,031 1,030,142 $ 9,598,057 1,103,922 6,018,409 900,000 919,164 $ 38,663,247 $ $ 10,053,395 919,164 $ 11,322,617 $ 6,850,848 $ 838,330 $ $ $ $ 39,102 21,360 594,634 620,703 422,991 79,118 36,967 2,029 801 119,602 40,781 2,550 15,343 729,990 70,070 1,335,740 542,890 56,889 860,522 198,762 61,244 50,225 198,762 61,244 123,674 173,899 6,732,715 776,913 (973,004) (196,091) 900,000 Other Total Governmental Governmental Funds Funds $ 8,289,811 84,230 1,031,006 3,306,601 900,000 Public Health District Fund 919,164 9,860,563 2,734,436 4,884,457 8,518,893 10,779,727 6,732,715 $ 10,053,395 $ 11,322,617 $ 6,850,848 See accompanying notes to financial statements. 18 $ 838,330 $ 233,528 62,041 $ 1,327,222 785,251 370,581 120,903 155,000 130,491 1,072,544 1,103,922 366,699 155,000 130,491 3,868,585 19,649 150,350 36,112 206,111 329,880 150,350 159,786 640,016 7,558,503 2,182,636 (1,421,737) 8,319,402 $ 9,598,057 1,819,164 24,928,694 4,917,072 2,489,716 34,154,646 $ 38,663,247 Navajo County Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds June 30, 2017 Fund balances—total governmental funds $ 34,154,646 Amounts reported for 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. 74,746,244 Some receivables are not available to pay for current-period expenditures and, therefore, are reported as unavailable revenue in the funds. 640,016 Long-term liabilities, such as net pension liabilities and pledged revenue obligations payable, are not due and payable in the current period and, therefore, are not reported in the funds. Deferred outflows and inflows of resources related to pensions are applicable to future reporting periods and, therefore, are not reported in the funds. Net position of governmental activities (88,175,213) 7,836,255 $ 29,201,948 See accompanying notes to financial statements. 19 Navajo County Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2017 General Fund Revenues: Property taxes County sales taxes Special assessments Licenses and permits Fines and forfeits Intergovernmental Charges for services Investment earnings Contributions Miscellaneous Total revenues Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Installment purchase contracts Sale of capital assets Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances as restated, July 1, 2016 Changes in nonspendable resources: Increase in reserve for inventories Fund balances, June 30, 2017 Public Works/ HURF Fund $ 7,536,306 6,534,686 Other Total Flood Control Public Health Governmental Governmental District Fund District Fund Funds Funds $ 1,789,574 $ 2,005,944 $ 802,131 904,807 13,621,221 $ 12,133,955 6,534,686 488,962 567,951 1,339,324 41,900,493 9,280,867 164,425 38,784 1,666,057 74,115,504 3,433,320 4,343,589 49,417 174,921 803,616 3,947,416 322,770 165,114 29,089,321 17,667,900 9,187,604 8,676,682 803,616 4,241,865 322,770 165,114 1,412,743 456,247 421,836 15,530,989 1,571,917 461,083 1,608,272 73,796,144 488,962 438,370 684,282 18,043,647 7,434,503 38,721 129,581 $ 12,173,466 25,304 45,108 40,913 661,072 41,371,587 80,751 12,324,629 4 1,831,802 25,656,001 12,502,799 1,311 2,582,609 189,924 38,784 19,423 4,966,265 821,512 9,138,187 3,019,414 5,482,347 294,449 128,918 4,094 283,684 41,889,359 (517,772) 10,255 14,218 2,033,854 (1,946,333) 111,994 (405,778) 8,924,671 $ 8,518,893 30,256 742 516,097 9,654,284 386,655 1,208,167 2,670,345 623,635 5,513,345 (547,080) 655,042 9,099,460 1,631,136 39,683 (1,909,768) 91,086 (533,125) (533,125) 2,137,220 8,342,938 299,569 $ 10,779,727 (1,050,000) (1,050,000) 430,050 (268,984) 161,066 2,235,390 (900,852) 1,425,624 101,341 14,218 4,699,294 (4,699,294) 115,559 (426,365) 7,159,080 (386,014) 189,923 (484,144) 8,803,546 434,919 33,420,158 $ 6,732,715 See accompanying notes to financial statements. 20 319,360 $ (196,091) $ 8,319,402 299,569 $ 34,154,646 Navajo County Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Funds Year Ended June 30, 2017 Net change in fund balances—total governmental funds $ 434,919 Amounts reported for governmental activities in the Statement of Activities are different because: 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 Depreciation expense $ 1,608,272 (5,148,683) In the statement of activities, only the gain/loss on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the book value of the capital assets sold. Some revenues reported in the Statement of Activities do not represent the collection of current financial resources and, therefore, are not reported as revenues on the governmental funds Capital contributions Intergovernmental revenues Collection of revenues in the governmental funds exceeded revenues reported in the Statement of Activities Property taxes Special assessments County pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the Statement of Net Position because the reported net pension liability is measured a year before the County's report date. Pension expense, which is the change in the net pension liability adjusted for changes in deferred outflows and inflows of resources related to pensions, is reported in the Statement of Activities. County pension contributions Pension expense Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of debt principal is an expenditure in the governmental funds but the repayment reduces long-term liabilities in the Statement of Net Position. Debts issued Principal repaid Under the modified accrual basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available resources. In the Statement of Activities, however, which is presented on the accrual basis of accounting, expenses are reported regardless of when the financial resources are available. Increase in IBNR healthcare claim costs Decrease in compensated absences Increase in claims and judgments Decrease in landfill closure and post-closure care costs Some cash outlays, such as purchases of inventories, are reported as expenditures in the governmental funds when purchased. In the Statement of Activities, however, they are reported as expenses when consumed. Increase in inventories Change in net position of governmental activities (3,540,411) (4,618) 67,306 1,059,191 1,126,497 (2,259) (32,544) (34,803) 4,189,220 (8,216,704) (4,027,484) (101,341) 1,571,917 1,470,576 (66,786) 56,238 (813,399) 1,150 (822,797) 299,569 $ (5,098,552) See accompanying notes to financial statements. 21 Navajo County Statement of Fiduciary Net Position Fiduciary Funds June 30, 2017 Investment Trust Funds Assets Cash and investments Total assets Agency Funds $ 186,986,704 $ 2,657,877 $ 186,986,704 $ 2,657,877 $ 658,241 1,999,636 2,657,877 Liabilities Due to other governments Deposits held for others Total liabilities $ Net Position Held in trust for investment trust participants $ 186,986,704 See accompanying notes to financial statements. 22 Navajo County Statement of Changes in Fiduciary Net Position Fiduciary Funds Year Ended June 30, 2017 Investment Trust Funds Additions: Contributions from participants Net investment income Total additions $ Deductions: Distributions to participants 247,088,201 1,041,336 248,129,537 227,705,947 Change in net position 20,423,590 Net position, July 1, 2016 166,563,114 Net position, June 30, 2017 $ See accompanying notes to financial statements. 23 186,986,704 Navajo County Notes to Financial Statements June 30, 2017 Note 1 - Summary of Significant Accounting Policies Navajo County’s accounting policies conform to generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A. Reporting Entity The County is a general purpose local government that a separately elected board of supervisors governs. The accompanying financial statements present the activities of the County (the primary government) and its component units. Component units are legally separate entities for which the County is considered to be financially accountable. Blended component units, although legally separate entities, are so intertwined with the County that they are in substance part of the County’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize they are legally separate from the County. Each blended component unit discussed below has a June 30 year-end, and the County has no discretely presented component units. The following table describes the County’s component units: Component Unit Navajo County Flood Control District Description; Criteria for Inclusion A tax-levying district that provides flood control systems; the County’s Board of Supervisors serves as the board of directors and County management has operational responsibility for the component unit Reporting Method Blended For Separate Financial Statements Not available Navajo County Library District A tax-levying district that provides and maintains library services for the County’s residents; the County’s Board of Supervisors serves as the board of directors and County management has operational responsibility for the component unit Blended Not available 24 Navajo County Notes to Financial Statements June 30, 2017 Navajo County Public Health District A tax-levying district that provides and maintains health services for the County’s residents; the County’s Board of Supervisors serves as the board of directors and County management has operational responsibility for the component unit Blended Not available White Mountain Lake Recreation District A tax-levying district that provides and improves recreational services for the White Mountain Lake Community; the County’s Board of Supervisors serves as the board of directors and County management has operational responsibility for the component unit Blended Not available Navajo County Special Assessment Districts Legally separate entities that provide improvements to various properties within the County; the County’s Board of Supervisors serves as the board of directors and there is either a financial benefit or burden relationship between the County and the component unit Blended Not available B. Basis of Presentation The basic financial statements include both government-wide statements and fund financial statements. The government-wide statements focus on the County as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information’s usefulness. Government-wide statements—Provide information about the primary government (the County) and its component units. The statements include a statement of net position and a statement of activities. These statements report the overall government’s financial activities, except for fiduciary funds of the primary government and component units that are fiduciary in nature. Governmental activities generally are financed through taxes and intergovernmental revenues. A statement of activities presents a comparison between direct expenses and program revenues for each function of the County’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include: • charges to customers or applicants for goods, services, or privileges provided; • operating grants and contributions; and • capital grants and contributions. 25 Navajo County Notes to Financial Statements June 30, 2017 Revenues that are not classified as program revenues, including internally dedicated resources and all taxes the County levies or imposes, are reported as general revenues. Generally, the effect of interfund activity has been eliminated from the government-wide financial statements to minimize the double-counting of internal activities. However, charges for interfund services provided and used are not eliminated if the prices approximate their external exchange values. Fund financial statements—Provide information about the County’s funds, including fiduciary funds and blended component units. Separate statements are presented for the governmental and fiduciary fund categories. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. Fiduciary funds are aggregated and reported by fund type. The County reports the following major governmental funds: The General Fund is the County’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Public Works/HURF Fund is used to account for road construction and maintenance of major and nonmajor regional roads, and is funded by highway user revenues and vehicle license taxes. The Flood Control District Fund is used to provide flood control facilities and regulates floodplains and drainage to prevent flooding of property in Navajo County and is funded by secondary property taxes. The Public Health District Fund is used to account for a variety of health service and education programs including Bioterrorism; Women, Infants and Children (WIC); Nutrition; Tobacco; Dental; and infectious and contagious diseases. Funding sources include a secondary property tax levy, federal and state grants, appropriations, fees and private party contributions. The County also reports the following fund types: The investment trust funds account for pooled assets the County Treasurer holds and invests on behalf of other governmental entities. The agency funds account for assets the County holds as an agent for the State, various local governments, individuals, and other parties. C. Basis of Accounting The government-wide and fiduciary fund financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. The agency 26 Navajo County Notes to Financial Statements June 30, 2017 funds are custodial in nature and do not have a measurement focus but utilize the accrual basis of accounting for reporting its assets and liabilities. Revenues are recorded when earned, and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Property taxes are recognized as revenue in the year for which they are levied. Grants and donations are recognized as revenue as soon as all eligibility requirements the provider imposed have been met. Under the terms of grant agreements, the County funds certain programs by a combination of grants and general revenues. Therefore, when program expenses are incurred, there are both restricted and unrestricted resources available to finance the program. The County applies grant resources to such programs before using general revenues. Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when they become both measurable and available. The County considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after year-end. The County’s major revenue sources that are susceptible to accrual are property taxes, special assessments, intergovernmental, charges for services, and investment earnings. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, compensated absences, and landfill closure and postclosure care costs, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Issuances of general long-term debt and acquisitions under capital lease agreements are reported as other financing sources. D. Cash and Investments Money market investments with a remaining maturity of 1 year or less at the time of purchase are stated at amortized cost. All other investments are stated at fair value. E. Inventories Inventories in the government-wide financial statements are recorded as assets when purchased and expensed when consumed. These inventories are stated at cost using the first-in, first-out method. The County accounts for its inventories in the governmental funds using the purchase method. Inventories of the governmental funds consist of expendable supplies held for consumption and are recorded as expenditures at the time of purchase. Amounts on hand at year-end are shown on the balance sheet as an asset for informational purposes only and as nonspendable fund balance to indicate that they do not constitute “available spendable resources.” These inventories are stated at cost using the first-in, first-out method. 27 Navajo County Notes to Financial Statements June 30, 2017 F. Property Tax Calendar The County levies real and personal property taxes on or before the third Monday in August that become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May. A lien assessed against real and personal property attaches on the first day of January preceding assessment and levy. G. Capital Assets Capital assets are reported at actual cost or estimated historical cost if historical records are not available. Donated assets are valued at their acquisition value at date of acquisition. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets are as follows: Land Buildings and improvements Machinery and equipment Infrastructure Capitalization Threshold $10,000 10,000 5,000 10,000 Depreciation Method N/A Straight-line Straight-line Straight-line Estimated Useful Life N/A 15-40 years 3-7 years 35 years H. Deferred Outflows/Inflows of Resources The statement of net position and balance sheet include separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to future periods that will be recognized as an expense or expenditure in future periods. Deferred inflows of resources represent an acquisition of net position or fund balance that applies to future periods and will be recognized as a revenue in future periods. I. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 28 Navajo County Notes to Financial Statements June 30, 2017 J. Fund Balance Classifications The governmental funds’ fund balances are reported separately within classifications based on a hierarchy of the constraints placed on those resources’ use. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, and unrestricted, which includes committed, assigned, and unassigned fund balance classifications. The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form, such as inventories, or are legally or contractually required to be maintained intact. Restricted fund balances are those that have externally imposed restrictions on their usage by creditors (such as through debt covenants), grantors, contributors, or laws and regulations. The unrestricted fund balance category is composed of committed, assigned, and unassigned resources. Committed fund balances are self-imposed limitations that the County’s Board of Supervisors approved, which is the highest level of decision-making authority within the County. Only the Board can remove or change the constraints placed on committed fund balances. The County did not commit any fund balances at June 30, 2017. Assigned fund balances are resources constrained by the County’s intent to be used for specific purposes, but that are neither restricted nor committed. The Board of Supervisors has authorized the County’s manager to assign resources for a specific purpose. The unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not reported in the other classifications. Also, deficits in fund balances of the other governmental funds are reported as unassigned. When an expenditure is incurred that can be paid from either restricted or unrestricted fund balances, the County will use restricted fund balance first. The County will use committed amounts first when disbursing unrestricted fund balances, followed by assigned amounts, and lastly unassigned amounts. K. Investment Earnings Investment earnings is composed of interest, dividends, and net changes in the fair value of applicable investments. L. Compensated Absences Compensated absences payable consists of vacation leave and a calculated amount of sick leave employees earned based on services already rendered. Employees may accumulate up to 240 hours of vacation depending on years of service, but they forfeit any unused vacation hours in excess of the maximum amount at calendar 29 Navajo County Notes to Financial Statements June 30, 2017 year-end. Upon terminating employment, the County pays all unused and unforfeited vacation benefits up to a maximum of 240 hours. Upon retirement, the County pays up to a maximum of 240 hours plus 75 percent of vacation hours earned in the employee’s final year of employment. Accordingly, vacation benefits are accrued as a liability in the government-wide financial statements. A liability for these amounts is reported in the governmental funds’ financial statements only if they have matured, for example, as a result of employee resignations and retirements by fiscal year-end. Employees may accumulate an unlimited number of sick leave hours. Generally, sick leave benefits provide for ordinary sick pay and are cumulative but employees forfeit them upon terminating employment. However, upon retirement or death, employees who have accumulated at least 500 hours of sick leave and at least 5 continuous service years receive some benefit payments. Benefit payments vary based on the number of continuous service years but cannot exceed $5,000. Accordingly, sick leave benefits do vest and, therefore, are accrued as a liability in the government-wide financial statements. A liability for these amounts is reported in the governmental funds’ financial statements only if they have matured, for example, as a result of employee retirements and deaths by fiscal year-end. Note 2 - Corrections of Misstatement—Prior-Period Adjustments Net position as of July 1, 2016, on the Statement of Activities and fund balance of the General Fund as of July 1, 2016, on the Statement of Revenues, Expenditures, and Changes in Fund Balance have been restated for the corrections of the following accounting errors. Government-Wide Financial Statements Net position as of June 30, 2016, as previously reported Correction of county sales tax revenue recognition Correction of state shared sales tax revenue recognition Net position as of July 1, 2016, as restated Governmental Activities $33,047,463 555,917 697,120 $34,300,500 Governmental Fund Financial Statements Fund balance as of June 30, 2016, as previously reported Correction of county sales tax revenue recognition Correction of state shared sales tax revenue recognition Fund Balance as of July 1, 2016, as restated 30 General Fund $7,671,634 555,917 697,120 $8,924,671 Navajo County Notes to Financial Statements June 30, 2017 Note 3 - Stewardship, Compliance, and Accountability Deficit fund balances—At June 30, 2017, the following nonmajor funds reported deficits in fund balance: Fund Deficit Governmental funds: Other governmental Special Revenue Housing Capital Projects Other $18,371 2,578 Note 4 - Deposits and Investments Arizona Revised Statutes (A.R.S.) authorize the County to invest public monies in the State Treasurer’s investment pool; obligations issued or guaranteed by the United States or any of the senior debt of its agencies, sponsored agencies, corporations, sponsored corporations, or instrumentalities; specified state and local government bonds, notes, and other evidences of indebtedness; interest-earning investments such as savings accounts, certificates of deposit, and repurchase agreements in eligible depositories; specified commercial paper issued by corporations organized and doing business in the United States; specified bonds, debentures, notes, and other evidences of indebtedness that are denominated in United States dollars; and certain open-end and closed-end mutual funds, including exchange traded funds. In addition, the County Treasurer may invest trust funds in certain fixed income securities of corporations doing business in the United States or District of Columbia. Credit risk Statutes have the following requirements for credit risk: 1. Commercial paper must be of prime quality and be rated within the top two ratings by a nationally recognized rating agency. 2. Bonds, debentures, notes, and other evidences of indebtedness that are denominated in United States dollars must be rated “A” or better at the time of purchase by at least two nationally recognized rating agencies. 3. Fixed income securities must carry one of the two highest ratings by Moody’s investors service and Standard and Poor’s rating service. If only one of the abovementioned services rates the security, it must carry the highest rating of that service. Custodial credit risk Statutes require collateral for deposits at 102 percent of all deposits federal depository insurance does not cover. 31 Navajo County Notes to Financial Statements June 30, 2017 Concentration of credit risk Statutes do not include any requirements for concentration of credit risk. Interest rate risk Statutes require that public monies invested in securities and deposits have a maximum maturity of 5 years. The maximum maturity for investments in repurchase agreements is 180 days. Foreign currency risk Statutes do not allow foreign investments unless the investment is denominated in United States dollars. Deposits—At June 30, 2017, the carrying amount of the County’s deposits was $48,553,032, and the bank balance was $50,315,678. The County’s formal policy is to follow collateralization requirements set forth in A.R.S. §35-323 as described above. Investments—The County’s investments at June 30, 2017, categorized within the fair value hierarchy established by generally accepted accounting principles, were as follows: Fair value measurement using Quoted prices in active Significant markets for other identical observable assets inputs (Level 1) (Level 2) Amount Investments by fair value level U.S. Treasury securities U.S. Treasury money market funds U.S. agency securities $ 49,925,529 10,000 120,118,169 $170,053,698 $49,925,529 10,000 $49,935,529 $120,118,169 $120,118,169 Investments categorized as Level 1 are valued using prices quoted in active markets for those investments. Investments categorized as Level 2 are valued using an automated method – IDC institutional bond pricing model. Credit risk—The County’s formal policy is to limit its portfolio to investments with the top rating issued by nationally recognized statistical rating organizations. As of June 30, 2017, credit risk for the County’s investments was as follows: Investment type Rating Rating agency Amount U.S. agency securities U.S. Treasury money market funds Total AAA Unrated Moody’s N/A $120,118,169 10,000 $120,128,169 32 Navajo County Notes to Financial Statements June 30, 2017 Custodial credit risk—For an investment, custodial credit risk is the risk that, in the event of the counterparty’s failure, the County will not be able to recover the value of its investments or collateral securities that are in the outside party’s possession. The County’s formal policy stipulates that securities that are held in a custody or safekeeping account must be held under the name of Navajo County or Navajo County Treasurer. At June 30, 2017, the County had $10,000 of U.S. Treasury money market funds that were uninsured, not registered in the County’s name and held by the counterparty’s trust department or agent but not in the County’s name. Concentration of credit risk—The County’s formal policy stipulates that the County will diversify the investment portfolio by limiting investments to avoid over-concentration in securities from a specific issuer, excluding obligations issued or guaranteed by the United States or any of the senior debt of its agencies or sponsored agencies. The County had investments at June 30, 2017, of 5 percent or more in U.S. Treasury, Federal National Mortgage Association, Federal Farm Credit Banks, Federal Home Loan Mortgage Corporation, and Federal Home Loan Bank securities. These investments were 29.38 percent, 23.98 percent, 21.52 percent, 14.52 percent, and 10.59 percent, respectively, of the County’s total investments. Interest rate risk—The County’s formal policy is to purchase a combination of short-, medium-, and long-term investments such that maturities occur evenly over time as necessary to provide the cash flow needed for operations. At June 30, 2017, the County had the following investments in debt securities: Investment type U.S. agency securities U.S. Treasury securities U.S. Treasury money market funds Amount $120,118,169 49,925,529 10,000 $170,053,698 Weighted average maturity (in years) 1.360 1.114 0.003 A reconciliation of cash, deposits, and investments to amounts shown on the statements of net position follows: Cash, deposits, and investments: Cash on hand Amount of deposits Amount of investments $ 10,169 48,553,032 170,053,698 $218,616,899 Total Statement of net position Cash and investments Governmental activities Investment trust funds $28,972,318 $186,986,704 33 Agency funds Total $2,657,877 $218,616,899 Navajo County Notes to Financial Statements June 30, 2017 Note 5 - Due From Other Governments Amounts due from other governments at June 30, 2017, are shown as follows: General Fund State-shared sales tax County sales tax State-shared vehicle license tax Highway user revenue Grants and contributions from Local, state and federal governments Reimbursements for services provided for governmental units Timberland Acres Domestic Water Improvement District loan $1,503,086 1,172,624 96,635 512,264 Public Works/ HURF Fund Total $1,503,086 1,172,624 201,977 795,592 $105,342 795,592 43,343 $737,292 21,992 $3,306,601 Public Health Other District Governmental Fund Funds $ 863,536 2,156,435 159,636 181,725 6,970 $1,030,142 6,970 $6,018,409 97 $944,374 $737,292 Note 6 - Capital Assets Capital asset activity for the year ended June 30, 2017, was as follows: Balance July 1, 2016 Governmental activities: Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and improvements Infrastructure Machinery and equipment Total Less accumulated depreciation for: Buildings and improvements Infrastructure Machinery and equipment Total Total capital assets being depreciated, net Governmental activities capital assets, net $ 5,701,286 3,248,675 Increases Decreases Balance June 30, 2017 372,502 5,701,286 3,621,177 8,949,961 372,502 9,322,463 50,163,460 77,615,605 31,522,131 159,301,196 49,598 1,253,478 1,303,076 $315,262 315,262 50,163,460 77,665,203 32,460,347 160,289,010 20,607,590 42,369,724 27,049,876 90,027,190 1,357,053 2,152,972 1,638,658 5,148,683 310,644 310,644 21,964,643 44,522,696 28,377,890 94,865,229 69,274,006 (3,845,607) 4,618 65,423,781 $ 78,223,967 $(3,473,105) 4,618 $ 74,746,244 34 $ $ $ Navajo County Notes to Financial Statements June 30, 2017 Depreciation expense was charged to functions as follows: Governmental activities: General government Public safety Highways and streets Health and welfare Education and economic opportunity Total governmental activities depreciation expense $1,046,624 1,207,403 2,545,703 230,283 118,670 $5,148,683 Note 7 - Long-Term Liabilities The following schedule details the County’s long-term liability and obligation activity for the year ended June 30, 2017: Governmental activities Pledged revenue obligations payable Special assessment debt with governmental commitment Capital leases payable Installment purchase contracts payable Net pension liability Landfill closure and postclosure care costs payable Compensated absences payable Incurred but not reported healthcare claims payable Claims and judgments payable Total Balance July 1, 2016 Reductions Balance June 30, 2017 Due within 1 year $15,840,000 $1,180,000 $14,660,000 $1,200,000 352,575 172,822 222,575 157,473 130,000 15,349 63,000 15,349 Additions 64,322,078 $ 101,341 5,204,054 6,869 87,047 94,472 69,439,085 18,193 33,307 246,801 1,684,597 1,213,722 1,150 1,269,960 245,651 1,628,359 1,150 1,348,306 1,166,750 70,362 $83,855,985 6,646,200 866,847 $14,032,164 6,579,414 53,448 $9,557,936 1,233,536 883,761 $88,330,213 1,233,536 608,752 $4,521,593 Pledged revenue and pledged revenue refunding obligations—The County has issued pledged revenue obligations that are generally callable with interest payable semiannually. The Series 2013 pledged revenue and pledged revenue refunding obligations were originally issued for an amount of $10,625,000 to be used for construction projects and refunding the Series 2008 Navajo County pledged revenue obligations. These obligations were allocated as follows: $1,215,000 to complete the detention facilities, $4,550,000 to construct a public works complex in Holbrook and $4,860,000 to refund the outstanding principal balance of $4,780,000 relating to the Series 2008 Navajo County pledged revenue obligations. The Series 2012A pledged revenue refunding obligations were originally issued for an amount of $4,100,000 to refund the outstanding principal balance of $4,345,000 relating to the Series 2000 Jail Facility certificate of participation. The Series 2012B pledged revenue obligations, originally issued in the amount of $4,400,000, were issued to construct and remodel jail facilities. 35 Navajo County Notes to Financial Statements June 30, 2017 Pledged revenue and pledged revenue refunding obligations outstanding at June 30, 2017, were as follows: Description Navajo County Pledged Revenue and Pledged Revenue Refunding Obligations, Series 2013 Navajo County Pledged Revenue Refunding Obligations, Series 2012A Navajo County Pledged Revenue Obligations, Series 2012B Original amount issued Maturity ranges Interest rates Outstanding principal $10,625,000 2018 – 2024 2.17% $ 6,605,000 4,100,000 2018 – 2027 3.24% 3,655,000 4,400,000 2018 – 2032 3.24% 4,400,000 Total $14,660,000 The following schedule details debt service requirements to maturity for the County’s pledged revenue obligations payable at June 30, 2017: Governmental activities Principal Interest Year ending June 30 2018 2019 2020 2021 2022 2023-2027 2028-2032 Total $ 1,200,000 1,230,000 1,255,000 1,290,000 1,320,000 3,965,000 4,400,000 $14,660,000 $ 401,800 373,858 345,348 316,133 286,214 1,026,116 365,472 $3,114,941 The County has pledged a portion of its general county and state sales tax revenues toward the payment of debt related to revenue obligations outstanding at June 30, 2017. At June 30, 2017, future pledged revenues through final maturity at July 1, 2031 totaled $17,774,941, consisting of $14,660,000 for principal and $3,114,941 for interest. Future principal and interest payments are expected to require approximately 7 percent of pledged sales tax revenues. Total principal and interest paid for the current year and total current-year pledged revenues were $1,328,731 and $17,897,143, respectively. Special assessment debt with governmental commitment—Special assessment debt is payable from assessments collected from property owners benefited by the respective improvements. The special assessment districts pledged these assessments to repay the principal amount of $524,000 in special assessment debt. The proceeds were used to finance the construction or improvement of Bucking Horse Road. At June 30, 2017, future pledged revenues through final maturity at July 1, 2019, totaled $141,327 consisting of $130,000 for principal and $11,327 for interest. Future principal and interest payments are expected to require 100 percent of pledged special assessment revenues. Principal and interest paid for the current year and total current year special assessment revenues were $242,265 and $226,853, respectively. While there is no legal obligation for the County to 36 Navajo County Notes to Financial Statements June 30, 2017 further secure the special assessment debt of the districts below, the County has made a moral commitment to take steps necessary to prevent default. Special assessment debt currently outstanding for governmental activities is as follows: Description Bucking Horse Road Original amount issued $524,000 Maturity ranges 2018-2019 Interest rates 5.75% Outstanding principal $130,000 Annual debt service requirements to maturity for the special assessment debt with governmental commitment are as follows: Governmental activities Principal Interest Year ending June 30 2018 2019 Total $ 63,000 67,000 $130,000 $ 7,475 3,852 $11,327 Compensated absences—Compensated absences are paid from various funds in the same proportion that those funds pay payroll costs. During fiscal year 2017, the County paid for compensated absences as follows: 62 percent from the General Fund, 12 percent from the Public Works/HURF Fund, 8 percent from the Public Health District Fund, and 18 percent from the Other Governmental Funds. Incurred but not reported healthcare claims payable—On July 1, 2014, Navajo County implemented a self-insured health benefits program as described in Note 8. The liability for medical, dental and pharmacy claims is based on fiscal year 2017 actuarial report. Changes in incurred but not reported (IBNR) healthcare claims payable for the years ended June 30, 2016 and 2017, were as follows: IBNR healthcare claims payable beginning of year Current-year claims and changes in estimates Claim payments IBNR healthcare claims payable, end of year 2016 $ 759,809 5,605,979 5,199,038 $1,166,750 2017 $1,166,750 6,646,200 6,579,414 $1,233,536 Claims and judgments payable—Claims and judgments are generally paid from the fund that accounts for the activity that gave rise to the claim. At June 30, 2017, the total claims and judgments payable of $883,761 consists of $183,372 of deductible reserves on reported claims and $700,389 of refunds for PSPRS and EORP employee contributions. Note 8 - Risk Management Public entity risk pools—The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. For these risks of loss, the County joined and is 37 Navajo County Notes to Financial Statements June 30, 2017 covered by two public entity risk pools: the Arizona Counties Property and Casualty Pool and the Arizona Counties Workers’ Compensation Pool, which are described below. The Arizona Counties Property and Casualty Pool is a public entity risk pool currently composed of 12 member counties. The pool provides member counties catastrophic loss coverage for risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters; and provides risk management services. Such coverage includes all defense costs as well as the amount of any judgment or settlement. The County is responsible for paying a premium based on its exposure in relation to the exposure of the other participants and a deductible of $10,000 per occurrence for property claims and $50,000 per occurrence for liability claims. The County is also responsible for any payments in excess of the maximum coverage of $300 million per occurrence for property claims and $15 million per occurrence for liability claims. However, lower limits apply to certain categories of losses. A county must participate in the pool at least 3 years after becoming a member; however, it may withdraw after the initial 3-year period. The Arizona Counties Workers’ Compensation Pool is a public entity risk pool currently composed of 12 member counties. The pool provides member counties with workers’ compensation coverage, as law requires, and risk management services. The County is responsible for paying a premium based on an experience-rating formula that allocates pool expenditures and liabilities among the members. The Arizona Counties Property and Casualty Pool and the Arizona Counties Workers’ Compensation Pool receive independent audits annually and an audit by the Arizona Department of Insurance every 5 years. Both pools accrue liabilities for losses that have been incurred but not reported. These liabilities are determined annually based on an independent actuarial valuation. If a pool were to become insolvent, the County would be assessed an additional contribution. Self-insured employee benefits program—On July 1, 2014, Navajo County implemented a self-insured health benefits program in partnership with Summit Healthcare and the Aetna Network. The program offers one comprehensive medical plan. The uninsured risk of loss per individual is $250,000 per plan year. In addition, the County established an onsite health care facility named High Desert Health Care clinic in the County’s Holbrook complex. Under the program, the County contracts directly with healthcare providers to deliver healthcare services to its eligible employees and their dependents. The County pays for the services using premiums it receives from employees and county contributions. Health benefits program expenditures are recorded in the General Fund and employee premiums and county contributions are recorded in the applicable governmental funds through payroll deductions and transferred to the General Fund. However, the county contributions are considered as internal activities, and therefore, are eliminated at the government-wide level of the financial statements. The liability for incurred but not reported healthcare claims payable at June 30, 2017, is actuarial valued and disclosed in Note 7. 38 Navajo County Notes to Financial Statements June 30, 2017 Note 9 - Operating Lease The County leases 25 percent of a newly purchased and renovated public safety building from City of Show Low under the provisions of a long-term lease agreement classified as an operating lease for accounting purposes. The lease will allow for more efficient use of space and resources for jail, inmate holding facilities, regional dispatch, locker rooms, conference rooms and break rooms to save money for Navajo County and City of Show Low. The noncancelable lease term is 20 years and may be extended for additional 5 years with any additions to the monthly rental rate to be negotiated between the parties at that time. The lease requires the County to prepay four $225,000 rental payments, totaling $900,000, on or before June 30, 2017. The County did not incur any rental expenditures for the year ended 2017 because it did not move into the leased property until August 16, 2017. Therefore, $900,000 is reported in the General Fund as prepaid items at June 30, 2017. In addition, the lease requires the County to pay its proportionate share of 25 percent of the operational costs for the leased property including its parking lot. Operational costs include all utility and maintenance costs such as cleaning, insurance, snow removal and landscaping. Note 10 - Fund Balance Classifications of the Governmental Funds The fund balance classifications of the governmental funds as of June 30, 2017, were as follows: Public Works/ HURF Fund General Fund Fund balances: Nonspendable: Prepaid items Inventories Total nonspendable Restricted for: Highways and streets Flood control projects Health Judicial activities Law enforcement Education Environmental and conservation Economic stabilization and development Social services Library Public safety Recreation Flood Control District Fund Public Health District Fund Other Governmental Funds $ 900,000 $ $ 900,000 Total 919,164 919,164 9,860,563 $ 626,029 3,131,008 1,206,377 824,528 10,486,592 6,732,715 776,913 3,131,008 1,206,377 824,528 693,430 693,430 103,503 103,503 114,876 107,675 120,278 127,540 114,876 107,675 120,278 127,540 $6,732,715 $ 776,913 39 900,000 919,164 1,819,164 Navajo County Notes to Financial Statements June 30, 2017 General Fund Debt service Road projects Capital projects Other purposes Total restricted Assigned to: Health insurance reserve Economic stabilization and development Judicial activities Law enforcement Education Debt service Other capital projects Other purposes Total assigned Unassigned Total fund balances Public Works/ HURF Fund Flood Control District Fund Public Health District Fund $ 9,860,563 $6,732,715 $ 776,913 Other Governmental Funds Total $ 74,217 $ 74,217 178,382 178,382 225,199 225,199 25,461 25,461 7,558,503 24,928,694 1,042,396 1,042,396 401,616 9,000 603,658 2,821 35,525 1,212,082 831,519 117 100,572 2,182,636 401,616 11,821 639,183 1,212,082 831,519 64,748 713,707 4,917,072 (973,004) (1,421,737) 2,489,716 $(196,091) $8,319,402 64,631 613,135 2,734,436 4,884,457 $8,518,893 $10,779,727 $6,732,715 $34,154,646 Note 11 - Pensions and Other Postemployment Benefits The County contributes to the plans described below. The plans are component units of the State of Arizona. At June 30, 2017, the County reported the following aggregate amounts related to pensions for all plans to which it contributes: Statement of net position and statement of activities Net pension liabilities Deferred outflows of resources Deferred inflows of resources Pension expense Governmental activities $69,439,085 14,741,687 6,905,432 8,216,704 The County’s accrued payroll and employee benefits includes $44,769 of outstanding pension contribution amounts payable to all pension plans for the year ended June 30, 2017. Also, the County reported $4,189,220 of pension contributions as expenditures in the governmental funds related to all pension plans to which it contributes. A. Arizona State Retirement System Plan description—County employees not covered by the other pension plans described below participate in the Arizona State Retirement System (ASRS). The ASRS administers 40 Navajo County Notes to Financial Statements June 30, 2017 a cost-sharing multiple-employer defined benefit pension plan, a cost-sharing multipleemployer defined benefit health insurance premium benefit (OPEB) plan, and a costsharing multiple-employer defined benefit long-term disability (OPEB) plan. The Arizona State Retirement System Board governs the ASRS according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes its financial statements and required supplementary information. The report is available on its website at www.azasrs.gov. Benefits provided—The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: ASRS Years of service and age required to receive benefit Final average salary is based on Benefit percent per year of service Retirement Initial membership date: Before July 1, 2011 On or after July 1, 2011 Sum of years and age equals 80 30 years, age 55 10 years, age 62 25 years, age 60 5 years, age 50* 10 years, age 62 any years, age 65 5 years, age 50* any years, age 65 Highest 36 consecutive months Highest 60 consecutive of last 120 months months of last 120 months 2.1% to 2.3% 2.1% to 2.3% * With actuarially reduced benefits. Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earning. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the retirement benefit option chosen determines the survivor benefit. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions—In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2017, statute required active ASRS members to contribute at the actuarially determined rate of 11.48 percent (11.34 percent for retirement and 0.14 percent for long-term disability) of the members’ annual covered payroll, and statute required the County to contribute at the actuarially determined rate of 11.48 percent (10.78 percent for retirement, 0.56 percent for health insurance premium benefit, and 0.14 percent for long-term disability) of the active members’ annual covered payroll. In addition, the County was required by statute to contribute at the actuarially determined rate of 9.47 percent (9.17 percent for retirement, 0.21 percent for health insurance 41 Navajo County Notes to Financial Statements June 30, 2017 premium benefit and 0.09 percent for long-term disability) of annual covered payroll of retired members who worked for the County in positions that an employee who contributes to the ASRS would typically fill. The County’s contributions to the pension plan for the year ended June 30, 2017, were $2,171,922. The County’s OPEB contributions for the current and 2 preceding years, all of which were equal to the required contributions, were as follows: ASRS Year ended June 30 2017 2016 2015 Health Benefit Supplement Fund Long-Term Disability Fund $112,832 96,268 113,693 $28,056 23,334 23,124 During fiscal year 2017, the County paid for ASRS pension and OPEB contributions as follows: 50 percent from the General Fund, 16 percent from the Public Works/HURF Fund, 10 percent from the Public Health District Fund, and 24 percent from other governmental funds. Pension liability—At June 30, 2017, the County reported a liability of $33,707,260 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2015, to the measurement date of June 30, 2016. The total pension liability as of June 30, 2016, reflects a change in actuarial assumption for a decrease in loads for future potential permanent benefit increases. The County’s proportion of the net pension liability was based on the County’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2016. The County’s proportion measured as of June 30, 2016, was 0.208830 percent, which was a decrease of 0.00215 from its proportion measured as of June 30, 2015. Pension expense and deferred outflows/inflows of resources—For the year ended June 30, 2017, the County recognized pension expense for ASRS of $1,510,886. At June 30, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 42 Navajo County Notes to Financial Statements June 30, 2017 ASRS Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between county contributions and proportionate share of contributions County contributions subsequent to the measurement date Total Deferred outflows of resources $ 204,837 Deferred inflows of resources $2,318,813 1,783,382 3,652,745 566,083 2,171,922 749,470 $6,595,587 $4,851,665 The $2,171,922 reported as deferred outflows of resources related to ASRS pensions resulting from county contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: Year ending June 30 2018 2019 2020 2021 $(1,655,134) (1,263,382) 1,466,295 1,024,221 Actuarial assumptions—The significant actuarial assumptions used to measure the total pension liability are as follows: ASRS Actuarial valuation date Actuarial roll forward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2015 June 30, 2016 Entry age normal 8% 3–6.75% 3% Included 1994 GAM Scale BB Actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2012. The long-term expected rate of return on ASRS pension plan investments was determined to be 8.75 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the 43 Navajo County Notes to Financial Statements June 30, 2017 expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: ASRS Asset class Equity Fixed income Real estate Multi-asset Commodities Total Target allocation 58% 25% 10% 5% 2% 100% Long-term expected arithmetic real rate of return 6.73% 3.70% 4.25% 3.41% 3.84% Discount rate—The discount rate used to measure the ASRS total pension liability was 8 percent, which is less than the long-term expected rate of return of 8.75 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the County’s proportionate share of the ASRS net pension liability to changes in the discount rate—The following table presents the County’s proportionate share of the net pension liability calculated using the discount rate of 8 percent, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7 percent) or 1 percentage point higher (9 percent) than the current rate: ASRS County’s proportionate share of the net pension liability 1% Decrease (7%) Current discount rate (8%) 1% Increase (9%) $42,979,316 $33,707,260 $26,273,098 Pension plan fiduciary net position—Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. 44 Navajo County Notes to Financial Statements June 30, 2017 B. Public Safety Personnel Retirement System and Corrections Officer Retirement Plan Plan descriptions—County sheriff employees and county attorney investigators who are regularly assigned hazardous duty participate in the Public Safety Personnel Retirement System (PSPRS). The PSPRS administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan (agent plans). A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. County detention officers and Administrative Office of the Courts (AOC) probation, surveillance, and juvenile detention officers participate in the Corrections Officer Retirement Plan (CORP). The CORP administers an agent multiple-employer defined benefit pension plan and an agent multiple-employer defined benefit health insurance premium benefit (OPEB) plan for county detention officers (agent plans), and a costsharing multiple-employer defined benefit pension plan and a cost-sharing multipleemployer defined benefit health insurance premium benefit (OPEB) plan for AOC officers (cost-sharing plans). The PSPRS Board of Trustees and the participating local boards govern CORP according to the provisions of A.R.S. Title 38, Chapter 5, Article 6. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information for PSPRS and CORP plans. The report is available on the PSPRS website at www.psprs.com. Benefits provided—The PSPRS and CORP provide retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefit terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: PSPRS Retirement and disability Years of service and age required to receive benefit Final average salary is based on Initial membership date: Before January 1, 2012 On or after January 1, 2012 20 years, any age 15 years, age 62 25 years, age 52.5 Highest 36 consecutive months of last 20 years Highest 60 consecutive months of last 20 years 45 Navajo County Notes to Financial Statements June 30, 2017 PSPRS Initial membership date: Before January 1, 2012 On or after January 1, 2012 Benefit percent Normal retirement 50% less 2.0% for each year of credited service less than 20 years OR plus 2.0% to 2.5% for each year of credited service over 20 years, not to exceed 80% Accidental disability retirement 50% or normal retirement, whichever is greater Catastrophic disability retirement Ordinary disability retirement 2.5% per year of credited service, not to exceed 80% 90% for the first 60 months then reduced to either 62.5% or normal retirement, whichever is greater Normal retirement calculated with actual years of credited service or 20 years of credited service, whichever is greater, multiplied by years of credited service (not to exceed 20 years) divided by 20 Survivor benefit Retired members 80% to 100% of retired member’s pension benefit Active members 80% to 100% of accidental disability retirement benefit or 100% of average monthly compensation if death was the result of injuries received on the job CORP Initial membership date: Before January 1, 2012 On or after January 1, 2012 Retirement and disability Years of service and age required to receive benefit Sum of years and age equals 80 20 years, any age 10 years, age 62 25 years, age 52.5 10 years, age 62 Final average salary is based on Highest 36 consecutive months of last 10 years Highest 60 consecutive months of last 10 years Benefit percent Normal retirement Accidental disability retirement 2.0% to 2.5% per year of credited service, not to exceed 80% 50% or normal retirement if more than 20 years of credited service 46 50% or normal retirement if more than 25 years of credited service Navajo County Notes to Financial Statements June 30, 2017 Total and permanent disability retirement 50% or normal retirement if more than 25 years of credited service Ordinary disability retirement 2.5% per year of credited service Survivor benefit Retired members 80% of retired member’s pension benefit Active members 40% of average monthly compensation or 100% of average monthly compensation if death was the result of injuries received on the job. If there is no surviving spouse or eligible children, the beneficiary is entitled to 2 times the member’s contributions. Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. In addition, the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. PSPRS also provides temporary disability benefits of 50 percent of the member’s compensation for up to 12 months. Employees covered by benefit terms—At June 30, 2017, the following employees were covered by the agent pension plans’ benefit terms: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total PSPRS Sheriff PSPRS Attorney Investigators CORP 30 1 11 1 29 47 87 23 49 102 Contributions and annual OPEB cost—State statutes establish the pension contribution requirements for active PSPRS and CORP employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS and CORP pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contributions rates for the year ended June 30, 2017, are indicated below. Rates are a percentage of active members’ annual covered payroll. 47 Navajo County Notes to Financial Statements June 30, 2017 Active members—Pension PSPRS members with an initial membership date on or before July 19, 2011 July 2016 through April 2017 April 2017 through June 2017 PSPRS members with an initial membership date after July 19, 2011, and all CORP members County Pension Health insurance premium benefit PSPRS Sheriff CORP CORP AOC 11.65% 7.65% n/a n/a n/a n/a 11.65% 8.41% 8.41% 44.11% 0% 8.42% 0% 20.08% 0.80% The County was required to contribute $38,721 for the PSPRS Attorney Investigators Pension Plan based on the estimated actuarially required contribution for an inactive member. In addition, statute required the County to contribute at the actuarially determined rate of 19.65 percent for the PSPRS of annual covered payroll of a retired member who worked for the County in a position that an employee who contributes to the PSPRS would typically fill. For the agent plans, the County’s contributions to the pension plan and annual OPEB cost and contributions for the health insurance premium benefit for the year ended June 30, 2017, were: PSPRS Attorney Investigators CORP Detention $1,091,146 $38,721 $144,735 $0 $0 $0 $0 $0 $0 PSPRS Sheriff Pension Contributions made Health Insurance Premium Benefit Annual OPEB cost Contributions made Contributions to the CORP AOC pension plan for the year ended June 30, 2017, were $379,356. The County’s contributions for the current and 2 preceding years for the CORP AOC OPEB, all of which were equal to the required contributions, were as follows: CORP AOC Health Insurance Fund Year ended June 30 2017 2016 2015 48 $15,114 16,341 23,306 Navajo County Notes to Financial Statements June 30, 2017 During fiscal year 2017, the County paid for PSPRS and CORP pension and OPEB contributions as follows: 82 percent from the General Fund and 18 percent from the other governmental funds. Pension liability—At June 30, 2017, the County reported the following net pension liabilities: Net pension liability PSPRS Sheriff $11,647,813 PSPRS Attorney Investigators 482,165 CORP 1,040,040 CORP AOC (County’s proportionate share) 4,896,487 The net pension liabilities were measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liabilities as of June 30, 2016, reflect the following changes of benefit terms and actuarial assumptions. • In May 2016 voters approved Proposition 124 that authorized certain statutory adjustments to PSPRS’ automatic cost-of-living adjustments. The statutory adjustments change the basis for future cost-of-living adjustments from excess investment earnings to the change in the consumer price index, limited to a maximum annual increase of 2 percent. • Laws 2016, Chapter 2, changed the benefit formula and contribution requirements for members hired on or after July 1, 2017. • The investment rate of return actuarial assumption was decreased from 7.85 percent to 7.50 percent for PSPRS and CORP plans. The net pension liabilities measured as of June 30, 2017, will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the County’s net pension liabilities as a result of these changes is not known. Pension actuarial assumptions—The significant actuarial assumptions used to measure the total pension liability are as follows: PSPRS and CORP—pension Actuarial valuation date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2016 Entry age normal 7.50% 4.0%–8.0% for PSPRS and 4.0%–7.25% for CORP 4.0% Included RP-2000 mortality table (adjusted by 105% for both males and females) 49 Navajo County Notes to Financial Statements June 30, 2017 Actuarial assumptions used in the June 30, 2016, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on PSPRS and CORP pension plan investments was determined to be 7.50 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-term PSPRS and CORP expected Target arithmetic real Asset class allocation rate of return Short term investments 2% 0.75% Absolute return 5% 4.11% Risk parity 4% 5.13% Fixed income 7% 2.92% Real assets 8% 4.77% GTAA 10% 4.38% Private equity 11% 9.50% Real estate 10% 4.48% Credit opportunities 13% 7.08% Non-U.S. equity 14% 8.25% U.S. equity 16% 6.23% Total 100% Pension discount rates—At June 30, 2016, the discount rate used to measure the PSPRS and CORP total pension liabilities was 7.50 percent, which was a decrease of 0.35 percent from the discount rate used as of June 30, 2015. The projection of cash flows used to determine the PSPRS and CORP discount rates assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between the actuarially determined contribution rate and the member rate. Based on those assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 50 Navajo County Notes to Financial Statements June 30, 2017 Changes in the Net Pension Liability PSPRS Sheriff Balances at June 30, 2016 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2017 Increase (Decrease) Total Plan Pension Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) $17,254,367 $ 5,340,226 $11,914,141 468,580 1,327,262 (615,741) 468,580 1,327,262 (615,741) (777,000) 641,504 (777,000) 641,504 (1,205,254) (295,080) (31,020) 1,205,254 295,080 31,020 (1,161,727) (117,122) $17,137,245 PSPRS Attorney Investigators Balances at June 30, 2016 Changes for the year: Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions—employer Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2017 51 Total Pension Liability (a) $590,475 (1,161,727) (4,864) (215,557) 149,206 $ 5,489,432 4,864 215,557 (266,328) $11,647,813 Increase (Decrease) Plan Fiduciary Net Pension Net Position Liability (b) (a) – (b) $21,263 $569,212 44,961 (78,488) 44,961 (78,488) (13,833) 25,702 (13,833) 25,702 (65,456) (390) 65,456 390 (35,451) (57,109) $533,366 (35,451) (456) (1) 29,938 $51,201 456 1 (87,047) $482,165 Navajo County Notes to Financial Statements June 30, 2017 CORP Balances at June 30, 2016 Changes for the year: Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net changes Balances at June 30, 2017 Total Pension Liability (a) $3,945,690 Increase (Decrease) Plan Fiduciary Net Pension Net Position Liability (b) (a) – (b) $3,303,418 $ 642,272 226,516 307,215 9,571 226,516 307,215 9,571 (31,895) 160,139 (31,895) 160,139 (137,367) (130,513) (19,994) 137,367 130,513 19,994 (290,765) 380,781 $4,326,471 (290,765) (3,227) (10,869) (16,987) $3,286,431 3,227 10,869 397,768 $1,040,040 The County’s proportion of the CORP AOC net pension liability was based on the County’s actual contributions to the plan relative to the total of all participating counties’ actual contributions for the year ended June 30, 2016. The County’s proportion measured as of June 30, 2016, was 1.735399 percent, which was an increase of 0.045517 from its proportion measured as of June 30, 2015. Sensitivity of the County’s net pension liability to changes in the discount rate— The following table presents the County’s net pension liabilities calculated using the discount rate of 7.50 percent, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.50 percent) or 1 percentage point higher (8.50 percent) than the current rate: 1% Decrease (6.50%) Current discount rate (7.50%) $13,686,259 $11,647,813 $9,958,400 $550,805 $482,165 $425,968 $1,613,989 $1,040,040 $569,736 $6,293,033 $4,896,487 $3,742,998 PSPRS Sheriff Net pension liability PSPRS Attorney Investigators Net pension liability CORP Net pension liability CORP AOC County’s proportionate share of the net pension liability 52 1% Increase (8.50%) Navajo County Notes to Financial Statements June 30, 2017 Pension plan fiduciary net position—Detailed information about the pension plans’ fiduciary net position is available in the separately issued PSPRS and CORP financial reports. Pension expense—For the year ended June 30, 2017, the County recognized the following pension expense: PSPRS Sheriff PSPRS Attorney Investigators CORP CORP AOC (County’s proportionate share) Pension Expense $1,002,022 (53,388) 185,885 744,493 Pension deferred outflows/inflows of resources—At June 30, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: PSPRS Sheriff Deferred Outflows of Resources Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments County contributions subsequent to the measurement date Total PSPRS Attorney Investigators Net difference between projected and actual earnings on pension plan investments County contributions subsequent to the measurement date Total 53 Deferred Inflows of Resources $1,137,775 $1,566,610 333,166 1,091,146 $2,990,922 $1,137,775 Deferred Outflows of Resources Deferred Inflows of Resources $ 1,710 38,721 $40,431 $ Navajo County Notes to Financial Statements June 30, 2017 CORP Deferred Outflows of Resources Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments County contributions subsequent to the measurement date Total CORP AOC Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between county contributions and proportionate share of contributions County contributions subsequent to the measurement date Total Deferred Inflows of Resources $261,278 $230,713 202,713 144,735 $578,161 $261,278 Deferred Outflows of Resources Deferred Inflows of Resources $ 104,118 664,602 $246,563 369,770 76,757 59,916 379,356 $1,594,603 $306,479 The amounts reported as deferred outflows of resources related to pensions resulting from county contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: PSPRS Sheriff Year ending June 30 2018 2019 2020 2021 2022 PSPRS Attorney Investigators CORP Detention CORP AOC $220 219 784 487 - $15,487 15,486 73,234 67,804 - $264,870 264,870 249,277 121,869 7,882 $311,206 311,207 98,818 42,016 (1,246) Agent plan OPEB actuarial assumptions—The health insurance premium benefit contribution requirements for the year ended June 30, 2017, were established by the 54 Navajo County Notes to Financial Statements June 30, 2017 June 30, 2015, actuarial valuations, and those actuarial valuations were based on the following actuarial methods and assumptions. Actuarial valuations involve estimates of the reported amounts’ value and assumptions about the probability of events in the future. Amounts determined regarding the plans’ funded status and the annual required contributions are subject to continual revision as actual results are compared to past expectations and new estimates are made. The required schedule of funding progress for the health insurance premium benefit presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of the plans’ assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Projections of benefits are based on (1) the plans as the County and plans’ members understand them and include the types of benefits in force at the valuation date, and (2) the pattern of sharing benefit costs between the County and plans’ members to that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The significant actuarial methods and assumptions used are the same for all PSPRS and CORP plans and related benefits (unless noted), and the following actuarial methods and assumptions were used to establish the fiscal year 2017 contribution requirements: PSPRS and CORP—OPEB contribution requirements Actuarial valuation date June 30, 2015 Actuarial cost method Entry age normal Amortization method Level percent closed for unfunded actuarial accrued liability, open for excess Remaining amortization period 21 years for unfunded actuarial accrued liability, 20 years for excess Asset valuation method 7-year smoothed market value; 80%/120% market corridor Actuarial assumptions: Investment rate of return 7.85% Projected salary increases 4 %–8% for PSPRS and 4%–7.25% for CORP Wage growth 4% for PSPRS and CORP Agent plan OPEB trend information—Annual OPEB cost information for the health insurance premium benefit for the current and 2 preceding years follows for each of the agent plans: Year Ended June 30 PSPRS Sheriff 2017 2016 2015 Annual OPEB Cost $ 0 0 31,455 55 Percentage of Annual Cost Contributed 0% 0 100 Net OPEB Obligation $0 0 0 Navajo County Notes to Financial Statements June 30, 2017 Year Ended June 30 PSPRS Attorney Investigators 2017 2016 2015 Annual OPEB Cost CORP 2017 2016 2015 $ Percentage of Annual Cost Contributed Net OPEB Obligation 0 0 0 0% 0 0 $0 0 0 0 0 14,526 0% 0 100 $0 0 0 $ Agent plan OPEB funded status—The health insurance premium benefit plans’ funded status as of the most recent valuation date, June 30, 2016, along with the actuarial assumptions and methods used in those valuations follow. PSPRS Sheriff $ 628,925 338,940 Actuarial value of assets (a) Actuarial accrued liability (b) Unfunded actuarial accrued liability (funding excess) (b) – (a) Funded ratio (a)/(b) Annual covered payroll (c) Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll (b) – (a) / (c) (289,985) 185.56% 2,452,015 (11.8)% PSPRS Attorney Investigators $ 6,059 34,136 CORP Detention $ 348,466 125,473 28,077 17.80% 0 (222,993) 277.72% 1,576,314 0% (14.1)% The actuarial methods and assumptions used are the same for all the PSPRS and CORP health insurance premium benefit plans (unless noted), and for the most recent valuation date are as follows: PSPRS and CORP—OPEB funded status Actuarial valuation date June 30, 2016 Actuarial cost method Entry age normal Amortization method Level percent closed for unfunded actuarial accrued liability, open for excess Remaining amortization period 20 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market Asset valuation method corridor Actuarial assumptions: Investment rate of return 7.50% Projected salary increases 4%–8% for PSPRS and 4%–7.25% for CORP Wage growth 4% for PSPRS and CORP 56 Navajo County Notes to Financial Statements June 30, 2017 C. Elected Officials Retirement Plan Plan description—Elected officials and judges participate in the Elected Officials Retirement Plan (EORP), ASRS, or the Elected Officials Defined Contribution Retirement System (EODCRS). EORP administers a cost-sharing multiple-employer defined benefit pension plan and a cost-sharing multiple-employer defined benefit health insurance premium benefit (OPEB) plan for elected officials and judges who were members of the plan on December 31, 2013. This plan was closed to new members as of January 1, 2014. The PSPRS Board of Trustees governs the EORP according to the provisions of A.R.S. Title 38, Chapter 5, Article 3. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information for the EORP plans. The report is available on PSPRS’s website at www.psprs.com. Benefits provided—The EORP provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefit terms. Retirement, disability, and survivor benefits are calculated on the basis of age, average yearly compensation, and service credit as follows: EORP Retirement and disability Years of service and age required to receive benefit Final average salary is based on Benefit percent Normal retirement Disability retirement Survivor benefit Retired members Active members and other inactive members Initial membership date: Before January 1, 2012 On or after January 1, 2012 20 years, any age 10 years, age 62 5 years, age 65 5 years, any age* any years and age if disabled Highest 36 consecutive months of last 10 years 10 years, age 62 5 years, age 65 any years and age if disabled 4% per year of service, not to exceed 80% 80% with 10 or more years of service 40% with 5 to 10 years of service 20% with less than 5 years of service 3% per year of service, not to exceed 75% 75% with 10 or more years of service 37.5% with 5 to 10 years of service 18.75% with less than 5 years of service 75% of retired member’s benefit 75% of disability retirement benefit 50% of retired member’s benefit 50% of disability retirement benefit Highest 60 consecutive months of last 10 years * With reduced benefits of 0.25% for each month early retirement precedes the member’s normal retirement age, with a maximum reduction of 30%. 57 Navajo County Notes to Financial Statements June 30, 2017 Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on excess investment earning. In addition, the Legislature may enact permanent one-time benefit increases after a Joint Legislative Budget Committee analysis of the increase’s effects on the plan. Contributions—State statutes establish active member and employer contribution requirements. Statute also appropriates $5 million annually through fiscal year 2043 for the EORP from the State of Arizona to supplement the normal cost plus an amount to amortize the unfunded accrued liability and designates a portion of certain court fees for the EORP. For the year ended June 30, 2017, statute required active EORP members with an initial membership date on or before July 19, 2011, to contribute 13 percent of the members’ annual covered payroll for July 2016 through April 2017 and 7 percent of the members’ annual covered payroll for April 2017 through June 2017. Statute required active EORP members with an initial membership date after July 19, 2011, to contribute 13 percent of the members’ annual covered payroll and the County to contribute 23.5 percent of all active EORP members’ annual covered payroll. Also, statute required the County to contribute 12.16 percent to EORP of the annual covered payroll of elected officials and judges who were ASRS members and 17.50 percent to EORP of the annual covered payroll of elected officials and judges who were EODCRS members, in addition to the County’s required contributions to ASRS and EODCRS for these elected officials and judges. The County’s contributions to the pension plan for the year ended June 30, 2017, were $363,340. No OPEB contributions were required or made for the years ended June 30, 2015, 2016, and 2017. During fiscal year 2017, the County paid for EORP pension contributions as follows: 100 percent from the General Fund. Pension liability—At June 30, 2017, the County reported a liability for its proportionate share of the EORP’s net pension liability that reflected a reduction for the County’s proportionate share of the State’s appropriation for EORP. The amount the County recognized as its proportionate share of the net pension liability, the related state support, and the total portion of the net pension liability that was associated with the County were as follows: County’s proportionate share of the EORP net pension liability State’s proportionate share of the EORP net pension liability associated with the County Total $17,665,320 3,647,430 $21,312,750 The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability as of June 30, 2016, reflects a decrease in the investment rate of return actuarial assumption from 7.85 percent to 7.50 percent. 58 Navajo County Notes to Financial Statements June 30, 2017 The County’s proportion of the net pension liability was based on the County’s actual contributions to the plan relative to the total of all participating employers’ actual contributions for the year ended June 30, 2016. The County’s proportion measured as of June 30, 2016, was 1.8698352 percent, which was an increase of 0.0493442 from its proportion measured as of June 30, 2015. The collective net pension liability measured as of June 30, 2017, will reflect changes of actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The change in the County’s proportionate share of the collective net pension liability as a result of these changes is not known. Pension expense and deferred outflows/inflows of resources—For the year ended June 30, 2017, the County recognized pension expense for EORP of $4,826,806 and revenue of $973,316 for the County’s proportionate share of the State’s appropriation to EORP and the designated court fees. At June 30, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: EORP Deferred Outflows of Resources Differences between expected and actual experience Changes of assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between county contributions and proportionate share of contributions County contributions subsequent to the measurement date Total Deferred Inflows of Resources $332,203 $1,983,377 409,216 186,187 16,042 363,340 $2,942,120 $348,235 The $363,340 reported as deferred outflows of resources related to EORP pensions resulting from county contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to EORP pensions will be recognized in pension expense as follows: Year ending June 30 2018 2019 2020 2021 $1,497,752 502,118 148,701 81,974 Actuarial assumptions—The significant actuarial assumptions used to measure the total pension liability are as follows: 59 Navajo County Notes to Financial Statements June 30, 2017 EORP Actuarial valuation date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2016 Entry age normal 7.50% 4.25% 4.0% Included RP-2000 mortality table projected to 2025 with projection scale AA Actuarial assumptions used in the June 30, 2016, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2011. The long-term expected rate of return on EORP pension plan investments was determined to be 7.50 percent using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: EORP Target allocation 2% 5% 4% 7% 8% 10% 11% 10% 13% 14% 16% 100% Asset class Short term investments Absolute return Risk parity Fixed income Real assets GTAA Private equity Real estate Credit opportunities Non-U.S. equity U.S. equity Total Long-term expected arithmetic real rate of return 0.75% 4.11% 5.13% 2.92% 4.77% 4.38% 9.50% 4.48% 7.08% 8.25% 6.23% Discount rate—At June 30, 2016, the discount rate used to measure the EORP total pension liability was 3.68 percent, which was a decrease of 1.18 from the discount rate used as of June 30, 2015. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate, employer contributions will be made at the statutorily set rates, and state contributions will be made as currently required by statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be insufficient to make all projected future benefit payments of current plan members. Therefore, to determine the total pension liability for the plan, the long-term expected rate of return on pension plan 60 Navajo County Notes to Financial Statements June 30, 2017 investments of 7.50 percent was applied to periods of projected benefit payments through the year ended June 30, 2027. A municipal bond rate of 2.85 percent obtained from the 20-year Bond Buyer Index, as published by the Federal Reserve as of June 30, 2016, was applied to periods of projected benefit payments after June 30, 2027. Sensitivity of the County’s proportionate share of the EORP net pension liability to changes in the discount rate—The following table presents the County’s proportionate share of the net pension liability calculated using the discount rate of 3.68 percent, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.68 percent) or 1 percentage point higher (4.68 percent) than the current rate: EORP County’s proportionate share of the net pension liability 1% Decrease (2.68%) Current discount rate (3.68%) 1% Increase (4.68%) $20,563,304 $17,665,320 $15,246,239 Pension plan fiduciary net position—Detailed information about the pension plan’s fiduciary net position is available in the separately issued EORP financial report. EODCRS plan—Elected officials and judges who are not members of EORP or ASRS participate in the EODCRS and the Elected Officials Defined Contribution Retirement System Disability Program (EODCDP). The EODCRS is a defined contribution pension plan. The EODCDP is a cost-sharing multiple-employer defined benefit disability (OPEB) plan for EODCRS members. The PSPRS Board of Trustees governs the EODCRS and EODCDP according to the provisions of A.R.S. Title 38, Chapter 5, Articles 3.1 and 3.2. Benefit terms, including contribution requirements, are established by state statute. For the year ended June 30, 2017, active EODCRS members were required by statute to contribute 8 percent of the members’ annual covered payroll, and the County was required by statute to contribute 6 percent of active members’ annual covered payroll to an individual employee account. Employees are immediately vested in their own contributions and the County’s contributions to the individual employee account and the earnings on those contributions. In addition, statute required active EODCRS members and the County to each contribute at the actuarially determined rate of 0.125 percent of the members’ annual covered payroll to the EODCDP plan. For the year ended June 30, 2017, the County recognized pension expense of $18,428. The County’s OPEB contributions for the current and 2 preceding years, all of which were equal to the required contributions, were as follows: EODCDP Disability Fund Year ended June 30 2017 $381 2016 367 2015 88 61 Navajo County Notes to Financial Statements June 30, 2017 Note 12 - Interfund Balances and Activity Interfund receivables and payables—Interfund balances at June 30, 2017, were as follows: Payable from General Fund Flood Control District Fund Public Health District Fund Other Governmental Funds Total Public Works/ HURF Fund General Fund Payable To Public Health Other District Governmental Fund Funds $335 $ 466 $2,550 $ 729,990 301,016 $1,031,006 $2,550 $335 69,565 $70,031 Total 801 2,550 729,990 370,581 $1,103,922 $ The interfund balances resulted from time lags between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. All interfund balances are expected to be paid in one year. Interfund transfers—Interfund transfers for the year ended June 30, 2017, were as follows: Transfer from General Fund Public Works/HURF Fund Flood Control District Fund Public Health District Fund Other Governmental Funds Total General Fund $ 21,605 1,050,000 222,310 739,939 $2,033,854 Transfers To Public Other Health Governmental District Fund Funds $375,090 $1,571,243 511,520 54,960 $430,050 46,674 105,953 $2,235,390 Total $1,946,333 533,125 1,050,000 268,984 900,852 $4,699,294 Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments are due, and (3) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Note 13 - County Treasurer’s Investment Pool Arizona Revised Statutes require community colleges, school districts, and other local governments to deposit certain public monies with the County Treasurer. The Treasurer has a fiduciary responsibility to administer those and the County’s monies under his stewardship. The Treasurer invests, on a pool basis, all idle monies not specifically 62 Navajo County Notes to Financial Statements June 30, 2017 invested for a fund or program. In addition, the Treasurer determines the fair value of those pooled investments annually at June 30. The County Treasurer’s investment pool is not registered with the Securities and Exchange Commission as an investment company, and there is no regulatory oversight of its operations. The pool’s structure does not provide for shares, and the County has not provided or obtained any legally binding guarantees to support the value of the participants’ investments. The Treasurer allocates interest earnings to each of the pool’s participants. The deposits and investments the County holds are included in the County Treasurer’s investment pool, except for $839,821 in deposits. Therefore, the deposit and investment risks of the Treasurer’s investment pool are substantially the same as the County’s deposit and investment risks. See Note 4 for disclosure of the County’s deposit and investment risks. Details of each major investment classification follow: Investment Type U.S. agency securities U.S. Treasury securities U.S. Treasury money market funds Principal $120,300,000 50,000,000 10,000 Interest Rates .73% - 1.50% .50% - .1.125% Maturities 08/17 – 09/19 07/17 – 06/19 .02% N/A Amount $120,118,169 49,925,529 10,000 A condensed statement of the investment pool’s net position and changes in net position follows: Statement of Net Position Assets Liabilities Net position $217,766,909 1,860,577 $215,906,332 Net position held in trust for: Internal participants External participants Total net position held in trust Statement of Changes in Net Position Total additions Total deductions Net increase Net position held in trust: July 1, 2016 June 30, 2017 63 $ 28,919,628 186,986,704 $215,906,332 $317,456,436 298,344,296 19,112,140 196,794,192 $215,906,332 Navajo County, Arizona Fiscal Year Ended June 30, 2017 OTHER REQUIRED SUPPLEMENTARY INFORMATION Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Required Supplementary Information Budgetary Comparison Schedule General Fund Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Property taxes County sales taxes Licenses and permits Fines and forfeits Intergovernmental Charges for services Investment earnings Miscellaneous $ Total revenues Expenditures: General government Board of Supervisors/Administration Facilities Management Elections Planning and Zoning Recorder Voter Registration Assessor Information Technology Treasurer Personnel Commission Fleet Management County-wide Legal Defender County Attorney Superior Court Public Defender Clerk of Court Holbrook Justice Court Winslow Justice Court Snowflake Justice Court Show Low Justice Court Pinetop Justice Court 7,759,129 6,488,000 425,033 762,250 18,061,029 7,716,528 43,118 715,426 $ Actual Amounts Variance with Final Budget 7,536,306 6,534,686 438,370 684,282 18,043,647 7,434,503 38,721 661,072 $ (222,823) 46,686 13,337 (77,968) (17,382) (282,025) (4,397) (54,354) 41,970,513 41,371,587 (598,926) 3,180,922 2,089,019 767,241 424,505 259,594 228,112 1,318,465 1,041,250 489,188 15,000 50,000 8,304,725 249,511 2,351,056 2,732,613 663,966 1,421,451 348,655 345,840 405,826 284,406 362,451 2,329,245 1,915,053 517,961 317,344 200,302 177,887 1,195,899 1,063,278 487,453 3,771 5,324 10,232,727 258,219 2,278,128 2,723,538 596,854 1,249,071 334,909 329,743 394,154 243,072 352,599 851,677 173,966 249,280 107,161 59,292 50,225 122,566 (22,028) 1,735 11,229 44,676 (1,928,002) (8,708) 72,928 9,075 67,112 172,380 13,746 16,097 11,672 41,334 9,852 (Continued) See accompanying note to budgetary comparison schedules. 66 Navajo County Required Supplementary Information Budgetary Comparison Schedule General Fund Year Ended June 30, 2017 (Continued) Original and Final Budgeted Amounts Kayenta Justice Court Kayenta Constable Pinetop Constable Snowflake Constable Holbrook Constable Winslow Constable Show Low Constable Total general government $ Public safety Juvenile Detention Juvenile Probation Adult Probation Jail Operations Sheriff Total public safety 116,948 22,081 72,569 59,698 42,727 33,172 67,861 27,748,852 $ Actual Amounts Variance with Final Budget 106,820 20,752 70,222 45,598 43,630 35,050 66,676 27,595,279 $ 10,128 1,329 2,347 14,100 (903) (1,878) 1,185 153,573 1,268,716 433,554 584,195 6,535,550 5,765,860 14,587,875 1,065,421 383,999 552,208 4,995,216 5,587,269 12,584,113 203,295 49,555 31,987 1,540,334 178,591 2,003,762 444,796 2,588,200 431,214 2,588,200 13,582 - 3,032,996 3,019,414 13,582 353,299 294,449 58,850 Capital outlay 1,068,664 262,219 806,445 Contingency 4,200,000 - 4,200,000 50,991,686 43,755,474 7,236,212 Health and welfare Public Fiduciary Indigent Health Total health and welfare Education School Superintendent Total expenditures (Continued) See accompanying note to budgetary comparison schedules. 67 Navajo County Required Supplementary Information Budgetary Comparison Schedule General Fund Year Ended June 30, 2017 (Continued) Original and Final Budgeted Amounts Actual Amounts $ (9,021,173) $ (2,383,887) 3,725,350 (3,350,141) 375,209 14,218 3,910,224 (1,946,333) 1,978,109 14,218 184,874 1,403,808 Net change in fund balances (8,645,964) (405,778) 8,240,186 Fund balances as restated, July 1, 2016 8,645,964 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Sale of capital assets Transfers in Transfers out Total other financing sources and uses Fund balances, June 30, 2017 $ - $ $ 8,518,893 6,637,286 1,602,900 8,924,671 See accompanying note to budgetary comparison schedules. 68 Variance with Final Budget 278,707 $ 8,518,893 Navajo County Required Supplementary Information Budgetary Comparison Schedule Public Works/HURF Fund Year Ended June 30, 2017 Original and Final Budgeted Amounts Actual Amounts $ 11,297,993 10,000 36,017 54,028 11,398,038 $ 12,173,466 25,304 45,108 80,751 12,324,629 15,982,390 15,982,390 8,820,738 8,820,738 7,161,652 7,161,652 Excess (deficiency) of revenues over expenditures (4,584,352) 3,503,891 8,088,243 Other financing uses: Transfers out Total other financing sources and uses (1,367,654) (1,367,654) (1,366,671) (1,366,671) (5,952,006) 2,137,220 8,089,226 8,342,938 299,569 $ 10,779,727 2,390,932 299,569 $ 10,779,727 Revenues: Intergovernmental Charges for services Investment earnings Miscellaneous Total revenues Expenditures: Highways and streets Total expenditures Net change in fund balances Fund balances, July 1, 2016 Increase in reserve for inventories Fund balances, June 30, 2017 5,952,006 $ - See accompanying note to budgetary comparison schedules. 69 Variance with Final Budget $ 875,473 15,304 9,091 26,723 926,591 983 983 Navajo County Required Supplementary Information Budgetary Comparison Schedule Flood Control District Fund Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Property taxes Intergovernmental Investment earnings Miscellaneous Total revenues $ 1,814,523 Actual Amounts $ 1,856,973 1,789,574 1,311 40,913 4 1,831,802 7,910,622 7,910,622 862,665 862,665 7,047,957 7,047,957 (6,053,649) 969,137 7,022,786 42,450 Expenditures: Public safety Total expenditures Excess (deficiency) of revenues over expenditures Other financing uses: Transfers out Total other financing uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ (1,345,502) (1,345,502) (1,395,502) (1,395,502) (7,399,151) (426,365) 7,399,151 - $ 7,159,080 6,732,715 See accompanying note to budgetary comparison schedules. 70 Variance with Final Budget $ (24,949) 1,311 (1,537) 4 (25,171) (50,000) (50,000) 6,972,786 $ (240,071) 6,732,715 Navajo County Required Supplementary Information Budgetary Comparison Schedule Public Health District Fund Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Property taxes Licenses and permits Intergovernmental Charges for services Investment earnings Contributions Miscellaneous Total revenues $ Expenditures: Health and welfare Total expenditures 2,007,656 100,000 3,197,642 150,750 920 20,140 5,477,108 6,362,645 6,362,645 5,048,767 5,048,767 Variance with Final Budget $ (1,712) 29,581 (615,033) 39,174 (920) 18,644 19,423 (510,843) 1,313,878 1,313,878 (885,537) (82,502) 1,511,175 (490,018) 430,050 (733,562) (1,081,125) (243,544) 1,021,157 (303,512) (1,324,669) 135,620 (386,014) (521,634) Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 2,005,944 129,581 2,582,609 189,924 38,784 19,423 4,966,265 Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Actual Amounts (135,620) - $ $ 189,923 (196,091) See accompanying note to budgetary comparison schedules. 71 803,035 $ 325,543 (196,091) Navajo County Required Supplementary Information Notes to Budgetary Comparison Schedules June 30, 2017 Note 1 - Budgeting and Budgetary Control A.R.S. requires the County to prepare and adopt a balanced budget annually for each governmental fund. The Board of Supervisors must approve such operating budgets on or before the third Monday in July to allow sufficient time for the legal announcements and hearings required for the adoption of the property tax levy on the third Monday in August. A.R.S. prohibits expenditures or liabilities in excess of the amounts budgeted. Essentially, the County prepares its budget on the same modified accrual basis of accounting used to record actual revenues and expenditures. In addition, the County budgets its expenditures by function. The County has adopted budgets in accordance with A.R.S. requirements for the General Fund, Special Revenue Funds, Capital Project Funds, and Debt Service Funds, with the exception of the County School Superintendent’s (CSS) Special Revenue Fund. In accordance with A.R.S. §15-301(C), the CSS is designated as a local education agency (LEA). Expenditures for the LEA for an accommodation school, juvenile detention education, special education services, and unorganized territory transportation are not included in the adopted budget of the County’s Board of Supervisors. Expenditures may not legally exceed appropriations at the department level. In certain instances, transfers of appropriations between departments or from the contingency account to a department may be made upon the Board of Supervisors’ approval. With the exception of the General Fund, each fund includes only one department. Note 2 - Budgetary Basis of Accounting The County’s budget is prepared on a basis consistent with generally accepted accounting principles, except for the indirect costs were budgeted in transfers in and out and the present value of net minimum installment purchase contract payments were not budgeted. The following schedule reconciles the excess/(deficiency) of revenues over expenditures from the Statement of Revenues, Expenditures, and Changes in Fund Balances to the budgetary comparison schedules: 72 Navajo County Required Supplementary Information Notes to Budgetary Comparison Schedules June 30, 2017 Excess (deficiency) of revenues over expenditures from the Statement of Revenues, Expenditures, and Changes in Fund Balances Indirect costs budgeted in transfers in/(out) Present value of net minimum installment purchase contract payments Excess (deficiency) of revenues over expenditures from the Budgetary comparison schedules General Fund Public Works Fund Flood Control Fund Public Health Fund $ (517,772) (1,876,370) $2,670,345 833,546 $623,635 345,502 $(547,080) 464,578 $3,503,891 $969,137 $ (82,502) 10,255 $(2,383,887) Note 3 - Expenditures in Excess of Appropriations For the year ended June 30, 2017, expenditures exceeded final budget amounts at the department level (the legal level of budgetary control) as follows: Department/Fund Information Technology – General Fund County-wide - General Fund Holbrook Constable – General Fund Winslow Constable – General Fund NARDC – Capital Projects Fund Housing Sheriff’s Office Excess $ 22,028 1,928,002 903 1,878 2,681 33,825 130,610 The excesses were primarily the result of unexpected expenditures or expenditures made as a result of unanticipated revenues, or both. When departments exceed their annual budget, the County closely monitors departmental spending and discusses the overage with the departments in subsequent budget meetings with the County Manager and Finance. Specifically, the County experienced higher than anticipated claims costs in its self-insured healthcare plan that resulted in an over expended the final budget amount of $1,928,002 for the General Fund County-wide line item. To address these increased healthcare costs, the County is aggressively implementing a strategy to reduce structural costs and promote healthier lifestyles for its employees. In addition, the County performed a comprehensive review each of its health plan vendors and associated contracts, and is moving forward with different partners with lower administrative costs. Further, the County has established new, lower-cost relationships for providers and air ambulance services. To complement the structural changes in the health plan, the County is implementing a new Wellness Program to educate, support, and incentivize employees to make healthier lifestyle choices; become aware of and correct potential chronic issues; and properly address existing chronic issues. 73 Navajo County Required Supplementary Information Schedule of the County’s Proportionate Share of the Net Pension Liability Cost-Sharing Pension Plans June 30, 2017 Arizona State Retirement System County’s proportion of the net pension liability County’s proportionate share of the net pension liability County’s covered payroll County’s proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 2017 (2016) 0.21% $ 33,707,260 $ 19,429,032 173.49% 169.39% 164.85% 67.06% 68.35% 69.49% Corrections Officer Retirement Plan—Administrative Office of the Courts County’s proportion of the net pension liability County’s proportionate share of the net pension liability County’s covered payroll County’s proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 2017 (2016) 1.74% $ 4,896,487 $ 1,891,207 Reporting Fiscal Year (Measurement Date) 2016 2015 2014 through 2008 (2015) (2014) 1.69% 1.74% Information $ 4,108,278 $ 3,902,859 not available $ 1,879,552 $ 1,854,011 258.91% 218.58% 210.51% 54.81% 57.89% 58.59% 2017 (2016) 1.87% $ 17,665,320 Reporting Fiscal Year (Measurement Date) 2016 2015 2014 through 2008 (2015) (2014) 1.82% 1.84% Information $ 14,226,251 $ 12,307,206 not available 3,647,430 $ 21,312,750 $ 1,532,182 4,435,153 $ 18,661,404 $ 1,551,376 3,773,504 $ 16,080,710 $ 1,704,339 1152.95% 917.01% 722.11% 23.42% 28.32% 31.91% Elected Officials Retirement Plan County’s proportion of the net pension liability County’s proportionate share of the net pension liability State’s proportionate share of the net pension liability associated with the County Total County’s covered payroll County’s proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability Reporting Fiscal Year (Measurement Date) 2016 2015 2014 through 2008 (2015) (2014) 0.21% 0.21% Information $ 32,861,924 $ 30,957,928 not available $ 19,400,464 $ 18,778,977 See accompanying notes to pension plan schedules. 74 Navajo County Required Supplementary Information Schedule of Changes in the County’s Net Pension Liability and Related Ratios Agent Pension Plans June 30, 2017 Reporting Fiscal Year PSPRS Sheriff (Measurement Date) Total pension liability Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability—beginning Total pension liability—ending (a) Plan fiduciary net position Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending (b) County’s net pension liability—ending (a) – (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll $ 2017 2016 2015 (2016) (2015) (2014) 468,580 $ 1,327,262 (615,741) 397,350 1,309,258 (777,000) 641,504 (377,151) 426,843 1,092,844 586,447 (668,752) 2,472,745 (1,161,727) (1,109,711) (1,167,336) (117,122) 219,746 2,742,791 17,254,367 17,034,621 14,291,830 $17,137,245 $ 17,254,367 $ 17,034,621 $ 1,205,254 295,080 31,020 $ 790,385 261,993 191,904 $ 691,037 233,105 675,189 (1,161,727) (1,109,711) (1,167,336) (4,864) (5,044) (5,438) (215,557) (114,224) (8,622) 149,206 15,303 417,935 5,340,226 5,324,923 4,906,988 $ 5,489,432 $ 5,340,226 $ 5,324,923 $11,647,813 $ 11,914,141 $ 11,709,698 32.03% 30.95% 31.26% $ 2,464,986 County’s net pension liability as a percentage of covered payroll $ 472.53% $ 2,365,037 503.76% See accompanying notes to pension plan schedules. 75 $ 2,242,753 522.11% 2014 through 2008 Information not available Navajo County Required Supplementary Information Schedule of Changes in the County’s Net Pension Liability and Related Ratios Agent Pension Plans June 30, 2017 Reporting Fiscal Year PSPRS Attorney Investigators (Measurement Date) Total pension liability Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability—beginning Total pension liability—ending (a) Plan fiduciary net position Contributions—employer Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending (b) County’s net pension liability—ending (a) – (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll County’s net pension liability as a percentage of covered payroll 2017 2016 2015 (2016) (2015) (2014) $ - $ 44,961 (78,488) (13,833) 25,702 40,906 $ 6,616 (392,840) $ 65,456 390 $ 20,181 744 30,804 28,416 1,839 535,143 (35,451) (35,451) (57,109) (380,769) 590,475 971,244 533,366 $ 590,475 $ $ 2014 through 2008 $ (34,741) 561,461 409,783 971,244 6,765 $ (35,451) (35,451) (34,741) (456) (308) (54) (1) (37) 29,938 (14,871) (28,030) 21,263 36,134 64,164 51,201 $ 21,263 $ 36,134 $ 482,165 $ 569,212 $ 935,110 3.60% 3.72% 9.60% $ - 0.00% $ - 0.00% See accompanying notes to pension plan schedules. 76 $ - 0.00% Information not available Navajo County Required Supplementary Information Schedule of Changes in the County’s Net Pension Liability and Related Ratios Agent Pension Plans June 30, 2017 Reporting Fiscal Year CORP (Measurement Date) Total pension liability Service cost Interest on the total pension liability Changes of benefit terms Differences between expected and actual experience in the measurement of the pension liability Changes of assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability—beginning Total pension liability—ending (a) Plan fiduciary net position Contributions—employer Contributions—employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position—beginning Plan fiduciary net position—ending (b) County’s net pension liability—ending (a) – (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll $ 2017 2016 2015 (2016) (2015) (2014) 226,516 307,215 9,571 (31,895) 160,139 $ 137,367 130,513 19,994 $ (290,765) (3,227) (10,869) (16,987) 3,303,418 $ 3,286,431 $ $ 1,040,040 $ 75.96% 66.12% 229,853 301,883 123,062 137,233 120,952 (414,141) 240,204 $ 142,344 141,818 417,329 (445,789) (275,163) (3,354) (3,281) 9,359 (82,179) (58,537) 340,868 3,361,955 3,021,087 3,303,418 $ 3,361,955 642,272 83.72% $ 262,381 298,329 35,245 (445,789) (275,163) (7,923) 146,855 3,953,613 3,806,758 3,945,690 $ 3,953,613 1,632,100 39.35% See accompanying notes to pension plan schedules. 77 $ (93,870) (290,765) 380,781 3,945,690 $ 4,326,471 $ $ 1,572,955 County’s net pension liability as a percentage of covered payroll $ $ 591,658 85.04% $ 1,726,328 34.27% 2014 through 2008 Information not available Navajo County Required Supplementary Information Schedule of County Pension Contributions June 30, 2017 Arizona State Retirement System Statutorily required contribution County’s contributions in relation to the statutorily required contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll 2017 $ 2,171,922 Reporting Fiscal Year 2016 2015 2014 $ 2,128,972 $ 2,098,505 $ 2,009,012 2,171,922 $ $ 20,130,088 2,128,972 $ $ 19,429,032 2,098,505 $ $ 19,400,464 2,009,012 $ $ 18,778,977 10.79% 10.96% 10.82% 10.70% 2013-2008 Information not available Corrections Officer Retirement Plan—Administrative Office of the Courts Statutorily required contribution County’s contributions in relation to the statutorily required contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll $ 2017 379,356 $ Reporting Fiscal Year 2016 2015 367,198 $ 279,677 $ 2014 267,905 379,356 $ $ 1,941,447 367,198 $ $ 1,891,207 279,677 $ $ 1,879,552 267,905 $ $ 1,854,011 19.54% 19.42% 14.88% 14.45% 2013-2008 Information not available Elected Officials Retirement Plan Statutorily required contribution County’s contributions in relation to the statutorily required contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll $ 2017 363,340 $ Reporting Fiscal Year 2016 2015 355,627 $ 364,573 $ 2014 394,725 363,340 $ $ 1,668,147 355,627 $ $ 1,532,182 364,573 $ $ 1,551,376 394,725 $ $ 1,704,339 21.78% 23.21% 23.50% 23.16% See accompanying notes to pension plan schedules. 78 2013-2008 Information not available Navajo County Required Supplementary Information Schedule of County Pension Contributions June 30, 2017 PSPRS Sheriff Actuarially determined contribution County’s contributions in relation to the actuarially determined contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll 2017 $ 1,091,146 Reporting Fiscal Year 2016 2015 2014 $ 1,214,475 $ 784,719 $ 692,113 1,091,146 $ $ 2,475,549 1,214,475 $ $ 2,464,986 784,719 $ $ 2,365,037 692,113 $ $ 2,242,753 44.08% 49.27% 33.18% 30.86% 2013-2008 Information not available PSPRS Attorney Investigators Actuarially determined contribution County’s contributions in relation to the actuarially determined contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll $ 2017 38,721 $ $ 38,721 - $ $ $ 0.00% Reporting Fiscal Year 2016 2015 2014 35,878 $ 49,759 $ 35,878 0.00% $ $ 49,759 0.00% - 2013-2008 Information not available - $ $ 0.00% CORP Actuarially determined contribution County’s contributions in relation to the actuarially determined contribution County’s contribution deficiency (excess) County’s covered payroll County’s contributions as a percentage of covered payroll $ 2017 144,735 $ Reporting Fiscal Year 2016 2015 2014 138,748 $ 123,060 $ 146,738 144,735 $ $ 1,668,947 138,748 $ $ 1,572,955 123,060 $ $ 1,632,100 146,738 $ $ 1,726,328 8.67% 8.82% 7.54% 8.50% See accompanying notes to pension plan schedules. 79 2013-2008 Information not available Navajo County Required Supplementary Information Notes to Pension Plan Schedules June 30, 2017 Note 1 - Actuarially Determined Contribution Rates Actuarial determined contribution rates for PSPRS and CORP are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial cost method Amortization method Remaining amortization period as of the 2015 actuarial valuation Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth Retirement age Mortality Entry age normal Level percent closed for unfunded actuarial accrued liability, open for excess 21 years for unfunded actuarial accrued liability, 20 years for excess 7-year smoothed market value; 80%/120% market corridor In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85% In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%–8.5% to 4.0%–8.0% for PSPRS and from 4.5%–7.75% to 4.0%–7.25% for CORP. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%–9.0% to 4.5%–8.5% for PSPRS and from 5.0%–8.25% to 4.5%–7.75% for CORP. In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0% for PSPRS and CORP. In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5% for PSPRS and CORP. Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to an experience study of the period July 1, 2006 June 30, 2011. RP-2000 mortality table (adjusted by 105% for both males and females) Note 2 - Factors that affect trends In February 2014, the Arizona Supreme Court affirmed a Superior Court ruling that a 2011 law that changed the mechanism for funding permanent benefit increases was unconstitutional. As a result, the PSPRS, CORP, and CORP-AOC changed benefit terms to reflect the prior mechanism for funding permanent benefit increases and revised actuarial assumptions to explicitly value future permanent benefit increases. These changes are included in the PSPRS’ and CORP’s changes in total pension liability for fiscal year 2015 (measurement date 2014) in the schedule of changes in the County’s net pension liability and related ratios. These changes also increased the PSPRS, CORP, and CORP-AOC’s required contributions beginning in fiscal year 2016 in the schedule of county pension contributions. 80 Navajo County Required Supplementary Information Schedule of Agent OPEB Plans’ Funding Progress June 30, 2017 Health insurance premium benefit Unfunded actuarial accrued liability (UAAL) (funding excess) (b) – (a) UAAL (funding excess) as a percentage of covered payroll ((b) – (a)/c) Annual covered payroll (c) Actuarial valuation date Actuarial Actuarial value of accrued assets liability (a) (b) PSPRS Sheriff 6/30/16 6/30/15 6/30/14 $628,925 $338,940 $ (289,985) 185.56% $2,452,015 602,123 351,023 (251,100) 171.53 2,324,267 553,923 293,122 (260,801) 188.97 2,080,280 PSPRS Attorney Investigators 6/30/16 6/30/15 6/30/14 CORP 6/30/16 6/30/15 6/30/14 $ 6,059 $ 34,136 $ 7,274 18,907 7,930 - Funded ratio (a)/(b) 28,077 17.80% 11,633 38.47% (7,930) - $ - $348,466 $125,473 $ (222,993) 277.72% $1,576,314 329,954 129,078 (200,876) 255.62 1,493,854 302,076 138,877 (163,199) 217.51 1,618,686 81 (11.8)% (10.8) (12.5) 0% 0 0 (14.1)% (13.4) (10.1) Navajo County, Arizona Fiscal Year Ended June 30, 2017 SUPPLEMENTARY INFORMATION Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Nonmajor Governmental Funds June 30, 2017 Special Revenue Funds Administration Accounts for administration of a variety of programs including the Assessor, Recorder and Treasurer surcharges, election services and certain emergency service functions. Funding sources include service related surcharges, federal and state grant funds, fees and local government contributions. County Attorney Accounts for various programs administered by the County Attorney including Victim's Rights, Assistance and Restitution, Child Support Enforcement, AntiRacketeering, High-Intensity Drug Trafficking Area and Bad Check Enforcement. Funding sources include statutory fees and other surcharges related to criminal prosecution, federal and state grants and other user fees. Courts Accounts for the processing of criminal cases as well as court enhancement and record retention improvement funds. Funding sources include statutory fees and other surcharges related to the courts. Environmental and Conservation Accounts for forest health and energy conservation programs. Funding is provided by federal grants. Housing Accounts for housing and community development programs. Funding is provided by federal Community Development Block Grants. Library District Accounts for support services and materials provided to the County's community libraries. Funding sources include federal and state grants and a secondary property tax levy. Probation Accounts for Adult and Juvenile Probation programs and services provided in coordination with the State's Superior Court System. Funding sources include state grants and fees paid by probationers. Public Defense Accounts for the public defense of criminal cases including public defense enhancement funds. Funding sources include statutory fees and other surcharges related to public defense. Recreation District Accounts for operating costs of the White Mountain Lake Recreation District. Funding sources are fees and secondary property taxes assessed the benefiting property owners within the district boundaries. Sheriff's Office Accounts for various jail and law enforcement programs including Jail Enhancement, Drug Enforcement, Anti-Racketeering, High-Intensity Drug Trafficking Area and Boating Safety. Funding sources include federal and state grants. Special Districts Accounts for operating costs for the Silver Creek, Bucking Horse, Victory Heights, Hilltop Drive, Mountain View and North Whistle Stop Loop County Road Improvement Districts. Funding sources are secondary property taxes assessed the benefiting property owners within the district boundaries. 84 Navajo County Nonmajor Governmental Funds June 30, 2017 Special Revenue Funds Superintendent of Schools Accounts for educational services and programs including the Navajo County Accommodation District, juvenile detention Hope School, Special Services Consortium and unorganized school district territory. Funding sources include federal and state grants and charges for services from local school districts. Workforce Innovation and Opportunity Act (WIOA) Accounts for administration of the federal Workforce Innovation and Opportunity Act (WIOA) program. Funding is from federal grants. Capital Projects Funds Other Accounts for miscellaneous construction projects and funding sources include county revenues and investment earnings. Debt Service Funds General Government Accounts for the accumulation of resources for payment of principal and interest on the 2012 and 2013 Series Pledged Revenue Obligations for construction of the Public Works Complex in Holbrook and construction and remodel of jail facilities. Special Districts Accounts for the accumulation of resources for the payment of principal and interest on bonds and other debt instruments of the Bucking Horse Improvement District. Funding sources are secondary property taxes assessed the benefiting property owners within the district boundaries. 85 Navajo County Combining Balance Sheet Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue County Attorney Courts Administration Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Total assets Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities $ $ $ 606,396 748,331 $ 1,237,206 1,740 2,310 128 110,647 718,783 69,556 265,527 $ 1,085,724 $ 5,771 9,379 $ 17,968 - Environmental and Conservation $ 690,467 9,067 $ 1,246,401 $ 690,467 $ $ 1,766 2,854 15,233 8,734 25,759 1,164 9 14,315 69,556 8,349 59 42,073 32,292 101,872 4,679 1,449,074 693,430 (304,545) 1,144,529 (7,642) 685,788 Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources Fund balances Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances 652,823 100,572 (76,685) 676,710 $ 718,783 1,408,027 2,821 (357,416) 1,053,432 $ 1,085,724 $ 1,246,401 $ 690,467 (continued) 86 Navajo County Combining Balance Sheet Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Library District Probation Housing Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Total assets Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities $ 140,549 $ 666,906 $ 276,077 $ 169,628 $ 666,906 $ 5,849 281,926 $ $ 25,837 19,959 $ 29,079 $ 22 213,504 $ 213,526 38,319 3,455 4,726 288 $ 231,897 231,897 Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources Fund balances Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances Public Defense 553 54,668 3,005 42,327 100,464 8,019 107,675 596,321 273,907 (23) 107,652 (29,879) 566,442 273,907 19,649 19,649 (18,371) (18,371) $ 213,526 $ 169,628 $ 666,906 $ 281,926 (continued) 87 Navajo County Combining Balance Sheet Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Sheriff's Special Office Districts Recreation District Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Total assets Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities $ $ 610 39,065 106,986 $ $ 453 146,505 259,390 $ 160 943 11,475 3 126 34,970 163 47,514 $ 1,892,189 11,656 $ 6,970 630,656 $ $ 2,736 $ 2,736 35,132 115,887 2,019,732 115,670 1,057 116,727 3,591 36,112 36,112 35,132 127,540 3,591 610,056 35,525 (469,817) 175,764 127,540 162,835 $ 5,251 162,835 $ 618,435 5,446 $ Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources Fund balances Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances 123,160 Superintendent of Schools $ 259,390 626,029 824,528 1,212,082 (133,605) 1,903,005 (1,700) 624,329 $ 630,656 $ 2,019,732 (continued) 88 Navajo County Combining Balance Sheet Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Workforce Innovation & Opportunity Act Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Total assets Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities $ $ 156,186 156,186 $ 4,559 4,680 40,656 3,817 Capital Projects Other $ - $ 2,578 53,712 2,578 Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources Fund balances Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances 114,876 117 (2,695) (2,578) (12,402) 102,474 $ 156,186 $ (continued) 89 Navajo County Combining Balance Sheet Nonmajor Governmental Funds Year Ended June 30, 2017 Assets Cash and investments Receivables (net of allowance for uncollectibles): Property taxes Accounts receivable Special assessments Due from: Other funds Other governments Total assets Debt Service General Special Government Districts Total Nonmajor Governmental Funds $ 1,117,010 66,099 $ 8,289,811 112,788 29,079 21,890 157,104 $ 178,887 70,031 1,030,142 $ 9,598,057 $ 1,117,010 Liabilities Accounts payable Accrued payroll and employee benefits Due to: Other funds Other governments Pledged revenue obligations payable Interest payable Total liabilities $ $ $ 370,581 120,903 155,000 130,491 1,072,544 155,000 130,491 285,491 Deferred Inflows of Resources Unavailable revenue–property taxes Unavailable revenue–special assessments Unavailable revenue–intergovernmental Total deferred inflows of resources $ 111,627 111,627 Fund balances Restricted Assigned Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances 74,217 831,519 831,519 $ 1,117,010 90 233,528 62,041 (6,957) 67,260 $ 178,887 19,649 150,350 36,112 206,111 7,558,503 2,182,636 (1,421,737) 8,319,402 $ 9,598,057 Navajo County Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue County Attorney Courts Administration Revenues: Property taxes Special assessments Fines and forfeits Intergovernmental Charges for services Investment earnings (loss) Miscellaneous Total revenues $ $ Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt Service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 552,999 107,141 3,436 329,111 992,687 200,657 625,938 502,074 1,034,731 71,974 4,048 9,360 1,622,187 2,101,219 $ 51,926 351,161 619,910 7,538 946 1,031,481 Environmental and Conservation $ 317,752 3,728 321,480 1,079,047 174,921 17,929 322,770 32,271 1,051,716 2,101,219 14,540 1,093,587 322,770 (59,029) (479,032) (62,106) (1,290) 312,961 (80,478) 232,483 237,979 (134) 237,845 (97,966) (97,966) (572) (572) 173,454 (241,187) (160,072) (1,862) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances (deficits), June 30, 2017 $ 503,256 1,294,619 1,304,601 676,710 $ 1,053,432 $ 1,144,529 687,650 $ 685,788 (continued) 91 Navajo County Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Library District Probation Housing Revenues: Property taxes Special assessments Fines and forfeits Intergovernmental Charges for services Investment earnings (loss) Miscellaneous Total revenues Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt Service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Public Defense $ 802,131 $ 458,825 70,186 458,825 1,188 30,022 903,527 $ 2,051,663 335,664 3,354 4,253 2,394,934 $ 24,803 1,106 68,564 94,473 52,397 2,340,686 643,145 165,114 293,711 458,825 - 643,145 5,397 2,346,083 52,397 260,382 48,851 42,076 5,706 Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses 22 22 (200,000) (200,000) 5,706 53,487 (1,549) 51,938 22 60,382 54,557 94,014 (18,393) 47,270 511,885 179,893 $ (18,371) $ 107,652 566,442 $ 273,907 Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances (deficits), June 30, 2017 $ (continued) 92 Navajo County Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Sheriff's Special Office Districts Recreation District Revenues: Property taxes Special assessments Fines and forfeits Intergovernmental Charges for services Investment earnings (loss) Miscellaneous Total revenues $ $ $ 865 2,673 161,218 Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt Service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 101,042 810,690 496,447 3,309 77,953 1,489,441 104,429 $ 2,152 28,795 135,376 2,543,769 4,134 353,126 2,901,029 1,374,284 49,417 160,471 3,117,598 5,168 Other financing sources (uses): Installment purchase contracts Transfers in Transfers out Total other financing sources and uses 160,471 75,917 1,455,369 49,417 747 34,072 85,959 (216,569) (216,569) 572 91,086 303 (507,281) (415,892) 1,319 (381,820) 85,959 557,584 538,370 572 Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances (deficits), June 30, 2017 157,680 Superintendent of Schools 126,221 $ 127,540 $ 175,764 $ 624,329 3,117,598 2,119,574 $ 1,903,005 (continued) 93 Navajo County Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2017 Special Revenue Workforce Innovation & Opportunity Act Revenues: Property taxes Special assessments Fines and forfeits Intergovernmental Charges for services Investment earnings (loss) Miscellaneous Total revenues $ Capital Projects Other 882,881 $ 882,881 Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt Service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 103 103 2,681 811,889 811,889 2,681 70,992 (2,578) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses (12,872) (12,872) Net change in fund balances 58,120 Fund balances (deficits), July 1, 2016 Fund balances (deficits), June 30, 2017 (2,578) 44,354 $ 102,474 $ (2,578) (continued) 94 Navajo County Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2017 Total Nonmajor Governmental Funds Debt Service General Special Districts Government Revenues: Property taxes Special assessments Fines and forfeits Intergovernmental Charges for services Investment earnings (loss) Miscellaneous Total revenues $ $ $ 3,704 4 3,708 Expenditures: Current: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Debt Service: Principal Interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 226,853 1,018 227,871 802,131 488,962 655,042 9,099,460 1,631,136 39,683 904,807 13,621,221 3,433,320 4,343,589 49,417 174,921 803,616 3,947,416 322,770 165,114 1,185,000 429,222 222,575 27,025 1,614,222 249,600 1,412,743 456,247 421,836 15,530,989 (1,610,514) (21,729) (1,909,768) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses 1,624,360 1,624,360 Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances (deficits), June 30, 2017 91,086 2,235,390 (900,852) 1,425,624 $ 13,846 (21,729) 817,673 88,989 831,519 95 $ 67,260 (484,144) 8,803,546 $ 8,319,402 Navajo County Budgetary Comparison Schedule Special Revenue - Administration Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Intergovernmental Charges for services Investment earnings Miscellaneous Total revenues $ Expenditures: General government Public safety Health and welfare Education and economic opportunity Total expenditures 2,885,453 164,300 2,500 600,000 3,652,253 Actual Amounts $ 2,000,970 2,136,993 257,872 420,210 4,816,045 552,999 107,141 3,436 329,111 992,687 Variance with Final Budget $ 200,657 658,209 174,921 17,929 1,051,716 (2,332,454) (57,159) 936 (270,889) (2,659,566) 1,800,313 1,478,784 82,951 402,281 3,764,329 Excess (deficiency) of revenues over expenditures (1,163,792) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 96 (59,029) 1,104,763 569,701 312,961 (256,740) (100,500) (80,478) 20,022 469,201 232,483 (236,718) (694,591) 173,454 868,045 694,591 503,256 (191,335) - $ 676,710 $ 676,710 Navajo County Budgetary Comparison Schedule Special Revenue - County Attorney Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Fines and forfeits Intergovernmental Charges for services Investment earnings Contributions Miscellaneous Total revenues $ 192,575 1,540,198 41,225 11,178 5,000 220,279 2,010,455 Expenditures: General government Total expenditures $ Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 (1,639,557) (479,032) 286,424 (15,000) 271,424 237,979 (134) 237,845 (1,368,133) (241,187) - 97 $ 2,101,219 2,101,219 1,368,133 $ 502,074 1,034,731 71,974 4,048 Variance with Final Budget 9,360 1,622,187 3,650,012 3,650,012 Excess (deficiency) of revenues over expenditures Fund balances, June 30, 2017 Actual Amounts 1,548,793 1,548,793 1,160,525 (48,445) 14,866 (33,579) 1,126,946 1,294,619 $ 1,053,432 309,499 (505,467) 30,749 (7,130) (5,000) (210,919) (388,268) (73,514) $ 1,053,432 Navajo County Budgetary Comparison Schedule Special Revenue - Courts Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Fines and forfeits Intergovernmental Charges for services Investment earnings Miscellaneous Total revenues $ Expenditures: General government Total expenditures Excess (deficiency) of revenues over expenditures 57,375 372,788 740,800 350 1,171,313 51,926 351,161 619,910 7,538 946 1,031,481 2,301,685 2,301,685 1,093,587 1,093,587 $ (1,130,372) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 Actual Amounts (97,966) (97,966) (1,327,133) (160,072) 1,327,133 - 98 $ 1,068,266 (3,623) 102,418 98,795 1,167,061 1,304,601 $ 1,144,529 (5,449) (21,627) (120,890) 7,188 946 (139,832) 1,208,098 1,208,098 (62,106) 3,623 (200,384) (196,761) $ Variance with Final Budget (22,532) $ 1,144,529 Navajo County Budgetary Comparison Schedule Special Revenue - Environmental and Conservation Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Intergovernmental Investment earnings Total revenues $ Expenditures: Environmental and conservation Total expenditures 140,000 1,700 141,700 Actual Amounts $ 653,624 653,624 Excess (deficiency) of revenues over expenditures $ 322,770 322,770 (511,924) 510,634 (572) (572) Net change in fund balances (511,924) Fund balances, July 1, 2016 $ 99 - (572) (572) (1,862) 511,924 510,062 687,650 $ 685,788 177,752 2,028 179,780 330,854 330,854 (1,290) Other financing uses: Transfers out Total other financing uses Fund balances, June 30, 2017 317,752 3,728 321,480 Variance with Final Budget 175,726 $ 685,788 Navajo County Budgetary Comparison Schedule Special Revenue - Housing Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Intergovernmental Total revenues $ Expenditures: Urban redevelopment and housing Total expenditures 443,371 443,371 Actual Amounts $ 425,000 425,000 Excess (deficiency) of revenues over expenditures $ 458,825 458,825 (18,371) 22 22 Net change in fund balances 18,371 100 - 22 22 22 (18,371) $ 15,454 15,454 (33,825) (33,825) 18,371 Other financing sources: Transfers in Total other financing sources Fund balances (deficits), July 1, 2016 Fund balances, June 30, 2017 458,825 458,825 Variance with Final Budget (18,349) (18,393) $ (18,371) (22) $ (18,371) Navajo County Budgetary Comparison Schedule Special Revenue - Library District Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Property taxes Intergovernmental Investment earnings Miscellaneous Total revenues $ Expenditures: Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures Actual Amounts 803,062 150,146 Variance with Final Budget 953,208 $ 802,131 70,186 1,188 30,022 903,527 $ (931) (79,960) 1,188 30,022 (49,681) 643,804 643,804 410,401 410,401 233,403 233,403 309,404 493,126 183,722 (432,744) (432,744) (432,744) (432,744) (123,340) 60,382 183,722 123,340 47,270 (76,070) - $ 107,652 Other financing uses: Transfers out Total other financing uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 101 - $ 107,652 Navajo County Budgetary Comparison Schedule Special Revenue - Probation Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Intergovernmental Charges for services Investment earnings Miscellaneous Total revenues $ Actual Amounts 1,899,850 321,458 2,917 200 2,224,425 Expenditures: Public safety Total expenditures $ 2,782,105 2,782,105 Excess (deficiency) of revenues over expenditures 2,051,663 335,664 3,354 4,253 2,394,934 Variance with Final Budget $ 151,813 14,206 437 4,053 170,509 2,346,083 2,346,083 436,022 436,022 (557,680) 48,851 606,531 2,996 (3,623) (627) 5,706 5,706 2,710 3,623 6,333 (558,307) 54,557 612,864 558,307 511,885 (46,422) Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ - 102 $ 566,442 $ 566,442 Navajo County Budgetary Comparison Schedule Special Revenue - Public Defense Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Intergovernmental Investment earnings Miscellaneous Total revenues $ Expenditures: General government Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 103 Actual Amounts 21,500 730 22,230 24,803 1,106 68,564 94,473 291,656 291,656 52,397 52,397 239,259 239,259 (269,426) 42,076 311,502 107,460 53,487 (53,973) 107,460 (1,549) 51,938 (1,549) (55,522) (161,966) 94,014 255,980 161,966 179,893 17,927 - $ Variance with Final Budget $ 273,907 $ $ 3,303 376 68,564 72,243 273,907 Navajo County Budgetary Comparison Schedule Special Revenue - Recreation District Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Special assessments Investment earnings Miscellaneous Total revenues $ Expenditures: Culture and recreation Total expenditures Excess (deficiency) of revenues over expenditures 164,500 164,500 320,000 320,000 160,471 160,471 159,529 159,529 747 156,247 572 572 572 572 1,319 156,819 Other financing sources: Transfers in Total other financing sources (155,500) Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 104 Variance with Final Budget $ 157,680 865 2,673 161,218 (155,500) Net change in fund balances Actual Amounts 155,500 126,221 - $ 127,450 $ (6,820) 865 2,673 (3,282) (29,279) $ 127,540 Navajo County Budgetary Comparison Schedule Special Revenue - Sheriff's Office Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Fines and forfeits Intergovernmental Charges for services Investment earnings Miscellaneous Total revenues $ Expenditures: Public safety Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources and uses Net change in fund balances Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 105 Actual Amounts 10,000 557,633 547,610 943 25,470 1,141,656 $ 101,042 810,690 496,447 3,309 77,953 1,489,441 1,233,673 1,233,673 1,364,283 1,364,283 Variance with Final Budget $ 91,042 253,057 (51,163) 2,366 52,483 347,785 (130,610) (130,610) (92,017) 125,158 217,175 (515,000) (515,000) 303 (507,281) (506,978) 303 7,719 8,022 (607,017) (381,820) 225,197 607,017 557,584 (49,433) - $ 175,764 $ 175,764 Navajo County Budgetary Comparison Schedule Special Revenue - Special Districts Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Special assessments Investment earnings Miscellaneous Total revenues $ Expenditures: Highways and streets Total expenditures Excess (deficiency) of revenues over expenditures Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 106 Actual Amounts Variance with Final Budget 44,861 300 19,700 64,861 $ 104,429 2,152 28,795 135,376 $ 574,520 574,520 49,417 49,417 525,103 525,103 (509,659) 85,959 595,618 509,659 538,370 28,711 - $ 624,329 $ 59,568 1,852 9,095 70,515 624,329 Navajo County Budgetary Comparison Schedule Special Revenue - Workforce Innovation and Opportunity Act Year Ended June 30, 2017 Original and Final Budgeted Amounts Actual Amounts Variance with Final Budget 2,120,468 2,120,468 $ 882,881 882,881 $ (1,237,587) (1,237,587) Expenditures: Education and economic opportunity Total expenditures 2,052,519 2,052,519 811,889 811,889 1,240,630 1,240,630 Excess (deficiency) of revenues over expenditures 67,949 70,992 3,043 (12,872) (12,872) (12,872) (12,872) 67,949 58,120 (9,829) (67,949) 44,354 Revenues: Intergovernmental Total revenues $ Other financing uses: Transfers out Total other financing uses Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances, June 30, 2017 $ 107 - $ 102,474 112,303 $ 102,474 Navajo County Budgetary Comparison Schedule Capital Projects - Other Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Investment earnings Total revenues Actual Amounts $ Expenditures: Public safety Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources: Bond proceeds Total other financing sources $ Net change in fund balances Fund balances (deficits), July 1, 2016 Fund balances, June 30, 2017 108 (2,500,000) - $ 103 103 2,681 2,681 (2,681) (2,681) (2,578) (2,578) 2,500,000 2,500,000 (2,500,000) (2,500,000) 2,500,000 $ 103 103 Variance with Final Budget $ (2,578) (2,502,578) (2,578) 2,500,000 $ (2,578) Navajo County Budgetary Comparison Schedule Debt Service - General Government Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Investment earnings Miscellaneous Total revenues Expenditures: Debt Service General government Total expenditures Actual Amounts $ $ 3,704 4 3,708 Variance with Final Budget $ 3,704 4 3,708 2,714,431 2,714,431 1,614,222 1,614,222 1,100,209 1,100,209 (2,714,431) (1,610,514) 1,103,917 1,613,837 1,624,360 10,523 Total other financing sources 1,613,837 1,624,360 10,523 Net change in fund balances (1,100,594) 13,846 1,114,440 1,100,594 817,673 Excess (deficiency) of revenues over expenditures Other financing sources: Transfers in Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 109 - $ 831,519 (282,921) $ 831,519 Navajo County Budgetary Comparison Schedule Debt Service - Special Districts Year Ended June 30, 2017 Original and Final Budgeted Amounts Revenues: Special assessments Investments earnings Total revenues $ Expenditures: Debt Service Highways and streets Total expenditures Excess (deficiency) of revenues over expenditures Fund balances, July 1, 2016 Fund balances, June 30, 2017 $ 110 270,620 Actual Amounts Variance with Final Budget 270,620 $ 226,853 1,018 227,871 433,060 433,060 249,600 249,600 183,460 183,460 (162,440) (21,729) 140,711 162,440 88,989 (73,451) - $ 67,260 $ $ (43,767) 1,018 (42,749) 67,260 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2017 Assets Cash and investments Total Assets Liabilities Due to other governments Deposits held for other parties Total Liabilities Balance July 1, 2016 Additions Deductions $ 2,939,392 $ 2,939,392 $ 13,166,934 $ 13,166,934 $ 13,448,449 $ 13,448,449 $ $ 2,657,877 2,657,877 $ $ 11,915,214 1,251,720 $ 13,166,934 $ 11,994,465 1,453,984 $ 13,448,449 $ 658,241 1,999,636 2,657,877 737,492 2,201,900 $ 2,939,392 112 Balance June 30, 2017 $ STATISTICAL SECTION Navajo County, Arizona Fiscal Year Ended June 30, 2017 Navajo County Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2008 Expenses: General government Public safety Highways and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Interest on long-term debt Total governmental activities expenses $ Program Revenues: Charges for services: General government Public Safety Highway and streets Health and welfare Culture and recreation Operating grants and contributions: General government Public Safety Highway and streets Health and welfare Culture and recreation Education and economic opportunity Environmental and conservation Urban redevelopment and housing Capital grants and contributions: General government Public Safety Highway and streets Total governmental activities program revenues Net (Expense) Revenue General Revenues: Property taxes Special assessments (see Note) General county sales tax State shared revenues Payment in lieu of taxes Grants and contributions not restricted to specific programs Investment earnings Capital contributions Gain on disposal of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position - governmental activities 20,503,496 17,570,231 12,960,992 6,809,907 472,151 7,119,026 234,078 5,000 349,677 66,024,558 2009 $ 19,392,043 19,182,119 14,058,305 7,219,915 510,035 5,723,104 231,225 594,260 66,911,006 2010 2011 $ 22,647,297 17,566,896 13,057,318 9,366,578 747,065 6,307,885 237,032 307,208 677,253 70,914,532 $ 22,396,786 16,191,164 14,480,464 7,129,008 814,786 5,710,417 196,504 35,558 625,962 67,580,649 3,465,053 672,441 98,695 194,090 3,746,695 541,256 83,076 77,965 3,473,303 765,083 122,462 3,531,064 517,702 39,249 215,494 1,851,358 3,063,868 3,719,202 3,599,091 1,735,327 3,290,457 2,584,222 2,916,270 1,751,447 38,102 7,186,346 162,086 2,199,624 64,885 5,512,115 205,884 1,803,890 122,207 6,086,494 195,574 305,647 2,280,437 137,643 3,665,344 429,653 63,162 12,361,020 30,863,219 12,393,158 32,054,807 15,637,667 33,480,772 13,170,789 29,677,799 $ (35,161,339) $ (34,856,199) $ (37,433,760) $ (37,902,850) $ $ 10,933,578 $ 12,494,737 $ 12,866,253 7,083,165 13,302,354 6,330,588 12,017,517 5,480,598 10,728,725 5,889,027 11,405,376 3,922,712 1,624,746 6,444,858 750,742 4,902,289 322,748 4,489,096 254,483 11,971 1,207,819 23,895 1,466,751 36,860,156 37,967,929 115,237 1,273,310 (380,236) 34,937,408 5,957 1,822,741 36,732,933 $ 9,707,389 1,698,817 $ 3,111,730 $ (2,496,352) $ (1,169,917) Note: The County reclassified special assessments revenue from general revenue to program revenue beginning in FY 2016. (Continued) 114 Navajo County Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2012 $ 2013 2014 $ 3,326,109 982,588 334,513 163,957 155,895 3,649,106 1,146,080 12,171 243,393 3,537,721 919,746 252,982 329,602 5,079,224 1,390,048 100,758 274,262 5,400,182 1,549,821 432,421 333,306 166,881 4,780,321 1,285,569 330,585 319,505 151,137 2,215,242 3,252,479 1,966,176 4,500,832 2,700,852 3,976,671 3,613,033 3,715,424 3,945,966 4,911,950 3,794,242 4,571,216 1,819,214 152,083 4,654,668 59,097 2,500,943 129,282 4,327,485 301,660 40,823 2,820,717 149,666 5,266,695 534,722 376,628 2,898,998 128,945 4,488,394 411,987 62,860 2,770,719 61,754 5,034,340 364,692 10,000 2,901,048 68,388 3,450,856 317,752 458,825 11,571,167 36,553,199 67,306 12,173,466 34,670,216 9,565,055 30,431,057 31,968,411 16,655,632 11,190,411 7,956,284 665,292 5,669,487 211,478 73,852 802,936 75,193,783 $ 11,431,446 33,595,379 29,716,664 17,512,220 12,008,267 8,350,410 798,683 5,479,786 247,622 16,887 503,684 74,634,223 2017 $ 20,944,578 19,123,378 10,935,566 7,734,191 788,127 5,498,285 303,402 42,701 527,044 65,897,272 9,690,517 28,508,468 22,213,348 16,995,243 9,534,493 8,039,343 694,108 6,190,399 329,829 365,994 487,808 64,850,565 2016 21,607,586 18,238,891 8,023,409 5,909,936 966,000 6,164,792 16,352 784 721,020 61,648,770 220,229 5,000 9,578,324 26,919,398 $ 2015 $ 32,717,374 17,730,173 10,710,700 8,362,293 790,379 4,297,521 303,270 165,114 461,083 75,537,907 $ (34,729,372) $ (37,388,804) $ (34,419,508) $ (41,598,404) $ (38,081,024) $ (40,867,691) $ 12,087,700 $ 11,924,765 502,434 6,239,089 12,024,496 1,430,914 $ $ 12,536,351 507,456 6,674,867 12,964,950 1,406,936 $ 12,531,782 $ 12,131,695 6,246,077 11,475,113 3,175,428 202,500 (109,711) 13,116 1,170,658 34,370,592 $ (358,780) $ 11,704,948 542,526 6,667,433 12,773,729 1,538,954 6,365,510 13,125,229 1,547,382 6,534,686 13,730,314 1,532,361 164,425 9,600 1,666,058 35,769,139 453,017 195,437 52,473 892,976 96,640 1,455,607 35,974 1,072,052 165,384 6,980 2,995 1,341,167 32,957,436 35,232,854 35,394,023 35,086,429 (4,431,368) $ 813,346 $ 115 (6,204,381) $ (2,994,595) $ (5,098,552) Navajo County Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2008 General fund Reserved Unreserved Nonspendable* Assigned* Unassigned Total general fund All other governmental funds Reserved Unreserved, reported in: Special revenue funds Debt service funds Capital projects funds Nonspendable* Restricted Assigned Unassigned Total all other governmental funds $ 2009 3,957,781 10,939,695 $ 2,883,159 7,550,215 2010 $ 2011 325,096 7,416,990 $ $ 14,897,476 $ 10,433,374 $ 7,742,086 $ $ $ 528,878 500,703 26,620,823 1,777,950 24,543 679,641 25,962,952 1,824,003 $ 3,182,499 3,349,495 6,531,994 31,118,113 1,924,862 76,332 $ $ 28,924,019 $ 28,466,596 $ 33,648,185 543,055 28,973,243 1,231,112 (270,933) $ 30,476,477 (Continued) * Due to the implementation of GASB Statement No. 54 in FY 2011, categories regarding fund balance have been redefined. See Notes for Financial Statements Note 10 for details. 116 Navajo County Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2012 2013 2014 2015 $ 437,220 $ 2,331,597 3,482,808 6,251,625 $ 1,273,833 $ 2,836,408 3,544,712 7,654,953 2016 $ 1,612,513 $ 2,535,860 3,523,261 7,671,634 2017 $ $ $ $ 2,533,698 3,939,417 6,473,115 920,545 25,792,646 1,529,453 (39,006) $ 28,203,638 $ $ $ 2,021,131 3,849,238 5,870,369 1,034,772 26,621,136 2,064,946 (13) $ 29,720,841 $ 1,114,772 26,720,572 3,288,638 (1,048,472) $ 30,075,510 117 $ 991,663 22,055,581 2,552,485 (1,686,672) $ 23,913,057 $ 619,596 23,119,737 966,610 (210,456) $ 24,495,487 $ $ 900,000 2,734,436 4,884,457 8,518,893 919,164 24,928,694 2,182,636 (2,394,741) $ 25,635,753 Navajo County Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2008 Revenues: Property taxes $ 9,581,813 County sales taxes Licenses and permits 643,032 Fines and forfeits 1,290,001 Intergovernmental 50,665,504 Charges for services 2,515,958 Investment earnings 1,624,746 Special assessments Rents and royalties Contributions 56,956 Miscellaneous 1,222,929 Total revenues 67,600,939 Expenditures: General government 22,871,415 Public safety 17,525,292 Highways and streets 14,792,747 Health and welfare 6,813,069 Culture and recreation 471,342 Education and economic opportunity 7,119,291 Environmental and conservation 234,078 Urban redevelopment and housing 5,000 Debt service: Principal 303,173 Interest and other charges 349,677 Bond Issuance Costs Capital outlay 6,238,140 Total expenditures 76,723,224 Excess(deficiency) of revenues over expenditures (9,122,285) Other financing sources (uses): Revenue bonds issued 6,600,000 Payment to bond refunding escrow agent Capital lease/installment purchase agreements 77,845 Special assessment bonds issued Sale of capital assets 11,971 Transfers in 1,845,732 Transfers out (1,845,732) Total other financing sources and uses 6,689,816 Net change in fund balances $ (2,432,469) Ratio of total debt service expenditures to non-capital expenditures 0.93% 2009 2010 2011 $ 10,780,692 $ 12,294,308 $ 12,612,528 513,081 1,563,382 52,104,688 2,284,384 750,741 356,318 619,663 1,336,602 49,652,453 2,347,245 322,747 133,181 529,657 1,317,038 46,350,655 2,583,583 254,483 198,817 25,916 1,466,751 69,845,953 31,141 1,273,311 68,010,651 30,333 1,822,741 65,699,835 22,160,207 18,403,733 17,778,854 7,074,321 501,738 5,515,147 231,225 21,661,752 16,838,127 10,087,829 9,306,800 740,591 6,139,063 237,032 307,208 21,894,300 17,020,246 15,462,752 7,138,323 808,312 5,674,996 196,504 35,558 487,701 594,260 858,416 677,253 919,249 625,962 3,030,157 75,777,343 81,675 66,935,746 274,573 70,050,775 (5,931,390) 1,074,905 (4,350,940) 6,846 18,913 23,895 2,304,012 (2,304,012) 30,741 $ (5,900,649) 115,237 8,048,481 (6,789,602) 1,374,116 $ 2,449,021 5,957 6,600,855 (6,600,855) 24,870 $ (4,326,070) 1.49% 2.30% 2.21% (Continued) 118 Navajo County Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2012 2013 $ 12,092,878 $ 12,058,648 2014 469,651 1,539,663 43,050,561 3,041,435 (109,710) 502,434 50,540 1,170,659 60,834,002 64,512 892,976 61,510,170 42,650 1,455,607 65,577,439 43,061 1,072,052 73,099,759 39,962 1,341,167 75,735,226 38,784 1,666,057 74,115,504 20,650,249 17,394,177 9,452,610 7,507,775 962,712 6,019,533 16,352 784 20,746,489 17,515,389 9,583,999 7,987,610 785,901 5,326,169 303,402 42,701 21,296,099 17,165,782 8,446,932 7,909,342 691,882 6,146,055 347,079 365,994 27,228,792 16,762,711 10,245,789 8,323,596 702,563 5,491,323 223,528 73,852 27,475,209 18,013,055 9,949,660 8,698,408 812,461 5,408,227 266,428 16,887 29,089,321 17,667,900 9,187,604 8,676,682 803,616 4,241,865 322,770 165,114 946,316 721,020 821,698 461,413 75,464 7,613,324 71,341,064 2,737,814 802,936 1,529,333 503,684 1,571,917 461,083 327,361 63,998,889 676,779 527,044 115,290 1,469,268 65,080,041 5,207,816 77,800,720 2,093,691 74,767,043 1,608,272 73,796,144 (3,164,887) (3,569,871) (5,763,625) (4,700,961) 968,183 319,360 8,500,000 (4,345,000) 146,994 10,625,000 (4,806,395) 488,368 68,446 10,017,167 (10,017,167) 423,272 $ (2,741,615) 78,863 10,157,899 (10,157,899) 4,380,857 $ 810,986 98,822 7,753,432 (7,753,432) 6,405,795 642,170 2.62% 1.89% 2.13% 119 12,565,289 6,674,867 522,919 1,789,993 40,045,748 9,698,659 195,437 491,734 $ 2017 397,490 1,228,579 42,113,926 2,934,743 202,499 642,688 $ $ 2016 11,699,519 6,667,433 606,269 1,247,497 39,645,165 3,241,520 453,017 518,762 354,826 $ 2015 12,542,649 6,365,510 604,525 1,492,927 42,328,108 10,369,286 165,384 485,708 $ 12,133,955 6,534,686 567,951 1,339,324 41,900,493 9,280,867 164,425 488,962 101,341 $ 64,945 5,625,009 (5,625,009) 64,945 (4,636,016) 4.88% $ 2,995 4,218,192 (4,218,192) 2,995 971,178 2.80% $ 14,218 4,699,294 (4,699,294) 115,559 434,919 2.82% Navajo County Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position Governmental activities: Net investment in capital assets Restricted Unrestricted (deficit) Total governmental activities net position 2008 2009 Fiscal Year 2010 $ 61,704,323 24,374,755 16,119,289 $ 102,198,367 $ 73,728,006 19,040,878 15,007,820 $ 107,776,704 $ 66,038,408 23,034,928 16,207,016 $ 105,280,352 $ 70,264,651 27,364,617 6,481,167 $ 104,110,435 $ 64,205,881 25,830,803 7,151,635 $ 97,188,319 2013 2014 Fiscal Year 2015 2016 2017 $ 58,803,447 25,924,806 8,028,698 $ 92,756,951 $ 65,059,354 24,056,612 4,454,331 $ 93,570,297 $ 63,750,745 23,521,625 (51,230,312) $ 36,042,058 $ 62,361,145 24,226,548 (53,540,230) $ 33,047,463 $ 60,217,341 26,973,194 (57,988,587) $ 29,201,948 2011 2012 * Capital assets were restated for fiscal year 2012 due to certain road projects such as chip seals, slurry seals, and overlays being reclassified from capitalized road improvements to road maintenance projects expensed in the year completed. 120 Navajo County Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years PRIMARY ASSESSED VALUE Fiscal Year Residential and Vacant Property Commercial Property Unattached Personal Property Total Taxable Assessed Value 2008 2009 2010 **2011 2012 2013 2014 2015 2016 2017 480,365,541 563,228,216 631,550,018 683,204,674 634,214,647 575,074,783 513,683,811 468,337,874 473,702,904 483,652,421 315,601,599 328,530,388 345,011,622 365,730,626 371,913,522 380,102,301 371,638,224 359,094,468 344,422,319 305,141,610 16,347,131 16,599,092 22,964,880 20,353,287 19,936,077 19,084,628 18,023,142 17,584,375 14,676,214 14,268,450 812,314,271 908,357,696 999,526,520 1,069,288,587 1,026,064,246 974,261,712 903,345,177 845,016,717 832,801,437 803,062,481 Assessed Value as a Percentage *Total Direct Estimated Actual of Actual Tax Rate Value Value 1.2504 1.2238 1.2057 1.2035 1.2447 1.2864 1.3850 1.5615 1.5917 1.5849 7,181,877,591 8,083,048,537 8,941,980,626 9,625,529,702 9,350,503,687 8,838,891,218 8,029,406,641 7,573,933,720 7,591,032,171 7,599,284,336 Source: Navajo County Assessor's office * Total Direct Tax Rate contains both primary and secondary tax rates ** Revised abstract resulting from centrally assessed Transwestern lawsuit. 121 11.31% 11.24% 11.18% 11.11% 10.97% 11.02% 11.25% 11.16% 10.97% 10.57% NAVAJO COUNTY Direct and Overlapping Property Tax Rates Last Ten Fiscal Years County Direct Rates Fiscal Year Primary Fire District Assistance Tax Library District Flood Control District Public Health District Total Direct 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.6041 0.5775 0.5594 0.5572 0.5984 0.6401 0.6995 0.8185 0.8417 0.8471 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.1000 0.0500 0.0500 0.0500 0.0500 0.0500 0.0500 0.0704 0.1000 0.1000 0.1000 0.3000 0.3000 0.3000 0.3000 0.3000 0.3000 0.3000 0.3000 0.3000 0.2878 0.1963 0.1963 0.1963 0.1963 0.1963 0.1963 0.2151 0.2430 0.2500 0.2500 1.2504 1.2238 1.2057 1.2035 1.2447 1.2864 1.3850 1.5615 1.5917 1.5849 Community College District 1.4206 1.3382 1.1352 1.1308 1.2387 1.3515 1.4769 1.6610 1.7423 1.7884 Overlapping rates Fiscal Year School Equalization School Districts Cities Other Special Districts 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0000 0.0000 0.3306 0.3564 0.4259 0.4717 0.5123 0.5089 0.5054 0.5010 3.1373-6.7592 3.6519-7.7773 3.6624-8.3747 3.0839-8.0000 3.1634-7.3012 2.9606-8.000 2.8322-8.000 2.6662-8.000 2.8027-7.3012 3.5669-7.3012 0.2845-0.8870 0.2845-0.8685 0.2789-0.8550 0.2789-0.8567 0.2789-0.9815 0.2789-0.9880 0.2789-1.1934 1.2831-1.2831 1.3646-1.3646 1.4021-1.4021 0.0864-2.7749 0.0785-2.7512 0.0706-2.7326 0.0707-3.5500 0.0835-3.5500 0.0910-3.5500 0.1131-3.550 0.1291-3.550 0.1401-3.550 0.1401-3.550 Source: Navajo County Assessor's Office and Navajo County Finance Department. 1) All tax rates are per $100 assessed valuation. 2) Includes both primary and secondary tax rates. 122 Navajo County Principal Property Taxpayers Current Year and Five Years Ago 2017 Taxpayer Arizona Public Service Company PacifiCorp Electric Operations Peabody Western Coal Co. Transwestern Pipeline Co Burlington Northern/Santa Fe Railway Kinder Morgan Navopache Electric Co-Op Inc. Citizens Telecom of White Mountains Unisource Energy Corporation Smith Bagley Primary Assessed Value $135,671,176 55,275,181 15,827,002 12,839,040 7,633,285 7,160,409 6,417,901 5,433,659 4,994,177 3,958,786 TOTALS $ 255,210,616 Total 2017 Navajo County Assessed Value 2010 Percentage of Total Primary Assessed Value Rank 1 16.89% 2 6.88% 3 1.97% 4 1.60% 5 0.95% 6 0.89% 7 0.80% 8 0.68% 9 0.62% 10 0.49% 31.78% Primary Assessed Value $ 107,346,606 31,068,621 16,669,389 11,923,788 4,483,725 9,163,477 3,328,331 6,231,982 2,821,246 N/A Rank 1 2 3 4 8 5 9 7 10 N/A $ 193,037,165 Total 2010 Navajo County Assessed Value $803,062,481 Percentage of Total Primary Assessed Value 10.75% 3.11% 1.67% 1.19% 0.45% 0.92% 0.33% 0.62% 0.28% N/A 19.32% $ 998,764,550 Source: Navajo County Assessor's office Note: Information for principle property taxpayers was not available prior to fiscal year 2010; consequently the comparison is for a 7 year period. 123 Navajo County Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Taxes Levied for the Fiscal Year (1) Collected within Fiscal Year Percentage Amount of Levy Collections in Subsequent Years 2008 $ 4,910,224 $ 4,684,181 95.40% $ 122,424 $4,806,605 97.89% 2009 $ 5,246,500 $ 5,003,706 95.37% $ 113,842 $5,117,548 97.54% 2010 $ 5,579,624 $ 5,306,931 95.11% $ 149,020 $5,455,951 97.78% 2011 $ 5,857,939 $ 5,569,913 95.08% $ 176,635 $5,746,548 98.10% 2012 $ 6,104,482 $ 5,887,544 96.45% $ 99,380 $5,986,924 98.07% 2013 $ 6,178,444 $ 6,001,505 97.14% $ 57,562 $6,059,067 98.07% 2014 $ 6,265,198 $ 6,070,355 96.89% $ 77,665 $6,148,019 98.13% 2015 $ 6,863,137 $ 6,652,088 96.92% $ 91,242 $6,743,330 98.25% 2016 $ 6,986,971 $ 6,748,980 96.59% $ 115,343 $6,864,323 98.24% 2017 $ 6,793,141 $ 6,579,938 96.86% $ (95,792) $ 6,484,146 95.45% Total Collections to Date Percentage Amount of Levy Source: Taxes levied obtained by Navajo County Board of Supervisors Adopted Budget net of Assessor's corrections. Collections obtained from the Navajo County Treasurer. Note: General Fund Levies and Collections Only. (1) Changes to prior year Taxes Levied due to Board orders in the current fiscal year. 124 Navajo County Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Certificates of Participation Special Assessment Bonds Capital Leases & Installment Purchase Contracts 6,600,000 5,635,000 2,442,125 73,520 14,750,645 0.58 131.29 2009 6,600,000 5,340,000 1,702,213 53,687 13,695,900 0.52 121.23 2010 6,265,000 5,030,000 1,517,107 25,377 12,837,484 0.47 119.48 2011 5,915,000 4,700,000 1,309,455 12,693 11,937,148 0.43 111.38 2012 5,545,000 4,345,000 1,172,771 282,887 11,345,658 0.4 105.94 2013 13,665,000 - 985,235 320,638 14,970,873 0.52 137.73 2014 19,125,000 - 786,508 571,035 20,482,543 0.69 187.59 2015 16,845,000 - 573,542 326,188 17,744,730 0.56 163.88 2016 15,840,000 - 352,575 172,822 16,365,397 N/A (2) N/A (3) 2017 14,660,000 - 130,000 109,821 14,899,821 N/A (2) N/A (3) Fiscal Year Revenue Bonds 2008 Source: Total Primary Government Percentage of Personal Income (1) Per Capita (1) Details regarding the County's outstanding debt can be found in the notes to the financial statements (1) Personal income and population information can be found in the Demographic and Economic Statistics schedule. (2) Personal income was not available for 2016 and 2017. (3) Population was not available for 2016 and 2017. 125 Navajo County Pledged Revenue Coverage Last Ten Fiscal Years County Excise Tax $ 6,667,433 6,674,867 6,365,510 6,534,686 2013 Series Pledged Revenue Obligations Debt Service State Shared Net Available Sales Tax Revenue Principal Interest $ 10,763,214 $ 17,430,647 $ $ 83,899 10,891,962 17,566,829 1,985,000 324,035 10,874,837 17,240,347 1,005,000 187,488 11,362,457 17,897,143 1,030,000 165,680 Coverage 207.76 7.61 14.46 14.97 Fiscal Year 2013 2014 2015 2016 2017 County Excise Tax $ 6,239,089 6,667,433 6,674,867 6,365,510 6,534,686 2012 Series Pledged Revenue Obligations Debt Service State Shared Net Available Sales Tax Revenue Principal Interest $ 10,087,589 $ 16,326,678 $ $ 50,368 10,763,214 17,430,647 186,604 10,891,962 17,566,829 295,000 408,402 10,874,837 17,240,347 150,000 265,842 11,362,457 17,897,143 150,000 260,982 Coverage 324.15 93.41 24.97 41.46 43.55 Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2008 Series Pledged Revenue Obligations (Refunded in August 2013) Debt Service County Excise State Shared Net Available Tax Sales Tax Revenue Principal Interest $ 7,083,165 $ 10,915,470 $ 17,998,635 $ $ 6,330,588 9,844,858 16,175,446 131,432 5,480,598 8,732,190 14,212,788 335,000 240,573 5,846,576 9,285,088 15,131,664 350,000 228,585 6,200,729 9,553,213 15,753,942 370,000 215,985 6,239,089 10,087,589 16,326,678 380,000 202,860 6,667,433 10,763,214 17,430,647 385,000 124,500 Fiscal Year 2014 2015 2016 2017 Fiscal Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: $ Revenues 300,706 273,885 241,567 241,374 248,745 251,299 231,966 224,359 226,853 Special Assessment Bonds Debt Service Coverage Ratio Principal Interest $ 166,022 $ 105,882 1.11 185,106 94,237 0.98 207,652 83,934 0.83 136,684 75,045 1.14 187,536 74,568 0.95 198,727 54,482 0.99 212,967 43,352 0.90 220,967 39,763 0.86 222,575 19,690 0.94 Navajo County Finance Department 126 Coverage Ratio 123.07 24.69 26.15 26.88 28.01 34.21 Navajo County Legal Debt Margin Information Last Ten Fiscal Years Legal Debt Margin Calculation for Fiscal Year 2017 Assessed value Debt limit (15% of assessed value) Debt applicable to limit: General obligation bonds Less: Amount set aside for repayment of general obligation debt Total net debt applicable to limit Legal debt margin Debt Limit Total net debt applicable to limit Legal debt margin $ Total net debt applicable to the limit as a percentage of the debt Debt Limit Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of the debt 2008 121,847,141 2009 $ 136,253,654 121,847,141 136,253,654 0% $ 2014 $ 135,502,778 146,139,257 135,502,778 0% 841,423,705 126,213,556 $ 126,213,556 $ 2011 158,850,728 149,814,683 0% 2013 146,139,257 0% $ Fiscal Year 2010 149,814,683 $ 158,850,728 0% $ Fiscal Year 2015 126,937,062 126,937,062 0% $ 153,920,569 0% $ 2016 126,455,560 0% $ 126,455,560 0% Source: The legal debt limit of Navajo County is equal to 15% of the County's net secondary assessed valuation, per the Arizona Constitution, Article 9, Section 8. Assessed valuations are provided by the Navajo County Assessor. 127 2012 153,920,569 2017 126,213,556 126,213,556 0% Navajo County Demographic and Economic Statistics Last Ten Calendar Years Fiscal Year Population Personal Income (thousands of dollars) Per Capita Personal Income Unemployment Rate 2008 112,348 2,539,509 $ 22,604 9.7 2009 112,975 2,634,137 $ 23,316 14.9 2010 107,449 2,742,716 $ 25,526 16.0 2011 107,174 2,780,847 $ 25,947 15.8 2012 107,094 2,826,523 $ 26,393 15.2 2013 108,694 2,869,655 $ 26,401 13.1 2014 109,185 2,965,679 $ 27,162 11.2 2015 108,277 3,154,284 $ 29,132 9.6 2016 (1) (1) (1) 9.4 2017 (1) (1) (1) 7.6 Source: Population and Personal Income from U.S. Bureau of Economic Analysis. Workforce Informer Arizona at www.laborstats.az.gov for unemployment rate. (1) Information is not yet available for 2016 and 2017. 128 Navajo County Employment by Sector and Major Employers Employment by Sector 2008 2,375 3,300 525 10,400 3,475 800 1,000 1,275 5,650 850 Mining and Construction Educational & Health Srvs Financial Activities Government Leisure & Hospitality Manufacturing Information Professional & Business Srvs Trade, Transportation & Utilities Other Services 2009 1,600 3,500 475 10,100 3,150 550 1,075 1,025 5,375 750 2010 1,450 3,550 400 9,650 3,500 525 1,150 1,000 5,250 700 2011 1,325 3,200 425 9,500 3,625 525 1,150 1,025 5,025 525 2012 1,600 3,550 575 9,850 3,600 475 1,175 1,000 5,150 950 (Continued) Source: see next page Major Employers(1) Employer Apache Railway APS Arizona Department of Corrections Algae Biosciences Burlington Northern Santa Fe Cellular One Forest Energy Corp. Hatch Auto Centers Hondah Resort & Casino Holiday Inn Home Depot Kayenta Boarding B.I.A. School Keams Canyon Indian Hospital K-Mart Little Colorado Medical Center Lowes Navajo Government Executive Branch Navajo County School District Navajo Tribal Utility Authority Navopache Electric Cooperative, Inc. Northland Pioneer College NovoPower Overseas Aircraft Support Peabody Coal Co. Smithfield Pinon Unified School District #4 Safeway Summit Healthcare Tate's Auto Center Wal-Mart SuperCenter Western Moulding Co. Inc. White Mountain Apache Tribe Employer Type Railroad Operation Utilities Prison Pharmaceuticals Railroad Operation Communications Energy Auto Dealer Hospitality Hotels and Motels Retail Education Medical Retail Medical Retail Government Education Utilities Utilities Education Energy Aircraft Coal and Mining Pork Production Education Retail Medical Auto Dealer Retail Millwork Government Sources: Holbrook Chamber of Commerce; Navajo Nation, Navajo Nation, Division of Economic Development: Pinetop-Lakeside Chamber of Commerce: Show Low Regional Chamber of Commerce; and Snowflake/Taylor Chamber of Commerce. 129 Navajo County Employment by Sector and Major Employers (Continued) Employment by Sector 2013 1,600 3,575 600 9,675 3,875 125 1,175 1,175 5,175 1,050 Mining and Construction Educational & Health Srvs Financial Activities Government Leisure & Hospitality Manufacturing Information Professional & Business Srvs Trade, Transportation & Utilities Other Services 2014 1,625 3,575 700 9,325 3,700 150 1,150 1,425 4,700 925 2015 1,725 3,900 625 9,775 3,200 175 1,200 1,150 4,875 950 2016 1,525 4,125 650 8,925 3,450 250 1,050 1,325 5,475 975 2017 2,625 4,400 525 8,850 3,850 275 950 1,300 5,500 450 (Continued) Source: Prepared in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics. Arizona Department of Commerce, Strategic Investment and Research. Figures are organized under the North American Industrial Classification System (NAICS). (1) The number of employees for the 10 largest employers in the County is not available due to State of Arizona non-disclosure restrictions. 130 Navajo County Full-Time Equivalent Employees by Function Last Ten Fiscal Years Fiscal Year Function General government Public safety Highways and streets Health and welfare Culture and recreation Total 2008 290 260 90 67 4 711 2009 284 256 90 66 4 700 2010 284 248 81 63 5 681 2011 294 239 81 65 6 685 Function General government Public safety Highways and streets Health and welfare Culture and recreation Total 2014 277 236 83 80 4 680 2015 278 238 91 81 5 693 2016 288 235 96 81 4 704 2017 266 229 72 80 4 651 Source: Navajo County Budget 2008 - 2017 131 2012 295 243 82 66 5 691 2013 278 238 78 73 8 675 Navajo County Operating Indicators by Function Last Ten Fiscal Years Function General Government Assessor Number of parcels assessed Elections Elections Number voting Fiscal Year 2009 2010 2008 Planning & Zoning Building permits issued Public Fiduciary Guardianships/conservatorships Public Safety Adult Probation Community service hours Pre-sentence reports written for courts Probationers actively supervised Juvenile Probation Average length of detention (days) Juveniles in detention Probationers Community restitution hours Sheriff Inmate population Highways & Streets Public Works Crack sealing (miles) Street resurfacing (miles) Waste Tire Program Waste tires collected Health & Welfare Public Health District Certified copies of birth or death certificates Childhood immunization visits Restaurant inspections and re-inspections Culture & Recreation Library District Number of items circulated Number of library cards issued (by member libraries) Number of prints, media and electronic items Number of items owned by Library District Education School Superintendent Charter schools Charter students District students School districts 2011 84,824 85,536 85,858 86,304 5 23,687 4 51,626 4 21,379 4 50,969 3,085 1,837 1,285 926 104 103 110 99 50,415 678 1,036 51,910 594 1,009 49,198 504 1,008 40,687 637 1,349 12 338 186 10,504 8 457 199 8,740 10 441 171 8,939 12 408 182 5,173 363 363 361 319 2 52 42 47 25 49 42 56,775 51,481 48,743 60,117 5,685 10,586 593 6,811 7,343 608 6,913 10,299 336 4,949 5,154 709 442,038 6,079 262,997 16,907 456,579 5,985 287,552 19,607 480,959 6,206 310,602 21,774 441,232 6,170 333,901 24,199 6 818 20,861 14 6 839 20,497 14 7 471 19,913 14 7 352 19,071 14 (continued) Source: Navajo County departments monthly and annual performance reports 132 Navajo County Operating Indicators by Function Last Ten Fiscal Years 2012 Fiscal Year 2014 2015 2013 2016 2017 88,148 85,773 85,752 88,306 88,527 88,363 5 17,330 4 57,960 3 8,569 1 685 3 32,969 3 57,699 994 1,023 970 981 1,009 1,061 108 109 163 160 131 116 39,135 641 1,270 40,306 566 1,313 36,388 571 1,181 33,793 828 1,101 30,408 572 1,086 32,460 453 1,098 11 449 148 7,346 12 336 122 6,401 10 355 307 5,252 9 339 297 5,093 10 353 151 5,061 14 276 210 4,715 274 283 382 364 301 268 82 32 59 13 88 12 102 30 444 14 264 20 47,962 57,742 52,623 47,184 56,331 51,038 4,678 4,592 423 5,031 2,165 621 5,353 1,096 483 5,341 1,250 503 5,595 1,068 696 6,525 4,076 632 438,916 5,406 343,659 25,837 425,272 5,054 333,193 28,827 378,584 14,303 334,866 34,214 368,114 13,957 336,617 32,149 361,865 33,223 346,632 33,577 370,800 33,883 330,600 41,422 7 399 18,606 14 7 630 18,495 13 6 742 17,090 11 6 829 17,575 13 9 789 17,803 14 4 664 16,360 14 (continued) 133 Navajo County Capital Asset Statistics by Function Last Ten Fiscal Years 2008 2009 2010 Fiscal Year 2012 2013 2011 2014 2015 2016 2017 Function General Government Elections Voting Machines Superior Courts Divisions Division - Satellite Justice Courts 158 158 158 173 173 173 173 173 60 60 4 4 4 6 6 6 4 1 6 4 1 6 4 1 6 4 1 6 4 1 6 4 1 6 4 1 6 1 0 433 1 0 425 1 0 426 1 0 442 2 0 442 2 0 441 2 0 438 2 0 438 2 0 438 2 0 31 8 1 31 8 1 30 9 1 31 12 1 31 12 0 31 12 0 31 13 0 26 13 0 31 14 0 43 13 0 732.01 14 737.65 14 734.9 14 733.28 14 733.65 15 733.95 15 733.95 15 734.66 15 734.32 15 731.67 15 Sanitation Landfill/Environment Transfer Stations 0 0 0 0 0 0 0 0 0 0 Health Health Care Public health facilities Heber - Owned Show Low - Owned Snowflake - Operated Holbrook - Owned Winslow - Owned Pinetop - Owned 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 1 1 1 1 1 1 1 1 1 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 1 0 1 1 1 1 1 1 1 1 1 1 Public Safely Sheriff Inmate beds available Jail Facilities Stations Improvement Districts Flood Warning Sites Flood Control District Properties Road Improvement Districts Highways and Streets Public Works Miles of maintained roads Bridges Culture and Recreation Parks & Recreation County Parks (Tall Timber, Heber) Library District Number of facilities owned Facilities operated Bookmobiles Education Schools Source: Navajo County capital asset reports. 134