City of Mesa, Arizona Comprehensive Annual Financial Report Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov For the Fiscal Year Ended June 30, 2012 City of Mesa, Arizona Comprehensive Annual Financial Report Scott Smith Mayor Dave Richins Councilmember, District 1 Alex Finter Councilmember, District 2 Dennis Kavanaugh Councilmember, District 3 Christopher Glover Councilmember, District 4 Dina Higgins Councilmember, District 5 Scott Somers Vice Mayor, District 6 Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov Chris Brady City Manager Kari Kent Deputy City Manager John Pombier Deputy City Manager For the Fiscal Year Ended June 30, 2012 Water Resources Kathryn Sorensen Transportation Dan Cleavenger Transit Jodi Sorrell (Interim) Parks, Recreation & Commercial Facilities Marc Heirshberg Engineering Beth Huning Business Technology Innovation CityEdge Programs Regional Communications Library Heather Wolf Information Technology Diane Gardner Communications Randy Thompson Grants Housing & Community Development Tammy Albright U.S. Conference of Mayors State Legislative Affairs Regional Initiatives, Maricopa Association of Governments National League of Cities Federal Initiatives Mayor and City Council Support Financial Services Doug Yeskey Strategic Planning and Development Pinal County Land Downtown Coordination, DMA Neighborhood Outreach/Diversity Ruth Giese Animal Control Diane Brady Arts & Culture Cindy Ornstein Falcon Field Corinne Nystrom Solid Waste Mike Comstock (Interim) Public Information & Communications Steve Wright Human Resources Gary Manning Fleet Services Pete Scarafiotti Facilities Maintenance Dennis Ray Fire Department Harry Beck Business Services Ed Quedens Energy Resources Frank McRae CityEdge Business Advisory Boards and Committees Police Department Frank Milstead Assistant to the City Manager Scott J. Butler Chief Financial Officer Michael Kennington Assistant to the City Manager Natalie Lewis Office of Management and Budget Candace Cannistraro City Auditor Jennifer Ruttman Manager of Technology and Innovation Alex Deshuk Senior Executive Manager Chuck Odom City Attorney Debbie Spinner Development & Sustainability Christine Zielonka Economic Development Bill Jabjiniak CITY MANAGER Chris Brady Deputy City Manager John Pombier City Court Matt Tafoya Deputy City Manager Kari Kent Mesa Counts on College Amy Trethaway City Clerk DeeAnn Mickelsen (Interim) Mayor and City Council Citizens of Mesa Introductory Section Mayor Scott Smith City of Mesa, Arizona TABLE OF CONTENTS Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal – Manager of Technology and Innovation Certificate of Achievement for Excellence in Financial Reporting I V X SECTION II - FINANCIAL SECTION Exhibits Independent Auditors' Report 1 Management’s Discussion and Analysis 3 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets Statement of Activities A-1 A-2 18 19 A-3 21 A-4 A-5 22 23 A-6 24 A-7 25 A-8 A-9 27 29 A-10 31 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds to the Statement of Activities Proprietary Funds Financial Statements Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows Fiduciary Funds Financial Statements Statement of Fiduciary Assets and Liabilities I TABLE OF CONTENTS (Continued) Exhibits NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Note 2 - Reconciliation of Governmental Fund Financial Statements to Government-wide Financial Statements Note 3 - Retirement and Pension Plans Note 4 - Post Employment Benefits Note 5 - Long-Term Obligations Note 6 - Refunding Bonds Note 7 - Liabilities to be Paid From Assets Held in Escrow Note 8 - Capital Contributions Note 9 - Commitments and Contingent Liabilities Note 10 - Enterprise Activities Operations Detail Note 11 - Net Assets Note 12 - Pledged Revenues Note 13 - Joint Ventures Page 32 52 58 62 66 77 79 80 80 81 81 82 83 Required Supplementary Information Schedule of Funding Progress - Public Safety Personnel Retirement System Schedule of Funding Progress – Other Post-Employment Benefits General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual (Budget Basis) Highway User Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual (Budget Basis) Note to Required Supplementary Information – Budgetary Reporting B-1 B-2 88 89 B-3 90 B-4 91 92 C-1 93 C-2 94 Combining Balance Sheet C-3 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-4 95 97 Combining Financial Statements Non-major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Special Revenue Funds Non-major Debt Service Funds Combining Balance Sheet C-5 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-6 II 99 101 TABLE OF CONTENTS (Continued) Exhibits Page Combining Financial Statements (Continued) Non-major Capital Projects Funds Combining Balance Sheet C-7 Combining Statement of Revenues, Expenditures and Changes in Fund Balances C-8 103 105 Internal Service Funds Combining Statement of Net Assets Combining Statement of Revenues, Expenses and Changes in Net Assets Combining Statement of Cash Flows C-9 C-10 C-11 107 109 111 C-12 113 D-1 114 D-2 116 D-3 117 D-4 127 D-5 131 D-6 132 D-7 D-8 133 134 D-9 135 D-10 140 Agency Fund Statement of Changes in Assets and Liabilities Supplemental Information Budgetary Comparison Schedules – General Fund and Major Governmental Funds General Fund Schedule of Expenditures by Program – Budget and Actual (Budget Basis) Highway User Revenue Fund Schedule of Expenditures by Program – Budget and Actual (Budget Basis) Budgetary Comparison Schedules – Other Non-major Governmental Funds Non-major Special Revenue Funds Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (Budget Basis) Non-major Special Revenue Funds Schedule of Expenditures by Program Budget and Actual (Budget Basis) Non-major Debt Service Funds Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (Budget Basis) Non-major Capital Project Funds Schedule of Revenues, Expenditures And Changes in Fund Balances – Budget and Actual (Budget Basis) Budgetary Comparison Schedules – Proprietary Funds Enterprise Fund Schedule of Revenues, Expenses and Changes in Net Assets – Budget and Actual (Budget Basis) Enterprise Fund Reconciliation of Budget to GAAP Changes in Net Assets Internal Service Funds Schedule of Revenues, Expenses and Changes in Net Assets – Budget and Actual (Budget Basis) Internal Service Funds Reconciliation of Budget to GAAP Changes in Net Assets III TABLE OF CONTENTS (Concluded) SECTION III - STATISTICAL SECTION Financial Trends Net Assets by Components - Last Ten Fiscal Years (Accrual Basis of Accounting) Changes in Net Assets - Last Ten Fiscal Years (Accrual Basis of Accounting) Fund Balance, Governmental Funds - Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Changes in Fund Balance, Governmental Funds - Last Ten Fiscal Years (Modified Accrual Basis of Accounting) I II 141 143 III 149 IV 151 V VI 153 155 VII VIII IX X XI 156 158 159 160 162 XII XIII 164 165 XIV XV XVI 166 168 170 Revenue Capacity Sales Tax Collections by Category - Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information – Last Ten Fiscal Years Pledged-Revenue Coverage – Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years Principal Employers – Current Year and Ten Years Ago Operating Information Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years Operating Indicators by Function/Program – Last Ten Fiscal Years Capital Asset Statistics by Function/Program – Last Ten Fiscal Years IV Financial Section Councilmember Dave Richins District 1 INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and the City Council of the City of Mesa, Arizona We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Mesa, Arizona (City), as of and for the year ended June 30, 2012, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Mesa, Arizona, as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 14, 2013 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. An independent member of Nexia International (1) The Honorable Mayor and the City Council of the City of Mesa, Arizona Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the Public Safety Personnel Retirement System Schedule of Funding Progress, the Other Post Employment Benefit Plan Schedule of Funding Progress and the budgetary comparison information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial 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 nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken 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. CliftonLarsonAllen LLP Phoenix, Arizona January 14, 2013 (2) MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Mesa, Arizona (the City), we offer this discussion and analysis of the financial activities of the City for the fiscal year ended June 30, 2012. This discussion and analysis is designed to 1) assist the reader in focusing on significant financial issues, 2) provide an overview of the City’s financial activities, 3) identify changes in the City’s financial position, 4) identify any material deviations from the financial plan (the approved annual budget), and 5) identify individual fund issues and concerns. The management’s discussion and analysis should be read in conjunction with the transmittal letter presented on pages V-IX, as well as the financial statements beginning on page 18 and the accompanying notes to the financial statements. Financial Highlights  The City’s total net assets decreased $56 million in fiscal year 2012.  Total net assets of the City are $1.59 billion, of which $157 million are unrestricted and may be used to meet the City’s ongoing obligations to citizens and creditors.  As of the end of fiscal year 2012, the City’s governmental funds reported a combined ending fund balance of $313.5 million, a $77.8 million increase from the previous year. A complete reconciliation of the governmental funds’ fund balance to the governmental activities’ net assets is on page 22.  At the end of the fiscal year, the City’s unassigned fund balance for the General Fund was $78 million, or 25% of total General Fund expenditures.  The City issued $59 million in general obligation debt during the current fiscal year. $27.3 million was issued for new street and public safety improvement projects and $31.7 million was issued to refund prior outstanding general obligation debt.  The City issued $36.1 million in street and highway user revenue debt during the current fiscal year to refund prior outstanding street and highway user revenue debt.  The City issued $77.8 million in highway advancement project notes during the current fiscal year. The notes will be used to accelerate the construction of highway improvements to State Route 24 between State Route 202L and Ellsworth Road.  The City issued $179.2 million in utility system revenue debt during the current fiscal year. $67.3 million was issued for new electric, gas, water and wastewater improvement projects and $111.9 million was issued to refund prior outstanding utility system revenue debt. OVERVIEW OF THE FINANCIAL STATEMENTS This management discussion and analysis serves as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: government-wide financial statements, fund financial statements and notes to the financial 3 statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide Financial Statements The government-wide financial statements (pages 18–20) are designed to provide a broad overview of the City’s finances in a manner similar to private businesses. All the activities of the City, except fiduciary activities, are included in these statements. The statement of net assets presents information on all the City’s assets and liabilities, with the difference between the two being reported as net assets. Over time increases and decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net assets changed over the most recent fiscal year. All changes to net assets are reported at the time that the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This statement also focuses on both the gross and net costs of the various functions of the City, based only on direct functional revenues and expenses. This is designed to show the extent to which the various functions depend on general revenues for support. The activities of the City are presented in two columns on these statements – governmental activities and business-type activities. A total column for the City is also provided.  The governmental activities include the City’s basic services including general government (administration), public safety, cultural-recreational, and community environment. Taxes and general revenues generally support these activities.  The business-type activities include private sector type activities such as the City-owned electric, gas, water, wastewater and solid waste systems, as well as the City-owned airport, golf courses, stadiums, convention center and district cooling. These activities are primarily supported by user charges and fees. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements as well as for managerial control to demonstrate fiduciary responsibility over the assets of the City. Traditional fund financial statements are presented for governmental funds, proprietary funds and fiduciary funds. These fund financial statements now focus on major funds of the City, rather than fund types used in the previous financial reporting model. Governmental funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements (pages 21-24) focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information is useful in evaluating the City’s near-term financing requirements. Since the governmental fund financial statements focus on near-term spendable resources, while the governmental activities 4 on the government-wide financial statements have a longer-term focus, a reconciliation of the differences between the two is provided with the fund financial statements and also in Note 3 to the basic financial statements (pages 52-57). Proprietary funds – The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its fleet support; materials and supplies; printing and graphics; and the property and public liability; workers’ compensation and employee benefits self-insurance programs. Since the primary customers of the internal service funds are the governmental activities, the assets and liabilities of those funds are included in the governmental activities column of the government-wide statement of net assets. The costs of internal service funds are allocated to the various user functions on the government-wide statement of activities. The proprietary fund financial statements (pages 25–30) are prepared on the same long-term focus as the governmentwide financial statements. The enterprise funds provide the same information as the government-wide financial statements, only with more detail. The internal service funds are combined into a single column on the proprietary funds statements. Additional detail of the internal service funds can be found in the combining statements (pages 107-112). Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of others outside the City government. Fiduciary funds are not reflected in the government-wide financial statements because the resources are not available to support the City’s programs. The fiduciary fund financial statement (page 31) is prepared on the same basis as the governmentwide and proprietary fund financial statements. Notes to the financial statements – The notes to the financial statements (pages 32–87) provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. Other information – Governments have an option of including the budgetary comparisons statements for the General Fund and major special revenue funds as either part of the fund financial statements within the basic financial statements or as required supplementary information after the notes to the financial statements. The City has chosen to present these budgetary statements as required supplementary information beginning on page 90. GOVERNMENT-WIDE FINANCIAL ANALYSIS The following tables, graphs and analysis discuss the financial position and changes to the financial position for the City as a whole as of and for the year ended June 30, 2012 and as of and for the year ended June 30, 2011. Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Assets of the City for June 30, 2012 and 2011. 5 Condensed Statement of Net Assets As of June 30 (In thousands of dollars) Governmental Business-type T otal Activities Activities Primary Government 2012 Cash and Other Assets $ 515,096 Capital Assets 1,293,796 T otal Assets 1,808,892 2011 $ 426,059 1,279,788 1,705,847 Non-current Liabilities, Outstanding Other Liabilities T otal Liabilities 835,493 115,426 950,919 691,599 109,026 800,625 Net Assets: Invested in Capital Assets, Net of Related Debt Restricted Unrestricted 913,702 41,257 (96,986) 872,302 39,296 (6,376) T otal Net Assets $ 857,973 $ 905,222 2012 $ $ 483,838 1,339,886 1,823,724 2011 $ 464,539 1,302,381 1,766,920 2012 $ 998,934 2,633,682 3,632,616 Change 2011 $ 890,598 2,582,169 3,472,767 Dollars $ 108,336 51,513 159,849 Percent 12.16 % 1.99 4.60 1,011,663 76,117 1,087,780 953,975 68,505 1,022,480 1,847,156 191,543 2,038,699 1,645,574 177,531 1,823,105 201,582 14,012 215,594 412,016 69,739 254,189 430,436 55,873 258,131 1,325,718 110,996 157,203 1,302,738 95,169 251,755 22,980 1.76 15,827 16.63 (94,552) (37.56) 744,440 $ 1,593,917 $ 1,649,662 735,944 $ $ (55,745) In the case of the City, the combined net assets (governmental activities and business-type activities) exceeded liabilities by $1.59 billion at the close of the most recent year. The net assets decreased $56 million (3.4%) in fiscal year 2012. The governmental activities decreased $47 million while the business-type activities decreased $9 million. The largest portion of net assets (83%) reflects the City’s investment in capital assets (land, buildings, equipment, infrastructure, etc.) less any outstanding related debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. $111 million of the City’s net assets represent resources that are subject to external restrictions on how they may be used. The unrestricted net assets of $157 million may be used to meet the City’s ongoing obligations to citizens and creditors. Changes in Net Assets The following table shows the revenues and expenses of the City for the fiscal years ended June 30, 2012 and 2011. 6 12.25 7.89 11.83 (3.38) Changes in Net Assets (In thousands of dollars) Governmental Business-type Activities Activities 2012 2011 2012 T otal Primary Government 2011 2012 Change 2011 Dollars REVENUES Program Revenues: Charges for Services $ 50,450 Operating Grants & Contributions 60,355 Capital Grants & Contributions 23,503 General Revenues: Sales T axes 126,644 Property T axes 14,234 Occupancy T axes 2,019 Unrestricted State-Shared 86,103 Contributions 17,171 Unrestricted Investment Income 1,503 Miscellaneous 8,939 44,710 $ 314,908 65,284 2,125 25 62,480 65,309 (2,829) (4.33) 31,461 15,814 10,774 39,317 42,235 (2,918) (6.91) 121,046 14,244 2,148 92,613 15,611 617 7,060 850 - 839 - 126,644 14,234 2,019 86,103 17,171 2,353 8,939 121,046 14,244 2,148 92,613 15,611 1,456 7,060 5,598 (10) (129) (6,510) 1,560 897 1,879 4.62 (0.07) (6.01) (7.03) 9.99 61.61 26.61 390,921 394,794 333,697 311,111 724,618 705,905 18,713 57,472 287,918 57,171 97,593 21,631 59,552 273,320 54,549 106,434 21,078 - - 57,472 287,918 57,171 97,593 21,631 59,552 273,320 54,549 106,434 21,078 (2,080) 14,598 2,622 (8,841) 553 - - 29,751 34,275 74,162 68,540 32,485 3,737 2,589 3,486 8,525 54 974 26,816 36,020 82,378 63,614 31,462 3,972 2,679 3,849 8,324 15 965 29,751 34,275 74,162 68,540 32,485 3,737 2,589 3,486 8,525 54 974 26,816 36,020 82,378 63,614 31,462 3,972 2,679 3,849 8,324 965 2,935 (1,745) (8,216) 4,926 1,023 (235) (90) (363) 201 54 9 521,785 514,933 258,578 260,094 780,363 775,012 (130,864) (120,139) 75,119 51,017 (55,745) (69,107) 83,615 83,333 (83,615) (83,333) Change in Net Assets (47,249) (36,806) (8,496) (32,316) Net Assets-Beginning, as Restated 905,222 942,028 744,440 905,222 $ 735,944 T otal Revenues EXPENSES Governmental Activities: General Government Public Safety Cultural-Recreational Community Environment Interest on Long-term Debt Business-type Activities: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling T otal Expenses Increase (decrease) in Net Assets Before T ransfers T ransfers Net Assets-Ending $ 857,973 $ $ $ $ 299,473 $ 365,358 $ - 1,649,662 744,440 $ 1,593,917 $ 21,175 1,718,784 $ 1,649,662 $ (3.49) % 5.34 4.81 (8.31) 2.62 10.94 (4.84) (9.97) 7.74 3.25 (5.92) (3.36) (9.43) 2.41 100.00 0.93 13,362 (19.34) 0.00 13,362 (19.34) (69,122) (4.02) (55,745) (3.38) Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (30%) and state-shared revenues (18%). The largest users of 7 2.65 0.69 - (69,107) 6.15 % 5,351 - (55,745) 776,756 344,183 Percent resources for the governmental activities are Public Safety (55%), Community Environment (19%), General Government (11%), and Cultural-Recreational (11%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2012 Transfers 17% Taxes 30% State-Shared 18% Miscellaneous 6% Capital Grants & Contributions 5% Operating Grants & Contributions 13% Charges for Services 11% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2012 Public Safety 55% CulturalRecreational 11% Community Environment 19% General Government 11% Interest on Long-term Debt 4% The following graph shows the functional revenues and expenses of the governmental activities to demonstrate the extent to which the governmental functions produce direct revenues to offset the program costs. It should be noted that this is not intended to represent the full cost allocation 8 to these functions. General revenues of the City, including an $83.6 million transfer from the business-type activities, cover expenses not generated by direct program revenues. Expenses and Program Revenues – Governmental Activities For the Fiscal Year ended June 30, 2012 (In millions of dollars) $300 $250 $200 $150 $100 $50 $0 General Government Public Safety Expenses Cultural Recreational Community Environment Program Revenues Governmental activities decreased the net assets of the City by $47 million accounting for a 5.2% decrease. Governmental activities accounted for 54% of the total revenues and 67% of the total expenses of the City in fiscal year 2012. This compares to 56% of total revenues and 66% of the total expenses in fiscal year 2011. Governmental Activities Revenues For Fiscal Years 2012 and 2011 (In millions of dollars) Program Revenues Taxes State-Shared Contributions Investment Income Miscellaneous $0 $20 $40 $60 $80 2012 $100 $120 $140 $160 2011 The graph above compares governmental activities revenues from fiscal year 2012 to fiscal year 2011. Total governmental activities revenues decreased $3.9 million from $394.8 million to $390.9 million. This is the fifth consecutive year that governmental activities revenues declined. Key factors in this change include: 9  The program revenues (charges for services, grants and contributions that are clearly identifiable to an operating activity) of the governmental activities decreased $7.1 million over the previous year. Charges for services increased $5.7 million from the previous year. There was a $13 million decrease in the amount of capital contributions of streets, storm sewers and retention basins by developers over the previous year. Operating grants and contributions decreased by $4.9 million over the previous year due to decreased local government and federal government funding.  Sales taxes increased by $5.6 million over the previous year reflecting an overall improvement in the local economy.  State shared revenues decreased by $6.5 million over the previous year because of reduced revenues received from the state. State shared revenue are formula driven based on collections in prior years. Governmental Activities Functional Expenses For Fiscal Years 2012 and 2011 (In millions of dollars) General Government Public Safety Cultural-Recreational Community Environment Interest on Long-term Debt $0 $50 $100 2012 $150 $200 $250 $300 2011 The graph above compares governmental activities expenses from fiscal year 2012 to fiscal year 2011. Total governmental expenses increased by $6.9 million from $514.9 million to $521.8 million. Key factors in this change include:  There was an overall increase in expenses caused by higher payments for pension-related expenses and the expensing of Post-Employment Benefits to the governmental activities.  Public Safety expenses also increased as result of additional personnel added to staff two new fire stations.  Community Environment expenses decreased due to lower Community Development Block Grant expenses and the completion of Phase I of the light rail project. 10 Business-type Activities As presented in the following two graphs, the largest funding sources and users of resources for the business-type activities are Water, Wastewater, Solid Waste, Gas and Electric. Revenues by Source – Business-type Activities Wastewater 22% Water 36% Solid Waste 14% Gas 12% Other Programs 5% Electric 11% Functional Expenses – Business-type Activities Wastewater 27% Water 29% Solid Waste 13% Gas 13% Other Programs 7% Electric 11% Business-type activities decreased the City’s net assets by $9 million. Total business-type activities program and general revenues increased by $22.6 million (7.3%) from $311.1 million to $333.7 million, while the business-type activities total expenses decreased by $1.5 million from $260.1 million to $258.6 million. Business-type activities accounted for 46% of the total revenues and 33% of the total expenses of the City in fiscal year 2012. This compares to 44% of total revenues and 34% of the expenses in fiscal year 2011. 11 Business-type Activities Program Revenues For Fiscal Years 2012 and 2011 (In millions of dollars) Electric Gas Water Wastewater Solid Waste Other Activities $0 $50 $100 2012 $150 2011 The graph above compares program revenues for the Business-type Activities from fiscal year 2012 to fiscal year 2011. Total business-type activities program revenues increased by $22.6 million (7.3%) from $311.1 million to $333.7 million. Key factors in this change include:  Capital contributions increased by $4.7 million from the previous year and, while they continue to be a major revenue source for the business-type activities, the amount contributed each year is dependent on how well the construction activity in the City is performing.  Charges for Services increased $15.4 million reflecting increases in the rate structure and usage. All commodity cost increases in the Electric and Gas utilities are passed through to the customers. Business-type Activities Functional Expenses For the Fiscal Years 2012 and 2011 Electric Gas Water Wastewater Soild Waste Other Activites $0 $20 $40 $60 2012 $80 $100 2011 The graph above compares functional expenses for the Business-type Activities from fiscal year 2012 to fiscal year 2011. Total business-type functional expenses decreased by $1.5 million (0.5%) from $260.1 million to $258.6 million. 12 Financial Analysis of the City’s Funds As previously mentioned, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The following is a brief discussion of the financial highlights from the fund financial statements. Governmental Funds - The focus of the City’s governmental funds (pages 21-24) is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The City’s governmental funds reported combined ending fund balance of $313.5 million, a $77.7 million increase from the previous year. $78 million of this total amount is in unassigned fund balance, available for spending in the coming year. The remainder of fund balance includes $213.3 million in restricted fund balance, $21.4 million in committed fund balance and $.8 million in nonspendable fund balance. See Note 1 p. to the basic financial statements for additional detail on these fund balance amounts. The General Fund is the chief operating fund of the City and accounts for many of the major functions of the government including general government, public safety, cultural-recreational and community environment services. At the end of the current fiscal year, total fund balance of the General Fund was $85.8 million, while unassigned fund balance was $78 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. For 2012, unassigned fund balance represents 25.5% of total General Fund expenditures of $307 million, while total fund balance represents 28% of the same amount. For 2011, unassigned fund balance represents 29.4% of total General Fund expenditures of $319 million, while total fund balance represents 31.7% of the same amount. Total fund balance of the City’s General Fund decreased by $15 million during the current fiscal year from $101 to $86 million. Total revenues of $233 million were $23 million less than the previous year, however approximately $18 million of this difference is due to the reclassification of the Quality of Life Sales Tax fund from the General Fund to the Special Revenue funds. State-shared revenue reported in the General Fund was $5.8 million less than the prior fiscal year. Total expenditures of $307 million were $12 million less than the previous year, however approximately $18 million of expenditures in the Quality of Life Sales Tax fund were reclassified from the General Fund to the Special Revenue Funds. Capital outlay expenditures decreased $1.31 million from the prior fiscal year. The transfer in of $84.1 million, mostly from the Enterprise Fund, was reduced by $25.5 million in transfers out to other funds, compared with a transfer in from the prior year of $83.6 million that was reduced by $26.9 million in transfers out to other funds in the previous year. The Highway User Revenue Fund that accounts for the capital and maintenance costs for the City’s streets received $4.4 million less in state shared revenue and had a decrease of $6.7 million in street-related expenditures. 13 The Highway Project Advancement Notes Fund accumulates monies for the payment of principal and interest requirements for the Highway Project Advancement Notes. The City issued an additional $77.8 million in notes to accelerate the construction of State Route 24. Debt service on the notes increased to $4.3 million from $1.6 million in the previous fiscal year. The City’s Capital Project Funds that account for the acquisition and construction of major capital facilities other than those reported in the proprietary funds reported an increase of $5.5 million in capital expenditures. These expenditures were for improvements in law enforcement, fire, storm sewers, streets and other city facilities. Proprietary Funds - The City’s Enterprise Fund (pages 25-30) provides the same type of information as the government-wide financial statements, except in more detail. The total net assets of the Enterprise Fund decreased by $7.8 million in fiscal year 2012 from $747.2 million in fiscal year 2011 to $739.4 million. The unrestricted net assets of the Enterprise Fund amounted to $257.6 million. Other factors concerning the finances of the Enterprise Fund have already been addressed in the discussion on the City’s business-type activities. Budgetary Highlights The City’s annual budget is the legally adopted expenditure control document of the City. Budgetary comparison schedules are required for the General Fund and major special revenue funds and may be found on pages 90-92. These schedules compare the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. Budgetary schedules for the other governmental funds as well as the proprietary funds are also presented on pages 114-140. Amendments to the adopted budget may occur throughout the year in a legally permissible manner (see Note 1.r. and Note 1.s. of the notes to the financial statements for more information on budget policies). No amendments increasing the City’s total adopted budget of $1.148 billion occurred during fiscal year 2012. Contingency allocations were made at fiscal year-end to cover programs in the General Fund of $3.6 million. General Fund revenues of $245 million, on a budgetary basis, were less than budgeted revenues of $253.5 million by $8.5 million while expenditures of $335.9 million were only 84% of budgeted expenditures. The shortfall in revenues is due to primarily to lower revenue received in state-shared taxes. Federal grant revenues were less than budgeted however, since the majority of the Federal grants are on a reimbursement basis, the City also did not have the associated expenditures. Reduced expenditures resulted from the continuing hiring freeze, reduced debt service expenditures caused by refinancing existing debt and unused contingency allocations. Capital Asset and Debt Administration Capital Assets – The City’s investment in capital assets for its governmental and business-type activities amounts to $2.63 billion (net of accumulated depreciation/amortization) as of June 30, 2012. This investment in capital assets includes land, buildings, other improvements, machinery and equipment, intangibles and infrastructure. Infrastructure assets are items that are normally immovable and have value only to the City, such as streets, street lighting systems and storm drainage systems. The following table provides a breakdown of the City’s capital assets at June 30, 2012 and 2011. 14 Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Governmental Activities 2012 2011 Land $ 285,322 Water Rights Buildings 210,528 Other Improvements 20,972 M achinery & Equipment 49,190 Intangibles 147 Infrastructure 541,792 Construction-in-Progress 185,845 Total $ 1,293,796 $ 265,803 232,855 147,205 44,884 14 499,485 89,542 $ 1,279,788 Business-type Activities 2012 2011 $ 58,980 17,560 30,787 56,013 23,199 2,350 994,982 156,015 $ 1,339,886 $ 58,803 12,761 36,530 133,904 128,512 3,920 814,481 113,470 $ 1,302,381 Total Primary Government 2012 2011 $ 344,302 17,560 241,315 76,985 72,389 2,497 1,536,774 341,860 $ 2,633,682 $ 324,606 12,761 269,385 281,109 173,396 3,934 1,313,966 203,012 $ 2,582,169 Change Dollars 19,696 4,799 (28,070) (204,124) (101,007) (1,437) 222,808 138,848 $ 51,513 $ Major capital assets completed or constructed during the current fiscal year included:  The City continued the implementation of an Enterprise Resource Planning (ERP) system with an additional $10.9 million spent during fiscal year 2012. The ERP system will replace the current Human Resources/Payroll and Financial applications in the City. The $24.7 million project is scheduled for final implementation in 2013.  The City began construction of a new Spring Training Facility for the Chicago Cubs Major League Baseball team with $2.4 million spent during fiscal year 2012. The City’s cost to design and construct the stadium and related facilities is limited to $84 million, with an additional cost to design and construct public infrastructure limited to $15 million. These limits were established by a voter-approved election.  The City completed construction on two new fire stations at a total cost of $3.73 million. Station 219 and Station 220 will meet the growing demands and help reduce response times for emergencies. Additional information on the City’s capital assets can be found in Note 1.l. of the notes to the financial statements. Debt Administration - At the end of the current fiscal year, the City had total bonded debt outstanding of $1.33 billion. Of this amount, $287.3 million comprises debt backed by the full faith and credit of the City and $1.046 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue Bonds and Highway User Revenue Bonds). The City’s outstanding long-term debt, including bonds, capital leases and notes payable was $1.462 billion at June 30, 2012. $532 million of this total was in governmental activities and $930 million was in business-type activities. The City’s outstanding long-term debt (considering new borrowings, debt retirements and refunding) increased $116 million. New borrowings during the fiscal year included $27.3 million in general obligation bonds, $77.8 million in Highway Advancement Project Notes and $67.3 million in utility system revenue bonds. 15 Percent 6.07 % 37.61 (10.42) (72.61) (58.25) (36.53) 16.96 68.39 1.99 The following schedule shows the outstanding long-term debt of the City as of June 30, 2012 and 2011. Outstanding Long-term Debt (In thousands of dollars) Governmental Activities 2012 2011 General Obligation Bonds $ 285,706 $ 279,028 Utility System Revenue Bonds Highway User Revenue Fund Bonds 118,248 126,573 Special Assessment Bonds with Governmental Commitment 5,062 5,806 Capital Leases 822 2,166 Notes Payable 122,835 45,000 Total $ 532,673 $ 458,573 Business-type Activities 2012 2011 $ 1,596 $ 2,210 928,226 884,995 2,493 2,731 $ 932,315 $ 889,936 $ Total 2012 287,302 $ 928,226 118,248 2011 281,238 884,995 126,573 5,062 5,806 822 2,166 125,328 47,731 $ 1,464,988 $ 1,348,509 Change Dollars Percent $ 6,064 2.16 % 43,231 4.88 (8,325) (6.58) (744) (1,344) 77,597 $ 116,479 (12.81) (62.05) 162.57 8.64 During the current fiscal year, the City refinanced $179.7 million of its existing debt to take advantage of favorable interest rates and to restructure debt service payments. The new refinancing include: (all amounts shown in millions of dollars). Debt Issued Debt Refunded $31.7 General Obligation Bonds $36.1 Highway User Revenue Bonds $31.6 Utility System Revenue Bonds $80.3 Taxable Utility System Revenue Bonds $31.7 General Obligation Bonds $39.9 Highway User Revenue Bonds Debt Service Savings/Restructuring $2.2 $3.4 $35.2 Utility System Revenue Bonds $3.5 $68.8 Utility System Revenue Bonds ($63.2) The City’s current bond ratings are as follows: General Obligation Bonds Highway User Revenue Bonds Utility Systems Revenue Bonds Standard and Poor’s Corporation Moody’s Investors Service AA AA AA- Aa2 A2 Aa2 The Arizona Constitution provides that the general obligation bonded indebtedness of a city for general municipal purposes may not exceed 6 percent of the secondary assessed valuation of the taxable property in that city. In addition to the 6 percent limitation for general municipal purpose bonds, cities may issue general obligation bonds up to an additional 20 percent of the secondary assessed valuation for supplying such city with water, artificial light or sewers, and for the acquisition and development of land for open space preserves, parks, playgrounds and recreational facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities. 16 The total debt margin available July 1, 2012 is: 6% Bonds 20% Bonds Total Available $164,855,287 265,184,455 $430,039,742 Additional information on the City’s long-term obligations can be found in Note 5 and Note 6 of the notes to the basic financial statements. Economic Factors In June 2012, the City Council approved a $1.264 billion budget, which is approximately a 10% increase from the prior year’s budget. The fiscal year 2012–13 budget includes $1.005 billion for operations and $259 million for scheduled bond capital improvements. The adopted fiscal year 2012-13 budget continues the City’s fiscally conservative approach to budget development, while still providing quality services to the citizens. Rather than simply surviving budget reductions, the City has reorganized and retooled to focus on community priorities and innovative approaches. The goal has been to help Mesa grow and prosper despite a challenging national, state and local economy. While Mesa has seen an overall improvement in the revenue collections over the previous year, it is anticipated that this improvement will continue at a modest rate. This improvement allowed the City to address several budget priorities in the coming year. Additional positions were added in the Police and Fire & Medical Services departments. Council approved the restoration of a 2% pay reduction that was implemented in 2009 and included a one-time step increase for eligible employees. The City also took advantage of a strategic financial opportunity in the market by refinancing large portions of outstanding debt which will result in significant savings for the City over the repayment period. The largest portion of the refinancing occurred in the Enterprise Fund. The Council approved reinvesting the savings by creating the Economic Investment Fund. The Economic Investment Fund will assist the City’s efforts to provide facilities and programs that will create long-term economic benefit to the City. Requests for Information This financial report is designed to provide a general overview of the City of Mesa, Arizona’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to City of Mesa Finance Director, P.O. Box 1466, Mesa, Arizona, 85211-1466. 17 Basic Financial Statements Councilmember Alex Finter District 2 CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET ASSETS JUNE 30, 2012 Governmental Activities ASSETS Pooled Cash and Investments Receivables: Accounts and Miscellaneous (Net of Allowances) Accrued Interest Due From Other Governments Internal Balances Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash With Fiscal Agent Cash With Trustee Accounts Receivable Due From Other Governments Customer Deposits Unamortized Bond Issue Costs Investment in Joint Ventures Capital Assets: Non-Depreciable Depreciable, Net Total Assets LIABILITIES Warrants Outstanding Accounts Payable Other Accrued Expenses Customer and Defendant Deposits Compensated Absences Liabilities Payable From Restricted Assets Noncurrent Liabilities: Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted For: Convention Center Airport Golf Courses Hohokam/Fitch Complex Court Projects Quality of Life Projects Debt Service Bond Indentures Grant Programs Transportation Programs Water, Wastewater & Solid Waste Improvements Miscellaneous Programs Unrestricted Total Net Assets $ $ 216,575,101 Primary Government Business-Type Activities $ 64,953,804 Total $ 281,528,905 19,546,817 548,812 36,902,404 3,457,400 6,061,888 1,494,916 288,550 30,171,409 106,880 3,370,821 (3,457,400) 260,576 7,010,289 49,718,226 655,692 40,273,225 6,061,888 1,755,492 7,298,839 160,510 32,712,490 89,469,582 42,940,063 89,630,092 75,652,553 98,674,150 9,381,469 32,669,789 2,940,257 53,681,635 3,004,468 4,492,433 241,515,386 98,674,150 9,381,469 32,669,789 3,004,468 7,432,690 295,197,021 471,166,606 822,629,864 1,808,892,658 232,555,150 1,107,331,117 1,823,724,578 703,721,756 1,929,960,981 3,632,617,236 8,397,178 15,086,198 37,334,965 8,870,812 1,187,019 44,549,965 5,936,339 70,180,409 8,397,178 21,022,537 37,334,965 8,870,812 1,187,019 114,730,374 36,386,179 799,107,312 950,919,628 23,463,146 988,200,505 1,087,780,399 59,849,325 1,787,307,817 2,038,700,027 913,701,563 412,016,435 1,325,717,998 1,572,632 3,582,240 1,074 1,804,282 33,882,622 414,368 (96,985,751) 857,973,030 294,487 6,337,063 19,371 460,963 43,171,834 19,247,144 207,941 254,188,941 735,944,179 294,487 6,337,063 19,371 460,963 1,572,632 3,582,240 43,172,908 19,247,144 1,804,282 33,882,622 207,941 414,368 157,203,190 1,593,917,209 The accompanying notes are an integral part of the financial statements. 18 $ $ CITY OF MESA, ARIZONA EXHIBIT A-2 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Program Revenues Charges for Services Expenses Operating Grants and Contributions Capital Grants and Contributions $ $ Functions/Programs Primary Government: Governmental Activities: General Government Public Safety $ 57,472,328 $ 16,466,194 2,399,494 - 287,918,202 11,273,414 8,749,742 - Cultural-Recreational 57,170,754 9,947,522 1,397,966 - Community Environment 97,592,690 12,763,243 47,807,372 23,502,772 Interest on Long-Term Debt 21,631,042 - - - 521,785,016 50,450,373 60,354,574 23,502,772 Electric 29,751,312 34,624,920 157,772 - Gas 34,275,119 39,139,278 233,614 12,002 Water 74,161,665 113,417,881 1,209,373 5,474,768 Wastewater 68,540,140 64,543,503 524,742 8,186,440 Solid Waste 32,485,233 47,630,828 - 135,876 Airport 3,737,409 3,270,632 - 1,655,194 Golf Course 2,588,958 2,168,575 - 50,000 Convention Center 3,486,069 2,122,304 - 200,000 HohokamStadium/Fitch Complex Total Government Activities Business-type Activities: 8,525,374 6,073,590 - 100,000 Cubs Stadium 53,747 824,556 - - District Cooling 973,595 1,091,665 - - 258,578,621 314,907,732 2,125,501 15,814,280 $ 780,363,637 $ 365,358,105 Total Business-type Activities Total Primary Government $ 62,480,075 $ 39,317,052 General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted State Shared Revenue Contributions Not Restricted to Specific Programs Unrestricted Investment Income Miscellaneous Transfers In (Out) Total General Revenues and Transfers Change in Net Assets Net Assets - Beginning Net Assets - Ending The accompanying notes are an integral part of the financial statements. 19 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Activities $ $ $ Business-type Activities (38,606,640) $ - Total $ (38,606,640) (267,895,046) - (267,895,046) (45,825,266) - (45,825,266) (13,519,303) - (13,519,303) (21,631,042) - (21,631,042) (387,477,297) - (387,477,297) - 5,031,380 5,031,380 - 5,109,775 5,109,775 - 45,940,357 45,940,357 - 4,714,545 4,714,545 - 15,281,471 15,281,471 - 1,188,417 1,188,417 - (370,383) (370,383) - (1,163,765) (1,163,765) - (2,351,784) (2,351,784) - 770,809 770,809 - 118,070 118,070 - 74,268,892 74,268,892 (387,477,297) $ 74,268,892 $ (313,208,405) 126,644,151 - 126,644,151 14,234,285 - 14,234,285 2,018,764 - 2,018,764 86,103,399 - 86,103,399 17,170,502 - 17,170,502 1,502,659 850,454 2,353,113 8,939,334 - 8,939,334 83,615,000 (83,615,000) - 340,228,094 (82,764,546) 257,463,548 (47,249,203) (8,495,654) (55,744,857) 905,222,233 744,439,833 857,973,030 $ 735,944,179 1,649,662,066 $ 1,593,917,209 20 CITY OF MESA, ARIZONA EXHIBIT A-3 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2012 General Fund Highway User Revenue Fund Highway Project Advancement Notes Non-major Governmental Funds Total Governmental Funds $ $ $ 94,054,219 5,428,978 18,658,892 82,290 - $ 165,149,325 18,104,077 548,812 36,859,254 8,096,813 837,203 288,550 ASSETS Pooled Cash and Investments $ Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due From Other Governments Due From Other Funds Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash With Fiscal agent Cash With Trustee Accounts Receivable Due From Other Governments Total Assets 71,094,974 12,639,036 548,812 15,526,871 8,096,813 753,701 288,550 132 36,063 2,673,491 1,212 - 4,879,002 - - - 756,250 98,638,950 32,093,761 160,510 31,956,240 35,200 4,502,467 576,028 160,510 32,712,490 98,674,150 9,381,469 32,669,789 $ 113,827,759 $ 2,710,898 $ 131,488,961 $ 155,454,824 $ 403,482,442 $ 8,397,178 8,782,336 2,967,002 1,187,019 $ 102,573 2,608,000 50 - $ $ $ LIABILITIES AND FUND BALANCES Liabilities: Warrants Outstanding Accounts Payable Due To Other Funds Customer and Defendant Deposits Compensated Absences Payable From Restricted Assets: Accrued Bond Interest Payable Accrued Note Interest Payable Deferred Revenue Matured General Obligation Bonds Payable Matured Highway User Revenue Bonds Payable - 5,102,503 5,488,813 5,903,760 - 8,397,178 13,987,412 8,096,813 8,870,812 1,187,019 6,702,097 - 3,556,148 - 8,690,566 7,055,115 8,690,566 3,556,148 13,757,212 - - - 20,135,109 20,135,109 - - - 3,290,000 3,290,000 Total Liabilities 28,035,632 2,710,623 3,556,148 55,665,866 89,968,269 Fund Balances Nonspendable Restricted Committed Unassigned 753,701 2,011,527 4,992,039 78,034,860 1,212 (937) 127,932,813 - 82,290 83,346,190 16,360,478 - 837,203 213,290,530 21,352,517 78,033,923 Total Fund Balances 85,792,127 275 127,932,813 99,788,958 313,514,173 2,710,898 $ 131,488,961 $ 155,454,824 $ 403,482,442 Total Liabilities and Fund Balances $ 113,827,759 $ The accompanying notes are an integral part of the financial statements. 21 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 Fund Balances - total governmental funds $ 313,514,173 Amounts reported for governmental activities in the statement of net assets are different because (also see Note 3 to the basic financial statements): Capital assets used in governmental activites are not financial resources and therefore not reported in the governmental funds. 1,290,416,799 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 56,621,892 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore not reported in the governmental funds. (828,506,522) Deferred revenue for long-term rehabilitation loans and special assessments is shown on the governmental funds, but is not deferred on the statement of net assets. 4,879,070 Internal service funds are used by management to charge the costs of certain activites to individual funds. 21,047,618 Net assets of the governmental activities - statement of net assets The accompanying notes are an integral part of the financial statements. 22 $ 857,973,030 CITY OF MESA, ARIZONA EXHIBIT A-5 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Highway User Revenue Fund General Fund Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges For Services Fines and Forfeitures Investment Income Miscellaneous $ Total Revenues 86,576,717 2,018,764 10,984,707 106,477,848 8,931,869 10,144,455 767,495 6,655,768 $ 27,444,747 143,667 226,101 59 10,570 Highway Project Advancement Notes $ 1,477,300 40,469 - Non-major Governmental Funds $ 40,067,434 14,322,925 995,897 2,374,152 33,033,537 16,703,676 923,509 475,858 906,163 Total Governmental Funds $ 126,644,151 14,322,925 2,018,764 995,897 13,358,859 168,433,432 25,779,212 11,294,065 1,283,881 7,572,501 232,557,623 27,825,144 1,517,769 109,803,151 371,703,687 41,083,321 210,636,675 32,014,119 7,159,619 18,866,348 - 15,792,186 11,889,515 38,377,792 41,083,321 226,428,861 43,903,634 64,403,759 15,640,055 105,969 4,312,398 400,470 - 25,513,155 18,244,535 86,367 7,864 469,412 51,204,608 25,513,155 18,244,535 86,367 4,312,398 7,864 869,882 66,950,632 Total Expenditures 306,533,789 18,972,317 4,712,868 161,585,434 491,804,408 Excess (Deficiency) of Revenues Over (Under) Expenditures (73,976,166) 8,852,827 (3,195,099) (51,782,283) (120,100,721) 84,096,031 (25,496,798) - 3,513 (8,856,848) - 77,835,000 8,250,081 - 37,359,939 (3,781,937) 27,290,000 8,027,060 67,238,160 121,459,483 (38,135,583) 27,290,000 77,835,000 8,027,060 8,250,081 67,238,160 - (74,127,409) (74,127,409) Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Service Charges Cost of Issuance Capital Outlay Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Face Amount of Notes Issued Premium on Issuance of Bonds Premium on Issuance of Notes Issuance of Refunding Debt Payment to Refunded Bond Escrow Agent - Total Other Financing Sources (Uses) - 58,599,233 - (8,853,335) 86,085,081 62,005,813 197,836,792 Net Change in Fund Balances (15,376,933) (508) 82,889,982 10,223,530 77,736,071 Fund Balances - Beginning 101,169,060 783 45,042,831 89,565,428 235,778,102 275 $ 127,932,813 Fund Balances - Ending $ 85,792,127 $ The accompanying notes are an integral part of the financial statements. 23 $ 99,788,958 $ 313,514,173 CITY OF MESA, ARIZONA EXHIBIT A-6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Net change in fund balances - total governmental funds $ 77,736,071 Amounts reported for governmental activities in the statement of activities are different because (also see Note 3 to the basic financial statements): Revenues in the statement of activities that do not provide current financial resources are not reported in the governmental funds. (841,496) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (54,676,265) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays ($66,950,632) exceeded depreciation ($48,629,704) in the current period. 18,320,928 The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net assets. (1,816,396) Loss on equity in Joint Venture (2,006,011) The issuance of long-term debt (e.g., bonds and capital leases) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes financial resources of governmental funds. Neither transaction has any effect on net assets. (80,353,418) Governmental funds report the effect of bond issuance costs, premiums and deferred amounts related to refunding when the new debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. (7,133,166) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. 3,520,550 Change in net assets of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 24 $ (47,249,203) CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2012 Business-type Governmental Activities Activities Internal Service Funds Enterprise Fund ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances of $1,190,000) Accrued Premiums Receivable Accrued Interest Receivable Due From Other Governments Inventory Prepaid Costs Deposits $ 64,953,804 30,171,409 106,880 3,370,821 260,576 7,010,289 $ 51,425,776 163,572 1,279,168 43,150 6,061,888 657,713 - Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Customer Deposits Total Current Assets 20,254,711 42,940,063 3,004,468 - 172,073,021 59,631,267 207,941 - 19,638,550 - 49,368,380 4,492,433 - 73,707,304 - 58,980,182 17,560,145 52,013,687 62,112,156 51,689,945 17,322,447 2,061,431 426,745 6,506,851 2,758 Noncurrent Assets: Restricted Assets: Impact & Development Fees: Pooled Cash and Investments Bond Replacement, Extensions and Reserves: Pooled Cash and Investments Capital Projects: Pooled Cash and Investments Unamortized Bond Issue Costs Total Restricted Assets Capital Assets: Land Water Rights Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure Construction in Progress Less Accumulated Depreciation and Amortization Total Capital Assets, Net Investment in Joint Ventures Total Noncurrent Assets Total Assets $ The accompanying notes are an integral part of the financial statements. 25 1,519,648,775 156,014,823 (595,455,893) 1,042 144,538 (5,763,694) 1,339,886,267 241,515,386 3,379,671 - 1,655,108,957 3,379,671 1,827,181,978 $ 63,010,938 CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2012 Business-type Governmental Activities Activities - Enterprise Fund Internal Service Funds LIABILITIES Current Liabilities-Payable From Current Assets: Accounts Payable Other Accrued Expenses $ Current Liabilities-Payable From Restricted Assets: Bond Replacement, Extensions and Reserves-Accounts Payable Capital Projects-Accounts Payable Accrued Bond Interest Payable Matured Bonds Payable Customer Deposits and Prepayments Current Portion of Long-Term Liabilities: Current Portion of Revenue Bonds Payable Current Portion of General Obligation Bonds Payable Current Portion of Notes Payable Current Portion of Other Long-Term Obligations Current Portion of Compensated Absences Total Current Liabilities Long-Term Liabilities: Revenue Bonds Payable, Net of Deferred Amount on Refundings General Obligation Bonds Payable, Net of Deferred Amt on Refundings Notes Payable Unamortized Bond Premium Compensated Absences Post Employment Benefits Total Long-Term Liabilities Total Liabilities NET ASSETS Invested In Capital Assets, Net of Related Debt Restricted For: Convention Center Airport Golf Courses Hohokam Stadium\Fitch Complex Debt Service Bond Indentures Water, Wastewater & Solid Waste Improvements Unrestricted Total Net Assets 5,936,339 - - 21,630,000 712,959 122,973 116,754 880,460 87,848 99,579,894 38,521,599 906,595,968 883,167 2,370,002 19,238,432 3,301,802 55,811,134 831,628 6,067,493 988,200,505 6,899,121 1,087,780,399 45,420,720 412,016,435 3,379,671 294,487 6,337,063 19,371 460,963 43,171,834 19,247,144 207,941 257,646,341 14,210,547 739,401,579 $ 735,944,179 (3,457,400) Total net assets of the business-type activities The accompanying notes are an integral part of the financial statements. 26 1,098,786 37,334,965 391,406 3,589,761 21,186,983 21,984,891 23,027,368 $ Adjustment to reflect the consolidation of the internal service funds related to the enterprise fund. $ $ 17,590,218 CITY OF MESA, ARIZONA EXHIBIT A-8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Operating Revenues: Electric Sales Pledged as Security for Revenue Bonds Gas Sales Pledged as Security for Revenue Bonds Water Sales Pledged as Security for Revenue Bonds Wastewater Charges Pledged as Security for Revenue Bonds Solid Waste Charges Pledged as Security for Revenue Bonds Airport Fees Golf Course Fees Convention Center Fees Hohokam Stadium/Fitch Complex Fees Cubs Stadium District Cooling Charges Charges For Services Self-Insurance Contributions Other Total Operating Revenues Business-type Governmental Activities Enterprise Fund Activities Internal Service Funds $ $ 34,624,920 39,139,278 113,417,881 64,543,503 47,630,828 3,270,632 2,168,575 2,122,304 6,073,590 824,556 1,091,665 - 19,062,105 71,376,544 1,352,879 314,907,732 91,791,528 23,559,483 27,579,988 32,492,891 24,511,236 28,946,276 2,448,040 2,295,242 3,207,565 7,817,116 53,748 582,915 - 20,292,608 68,791,390 Total Operating Expenses 153,494,500 89,083,998 Operating Income Before Depreciation and Amortization Depreciation and Amortization 161,413,232 (46,099,910) 2,707,530 (340,110) Operating Income 115,313,322 2,367,420 (Continued) Operating Expenses: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Warehouse, Maintenance & Services Self-Insurance The accompanying notes are an integral part of the financial statements. 27 CITY OF MESA, ARIZONA EXHIBIT A-8 (Continued) STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Business-type Governmental Activities Activities - Enterprise Fund Internal Service Funds Nonoperating Revenues (Expenses): Investment Income Pledged as Security for Revenue Bonds Investment Income Unpledged Intergovernmental Interest Expense: Revenue Bonds General Obligation Bonds Notes Payable Other Long-Term Obligations Amortization of Bond Issuance and Administrative Costs Loss on Disposal of Capital Assets Equity Interest in Joint Ventures 838,981 11,473 2,125,501 237,016 - (39,910,089) (94,432) (69,067) (14,489) (323,330) (5,243,965) (12,665,274) (36,970) - Total Nonoperating Revenues (Expenses) (55,344,691) 200,046 Income before Transfers and Capital Contributions 59,968,631 Capital Contributions Transfers In Transfers Out 15,814,280 (83,615,000) Change in Net Assets (7,832,089) Total Net Assets - Beginning Total Net Assets - Ending 28 2,856,985 14,733,233 $ 739,401,579 $ 17,590,218 (663,565) $ The accompanying notes are an integral part of the financial statements. (1,581) 291,100 - 747,233,668 Adjustment to reflect consolidation of internal service funds related to the enterprise fund. Change in net assets of the business-type activities 2,567,466 (8,495,654) CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Business-type Governmental Activities Activities Internal Service Enterprise Fund Cash Flows From Operating Activities: Cash Received From Customers Cash Received From Users Cash Payments to Suppliers Cash Payments to Employees $ 303,277,355 6,701,104 (88,767,867) (52,975,183) Funds $ 91,876,952 (73,453,516) (7,484,233) Net Cash Provided By Operating Activities 168,235,409 Cash Flows From Noncapital Financing Activities: Intergovernmental Investment in Joint Ventures Transfers In from Other Funds Transfers Out to Other Funds 2,125,501 (3,623,842) (83,615,000) 291,100 - Net Cash Provided By (Used For) Noncapital Financing Activities (85,113,341) 291,100 Cash Flows From Capital and Related Financing Activities: Proceeds From Bond Sales Payment to Refunded Bond Escrow Agent Acquisition and Construction of Capital Assets Proceeds From Sale of Capital Assets Principal Paid on Bonds, Leases and Notes Maturities Interest Paid on Bonds, Leases and Notes Capital Contributed by Other Governments Capital Contributed by Subdividers 185,317,964 (117,740,930) (83,819,495) 96,315 (13,531,230) (44,072,729) 6,148,923 5,215,556 (97,030) - Net Cash Used For Capital and Related Financing Activities (62,385,626) (97,030) Cash Flows From Investing Activities: Interest Received on Investments 1,032,063 237,016 Net Cash Provided By Investing Activities 1,032,063 237,016 21,768,505 11,370,289 175,594,944 40,055,487 Net Increase in Pooled Cash and Investments Total Cash and Investments at Beginning of Year Total Cash and Investments at End of Year $ 197,363,449 The accompanying notes are an integral part of the financial statements. 29 10,939,203 $ 51,425,776 CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Business-type Governmental Activities Activities Internal Service Enterprise Fund Reconciliation of Operating Income to Net Cash Provided By Operating Activities: Operating Income $ 115,313,322 Adjustments to Reconcile Operating Income to Net Cash Provided By Operating Activities: Depreciation and Amortization Changes in Assets and Liabilities: (Increase) Decrease in Receivables Increase in Inventory Increase in Deposits and Prepaid Costs Increase in Accounts Payable Increase in Other Accrued Expense Total Adjustments Net Cash Provided By Operating Activities Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Transfers of Capital Assets to Governmental Funds Loss on Disposal of Capital Assets Amortization of Bond Premium Amortization of Debt Issuance Costs Amortization of Deferred Amounts on Refundings The accompanying notes are an integral part of the financial statements. 30 Funds $ 2,367,420 46,099,910 340,110 (4,929,273) (2,086,282) 13,837,732 - 85,424 (193,994) (348,861) 778,530 7,910,574 52,922,087 8,571,783 $ 168,235,409 $ $ $ 4,449,801 (5,340,280) 2,395,803 (323,330) 2,007,092 10,939,203 (1,581) (36,970) - CITY OF MESA, ARIZONA EXHIBIT A-10 FIDUCIARY FUNDS STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES JUNE 30, 2012 Payroll Agency ASSETS Pooled Cash and Investments $ 12,851,354 Total Assets $ 12,851,354 LIABILITIES Accrued Payroll Payable $ 12,851,354 Total Liabilities $ 12,851,354 The accompanying notes are an integral part of the financial statements. 31 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The City of Mesa, Arizona, (the “City”) was incorporated July 5, 1883 with an approximate population of 300 and an area of one square mile. Today, the City’s estimated population is 441,160 within an area of approximately 137 square miles. The City’s charter was adopted August 18, 1967 providing for a Council-Manager form of government. The City provides a full range of municipal services including police and fire protection, parks and recreation, library, transportation, health and certain social services and general administration. In addition, the City owns and operates an enterprise whose activities include operations of electricity, gas, water, wastewater, solid waste, airport, golf courses, convention center, stadium and district cooling. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The City’s other significant accounting policies are described below: a. Reporting Entity The accompanying financial statements include the City and its blended component unit, the City of Mesa Municipal Development Corporation, collectively referred to as “the financial reporting entity”. In accordance with GASB No. 14, the component unit discussed below has been included in the City’s reporting entity because of the significance of its operational or financial relationship with the City. City of Mesa Municipal Development Corporation is a nonprofit corporation that is organized under the laws of the State of Arizona to assist the City in the acquisition and financing of municipal projects and facilities. The corporation is governed by a board of directors which is responsible for approving the corporation’s bond sales. Bond sales must also be approved by the City Council. Although it is legally separate from the City, the corporation is reported as if it is part of the primary government because its sole purpose is to finance the acquisition and or construction of public facilities for the City. Separate financial statements for the corporation can be obtained through the City’s Accounting Services Division. b. Jointly Governed Organizations Phoenix – Mesa Gateway Airport Authority (“PMGAA”) is a nonprofit corporation established and funded by the City, the City of Phoenix, and Towns of Gilbert and Queen Creek, and the Gila River Indian Community. The purpose of the entity is the redevelopment of Williams Air Force Base that was closed in September 1993 to become PMGAA. The Board of Directors consists of the mayors for the respective municipalities and the governor of the tribal community. The City contributed $1.7 million to the PMGAA operating and capital budget during this fiscal year. (Continued) 32 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Regional Public Transportation Authority (“RPTA”) is a voluntary association of local governments, including the cities of Mesa, Tempe, Scottsdale, Glendale, Phoenix and Maricopa County. Its purpose is to create a regional public transportation plan for Maricopa County. The Board of Directors consists of the mayors of those cities and a member of the County Board of Supervisors. Arizona Municipal Water Users Association (“AMWUA”) is a nonprofit corporation established and funded by cities in Maricopa County for the development of an urban water policy and to represent the cities’ interests before the Arizona legislature. The City’s annual membership fee for this fiscal year was approximately $177,504. In addition, AMWUA contracts with the cities jointly using a multi-city sanitary sewer system to perform certain accounting, administrative and support services (see Note 13). c. Basic Financial Statements Government-wide Financial Statements: The government-wide financial statements (the statement of net assets and the statement of activities) report on the City as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. Certain charges between the Enterprise Fund’s utility systems and the various functional activities are not eliminated, as this would distort the direct costs and program revenues reported for the various functions concerned. The government-wide statement of net assets reports all financial and capital resources of the City, excluding fiduciary funds. It is presented in a format of assets less liabilities equals net assets, with the assets and liabilities shown in order of their relative liquidity. Net assets are required to be presented in three components: invested in capital assets, net of related debt; restricted and unrestricted. Invested in capital assets, net of related debt is capital assets net of accumulated depreciation and reduced by outstanding balances of bonds, capital leases, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net assets are those with constraints placed on their use externally either imposed by creditors (such as bond covenants), grantors, contributors, laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. All net assets not otherwise classified as restricted, are shown as unrestricted. Generally, the City would first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. (Continued) 33 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The government-wide statement of activities demonstrates the degree to which the direct expenses of the various functional activities and segments of the City are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific functional activity (General Government, Public Safety, Cultural-Recreational, etc.) or segment. Expenses reported for the various functional activities or segments include indirect expenses, such as overhead costs. Interest on long-term debt is not allocated to the various functions in the governmental activities. Program revenues include charges to customers or applicants who directly benefit from goods, services or privileges provided by a given function or segment. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment, including special assessments. Taxes and other items not properly included as program revenues are reported as general revenues. The general revenues support the net costs of the functions and segments not covered by program revenues. Fund Financial Statements: The fund financial statements are, in substance, very similar to the financial statements presented in the previous model. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds. However, the fiduciary funds are not included in the government-wide financial statements. The focus of the fund financial statements is on major funds, as defined by GASB Statement No. 34. Major individual governmental funds are reported as separate columns in the fund financial statements. The City has only one enterprise fund, which is reported as a major fund. Nonmajor governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in combining statements included as supplementary information after the basic financial statements. d. Measurement Focus, Basis Accounting and Financial Statement Presentation Government-wide Financial Statements: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental Fund Financial Statements: The governmental fund financial statements are reported using the current financial resources measurement focus and modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become susceptible to accrual, i.e., - measurable and available to finance the City’s operations. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers revenues to be available if they are collected within 60 days of the end of the current period. Principal revenue sources considered to be susceptible to accrual are City sales taxes, property taxes, intergovernmental revenues and interest on investments. (Continued) 34 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 In applying the susceptible to accrual concept to intergovernmental revenues pursuant to GASB Statement No. 33, receivables and revenues are recognized when all the applicable eligibility requirements, including time requirements, have been met. Resources transmitted before the eligibility requirements are met are reported as deferred revenue. Expendituredriven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. City sales taxes collected and held by merchants at year-end on behalf of the City are recognized as revenue. State shared revenues, including sales and income taxes, highway user and auto lieu taxes, and lottery distributions for transportation assistance, which are collected and held by the State at year-end, on behalf of the City, are also recognized as revenue. Special assessments are recognized as revenue only to the extent that individual installments are considered current assets. Annual installments not currently receivable are reflected as deferred special assessments revenue. Licenses and permits, charges for services and miscellaneous revenues are recorded as revenue when received as cash because they are generally not available until actually received. Changes in the fair value of investments are recognized in revenue at the end of each year. Expenditures are generally recognized when the related fund liability is incurred, as under accrual accounting. An exception to this general rule is interest on long-term debt which is recorded when due. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide financial statements, a reconciliation is presented on the page following each governmental fund financial statement, which briefly explains the adjustments necessary to transform the fund-based financial statements into the governmental activities column of the government-wide financial statements. Additional reconciliations are also provided in Note 2. Proprietary Funds and Fiduciary Funds Financial Statements: The financial statements of the proprietary fund are reported using the economic resources measurement focus and accrual basis of accounting, similar to the government-wide financial statements described above. GASB Statement No. 20 requires that governments’ proprietary and business-type activities apply all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (“FASB”) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins. Governments are given the option whether or not to apply all FASB Statements and Interpretations issued after November 30, 1989, except for those that conflict with or contradict GASB pronouncements to its enterprise fund and business-type activities. (Continued) 35 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The City has elected not to implement FASB Statements and Interpretations issued after November 30, 1989. The proprietary fund financial statements distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. All revenues and expenses not meeting this definition, such as investment income and interest expense are reported as non-operating revenues and expenses. Internal service funds of the City, which provide services primarily to the other funds of the City, are presented in summary form as part of the proprietary fund financial statements. Since the principal users of the internal services are the City’s governmental activities, financial statements of the internal service funds are consolidated into the governmental activities column when presented at the government-wide level. The costs of these services are reflected in the appropriate functional activity (General Government, Public Safety, Cultural-Recreational, etc.) on the government-wide statement of activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect of these revenues and expenses. The City’s fiduciary fund is presented in the fund financial statements. The City’s fiduciary fund is an agency fund, which is custodial in nature and does not involve measurement of results of operations. The agency fund is accounted for on the accrual basis of accounting. Since by definition these assets are being held for the benefit of a third party and cannot be used to address activities or obligations of the City, these funds are not incorporated into the government-wide financial statements. e. Fund Accounting The financial transactions of the City are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the fund financial statements. GASB Statement No. 34 sets forth minimum criteria for the determination of major funds. The non-major funds are combined in a column in the fund financial statements and detailed in the combining section. (Continued) 36 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The City reports the following major governmental funds: The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The Highway User Revenue Fund accounts for capital projects and maintenance of the City’s streets and highways, as mandated by the Arizona Revised Statutes. Financing for this fund is provided by the state shared fuel taxes. The Highway Project Advancement Notes Fund accumulates monies for payment of principal and interest requirements for the Highway Project Advancement notes. The City reports the following non-major governmental funds: Eight non-major Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. Four non-major Debt Service Funds are used to account for the accumulation of resources for the payment of long-term obligation principal, interest and service charges. Six non-major Capital Project Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. The City reports the following major proprietary fund: The Enterprise Fund has been established to account for all enterprise functions. This includes the City-owned electric, gas, water, wastewater and solid waste systems, as well as the City-owned airport, golf courses, convention center, stadiums and district cooling. Additionally, the City reports the following fund types: The Internal Service Funds are used to account for operations that provide services to other departments of the government on a cost-reimbursement basis. These services include fleet support, materials and supply, printing and graphics, and self-insurance for property and public liability, workers’ compensation and employee benefit programs. The Agency Fund is used to account for assets being held by the City as an agent in a temporary custodial capacity. The Payroll Agency Fund accounts for all payroll transactions. (Continued) 37 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 f. Pooled Cash and Investments The City maintains an invested pool that is available for use by all City funds. Each funds portion of this pool is reported on the financial statements as “pooled cash and investments”. A single master custodian holds all assets of the invested pool. In addition, certain cash deposits and investments are also held separately by various City funds in separate accounts. At year-end, City cash totaled $1,302,324 which includes $218,090 of petty cash. The carrying amount of the City’s deposits was $1,084,234 and the bank balance was $227,173. The entire balance was covered by federal depository insurance. The difference of $857,061 represents deposits in transits, outstanding checks and other reconciling items. Interest Rate Risk. The City’s investment policy for limiting its exposure from rising interest rates complies with Arizona Revised Statute §35-323, which limits investments of public monies to maturities of less than three years. The City has purchased its own Special Improvement District Bonds with maturities that exceed three years. Credit Risk. The City’s Policy is consistent with the City Charter which authorizes the investment of City funds in accordance with Arizona Revised Statute §35-313. These investments include obligations of the U.S. Treasury and U.S. agencies, certificates of deposit in eligible depositories, repurchase agreements, obligations of the State of Arizona or any of its counties or incorporated cities, towns or duly organized school districts, improvement districts in this state and the State Treasurer’s Investment Pool. The State Treasurer’s Investment Pool is overseen according to Arizona State Statute by the State Board of Deposit. The fair value of each share as of June 30, 2012, is equal to $1.00. The State Treasurer’s Investment Pool #7 that the City participates in does not receive a credit quality rating. The City’s investment in the Federal Agency Securities are rated AA+ by Standard & Poor’s. The City’s Special Improvement District bonds have no credit rating. The City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The City’s investments that are reflected in the financial statements as cash total $237,235,064. (Continued) 38 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The City’s investments at June 30, 2012 are as follows: Investment Maturities (in Years) Fair Value Investment Type U.S. Treasuries $ U.S. Agencies: Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Assn City of Mesa Special Improvement District Bonds Total $ Less Than 1 Concentration of Credit Risk % 37,531,527 $ 51,591,327 39.44 % 6,956,548 4,735,976 5,046,235 16,205,095 10,024,480 49,756,893 45,459,546 6,231,763 9.49 24.67 25.00 335,000 24,255,990 335,000 113,852,995 2,755,492 106,038,128 96,305,085 $ 7,182,231 23,161,643 60,220,002 61,034,891 3,425,492 244,147,113 $ More than 2 1-2 $ $ $ None of these Investments are callable. Total Pooled City Cash and Investments at fair value are as follows: Cash on Hand $ Carrying Amount of City Deposits Investments in Local Govt Invest Pool Repurchase Agreement Cash with Trustee Cash with Fiscal Agent Long-Term Investments Total Pooled Cash and Investments $ 218,090 1,084,234 122,948,877 15,612,037 98,674,150 75,652,553 244,147,113 558,337,054 Interest income from investments is recorded as revenue within the fund that made the investment, with the exception of the Debt Service, Capital Projects and Agency Funds. Income from investments within these funds is recorded in the General or Enterprise Fund based upon their general governmental or enterprise related function. The City had a net increase in the fair value of investments during fiscal year 2011-12 of $534,251. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. (Continued) 39 1.40 100.00 % CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 g. Accounts Receivable and Due from Other Governments Accounts receivable are recorded in the various funds and displayed in the financial statements net of an allowance for uncollectibles as follows: Fund Receivables Governmental Activities: General Fund: Taxes $ 8,336,988 Courts 58,399,517 Other Customers 3,634,510 Restricted 4,879,002 Due from Other Governments State Shared Revenues 5,586,093 Other 9,940,778 Highway User Revenue Fund: Customers 36,063 Due from Other Governments 2,673,491 Highway Project Advancement Notes Restricted-Due from Other Governments 32,093,761 Non-Major Governmental Funds: Taxes 5,279,200 Other Customers 149,778 Restricted-Spec. Assessments 4,502,467 Restricted-Property Taxes 576,028 Due from Other Governments 18,658,892 Internal Service Funds Customers 1,442,740 Due from Other Governments 43,150 Total Governmental Activities $ 156,232,458 Business-Type Activities: Utility Customers $ 29,420,437 Other Customers 1,940,972 Due from Other Governments 3,370,821 Total Business-type Activities $ 34,732,230 Allowance $ Net (2,327,000) (54,292,879) (1,112,100) - $ - 5,586,093 9,940,778 - 36,063 2,673,491 - 32,093,761 - 5,279,200 149,778 4,502,467 576,028 18,658,892 - $ $ $ 6,009,988 4,106,638 2,522,410 4,879,002 (57,731,979) (890,000) (300,000) (1,190,000) $ $ $ 1,442,740 43,150 98,500,479 28,530,437 1,640,972 3,370,821 33,542,230 (Continued) 40 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 h. Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Rehabilitation Revolving Loans not yet due (General Fund) $ 62,810 Surcharges included in Court Receivables (General Fund) 4,816,089 Grants received prior to meeting all eligibility requirements (General Fund) 1,823,198 Delinquent Property Taxes (Debt Service Funds) 313,793 Special assessments not yet due (Debt Service Funds) 4,502,467 Joint Project with McDot and Gilbert (Capital Project Funds) 2,238,855 Total deferred revenue for governmental funds $ 13,757,212 i. Interfund Receivables, Payables, and Transfers The following interfund activities are included in the fund financial statements at June 30, 2012: Interfund Receivables Fund Governmental funds: General Fund Highway User Revenue Fund Non-major Governmental Funds Total Governmental funds Interfund Payables $ 8,096,813 $ $ 8,096,813 $ 2,608,000 5,488,813 8,096,813 The interfund balances at June 30, 2012 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2012 are expected to be repaid within one year. The transfer of $83,615,000 from business-type activities to governmental activities on the government-wide statement of activities is an operational subsidy from the Enterprise Fund to the General Fund. The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2012: (Continued) 41 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Fund Governmental funds: General Fund Highway User Revenue Fund Non-major Governmental Funds Total governmental funds Proprietary funds: Enterprise Fund Internal Service Funds Total $ $ Transfers Out Transfers In 25,496,798 8,856,848 3,781,937 38,135,583 84,096,031 3,513 37,359,939 121,459,483 83,615,000 121,750,583 291,100 121,750,583 $ The interfund transfers generally fall within one of the two following categories: 1) debt service payments made from a debt service fund but funded from an operating fund; 2) subsidy transfers. j. Inventory The warehouse inventory is valued at the lower of average cost or market, while fleet support services inventory is valued at cost on a first-in, first out (FIFO) basis. The cost of inventory is reported as an expenditure at the time individual items are consumed. k. Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2012, unbilled utility service receivables are recorded in the Enterprise Fund as follows: Electric Gas Water Wastewater Solid Waste $ $ 1,273,832 892,563 5,353,068 2,521,598 1,830,090 11,871,151 l. Capital Assets Capital assets, including infrastructure (streets, sidewalks, street lighting, storm drainage and other assets that are immovable and of value only to the City) are defined as assets with an initial cost of $5,000 or more and an estimated useful life of more than one year. Intangible assets for the City include goodwill, right of way, easements and computer software. The City has elected to capitalize software with an initial cost of $100,000 or more. All capital assets, whether owned by governmental activities or business-type activities are required to be recorded and depreciated in the government-wide financial statements. (Continued) 42 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Contributions of assets are stated at fair market value based on appraisals or engineering estimates of value at the time of receipt. When assets are retired or sold, the costs of the assets and the related accumulated depreciation are eliminated from the accounts, and any resultant gain or loss is charged to income or expense. Prior to June 30, 1978, the City did not maintain detailed property cost records of its capital assets other than for rolling stock. A physical inventory was performed during the fiscal year ended June 30, 1978 and detailed property records were prepared. Generally, the assets were recorded at cost. Where historical cost information was not available, the assets were valued at estimated cost using engineering estimates, appraisals or current replacement cost, adjusted to the year of acquisition. The City has made various class changes to both the government-wide and business-type capital asset classifications during fiscal year 2011–12 in preparation for the implementation of fully integrated ERP system expected to go live in next fiscal year. The changes did not affect the overall capital asset cost. Depreciation has been provided using the straight-line method based on the estimated useful lives of the assets. Amortization of capital leased assets has been provided using the straightline method based on the shorter of the lease period or estimated useful lives of the leased assets. The estimated useful lives are as follows: Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure 15-50 Years 10-50 Years 3-30 Years 3-99 Years 10-99 Years (Continued) 43 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2012 follows: Balance July 1, 2011 Governmental Activities: Non-depreciable Assets: Land $ Construction-in-Progress Total Non-depreciable Assets Depreciable Assets: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Depreciable Assets Less Accumulated Depreciation for: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Accum. Depreciation Total Depreciable Assets, net Governmental Activities Capital Assets, net $ 265,803,456 $ 89,542,374 355,345,830 300,612,775 215,435,029 140,066,160 176,578 819,889,033 1,476,179,575 (67,757,845) (68,229,823) (95,182,019) (162,540) (320,404,447) (551,736,674) 924,442,901 1,279,788,731 $ Additions Class Change and Transfers Retirements Balance June 30, 2012 1,062,887 $ 65,321,498 66,384,385 - $ (23,385,989) (23,385,989) 3,014,280 8,963,223 6,143,345 98,626 4,898,900 23,118,374 (4,484,965) (7,794,669) (137,027) (12,416,661) (24,806,366) (139,294,540) 18,336,795 128,640 72,813,091 (72,822,380) (5,749,242) (7,980,244) (9,430,208) (46,308) (25,763,812) (48,969,814) (25,851,440) 1,714,286 7,427,164 135,994 9,277,444 (3,139,217) 5,214,853 14,849,202 (10,376,840) (47,860) (9,639,355) (72,822,380) 40,532,945 $ 18,455,476 $ 54,366,904 72,822,380 (26,525,206) $ - $ 285,321,819 185,844,787 471,166,606 278,820,689 80,618,747 156,751,631 403,844 897,463,997 1,414,058,908 (68,292,234) (59,646,579) (107,561,903) (256,708) (355,671,620) (591,429,044) 822,629,864 1,293,796,470 Depreciation expense was charged to governmental functions in the government-wide financial statements as follows: General Government $ Public Safety Cultural - Recreational Community Environment Capital assets held by the City's Internal Service funds are charged to the various functions based on their usage of the assets 4,806,217 10,674,182 6,877,000 26,272,305 Total Depreciation $ 48,969,814 340,110 (Continued) 44 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Balance July 1, 2011 Business-type Activities: Non-depreciable Assets: Land $ Water Rights Construction-in-Progress Total Non-depreciable Assets Depreciable Assets: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Depreciable Assets Less Accum. Depr. & Amort. for: Buildings Other Improvements Machinery & Equipment Intangibles Infrastructure Total Accum. Depr. & Amort. Total Depreciable Assets, net Business-type Activities Capital Assets, net $ 58,802,555 $ 12,760,846 113,470,253 185,033,654 Additions 144,410 $ 4,799,299 79,610,489 84,554,198 Class Change and Transfers Retirements (500) $ (37,065,919) (37,066,419) 33,717 $ 33,717 Balance June 30, 2012 58,980,182 17,560,145 156,014,823 232,555,150 62,413,552 174,566,571 216,413,649 13,683,262 1,201,069,809 1,668,146,843 454,683 21,849,300 6,166,128 414 12,995,855 41,466,380 (5,284,068) (1,418,008) (80,782) (6,782,858) (10,854,548) (129,019,647) (169,471,824) 3,638,771 305,663,893 (43,355) 52,013,687 62,112,156 51,689,945 17,322,447 1,519,648,775 1,702,787,010 (25,883,941) (40,661,998) (87,901,227) (9,763,011) (386,588,884) (550,799,061) 1,117,347,782 (1,278,005) (9,617,189) (8,341,898) (417,921) (26,444,897) (46,099,910) (4,633,530) 7,745 1,356,545 78,788 1,443,078 (5,339,780) 5,934,851 44,172,803 66,395,921 (4,791,299) (111,712,276) (43,355) (21,227,095) (6,098,639) (28,490,659) (14,972,231) (524,667,269) (595,455,893) 1,107,331,117 1,302,381,436 $ 79,920,668 $ (42,406,199) $ (9,638) $ 1,339,886,267 Depreciation and Amortization expense was charged to enterprise functions in the government-wide financial statement as follows: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex District Cooling $ 2,944,156 3,011,300 18,838,487 16,204,815 2,207,321 1,280,834 238,809 273,418 710,090 390,680 Total Depreciation and Amortization $ 46,099,910 (Continued) 45 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Construction in progress and related construction commitments are composed of the following: Construction in Progress Governmental Activities General Government Public Safety Cultural-Recreational Community Environmental Warehouse, Maintenance & Services Total $ Commitments 10,050,964 52,970,026 4,415,615 118,263,644 144,538 $ 185,844,787 $ $ $ $ 1,029,958 7,107,208 381,470 28,029,507 143,800 36,691,943 Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total 22,094,075 23,713,537 92,037,781 6,917,209 735,763 5,685,240 507,586 91,826 482,322 2,660,137 1,089,347 $ 156,014,823 $ 1,343,471 3,448,009 10,523,268 2,884,859 1,954,980 211,525 4 26 1 4,735,891 25,102,034 m. Capitalization of Interest For the year ended June 30, 2012, the City capitalized net interest costs of $3,132,995 (interest expense of $3,182,676 reduced by interest income of $49,681 in the Business-type Activities Enterprise Fund). Total interest expense and income in the Business-type Activities Enterprise Fund before capitalization was $43,270,753 and $900,135 respectively. n. Self-Insurance Internal Service Fund The Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds have been established to account for the costs of claims incurred by the City under self-insurance programs. The City is fully self-insured for all public liability risks, up to a maximum of $3,000,000, per occurrence, for the current policy year under the Property (Continued) 46 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 and Public Liability Insurance program. In addition, the City carries full property insurance with a $50,000 per occurrence deductible. Under the Workers’ Compensation Program, the City is subject to a maximum deductible of $1,000,000 liability per occurrence. In the Employee Benefits Fund, the City has excess insurance coverage when an individual’s claims exceed $200,000 per contract year. There were no changes in insurance coverage during this fiscal year for any of the three Self-Insurance Funds. The various funds of the City include, as expenditures, amounts contributed to each of the self-insurance funds during the fiscal year. The estimated liability for claims outstanding is determined by a yearly actuarial study in the Property and Public Liability Fund and the Workers Compensation Fund. The claims liability in the Employee Benefits Fund is generated by the claims processing software system maintained by City Staff. The stop loss receivable balance for the Workers’ Compensation Fund at June 30, 2012 is $162,840. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $511,739 with $130,748 received this current fiscal year. The Property and Public Liability Fund does not have a stop loss receivable at June 30, 2012, and the Fund has not received any settlements in excess of insurance coverage over the past three fiscal years. The Employee Benefits Fund does not have stop loss receivable at June 30, 2012. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $3,158,065 with $397,479 received this current fiscal year. Changes in the balances of claims liabilities during the past two fiscal years are as follows: Property & Public Liability Workers' Compensation Unpaid Claims, 6/30/10 $ 17,636,000 Adjustments to Reserves-FY 10-11 545,129 Claim Payments-FY 10-11 (3,540,129) $ Unpaid Claims, 6/30/11 Total $ 3,731,291 51,013,683 (51,431,201) $ 29,088,317 58,435,232 (58,099,158) $ 11,469,618 $ 3,313,773 $ 29,424,391 Adjustments to Reserves-FY 11-12 $ 567,582 Claim Payments-FY 11-12 (2,178,582) $ 10,816,654 (3,568,076) $ 48,861,122 (46,588,126) $ 60,245,358 (52,334,784) Unpaid Claims, 6/30/12 $ 18,718,196 $ 5,586,769 $ 37,334,965 $ 14,641,000 $ 13,030,000 7,721,026 6,876,420 (3,127,828) Employee Benefits All unpaid claims are reported as current liabilities in the Statement of Net Assets as the change in these amounts have already been expensed in the statement of activities. (Continued) 47 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 o. Compensated Absences The current portion of governmental funds accrued vacation and sick leave benefits payable are included as a liability in the fund financial statements. The entire amount of accumulated unpaid vested vacation pay and an estimated amount for sick leave related to the proprietary funds is included as a liability in the fund financial statements. The remaining long-term balances related to governmental activities are included in the government-wide financial statement (see Note 5 for additional disclosure of long-term balances). p. Fund Balance Policies In the fund financial statements, fund balance is reported in classifications that comprise a hierarchy based on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The classifications of fund balance are Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned, and Unassigned represent the unrestricted classifications. Nonspendable fund balance includes amounts that can not be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) legally or contractually required to be maintained intact. Restricted fund balance has externally (outside the City) enforceable limitations imposed by creditors, grantors, contributors, laws and regulations of other governments, or laws through constitutional provisions or enabling legislation (changes in City Charter). Committed fund balance has self-imposed limitations imposed at the highest level of decision making authority, namely, Mayor and Council. Mayor and Council approval is required by resolution to commit resources or to rescind the commitment. Assigned fund balance represents limitations imposed by management. Assigned fund balance requests are submitted to the Chief Financial Officer for approval/nonapproval. City Charter authorizes the City Manager or Designee the authority to perform all financial transactions. The City Manager has authorized the Chief Financial Officer this responsibility. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any governmental fund can report a negative unassigned fund balance. When both restricted and unrestricted resources are available for specific expenditures, restricted resources are considered spent before unrestricted resources. Within unrestricted resources, committed and assigned are considered spent (if available) before unassigned amounts. (Continued) 48 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 As of June 30, 2012 the fund balance details by classification are listed below: Fund Balances: Highway Project Non-M ajor Total General Highway User Advancement Governmental Governmental Fund Revenue Fund Notes Funds Funds Nonspendable: Prepaid Costs $ 753,701 $ 1,212 $ - $ 82,290 $ 837,203 Restricted: Debt Service - - 127,932,813 - 127,932,813 Capital Projects - - - 44,154,587 44,154,587 Quality of Life Projects - - - Streets Projects - - - Public Safety 311,407 - - Cultural-Recreational 127,488 - - - 127,488 - - - 1,804,282 1,804,282 1,572,632 - - - 1,572,632 General Govt 682,721 - - - 682,721 Cultural-Recreational 195,266 - - 1,856,210 2,051,476 - 1,074 1,074 Community Environment Court - 3,582,240 3,582,240 33,805,081 33,805,081 - 311,407 Committed To: Court - Public Safety 2,783,213 - - 1,084,138 3,867,351 Building Safety 682,525 - - - 682,525 Community Environment 642,617 - - 6,195,898 6,838,515 Vehicle Replacements - - - 5,922,672 5,922,672 General Govt Facilities - - 1,300,486 1,300,486 - - 5,697 - - 78,033,923 Other Commitments 5,697 Unassigned Total Fund Balances - 78,034,860 $ 85,792,127 (937) $ 275 $ 127,932,813 $ 99,788,958 $ 313,514,173 The Mayor and Council has established a minimum fund balance policy for the General Fund of eight to ten percent of budgeted expenditures. The fund balance in the General Fund as of June 30, 2012 as reported in Exhibit B-3 is 21.8% of General Fund expenditures budgeted for fiscal year 2012-2013. (Continued) 49 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 q. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, non-capital financing, capital and related financing, or investing activities. For purposes of the statements of cash flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. This includes repurchase agreements and all monies in the State Treasurer’s Local Government Investment Pool since the City may deposit or withdraw cash at any time without prior notice or penalty. r. Budgets and Budgetary Accounting Each year, the City Manager issues a budget calendar giving specific completion dates for various phases of the budget preparation process. The final adoption of the operating budget is by ordinance. Prior to June 1, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted by the City to obtain citizen comments. Prior to June 30, the budget for the ensuing year is legally adopted through passage of an ordinance; these appropriations lapse at the end of each fiscal year. Legal control over the budget derives from State statutes that prohibit the City from exceeding its adopted budget in total, and from the resolution itself that limits expenditures by fund and by departmental groupings. Transfers of sums within a specific fund or departmental group may be made upon City Manager approval. The legally adopted budget consists of all funds except the Agency Fund. Capital Projects (both Governmental and Proprietary) are budgeted as one item (as shown in Exhibit D-5). Governmental debt service expenditures are budgeted in the General Fund and Special Revenue Funds or Debt Service Funds. Budget schedules for the General and Highway User Revenue Funds are presented in the Required Supplementary Information Section, and the other funds are located in the Supplementary Information Section. Additional detailed budget schedules for the General and Highway User Revenue Funds are also located in the Supplementary Information Section. The Highway Project Advancement notes major governmental fund revenues and expenditures are budgeted in the special revenue funds. On June 3, 1980, the voters of Arizona approved an expenditure limitation for all local governments. This limitation restricts the growth of expenditures to a percentage determined (Continued) 50 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 by population and inflation, with certain expenditures excluded from the limitation. The State Economic Estimates Commission determines and publishes, prior to April 1st of each year, the expenditure limitation for the following fiscal year for each governmental unit. Fiscal year 1979-80 is the base year for calculations. Budgets for all funds are adopted in accordance with the requirements of the Arizona Constitution, Arizona Revised Statutes and the Mesa City Charter. There are certain differences between the basis used for budgetary purposes and that used for reporting in accordance with generally accepted accounting principles. For additional detail, see the note to required supplementary information and the individual budget schedules in the supplemental information exhibits. Budgeted amounts are as originally adopted by the City Council on June 27, 2011. s. Contingency Services The principal purpose of a contingency is to cover any unforeseen expenditures that may arise after the budget is adopted, and to cover expenditures resulting from prior year encumbrances. It is impossible to estimate revenues exactly or to determine in a prior year the exact expenditure of each program or activity for the ensuing year. Thus a contingency is essential for budgetary purposes. Any balance of a contingency appropriation not used during one fiscal year is available to help finance the following year’s budget. The contingency applications are reflected in the budget basis financial statements for the fiscal year ended June 30, 2012 and are made in accordance with State Statutes. t. Property Taxes The City’s secondary property tax is levied each year on or before the third Monday in August based on the previous January 1 full cash value as determined by the Maricopa County Assessor. Levies are due and payable in two installments, on October 1 and March 1, and become delinquent after November 1 and after May 1, respectively. A lien attaches to the property on the first day of January preceding the assessment and levy of taxes. Delinquent amounts bear interest at the rate of 16 percent. Maricopa County, at no charge to the taxing entities, bills and collects all property taxes. Public auctions of properties which have delinquent real estate taxes are held in February. Secondary property taxes are levied to pay principal and interest on bonded indebtedness. The dollar amount of the secondary property tax is “unlimited” and the actual full cash value of property is used in determining the tax rate. In fiscal year 2011-12, current property tax collections were $13,796,512 or 95.99% of the tax levy, and were recognized as revenue when received. At fiscal year end, the delinquent property tax is recorded as a receivable. Revenue is recognized for those payments expected to be collected within 60 days and the remaining balance is reported as deferred revenue. The (Continued) 51 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 receivable at 06/30/12 was $576,028 of which $262,235 was recorded as revenue and $313,793 as deferred revenue. 2. RECONCILIATION OF GOVERNMENTAL FUND FINANCIAL STATEMENTS TO GOVERNMENT-WIDE STATEMENTS The governmental fund financial statements are presented on a current financial resources measurement focus and modified accrual accounting basis while the government-wide financial statements are prepared on a long-term economic resources measurement focus and accrual accounting basis. Reconciliations briefly explaining the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide financial statements immediately follow each governmental fund financial statement. Additional reconciliations are provided on the next page. (Continued) 52 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Reconciliation of the Governmental Funds Balance Sheet to the government-wide Statement of Net Assets: Total Governmental Funds Assets Pooled Cash and Investments Accounts Receivable, net Interest Receivable Due From Other Governments Due From Other Funds Inventories Prepaid Costs Deposits Restricted Pooled Cash and Investments Restricted Cash With Fiscal Agent Restricted Cash With Trustee Restricted Accounts Receivable - Deferred Restricted Due From Other Governments Unamortized Bond Issuance Costs Investment in Joint Ventures Capital Assets Total Assets Liabilities Warrants Outstanding Accounts Payable Other Accrued Expenses Due To Other Funds Customer and Defendant Deposits Compensated Absences Restricted Bond Interest Payable Restricted Note Interest Payable Restricted Deferred Revenue M atured G.O. Bonds Payable M atured HURF Bonds Payable Long-term Liabilities Total Liabilities Fund Balance/Net Assets Total Fund Balance/Net Assets Total Liabilities and Fund Balance/Net Assets $ $ $ $ Long-term Assets/ Liabilities(1) 165,149,325 18,104,077 548,812 36,859,254 8,096,813 837,203 288,550 160,510 32,712,490 98,674,150 9,381,469 32,669,789 403,482,442 $ 2,940,257 53,681,635 1,290,416,799 $ 1,347,038,691 8,397,178 13,987,412 8,096,813 8,870,812 1,187,019 8,690,566 3,556,148 13,757,212 20,135,109 3,290,000 89,968,269 $ Internal Service Funds(2) $ 51,425,776 1,442,740 43,150 3,457,400 6,061,888 657,713 3,379,671 $ 66,468,338 - $ 1,098,786 37,334,965 (4,879,070) 828,506,522 6,986,969 823,627,452 45,420,720 313,514,173 523,411,239 21,047,618 403,482,442 $ 1,347,038,691 $ 66,468,338 Reclassifications and Eliminations $ $ - $ 216,575,101 19,546,817 548,812 36,902,404 (8,096,813) 3,457,400 6,061,888 1,494,916 288,550 160,510 32,712,490 98,674,150 9,381,469 32,669,789 2,940,257 53,681,635 1,293,796,470 (8,096,813) $ 1,808,892,658 - $ (8,096,813) (8,096,813) $ Statement of Net Assets Total 8,397,178 15,086,198 37,334,965 8,870,812 1,187,019 8,690,566 3,556,148 8,878,142 20,135,109 3,290,000 835,493,491 950,919,628 857,973,030 (8,096,813) $ 1,808,892,658 (1) When capital assets (land, buildings, equipment, etc.) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds, and thus a reduction in fund balance. However, the statement of net assets includes those capital assets among the assets of the City as a whole. (Continued) 53 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Costs of capital assets Accumulated depreciation $1,876,082,150 (585,665,351) $1,290,416,799 Investment in joint ventures that are to be used in governmental activities are also reported in the governmental funds as expenditures as constructed. These assets are included in the statement of net assets for the City as a whole. Investment in joint ventures $ 53,681,635 Bond issuance costs are expended when incurred in governmental funds, but are deferred and amortized over the life of the bonds in the statement of net assets. Unamortized bond issuance costs $ 2,940,257 Long-term liabilities applicable to the City’s governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental fund statement. Bonds payable Notes payable Capital leases Compensated absences Post employment benefits Unamortized bond premiums $ 409,016,303 122,835,000 821,550 16,323,141 258,277,986 21,232,542 $ 828,506,522 Deferred revenue for the long-term special assessment receivables, property tax receivables and for the rehabilitation loan program shown on the governmental fund statements is not deferred on the statement of net assets. Deferred property tax revenues Deferred special assessment revenue Deferred rehabilitation loan revenue $ $ (2) 313,793 4,502,467 62,810 4,879,070 Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets, but are not included on the governmental funds balance sheet. Total $ 21,047,618 (Continued) 54 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities: To ta l Go ve rnm e nta l F unds R e v e n u e s a n d O t h e r S o u rc e s Ta xe s P ro pe rty Ta xe s Oc c upa nc y Ta xe s S pe c ia l As s e s s m e nts Lic e ns e s a nd P e rm its Inte rgo ve rnm e nta l C ha rge s fo r S e rvic e s C o ntributio ns F ine s a nd F o rfe iture s Inve s tm e nt Inc o m e M is c e lla ne o us Othe r S o urc e s : C a pita l C o ntributio ns Tra ns fe rs In F a c e Am o unt o f B o nds Is s ue d F a c e Am o unt o f No te s Is s ue d P re m ium s o n Is s ua nc e o f B o nds P re m ium s o n Is s ua nc e o f No te s Is s ua nc e o f R e funding De bt To ta l R e ve nue s a nd Othe r S o urc e s $ 121,459,483 27,290,000 77,835,000 8,027,060 8,250,081 67,238,160 681,803,471 E xp e n d it u re s / E xp e n s e s C urre nt: Ge ne ra l Go ve rnm e nt P ublic S a fe ty C ultura l-R e c re a tio na l C o m m unity Enviro nm e nt De bt S e rvic e : P rinc ipa l P a ym e nts Inte re s t o n B o nds Inte re s t o n C a pita l Le a s e s Inte re s t o n No te s S e rvic e C ha rge s C o s t o f Is s ua nc e C a pita l Outla y To ta l Expe nditure s \Expe ns e s O t h e r F in a n c in g Us e s / C h a n g e s in N e t A s s e t s Tra ns fe rs Out P a ym e nt to R e funde d B o nd Es c ro w Age nt To ta l Expe nditure s \Expe ns e s & Othe r F ina nc ing Us e s Ne t C ha nge fo r the Ye a r 126,644,151 $ 14,322,925 2,018,764 995,897 13,358,859 168,433,432 25,779,212 11,294,065 1,283,881 7,572,501 $ Lo ng-te rm R e ve nue s / Expe ns e s (1) C a pita l R e la te d Ite m s (2) - $ (88,640) (743,945) (8,911) (841,496) Inte rna l S e rvic e F unds (3) - $ Lo ng-te rm De bt Tra ns a c tio ns (4) 17,170,502 $ 237,015 1,366,833 - Elim ina tio ns a nd Adjus tm e nts (5) $ - S ta te m e nt of Ac tivitie s $ 126,644,151 14,234,285 2,018,764 251,952 13,358,859 168,424,521 25,779,212 17,170,502 11,294,065 1,520,896 8,939,334 1,284,272 1,581 - 289,519 - (27,290,000) (77,835,000) (8,027,060) (8,250,081) (67,238,160) (38,135,583) - 1,284,272 83,615,000 - 1,285,853 19,063,869 (188,640,301) (38,135,583) 474,535,813 41,083,321 226,428,861 43,903,634 64,403,759 7,120,113 38,612,330 4,715,178 4,236,508 7,283,711 10,826,564 7,155,241 28,472,448 1,982,183 11,999,024 1,360,590 201,522 3,000 51,423 36,111 278,453 - 57,472,328 287,918,202 57,170,754 97,592,690 25,513,155 18,244,535 86,367 4,312,398 7,864 869,882 66,950,632 491,804,408 (7,864) 54,676,265 (66,950,632) (13,212,668) 15,543,319 (25,513,155) (13,458) (998,800) (869,882) (27,026,308) - 18,231,077 86,367 3,313,598 521,785,016 38,135,583 - - - 74,127,409 - - - 604,067,400 77,736,071 $ 54,676,265 (55,517,761) $ (13,212,668) 14,498,521 $ 15,543,319 3,520,550 - (38,135,583) (74,127,409) $ - (101,153,717) (87,486,584) $ (38,135,583) - $ (1) Revenues that are “unavailable” and do not provide current financial resources are not reported in the governmental funds. These revenues are reported in the statement of activities. However, the subsequent collection of these revenues in the governmental funds will reduce the amount reported in the statement of activities. Property tax revenue Special assessment revenue Rehabilitation loan revenue Total 55 $ (88,640) (743,945) (8,911) $ (841,496) (Continued) 521,785,016 (47,249,203) CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrual of long-term compensated absences Accrual of post employment benefits Total (2) $ 53,579 (54,729,844) $ (54,676,265) When capital assets that are to be used in the governmental activities are purchased or constructed, or are to be classified as investment in joint venture, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of the financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year. Capital outlay for capital assets Capital outlay for joint venture Depreciation expense Loss on equity interest for joint venture Total $ 65,640,917 1,309,715 (48,629,704) (2,006,011) $ 16,314,917 The net effect of miscellaneous transactions involving capital assets (donations, transfers and disposals) is to increase net assets. Donation of capital assets $ 1,284,272 Loss on disposal of capital assets (3,102,249) Transfer of capital assets reclassified to transfer in 1,581 Total $ (1,816,396) (3) Internal service funds are used by management to charge the costs of certain activities, such as fleet support, materials and supplies, printing and graphics, and self-insurance, to the individual funds. The adjustments for internal service funds “close” those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds’ costs for the year. Revenue and other sources Expenditures and other uses Transfers out to General Fund Change in net assets $ 18,772,769 (15,543,319) 291,100 $ 3,520,550 (Continued) 56 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 (4) Bond and note proceeds are reported as financing sources and the repayment of principal consumes financial resources in the governmental funds. Neither transaction has any effect on the statement of activities. New debt issued (including refunded debt) General Obligation bond proceeds Highway User Revenue bond proceeds Highway Project Advancement note proceeds Premiums on refunding bonds $ (58,438,160) (36,090,000) (77,835,000) (7,630,822) Principal repayments Payment to refunded bond escrow agent Total 25,513,155 74,127,409 $ (80,353,418) Governmental funds report bond issue costs, premiums and deferred amounts relating to refunding when first issued. In the statement of activities these amounts are deferred and amortized. Current Year bond issue cost $ 869,882 Amortization of bond issue costs (368,986) Amortization of deferred refunding amounts (1,377,803) Current year bond premium additions (8,646,319) Amortization of bond premiums 2,390,060 Total $ (7,133,166) (5) Interfund transfers between governmental activities, other than Internal Service Funds, are eliminated in the consolidation of these activities for the statement of activities. The elimination is reflected as a reduction of transfers in and transfers out to eliminate the doubling up effect of these transactions within the governmental activities. Elimination of transfers to/from the Internal Service Funds is netted into the results of the Internal Service Funds in (3) above. Transfers out Transfers in Total $ (38,135,583) 38,135,583 $ - (Continued) 57 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 3. RETIREMENT AND PENSION PLANS All full-time employees of the City are covered by one of three pension plans. The Arizona State Retirement System is for the benefit of the employees of the state and certain other governmental jurisdictions. All full-time City employees, except fire and police personnel, are included in the plan that is a multiple-employer cost-sharing defined benefit pension plan. All police and fire personnel participate in the Public Safety Personnel Retirement System that is an agent multipleemployer plan. In addition, the Mayor and Councilmembers contribute to the State’s Elected Officials Retirement Plan that is also a multiple-employer cost-sharing pension plan. Arizona State Retirement System: a. Plan Description All the City’s full-time general employees participate in the Arizona State Retirement System (“System”), a multiple-employer, cost-sharing defined benefit pension plan. The System was established by the State of Arizona to provide pension benefits for employees of the state and employees of participating political subdivisions and school districts. The System is administered in accordance with Title 38, Chapter 5 of the Arizona Revised Statutes. The System provides for retirement, disability, and death and survivor benefits. The System issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to the Arizona State Retirement System, 3300 N. Central Avenue, Suite 1300, Phoenix, Arizona, 85012 or by calling 1-800-621-3778. b. Funding Policy Covered employees were required by state statute to contribute 10.74 percent of their salary to the System during fiscal year 2011-12 and the City was required to match it. The Arizona Revised Statutes (“A.R.S.”) provide statutory authority for determining the employees’ and employers’ contribution amounts as a percentage of covered payroll. Employers are required to contribute at the same rate as employees. Although the statutes prescribe the basis of making the actuarial calculation, the Arizona legislature is able to legislate a contribution rate other than the actuarially determined rate. The City’s contributions to the System for the years ending June 30, 2012, 2011 and 2010 were $14,563,437, $13,347,661 and $13,134,628 respectively, which were equal to the required contributions for each year. The City’s employees contributed equal amounts to the System for the same time period. Elected Officials Retirement Plan: a. Plan Description The City’s Mayor and Councilmembers participate in the Elected Officials Retirement Plan (“EORP”) a multiple employer, cost-sharing defined benefit pension plan. The Fund Manager of the Public Safety Personnel Retirement System (“PSPRS”) is the administrator (Continued) 58 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 for the EORP that was established by Title 38, Chapter 5, Article 3 of the Arizona Revised Statutes to provide pension benefits for state and county elected officials, judges and certain city elected officials. EORP provides retirement benefits as well as death and disability benefits. EORP issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to the Elected Officials Retirement Plan, 1020 East Missouri Avenue, Phoenix, Arizona, 85014 or by calling 602-255-5575. b. Funding Policy The retirement plan’s funding policy (required by State Statutes) provides for periodic employer contributions at actuarially determined rates and employee contributions of 10 percent of their annual covered salary. The employer rate for 2011-12 was 29.79 percent. The City’s contributions to EORP for the fiscal years ending June 30, 2012, 2011 and 2010 were $49,518, $44,454 and $39,152 respectively, which were equal to the required contributions for each year. The City’s employees contributed $15,010, $10,446 and $10,440, for the same time period. Public Safety Personnel Retirement System: a. Plan Description The City contributes to the Public Safety Personnel Retirement System (“PSPRS”), an agent multiple-employer public safety employee retirement system that acts as a common investment and administrative agent for the various fire and police agencies within the state. All police and fire personnel are eligible to participate in the plan. The plan provides retirement and disability benefits, and death benefits to plan members and beneficiaries. The PSPRS is jointly administered by the Fund Manager and 162 Local Boards and was established by Title 38, Chapter 5 Article 4 of the Arizona Revised Statutes. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report may be obtained by writing to Public Safety Personnel Retirement System, 1020 East Missouri, Phoenix, Arizona, 85014 or by calling 602-255-5575. b. Funding Policy PSPRS members are required to contribute 8.65 percent of their annual covered salary and the City is required to contribute an actuarially determined rate. The rate for 2011-12 was 23.12 (21.46 pension plus 1.66 health care) percent for fire personnel and 23.34 (21.58 pension plus 1.76 health care) percent for police members. Benefit and contribution provisions are established by state law and may be amended only by the State of Arizona Legislature. (A.R.S. Section 38-843) (Continued) 59 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 c. Annual Pension Cost Police personnel contributed $4,642,890 and fire personnel $2,407,125 during fiscal year 2011-12. For 2012, the City’s annual pension cost of $11,583,072 for police and $5,971,897 for fire was equal to the City’s required and actual contributions for the pension cost not including health care. The required contribution was determined as part of the June 30, 2010 actuarial valuation using the projected unit credit actuarial cost method. The actuarial assumptions included (a) 8.5 percent investment rate of return, (b) projected salary increases of 5.5 percent attributable to inflation, (c) additional projected salary increases ranging from 0.0 percent to 3.0 percent per year, attributable to seniority/merit. The actuarial value of PSPRS assets was determined using the smooth market value method. PSPRS’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll over an closed period of 26 years. d. Funded Status and Funding Progress The funded status of the plans (excluding health insurance subsidy) as of June 30, 2011 (Latest actuarial date available) is as follows: Police Actuarial accrued liability (AAL) $ Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) $ Funded ratio (actuarial value of plan assets/AAL) Covered payroll (active plan members) $ UAAL as a percentage of covered payroll 394,642,766 $ 267,751,509 126,891,257 $ 67.8% 53,322,879 $ 238.0% Fire 226,084,157 158,852,143 67,232,014 70.3% 26,468,460 254.0% The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. (Continued) 60 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 e. Three Year Trend Information for PSPRS (Excluding health insurance subsidy) Police Fiscal Year Ending 2010 2011 2012 Annual Pension Cost (APC) $ 11,251,641 10,632,286 11,583,072 Percentage of APC Contributed 100% 100 100 Net Pension Obligation $ - Annual Pension Cost (APC) $ 5,552,793 5,088,956 5,971,897 Percentage of APC Contributed 100% 100 100 Net Pension Obligation $ - Fire Fiscal Year Ending 2010 2011 2012 f. Annual Other Post Employment Benefits Cost (Health Insurance Subsidy) For 2012 the City’s annual Other Post Employment Benefits (OPEB) cost of $944,681 for police and $461,945 for fire was equal to the City’s required contributions. g. Funded Status and Funding Progress The funded status of the plans (health insurance subsidy) as of June 30, 2011 (Latest actuarial date available) is as follows: Police Actuarial accrued liability (AAL) $ Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) $ Funded ratio (actuarial value of plan assets/AAL) Covered payroll (active plan members) $ UAAL as a percentage of covered payroll 14,829,939 $ 14,829,939 $ 0.0% 53,322,879 $ 27.8% Fire 6,903,647 6,903,647 0.0% 26,468,460 26.1% (Continued) 61 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows: Police Fiscal Year Ending 2010 2011 2012 $ Annual OPEB Cost 931,954 866,052 944,681 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - Annual OPEB Cost 458,840 414,816 461,945 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - Fire Fiscal Year Ending 2010 2011 2012 $ 4. POST EMPLOYMENT BENEFITS In addition to the pension benefits described in Note 3, the City provides post-retirement health care benefits to all eligible retirees in accordance with the compensation plan adopted by the City Council each fiscal year. These benefits include medical, dental and vision insurance programs and are the same as those offered to active employees. Retirees may select single or family coverage. As of June 30, 2012, approximately 1,575 former employees were eligible for these benefits, an increase of 70 participants from the prior year or a 4.7% increase. The cost of post-employment healthcare benefits, from an accrual accounting perspective, similar to the cost of pension benefits, should be associated with the periods in which the cost occurs, rather than in the future year when it will be paid. In implementing the requirements of GASB Statement No. 45, the City recognizes the cost of post employment healthcare in the year the employee services are received, reports the accumulated liability from prior years, and provides information useful in assessing potential demands on the City’s future cash flows. Recognition of the liability accumulated from prior years will be amortized over 30 years, the first period commencing with the fiscal year ending June 30, 2008. (Continued) 62 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The unfunded actuarial accrued annual required contribution for current retirees as well as current active members for fiscal year 11-12 was $68,134,844. A liability of $12,176,413 is accrued in the business type activities financial statements, the remaining $55,958,431 has been accrued in the governmental activities column in the government-wide financial statements. Plan Description The City provides post-employment medical care (OPEB) for retired employees through a singleemployer defined benefit medical plan. The plan provides medical benefits for eligible retirees, their spouses and dependents through the City’s self-insurance health insurance plan which covers both active and retired members. The benefits, benefit levels and contribution rates are determined annually by the City’s Benefits Advisory Board and approved by the Mesa City Council. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate financial report. Benefits Provided The City provides post-employment medical care benefits to its retirees. To be eligible for benefits, an employee must qualify for retirement under one of the state retirement plans for public employees and be covered under the City’s medical plan during their active status. Employees must enroll in a City plan immediately after they retire or their eligibility for this benefit ceases. All medical care benefits are provided through the City’s self-insured health plan. The benefit levels are the same as those afforded to active employees. Upon a retiree’s death, the retiree’s dependents are no longer eligible for City coverage. As of July 1, 2011, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Active Employees Total 1,615 3,310 4,925 Funding Policy The plan premium rates are determined annually by the Benefits Advisory Board and approved by the City Council. The City’s contribution to the retirees health insurance premium is determined by their length of service with the City and their original hire date. To receive maximum benefits an employee must meet the following: Ten years of service for employees hired prior to January 1, 2001 Fifteen years of service for employees hired at January 1, 2001 but before January 1, 2006. Twenty years of service for employees hired on or after January 1, 2006. As of January 1, 2009, new hires are no longer eligible for benefits. (Continued) 63 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 For fiscal year ended June 30, 2012, the City contributed $14,328,105 to the plan (approximately 69.2 percent of total premiums). Plan members receiving benefits contributed $6,365,406 or approximately 30.8 percent of total premiums. Annual OPEB Costs / Net OPEB Obligation The City’s annual other post-employment benefit (OPEB) cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The City’s annual OPEB cost for the current year and the related information for the plan are as follows at June 30, 2012: Annual Required Contribution Interest on Net OPEB Obligation Adjusted to Annual Required Contribution Annual OPEB Cost Contributions Made Increase in Net OPEB Obligation Net OPEB Obligation – Beginning of year Net OPEB Obligation – End of year $ $ 86,593,869 11,340,980 (15,471,900) 82,462,949 14,328,105 68,134,844 252,021,769 320,156,613 The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the three years ending June 30, 2010 through 2012 were as follows: Fiscal Year Ended 2010 2011 2012 Annual OPEB Cost Actual Contributions $81,969,756 80,493,139 82,462,949 $ 9,879,765 13,494,020 14,328,105 Percentage of OPEB Cost Contributed 12.05% 16.76 17.38 Net OPEB Obligation $185,022,650 252,021,769 320,156,613 Funded Status and Funding Progress The funded status of the plan as of July 1, 2011 was as follows: (Latest actuarial date available) Actuarial Value of Plan Assets Actuarial Accrued Liability Unfunded actuarial accrued liability Funded ratio Covered payroll Unfunded actuarial accrued liability as a percentage of covered payroll $ 992,015,472 992,015,472 0% 330,112,710 $ $ 300.5% (Continued) 64 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits are based on the substantive plan (the plan understood by the employer and plan members) and include the type of benefits in force at the valuation date and the pattern of sharing benefits between the City and the plan members at that point. Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant method and assumptions used for this fiscal year valuation were as follows: Valuation Date Actuarial Cost Method Amortization method Remaining amortization period Asset Valuation Method July 1, 2011 Entry age normal, level dollar amount 30 – year amortization open 30 years N/A, no assets in trust Actuarial Assumptions: Discount rate Health care cost trend rate: 4.50% Medical, Drugs 9.0% in 2011-2012, grading down by 0.5% each year to an ultimate rate of 5.0% Dental, Mental Health, Vision Retiree contribution increase 5% Same as medical Trend Medical Reimbursements The federal government may provide the City subsidies per the Medicare Part D Prescription Drug Subsidy Program for providing healthcare for Medicare eligible employees. Any current and future year subsidies are recorded as revenue in the year received and is not recognized as a reduction to the actuarial accrued liability. (Continued) 65 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 5. LONG-TERM OBLIGATIONS a. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations. Governmental Activities: Bonds Payable: General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds with Governmental Commitment Less Deferred Amounts on Refundings Total Bonds Payable Capital Leases Notes Payable Unamortized Premiums Post Employment Benefits Compensated Absences Governmental Activities Total Business-type Activities: Bonds Payable: Revenue Bonds General Obligation Bonds Less Deferred Amounts on Refundings Total Bonds Payable Notes Payable Unamortized Bond Premiums Post Employment Benefits Compensated Absences Other Long-Term Obligations Business-type Activities Total $ $ $ $ Beginning Balances Additions 281,513,949 $ 128,515,000 58,438,160 36,090,000 Reductions Ending Balances Amounts Due Within One Year (51,283,269) $ (43,210,000) 288,668,840 $ 121,395,000 24,157,041 6,745,000 5,806,000 (744,000) (4,428,090) (3,059,250) 1,377,803 411,406,859 91,468,910 (93,859,466) 2,165,596 (1,344,046) 45,000,000 77,835,000 7,345,461 16,277,141 (2,390,060) 208,387,048 67,725,953 (11,767,522) 17,294,278 13,220,391 (13,272,052) 691,599,242 $ 266,527,395 $ (122,633,146) $ 5,062,000 (6,109,537) 409,016,303 821,550 122,835,000 21,232,542 264,345,479 17,242,617 835,493,491 $ 744,000 31,646,041 681,958 4,058,180 36,386,179 898,800,000 $ 179,175,000 (125,475,000) $ 952,500,000 $ 2,221,051 516,840 (1,136,731) 1,601,160 (13,816,642) (12,469,516) 2,007,092 (24,279,066) 887,204,409 167,222,324 (124,604,639) 929,822,094 2,731,125 (238,150) 2,492,975 16,008,249 5,618,290 (2,388,107) 19,238,432 43,634,721 14,736,996 (2,560,583) 55,811,134 4,163,267 2,930,724 (2,911,729) 4,182,262 233,508 (116,754) 116,754 953,975,279 $ 190,508,334 $ (132,819,962) $ 1,011,663,651 $ Internal service funds predominantly serve the governmental funds. Accordingly long-term liabilities for them are included as part of the above totals for governmental activities. At year end $6,986,969 of internal service funds post employment benefits and compensated absences are included in the above amounts. Also, for the governmental activities, post employment benefits and compensated absences are generally liquidated by the general fund. (Continued) 66 21,630,000 712,959 22,342,959 122,973 880,460 116,754 23,463,146 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 b. Bonds Payable At June 30, 2012, long-term bonds payable consisted of: Classified in Governmental Activities on the government-wide financial statements: General Obligation Bonds $24,720,000 2002 general obligation refunding serial bonds, due in annual principal installments ranging from $59,706 to $9,498,229, plus semi-annual interest ranging from 3.75 percent to 5.375 percent through July 1, 2015. $ 3,962,570 $41,680,611 2002A general obligation refunding serial bonds, (partially refunded by 2012 general obligation refunding bonds), due in annual principal installments ranging from $1,461,369 to $10,277,813, plus semi-annual interest ranging from 3.75 percent to 4.20 percent through July 1, 2013. 4,816,246 $22,565,000 2003 general obligation serial bonds, (partially refunded by 2012 general bonds), due in annual installments ranging from $1,250,000 to $2,315,000, plus semi-annual interest ranging from 3.50 percent to 5.00 percent through July 1, 2013. 1,500,000 $46,230,300 2004 general obligation refunding serial bonds, due in annual installments ranging from $34,839 to $31,852,800, plus semi-annual interest ranging from 2.4 percent to 5.0 percent through July 1, 2018. 44,696,910 $11,705,000 2005 general obligation serial bonds, due in annual installments ranging from $500,000 to $3,250,000, plus semi-annual interest ranging from 4.0 percent to 5.0 percent through July 1, 2024. 11,205,000 $9,710,000 2006 general obligation serial bonds, due in annual installments ranging from $135,000 to $4,225,000, plus semi-annual interest ranging from 4.40 percent to 5.0 percent through July 1, 2025. 9,710,000 $25,482,000 2006 general obligation refunding serial bonds, due in annual installments ranging from $143,425 to $11,306,746, plus semi-annual interest ranging from 4.25 percent to 5.25 percent through July 1, 2014. 14,428,012 $15,915,000 2007 general obligation serial bonds due in annual installments ranging from $615,000 to $5,500,000, plus semi-annual interest ranging from 4.125 percent to 6.0 percent through July 1, 2027. 15,915,000 $15,450,000 2008 general obligation serial bonds due in annual installments ranging from $375,000 to $6,675,000, plus semi-annual interest ranging from 4.25 percent to 5.0 percent through July 1, 2028. 13,875,000 $61,830,000 2009 general obligation serial bonds due in annual installments ranging from $1,750,000 to $10,125,000, plus semi-annual interest ranging from 4.0 percent to 4.625 percent through July 1, 2029. 48,995,000 $30,865,000 2010 general obligation bonds due in annual installments ranging from $1,115,000 to $13,225,000, plus semi-annual interest ranging from 4.75 percent to 5.85 percent through July 1, 2030. 30,865,000 (Continued) 67 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 $29,320,000 2011 general obligation serial bonds due in annual installments ranging from $800,000 to $6,825,000, plus semi-annual interest ranging from 2 percent to 4.25 percent through July 1, 2031 $ 28,520,000 $27,290,000 2012 general obligation serial bonds due in annual installments ranging from $840,000 to $8,550,000, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2032. 27,290,000 $31,148,160 2012 general obligation refunding serial bonds due in annual installments ranging from $419,601 to $7,350,252, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2022. 29,927,633 Total General Obligation Bonds Deferred amounts on refundings Bonds not including deferred amounts on refunding $ 285,706,371 2,962,469 $ 288,668,840 Street and Highway User Revenue Bonds $31,985,000 2002 street and highway user revenue refunding bonds, (partially refunded by street and highway user revenue refunding bonds, series 2012) due in annual installments ranging from $40,000 to $6,270,000, plus semi-annual interest ranging from 2.0 percent to 5.0 percent through July 1, 2013. $ 5,667,765 $26,805,000 2003 street and highway user revenue bonds, (partially refunded by street and highway user revenue refunding bonds, series 2012) due in annual principal installments ranging from $500,000 to $9,750,000, plus semi-annual interest ranging from 4.25 percent to 5.50 percent through July 1, 2018. 4,300,000 $9,585,000 2004 street and highway user revenue bonds (partially refunded by street and highway user revenue refunding bonds, series 2005), due in annual principal installments ranging from $100,000 to $225,000, plus semi-annual interest ranging from 4.00 percent to 5.00 percent through July 1, 2022. 1,275,000 $17,760,000 2004 street and highway user revenue refunding bonds, due in annual installments ranging from $20,000 to $7,250,000, plus semi-annual interest ranging from 3.5 percent to 5.0 percent through July 1, 2018. 17,293,915 $23,800,000 2005 street and highway user revenue refunding bonds, due in annual principal installments ranging from $25,000 to $8,000,000, plus semi-annual interest ranging from 2.75 percent to 5.0 percent through July 1, 2023. 22,957,654 $10,225,000 2005 street and highway user revenue bonds, due in annual principal installments ranging from $50,000 to $8,500,000, plus semi-annual interest ranging from 4.0 percent to 5.0 percent through July 1, 2024. 9,975,000 $11,675,000 2006 street and highway user revenue bonds, due in annual installments ranging from $850,000 to $9,850,000, plus semi-annual interest ranging from 4.50 percent to 5.25 percent through July 1, 2025. 11,675,000 $10,675,000 2007 street and highway user revenue bonds, due in annual principal installments ranging from $1,000,000 to $3,900,000, plus semi-annual interest ranging from 4.25 percent to 5.0 percent through July 1, 2027. 10,675,000 (Continued) 68 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 $36,090,000 2012 street and highway user revenue refunding bonds, due in annual installments ranging from $665,000 to $9,700,000, plus semi-annual interest ranging from 3.0 percent to 5.0 percent through July 1, 2022. Total Street and Highway User Revenue Bonds Deferred amounts on refundings Total Street and Highway User Revenue Bonds not including deferred amounts on refundings $ 34,428,598 $118,247,932 3,147,068 $121,395,000 Special Assessment Bonds (payable from special assessments levied on the benefited properties) $5,025,000 2005 special assessment district bonds, due in annual principal installments of $335,000, plus semi-annual interest of 5.80 percent, through January 1, 2021. $ 3,015,000 $4,091,840 2007 special assessment district bonds, due in annual principal installments ranging from $408,840 to $410,000, plus semi-annual interest of 5.0 percent, through January 1, 2017. Total Special Assessment Bonds 2,047,000 $ Total bonds payable recorded in governmental activities 5,062,000 $409,016,303 Classified in Business-type Activities on the government-wide financial statements: General Obligation Bonds $120,000 2002 general obligation refunding serial bonds, due in annual principal installments ranging from $294 to $46,771, plus semi-annual interest ranging from 3.75 percent to 5.375 percent through July 1, 2015. $ 17,981 $1,529,379 2002A general obligation refunding serial bonds, (partially refunded by 2012 general obligation refunding bonds) due in annual principal installments ranging from $53,631 to $377,187, plus semi-annual interest ranging from 3.75 percent to 4.20 percent through July 1, 2013. 176,517 $214,700 2004 general obligation refunding serial bonds, due in annual principal installments ranging from $35,000 to $32,000,000, plus semi-annual interest ranging from 2.4 percent to 5.0 percent through July 1, 2016. 213,918 $1,168,000 2006 general obligation refunding serial bonds, due in annual principal installments ranging from $6,574 to $518,254, plus semi-annual interest ranging from 4.25 percent to 5.25 percent through July 1, 2014. 670,870 $ 516,840 2012 general obligation refunding serial bonds, due in annual principal installments ranging from $15,399 to $269,748, plus semi-annual interest ranging from 2 percent to 4 percent through July 1, 2022. 516,840 Total General Obligation Bonds Deferred amounts on refundings $ 1,596,126 5,034 (Continued) 69 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Total General Obligation Bonds not including deferred amounts on refunding $ 1,601,160 Utility Systems Revenue Bonds $57,950,000 2002 utility systems revenue serial bonds (partially refunded by 2004 & 2006 utility systems revenue refunding bonds), due in annual principal installments ranging from $950,000 to $1,000,000, plus semi-annual interest ranging from 4.25 percent to 5.75 percent through July 1, 2017. $ 5,000,000 $129,000,000 2002 utility systems revenue refunding serial bonds, (partially refunded by 2012 and 2012 taxable utility systems revenue refunding bonds) due in annual principal installments ranging from $65,000 to $29,550,000, plus semi-annual interest ranging from 3.40 percent to 5.25 percent through July 1, 2017. 41,969,100 $48,850,000 2002A utility systems revenue refunding serial bonds, (partially refunded by 2012 utility systems revenue refunding bonds) due in annual principal installments ranging from $40,000 to $17,890,000, plus semi-annual interest ranging from 3.00 percent to 5.00 percent through July 1, 2015. 27,205,120 $50,470,000 2003 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) and series 2012 utility systems revenue refunding bonds), due in annual principal installments ranging from $970,000 to $25,500,000, plus semi-annual interest ranging from 3.50 percent to 5.00 percent through July 1, 2019. 7,000,000 $64,625,000 2004 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) utility systems revenue refunding bonds), due in annual principal installments ranging from $1,125,000 to $11,000,000, plus semi-annual interest ranging from 5.00 percent to 6.00 percent through July 1, 2028. 6,125,000 $40,345,000 2004 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $20,000 to $21,010,000, plus semi-annual interest ranging from 3.50 percent to 5.00 percent through July 1, 2019. 39,036,086 $91,200,000 2005 utility systems revenue serial bonds, (partially refunded by 2006 (and series 2012) utility systems revenue refunding bonds), due in annual principal installments ranging from $750,000 to $24,000,000, plus semi-annual interest ranging from 4.125 percent to 5.0 percent through July 1, 2029. 71,200,000 $105,400,000 2006 utility systems revenue serial bonds, (partially refunded by 2006 (Series 2) utility systems revenue refunding bonds), due in annual principal installments ranging from $8,650,000 to $36,750,000, plus semi-annual interest ranging from 4.375 percent to 5.0 percent through July 1, 2030. 87,325,000 $61,300,000 2006 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $2,075,000 to $18,000,000, plus semi-annual interest ranging from 4.0 percent to 5.0 percent through July 1, 2021. 55,647,908 $127,260,000 2006 (Series 2) utility systems revenue refunding serial bonds, due in annual principal installments ranging from $50,000 to $25,845,000, plus semi-annual interest ranging from 4.0 percent to 5.25 percent through July 1, 2028. 121,068,167 (Continued) 70 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 $65,550,000 2007 utility systems revenue serial bonds, due in annual principal installments ranging from $2,500,000 to $41,800,000, plus semi-annual interest ranging from 4.25 percent to 6.25 percent through July 1, 2031. $ 65,550,000 $52,875,000 2008 utility systems revenue serial bonds, due in annual principal installments ranging from $700,000 to $44,675,000, plus semi-annual interest ranging from 4.875 percent to 5.25 percent through July 1, 2032. 52,875,000 $21,125,000 2008 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $100,000 to $2,200,000, plus semi-annual interest ranging from 3.00 percent to 4.00 percent through July 1, 2018. 17,106,824 $59,900,000 2009 utility systems revenue serial bonds, due in annual principal installments ranging from $900,000 to $48,250,000, plus semi-annual interest ranging from 5.875 percent to 6.375 percent through July 1, 2033. 59,900,000 $50,380,000 2010 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 6.10 percent through July 1, 2034. 50,380,000 $53,950,000 2011 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 5.0 percent through July 1, 2035. 53,950,000 $67,300,000 2012 utility systems revenue serial bonds, due in one principal installment, plus semi-annual interest of 4.0 percent through July 1, 2036. 67,300,000 $31,580,000 2012 utility systems revenue refunding serial bonds, due in annual principal installments ranging from $7,440,000 to $9,150,000, plus semi-annual interest ranging from 4.0 percent to 4.826 percent through July 1, 2021. 30,259,643 $80,295,000 2012 taxable utility systems revenue refunding serial bonds, due in annual principal installments ranging from $3,225,000 to $9,150,000, plus semiannual interest ranging from 3.269 percent to 5.048 percent through July 1, 2035. 69,328,120 Total Utility Systems Revenue Bonds Deferred amounts on refundings Total Utility System Revenue Bonds not including deferred amounts on refundings $ 928,225,968 24,274,032 Total bonds payable recorded in business-type activities $ 929,822,094 $ 952,500,000 (Continued) 71 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The following tables summarize the City’s debt service requirements to maturity for its long term bonds payable at June 30, 2012. The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year Principal 2013 $ 24,157,041 $ 2014 16,527,285 2015 13,510,323 2016 14,101,179 2017 14,742,595 2018-22 80,725,417 2023-27 64,630,000 2028-32 60,275,000 Highway User Revenue Bonds Interest Total 12,157,319 $ 36,314,360 11,049,539 27,576,824 10,535,491 24,045,814 10,141,208 24,242,387 9,719,995 24,462,590 35,789,159 116,514,576 22,506,606 87,136,606 7,111,944 67,386,944 TOTALS $ 288,668,840 $ 119,011,261 $ 407,680,101 Fiscal Year 2013 $ 2014 2015 2016 2017 2018-22 2023-27 2028-32 Principal 6,745,000 $ 6,945,000 7,255,000 7,585,000 7,900,000 45,965,000 39,000,000 - Interest 5,789,055 $ 5,471,900 5,186,200 4,884,250 4,502,850 16,245,675 4,491,250 - TOTALS $ 121,395,000 $ 46,571,180 $ Total 12,534,055 12,416,900 12,441,200 12,469,250 12,402,850 62,210,675 43,491,250 167,966,180 Special Assessment Bonds Fiscal Year Principal 2013 $ 744,000 $ 2014 744,000 2015 744,000 2016 745,000 2017 745,000 2018-21 1,340,000 TOTALS $ 5,062,000 $ Interest 257,280 $ 217,400 177,520 137,615 87,970 165,155 Total 1,001,280 961,400 921,520 882,615 832,970 1,505,155 1,042,940 $ 6,104,940 (Continued) 72 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Business-type Activities General Obligation Bonds Fiscal Year Principal 2013 $ 712,959 $ 2014 282,715 2015 129,677 2016 83,821 2017 67,405 2018-22 324,583 2023-27 2028-32 2033-37 - TOTALS $ 1,601,160 $ Revenue Bonds Interest 65,097 $ 30,155 20,865 17,998 15,993 26,666 - Total 778,056 312,870 150,542 101,819 83,398 351,249 - Fiscal Year 2013 $ 2014 2015 2016 2017 2018-22 2023-27 2028-32 2033-37 Principal 21,630,000 $ 22,550,000 23,860,000 24,800,000 26,070,000 161,360,000 191,110,000 239,235,000 241,885,000 Interest 46,179,875 $ 45,196,225 44,060,513 42,876,808 41,668,358 186,547,051 145,162,401 97,524,859 30,363,484 Total 67,809,875 67,746,225 67,920,513 67,676,808 67,738,358 347,907,051 336,272,401 336,759,859 272,248,484 176,774 $ 1,777,934 TOTALS $ 952,500,000 $ 679,579,574 $ 1,632,079,574 Special Assessment Bonds The City acts as trustee for special assessment districts whereby it collects the assessments levied against owners of property within established districts and disburses the amounts collected to retire the bonds issued to finance the improvements. At June 30, 2012, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, is adequate for the scheduled maturities of the bonds payable and the related interest. Improvement bonds are collateralized by properties within the districts. In the event of default by the property owner, the City may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. The City is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. Special assessment bonds payable with governmental commitment currently outstanding as of June 30, 2012 are $5,062,000. General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $1,596,126 of these bonds at June 30, 2012 is carried as a liability of the Enterprise Fund to reflect the intention of retirement from resources of that fund. All bonds, except Special Assessment Bonds, are callable by the City at various dates and at various premiums. The Arizona Constitution provides that the general obligation bonded indebtedness of a city for general municipal purposes may not exceed 6 percent of the secondary assessed valuation of the taxable property in that city. In addition to the 6 percent limitation for general (Continued) 73 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 municipal purpose bonds, cities may issue general obligation bonds up to an additional 20 percent of the secondary assessed valuation for supplying such city with water, artificial light or sewers, and for the acquisition and development of land for open space preserves, parks, playgrounds and recreation facilities, public safety, law enforcement, fire and emergency services facilities and streets and transportation facilities. The total debt margin available July 1, 2012 is: 6% Bonds 20% Bonds $164,855,287 265,184,455 Total Available $430,039,742 City revenue bond indenture ordinances require that the net amount of revenues of the electric, gas, water, wastewater and solid waste systems (total revenues less operations and maintenance expenses) equal 120 percent of the principal and interest requirement in each fiscal year. The above covenant and all other bond covenants have been met. c. Reserves for Bond Indentures Pursuant to the provisions of the Bond Resolution of the City of Mesa Utility System Revenue and Refunding bonds, Replacement and Reserve Funds are required to be established, into which a sum equal to 2 percent of the gross revenues – as determined on a modified accrual basis – must be deposited until a sum equal to two percent of all tangible assets of the Utility System is accumulated. As of June 30, 2012, the amount provided in the Replacement and Extension Funds equaled $19,247,144 which is in compliance with the bond provisions. d. Notes Payable Governmental Activities The City issued $122,835,000 of Highway Project Advancement Notes to provide funds to the Arizona Department of Transportation (ADOT) for the acceleration of the right-of-way acquisition, design and construction of highway improvements to State Route 24 between State Route 202L and Ellsworth Road. The City has entered into an intergovernmental agreement with ADOT and the Maricopa Association of Governments to advance the improvements to State Route 24. The agreement provides for repayment by ADOT to the City of the full amount of the City advance from monies available to ADOT for the project within a 60-month loan period. The repayments are not secured by any lien upon or pledge of any particular revenues, monies or property of ADOT. No assurance can be given that ADOT will have funds available for repayments due at the times or in the amounts set forth under the agreement. (Continued) 74 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Business Type Activities The City has entered into a loan agreement with the State of Arizona Department of Transportation Aeronautics Division State Aviation Fund for the construction of T-Hangars at the airport. The interest rate on the notes is 6.02 percent. The City entered into four separate loan agreements with the Water Infrastructure Finance Authority of Arizona. The purposes of the loans are to make improvements and upgrades to existing water and wastewater projects. The loans utilize funds from the United States Environmental Protection Agency pursuant to the federal American Reinvestment and Recovery Act of 2009. Subject to the City meeting the required specifications of the loan documents, two of the loans include a combined interest and fee rate subsidy and the two remaining loans include a principal forgiveness portion. Total principal (without principal forgiveness) is $3,486,902 and the loans have a 20 year repayment period. The total principal forgiveness is $626,000. Total interest over the 20 years with principal forgiveness and the combined interest and fee rate subsidy is $635,736. The following table reflects the annual requirements to amortize all notes outstanding as of June 30, 2012: Governmental Activites Fiscal Year 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2029 TOTALS Business-type Activities Interest Principal Interest Total Principal & Fees Total $ - $ 5,404,250 $ 5,404,250 $ 122,973 $ 54,692 $ 177,665 5,404,250 5,404,250 125,651 52,014 177,665 20,000,000 5,404,250 25,404,250 128,389 49,276 177,665 25,000,000 4,704,250 29,704,250 131,189 46,476 177,665 14,085,000 3,891,750 17,976,750 134,052 43,613 177,665 63,750,000 8,162,500 71,912,500 715,549 172,777 888,326 797,594 90,732 888,326 337,578 11,153 348,731 $ 122,835,000 $ 32,971,250 $ 155,806,250 $ 2,492,975 $ 520,733 $ 3,013,708 (Continued) 75 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 e. Lease Obligations The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2012. Governmental Activities Fiscal Year Principal Interest 2013 $ 681,958 $ 34,184 $ 2014 67,953 6,581 2015 71,639 2,894 Total 716,142 74,534 74,533 TOTALS $ 865,209 821,550 $ 43,659 $ The assets acquired through capital leases are as follows: Governmental Activities Asset: Land $ Buildings Other Improvements Machinery & Equipment Infrastructure Construction Work in Process Less: Accumulated depreciation Total $ 4,663,859 3,196,300 (6,043,765) 1,816,394 f. Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2012. (Continued) 76 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 g. Series 2012 Special Activity Revenue Bonds PMGAA issued $19,220,000 in special facility Revenue Bonds on February 29, 2012. The City has entered into a memorandum of understanding (MOU) with PMGAA and Able Engineering and Component Services for the development, construction and lease of aircraft maintenance repair and overhaul facility at Phoenix-Mesa Gateway Airport. In general, the MOU addresses PMGAA issuing Special Facility Revenue Bonds, constructing the facility and leasing the facility to the City. The City, in turn, will sublease the facility to Able Engineering. The City pledged a portion of its excise taxes as security for payment of the base rent. The pledge of such excise taxes will be a junior lien subordinate to certain outstanding senior obligations. The bonds are payable from the future revenues from the City through 2038. During that time frame total principal and interest to be paid on the bonds will be $35,216,300. The bonds are not considered the debt of the City. 6. REFUNDING BONDS On April 4, 2012, the City issued $31,580,000 of utility system revenue bonds with an original issue premium of $5,319,346 to advance refund $35,280,000 of outstanding utility system revenue bonds. The refunding bonds were issued with an average interest rate of 4.59 percent. The net proceeds of $36,896,817 (after payment of $2,529 to the City) were provided to a refunding escrow agent to pay issuance costs of $231,844 for insurance premiums, underwriting fees and other issuance costs with the remaining $36,664,973 used to provide cash and purchase United States Government securities. The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,384,973. This difference, reported in the accompanying financial statements as a deduction from revenue bonds payable, is being charged to operations through the year 2022 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $3,537,059 over the next nine years producing an economic gain (difference between the present value of old and new debt service payments) of $3,541,596. On April 12, 2012, the City issued $80,295,000 of taxable utility system revenue bonds to advance refund $68,830,000 of outstanding utility system revenue bonds. The refunding bonds were issued with an average interest rate of 5.25 percent. The net proceeds of $80,294,146 (after payment of $854 to the City) were provided to a refunding escrow agent to pay issuance costs of $401,243 for insurance premiums, underwriting fees and other issuance costs with the remaining $79,892,903 used to provide cash and purchase United States Government securities The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. (Continued) 77 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $11,062,903. This difference, reported in the accompanying financial statements as a deduction from revenue bonds payable, is being charged to operations through the year 2035 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will increase debt service payments by $63,165,748 over the next twenty three years producing an economic loss (difference between the present value of old and new debt service payments) of $9,356,096. On April 4, 2012, the City issued $36,090,000 of highway user revenue bonds with an original issue premium of $5,837,482 to advance refund $39,920,000 of outstanding highway user revenue bonds. The refunding bonds were issued with an average interest rate of 4.83 percent. The net proceeds of $41,923,969 (after payment of $3,513 to the City) were provided to a refunding escrow agent to pay issuance costs of $248,985 for insurance premiums, underwriting fees and other issuance costs with the remaining $41,674,984 used to provide cash and purchase United States Government securities The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,754,984. This difference, reported in the accompanying financial statements as a deduction from highway user revenue bonds payable, is being charged to operations through the year 2022 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $3,410,927 over the next ten years producing an economic gain (difference between the present value of old and new debt service payments) of $3,400,908 On April 4, 2012, the City issued $31,665,000 of general obligation bonds with an original issue premium of $1,823,085 to advance refund $31,665,000 of outstanding general obligation bonds. The refunding bonds were issued with an average interest rate of 2.88 percent. The net proceeds of $33,214,986 (after payment of $273,099 to the City) were provided to a refunding escrow agent to pay issuance costs of $224,081 for insurance premiums, underwriting fees and other issuance costs with the remaining $32,990,905 used to provide cash and purchase United States Government securities The cash and securities were deposited in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed from the debt of the City. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,325,905. This difference, reported in the accompanying financial statements as a deduction from general obligation bonds payable, is being charged to operations through the year 2022 using the effective interest method. The purpose of the refunding was to take advantage of lower interest rates and restructuring debt service payments to achieve a more level debt retirement schedule. The refunding will decrease debt service payments by $2,161,552 over the next (Continued) 78 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 ten years producing an economic gain (difference between the present value of old and new debt service payments) of $2,430,451. 7. LIABILITIES TO BE PAID FROM ASSETS HELD IN ESCROW Liabilities to be paid from assets held in escrow include bonded debt of the City that has been provided for through an Advanced Refunding Bond Issue. Under an advanced refunding arrangement, refunding bonds are issued and the net proceeds, plus additional resources that may be required, are used to purchase securities issued or guaranteed by the United States Government. These securities are then deposited in an irrevocable trust under an escrow agreement which provides that all proceeds from the trust will be used to fund the principal and interest payments of the previously issued bonded debt being refunded. The trust deposits have been computed so that the securities in the trust, along with future cash flow generated by the securities, will be sufficient to service the previously issued bonds. In accordance with GASB Statement No. 7, the refunded debt outstanding at June 30, 2012 as reflected below is not included in the City’s financial statements. Utility System Revenue Refunding Bond Issue dated March 1, 1998 $ 7,405,000 Utility System Revenue Bond Issue dated March 1, 1998 10,035,000 Utility System Revenue Refunding Bond Issue dated February 1, 2002 68,830,000 Street and Highway User Revenue Bond Issue dated September 1, 2002 15,820,000 Street and Highway User Revenue Bond Issue dated February 1, 2003 21,000,000 General Obligation Bond Issued February 1, 2003 17,065,000 Utility System Revenue Bond Issue dated February 1, 2003 40,500,000 Street and Highway User Revenue Bond Issue dated June 1, 2004 8,000,000 Utility System Revenue Bond Issue dated June 1, 2004 58,500,000 Utility System Revenue Bond Issue dated June 1, 2005 20,000,000 Utility System Revenue Bond Issue dated June 1, 2006 18,075,000 Total Refunded Bonds Outstanding $ 285,230,000 (Continued) 79 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 8. CAPITAL CONTRIBUTIONS During the year, external capital contributions consisted of the following: Property Owners Governmental Activities: Federal and State Funds $ County Funds Other Local Government Funds Contributions - Capital Assets Total $ Business-type Activities: Federal and State Funds $ Developers - Impact and Development Fees Contributions-In-Aid Contributions - Capital Assets Total $ Governmental Agencies 99,287 99,287 $ 877,716 877,716 Developers Total $ 10,978,943 $ 10,598,980 640,577 558,636 22,777,136 $ - $ 626,349 626,349 $ 10,978,943 10,598,980 640,577 1,284,272 23,502,772 $ 1,655,194 $ - $ 1,655,194 $ 4,493,729 6,148,923 $ 4,337,840 4,449,801 8,787,641 $ 4,337,840 5,371,445 4,449,801 15,814,280 9. COMMITMENTS AND CONTINGENT LIABILITIES a. Pending Litigation The City is subject to a number of lawsuits, investigations, and other claims (some of which involve substantial amounts) that are incidental to the ordinary course of its operations, including those related to wrongful death and personal injury matters. Although the City Attorney does not currently possess sufficient information to reasonably estimate the amounts of the liabilities to be recorded upon the settlement of such claims and lawsuits, some claims could be significant to the City’s operations. While the ultimate resolution of such lawsuits, investigations, and claims cannot be determined at this time, in the opinion of City management, based on the advice of the City Attorney, the resolution of these matters will not have a material adverse effect on the City’s financial position. b. Sick Leave Benefits Sick leave benefits provided for ordinary sick pay are not vested with the employee. Fifty percent of unused benefits are payable only upon retirement of an employee. In accordance with the criteria, sick leave paid within 60 days of the year-end has been recorded as a liability in the governmental fund financial statements. Long-term liabilities of governmental funds are not shown on the fund financial statements. In the government-wide financial statements as well as the proprietary fund financial statements an amount of estimated sick pay to employees has been expensed and the liability is shown in the appropriate funds. These amounts have been calculated based on the vested method. (Continued) 80 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The total sick leave balance recorded as a liability at June 30, 2012, is $5,098,019. 10. ENTERPRISE ACTIVITIES OPERATIONS DETAIL The Enterprise Fund includes operations of electricity, gas, water, wastewater, solid waste, airport, golf course, convention center, stadiums and district cooling. Although the City’s Enterprise Fund does not meet the requirements for disclosing segment information, these services provided by the City are of such significance as to warrant certain additional disclosures. Operating revenue, expenses and operating income loss for the year ended June 30, 2012 for these services are as follows: Operating Expenses Depreciation and Amortization Other Functions Operating Revenues Electric $ Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam /Fitch Complex Cubs Stadium District Cooling 34,624,920 $ 39,139,278 113,417,881 64,543,503 47,630,828 3,270,632 2,168,575 2,122,304 6,073,590 824,556 1,091,665 2,944,156 $ 3,011,300 18,838,487 16,204,815 2,207,321 1,280,834 238,809 273,418 710,090 390,680 23,559,483 $ 27,579,988 32,492,891 24,511,236 28,946,276 2,448,040 2,295,242 3,207,565 7,817,116 53,748 582,915 Total 314,907,732 $ 46,099,910 $ 153,494,500 $ $ Operating Income (Loss) 8,121,281 8,547,990 62,086,503 23,827,452 16,477,231 (458,242) (365,476) (1,358,679) (2,453,616) 770,808 118,070 115,313,322 11. NET ASSETS a. Restricted Net Assets The government-wide statement of net assets reports $110,996,021 of restricted net assets, of which $37,364,565 is restricted by enabling legislation. (Continued) 81 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 b. Designated Net Assets The net assets in the Employee Benefits Self Insurance Fund is designated for anticipated future losses and is a result of excess premiums charged to increase the fund balance specifically for this purpose. c. Deficit Net Assets The deficit in the Property and Public Liability Self-Insurance Fund is the result of the large increases in the estimated liability for claims during prior fiscal years. In addition contributions from the other funds have not increased since fiscal year 2007. A decrease in claims incurred but not reported calculated by the actuarial study resulted in a reduction of the deficit net assets during the fiscal year. The deficit in the Workers Compensation Self-Insurance Fund was the result of a $2.9 million increase in contributions to the fund during the year and a $7.2 million increase in liabilities. The increase in liabilities was the result of an actuarial study which computed a liability for incurred but not of reported of $6.2 million. Contributions from the various funds will need to be increased in future years to cover these deficits. 12. PLEDGED REVENUES a. Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $1.456 billion in utility system revenue bonds issued since 1997. Proceeds from the bonds provided financing for the construction of various utility related projects including new gas pipelines and water and wastewater treatment plants. The bonds are payable solely from utility customer net revenues and are payable through 2036. Annual principal and interest payments on the bonds were 57 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1,632,079,574. Principal and interest paid for the current year and total customer net revenues were $64,830,323 and $119,060,457, respectively. b. Highway User Revenue Bonds The City has pledged future Highway User Taxes Revenue to repay $224.4 million in highway user revenue bonds issued since 2002. Proceeds from the bonds provided financing for streets projects. The bonds are payable solely from the state shared Highway User Tax revenues and are payable through 2027. Annual principal and interest payments on the bonds were 32 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $167,966,180. Principal and interest paid for the current year and total highway user tax revenues were $8,853,248 and $27,825,144, respectively. (Continued) 82 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 c. Special Assessment Bonds The special assessment revenues collected by the City are pledged to repay $9.1 million of special assessment bonds issued since 2005. Proceeds from the bonds are used to finance improvements that property owners have agreed to pay. In the event of default by the property owner, an auction sale may be enforced by the City. If collections and auction proceeds are not sufficient to retire outstanding bonds the City is contingently liable. These bonds are payable through 2021. Annual principal and interest payments on the bonds are expected to be covered 100% with collections from the property owners. The total principal and interest remaining to be paid on the bonds is $6,104,940. Principal and interest paid for the current year and total assessments collected were $1,041,160, and $996,359, respectively. 13. JOINT VENTURES The City participates with the cities of Phoenix, Glendale, Scottsdale and Tempe in a multi-city sanitary sewer system (the “System”) in which Phoenix is the lead agency. The City of Phoenix is responsible for the planning, budgeting, construction, operation and maintenance of the plant. As lead agency, Phoenix provides all management personnel and financing arrangements. The various cities participate in ownership of the plant and are charged for operating expenses based on gallons of flow. The different agencies participate in each facility at varying rates depending on their needs at the time each facility was constructed. The City’s investment in the joint venture is reflected in the proprietary funds financial statements. The System has no debt outstanding. Audited summary financial information on the System (GAAP basis) as of and for the fiscal year ended June 30, 2011 (latest information available) is as follows: (Continued) 83 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Assets Equity in Pooled Cash and Investments Receivables Inventories at Average Cost Capital Assets $ Total Assets 37,395,000 12,169,000 547,000 896,596,000 946,707,000 Liabilities 42,286,000 Net Assets $ 904,421,000 Total Revenues Total Expenses $ 55,919,000 (84,325,000) Increase (Decrease) in Net Assets $ (28,406,000) Separate financial statements for the activity under the Joint Venture agreement can be obtained through the AMWUA office at 3003 N. Central Avenue, Suite 1550, Phoenix, Arizona, 85012. The City also participates with the City of Phoenix in a water treatment plant. The City of Phoenix is responsible for the planning, budgeting, construction, operation and maintenance of the plant. As lead agency, Phoenix provides all management personnel and financing arrangements. Phoenix and Mesa participate in ownership of the plant and are charged for operating expenses based on gallons of water treated. The City’s investment in the joint venture is reflected in the proprietary funds financial statements. The water treatment plant has no debt outstanding. Audited summary financial information for the plant (GAAP basis) as of and for the fiscal year ended June 30, 2011 (latest information available) is as follows: (Continued) 84 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Assets Equity in Pooled Cash and Investments Receivables Inventories Capital Assets, Net of Accumulated Depreciation $ Total Assets 8,210,000 9,590,000 386,000 298,641,000 316,827,000 Liabilities 13,127,000 Net Assets $ 303,700,000 Total Revenues Total Expenses $ 76,950,000 (29,279,000) Increase (Decrease) in Net Assets $ 47,671,000 Separate financial statements for the activity can be obtained through the City of Phoenix at 305 W. Washington Street, Phoenix, Arizona, 85003. Construction of a joint water reclamation plant with the Towns of Gilbert and Queen Creek was completed on December 2, 2006. The City acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the plant. As lead agent, the City provides all management personnel and financing arrangements. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. The City’s investment in the joint venture is reflected in the proprietary funds financial statements. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2012 is: Mesa’s Share Gilbert’s Share Queen Creek’s Share $ 66,803,865 63,425,886 27,603,036 Total Joint Venture $157,832,787 In June 2002, the City agreed to participate in the Central Phoenix/East Valley Light Rail Transit (LRT). The City participates with the cities of Phoenix, Tempe and Glendale. Valley Metro Rail, Inc. (VMR) will design, construct, and operate the LRT project. A total of $52,152,759 has been spent on this project through the fiscal year ended June 30, 2012. The City has received $43.7 (Continued) 85 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 million of funding from the Federal Transit Administration (FTA); Congestion Mitigation Air Quality (DMAQ) and Public Transit Funds (PTF) related to this project. The City’s investment in the joint venture is reflected in the governmental activities column on the government-wide financial statements. Audited summary financial information on the system (GAAP basis), as of and for the fiscal year ended June 30, 2011, (latest information available) is as follows: Assets Current Assets Non Current Assets Total Assets $ Liabilities 40,821,064 1,185,084,002 1,225,905,066 67,532,429 Net Assets $ 1,158,372,637 Total Revenues Total Expenses $ 101,267,788 (121,627,679) Decrease in Net Assets $ (20,359,891) Separate financial statements for the activity can be obtained through Valley Metro Rail Inc. at 101 North First Avenue, Suite 1300, Phoenix, Arizona, 85003. In March 2010, the Mesa City Council approved a 3 mile extension of the LRT system and in August 2010, the Federal Transit Administration approved the alignment for project development as the next step toward federal funding. The extension begins at the eastern limits of METRO’s existing light rail system (Sycamore) and extends east on Main Street to Mesa Drive. The entire extension is within the City of Mesa. There are four stations on Main Street including a station at Alma School Road, Country Club Drive, Center Street, and Mesa Drive. The extension is planned to open in 2016 with ridership estimated at approximately 4,750 riders per day. The total capital cost of the project is $199.0 million to be funded with a combination of federal and regional funds. (Continued) 86 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 In August 2008, the City of Mesa, the City of Apache Junction, Apache Junction Fire District the Town of Gilbert, and the Town of Queen Creek (the Parties) entered into an intergovernmental agreement to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network – 700/800 MHz Network procured and built by the City of Mesa). On May 1, 2012, Rio Verde Fire District Joined TOPAZ. The City acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network. As lead agent, the City provides all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on six month rolling average of airtime. The City’s investment in the joint venture is reflected in the governmental funds financial statements. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2012 is: City of Mesa $ 1,528,876 Town of Gilbert 398,722 City of Apache Junction 91,108 Apache Junction Fire District 44,535 Town of Queen Creek 20,930 Rio Verde Fire District 7,156 Total Joint Venture $ 2,091,327 (Concluded) 87 Required Supplementary Information Councilmember Dennis Kavanaugh District 3 CITY OF MESA, ARIZONA EXHIBIT B-1 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Police Valuation Date June 30, 2009 2010 2011 Actuarial Value of Assets $ 250,465,218 257,026,009 267,751,509 Actuarial Accrued Liability (AAL) $ 336,097,656 357,206,422 394,642,766 Actuarial Value of Assets $ 155,971,492 156,842,989 158,852,143 Actuarial Accrued Liability (AAL) $ 193,517,551 205,749,451 226,084,157 Percent Funded 74.5 % 72.0 67.8 Annual Covered Payroll $ 58,240,512 56,051,165 53,322,879 Unfunded AAL as a % of Covered Payroll 147.0 % 178.7 238.0 Unfunded AAL $ 37,546,059 48,906,462 67,232,014 Annual Covered Payroll $ 27,553,989 26,743,003 26,468,460 Unfunded AAL as a % of Covered Payroll 136.3 % 182.9 254.0 Funded Ratio (a/b) - % - Annual Covered Payroll (c) $58,240,512 56,051,165 53,322,879 UALL as a % of Covered Payroll (( b - a ) / c ) 20.8 % 22.8 27.8 Funded Ratio (a/b) - % - Annual Covered Payroll (c) $27,553,989 26,743,003 26,468,460 UALL as a % of Covered Payroll (( b - a ) / c ) 21.0 % 22.8 26.1 Unfunded AAL $ 85,632,438 100,180,413 126,891,257 Fire Valuation Date June 30, 2009 2010 2011 Percent Funded 80.6 % 76.2 70.3 Other Post-Employment Benefits (Health Insurance Subsidy) Police Valuation Date June 30, 2009 2010 2011 Actuarial Value of Assets (a) $ - Actuarial Accrued Liability (AAL) (b) $12,123,354 12,792,042 14,829,939 Unfunded ALL (UALL) (b-a) $ 12,123,354 12,792,042 14,829,939 Actuarial Value of Assets (a) $ - Actuarial Accrued Liability (AAL) (b) $5,787,717 6,091,253 6,903,647 Unfunded ALL (UALL) (b-a) $ 5,787,717 6,091,253 6,903,647 Fire Valuation Date June 30, 2009 2010 2011 88 CITY OF MESA, ARIZONA EXHIBIT B-2 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS OTHER POST-EMPLOYMENT BENEFITS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Actuarial Valuation Date July 1, 2007 July 1, 2009 July 1, 2011 $ Actuarial Value of Assets - Actuarial Accrued Liability (AAL) $ 664,071,640 916,615,559 992,015,472 Percent Funded - % Unfunded AAL as a Annual Percentage Unfunded Covered of Covered AAL Payroll Payroll $ 664,071,640 $ 338,835,124 196.0 % 916,615,559 321,012,148 285.5 992,015,472 330,112,710 300.5 The original GASB 43 & 45 compliant OPEB valuation for the City of Mesa had a valuation date of July 1, 2007 producing biennial funding results applying to the 2007-08 and 2008-09 fiscal years. This corresponds to the first fiscal period that GASB reporting was required for OPEB plans. The current valuation as of July 1, 2011 provides funding results for the 2011-12 and 2012-13 fiscal years with biennial valuation planned going forward from this date. 89 CITY OF MESA, ARIZONA EXHIBIT B-3 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Revenues: Sales Taxes Property Taxes Occupancy Taxes Licenses and Permits Intergovernmental Charges For Services Fines and Forfeitures Investment Income Miscellaneous $ Total Revenues Less: Bad Debts Total Net Revenues Final Budget 85,144,000 14,141,000 1,493,000 9,141,000 121,243,000 8,621,000 13,652,000 227,000 6,013,000 $ 85,144,000 14,141,000 1,493,000 9,141,000 121,243,000 8,621,000 13,652,000 227,000 6,013,000 Variance With Final Budget Positive (Negative) Actual Amounts Budgetary Basis $ 86,996,212 14,322,925 2,018,764 10,984,707 106,521,461 9,101,614 15,864,392 384,882 5,792,286 $ 1,852,212 181,925 525,764 1,843,707 (14,721,539) 480,614 2,212,392 157,882 (220,714) 259,675,000 259,675,000 251,987,243 (7,687,757) 6,200,000 6,200,000 6,980,373 (780,373) 253,475,000 253,475,000 245,006,870 (8,468,130) 44,974,558 227,690,949 31,296,993 13,895,623 18,977,377 36,149,000 46,306,811 227,614,285 32,977,552 15,705,089 19,161,179 23,732,468 41,668,762 209,703,437 32,002,138 7,328,879 16,303,906 - 4,638,049 17,910,848 975,414 8,376,210 2,857,273 23,732,468 19,792,234 13,724,944 19,792,234 13,724,944 18,319,505 10,574,305 1,472,729 3,150,639 406,501,678 399,014,562 335,900,932 63,113,630 (153,026,678) (145,539,562) (90,894,062) 54,645,500 83,615,000 (11,346,000) 83,615,000 (11,346,000) 87,314,000 (9,450,700) 3,699,000 1,895,300 72,269,000 72,269,000 77,863,300 5,594,300 (80,757,678) (73,270,562) (13,030,762) 60,239,800 78,622,078 78,622,078 93,267,734 14,645,656 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Contingencies Debt Service: Principal Retirement Interest/Service Charges on Bonds Total Expenditures Deficiency of Revenues Under Expenditures Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance - Beginning Increase in Restricted Fund Balance Fund Balance - Ending (153,666) $ (2,289,266) See Note to Required Supplementary Information. 90 (153,666) $ 5,197,850 (235,901) $ 80,001,071 (82,235) $ 74,803,221 CITY OF MESA, ARIZONA EXHIBIT B-4 HIGHWAY USER REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Actual Amounts Budgetary Basis Final Budget Variance With Final Budget Positive (Negative) Revenues: Intergovernmental $ 30,483,000 $ 30,483,000 $ 27,444,747 $ (3,038,253) Charges For Services 39,000 39,000 143,667 104,667 Fines and Forfeitures 16,000 16,000 226,101 210,101 Investment Income - - 59 59 Miscellaneous 1,000 1,000 14,083 13,083 Total Revenues 30,539,000 30,539,000 27,828,657 (2,710,343) 17,976,773 17,976,773 18,866,348 (889,575) 180,000 180,000 105,969 74,031 Principal Retirement 6,390,000 6,390,000 3,290,000 3,100,000 Interest/Service Charges on Bonds 6,032,243 6,032,243 5,566,848 465,395 30,579,016 30,579,016 27,829,165 2,749,851 Expenditures: Current: Community Environment Capital Outlay Debt Service: Total Expenditures Deficiency of Revenues Under Expenditures Fund Balance - Beginning Fund Balance - Ending $ (40,016) (40,016) (508) 39,508 406,055 406,055 783 (405,272) 366,039 $ See Note to Required Supplementary Information. 91 366,039 $ 275 $ (365,764) CITY OF MESA, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY REPORTING FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The financial statements for the City are prepared in accordance with generally accepted accounting principles – “GAAP basis”. Since Mesa, like most other Arizona cities, prepares its annual budget on a modified cash basis that differs from the “GAAP basis”, additional schedules of revenues and expenditures are presented for the General Fund to provide a meaningful comparison of actual results to budget on the “budget basis”. Adjustments necessary to convert the results of operations of the General Fund for the year ended June 30, 2012 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-3 Basis Differences: Compensated Absences Special Assessments Sales Tax Accrual Unrealized Gain on Investments Timing Differences: Grants & Contributions $ (13,030,762) (138,952) (45,263) (3,031,903) 382,613 487,334 Net Change in Fund Balance-GAAP Basis Exhibit A-5 92 $ (15,376,933) Combining Statements Councilmember Christopher Glover District 4 NON-MAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Local Transportation Assistance Fund accounts for expenditures on local transportation operations and capital outlay, as mandated by the Arizona State Legislature. The principal financing source for this fund is the state shared lottery revenue. Mesa Housing Authority Fund accounts for expenditures of the City’s housing assistance programs that provide rent subsidy payments to private sector owners of dwelling units. Financing for this fund is derived from grants from the United States Department of Housing and Urban Development. Cemetery Fund is designed to provide an accumulation of monies from which the interest earnings will provide perpetual care of the Cemetery. Development Impact Fees Fund is designed to provide a balance of monies to ensure that new development bears a proportionate share of the cost of improvements to the City’s parks, cultural facilities, libraries, fire facilities and equipment, police facilities and equipment, general government facilities and storm sewers. These funds are provided through the collection of development impact fees. Mesa Arts Center Restoration Fund is designed to provide an accumulation of monies to be used to replace or refurbish the Mesa Arts Center facilities. These funds are provided through a fee on all ticketed events at the facility. Environmental Compliance Fund accounts for expenditures that are a result of federal and state environmental requirements. Financing for this fund is derived from a monthly environmental compliance fee that is charged to each utility customer. Street Sales Tax Fund accounts for expenditures of the voter-approved sales tax that is used as the City match for the MAG Proposition 400 sales tax funds and also provides a local revenue source that is dedicated for street programs. Quality of Life Sales Tax Fund accounts for expenditures of the voter-approved sales tax to improve the quality of life for Mesa residents. Debt Service Funds These funds are established to account for the accumulation of resources for, and the payment of, principal and interest not serviced by the Enterprise Fund. General Obligation Bond Redemption Fund accumulates monies for the payment of principal and interest requirements of the City’s General Obligation Bonds. Special Assessment Bond Redemption Fund accumulates monies for the payment of the Special Assessment Bonds that are issued to finance the costs of improvements which are to be paid from special assessments levied against the benefited properties. Capital Lease Redemption Fund accumulates monies for the payment of principal and interest requirements of capital leases relating to the acquisition of land, computer equipment, communication equipment, police helicopters and various public improvements within the City. Highway User Revenue Bond Redemption Fund accumulates monies for the payment of principal and interest requirements of the City’s Highway User Revenue Bonds. Capital Projects Funds Capital Projects Funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and special revenue funds. Fire Construction Fund accounts for the cost of fire prevention facilities and equipment. Storm Sewer Construction Fund accounts for the construction of drains, basins, channels and other storm sewer improvements. Streets Construction Fund accounts for the cost of right-of-way acquisitions and street improvements. Law Enforcement Construction Fund accounts for the cost of public safety facilities. Library Construction Fund accounts for the cost of improvements to the main library and expansion of branches. Vehicle Replacement Fund accounts for expenditures related to the acquisition of replacement vehicles for the City’s governmental funds. The funds are provided through transfers from the City’s General Fund. CITY OF MESA, ARIZONA EXHIBIT C-1 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 Special Revenue Funds Debt Service Funds Total Nonmajor Governmental Funds Capital Projects Funds ASSETS Pooled Cash and Investments Accounts Receivable Due From Other Governments Prepaid Costs Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Special Assessments Receivable Due From Other Governments $ 50,364,405 5,428,978 6,469,099 82,290 Total Assets - $ 43,689,814 12,189,793 - 35,200 - 160,510 31,956,240 4,502,467 576,028 - 160,510 31,956,240 35,200 4,502,467 576,028 $ 62,379,972 $ 37,195,245 $ 55,879,607 $ 155,454,824 $ 1,539,010 5,226,577 5,903,760 $ 262,236 - $ 3,563,493 - $ - 8,690,566 4,816,260 20,135,109 2,238,855 - 8,690,566 7,055,115 20,135,109 - 3,290,000 - 3,290,000 Total Liabilities 12,669,347 37,194,171 5,802,348 55,665,866 Fund Balances: Nonspendable Restricted Committed 82,290 39,191,603 10,436,732 1,074 44,154,587 5,922,672 82,290 83,346,190 16,360,478 Total Fund Balances 49,710,625 1,074 50,077,259 99,788,958 $ 62,379,972 $ 37,195,245 $ 55,879,607 $ 155,454,824 LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Due To Other Funds Customer Deposits Payable From Restricted Assets: Accrued Bond Interest Payable Deferred Revenue Matured General Obligation Bonds Payable Matured Highway User Revenue Bonds Payable Total Liabilities and Fund Balances 93 $ $ 94,054,219 5,428,978 18,658,892 82,290 5,102,503 5,488,813 5,903,760 CITY OF MESA, ARIZONA EXHIBIT C-2 NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Special Revenue Funds Revenues: Sales Taxes Property Taxes Special Assessments Licenses and Permits Intergovernmental Charges For Services Fees and Forfeitures Investment Income Miscellaneous Total Revenues $ 40,067,434 2,374,152 21,793,981 16,703,676 437,592 820,961 Debt Service Funds $ 14,322,925 995,897 923,509 590 462 Total Nonmajor Governmental Fund Capital Projects Funds $ 11,239,556 37,676 84,740 $ 40,067,434 14,322,925 995,897 2,374,152 33,033,537 16,703,676 923,509 475,858 906,163 82,197,796 16,243,383 11,361,972 109,803,151 15,792,186 11,889,515 38,377,792 - - 15,792,186 11,889,515 38,377,792 18,848,782 25,513,155 18,244,535 86,367 7,864 469,412 - 32,355,826 25,513,155 18,244,535 86,367 7,864 469,412 51,204,608 Total Expenditures 84,908,275 44,321,333 32,355,826 161,585,434 Deficiency of Revenues Under Expenditures (2,710,479) (28,077,950) (20,993,854) (51,782,283) Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Issuance of Refunding Debt Payment to Refunded Bond Escrow Agent 7,037,600 (3,509,776) - 27,475,339 (272,161) 7,630,822 67,238,160 (74,127,409) 2,847,000 27,290,000 396,238 - 37,359,939 (3,781,937) 27,290,000 8,027,060 67,238,160 (74,127,409) 3,527,824 27,944,751 30,533,238 62,005,813 (133,199) 9,539,384 10,223,530 134,273 40,537,875 89,565,428 1,074 $ 50,077,259 Expenditures: Current: Public Safety Cultural - Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Service Charges Cost of Issuance Capital Outlay Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending 817,345 48,893,280 $ 49,710,625 $ 94 $ 99,788,958 CITY OF MESA, ARIZONA EXHIBIT C-3 NON-MAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 Local Transportation Assistance Mesa Housing Authority Cemetery 645 5,800,728 369 $ 1,792,473 86,967 - $ 6,321,374 62,812 116 - - - Development Impact Fees ASSETS Pooled Cash and Investments Accounts Receivable Due From Other Governments Prepaid Costs Restricted Assets: Cash with Trustee $ $ 1,886,691 2,925 Total Assets $ 5,801,742 $ 1,879,440 $ 6,384,302 $ 1,889,616 $ 483,720 5,218,000 - $ $ $ - - LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Due To Other Funds Customer Deposits Total Liabilities Fund Balances: Nonspendable Restricted Committed Total Fund Balances Total Liabilities and Fund Balances $ 75,145 - 187,673 1,125 5,701,720 75,145 188,798 - 369 99,653 - 1,804,282 13 116 6,195,388 2,925 1,886,691 100,022 1,804,295 6,195,504 1,889,616 5,801,742 $ 1,879,440 $ 6,384,302 95 $ 1,889,616 EXHIBIT C-3 (Continued) Mesa Arts Center Restoration $ 1,271,504 - Environmental Compliance $ - Quality of Life Sales Tax $ 37,809,656 1,697,152 668,371 76,897 - 35,200 $ 40,287,276 $ 3,590,817 $ 62,379,972 $ $ 8,577 - $ 1,539,010 5,226,577 5,903,760 1,271,504 $ 1,275,275 $ - $ 190,156 - 602,316 5,902,635 $ 8,770 3,582,047 - Total 1,273,292 1,983 $ $ Street Sales Tax $ - 50,364,405 5,428,978 6,469,099 82,290 35,200 - 190,156 6,504,951 8,577 12,669,347 1,271,504 1,983 1,083,136 76,897 33,705,428 - 3,582,240 - 82,290 39,191,603 10,436,732 1,271,504 1,085,119 33,782,325 3,582,240 49,710,625 1,275,275 $ 40,287,276 1,271,504 $ $ 96 3,590,817 $ 62,379,972 CITY OF MESA, ARIZONA EXHIBIT C-4 NON-MAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Local Transportation Assisistance Revenues: Sales Taxes Licenses and Permits Intergovernmental Charges for Services Investment Income Miscellaneous $ 6,403,915 1,013,573 25 373,053 Mesa Housing Authority $ Cemetery 11,161,641 9,667 112,977 $ 1,180,710 35,692 528 Development Impact Fees $ 2,289,744 18,237 55,228 Total Revenues 7,790,566 11,284,285 1,216,930 2,363,209 Expenditures: Current: Public Safety Cultural-Recreational Community Environment Capital Outlay 9,672,660 5,080,345 11,597,703 - 1,090,776 681,049 3,505,863 Total Expenditures 14,753,005 11,597,703 1,771,825 3,505,863 Excess (Deficiency) of Revenues Over (Under) Expenditures (6,962,439) Other Financing Sources (Uses): Transfers In Transfers Out 7,037,600 - - - (2,572,392) Total Other Financing Sources (Uses) 7,037,600 - - (2,572,392) (313,418) Net Change in Fund Balances 75,161 Fund Balances - Beginning 24,861 2,117,713 6,750,399 100,022 $ 1,804,295 $ 6,195,504 Fund Balances - Ending $ 97 (313,418) (554,895) (1,142,654) (554,895) (3,715,046) 5,604,662 $ 1,889,616 EXHIBIT C-4 (Continued) Mesa Arts Center Restoration $ $ Street Sales Tax Quality of Life Sales Tax 10,114,540 7,297 - $ 21,821,912 84,408 4,198,759 360,290 985 $ 18,245,522 29,666 4,114,535 278,190 286,702 10,121,837 26,466,354 22,667,913 82,197,796 162,521 9,046,453 339,109 16,016,653 8,841,854 6,745,733 11,889,515 238,041 15,792,186 11,889,515 38,377,792 18,848,782 162,521 9,385,562 24,858,507 18,873,289 84,908,275 124,181 736,275 1,607,847 3,794,624 (2,710,479) - - (725,000) (212,384) 7,037,600 (3,509,776) - - (725,000) (212,384) 3,527,824 124,181 736,275 882,847 3,582,240 817,345 1,147,323 348,844 32,899,478 - 48,893,280 1,085,119 $ 33,782,325 280,318 6,384 - 1,271,504 Environmental Compliance $ $ $ 98 3,582,240 Total $ $ 40,067,434 2,374,152 21,793,981 16,703,676 437,592 820,961 49,710,625 CITY OF MESA, ARIZONA EXHIBIT C-5 NON-MAJOR DEBT SERVICE FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 General Obligation Bond Redemption Special Assessment Bond Redemption Capital Lease Redemption ASSETS Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Special Assesments Receivable Due From Other Governments $ Total Assets 73,075 26,065,938 576,028 $ 87,435 51,175 4,502,467 - $ - $ 26,715,041 $ 4,641,077 $ - LIABILITIES AND FUND BALANCES Liabilities Payable From Restricted Assets: Due To Other Funds Accrued Bond Interest Payable Deferred Revenue Matured General Obligation Bonds Payable Matured Highway User Revenue Bonds Payable 262,236 6,002,829 313,793 20,135,109 - 138,610 4,502,467 - - Total Liabilities 26,713,967 4,641,077 - 1,074 - - Fund Balances: Committed Total Liabilities and Fund Balances $ 26,715,041 99 $ 4,641,077 $ - EXHIBIT C-5 (Continued) Highway User Revenue Bond Redemption Total $ 5,839,127 - $ $ 5,839,127 $ 37,195,245 2,549,127 3,290,000 262,236 8,690,566 4,816,260 20,135,109 3,290,000 5,839,127 37,194,171 - 1,074 5,839,127 $ 37,195,245 $ 160,510 31,956,240 4,502,467 576,028 100 CITY OF MESA, ARIZONA EXHIBIT C-6 NON-MAJOR DEBT SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 General Obligation Bond Redemption Revenues: Property Taxes Special Assessments Fines and Forfeitures Investment Income Miscellaneous $ 14,322,925 923,509 590 - Special Assessment Bond Redemption $ 995,897 462 Capital Lease Redemption $ - Total Revenues 15,247,024 996,359 - Expenditures: Debt Service: Principal Retirement Interest on Bonds Interest on Leases Service Charges Cost of Issuance 20,135,109 12,384,126 4,264 220,428 744,000 297,160 - 1,344,046 86,367 - Total Expenditures 32,743,927 1,041,160 1,430,413 Deficiency of Revenues Under Expenditures (17,496,903) (44,801) (1,430,413) Other Financing Sources (Uses): Transfers In Transfers Out Refunding Bonds Issued Premium on Issuance of Bonds Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) 17,143,276 (268,648) 31,148,160 1,793,341 (32,452,425) 17,363,704 44,801 44,801 1,430,413 1,430,413 (133,199) - - 134,273 - - Net Change In Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 101 1,074 $ - $ - EXHIBIT C-6 (Continued) Highway User Revenue Bond Redemption $ $ Total - $ 14,322,925 995,897 923,509 590 462 - 16,243,383 3,290,000 5,563,249 3,600 248,984 25,513,155 18,244,535 86,367 7,864 469,412 9,105,833 44,321,333 (9,105,833) (28,077,950) 8,856,849 (3,513) 36,090,000 5,837,481 (41,674,984) 9,105,833 27,475,339 (272,161) 67,238,160 7,630,822 (74,127,409) 27,944,751 - (133,199) - 134,273 - $ 1,074 102 CITY OF MESA, ARIZONA EXHIBIT C-7 NON-MAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET JUNE 30, 2012 Storm Sewer Fire Streets Law Enforcement ASSETS Pooled Cash and Investments Due From Other Governments $ 3,953,262 - $ 591,465 - $ 25,693,355 12,189,793 $ 6,772,497 - Total Assets $ 3,953,262 $ 591,465 $ 37,883,148 $ 6,772,497 $ 357,886 - $ 174,571 - $ $ 352,641 - LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Deferred Revenue Total Liabilities 1,921,832 2,238,855 357,886 174,571 4,160,687 352,641 Fund Balances: Restricted Committed 3,595,376 - 416,894 - 33,722,461 - 6,419,856 - Total Fund Balances 3,595,376 416,894 33,722,461 6,419,856 591,465 $ 37,883,148 Total Liabilities and Fund Balances $ 3,953,262 103 $ $ 6,772,497 EXHIBIT C-7 (Continued) Vehicle Replacement Library Total $ - $ 6,679,235 - $ 43,689,814 12,189,793 $ - $ 6,679,235 $ 55,879,607 $ - $ 756,563 - $ $ 3,563,493 2,238,855 - 756,563 5,802,348 - 5,922,672 44,154,587 5,922,672 - 5,922,672 50,077,259 6,679,235 $ 55,879,607 - $ 104 CITY OF MESA, ARIZONA EXHIBIT C-8 NON-MAJOR CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Storm Sewer Fire Revenues: Intergovernmental Investment Income Miscellaneous $ $ 11,239,556 10,110 - 111 96 11,249,666 - Expenditures: Capital Outlay: Construction Projects Cost of Issuance 7,828,921 45,896 673,646 - 18,235,575 371,759 2,392,457 41,306 Total Expenditures 7,874,817 673,646 18,607,334 2,433,763 (7,874,706) (673,550) (7,357,668) (2,433,763) Deficiency of Revenues Under Expenditures $ Law Enforcement 96 - Total Revenues 111 - Streets $ - Other Financing Sources (Uses): Transfers In Face Amount of Bonds Issued Premium on Issuance of Bonds 2,729,000 39,624 - 22,104,900 320,953 2,456,100 35,661 Total Other Financing Sources (Uses) 2,768,624 - 22,425,853 2,491,761 15,068,185 57,998 1,090,444 18,654,276 6,361,858 416,894 $ 33,722,461 Net Change in Fund Balances (5,106,082) Fund Balances - Beginning Fund Balances - Ending (673,550) 8,701,458 $ 3,595,376 105 $ $ 6,419,856 EXHIBIT C-8 (Continued) Vehicle Replacement Library $ - $ 27,359 84,740 $ 11,239,556 37,676 84,740 - 112,099 11,361,972 544,032 - 2,222,234 - 31,896,865 458,961 544,032 2,222,234 32,355,826 (544,032) (2,110,135) (20,993,854) - 2,847,000 - 2,847,000 27,290,000 396,238 - 2,847,000 30,533,238 736,865 9,539,384 5,185,807 40,537,875 5,922,672 $ 50,077,259 (544,032) 544,032 $ Total - $ 106 INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and to other government units, on a cost reimbursement basis. Warehouse, Maintenance and Services Fund was established to finance and account for services and commodities furnished by Fleet Support, Materials and Supply, and Printing and Graphics. Property and Public Liability Self-Insurance Fund was established to account for the cost of claims incurred by the City under a self-insurance program. Workers’ Compensation Self-Insurance Fund was established to account for the costs of maintaining a self-insurance program for industrial insurance at the City. Employee Benefit Self-Insurance Fund was established to account for the costs of maintaining the City’s self-insurance health program. CITY OF MESA, ARIZONA EXHIBIT C-9 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS JUNE 30, 2012 ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Premiums Receivable Due From Other Governments Inventory Prepaid Costs Total Current Assets Capital Assets: Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure Construction in Progress Warehouse, Maintenance and Services Property and Public Liability Self Insurance $ $ 391,101 732 43,150 6,061,888 4,915 6,501,786 2,061,431 426,745 6,506,851 2,758 1,042 144,538 9,143,365 (5,763,694) 3,379,671 Less Accumulated Depreciation Net Capital Assets Total Assets 8,114,385 408,404 8,522,789 - 9,881,457 8,522,789 439,803 797 87,848 527,651 7,730,000 5,300,000 13,030,797 Long-Term Liabilities Compensated Absences Post Employment Benefits Total Long-Term Liabilities Total Liabilities 831,628 6,067,493 6,899,121 7,426,772 13,030,797 Net Assets: Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets 3,379,671 (924,986) 2,454,685 (4,508,008) (4,508,008) LIABILITIES AND NET ASSETS Current Liabilities: Accounts Payable Other Accrued Expenses: Estimated Liability For Claims: Incurred-Not Reported Incurred and Pending Current Portion of Compensated Absences Total Current Liabilities $ 107 $ EXHIBIT C-9 (Continued) Workers' Compensation Self Insurance Employee Benefits Self Insurance Total $ 4,471,203 162,840 232,445 4,866,488 $ 38,449,087 1,279,168 11,949 39,740,204 $ 51,425,776 163,572 1,279,168 43,150 6,061,888 657,713 59,631,267 - - 4,866,488 39,740,204 63,010,938 91,257 566,929 1,098,786 6,236,861 12,481,335 18,809,453 5,586,769 6,153,698 19,553,630 17,781,335 87,848 38,521,599 18,809,453 6,153,698 831,628 6,067,493 6,899,121 45,420,720 33,586,506 $ 33,586,506 3,379,671 14,210,547 $ 17,590,218 $ (13,942,965) (13,942,965) 2,061,431 426,745 6,506,851 2,758 1,042 144,538 9,143,365 (5,763,694) 3,379,671 108 CITY OF MESA, ARIZONA EXHIBIT C-10 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Warehouse, Maintenance and Services Property and Public Liability Self Insurance $ $ Operating Revenues: Charges For Services: Material and Supply Printing and Graphics 986,991 - 928,004 - 17,147,110 - Employee - - City - 4,301,000 State Retirement System - - - - 19,062,105 4,301,000 Material and Supply 1,045,846 - Printing and Graphics 1,097,291 - Fleet Support Services Fleet Support Services Self-Insurance Contributions: Other Total Operating Revenues Operating Expenses: 18,149,471 - Administrative Costs - 847,366 Claims Incurred - 567,582 Premiums to Insurance Carriers - 786,739 Total Operating Expenses 20,292,608 2,201,687 Operating Income (Loss) Before Depreciation (1,230,503) 2,099,313 (340,110) - (1,570,613) 2,099,313 Depreciation Operating Income (Loss) Nonoperating Revenues (Expense): Investment Income - Loss on Disposal of Capital Assets Total Nonoperating Revenues (Expenses) Net Income (Loss) Before Transfers and Capital Contributions Transfer of Capital Assets to Governmental Funds Transfers In 43,032 (36,970) - (36,970) 43,032 (1,607,583) 2,142,345 (1,581) - 291,100 Change in Net Assets - (1,318,064) Total Net Assets - Beginning 2,142,345 3,772,749 Total Net Assets - Ending $ 109 2,454,685 (6,650,353) $ (4,508,008) EXHIBIT C-10 (Continued) Workers' Compensation Self Insurance Employee Benefits Self Insurance $ $ - $ 986,991 - - 928,004 - - 17,147,110 - 13,649,905 13,649,905 3,308,189 46,596,854 54,206,043 - 3,520,596 3,520,596 - 1,352,879 1,352,879 3,308,189 65,120,234 91,791,528 - - 1,045,846 - - 1,097,291 - - 18,149,471 895,090 5,267,031 7,009,487 10,687,858 48,463,642 59,719,082 930,416 345,666 2,062,821 12,513,364 54,076,339 89,083,998 (9,205,175) 11,043,895 2,707,530 - - (9,205,175) (340,110) 11,043,895 2,367,420 25,237 168,747 237,016 - - 25,237 168,747 200,046 11,212,642 2,567,466 (9,179,938) (36,970) - - - - 291,100 11,212,642 2,856,985 (9,179,938) (4,763,027) $ - Total (13,942,965) (1,581) 22,373,864 $ 33,586,506 14,733,233 $ 17,590,218 110 CITY OF MESA, ARIZONA EXHIBIT C-11 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Warehouse, Maintenance and Services Cash Flows From Operating Activities: Cash Received From Users Cash Payments To Suppliers Cash Payments To Employees $ Net Cash Provided by (Used For) Operating Activities 19,036,190 (14,577,956) (5,028,884) (570,650) Cash Flows From Noncapital Financing Activities: Operating Transfers-In From Other Funds 291,100 Net Cash Provided By Noncapital Financing Activities 291,100 Cash Flows From Capital and Related Financing Activities: Acquisition of Capital Assets Interest Paidand on Construction Leases (97,030) Net Cash Used For Capital and Related Financing Activities (97,030) Cash Flows From Investing Activities: Interest Received on Investments - Net Cash Provided By Investing Activities - Net Increase (Decrease) in Cash and Cash Equivalents (376,580) Pooled Cash and Investments at Beginning of Year 767,681 Pooled Cash and Investments at End of Year $ 391,101 Reconciliation of Operating Income (Loss) to Net Cash Provided By Operating Activities: Operating Income (Loss) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Used Provided By Operating Activities: Depreciation Changes in Assets and Liabilities: (Increase) Decrease in Receivables Increase in Inventory Increase in Prepaid Costs Increase (Decrease) in Accounts Payable Increase (Decrease) in Other Accrued Expenses (1,570,613) 340,110 (25,915) (193,994) (2,050) 881,812 - Total Adjustments 999,963 Net Cash Provided By (Used For) Operating Activities $ (570,650) Noncash Transactions Affecting Financial Position: Loss on Disposal of Capital Assets Transfer of Capital Assets to Governmental Funds (36,970) (1,581) 111 EXHIBIT C-11 (Continued) Property and Public Liability Self Insurance $ 4,301,000 (3,171,172) (824,902) Workers' Compensation Self Insurance $ 304,926 3,438,937 (5,149,126) (245,432) Employee Benefits Self Insurance $ (1,955,621) 65,100,825 (50,555,262) (1,385,015) Total $ 91,876,952 (73,453,516) (7,484,233) 13,160,548 10,939,203 - - - 291,100 - - - 291,100 - - - (97,030) - - - - (97,030) 43,032 25,237 168,747 237,016 43,032 25,237 168,747 237,016 (1,930,384) 13,329,295 11,370,289 6,401,587 25,119,792 40,055,487 347,958 7,766,427 $ 8,114,385 $ 4,471,203 $ 38,449,087 $ 51,425,776 $ 2,099,313 $ (9,205,175) $ 11,043,895 $ 2,367,420 - $ - - 340,110 (183,847) 460 (1,611,000) 130,748 (152,688) 22,916 7,248,578 (19,409) (10,276) (126,658) 2,272,996 85,424 (193,994) (348,861) 778,530 7,910,574 (1,794,387) 7,249,554 2,116,653 8,571,783 304,926 $ (1,955,621) $ 13,160,548 $ 10,939,203 (36,970) (1,581) 112 FIDUCIARY FUND The Fiduciary Fund accounts for assets held by the City in a custodial capacity for the benefit of a third party and cannot be used to address activities or obligations of the City. The Payroll Agency Fund accounts for all payroll transactions. CITY OF MESA, ARIZONA EXHIBIT C-12 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Balance July 1, 2011 PAYROLL AGENCY FUND Assets: Pooled Cash and Investments Due From Other Funds Additions Balance June 30, 2012 Deductions $ 11,499,861 - $ 554,666,895 12,044,800 $ 553,315,402 12,044,800 $ 12,851,354 - Total Assets $ 11,499,861 $ 566,711,695 $ 565,360,202 $ 12,851,354 Liabilities: Accrued Payroll Payable $ 11,499,861 $ 340,787,367 $ 339,435,874 $ 12,851,354 Total Liabilities $ 11,499,861 $ 340,787,367 $ 339,435,874 $ 12,851,354 113 Supplemental Information Councilwoman Dina Higgins District 5 CITY OF MESA, ARIZONA EXHIBIT D-1 GENERAL FUND SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget General Government: Legislative Executive Williams Gateway Town Center Development Judicial Legal Building Maintenance City Clerk Economic Development Engineering Financial Services E-Streets & Cable TV Licensing General Services Planning Capital Improvement Total General Government $ 1,664,000 946,000 4,444,000 1,161,000 14,326,000 847,000 1,748,249 1,110,000 3,952,000 2,577,700 7,923,424 783,000 4,159,046 2,172,000 676,319 Final Budget Actual Amounts Budget Basis Variance With Final Budget Positive (Negative) $ $ $ 1,664,001 959,201 4,592,580 1,161,000 14,272,203 954,984 1,748,249 1,110,000 4,667,522 2,577,700 7,923,424 797,809 4,670,697 2,172,000 1,045,958 1,641,085 959,201 4,592,580 1,011,485 11,379,019 954,984 1,600,777 968,374 4,667,522 2,381,164 6,921,740 797,809 4,670,697 2,095,610 1,045,958 22,916 149,515 2,893,184 147,472 141,626 196,536 1,001,684 76,390 - 48,489,738 50,317,328 45,688,005 1,954,837 1,560,343 2,450,174 1,560,343 2,852,528 1,166,715 44,974,558 46,306,811 41,668,762 4,638,049 Public Safety: Law Enforcement Fire Prevention Building Safety Code Compliance Environmental Management 173,983,339 76,086,605 4,392,000 881,000 2,170,721 173,647,778 75,875,314 4,392,000 881,000 2,170,721 161,672,098 67,518,158 3,478,287 695,213 1,839,456 11,975,680 8,357,156 913,713 185,787 331,265 Total Public Safety 257,513,665 256,966,813 235,203,212 21,763,601 13,564,855 16,257,861 13,094,667 16,257,861 11,381,431 14,118,344 1,713,236 2,139,517 $ 227,690,949 $ 227,614,285 $ 209,703,437 Less: Capital Outlay Expenditures Debt Service Expenditures Total Current Expenditures Less: Capital Outlay Expenditures Debt Service Expenditures Total Current Expenditures 114 4,629,323 (402,354) 393,628 $ 17,910,848 CITY OF MESA, ARIZONA EXHIBIT D-1 (Continued) GENERAL FUND SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Variance With Final Budget Positive (Negative) Original Budget Final Budget Actual Amounts Budget Basis $ 19,706,854 747,011 2,292,115 8,745,145 2,840,000 2,188,000 1,396,161 3,137,000 $ 19,706,854 747,011 3,253,850 8,739,145 3,489,498 2,188,000 1,396,161 3,330,250 $ 18,110,982 466,211 3,253,850 7,487,047 3,489,498 1,859,704 1,134,596 3,330,250 41,052,286 42,850,769 39,132,138 3,718,631 2,883,864 6,871,429 3,001,788 6,871,429 1,693,642 5,436,358 1,308,146 1,435,071 Total Current Expenditures 31,296,993 32,977,552 32,002,138 975,414 Community Environment: Community Development Streets Storm Sewer Mass Transit Miscellaneous Services 13,140,000 3,392,351 6,113,941 25,697 625,000 13,140,000 3,392,351 6,113,941 66,426 2,434,466 4,769,860 3,359,868 5,246,957 66,426 2,434,466 8,370,140 32,483 866,984 - Total Community Environment 23,296,989 25,147,184 15,877,577 9,269,607 573,821 8,827,545 614,550 8,827,545 376,305 8,172,393 238,245 655,152 Total Current Expenditures 13,895,623 15,705,089 7,328,879 8,376,210 Contingencies 36,149,000 23,732,468 - 23,732,468 $ 406,501,678 $ 399,014,562 $ 335,900,932 Cultural-Recreational: Parks and Recreation Cultural Aquatics Library Community Aid Museum of Natural History Museum for Youth Neighborhood & Human Services Total Cultural-Recreational Less: Capital Outlay Expenditures Debt Service Expenditures Less: Capital Outlay Expenditures Debt Service Expenditures Total General Fund Expenditures 115 $ $ 1,595,872 280,800 1,252,098 328,296 261,565 - 63,113,630 CITY OF MESA, ARIZONA EXHIBIT D-2 HIGHWAY USER REVENUE FUND SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Final Budget Actual Amounts Budget Basis Variance With Final Budget Positive (Negative) 29,517,473 1,061,543 29,517,473 1,061,543 27,829,163 2 1,688,310 1,061,541 Total Community Environment 30,579,016 30,579,016 27,829,165 2,749,851 Less: Capital Outlay Expenditures Debt Service Expenditures 180,000 12,422,243 180,000 12,422,243 105,969 8,856,848 74,031 3,565,395 Total Current Expenditures 17,976,773 17,976,773 18,866,348 $ 30,579,016 $ 30,579,016 $ 27,829,165 Original Budget Community Environment: Streets Storm Sewer Total Highway User Revenue Fund Expenditures 116 (889,575) $ 2,749,851 CITY OF MESA, ARIZONA EXHIBIT D-3 (Concluded) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Budget Basis Actual amount (budgetary basis) "Net Change in Fund Balances" from the budgetary comparison schedule $ (2,924,322) Basis Difference Unrealized Gain on Investment Sales Tax Accrual 45,102 3,696,565 GAAP Basis "Net Change in Fund Balances" GAAP Basis as reported on the Statement of Revenues, Expenditures and Changes in Fund Balance-Non-Major Special Revenue Funds Exhibit C-4 126 $ 817,345 CITY OF MESA, ARIZONA EXHIBIT D-3 NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget LOCAL TRANSPORTATION ASSISTANCE FUND Revenues: Intergovernmental Charges For Services Investment Income Miscellaneous $ Total Revenues Actual Amounts Budgetary Basis Final Budget 6,280,000 715,000 2,000 $ 6,280,000 715,000 2,000 $ 6,403,915 1,013,573 25 373,053 Variance With Final Budget Positive (Negative) $ 123,915 298,573 25 371,053 6,997,000 6,997,000 7,790,566 793,566 Expenditures: Current: Community Environment Capital Outlay Contingencies 10,258,303 5,900,000 - 10,217,926 5,900,000 40,377 9,672,660 5,080,345 - 545,266 819,655 40,377 Total Expenditures 16,158,303 16,158,303 14,753,005 1,405,298 Deficiency of Revenues Under Expenditures (9,161,303) (9,161,303) (6,962,439) 2,198,864 9,162,000 9,162,000 7,037,600 (2,124,400) Net Change in Fund Balance 697 697 75,161 74,464 Fund Balance - Beginning 177 177 24,861 24,684 Other Financing Sources: Transfers In Fund Balance - Ending $ 874 117 $ 874 $ 100,022 $ 99,148 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis $ 11,211,000 2,000 23,000 $ 11,211,000 2,000 23,000 $ 11,161,641 6,240 112,977 Total Revenues 11,236,000 11,236,000 11,280,858 44,858 Expenditures: Current: Community Environment 12,847,000 12,847,000 11,597,703 1,249,297 Total Expenditures 12,847,000 12,847,000 11,597,703 1,249,297 Net Change in Fund Balance (1,611,000) (1,611,000) 1,611,788 1,611,788 MESA HOUSING AUTHORITY FUND Revenues: Intergovernmental Investment Income Miscellaneous Fund Balance - Beginning Fund Balance - Ending $ 788 118 $ 788 Variance With Final Budget Positive (Negative) $ (316,845) 1,294,155 2,117,713 $ 1,800,868 (49,359) 4,240 89,977 505,925 $ 1,800,080 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget CEMETERY FUND Revenues: Charges For Services Investment Income Miscellaneous $ Actual Amounts Budgetary Basis Final Budget 1,076,000 10,000 - $ 1,076,000 10,000 - $ 1,180,710 23,699 528 Variance With Final Budget Positive (Negative) $ 104,710 13,699 528 Total Revenues Expenditures: Current: Community Environment Capital Outlay 1,086,000 1,086,000 1,204,937 118,937 1,205,610 852,390 1,205,610 852,390 1,090,776 681,049 114,834 171,341 Total Expenditures 2,058,000 2,058,000 1,771,825 286,175 Net Change in Fund Balance (972,000) Fund Balance - Beginning Fund Balance - Ending (972,000) 6,896,711 $ 5,924,711 119 (566,888) 6,896,711 $ 5,924,711 405,112 6,750,399 $ 6,183,511 (146,312) $ 258,800 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget DEVELOPMENT IMPACT FEES FUND Revenues: Licenses & Permits Investment Income Miscellaneous $ Total Revenues Expenditures: Capital Outlay Debt Service: Principal Retirement Interest on Bonds Total Expenditures Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ Actual Amounts Budgetary Basis Final Budget 1,359,000 9,000 - $ 1,359,000 9,000 - $ 2,289,744 14,644 55,228 Variance With Final Budget Positive (Negative) $ 930,744 5,644 55,228 1,368,000 1,368,000 2,359,616 991,616 3,260,681 3,505,863 3,505,863 - 462,000 853,665 1,113,082 1,459,310 1,113,082 1,459,310 - 4,576,346 6,078,255 6,078,255 - (3,208,346) (4,710,255) (3,718,639) 991,616 5,343,128 5,343,128 5,604,662 261,534 2,134,782 120 $ 632,873 $ 1,886,023 $ 1,253,150 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget MESA ARTS CENTER RESTORATION FUND Revenues: Charges For Services Investment Income $ 184,000 2,000 Actual Amounts Budgetary Basis Final Budget $ 184,000 2,000 $ 280,318 3,952 Variance With Final Budget Positive (Negative) $ 96,318 1,952 Total Revenues 186,000 186,000 284,270 98,270 Expenditures: Current: Cultural-Recreational Capital Outlay 1,292 250,000 1,292 250,000 162,521 1,292 87,479 Total Expenditures 251,292 251,292 162,521 88,771 Net Change in Fund Balance (65,292) (65,292) 121,749 187,041 Fund Balance - Beginning 942,962 942,962 1,147,323 204,361 Fund Balance - Ending $ 877,670 121 $ 877,670 $ 1,269,072 $ 391,402 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget ENVIRONMENTAL COMPLIANCE FUND Revenues: Charges For Services Investment Income $ 6,184,000 1,000 Actual Amounts Budgetary Basis Final Budget $ 6,184,000 1,000 $ 10,114,540 4,865 Variance With Final Budget Positive (Negative) $ $ 3,930,540 3,865 Total Revenues 6,185,000 6,185,000 10,119,405 3,934,405 Expenditures: Current: Public Safety Capital Outlay 6,210,993 323,286 9,046,453 339,109 9,046,453 339,109 - Total Expenditures 6,534,279 9,385,562 9,385,562 - 733,843 3,934,405 Net Change in Fund Balance (349,279) Fund Balance - Beginning Fund Balance - Ending (3,200,562) 363,865 $ 14,586 122 363,865 $ (2,836,697) 348,844 $ 1,082,687 (15,021) $ 3,919,384 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 STREET SALES TAX FUND Revenues: Sales Taxes Licenses & Permits Intergovernmental Investment Income Miscellaneous Original Budget Final Budget Actual Amounts Budgetary Basis $ 21,205,000 10,331,000 31,000 - $ 21,205,000 10,331,000 31,000 - $ 21,707,394 84,408 5,676,059 339,065 985 31,567,000 31,567,000 27,807,911 (3,759,089) 446,576 446,576 27,804,603 12,086,028 9,095,000 27,804,603 12,086,028 9,095,000 16,016,653 8,841,854 - 446,576 11,787,950 3,244,174 9,095,000 - - 4,312,398 (4,312,398) 49,432,207 49,432,207 29,170,905 20,261,302 (17,865,207) (17,865,207) (1,362,994) 16,502,213 (725,000) (725,000) 2,835,098 (725,000) 2,835,098 - (18,590,207) (18,590,207) 747,104 19,337,311 18,809,744 18,809,744 31,284,739 12,474,995 219,537 $ 32,031,843 $ 31,812,306 Total Revenues Expenditures: Current: General Government Community Environment Capital Outlay Contingencies Debt Service: Interest on Notes and Bonds Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources: Transfers In Transfers Out Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 219,537 123 $ Variance With Final Budget Positive (Negative) $ 502,394 84,408 (4,654,941) 308,065 985 CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis $ 17,752,000 40,000 3,120,000 383,000 $ 17,752,000 40,000 3,120,000 383,000 $ 18,150,091 29,666 4,114,535 278,190 Total Revenues 21,295,000 21,295,000 22,572,482 1,277,482 Expenditures: Current: Public Safety Cultural - Recreational Capital Outlay 6,610,658 11,984,643 410,433 6,745,733 12,799,794 410,433 6,745,733 11,889,515 238,041 910,279 172,392 Total Expenditures 19,005,734 19,955,960 18,873,289 1,082,671 2,289,266 1,339,040 3,699,193 2,360,153 - - 3,699,000 (3,699,000) 2,289,266 1,339,040 193 (1,338,847) - - - QUALITY OF LIFE SALES TAX FUND Revenues: Sales Taxes Intergovernmental Charges For Services Miscellaneous Excess of Revenues Over Expenditures Other Financing Uses: Transfers Out Net Change in Fund Balance Fund Balance - Beginning Fund Balance - Ending $ 2,289,266 124 $ 1,339,040 $ Variance With Final Budget Positive (Negative) 193 $ 398,091 (10,334) 994,535 (104,810) $ (1,338,847) CITY OF MESA, ARIZONA EXHIBIT D-3 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis $ 38,957,000 1,359,000 27,862,000 11,279,000 55,000 408,000 $ 38,957,000 1,359,000 27,862,000 11,279,000 55,000 408,000 $ 39,857,485 2,374,152 23,271,281 16,703,676 392,490 820,961 Total Revenues 79,920,000 79,920,000 83,420,045 3,500,045 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Contingencies Principal Retirement Interest on Notes and Bonds 446,576 12,821,651 11,985,935 52,115,516 23,082,818 9,095,000 462,000 853,665 446,576 15,792,186 12,801,086 52,320,321 23,098,641 9,135,377 1,113,082 1,459,310 15,792,186 11,889,515 38,377,792 18,848,782 1,113,082 5,771,708 446,576 911,571 13,942,529 4,249,859 9,135,377 (4,312,398) Total Expenditures 110,863,161 116,166,579 91,793,065 24,373,514 Deficiency of Revenues Under Expenditures (30,943,161) (36,246,579) (8,373,020) 27,873,559 9,162,000 (725,000) 9,162,000 (725,000) 9,872,698 (4,424,000) 710,698 (3,699,000) (22,506,161) (27,809,579) (2,924,322) 24,885,257 33,968,375 33,968,375 47,278,541 13,310,166 6,158,796 $ 44,354,219 $ 38,195,423 RECAP Revenues: Sales Taxes Licenses and Permits Intergovernmental Charges for Services Investment Income Miscellaneous Other Financing Sources: Transfers In Transfer Out Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending $ 11,462,214 125 $ Variance With Final Budget Positive (Negative) $ 900,485 1,015,152 (4,590,719) 5,424,676 337,490 412,961 CITY OF MESA, ARIZONA EXHIBIT D-3 (Concluded) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Budget Basis Actual amount (budgetary basis) "Net Change in Fund Balances" from the budgetary comparison schedule $ (2,924,322) Basis Difference Unrealized Gain on Investment Sales Tax Accrual 45,102 3,696,565 GAAP Basis "Net Change in Fund Balances" GAAP Basis as reported on the Statement of Revenues, Expenditures and Changes in Fund Balance-Non-Major Special Revenue Funds Exhibit C-4 126 $ 817,345 CITY OF MESA, ARIZONA EXHIBIT D-4 NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Actual Amounts Budgetary Basis Final Budget Variance With Final Budget Positive (Negative) LOCAL TRANSPORTATION ASSISTANCE FUND Community Environment: Mass Transit $ Total Community Environment Less: Capital Outlay Expenditures Total Current Expenditures Contingencies 16,158,303 $ 16,117,926 $ 14,753,005 $ 1,364,921 16,158,303 16,117,926 14,753,005 1,364,921 5,900,000 5,900,000 5,080,345 819,655 10,258,303 10,217,926 9,672,660 545,266 - 40,377 - 40,377 Total Local Transportation Assistance Fund Expenditures $ 16,158,303 $ 16,117,926 $ 14,753,005 $ 1,364,921 $ 12,847,000 $ 12,847,000 $ 11,597,703 $ 1,249,297 MESA HOUSING AUTHORITY Community Environment Mesa Housing Authority Total Community Environment 12,847,000 12,847,000 11,597,703 1,249,297 Total Current Expenditures 12,847,000 12,847,000 11,597,703 1,249,297 Total Mesa Housing Authority Fund Expenditures $ 12,847,000 $ 12,847,000 $ 11,597,703 $ 1,249,297 $ 2,058,000 $ 2,058,000 $ 1,771,825 $ 286,175 CEMETERY FUND Community Environment: Cemetery Less: Capital Outlay Expenditures Total Current Expenditures Total Cemetery Fund Expenditures $ 852,390 852,390 681,049 171,341 1,205,610 1,205,610 1,090,776 114,834 2,058,000 127 $ 2,058,000 $ 1,771,825 $ 286,175 CITY OF MESA, ARIZONA EXHIBIT D-4 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget DEVELOPMENT IMPACT FEES FUND General Government: Capital Outlay: General Government Facilities $ Total General Government Public Safety: Debt Service: Law Enforcement Fire Prevention 3,260,681 Actual Amounts Budgetary Basis Final Budget $ 3,430,870 $ Variance With Final Budget Positive (Negative) 3,430,870 $ - 3,260,681 3,430,870 3,430,870 - 217,866 149,737 394,866 265,737 394,866 265,737 - Total Public Safety Cultural-Recreational: Capital Outlay: Library Cultural Facilities Debt Service: Library Parks & Recreation 367,603 660,603 660,603 - - 109 74,884 109 74,884 - 462,000 368,546 809,727 831,546 809,727 831,546 - Total Cultural-Recreational Community Environment: Debt Service: Storm Sewer 830,546 1,716,266 1,716,266 - 117,516 270,516 270,516 - Total Community Environment 117,516 270,516 270,516 - Total Development Impact Fees Fund Expenditures $ 4,576,346 $ 6,078,255 $ 6,078,255 $ - $ 251,292 $ 251,292 $ 162,521 $ 88,771 MESA ARTS CENTER RESTORATION FUND Cultural-Recreational: Cultural Total Cultural-Recreational Less: Capital Outlay Expenditures Total Current Expenditures 251,292 251,292 162,521 88,771 250,000 250,000 162,521 87,479 1,292 1,292 - 1,292 Total Mesa Arts Center Restoration Fund Expenditures $ 251,292 128 $ 251,292 $ 162,521 $ 88,771 CITY OF MESA, ARIZONA EXHIBIT D-4 (Continued) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Actual Amounts Budgetary Basis Final Budget Variance With Final Budget Positive (Negative) ENVIRONMENTAL COMPLIANCE FUND Public Safety: Environmental Management $ Total Environmental Management Less: Capital Outlay Expenditures Total Current Expenditures 6,534,279 $ 9,385,562 $ 9,385,562 $ - 6,534,279 9,385,562 9,385,562 - 323,286 339,109 339,109 - 6,210,993 9,046,453 9,046,453 - Total Environmental Compliance Fund Expenditures $ 6,534,279 $ 9,385,562 $ 9,385,562 $ 446,576 $ 446,576 $ - $ - STREET SALES TAX FUND General Government Financial Services Total General Government $ 446,576 446,576 446,576 - 446,576 39,890,631 39,890,631 29,170,905 10,719,726 Total Community Environment 39,890,631 39,890,631 29,170,905 10,719,726 Less: Capital Outlay Expenditures 12,086,028 12,086,028 8,841,854 3,244,174 - - 4,312,398 (4,312,398) 27,804,603 27,804,603 16,016,653 11,787,950 9,095,000 9,095,000 - 9,095,000 Community Environment: Streets Debt Service Expenditures Total Current Expenditures Contingencies Total Street Sales Tax Fund Expenditures $ 49,432,207 129 $ 49,432,207 $ 29,170,905 $ 20,261,302 CITY OF MESA, ARIZONA EXHIBIT D-4 (Concluded) NON-MAJOR SPECIAL REVENUE FUNDS SCHEDULE OF EXPENDITURES BY PROGRAM - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts - Budgetary Basis Variance With Final Budget Positive (Negative) QUALITY OF LIFE SALES TAX Public Safety: Fire $ Total Public Safety 6,610,658 $ 6,745,733 $ 6,745,733 $ - 6,610,658 6,745,733 6,745,733 - Total Current Expenditures 6,610,658 6,745,733 6,745,733 - Cultural - Recreational: Parks & Recreation Cultural Aquatics Library Museum for Youth 714,800 10,154,697 433,885 813,855 277,839 714,800 10,868,241 433,885 835,309 357,992 22,141 10,868,241 43,873 835,309 357,992 692,659 390,012 - Total Cultural - Recreational 12,395,076 13,210,227 12,127,556 1,082,671 410,433 410,433 238,041 172,392 11,984,643 12,799,794 11,889,515 910,279 Less: Capital Outlay Expenditures Total Current Expenditures Total Quality of Life Expenditures $ 19,005,734 $ 3,707,257 $ 19,955,960 $ 3,877,446 $ 18,873,289 $ 1,082,671 3,430,870 $ 446,576 RECAP General Government $ Public Safety 13,512,540 16,791,898 16,791,898 Cultural-Recreational 13,476,914 15,177,785 14,006,343 1,171,442 Community Environment 71,071,450 71,184,073 57,563,954 13,620,119 9,095,000 9,135,377 - 9,135,377 Contingencies - Total Nonmajor Special Revenue Funds Expenditures $ 110,863,161 130 $ 116,166,579 $ 91,793,065 $ 24,373,514 CITY OF MESA, ARIZONA EXHIBIT D-5 NON-MAJOR DEBT SERVICE FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget GENERAL OBLIGATION BOND REDEMPTION FUND Revenues: Fines and Forfeitures Investment Income $ Actual Amounts Budgetary Basis Final Budget 746,000 - $ 746,000 - $ Variance With Final Budget Positive (Negative) 923,509 590 177,509 590 Total Revenues 746,000 746,000 924,099 178,099 Expenditures: Debt Service: Principal Retirement Interest on Bonds Service Charges 702,522 43,478 - 702,522 354,478 298 702,522 354,478 298 - Total Expenditures 746,000 1,057,298 1,057,298 - Net Change in Fund Balance - Fund Balance - Beginning Fund Balance - Ending (311,298) 382 $ 382 131 382 $ (310,916) $ (133,199) 178,099 134,273 133,891 1,074 $ 311,990 CITY OF MESA, ARIZONA EXHIBIT D-6 NON-MAJOR CAPITAL PROJECT FUNDS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget CAPITAL PROJECTS FUNDS Revenues: Intergovernmental Investment Income Miscellaneous $ Final Budget Actual Variance With Final Budget Positive (Negative) 12,416,000 $ 344,000 12,416,000 $ 344,000 11,239,556 22,488 4,602,458 (1,176,444) 22,488 4,258,458 Total Revenues 12,760,000 12,760,000 15,864,502 3,104,502 Expenditures: Capital Outlay 236,332,091 236,229,158 107,774,064 128,455,094 Total Expenditures 236,332,091 236,229,158 107,774,064 128,455,094 (223,572,091) (223,469,158) (91,909,562) 131,559,596 Other Financing Sources: Face Amount of Bonds Issued Premium on Issuance of Bonds Transfers In 167,671,000 6,003,000 167,671,000 6,003,000 94,590,000 665,438 8,878,000 (73,081,000) 665,438 2,875,000 Net Change in Fund Balances (49,898,091) (49,795,158) 12,223,876 62,019,034 78,243,707 78,243,707 102,863,121 24,619,414 28,345,616 $ 28,448,549 $ 115,086,997 $ 86,638,448 Deficiency of Revenues Under Expenditures Fund Balances-Beginning Fund Balances-Ending $ Budget Basis Actual amounts (budgetary basis) "Net Change in Fund Balances" from the budgetary comparison schedule $ Basis Differences: Increase of Fair Market Value of Investments 12,223,876 16,026 Perspective Differences: Proprietary Capital Project Funds (2,700,518) GAAP Basis Actual amount (GAAP basis) "Net Change in Fund Balance" as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances - Non-major Capital Project Funds Exhibit C-8 132 $ 9,539,384 CITY OF MESA, ARIZONA EXHIBIT D-7 ENTERPRISE FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET AND ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis $ 33,993,000 43,679,000 109,177,000 66,720,000 47,860,000 9,396,000 1,957,000 1,917,000 6,409,000 969,000 $ 33,993,000 43,679,000 109,177,000 66,720,000 47,860,000 9,396,000 1,957,000 1,917,000 6,409,000 969,000 $ 34,893,746 39,687,912 117,467,707 67,247,815 47,808,733 4,901,902 2,220,739 2,277,372 6,175,500 824,556 1,091,665 322,077,000 322,077,000 324,597,647 2,520,647 26,146,000 35,390,000 74,510,000 60,203,000 28,824,000 11,160,000 3,007,000 3,431,000 6,857,000 1,516,000 37,770,000 26,144,173 35,387,032 74,503,150 60,173,477 28,817,835 11,160,000 2,981,107 3,431,000 7,718,964 495,482 1,516,000 36,485,780 24,588,641 30,715,048 66,112,955 58,003,769 28,220,432 3,997,493 2,537,900 2,980,033 7,718,964 495,482 574,008 - 1,555,532 4,671,984 8,390,195 2,169,708 597,403 7,162,507 443,207 450,967 941,992 36,485,780 288,814,000 288,814,000 225,944,725 62,869,275 Income Before Transfers 33,263,000 33,263,000 98,652,922 65,389,922 Other Operating Uses: Transfers Out 83,615,000 83,615,000 83,615,000 - Change in Net Assets (50,352,000) (50,352,000) 15,037,922 65,389,922 Unappropriated Net Assets - Beginning 54,690,890 54,690,890 60,195,266 5,504,376 Increase in Restricted Net Assets (4,338,890) (4,338,890) (1,146,982) 3,191,908 Revenues: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total Revenues Expenses: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Contingencies Total Expenses Unappropriated Net Assets - Ending $ - $ 133 - $ 74,086,206 Variance With Final Budget Positive (Negative) $ $ 900,746 (3,991,088) 8,290,707 527,815 (51,267) (4,494,098) 263,739 360,372 (233,500) 824,556 122,665 74,086,206 CITY OF MESA, ARIZONA EXHIBIT D-8 ENTERPRISE FUND RECONCILIATION OF BUDGET TO GAAP CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Budget Basis Actual Amounts (Budgetary Basis) "Change in Net Assets" from Exhibit D-7 $ Basis Differences: Compensated Absences Post Employment Benefits Capitalized Interest Contractual Commitments Utility Revenue Accrual Change in Fair Market Value of Investments Revenues in Capital Project Funds 15,037,922 (18,994) (12,176,413) 3,132,995 1,134 1,044,870 (4,540) 4,518,556 Perspective Differences: Contributions of Capital Assets 4,449,801 Timing Differences: Water Rights Capital Expenditures Depreciation - Amortization Investment in Joint Ventures Non-Cash Loss on Disposal of Capital Assets Bond Principal and Reserves Amortization of Bond Premiums Deferred Amounts on Refundings 4,799,299 7,288,681 (46,099,910) (12,651,307) (5,340,280) 28,136,245 2,388,108 (2,338,256) GAAP Basis Actual Amount (GAAP Basis) "Change in Net Assets" from Exhibit A-8 $ 134 (7,832,089) CITY OF MESA, ARIZONA EXHIBIT D-9 INTERNAL SERVICE FUNDS SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis Variance With Final Budget Positive (Negative) WAREHOUSE, MAINTENANCE AND SERVICES Revenues: Charges For Services: Materials and Supply Printing and Graphics Fleet Support Services $ 1,180,723 1,364,342 16,369,318 $ 1,180,723 1,364,342 16,369,318 $ 986,991 928,004 17,147,110 $ (193,732) (436,338) 777,792 Total Revenues 18,914,383 18,914,383 19,062,105 147,722 Expenses: Materials and Supply Printing and Graphics Fleet Support Services 1,192,723 1,369,396 16,414,318 1,376,218 1,369,396 16,461,641 1,182,486 931,209 17,239,433 193,732 438,187 (777,792) Total Expenses 18,976,437 19,207,255 19,353,128 (145,873) Loss Before Transfers Transfers In Change in Net Assets (292,872) (291,023) 62,000 62,000 291,100 229,100 77 230,949 (54) Unappropriated Net Assets - Beginning Unappropriated Net Assets - Ending (62,054) (230,872) 83 $ 29 135 83 $ (230,789) 1,849 18 $ 95 (65) $ 230,884 CITY OF MESA, ARIZONA EXHIBIT D-9 (Continued) INTERNAL SERVICE FUNDS SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis Variance With Final Budget Positive (Negative) PROPERTY AND PUBLIC LIABILITY FUND Revenues: Investment Income Contributions Miscellaneous $ 6,000 4,301,000 53,000 $ 6,000 4,301,000 53,000 $ 27,614 4,301,000 - $ 21,614 (53,000) Total Revenues 4,360,000 4,360,000 4,328,614 (31,386) Expenses: Administrative and Other Fees Claims Incurred 2,035,978 2,387,022 2,035,978 2,387,022 1,634,105 2,178,582 401,873 208,440 Total Expenses 4,423,000 4,423,000 3,812,687 610,313 515,927 578,927 Change in Net Assets (63,000) Unappropriated Net Assets - Beginning Unappropriated Net Assets - Ending (63,000) 9,366,098 $ 9,303,098 136 $ 9,366,098 7,990,647 9,303,098 $ 8,506,574 (1,375,451) $ (796,524) CITY OF MESA, ARIZONA EXHIBIT D-9 (Continued) INTERNAL SERVICE FUNDS SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis Variance With Final Budget Positive (Negative) WORKERS' COMPENSATION FUND Revenues: Investment Income Contributions Miscellaneous $ 7,000 2,148,000 134,000 $ 7,000 2,148,000 134,000 $ 16,726 3,308,189 128,796 $ 9,726 1,160,189 (5,204) Total Revenues 2,289,000 2,289,000 3,453,711 1,164,711 Expenses: Administrative and Other Fees Claims Incurred 1,324,821 2,427,179 1,825,506 3,568,076 1,825,506 3,568,076 - Total Expenses 3,752,000 5,393,582 5,393,582 - (1,463,000) (3,104,582) (1,939,871) 7,126,676 7,126,676 6,706,592 4,022,094 $ 4,766,721 Change in Net Assets Unappropriated Net Assets - Beginning Unappropriated Net Assets - Ending $ 5,663,676 137 $ 1,164,711 (420,084) $ 744,627 CITY OF MESA, ARIZONA EXHIBIT D-9 (Continued) INTERNAL SERVICE FUNDS SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Original Budget Actual Amounts Budgetary Basis Final Budget Variance With Final Budget Positive (Negative) EMPLOYEE BENEFITS FUND Revenues: Investment Income Contributions Miscellaneous $ 12,000 65,063,000 586,000 $ 12,000 65,063,000 586,000 $ 97,623 63,767,355 1,750,358 $ 85,623 (1,295,645) 1,164,358 Total Revenues 65,661,000 65,661,000 65,615,336 (45,664) Expenses: Administrative and Other Fees Claims Incurred 5,300,471 60,403,529 5,300,471 60,403,529 5,612,698 46,588,126 (312,227) 13,815,403 Total Expenses 65,704,000 65,704,000 52,200,824 13,503,176 13,414,512 13,457,512 7,702,205 Change in Net Assets Unappropriated Net Assets - Beginning Unappropriated Net Assets - Ending (43,000) (43,000) 17,985,434 17,985,434 25,687,639 $ 17,942,434 $ 17,942,434 $ 39,102,151 138 $ 21,159,717 CITY OF MESA, ARIZONA EXHIBIT D-9 (Concluded) INTERNAL SERVICE FUNDS SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL (BUDGET BASIS) FOR THE FISCAL YEAR JUNE 30, 2012 Original Budget Final Budget Actual Amounts Budgetary Basis Variance With Final Budget Positive (Negative) $ 18,914,383 25,000 71,512,000 773,000 $ 18,914,383 25,000 71,512,000 773,000 $ 19,062,105 141,963 71,376,544 1,879,154 Total Revenues 91,224,383 91,224,383 92,459,766 1,235,383 Expenses: Materials and Supply Printing and Graphics Fleet Support Administrative and Other Fees Claims Incurred 1,192,723 1,369,396 16,414,318 8,661,270 65,217,730 1,376,218 1,369,396 16,461,641 9,161,955 66,358,627 1,182,486 931,209 17,239,433 9,072,309 52,334,784 193,732 438,187 (777,792) 89,646 14,023,843 Total Expenses 92,855,437 94,727,837 80,760,221 13,967,616 Income (Loss) Before Transfers (1,631,054) (3,503,454) 11,699,545 15,202,999 291,100 229,100 RECAP Revenues: Charges for Services Investment Income Contributions Miscellaneous Transfers In 62,000 62,000 $ 147,722 116,963 (135,456) 1,106,154 Change in Net Assets (1,569,054) (3,441,454) 11,990,645 15,432,099 Unappropriated Net Assets - Beginning 34,478,291 34,478,291 40,384,896 5,906,605 $ 32,909,237 $ 31,036,837 $ 52,375,541 Unappropriated Net Assets - Ending 139 $ 21,338,704 CITY OF MESA, ARIZONA EXHIBIT D-10 INTERNAL SERVICE FUND RECONCILIATION OF BUDGET TO GAAP CHANGES IN NET ASSETS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Budget Basis Actual Amounts (Budgetary Basis) "Change in Net Assets" from Exhibit D-8 $ Basis Differences: Compensated Absences OPEB Proprietary Funds Increase of Fair Market Value of Investments 11,990,645 (1,916) (1,228,587) 95,053 Perspective Differences: Contributions of Capital Assets (1,581) Timing Differences: Capital Expenditures Non-Cash Loss on Disposal of Capital assests Depreciation - Amortization Inventory Increase Increase in Contingent Liabilities 97,030 (36,970) (340,110) 193,993 (7,910,572) GAAP Basis Actual Amount (GAAP Basis) "Change in Net Assets" from Exhibit A-8 $ 140 2,856,985 Statistical Section Vice Mayor Scott Somers District 6 STATISTICAL SECTION This part of the City of Mesa’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. 141 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 153 Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current level of outstanding debt and the City’s ability to issue additional debt in the future. 156 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. 164 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 166 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. CITY OF MESA, ARIZONA TABLE I NET ASSETS BY COMPONENTS LAST TEN FISCAL YEARS (accrual basis of accounting) GOVERNMENTAL ACTIVITIES Invested in Capital Assets, Net of Related Debt 2002-03 $ 692,576,782 $ 2003-04 781,518,870 $ 2004-05 769,923,509 $ 2005-06 765,874,830 Restricted 85,299,383 61,749,912 68,486,614 84,386,395 Unrestricted 53,068,738 43,964,946 62,539,346 85,734,791 Total Governmental Activities Net Assets $ 830,944,903 $ 887,233,728 $ 900,949,469 $ 935,996,016 $ 477,877,715 $ 451,550,515 $ 424,820,602 $ 390,100,160 BUSINESS-TYPE ACTIVITIES Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Business-type Activities $ 44,402,649 62,692,972 101,565,804 89,383,126 182,390,271 218,266,775 219,103,522 268,388,224 704,670,635 $ 732,510,262 $ 745,489,928 $ 747,871,510 PRIMARY GOVERNMENT Invested in Capital Assets, Net of Related Debt $ 1,170,454,497 $ 1,233,069,385 $ 1,194,744,111 $ 1,155,974,990 Restricted 129,702,032 124,442,884 170,052,418 173,769,521 Unrestricted 235,459,009 262,231,721 281,642,868 354,123,015 Total Primary Government $ 1,535,615,538 $ 1,619,743,990 $ 1,646,439,397 $ 1,683,867,526 141 TABLE I (Continued) 2006-07 $ 791,591,633 $ 2007-08 794,720,403 $ 2008-09 791,523,460 $ 2009-10 844,777,095 $ 2010-11 872,302,182 $ 2011-12 913,701,563 95,107,036 86,252,122 92,532,141 86,954,514 39,295,786 41,257,218 128,548,213 125,128,033 91,363,394 3,651,537 (6,375,735) (96,985,751) $ 1,015,246,882 $ 1,006,100,558 $ 975,418,995 $ 935,383,146 $ 905,222,233 $ 857,973,030 $ 413,943,796 $ 434,813,786 $ 430,435,538 $ 412,016,435 366,497,841 $ 410,073,719 $ 96,756,386 94,133,333 82,697,422 47,011,208 55,873,506 69,738,803 308,374,940 308,215,959 278,891,568 271,705,523 258,130,789 254,188,941 771,629,167 $ 812,423,011 $ 775,532,786 $ 753,530,517 $ 744,439,833 $ 735,944,179 $ 1,158,089,474 $ 1,204,794,122 $ 1,205,467,256 $ 1,279,590,881 $ 1,302,737,720 $ 1,325,717,998 $ 191,863,422 180,385,455 175,229,563 133,965,722 95,169,292 110,996,021 436,923,153 433,343,992 370,254,962 275,357,060 251,755,054 157,203,190 1,688,913,663 $ 1,649,662,066 $ $ 1,786,876,049 $ 1,818,523,569 $ 1,750,951,781 $ 142 1,593,917,209 CITY OF MESA, ARIZONA TABLE II CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (accrual basis of accounting) EXPENSES 2002-03 2003-04 2004-05 2005-06 GOVERNMENTAL ACTIVITIES: General Government $ Public Safety 48,918,830 $ 44,012,723 $ 48,722,316 $ 44,568,148 169,665,871 181,856,295 204,366,091 212,010,952 Cultural-Recreational 52,778,367 53,201,350 62,870,201 65,389,229 Community Environment 55,886,591 72,984,342 86,363,321 97,613,466 Interest in Long-term Debt 13,891,122 14,490,474 15,503,667 16,061,123 341,140,781 366,545,184 417,825,596 435,642,918 Electric 21,809,560 24,390,551 27,118,590 26,817,051 Gas 22,433,015 25,990,497 33,829,631 38,743,370 Water 46,247,340 49,542,568 54,247,920 54,110,525 Wastewater 36,177,157 39,673,430 47,799,248 67,180,688 Solid Waste Total Governmental Activities Expenses BUSINESS-TYPE ACTIVITIES: 21,737,238 21,826,949 23,863,908 25,070,150 Airport 1,940,735 2,087,395 2,119,795 4,194,272 Golf Course 2,296,550 2,781,273 2,966,147 2,524,364 Convention Center 3,013,443 4,224,151 4,260,510 4,822,347 Hohokam Stadium/Fitch Complex - - - - Cubs Stadium - - - - District Cooling - - - 67,274 155,655,038 170,516,814 196,205,749 223,530,041 Total Business-type Activities Expenses Total Primary Government Expenses $ 496,795,819 $ 143 537,061,998 $ 614,031,345 $ 659,172,959 TABLE II (Continued) 2006-07 $ $ 2007-08 48,200,767 $ 2008-09 63,633,405 $ 2009-10 54,225,566 $ 2010-11 54,862,584 $ 59,551,669 2011-12 $ 57,472,328 232,099,968 292,395,865 290,927,716 288,928,693 273,320,156 287,918,202 64,591,583 72,999,346 67,039,000 54,010,115 54,549,751 57,170,754 91,664,096 99,414,870 121,735,796 104,096,133 106,434,114 97,592,690 18,037,348 19,082,936 18,658,530 20,013,068 21,078,138 21,631,042 454,593,762 547,526,422 552,586,608 521,910,593 514,933,828 521,785,016 26,280,947 31,612,431 27,633,642 27,106,177 26,816,560 29,751,312 37,825,634 43,246,724 35,991,817 35,466,448 36,020,012 34,275,119 59,964,524 59,224,757 68,955,827 80,915,190 82,377,888 74,161,665 60,603,399 61,293,453 80,349,057 70,227,712 63,613,492 68,540,140 27,891,495 32,877,483 31,953,188 31,503,513 31,462,070 32,485,233 2,720,953 3,316,536 3,703,129 3,943,651 3,971,648 3,737,409 2,601,521 3,011,883 3,082,522 2,714,896 2,679,327 2,588,958 5,666,507 5,447,050 4,558,208 4,158,023 3,849,444 3,486,069 - - - 7,407,501 8,323,724 8,525,374 - - - - 14,990 53,747 1,090,931 768,873 975,687 1,000,347 964,585 973,595 224,645,911 240,799,190 257,203,077 264,443,458 260,093,740 258,578,621 679,239,673 $ 788,325,612 $ 809,789,685 $ 144 786,354,051 $ 775,027,568 $ 780,363,637 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (accrual basis of accounting) PROGRAM REVENUES 2002-03 2003-04 2004-05 2005-06 15,436,013 $ GOVERNMENTAL ACTIVITIES: Charges for services: Licenses and Permits 19,819,170 $ 18,817,521 $ 23,145,062 Charges for Services $ 9,639,690 11,152,669 13,047,596 17,649,718 Fines and Forfeitures 8,421,178 8,536,253 9,247,469 9,049,107 52,970 116,882 282,129 Other activities (113,419) Operating Grants and Contributions 53,256,253 60,346,450 60,813,367 68,784,384 Capital Grants and Contributions 25,473,077 48,400,338 25,513,149 16,777,436 112,112,792 148,307,850 127,555,984 135,687,836 Electric 27,839,896 33,694,077 30,983,581 36,112,821 Gas 25,113,857 29,941,402 35,131,012 44,088,814 Water 74,769,709 80,036,607 79,724,508 88,497,653 Wastewater 41,656,214 43,643,144 46,024,679 49,618,163 Solid Waste Total Governmental Activities Program Revenues BUSINESS-TYPE ACTIVITIES: Charges for services: 31,833,958 34,460,114 36,638,993 38,898,904 Airport 1,845,693 1,873,185 1,941,001 2,086,753 Golf Course 2,325,121 2,298,163 2,327,788 2,522,464 Convention Center 1,422,276 2,686,799 2,570,569 3,727,573 Hohokam Stadium/Fitch Complex - - - - Cubs Stadium - - - - District Cooling - - - 54,678 320,639 248,295 275,024 141,207 94,629,677 35,374,484 15,585,679 27,692,246 301,757,040 264,256,270 251,202,834 293,441,276 413,869,832 $ 412,564,120 $ 378,758,818 $ 429,129,112 $ (229,027,989) $ (218,237,334) $ (290,269,612) $ (299,955,082) 54,997,085 69,911,235 (235,272,527) $ (230,043,847) Operating Grants and Contributions Capital Grants and Contributions Total Business-type Activities Program Revenues Total Primary Government Program Revenues $ NET (EXPENSE)/REVENUE Governmental Activities Business-type Activities Total Primary Government Net Expense 146,102,002 $ 93,739,456 (82,925,987) $ (124,497,878) $ 145 TABLE II (Continued) $ $ 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 20,127,674 $ 23,342,116 $ 13,426,408 $ 11,823,758 $ 12,577,426 $ 13,358,859 22,039,055 23,702,601 24,739,517 20,419,291 20,303,514 25,779,212 10,276,600 10,761,086 10,215,428 10,134,507 11,820,028 11,294,065 433,359 323,970 78,021 8,709 8,490 18,237 74,498,258 63,787,258 63,054,542 72,811,744 65,283,992 60,354,574 44,858,222 21,916,433 35,436,059 30,343,087 31,461,449 23,502,772 172,233,168 143,833,464 146,949,975 145,541,096 141,454,899 134,307,719 34,518,898 34,148,281 35,312,658 33,078,601 33,138,456 34,624,920 45,250,476 46,539,692 41,707,578 38,923,919 41,369,805 39,139,278 92,007,207 97,558,682 95,994,839 98,806,049 102,215,430 113,417,881 55,398,349 53,950,994 54,719,926 57,698,904 59,659,464 64,543,503 42,894,663 46,167,910 46,762,035 46,685,307 47,537,833 47,630,828 2,953,825 3,192,347 2,958,955 3,124,886 3,317,542 3,270,632 2,456,596 2,448,313 2,309,899 2,265,452 2,250,256 2,168,575 4,745,578 3,658,449 2,686,663 1,970,891 2,825,693 2,122,304 - - - 5,836,650 6,161,320 6,073,590 - - - - 51,614 824,556 192,972 229,168 834,376 983,592 945,434 1,091,665 146,614 10,545 100,797 210,074 25,463 2,125,501 20,724,241 80,569,929 31,222,401 17,782,326 10,773,988 15,814,280 301,289,419 368,474,310 314,610,127 307,366,651 310,272,298 332,847,513 473,522,587 512,307,774 461,560,102 452,907,747 451,727,197 467,155,232 (282,360,594) $ 76,643,508 $ (205,717,086) $ (403,692,958) $ 127,675,120 (276,017,838) $ (405,636,633) $ (376,369,497) $ (373,478,929) $ (387,477,297) 57,407,050 42,923,193 50,178,558 74,268,892 (348,229,583) $ (333,446,304) $ (323,300,371) $ (313,208,405) 146 CITY OF MESA, ARIZONA TABLE II (Concluded) CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (accrual basis of accounting) GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS 2002-03 2003-04 2004-05 2005-06 GOVERNMENTAL ACTIVITIES: Sales Taxes $ 98,434,394 $ Property Taxes Occupancy Taxes Unrestricted State Shared Revenues 105,096,378 $ 112,528,968 $ 128,372,155 - - - - 1,224,044 1,320,706 1,856,955 2,189,830 89,146,593 85,469,452 90,867,567 103,848,818 Contributions Not Restricted to Specific Programs 5,363,401 8,202,920 10,725,969 12,205,647 Unrestricted Investment Income 2,499,434 1,202,348 1,905,411 5,430,860 - - - Loss on Investment in Local Government Investment Pool (4,442,638) Miscellaneous Transfers Total Governmental Activities 7,109,157 5,461,757 9,740,646 10,052,208 59,719,000 67,772,618 76,359,837 72,902,111 259,053,385 274,526,179 303,985,353 335,001,629 1,230,644 947,498 1,579,215 4,818,652 BUSINESS-TYPE ACTIVITIES: Unrestricted Investment Income Loss on Investment in Local Government Investment Pool (1,733,725) Miscellaneous 800,247 Special Item - Gain on Sale of Land - Transfers - - 84,910 553,806 - 32,678,293 - (59,719,000) (67,772,618) (76,359,837) (72,902,111) (59,421,834) (65,899,829) (42,017,419) (67,529,653) $ 199,631,551 $ 208,626,350 $ 261,967,934 $ 267,471,976 $ 30,025,396 $ 56,288,845 $ 13,715,741 $ 35,046,547 86,680,168 27,839,627 12,979,666 84,128,472 $ 26,695,407 $ Total Business-type Activities Total Primary Government 925,291 Change in Net Assets Governmental Activities Business-type Activities Total Primary Government $ 116,705,564 $ 147 2,381,582 37,428,129 TABLE II (Concluded) 2006-07 $ 2007-08 155,817,051 $ 2008-09 147,762,866 $ 2009-10 126,519,701 $ 2010-11 121,556,751 $ 2011-12 121,046,053 $ 126,644,151 - - - 14,318,257 14,243,721 14,234,285 2,389,528 2,394,765 1,807,601 1,580,533 2,148,216 2,018,764 113,048,782 122,560,731 117,542,894 104,580,393 92,612,858 86,103,399 14,037,707 14,745,722 14,740,889 14,757,171 15,610,470 17,170,502 7,824,612 6,282,425 1,895,561 260,939 617,419 1,502,659 - - - - - - 7,053,840 6,678,633 15,849,424 13,846,390 7,060,132 8,939,334 61,439,940 94,121,492 96,599,000 65,433,214 83,334,303 83,615,000 361,611,460 394,546,634 374,955,070 336,333,648 336,673,172 340,228,094 8,125,127 6,546,254 1,894,369 507,752 839,348 850,454 - - - - - - 428,962 693,962 407,356 - - - - - - - - - (61,439,940) (94,121,492) (96,599,000) (65,433,214) (83,334,303) (83,615,000) (52,885,851) (86,881,276) (94,297,275) (64,925,462) (82,494,955) (82,764,546) $ 308,725,609 $ 307,665,358 $ 280,657,795 $ 271,408,186 $ 254,178,217 $ 257,463,548 $ 79,250,866 $ (9,146,324) $ (30,681,563) $ (40,035,849) $ (36,805,757) $ (47,249,203) 23,757,657 40,793,844 (36,890,225) (22,002,269) (32,316,397) 31,647,520 $ (67,571,788) $ (62,038,118) $ (69,122,154) $ $ 103,008,523 $ 148 (8,495,654) (55,744,857) CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) 2002-03 2003-04 2004-05 2005-06 GENERAL FUND Reserved (1)(2) $ Unreserved 53,697,322 $ 11,253,612 30,195,115 $ 25,844,445 37,871,632 $ 19,310,081 61,257,305 27,993,782 Nonspendable - - - - Restricted - - - - Committed - - - - Unassigned - - - - Total General Fund $ 64,950,934 $ 56,039,560 $ 57,181,713 $ 89,251,087 $ 14,555,545 $ 8,542,839 $ 10,335,341 $ 8,391,978 ALL OTHER GOVERNMENTAL FUNDS Reserved Unreserved, Reported in: Special Revenue Funds Capital Project Funds 9,211,016 20,215,242 23,498,926 21,745,990 23,676,985 13,773,686 15,681,069 18,611,420 Nonspendable - - - - Restricted (3)(4) - - - - Committed - - - - Unassigned - - - - Total All Other Governmental Funds $ 47,443,546 $ 42,531,767 $ 49,515,336 $ 48,749,388 (1) During fiscal Year 1998-99, a voter-approved 1/2 percent increase to sales tax was enacted. This additional tax is restricted to fund improvements to quality of life projects and is reported as reserved fund balance in the General Fund. (2) During FY 2006-07, a quarter percent portion of the sales tax increase described in (1) above to fund capital improvements to quality of life projects expired and was not renewed. Also during FY 2006-07, a voter-approved 1/2 percent increase to sales tax was enacted. This additional tax is restricted to fund street improvements and is reported as restricted fund balance in the General Fund. (3) Effective with fiscal year 2010-11 the fund balance related to the sales tax for street improvements was moved to the Special Revenue funds. (4) Effective with fiscal year 2011-12 the fund balance related to the sales tax for Quality of Life projects was moved to the Special Revenue funds. 149 TABLE III (Continued) 2006-07 $ 2007-08 77,177,037 $ 57,029,523 2008-09 84,886,350 $ 50,283,211 2009-10 51,862,378 $ 74,711,328 2010-11 40,748,236 $ 92,186,747 2011-12 - $ - - - - - - 404,506 753,701 - - - - 1,991,911 2,011,527 - - - - 4,897,687 4,992,039 - - - - 93,874,956 78,034,860 $ 134,206,560 $ 135,169,561 $ 126,573,706 $ 132,934,983 $ 101,169,060 $ 85,792,127 $ 5,885,100 $ 8,643,272 $ 17,012,682 $ 53,674,468 $ - $ - $ 24,627,227 24,921,672 24,815,604 31,870,664 17,567,790 11,142,826 28,442,378 15,724,086 - - - - - - - - 2,905,610 83,502 - - - - 112,537,801 211,279,003 - - - - 19,165,631 16,360,478 - - - - - 48,080,117 $ 44,707,770 $ 70,270,664 $ 150 101,269,218 $ 134,609,042 (937) $ 227,722,046 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) 2002-03 REVENUES Sales Taxes (1) Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Loss on Investment in Local Government Investment Pool Miscellaneous 98,434,394 1,227,044 67,313 15,436,013 157,187,256 9,639,690 8,421,178 1,999,483 2003-04 $ 105,096,378 1,320,706 57,567 19,819,170 149,036,481 11,152,669 8,536,253 885,188 $ 112,258,968 1,856,955 4,770 18,817,521 153,369,074 13,047,596 9,247,469 1,353,224 2005-06 $ 128,372,155 2,189,830 4,770 23,145,062 178,553,235 17,649,718 9,049,107 4,376,010 5,268,925 9,562,131 9,632,863 295,027,870 301,173,337 319,517,708 372,972,750 35,314,279 160,151,434 46,940,164 48,643,271 36,328,122 166,576,022 47,366,458 51,520,603 38,364,301 182,224,448 54,761,753 56,953,311 36,730,857 190,761,508 56,187,938 60,079,827 20,548,390 13,551,752 74,345 106,255,818 7,145,591 14,081,131 62,131 81,823,895 7,692,222 15,369,204 61,994 62,392,135 8,857,085 16,181,484 234,487 55,510 79,316,975 431,479,453 404,903,953 417,819,368 448,405,671 (136,451,583) (103,730,616) (98,301,660) (75,432,921) 100,545,246 (40,765,246) 49,370,000 145,133 - 98,213,698 (27,993,698) 9,585,000 - 104,642,640 (28,065,640) 21,930,000 640,258 - 106,253,593 (32,339,810) 26,410,000 2,003,565 - 4,899,000 84,292,722 (84,875,410) 9,322,015 139,441,539 (138,661,071) 6,746,097 26,420,341 (26,156,314) 6,401,832 25,482,000 (27,474,833) Total Other Financing Sources (Uses) 113,611,445 89,907,483 106,157,382 106,736,347 Net Change in Fund Balances (22,840,138) $ Total Revenues EXPENDITURES General Government Public Safety Cultural-Recreational Community Environment Debt Service Principal Interest Issuance Cost on Refunding Bonds Service Charges Cost of Issuance Capital Outlay Total Expenditures Excess of Revenues Under Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Face Amount of Notes Issued Premium on Issuance of Bonds Premium on Issuance of Notes Proceeds from Obligations of Capital Leases Proceeds From Refunding Issue Payment to Refunded Bond Escrow Agent Debt Service as a percentage of Noncapital Expenditures (3,588,706) 6,204,205 2004-05 (13,823,133) $ 10.51% 6.59% 7,855,722 6.51% $ 31,303,426 6.86% (1) During fiscal year 1998-99, a voter approved one-half percent increase to sales tax was enacted. (2) During fiscal year 2006-07, a voter approved one-half percent increase to sales tax was enacted. In addition, a quarter percent portion of the sales tax described in (1) above expired and was not renewed by the voters. 151 TABLE IV (Continued) 2006-07 $ $ 155,817,051 2,389,528 416,906 20,127,674 190,825,624 22,039,055 10,276,600 6,463,111 2007-08 $ 147,762,866 2,394,765 1,218,100 23,342,116 193,585,472 23,702,601 10,761,086 5,177,695 2008-09 $ 2009-10 126,519,701 1,807,601 806,151 13,426,408 191,084,600 24,343,284 10,215,428 2,017,949 $ 2010-11 121,556,751 13,885,749 1,580,533 922,651 11,823,758 190,731,282 20,419,291 10,134,507 190,716 $ 2011-12 121,046,053 14,273,796 2,148,216 1,069,363 12,577,426 174,781,231 20,303,514 11,820,028 586,799 $ 126,644,151 14,322,925 2,018,764 995,897 13,358,859 168,433,432 25,779,212 11,294,065 1,283,881 6,365,625 6,421,576 14,754,573 13,675,435 7,416,679 7,572,501 414,721,174 414,366,277 384,975,695 384,920,673 366,023,105 371,703,687 40,661,807 210,541,969 54,711,334 65,314,260 48,111,893 233,506,939 57,765,169 66,615,531 36,506,727 230,863,556 53,171,005 72,646,647 40,112,552 216,025,864 40,150,034 72,081,273 38,843,180 215,165,541 42,191,344 68,462,936 41,083,321 226,428,861 43,903,634 64,403,759 8,357,577 18,150,710 56,768 77,474,595 25,870,624 19,229,682 58,196 77,308,807 36,905,901 18,845,224 27,738 77,899,367 34,845,924 21,185,810 9,397 538,824 82,530,441 31,689,926 21,211,173 9,546 29,100 60,172,590 25,513,155 22,643,300 7,864 869,882 66,950,632 475,269,020 528,466,841 526,866,165 507,480,119 477,775,336 491,804,408 (60,547,846) (114,100,564) (141,890,470) (122,559,446) (111,752,231) (120,100,721) 99,900,805 (33,233,233) 30,681,840 573,254 - 147,477,785 (53,960,459) 15,450,000 195,209 - 155,696,867 (59,105,867) 61,830,000 436,509 - 149,437,331 (66,653,904) 30,865,000 45,000,000 401,850 869,000 128,064,505 (44,418,305) 29,320,000 359,932 - 121,459,483 (38,135,583) 27,290,000 77,835,000 8,027,060 8,250,081 6,911,382 - 2,528,683 - - - - 104,834,048 111,691,218 158,857,509 159,919,277 113,326,132 44,286,202 6.68% $ (2,409,346) 10.01% $ 16,967,039 $ 37,359,831 12.42% 13.19% 152 $ 1,573,901 12.67% 67,238,160 (74,127,409) 197,836,792 $ 77,736,071 11.34% CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS 2002-03 Utilities $ 5,912,385 2003-04 $ 6,762,032 2004-05 $ 6,692,042 2005-06 $ 7,539,420 Communications 3,574,953 3,164,951 3,241,465 2,839,438 Publishing 1,530,906 1,470,008 1,564,309 1,792,345 384,241 378,322 367,306 453,958 Contracting 11,333,545 12,454,780 12,073,940 14,580,722 Retail Sales 54,110,533 58,588,455 64,266,464 74,420,542 7,176,167 7,749,295 8,483,650 9,417,798 Printing & Advertising Restaurants & Bars Amusements Rentals 974,633 1,029,101 1,071,285 1,210,343 13,323,813 13,399,200 14,380,416 15,786,032 113,218 100,234 118,091 331,557 Miscellaneous Total $ 98,434,394 City Direct Tax Rate 1.50% $ 105,096,378 1.50% $ 112,258,968 1.50% $ 128,372,155 1.50% Note: Amounts shown include penalties and interest. Occupancy tax not included. (1) Beginning in August 1998, the City enacted a voter-approved 1/2 percent increase in sales tax to fund quality of life projects. (2) Beginning in fiscal year 2001, the City enacted a voter-approved initiative that eliminated sales tax on food items. (3) During FY 2006-07, a quarter percent portion of the sales tax increase described in (1) above to fund capital improvements to quality of life projects expired and was not renewed. Also during FY 2006-07, a voter-approved 1/2 percent increase to sales tax was enacted and is restricted to fund street improvements. Source: City of Mesa Tax & Licensing Division 153 TABLE V (Continued) 2006-07 (3) $ $ 9,116,291 2007-08 $ 9,667,778 2008-09 $ 9,654,488 2009-10 $ 9,756,726 2010-11 $ 11,103,931 2011-12 $ 11,877,683 3,939,497 4,312,054 3,748,960 3,808,798 4,455,855 4,482,950 1,963,330 1,922,909 1,402,465 1,102,145 999,010 934,312 477,939 374,839 280,350 175,207 342,381 336,188 21,424,371 19,300,601 15,263,241 10,913,417 8,387,647 9,961,599 85,014,600 77,307,911 63,230,186 63,468,754 60,265,881 62,190,619 11,725,779 12,038,983 10,956,021 10,948,158 11,164,824 11,863,562 1,456,808 1,348,973 1,362,931 1,176,440 1,433,369 1,433,595 20,533,854 21,369,386 20,514,008 20,122,775 22,218,976 22,968,362 164,582 119,432 107,051 84,330 674,180 595,281 155,817,051 1.75% $ 147,762,866 1.75% $ 126,519,701 1.75% $ 121,556,751 1.75% 154 $ 121,046,053 1.75% $ 126,644,151 1.75% CITY OF MESA, ARIZONA TABLE VI DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS City Direct Rate 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 1.50 1.50 1.50 1.50 1.75 1.75 1.75 1.75 1.75 1.75 Maricopa County % 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 State of Arizona % 5.60 5.60 5.60 5.60 5.60 5.60 5.60 6.60 6.60 6.60 % * Source: City of Mesa Tax & Licensing Division *Note: The State of Arizona increased its tax to 6.60% effective 6/1/10 for a 3 year period 155 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities General Obligation Bonds Year 2003 $ 187,839,000 $ Municipal Development Corporation Bonds Highway User Revenue Bonds 10,970,000 $ Special Assessment Bonds 101,190,000 $ 133,000 $ Capital Leases Notes Payable 21,665,644 $ - 2004 187,644,270 9,970,000 110,770,000 48,000 25,193,586 - 2005 198,769,540 9,970,000 120,410,000 36,000 24,968,195 - 2006 207,859,834 9,970,000 131,950,000 5,049,000 23,273,476 - 2007 223,115,128 9,970,000 142,460,000 8,797,840 22,988,632 - 2008 221,625,447 9,970,000 142,290,000 8,046,000 17,502,575 - 2009 267,062,537 - 140,265,000 7,294,000 9,729,851 - 2010 273,869,349 - 134,545,000 6,550,000 5,406,120 45,000,000 2011 281,513,949 - 128,515,000 5,806,000 2,165,596 45,000,000 2012 288,668,840 - 121,395,000 5,062,000 821,550 122,835,000 (1) Information on personal income and population is presented on Table XII. 156 TABLE VII (Continued) Business-type Activities Utility System Revenue Bonds $ 397,315,000 General Obligation Bonds $ 13,706,000 $ Municipal Development Corporation Bonds Notes Payable Capital Leases Total Primary Government Percentage of Personal Income (1) Per Capita (1) 19,800,000 $ 1,218,660 $ 10,092,842 $ 763,930,146 8.08 % 458,525,000 3,290,730 16,900,000 1,074,110 23,473,486 836,889,182 8.57 1,879 549,415,000 3,290,460 13,500,000 921,377 21,641,099 942,921,671 9.24 2,090 655,085,000 3,290,166 9,600,000 759,993 4,301,174 1,051,138,643 9.97 2,309 723,185,000 3,289,872 5,100,000 589,462 2,869,497 1,142,365,431 10.54 2,483 767,445,000 3,289,553 - 431,565 1,541,281 1,172,141,421 10.68 2,529 817,530,000 2,957,463 - 333,189 158,413 1,245,330,453 11.03 2,677 857,435,000 2,690,651 - 2,963,780 - 1,328,459,900 11.49 2,843 898,800,000 2,221,051 - 2,731,125 - 1,366,752,721 13.06 3,101 952,500,000 1,601,160 - 2,492,975 - 1,495,376,525 14.10 3,390 157 $ 1,758 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS General Bonded Debt Outstanding Secondary Assessed Value (1) Year 2003 2,272,244,234 $ 201,545,000 2004 2,463,878,234 190,935,000 2005 2,648,163,284 202,060,000 2006 2,921,998,915 2007 2008 Less: Amounts Available in Debt Service Fund $ Total - 8.87 % - 190,935,000 7.75 428.73 - 202,060,000 7.63 447.81 211,150,000 - 211,150,000 7.23 463.91 3,083,070,290 226,405,000 - 226,405,000 7.34 492.02 4,114,527,313 224,915,000 - 224,915,000 5.47 485.36 2009 4,793,081,793 259,895,000 - 259,895,000 5.42 558.59 2010 4,749,616,941 276,560,000 382 276,559,618 5.82 591.75 2011 4,094,036,999 283,735,000 134,273 283,600,727 6.93 643.56 2012 3,164,277,311 290,270,000 1,074 290,268,926 9.17 657.97 (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 158 $ Per Capita (2) 201,545,000 Source: $ General Obligation Bonds Percentage Of Secondary Assessed Value $ 463.76 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2012 Proportion Applicable Debt Governmental Unit Outstanding (2) to the City of Mesa Percent (2) Amount Debt repaid with property taxes Maricopa County Community College District $ 671,250,000 8.16 % $ 54,774,000 Mesa Unified School District No. 4 244,095,000 86.01 209,946,110 Gilbert Unified School District No. 41 170,450,000 25.28 43,089,760 Queen Creek Unified School District No. 95 44,275,000 27.50 12,175,625 Higley Unified School District No. 60 64,905,000 1.52 986,556 Tempe Union High School District No. 213 Tempe Elementary School District No. 3 62,560,000 0.23 143,888 129,200,000 0.53 684,760 197,835,000 8.16 16,143,336 Other Debt: Maricopa County Subtotal, overlapping debt 337,944,035 City direct debt (3) 553,905,395 Total Direct and Overlapping Debt $ 891,849,430 (1) Does not include Salt River Project Agricultural Improvement and Power District debt, which is considered self-supporting from earnings of the district or special assessment debt of the City of Mesa, which is considered a junior lien. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Mesa. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. Proportion applicable to the City is computed on the ratio of secondary assessed valuation as calculated for fiscal year 2011/12 for the overlapping jurisdiction to the amount of such valuation which lies within the City. Source: (2) Wedbush Securities (3) Includes: General Obligation Bonds, Highway User Revenue Bonds, Special Assesment Bonds, Deferred Amts on refundings, Capital Leases, Highway Project Advancement Notes, and Unamortized Bond Premiums 159 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2002-03 6% Limitation Legal Debt Limitation Equal to 6% of Assessed Valuation $ Total Net Debt Applicable to 6% Limit Margin Available for Future General Obligation Bond Issues for 6% Bonds $ $ $ 454,448,977 $ 355,813,977 $ 389,238,670 $ 45,117,694 492,775,647 $ 404,555,647 $ 449,673,341 $ 48,804,797 $ 529,632,657 $ 437,657,657 $ 486,462,454 $ 488,649,783 16.38% $ (1) Under Arizona law, cities can issue General Obligation Bonds for all purposes other than those listed in Note 2 below, up to an amount not exceeding 6 percent of assessed secondary valuation. (2) Under Arizona law, cities can issue General Obligation Bonds for purposes of water, wastewater, artificial light, open space preserves, parks playgrounds and recreational facilities up to an amount not exceeding 20 percent of assessed secondary valuation. 160 584,399,783 95,750,000 17.37% $ 59,919,935 65.82% 91,975,000 $ 175,319,935 115,400,000 69.28% 17.90% $ 158,889,797 2005-06 110,085,000 88,220,000 21.70% $ 147,832,694 69.48% 98,635,000 Total Net Debt Applicable to the 20% Limit as a Percentage of the 20% Legal Debt Limitation Total Margin Available 33,424,693 2004-05 102,715,000 75.48% Total Net Debt Applicable to 20% Limit Margin Available for Future General Obligation Bond Issues for 20% Bonds $ 102,910,000 Total Net Debt Applicable to the 6% Limit as a Percentage of the 6% Legal Debt Limitation 20% Limitation Legal Debt Limitation Equal to 20% of Assessed Valuation 136,334,693 2003-04 548,569,718 TABLE X (Continued) Legal Debt Margin Calculation for Fiscal Year 2011-12 $ 3,164,277,311 Secondary Assessed Value 6% Bonds (1) $ Legal Debt Limitation Debt Applicable to Limit: General Obligation Bonds Less: Cash With Fiscal Agents Total Net Debt Applicable to Limit Margin Available for Future General Obligation Bond Issues $ 189,856,639 $ 184,984,217 2007-08 $ 22,453,366 $ 162,530,851 616,614,058 $ 412,662,424 $ 575,193,275 $ 822,905,463 $ 615,678,079 $ 844,862,103 274,015,586 284,977,016 958,616,359 $ 712,290,681 $ 278,912,694 986,306,267 $ 2.13% $ 305,699,483 (16,799,521) 1,370,038 288,899,962 188,486,601 949,923,388 $ $ 679,427,710 $ 28.48% $ 958,340,404 161 343,955,500 $ 532,442,102 2011-12 245,642,220 189,856,639 5,325,517 1,370,038 240,316,703 188,486,601 0.72% 818,807,400 632,855,462 278,409,483 288,899,962 540,397,917 343,955,500 34.00% $ $ 2010-11 2.17% 270,495,678 25.70% $ $ 6,064,322 246,325,678 25.18% $ $ 4.72% 207,227,384 33.08% $ 229,184,023 287,584,908 2009-10 13,569,322 7.16% 203,951,634 $ $ 17,687,616 12.14% $ 246,871,639 2008-09 632,855,462 5,325,517 (3,955,479) Total Margin Available 2006-07 20% Bonds (2) $ 780,714,621 45.65% 532,442,102 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Utility System Revenue Bonds Operating Revenues (1) 2002-03 $ 201,213,634 Net Revenue Available for Debt Service Operating Expenses $ 124,831,571 $ 76,382,063 Debt Service Principal $ 8,475,000 Interest $ Coverage Ratio 18,784,114 2.80 2003-04 221,775,345 132,447,862 89,327,483 14,010,000 20,476,532 2.59 2004-05 228,502,773 156,577,547 71,925,226 310,000 23,444,519 3.03 2005-06 254,216,355 174,560,598 79,655,757 340,000 25,843,553 3.04 2006-07 270,069,593 175,941,671 94,127,922 340,000 29,304,976 3.18 2007-08 278,365,559 196,129,748 82,235,811 7,960,000 34,658,198 1.93 2008-09 274,497,036 197,991,577 76,505,459 9,815,000 37,224,639 1.63 2009-10 275,192,780 194,158,513 81,034,267 10,475,000 40,379,631 1.59 2010-11 283,920,988 190,441,138 93,479,850 12,585,000 42,813,585 1.69 2011-12 299,356,410 180,295,953 119,060,457 21,365,000 43,465,323 1.84 Highway User Revenue Fund Revenue Bonds Highway User Fund Debt Service Revenues 2002-03 $ 31,384,493 Principal $ Coverage Interest - $ Ratio 3,793,944 8.27 2003-04 33,640,946 40,000 4,899,880 6.81 2004-05 35,369,649 135,000 5,400,476 6.39 2005-06 38,285,152 135,000 5,829,910 6.42 2006-07 40,974,923 135,000 6,401,428 6.27 2007-08 38,512,394 170,000 6,828,068 5.50 2008-09 34,259,887 2,025,000 6,822,668 3.87 2009-10 31,790,889 5,720,000 6,691,418 2.56 2010-11 32,052,757 6,030,000 6,365,242 2.59 2011-12 27,825,144 3,290,000 5,563,249 3.14 (1) Includes electric, gas, water, wastewater and solid waste systems. (2) Excise tax revenues include city use and sales taxes, unrestricted license, fees and permits, fines and forfeitures, state-shared sales tax, state revenue sharing, and state shared vehicle license tax. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 162 TABLE XI (Continued) Special Assessment Bonds Special Assessment Collections $ Debt Service Principal Interest 75,365 $ 84,000 $ Highway Project Advancement Notes Excise Tax Revenues (2) Coverage Ratio 10,535 0.80 $ - $ - $ Coverage Ratio - 0.00 60,844 85,000 5,455 0.67 - - - 0.00 5,807 12,000 2,535 0.40 - - - 0.00 188,475 12,000 184,771 0.96 - - - 0.00 850,926 343,000 357,384 1.21 - - - 0.00 1,709,830 751,840 457,396 1.41 - - - 0.00 1,202,384 752,000 417,040 1.03 - - - 0.00 922,651 744,000 376,920 0.82 208,547,166 - 449,167 464.30 1,088,465 744,000 337,040 1.01 200,873,397 - 1,575,694 127.48 996,359 744,000 297,160 0.96 199,948,711 - 4,312,398 46.37 Municipal Development Corporation Bonds Excise Tax Debt Service Revenues (2) $ Debt Service Principal Interest Principal 149,774,369 $ Coverage Interest 1,755,000 $ Ratio 910,270 56.19 153,456,415 3,900,000 796,250 32.68 162,555,789 3,400,000 625,250 40.38 187,580,165 3,900,000 479,250 42.83 216,896,723 4,500,000 309,000 45.10 226,909,733 5,100,000 108,375 43.57 203,197,847 9,970,000 16,643 20.35 - - - - - - - - - - - - 163 CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: (1) (2) (3) (4) (5) Population (1) 434,585 $ 445,354 451,223 455,151 460,155 463,397 465,272 467,355 440,677 441,160 Personal Income (2) 9,452,658,335 $ 9,770,176,052 10,203,505,699 10,539,476,556 10,840,791,645 10,977,411,533 11,288,894,536 11,563,297,410 10,465,197,396 10,603,280,600 Per Capita Personal Income (3) 21,751 21,938 22,613 23,156 23,559 23,689 24,263 24,742 23,748 24,035 Median Age (3) Public School Enrollment (4) Unemployment Rate (5) 31.0 32.3 32.5 32.6 32.9 33.1 33.3 33.6 32.6 34.3 73,211 73,428 74,070 74,626 74,128 73,054 70,297 67,749 66,144 65,662 4.4 4.2 3.6 3.8 2.9 4.3 8.0 8.7 9.0 7.5 City of Mesa Development Services Estimate 2003-2004 Census Bureau (estimate), 2005-2012 Claritas (estimate) 2003-2004 Census Bureau, 2005-2012 Claritas Mesa Public Schools AZ Dept of Economic Security. Data is Phoenix - Mesa Metropolitan Area. Beginning in 2011 unemployment rate is not seasonally adjusted. 164 CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND TEN YEARS AGO 2012 Employer Employees Rank 2002 Percentage of Total City Employment Employees Rank Percentage of Total City Employment Banner Health System 8,287 1 4.08 % 5,800 2 3.12 % Mesa Public Schools 8,042 2 3.96 9,300 1 5.01 Boeing 4,700 3 2.31 5,000 3 2.69 City of Mesa 3,491 4 1.72 3,600 4 1.94 Maricopa County Government 2,644 5 1.30 - 0.00 Wal-Mart 2,537 6 1.25 - 0.00 Maricopa Community College 1,951 7 0.96 - 0.00 Gilbert Unified School District 1,230 8 0.61 - 0.00 The Kroger Company (Fry's) 1,059 9 0.52 - 0.00 800 10 0.39 - 0.00 West Direct II Inc. Motorola Semiconductor Products - 0.00 3,100 5 1.67 TRW/Vehicle Safety Systems, Inc. - 0.00 3,000 6 1.62 AT&T - 0.00 2,400 7 1.29 General Motors Desert Proving Grounds - 0.00 1,400 8 0.75 Empire Machinery - 0.00 1,100 9 0.59 Excell Agent Services - 0.00 1,000 10 0.54 Phoenix Newspapers - 0.00 1,000 10 0.54 Total 34,741 17.11 % Source: City of Mesa Office of Economic Development 165 36,700 19.76 % CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2002-03 2003-04 2004-05 2005-06 2006-07 Function/Program General Government 879 867 882 826 857 1,269 1,286 1,325 1,311 1,332 Fire 434 440 446 454 468 Other 113 121 123 108 122 Cultural-Recreational 501 478 490 398 426 Community Environment Public Safety Police 168 164 170 161 183 Electric 48 51 50 38 44 Gas 82 77 79 77 81 Water 90 97 104 102 113 Wastewater 43 47 44 54 64 Solid Waste 137 135 135 138 132 Airport Convention Center Total 9 10 9 11 10 22 21 21 64 19 3,795 3,794 3,878 3,742 3,851 Source: City of Mesa Budget and Research Division 166 TABLE XIV (Continued) 2007-08 2008-09 2009-10 2010-11 2011-12 875 793 783 781 819 1,306 1,282 1,240 1,163 1,158 472 470 455 457 473 91 46 52 43 51 398 318 315 317 315 181 189 184 189 184 47 48 32 29 28 85 92 91 87 87 97 134 159 160 158 69 79 73 70 75 136 126 124 120 117 9 10 10 9 9 19 17 14 17 17 3,785 3,601 3,529 3,442 3,491 167 CITY OF MESA, ARIZONA TABLE XV OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2002-03 2003-04 2004-05 Function/Program Police Major Crimes Traffic Accidents 29,379 27,933 25,853 9,593 9,562 10,121 1,451 1,332 1,386 37,339 39,489 41,689 2,073 1,999 2,021 557 653 591 7,229 7,439 7,738 Fire Fires Rescue or Emergency False Alarms Hazardous Conditions Other Calls Libraries Number of Registered Borrowers 184,647 200,461 193,722 Total Attendance 1,202,947 1,183,794 1,208,594 Access to Electronic Resources 1,027,157 1,365,863 1,835,867 Electric Connections 15,797 17,945 15,652 Gas Connections 40,328 42,241 45,435 127,140 129,477 131,141 93.5 105.3 93.6 141.01 132.15 137.95 110,537 112,497 114,500 38.7 39.3 38.9 Customers Served 140,190 109,960 114,112 Refuse Collected (tons) Water Connections Average Daily Consumption (mgd)* Peak Daily Consumption (mg)** Wastewater Connections Average Daily Sewage Treatment (mgd)* Solid Waste 245,286 254,688 248,255 Recyclables Collected (tons) 36,282 34,141 36,264 Green Waste Collected (tons) 15,373 16,384 16,983 Falcon Field Average Number of Aircraft Based Aircraft Operations (annual) 930 934 922 290,902 277,088 255,069 * mgd - millions of gallons per day ** mg - millions of gallons 168 TABLE XV (Continued) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 24,904 22,437 21,388 18,482 17,345 16,623 16,740 9,205 12,184 7,578 6,256 5,890 5,952 6,047 1,605 1,428 1,200 1,165 1,048 981 1,012 43,073 38,003 34,207 32,478 34,079 38,788 42,925 2,595 2,875 2,456 2,125 1,478 1,478 1,292 676 608 567 663 701 478 446 7,820 11,792 12,976 11,923 12,819 11,840 11,192 233,836 266,839 275,449 306,427 352,607 220,812 142,943 1,195,075 1,161,887 1,165,451 1,348,555 1,367,667 1,095,196 1,143,718 2,307,051 3,029,001 2,910,088 3,661,261 2,542,927 1,691,966 1,566,775 15,806 15,723 15,215 14,546 14,738 15,064 15,841 48,622 50,478 51,454 51,911 52,832 53,434 55,828 133,105 133,249 133,086 132,771 133,701 134,072 135,138 94.5 89.6 85.8 79.7 72.7 76.2 81.6 131.28 128.83 125.72 108.68 111.14 114.30 122.30 116,282 116,190 116,465 116,721 117,831 118,413 119,615 41.8 38.1 38.0 36.0 33.6 33.7 33.4 113,146 115,305 112,632 112,832 113,079 115,811 118,949 261,369 266,817 243,208 234,709 217,295 223,217 209,116 32,869 38,660 39,296 37,841 36,490 35,486 34,443 17,500 18,215 17,601 18,936 18,588 19,149 17,882 924 901 934 873 841 789 749 271,295 261,623 337,178 283,336 248,381 221,910 222,650 169 CITY OF MESA, ARIZONA TABLE XVI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2002-03 2003-04 2004-05 Function/Program Police Stations Stations 4 4 4 421 306 321 17 17 17 3 3 3 Developed Parks (acres) 1,202 1,198 1,149 Undeveloped Acres 1,932 1,228 1,230 13 13 12 6 6 6 1,132 1,152 1,160 Vehicular Patrol Units Fire Stations Libraries Parks and Recreation Swimming Pools Recreation Facilities Community Environment Streets (miles) Paved Unpaved Storm Sewers (miles) Gas Mains (miles) 12 12 12 271 290 296 954 998 1,037 1,924 1,978 2,004 97 97 97 1,454 1,496 1,512 56 56 56 - - 69 2 2 2 Water Mains (miles) Storage Capacity (millions of gallons) Wastewater Mains (miles) Treatment Capacity (millions of gallons per day) Solid Waste Collection Trucks (1) Golf Courses (1) Amounts for fiscal years prior to 2004-05 not available 170 TABLE XVI (Continued) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 4 4 4 4 4 4 5 285 351 368 330 289 290 267 17 17 17 17 18 18 19 3 3 3 3 3 4 4 1,184 1,184 1,180 1,180 1,154 1,154 1,553 1,251 1,251 1,251 1,251 1,078 1,074 705 12 12 12 12 12 13 9 6 6 6 6 6 6 6 1,162 1,169 1,178 1,182 1,184 1,190 1,303 12 12 12 12 12 12 1 298 303 308 316 321 329 438 1,121 1,147 1,202 1,223 1,243 1,247 1,240 2,022 2,008 2,068 2,104 2,127 2,136 2,270 117 117 117 125 125 125 125 1,522 1,544 1,577 1,598 1,606 1,613 1,652 56 60 60 60 60 60 60 78 68 70 69 69 69 70 2 2 2 2 2 2 1 171 Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov 141