City of Mesa, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 HealthcareEducationAerospaceTourism & Technology City of Mesa, Arizona Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 John Giles Mayor Dave Richins Christopher Glover Councilmember, District 1 Councilmember, District 4 Alex Finter David Luna Councilmember, District 2 Councilmember, District 5 Dennis Kavanaugh Scott Somers Councilmember, District 3 Councilmember, District 6 Chris Brady City Manager Kari Kent Deputy City Manager John Pombier Deputy City Manager Citizens of Mesa Mayor and City Council City Clerk DeeAnn Mickelsen City Court Matt Tafoya CITY MANAGER Chris Brady City Attorney Debbie Spinner City Auditor Jennifer Ruttman Mesa Counts on College Amy Trethaway Economic Development Bill Jabjiniak Deputy City Manager Kari Kent Development & Sustainability Christine Zielonka Energy Resources Frank McRae Engineering Beth Huning Parks, Recreation & Commercial Facilities Marc Heirshberg Transit Jodi Sorrell Transportation Lenny Hulme Water Resources Dan Cleavenger Advisory Boards and Committees Deputy City Manager John Pombier Manager of Technology and Innovation Alex Deshuk Chief Financial Officer Michael Kennington Assistant to the City Manager Scott J. Butler Assistant to the City Manager Natalie Lewis Police Department Frank Milstead Business Services Ed Quedens Office of Management and Budget Candace Cannistraro Mayor and City Council Support Falcon Field Corinne Nystrom Fire Department Harry Beck Grants Arts & Culture Cindy Ornstein Facilities Maintenance Dennis Ray Communications Randy Thompson Information Technology Diane Gardner Library Heather Wolf Regional Communications Broadband Business Technology Innovation Financial Services Irma Ashworth Housing & Community Development Tammy Albright Enterprise Resource Planning (ERP) Valerie McBrien Federal Initiatives National League of Cities Regional Initiatives, Maricopa Association of Governments State Legislative Affairs U.S. Conference of Mayors Animal Control Diane Brady Neighborhood Outreach/Diversity Ruth Giese Downtown Coordination, DMA Pinal County Land Strategic Planning and Development Fleet Services Pete Scarafiotti Human Resources Gary Manning Public Information & Communications Steve Wright Solid Waste Mike Comstock Introductory Section Banner Health Cardon Children’s Medical Center TABLE OF CONTENTS Page SECTION I – INTRODUCTORY SECTION Table of Contents Letter of Transmittal I V SECTION II - FINANCIAL SECTION Exhibits Independent Auditors' Report 1 Management’s Discussion and Analysis 4 Basic Financial Statements Government-wide Financial Statements Statement of Net Position Statement of Activities A-1 A-2 16 17 A-3 19 A-4 A-5 20 21 A-6 22 A-7 23 A-8 A-9 25 27 A-10 29 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds to the Statement of Activities Proprietary Funds Financial Statements Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Fiduciary Funds Financial Statements Statement of Fiduciary Assets and Liabilities I TABLE OF CONTENTS (Continued) Exhibits Notes to the Financial Statements Note 1 – Summary of Significant Accounting Policies Note 2 – Reconciliation of Governmental Fund Financial Statements to Government-wide Financial Statements Note 3 – Fund Balance Note 4 – Pooled Cash and Investments Note 5 – Accounts Receivable and Due from Other Governments Note 6 – Interfund Receivables, Payables and Transfers Note 7 – Capital Assets Note 8 – Long-term Obligations Note 9 – Refunded, Refinanced and Defeased Obligations Note 10 – Self-Insurance Internal Service Fund Note 11 – Commitments and Contingent Liabilities Note 12 – Net Position Note 13 – Enterprise Activities Operations Detail Note 14 – Joint Ventures Note 15 – Retirement and Pension Plans Note 16 – Post Employment Benefits Note 17 – Subsequent Events Note 18 – Restatement of Beginning Net Position Page 30 39 45 46 48 50 51 54 66 67 68 68 69 69 72 78 81 81 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) Note to Required Supplementary Information B-1 B-2 82 83 B-3 84 85 C-1 C-2 86 91 C-3 C-4 C-5 96 98 100 C-6 102 Combining Statements Non-Major Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Internal Service Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses and Changes in Net Position Combining Statement of Cash Flows Agency Fund Statement of Changes in Assets and Liabilities II TABLE OF CONTENTS (Continued) Exhibits Page D-1 103 D-2 104 D-3 105 D-4 106 D-5 107 Supplemental Information Budgetary Comparison Schedules – Other Non-major Special Revenue Funds Grants and Special Programs Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Highway User Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Mesa Housing Authority Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Quality of Life Sales Tax Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Street Sales Tax Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual SECTION III - STATISTICAL SECTION Financial Trends Net Position by Components - Last Ten Fiscal Years (Accrual Basis of Accounting) Changes in Net Position - 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 108 110 III 116 IV 118 V VI 120 122 VII VIII IX X XI 123 125 126 127 129 XII XIII 131 132 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 III TABLE OF CONTENTS (Concluded) 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 XIV XV XVI 133 135 137 Financial Services Department December 16, 2014 To the Citizens, Honorable Mayor, City Council and City Manager: The Comprehensive Annual Financial Report of the City of Mesa (the “City”) for the fiscal year ended June 30, 2014 is hereby submitted. Prepared by the Financial Services Department, this report consists of management’s representations concerning the finances of the City of Mesa. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City’s financial statements have been audited by CliftonLarsonAllen, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the basic financial statements of the City for the fiscal year ended June 30, 2014, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit that there was a reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2014, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City’s separately issued Single Audit Report. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A) and should V be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. Profile of the City The City was founded in 1878 and incorporated July 15, 1883 with an approximate population of 300 and an area of one square mile. Today, the City’s estimated population is 454,981 compared with the 2000 decennial census count of 397,760, within an incorporated area of approximately 141 square miles. Total land area encompasses 182 square miles. The City is the 38th largest city in the United States and is the third largest city in the State of Arizona. Mesa is located 16 miles east of Phoenix, the State Capitol. The City operates under a charter form of government with citizens electing a Mayor and six Councilmembers to set policy for the City. City Councilmembers are elected from districts and serve terms of four years, with three members being elected every two years. The Mayor is elected at-large every four years. The Mayor and Council are elected on a non-partisan basis, and the Vice Mayor is selected by the City Council. The Mayor and City Council are responsible for appointing the City Manager, City Attorney, City Auditor, City Clerk and the Presiding City Magistrate. The City Manager has full responsibility for carrying out City Council policies and administering City operations and is responsible for the hiring of City employees. Additionally, City employees are hired under merit system procedures as specified in the City Charter. An allocated staff of 3,520 full-time (equivalent) City employees working within twenty-eight different City departments undertakes the various functions of Mesa’s city government and its operation. 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; and, the City owns and operates enterprises including operations of electric, gas, water, wastewater, solid waste, airport and golf courses. The Mesa Art Center, which includes 212,755 square feet of performing arts, visual arts and art education facilities, is the largest comprehensive arts campus in the state. The Mesa Art Center was awarded the Venue Excellence Award by the International Association of Venue Managers. This prestigious award recognizes venues such as stadiums, convention centers, arenas, performing arts centers, and academic institutions that demonstrate excellence in the following four criteria: service to the community, team building/professional development, safety and security, and operational excellence. The annual budget serves as the foundation for the City’s financial planning and control. Historical data is analyzed during the creation of a multi-year financial forecast. The forecast provides a framework to assist Mesa’s elected officials and executive team make important decisions about the direction of the City. The City Council sets the City’s long-term strategic direction and provides staff with budget priorities for the upcoming fiscal year. A proposed budget is presented to the City Council for review and discussion in mid spring with the final adoption of the operating budget by resolution in late spring. The City of Mesa begins the fiscal year on July 1st. VI 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 sets the limit. The residents of Mesa approved a Home Rule exemption to the State of Arizona’s expenditure limitation requirement. The City can determine the budget level as long as the City can identify resources to cover the expenses. The budget appropriated by the City Council consists of all planned expenditures and the associated resources to cover them. While the State does not require trust fund expenditures to be appropriated, the City chooses to include them in order to fully represent City activity. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. Local Economy The City’s economic indicator for residential construction in fiscal year (FY) 2013/2014 is up 15% from FY 2012/2013. During FY13/14 the City issued 1,081 permits for new residential construction. This is 12% more than the previous fiscal year. The corresponding dollar valuation associated with all FY13/14 permits increased approximately $83 million from the prior fiscal year. Analysis of the recent data indicates a steady level of construction activity in both the residential and commercial sectors. Activity levels have been increasing for the past four years and may indicate some level of sustained recovery from the economic slowdown of the prior years. The increase in construction activity resulted in an associated increase in sales tax revenues. For the year ending June 30, 2014, overall sales tax revenues were up 4.9%, an increase of 4.1% from the adopted budget. Other financial resources followed the economy’s continuation of a slow and steady recovery. The City incorporated this in the preparation of the FY14/15 budget. Conservative budget practices and willingness to respond to economic indicators continues to allow the City to maintain unrestricted fund balance reserve levels as established in the City’s financial policies. The FY14/15 budget continues the City’s fiscally conservative approach and reinforces the City’s effort to invest in economic development, improve public safety and attract and retain excellent employees. All fund balances were maintained at or above the levels prescribed by financial policy and prudent practice. Major Initiatives During the year, several major accomplishments have continued to be realized. Some of these were: VII • The Mesa Riverview area is getting a massive boost to its hospitality accommodations in the form of Starwood Hotels and Resorts’ Sheraton River View Hotel. The four-story, 160,000-plus-square-foot facility, directly adjacent to Cubs Park, will feature views of the park and easy access to games. This will allow baseball fans to stay as close to the action as physically possible. With 180 rooms, including seven VIP suites and one presidential suite with a balcony, the hotel is designed from top to bottom to provide an upscale environment. The resort includes a courtyard, patios with views of the mountains and the stadium, a sun terrace with a direct view of the scoreboard, fitness facilities, a full restaurant, a conference center and a ballroom and sports bar. • The Oakland A’s are putting the finishing touches on their upgrades to Hohokam Park and the training facility at the adjacent Fitch Park in preparation for the 2015 Spring Training season. The A’s have added nearly 26,000 square feet to the facilities at Fitch Park, including a strength-training room nearly three times larger than the team previously had, a hydrotherapy room that will include an underwater treadmill, and locker rooms designed to accommodate up to 200 players and about 50 coaches at one time. At Hohokam Park, the A’s have upgraded the seating bowl, patio areas, the home clubhouse and the scoreboard. The project is expected to cost $27 million with Mesa’s portion capped at $17.5 million of the cost. • This fall, Benedictine University began its second academic year at its Mesa branch campus with more than 200 students – more than doubling its enrollment since the school opened its doors in fall 2013. One reason for the strong enrollment increase is the University’s commitment to making higher education affordable and attainable by providing as much financial assistance as possible to those in need so that a private, Catholic education can become a reality for them. Student-athletes have begun competing in men’s and women’s cross country, golf, tennis and volleyball this fall as the Benedictine University at Mesa “Redhawks.” • The City of Mesa, in partnership with Arizona State University (ASU), has announced the Business Academy at LAUNCHPOINT, a free program to train entrepreneurs in a variety of methodologies, to validate business ideas, and to position their companies for funding opportunities. The first class at the Business Academy at LAUNCHPOINT began in the fall 2014 and will run through May 2015. The participants will be directed through an eight-month, structured program that will give entrepreneurs the competitive edge when pursuing funding opportunities. LAUNCHPOINT will provide each participant with free private office space and furniture, business center access, phone and Internet service, 24/7 facility access, on-site parking and mail service. • OneSource Virtual (OneSource), a leading cloud-based Business Process Outsourcing (BPO) provider, announced it is opening a 21,182 sq. ft. processing facility that will create approximately 120 jobs in Mesa by the end of 2015. The new office will allow OneSource to strategically service an established and growing customer base in the Pacific and Mountain Time Zones through expanded hours of operations. • Phoenix Rising Investments, LLC has acquired and will renovate the Valley East Plaza Shopping Center, located in the heart of the Fiesta District. The remodeled complex will be known as Centrica and is expected to be completed by early 2015. Centrica will VIII feature more than 110,000 sq. ft. of single story contiguous Class A office space, more than 700 parking spots and fiber optic backbone connectivity. Centrica will be located in prime real estate due to the proximity to both the U.S. 60 and Loop 101 freeways, easy access to public transit and the amenities surrounding the area. “Centrica will be within walking distance to an abundance of restaurants, retail, and educational facilities – and just a twenty-minute commute for over one million well-educated people,” Michael Hsiung, Principal of Phoenix Rising Investments, LLC said. • American Traffic Solutions (ATS), a market leader in road safety camera installations in North America, will move its corporate headquarters and 600 employees to a new office building planned at Mesa Riverview in northwest Mesa. Arizona developers, Lincoln Property Co. and Harvard Investments are building the 250,000 sq. ft. Waypoint office complex, which will complete the partially built Riverview Point Office Park. ATS will occupy 108,000 sq. ft. in the smaller building of the two-building Waypoint complex. The new facility will allow ATS to bring its fleet services and government solutions business units into one location, according to company CEO James Tuton. The company expects to add as many as 170 more employees at the location by 2017. • According to recent lists published by the Phoenix Business Journal, Mesa’s Empire Southwest with more than 1,400 employees was ranked the 2nd largest family-owned business and the 6th largest privately-owned business in Arizona. Empire Southwest is currently completing the 90,000 sq. ft. expansion of its Mesa facility and adding a twostory, 25,000 sq. ft. office area that will contain Empire’s fluids lab and 10 service and support teams. • A groundbreaking was held in August for El Rancho Apartments on the site of a blighted motel that will become a four-story apartment community with 66 units to house families with children. The $13.6 million El Rancho development is a collaboration led by Community Development Partners (CDP) with the City of Mesa, Arizona Department of Housing, non-profit partner Integrity Housing, and supportive service provider A New Leaf, with the goal of providing life-enhancing safe, quality affordable housing in Downtown Mesa. • In September 2014, Bridgestone Americas, Inc., a subsidiary of the world’s largest tire and rubber manufacturer, Japan-based Bridgestone Corporation, held a grand opening for its new Biorubber Process Research Center in the Mesa Gateway area to investigate the use of the Guayule plant as an alternative natural rubber source. The 10-acre site includes an 8,300 sq. ft. single-story office and laboratory building; a four-platform, 3,500 sq. ft. shrub prep building; a 5,500 sq. ft., two-level process building for rubber extraction, coproduct and solvent recycling; and a 3,100 sq. ft. mechanical and electrical building. The facility will employ more than 30 researchers and technicians. • The U.S. Army has recently awarded Boeing a $103.8 million contract to produce parts for Apache Helicopters. The parts will be produced at Boeing’s facility located in Mesa. Boeing’s Mesa facility was recently ranked by the Phoenix Business Journal as the third largest manufacturer in the Phoenix-Mesa metro area. IX • The new section of State Route 24, which provides a direct connection between the Loop 202 (Santan Freeway) and Ellsworth Rd., opened in early May 2014. Construction of the $73 million project began in March 2012. The City of Mesa accelerated the start of construction by several years through a transportation-bonding program. The program allowed Mesa to borrow money through the bond market, transfer the money to ADOT for construction, then repay the bonds with money the City has and will receive from Maricopa County’s Prop 400 sales tax. This approach allowed the State and City to save millions of dollars. Mesa was able to avoid inflationary costs of building the freeway five to 10 years from now, and because of the recession, many contractors competed for the work resulting in bid prices coming in below engineering estimates. • The METRO light rail Mesa drive extension project continues to progress with an estimated completion scheduled for late 2015. The project will add 3.1 miles of transit service through downtown Mesa. Four stations will serve the Mesa extension and support an estimated 5,000 passengers per day. In addition to light rail track, the project included new streetscape being built along the extension to better serve drivers, pedestrians, light rail passengers and bicyclists. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal year ended June 30, 2012. This was the 31st consecutive year the City has received this prestigious award. The Certificate of Achievement for the comprehensive annual financial report for the fiscal year ended June 30, 2013 is currently under review by the GFOA. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both accounting principles generally accepted in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. The efficient and dedicated services of the City’s Financial Services Director, Irma Ashworth, and the devoted staff of the Financial Services Division has made the preparation of the comprehensive annual financial report possible. Also, I want to thank the Mayor, members of the City Council and the City Manager for their continued interest and support of the staff’s efforts in planning and conducting the financial operations of the City. Respectfully submitted, Michael Kennington, Chief Financial Officer X Financial Section Top Of The Class Mesa For Higher Education INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and the City Council City of Mesa, Arizona Report on the Financial Statements 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, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. An independent member of Nexia International (1) The Honorable Mayor and the City Council City of Mesa, Arizona 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, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter During the fiscal year ended June 30, 2014, the City adopted the provisions of Governmental Accounting Standards Board Statement (GASBS) No. 65, Items Previously Reported as Assets and Liabilities. As a result, the City reported a change in accounting principle (See Note 18.) Beginning net position was restated as debt issuance costs, except any portion related to prepaid insurance costs, are now recognized as an expense in the period incurred. Debt issuance costs were previously reported as an asset and recognized as an expense in a systematic and rational manner over the duration of the related debt. The auditors’ opinion was not modified with regards to the restatement. Other Matters Required Supplementary Information 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. Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Mesa, Arizona’s basic financial statements. The combining and individual fund financial statements and schedules and the introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. (2) The Honorable Mayor and the City Council City of Mesa, Arizona The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2014, on our consideration of the City of Mesa, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Mesa, Arizona’s internal control over financial reporting and compliance. Phoenix, Arizona December 16, 2014 (3) 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, 2014. 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-X, as well as the financial statements beginning on page 16 and the accompanying notes to the financial statements. FINANCIAL HIGHLIGHTS  The City’s net position at the end of the fiscal year was $1.42 billion, of which $57.9 million is unrestricted and may be used to meet the City’s ongoing obligations to citizens and creditors.  The City’s total revenues increased by $76M from $782.4 million to $858.9 million. The increase is primarily from State Shared Revenues.  As of the end of fiscal year 2014, the City’s governmental funds reported a combined ending fund balance of $288.6 million, a $30.7 million decrease from the previous year. Approximately 33.0% of the total fund balance amount, or $94.9 million is designated by the City as committed, assigned, or unassigned. The remaining 67.0% or $193.8 million is designated as non-spendable or restricted.  The City’s total long-term liabilities remained comparable to prior year and were $2.1 billion at June 30, 2014. The current year increases were offset by equal amounts of reductions. 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 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 16-18) 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 position, Exhibit A-1, presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference being reported as net position. Over time increases and decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities, Exhibit A-2, presents information showing how the City’s net position changed over the most recent fiscal year. All changes to net position 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 4 is the accrual basis of accounting. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both the Statement of Net Position and the Statement of Activities divide the functions of the City that are principally supported by taxes and intergovernmental revenues (Governmental Activities) from other functions that are intended to recover all or a significant portion of their cost through user fees and charges (Business-Type Activities):  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. The City restated the beginning net position for the governmental activities and business type activities due to the implementation of GASB Statement No. 65. This resulted in a decrease to beginning net position of $4.1 million and $5.4 million in the governmental activities and business type activities, respectively. See Note 18 to the basic financial statements for additional details of these restatements. Government-Wide Financial Statement 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, 2014 and 2013. Condensed Statement of Net Position As of June 30 (In thousands of dollars) Governmental Activities 2014 Cash and Other Assets Capital Assets T otal Assets Deferred Amounts on Refundings Non-current Liabilities Outstanding Other Liabilities T otal Liabilities Net Position: Net Investment in Capital Assets Restricted Unrestricted T otal Net Position $ 610,158 1,282,555 1,892,713 2013 As Restated $ 569,087 1,261,873 1,830,960 4,949 - 936,843 154,735 1,091,578 931,360 124,839 1,056,199 866,332 60,555 (120,803) $ 806,084 902,397 56,719 (188,406) $ 770,710 5 Business-T ype Activities 2014 $ 456,593 1,428,825 1,885,418 19,431 2013 As Restated $ 542,024 1,371,362 1,913,386 - T otal Government 2014 1,066,751 2,711,380 3,778,131 24,380 2013 As Restated 1,111,111 2,633,235 3,744,346 - 1,188,235 101,169 1,289,404 1,151,357 106,263 1,257,620 2,125,078 255,904 2,380,982 2,082,717 231,102 2,313,819 393,720 43,023 178,702 346,352 37,795 266,265 1,260,052 103,578 57,899 1,248,749 94,514 77,859 $ 615,445 $ 650,412 $ 1,421,529 $ 1,421,122 Net Position - As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The City’s net position, the amounts by which assets plus deferred outflows of resources, exceeded liabilities plus deferred inflows of resources, was $1.4 billion at the close of the most recent year. The largest portion of net position ($1.3 billion or 88.6%) 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. Restricted net position represents resources that are subject to external restrictions on how they may be used. Such restrictions include debt service payments, transportation programs, and required bond indentures. The City’s restricted assets increased $9.1 million from $94.5 million in fiscal year 2013 to $103.6 million in fiscal year 2014 primarily due to increase in debt service restrictions. The unrestricted net position may be used to meet the City’s ongoing obligations to citizens and creditors. Unrestricted net position decreased from $77.9 million in fiscal year 2013 to $57.9 million in fiscal year 2014 primarily due to the change in net position as shown on page 9. Capital Assets – The following table provides a breakdown of the City’s capital assets at June 30, 2014 and 2013: Capital Assets (net of accumulated depreciation/amortization) As of June 30 (In thousands of dollars) Land Infrastructure - Nondepr Buildings Other Improvements M achinery & Equipment Intangibles Infrastructure Construction-in-Progress Total Governmental Activities 2014 2013 $ 297,398 $ 278,120 3,292 23 223,178 215,299 67,565 59,548 48,590 48,762 10,482 12,685 467,476 479,063 164,574 168,373 $ 1,282,555 $ 1,261,873 Business-Type Activities 2014 2013 $ 54,167 $ 57,847 17,666 17,560 64,255 29,927 80,670 52,049 35,113 17,889 9,042 9,813 932,917 906,013 234,995 280,264 $ 1,428,825 $ 1,371,362 Total Government 2014 2013 $ 351,565 $ 335,967 20,958 17,583 287,433 245,226 148,235 111,597 83,703 66,651 19,524 22,498 1,400,393 1,385,076 399,569 448,637 $ 2,711,380 $ 2,633,235 The City’s net investment in capital assets for its governmental and business-type activities amounts to $2.7 billion (net of accumulated depreciation/amortization) as of June 30, 2014. This net 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. 6 The largest capital asset completed during the current fiscal year was the new Spring Training Facility for the Chicago Cubs Major League Baseball team in 2014. 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 remaining capital assets and construction projects were consistent with prior year additions and projects and primarily related to storm sewer projects, transportation projects, water projects and wastewater projects. Additional information on the City’s capital assets can be found in Note 7 of the notes to the financial statements. Debt Administration – The following schedule shows the outstanding long-term debt of the City as of June 30, 2014 and 2013. Outstanding Long-term Debt As of June 30 (In thousands of dollars) General Obligation Bonds Utility System Revenue Bonds Highway User Revenue Fund Bonds Excise Tax Obligations Special Assessment Bonds with Governmental Commitment Community Facility District Capital Leases Notes Payable Total Governmental Activities 2014 2013 $ 344,040 $ 324,683 107,705 114,650 3,574 4,318 5,897 2,712 72 140 77,835 122,835 $ 539,123 $ 569,338 Business-Type Activities 2014 2013 $ 605 $ 887 991,995 978,160 94,060 94,060 2,244 2,370 $ 1,088,904 $ 1,075,477 Total Government 2014 2013 $ 344,645 $ 325,570 991,995 978,160 107,705 114,650 94,060 94,060 3,574 4,318 5,897 2,712 72 140 80,079 125,205 $ 1,628,027 $ 1,644,815 At the end of the current fiscal year, the City had total outstanding debt of $1.6 billion. Of this amount, $438.7 million comprises debt backed by the full faith and credit of the City and $1.1 billion represents bonds secured by specified revenue sources (i.e., Utility System Revenue and Highway User Revenue). An additional amount of $9.5 million are special assessment and community facility district bonds where the City is contingently liable in the event that the assessment revenues are insufficient to satisfy the debt payments. The City’s outstanding long-term debt (considering new borrowings, debt retirements, and refunding) decreased $16.8 million. The change in debt includes new borrowings during the fiscal year totaling $77.2 million and principal payments of $94 million. 7 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 AAAA 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. The City’s total debt margin available at June 30, 2014 was $153.0 million in the 6% capacity and $167.9 million in the 20% capacity. Additional information on the City’s long-term obligations can be found in Note 8 of the notes to the basic financial statements and also Table X in the Statistical Section. 8 Changes in Net Position The following table shows the revenues and expenses of the City for the fiscal years ended June 30, 2014 and 2013. Changes in Net Position Year Ended June 30 (In thousands of dollars) Governmental Activities 2013, as Restated 2014 REVENUES Program Revenues: Charges for Services Operating Grants & Contributions Capital Grants & Contributions General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Contributions Unrestricted Investment Income Gain on Disposal of Capital Assets Miscellaneous Business-type Activities 2013, as Restated 2014 Total Primary Government 2013, as Restated 2014 $ 61,193 29,514 20,714 $ 58,198 55,312 25,049 $ 304,554 9,056 17,331 $ 308,088 9,402 7,998 140,567 22,549 1,919 135,075 88,646 966 5,550 137,280 14,354 1,903 104,462 49,570 1,692 7,424 851 1,453 18,697 288 825 860 - 140,567 22,549 2,770 135,075 88,646 2,419 18,697 5,838 137,280 14,354 2,728 104,462 49,570 2,552 7,424 506,693 455,244 352,230 327,173 858,923 782,417 103,819 277,614 49,275 125,700 24,431 106,042 289,872 62,124 129,756 23,443 - - 103,819 277,614 49,275 125,700 24,431 106,042 289,872 62,124 129,756 23,443 - - 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 - 28,897 35,653 106,112 94,419 33,693 4,300 3,353 3,946 9,094 1,081 3,653 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 - 28,897 35,653 106,112 94,419 33,693 4,300 3,353 3,946 9,094 1,081 3,653 Total Expenses 580,839 611,237 277,671 324,201 858,510 935,438 Increase (decrease) in Net Position Before Transfers Transfers (74,146) 109,520 (155,993) 83,615 74,559 (109,520) 2,972 (83,615) 413 - (153,021) - 35,374 (72,378) (34,961) (80,643) 413 (153,021) 770,710 843,088 650,406 731,049 1,421,116 1,574,137 $ 806,084 $ 770,710 $ 615,445 $ 650,406 $ 1,421,529 $ 1,421,116 Total 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 Economic Investment Change in Net Position Total Net Position - As Adjusted Net Position - ending 9 $ 365,747 38,570 38,045 $ 366,286 64,714 33,047 Governmental Activities As presented in the following two graphs, the largest funding sources, including transfers, for the governmental activities are taxes (27%), Unrestricted Intergovernmental (22%), and transfers (18%). The largest users of resources for the governmental activities are Public Safety (48%), Community Environment (22%), and General Government (18%). Revenues by Source Including Transfers – Governmental Activities For the Fiscal Year Ended June 30, 2014 Taxes 27% Capital Grants & Contributions 3% Unrestricted Contributions 14% Operating Grants & Contributions 5% Other 1% Charges for Services 10% Unrestricted InterGovernmental 22% Transfers 18% Functional Expenses – Governmental Activities For the Fiscal Year Ended June 30, 2014 Public Safety 48% CulturalRecreational 8% General Government 18% Community Environment 22% Interest on Long-Term Debt 4% 10 Governmental Activities Revenues For Fiscal Years 2014 and 2013 (In millions of dollars) $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Miscellaneous Investment Income Contributions Unrestricted Intergovernmental 2013 Taxes Program Revenues 2014 Governmental Activities Functional Expenses For Fiscal Years 2014 and 2013 (In millions of dollars) $350 $300 $250 $200 $150 $100 $50 $0 Interest on Long-term Debt Community Environment Cultural-Recreational 2013 Public Safety General Government 2014 The graphs above compare governmental activities revenues and expenses from fiscal year 2014 to fiscal year 2013. Total governmental activities revenues increased $51.5 million from $455.2 million to $506.7 million. Total governmental expenses decreased by $26.4 million from $607.2 million to $580.8 million. 11 Key factors in this change include:  Unrestricted inter-governmental revenue increased by $30.6 million over the previous year. Increase is primarily due state shared revenues, reflecting an overall improvement in the local economy.  Contributions increased $39 million primarily due to an increase in donated capital assets.  There was an overall decrease in accruals related Post-Employment Benefits. 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 Water 37% Wastewater 22% Gas 13% Electric 10% Other Programs 3% Solid Waste 15% Functional Expenses – Business-type Activities Wastewater 24% Water 34% Solid Waste 12% Gas 12% Other Programs 7% Electric 11% 12 Total business-type activities program and general revenues increased by $25 million from $327.2 million to $352.2 million. The business-type activities total expenses decreased by $41.2 million from $318.9 million to $277.7 million. The largest decrease in expenses was primarily in the wastewater fund, and related to the post employment expense and depreciation expense. Fund Financial Statements The fund financial statements are presented in Exhibits A-3 through A-10 beginning on page 19 of this report. 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 (Exhibits A-3 through A-6), Proprietary Funds (Exhibits A-7 through A-9), and Fiduciary Funds (Exhibit A-10). 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 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 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 2 to the basic financial statements. 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; 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 position. 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 are prepared on the same long-term focus as the government-wide 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 (Exhibits C-3 through C-5). 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 is prepared on the same basis as the government-wide and proprietary fund financial statements. Notes to the financial statements – The notes to the financial statements 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. 13 Other information – Governments have an option of including the budgetary comparisons statements for the General Fund 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 the budgetary statements as required supplementary information beginning on page 84. Fund Financial Statement Analysis 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 is to provide information on nearterm 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 $288.6 million, a $30.7 million decrease from the previous year. $72.0 million of this total amount is in unassigned fund balance, available for spending in the coming year. Included in the remainder is $193.8 million in restricted and nonspendable fund balance. 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 $77.3 million, while unassigned fund balance was $72.7 million. Total fund balance of the City’s General Fund increased by $23.7 million during the current fiscal year from $53.6 million to $77.3 million. Total revenues of $253.4 million were $6.4 million higher than the previous year. Proprietary Funds - The City’s Enterprise Fund provides the same type of information as the government-wide financial statements, except in more detail. The total net position of the Enterprise Fund decreased by $35 million in fiscal year 2014 from $650.4 million (as restated) in fiscal year 2013 to $615.4 million. The unrestricted net position of the Enterprise Fund amounted to $178.7 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 can be found in Exhibit B-3. This schedule compares the original adopted budget, the budget as amended throughout the year, and the actual expenditures prepared on a budgetary basis. Amendments to the adopted budget may occur throughout the year in a legally permissible manner (see Note 1.f. of the notes to the financial statements for more information on budget policies). No amendments increasing the City’s total adopted budget of $1.3 billion occurred during fiscal year 2014. General Fund revenues of $245.4 million, on a budgetary basis, were comparable to budgeted revenues of $253.5 million. Expenditures of $323.0 million were also comparable to the budgeted expenditures. 14 ECONOMIC FACTORS In May 2014, the City Council approved a $1.3 billion budget, which is equal to prior year’s budget. The fiscal year 2014–15 budget includes $1.1 billion for operations and $265.6 million for scheduled bond capital improvements. The adopted fiscal year 2014-15 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. 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. 15 Basic Financial Section Phoenix-Mesa Gateway Airport CITY OF MESA, ARIZONA EXHIBIT A-1 STATEMENT OF NET POSITION JUNE 30, 2014 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable, Net Accrued Interest Receivable Due from Other Governments 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 Joint Venture Construction Deposits Investment in Joint Ventures Capital Assets: Non-Depreciable Depreciable, Net Total Assets Primary Government Governmental Activities Business-Type Activities $ $ DEFERRED OUTFLOWS OF RESOURCES Deferred Amounts on Refundings Total Deferred Outflows of Resources 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 POSITION Net Investment in Capital Assets Restricted For: Convention Center Airport Golf Courses Hohokam Stadium/Fitch Complex Court Projects Debt Service Bond Indentures Public Safety Grant Programs Quality of Life Programs Transportation Programs Water, Wastewater & Solid Waste Improvements Construction Miscellaneous Restrictions Unrestricted Total Net Position $ 259,947 25,400 548 35,847 5,841 1,869 526 27,546 29,256 399 2,992 449 45 Total $ 287,493 54,656 947 38,839 5,841 2,318 571 7,818 61,857 10,312 5,961 68,655 125,577 118,596 48,742 2,435 3,534 4,805 217,794 126,414 110,599 12,747 5,961 68,655 3,534 4,805 343,371 465,264 817,291 1,892,713 306,828 1,121,997 1,885,418 772,092 1,939,288 3,778,131 4,949 4,949 19,431 19,431 24,380 24,380 3,991 23,015 46,538 8,099 507 72,585 8,204 5,217 87,748 3,991 31,219 51,755 8,099 507 160,333 32,512 904,331 1,091,578 24,720 1,163,515 1,289,404 57,232 2,067,846 2,380,982 866,332 393,720 1,260,052 798 6,571 2,649 1,445 3,704 44,151 1,237 (120,803) 806,084 316 8,514 10 571 25,274 3,533 4,805 178,702 615,445 316 8,514 10 571 798 6,571 25,274 2,649 1,445 3,704 44,151 3,533 4,805 1,237 57,899 1,421,529 The accompanying notes are an integral part of the financial statements. 16 $ $ CITY OF MESA, ARIZONA EXHIBIT A-2 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Functions/Programs: Governmental Activities: General Government Public Safety Cultural-Recreational Community Environment Interest on Long-Term Debt Total Governmental Activities Expenses $ Business-type Activities: Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total Business-type Activities Total Government Charges for Services 103,819 277,614 49,275 125,700 24,431 580,839 $ 30,044 35,020 93,871 65,637 32,908 4,343 2,555 3,060 2,879 6,201 1,153 277,671 $ 858,510 9,739 36,472 12,614 2,368 61,193 Program Revenues Operating Grants and Contributions $ 31,198 38,600 112,003 66,457 47,452 3,813 1,622 2,057 36 174 1,142 304,554 $ 365,747 296 5,894 284 23,040 29,514 Capital Grants and Contributions $ 83 128 4,313 4,223 263 40 6 9,056 $ 38,570 103 83 10,135 6,400 254 200 100 56 17,331 $ General Revenues: Sales Taxes Property Taxes Occupancy Taxes Unrestricted Intergovernmental Revenues Contributions Not Restricted to Specific Programs Investment Income Miscellaneous Special Item - Gain on Sale of Capital Assets Transfers In (Out) Total General Revenues and Transfers Change in Net Position Total Net Position - As Reported Change in Accounting Principle Total Net Position - As Adjusted Net Position - Ending The notes to the financial statements are an integral part of this statement. 17 328 688 80 19,618 20,714 38,045 EXHIBIT A-2 (Continued) Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Total Activities Activities * * $ (93,456) (234,560) (36,297) (80,674) (24,431) (469,418) $ - $ - $ 1,340 3,791 32,580 11,443 14,807 (236) (933) (803) (2,743) (5,965) (11) 53,270 (93,456) (234,560) (36,297) (80,674) (24,431) (469,418) 1,340 3,791 32,580 11,443 14,807 (236) (933) (803) (2,743) (5,965) (11) 53,270 (469,418) 53,270 (416,148) 140,567 22,549 1,919 135,075 88,646 966 5,550 109,520 504,792 851 1,453 288 18,697 (109,520) (88,231) 140,567 22,549 2,770 135,075 88,646 2,419 5,838 18,697 416,561 35,374 (34,961) 413 774,761 (4,051) 770,710 655,766 (5,360) 650,406 806,084 $ 615,445 1,430,527 (9,411) 1,421,116 $ 1,421,529 18 CITY OF MESA, ARIZONA EXHIBIT A-3 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2014 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Due from Other Funds Advances to 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 LIABILITIES Warrants Outstanding Accounts Payable Other Accrued Liabilities Due to Other Funds Advances from Other Funds Customer and Defendant Deposits Compensated Absences Payable From Restricted Assets: Accrued Bond Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities General Fund Non-major Governmental Funds Total Governmental Funds $ $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances 69,308 17,850 342 9,050 286 1,825 1,131 205 99,997 3,451 14,740 1,118 1,975 507 $ $ The accompanying notes are an integral part of the financial statements. 19 7,818 61,857 10,312 5,961 68,655 312,040 8 6,175 8,143 286 1,825 6,124 - $ $ 194,047 23,295 459 35,842 286 1,825 1,154 526 7,818 61,857 10,312 5,961 68,655 412,037 3,459 20,915 9,261 286 1,825 8,099 507 895 22,686 11,731 9,756 50,203 94,251 11,731 10,651 50,203 116,937 - 6,453 6,453 6,453 6,453 2,956 188 1,484 72,683 77,311 $ 124,739 5,445 117 26,792 23 321 99,997 23 190,609 21,379 (675) 211,336 $ 312,040 2,979 190,797 22,863 72,008 288,647 $ 412,037 CITY OF MESA, ARIZONA EXHIBIT A-4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2014 (in thousands) Fund Balances - total governmental funds $ 288,647 Amounts reported for governmental activities in the statement of net position are different because (also see Note 2 to the basic financial statements): Capital assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 1,280,897 Other assets used in governmental activities are not financial resources and therefore not reported in the governmental funds. 125,577 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore not reported in the governmental funds. (927,464) Deferred outflows of resources from the refunding of bonds 4,949 Unavailable revenue for long-term rehabilitation loans, property taxes, amounts due from tenants, and special assessments is shown on the governmental funds, but is not unavailable on the statement of net position. 6,453 Internal service funds are used by management to charge the costs of certain activities to individual funds. Net position of the governmental activities - statement of net position The accompanying notes are an integral part of the financial statements. 20 27,025 $ 806,084 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, 2014 (in thousands) REVENUES Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenue Total Revenues General Fund Non-major Governmental Funds Total Governmental Funds $ $ $ EXPENDITURES Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Interest on Bonds Interest on Leases Interest on Notes Cost of Issuance Capital Outlay Total Expenditures 95,177 25 15,356 112,304 20,829 8,012 131 65 1,498 253,397 45,390 22,500 1,894 1,062 3,441 72,999 11,277 1,878 458 1,147 3,026 165,072 140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 418,469 69,314 205,433 32,495 8,050 5,763 25,931 6,293 48,523 75,077 231,364 38,788 56,573 7,853 323,145 71,015 18,907 7 4,790 727 94,804 276,760 71,015 18,907 7 4,790 727 102,657 599,905 Excess (Deficiency) of Revenues Over (Under) Expenditures (69,748) (111,688) (181,436) OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Sources (Uses) 109,520 (16,080) 93,440 32,389 (16,309) 40,800 430 57,310 141,909 (32,389) 40,800 430 150,750 23,692 (54,378) (30,686) 53,619 265,714 319,333 Net Change in Fund Balances Fund Balance - Beginning Fund Balances - Ending $ 77,311 $ The accompanying notes are an integral part of the financial statements. 21 211,336 $ 288,647 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, 2014 (in thousands) Net change in fund balances - total governmental funds $ (30,686) Amounts reported for governmental activities in the statement of activities are different because (also see Note 2 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. (535) 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. (31,529) 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 depreciation ($78,992) exceeded capital outlay ($72,325) in the current period. (6,667) The net effect of miscellaneous transactions involving capital assets (e.g., donations, transfers and disposals) is to decrease net position. 27,608 Change in equity in Joint Venture 41,202 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 position. 30,215 Governmental funds report the effect of 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. 1,703 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. 4,063 Change in net position of the governmental activities - statement of activities The accompanying notes are an integral part of the financial statements. 22 $ 35,374 CITY OF MESA, ARIZONA EXHIBIT A-7 STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2014 (in thousands) Business-type Activities Enterprise Fund ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agents Cash with Trustees Customer Deposits Joint Venture Construction Deposits Total Current Assets $ Noncurrent Assets: Restricted Pooled Cash and Investments: Impact & Development Fees Bond Replacement, Extensions and Reserves Capital Projects Investment in Joint Ventures Capital Assets: Land Water Rights Collections of Art Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure Construction in Progress Less Accumulated Depreciation and Amortization Total Capital Assets, Net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Amounts on Refundings Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources $ The accompanying notes are an integral part of the financial statements. 23 27,546 29,256 399 2,992 449 45 Governmental Activities Internal Service Funds $ 65,900 2,105 89 5 5,841 715 - 27,050 48,742 2,435 3,534 4,805 147,253 74,655 3,533 25,274 62,739 217,794 - 54,167 17,560 106 87,735 125,523 73,558 27,753 1,587,173 234,995 (779,745) 1,428,825 2,061 430 6,489 3 32 252 (7,609) 1,658 1,738,165 1,658 1,885,418 76,313 19,431 19,431 - 1,904,849 $ 76,313 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-7 (Continued) STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2014 (in thousands) Business-type Activities LIABILITIES Current Liabilities-Payable From Current Assets: Warrants Outstanding 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 Compensated Absences Total Current Liabilities Enterprise Fund Governmental Activities Internal Service Funds $ $ Long-Term Liabilities: Revenue Bonds Payable General Obligation Bonds Payable Excise Tax Obligations Notes Payable Unamortized Bond Premium Compensated Absences Post Employment Benefits Total Long-Term Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Restricted For: Convention Center Airport Golf Courses Hohokam Stadium\Fitch Complex Bond Indentures Water, Wastewater & Solid Waste Improvements Construction Unrestricted Total Net Position $ The accompanying notes are an integral part of the financial statements. 24 8,204 5,217 532 2,100 37,277 698 7,723 25,910 22,832 30,585 - 23,860 131 128 601 125,889 1 39,910 968,135 474 94,060 2,116 25,329 3,306 70,095 1,163,515 632 8,746 9,378 1,289,404 49,288 393,720 1,658 316 8,514 10 571 25,274 3,533 4,805 178,702 615,445 25,367 27,025 $ CITY OF MESA, ARIZONA EXHIBIT A-8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) 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 Fees District Cooling Charges Charges For Services Self-Insurance Contributions Other Revenue Total Operating Revenues Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds $ $ 31,198 38,600 112,003 66,457 47,452 3,813 1,622 2,057 36 174 1,142 304,554 28,299 70,792 948 100,039 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 Total Operating Expenses 22,983 26,778 40,997 21,689 32,431 2,410 2,052 2,825 1,992 970 706 155,833 29,495 66,631 96,126 Operating Income (Loss) Before Depreciation and Amortization 148,721 3,913 Depreciation and Amortization (63,914) Operating Income (Loss) 84,807 The accompanying notes are an integral part of the financial statements. 25 (330) 3,583 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-8 (Continued) STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Business-type Activities Enterprise Fund Governmental Activities Internal Service Funds 1,325 128 2,284 377 - (44,787) (16) (36) (12,676) 7,026 (409) 851 288 (46,022) 377 Nonoperating Revenues (Expenses): Investment Income Pledged as Security for Revenue Bonds Investment Income Unpledged Intergovernmental Interest Expense: Bonds Notes Payable and Other Long-Term Obligations Bond Administrative Costs Net Loss from Joint Venture Utility Development Fees Bond Issuance Costs Occupancy Tax Miscellaneous Revenue Total Nonoperating Revenues (Expenses) Income before Transfers and Capital Contributions 38,785 Capital Contributions Transfers Out Special Item - Gain on Sale of Capital Assets 3,960 17,077 (109,520) 18,697 93 6 Change in Net Position (34,961) 4,059 Total Net Position - As Reported Change in Accounting Principle 655,766 (5,360) 22,966 - Total Net Position - As Adjusted 650,406 22,966 Total Net Position - Ending $ The accompanying notes are an integral part of the financial statements. 26 615,445 $ 27,025 CITY OF MESA, ARIZONA EXHIBIT A-9 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Business-type Activities Enterprise Fund Cash Flows From Operating Activities: Cash Received from Customers Cash Received from Users Cash Payments to Suppliers Cash Payments to Employees $ Net Cash Provided By Operating Activities 311,991 (95,112) (49,063) Governmental Activities Internal Service Funds $ 167,816 99,829 (86,422) (10,647) 2,760 Cash Flows From Noncapital Financing Activities: Intergovernmental Transient Occupancy Tax Other Non-Operating Expense Transfers Out to Other Funds 4,761 851 282 (109,520) - Net Cash Provided By (Used For) Noncapital Financing Activities (103,626) - Cash Flows From Capital and Related Financing Activities: Proceeds from Bond Sales 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 Contributions from Other Governments Developer Contributions 36,643 (130,861) 24,867 (22,591) (44,316) 7,617 (58) 93 - Net Cash Used For Capital and Related Financing Activities (128,641) 35 Cash Flows From Investing Activities: Interest Received on Investments 1,385 355 Net Cash Provided By Investing Activities 1,385 355 Net Change in Pooled Cash and Investments (63,066) 3,150 Total Cash and Investments at Beginning of Year 260,385 62,750 Total Cash and Investments at End of Year $ The accompanying notes are an integral part of the financial statements. 27 197,319 $ 65,900 (Continued) CITY OF MESA, ARIZONA EXHIBIT A-9 (Continued) STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Business-type Activities Enterprise Fund Reconciliation of Operating Income to Net Cash Provided By Operating Activities: Operating Income $ 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 Expenses Total Adjustments Net Cash Provided By Operating Activities $ Noncash Transactions Affecting Financial Position: Contributions of Capital Assets Gain on Disposal of Capital Assets Amortization of Bond Premium Amortization of Deferred Amounts on Refunding $ The accompanying notes are an integral part of the financial statements. 28 84,807 Governmental Activities Internal Service Funds $ 3,583 63,914 330 3,071 4,018 7,355 4,651 (211) 268 (144) (127) (939) 83,009 (823) 167,816 16,490 18,697 (3,282) 2,393 $ 2,760 CITY OF MESA, ARIZONA EXHIBIT A-10 FIDUCIARY FUNDS STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES JUNE 30, 2014 (in thousands) Payroll Agency ASSETS Pooled Cash and Investments $ 14,061 Total Assets $ 14,061 LIABILITIES Accounts Payable Accrued Payroll Payable Total Liabilities $ $ 1,719 12,342 14,061 The accompanying notes are an integral part of the financial statements. 29 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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 454,981 within an area of approximately 141 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 units, the City of Mesa Municipal Development Corporation and Community Facilities District, collectively referred to as “the financial reporting entity”. In accordance with GASB No. 14, and as amended by GASB 61, the component units discussed below have been included in the City’s reporting entity because of the significance of their operational or financial relationship with the City. City of Mesa Municipal Development Corporation (“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 are not prepared. Community Facilities District (“District”) is a municipal corporation political subdivision of the State of Arizona that is organized to provide a vehicle for financing certain public infrastructure that is necessary for development of the land within the boundaries of the District. The City Council serves as the board of directors of the District and the City Manager of the City currently serves as the District Manager. Although it is legally separate from the City, the District is reported as if it is part of the primary government because the District’s governing body is substantively the same as the governing body of the City and management of the City has operational responsibility for the District. Separate financial statements for the District are not prepared. 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 30 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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. 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. In addition, AMWUA contracts with the cities jointly using a multi-city sanitary sewer system to perform certain accounting, administrative and support services. c. Basic Financial Statements Government-wide Financial Statements: The government-wide financial statements (the statement of net position 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 position reports all financial and capital resources of the City, excluding fiduciary funds. It is presented in a format of assets plus deferred outflows of resources less liabilities, plus deferred inflows of resources, equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be presented in three components: net investment in capital assets; restricted and unrestricted. Net investment in capital assets 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 position 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. Unrestricted net position are those not otherwise classified as restricted, and 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 position is available. 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 (Continued) 31 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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. Non-major 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. 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 unearned revenue. Expenditure-driven 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 unavailable revenue. (Continued) 32 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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 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. The proprietary fund financial statements distinguish operating revenues and expenses from nonoperating 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. Fiduciary Funds Financial Statements: 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 governmentwide 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) 33 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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 City reports the following non-major governmental funds: Ten non-major Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specific purposes. Six 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. Seven 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 Cityowned 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. f. 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. (Continued) 34 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 The legally adopted budget consists of all funds except the Agency Fund. Capital Projects are budgeted as one item and governmental debt service expenditures are budgeted in the Special Revenue Funds or Debt Service Fund. A budget schedule for the General Fund is presented in the Required Supplementary Information Section, and the other funds are located in the Supplementary Information Section. 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 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 17, 2013. g. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions that affect the reported amounts of assets, liabilities, and net position, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. h. 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. 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 are stated at fair value. Fair value is based on quoted market prices as of the valuation date. i. Inventory Inventories consist of expendable supplies held for consumption. 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. (Continued) 35 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 j. 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. 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. 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 straight-line 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 5-50 Years 3-30 Years 6-15 Years 5-50 Years Gain or loss is recognized when assets are retired from service or are otherwise disposed of. Capital assets transferred between funds are transferred at their net book value (cost less accumulated depreciation) or net realizable value, if lower, as of the date of the transfer. k. Compensated Absences Vacation, compensatory time and sick leave benefits are accrued as liabilities as employees earn the benefits to the extent that they meet both of the following criteria: 1) the City’s obligation is attributable to employees’ services already rendered; and 2) it is probable that the City will compensate the employees for the benefits through paid time off or some other means, such as cash. For governmental funds a liability for vacation, compensatory time and sick leave are reported only if they have matured, for example, as a result of employee resignations and retirements. The entire amount of accumulated unpaid vested vacation pay, compensatory time 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. (Continued) 36 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 l. Reserve for Loss and Loss Adjustment Expenses The Property and Public Liability, Workers’ Compensation and Employee Benefits Internal Service Funds establish claim liabilities based on actuarial estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. Adjustments to claim liabilities are charged or credited to expenses in the periods in which they are made. m. Long Term Obligations In the government-wide financial statements and the proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuance are reported as other financing uses. n. 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 restricted classifications and Committed, Assigned, and Unassigned represent unrestricted classifications. Nonspendable fund balance includes amounts that cannot be spent because either 1) it is not in a spendable form, such as inventory or prepaid items or 2) legally or contractually required to be maintained intact. Restricted fund balance 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) 37 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 o. 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. p. 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, 2014 and are made in accordance with State Statutes. q. 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 2013-2014, current property tax collections were $21,755,083 or 98.45% 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 unavailable revenue. The receivable at June 30, 2014 was $611,487 of which $298,841 was recorded as revenue and $312,646 as unavailable revenue. (Continued) 38 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 r. New Accounting Pronouncements GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2012. The City has implemented this statement in fiscal year 2014, see Note 18 for the current year effect of implementing GASB Statement No. 65. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, improves accounting and financial reporting for pensions. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2014. The City will implement this Statement in fiscal year 2015. GASB Statement No. 69, Government Combinations and Disposals of Government Operations, establishes accounting and financial reporting standards related to government combinations and disposals of government operations. As used in this Statement, the term government combinations includes a variety of transactions referred to as mergers, acquisitions, and transfers of operations. The requirements of this Statement are effective for fiscal periods beginning after December 15, 2013. The City will implement this Statement in fiscal year 2015. GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, improves accounting and financial reporting by state and local governments that extend and receive nonexchange financial guarantees. The requirements of this Statement are effective for fiscal periods beginning after June 15, 2013. The City implemented for fiscal year 2014 with no impact to this Statement. Although expected to be significant, the City has not fully determined the effects that implementation of Statement No. 68 will have on the City’s financial statements. The City has also not fully determined the effects that implementation of Statement No. 69 will have on the City’s financial statements. 2. RECONCILIATION OF GOVERNMENTAL FUND GOVERNMENT-WIDE FINANCIAL STATEMENTS FINANCIAL STATEMENTS TO 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. (Continued) 39 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Reconciliation of the Governmental Funds Balance Sheet to the government-wide Statement of Net Position (in thousands): T otal Governmental Funds Asse ts Pooled Cash and Investments Account and Misc Receivables, Net Accrued Interest Receivable Due from Other Governments Due from Other Funds Advances from Other Funds Inventory Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with T rustee Accounts Receivable Due from Other Governments Investment in Joint Ventures Capital Assets T otal Assets $ De fe rre d O utflows of Re source s Deferred amounts on refundings T otal Deferred Outflows of Resources Long-term Assets/ Liabilities(1) 194,047 23,295 459 35,842 286 1,825 1,154 526 $ 7,818 61,857 10,312 5,961 68,655 412,037 125,577 1,280,897 1,406,474 - 4,949 4,949 Internal Service Funds(2) $ Reclassifications and Eliminations 65,900 2,105 89 5 5,841 715 1,658 76,313 $ - (286) (1,825) (2,111) Statement of Net Position T otal $ 259,947 25,400 548 35,847 5,841 1,869 526 7,818 61,857 10,312 5,961 68,655 125,577 1,282,555 1,892,713 - 4,949 4,949 T otal Assets and Deferred Outflows of Resources $ 412,037 $ 1,411,423 $ 76,313 $ (2,111) $ 1,897,662 Liabilitie s Warrants Outstanding Accounts Payable Other Accrued Expenses Due T o Other Funds Advances to Other Funds Customer and Defendant Deposits Compensated Absences Restricted Bond Interest Payable Restricted Unearned Revenue Matured Bonds Payable Long-term Liabilities T otal Liabilities 3,459 20,915 9,261 286 1,825 8,099 507 11,731 10,651 50,203 116,937 $ 927,464 927,464 $ 532 2,100 37,277 9,379 49,288 $ (286) (1,825) (2,111) $ 3,991 23,015 46,538 8,099 507 11,731 10,651 50,203 936,843 1,091,578 $ Deferred Inflows of Resources Unavailable Revenue 6,453 6,453 T otal Deferred Inflows of Resources Fund Balance /Ne t Position T otal Fund Balance/Net Position T otal Liabilities and Fund Balance/Net Position (6,453) (6,453) 288,647 $ 490,412 412,037 $ 1,411,423 $ - - - 27,025 - 806,084 76,313 $ (2,111) $ 1,897,662 (Continued) 40 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (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 position includes those capital assets among the assets of the City as a whole. Costs of capital assets Accumulated depreciation $2,026,310 (745,413) $1,280,897 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 position for the City as a whole. Investment in joint ventures $ 125,577 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 $ 461,216 77,835 72 25,462 344,159 18,720 $ 927,464 For current refundings and advance refundings resulting in defeasance of debt reported by governmental activities, the difference between the reacquisition price and the net carrying amount of the old debt should be reported as a deferred outflow of resources or a deferred inflow of resources. Deferred charge on refunding $ 4,949 Unavailable revenues shown on the governmental fund statements are not deferred on the statement of net position. Unavailable property tax revenues Unavailable special assessment revenue Unavailable rehabilitation loan revenue Amounts due from tenants not yet available $ $ 313 5,886 73 181 6,453 (2) 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 position, but are not included on the governmental funds balance sheet. Total $ 27,025 (Continued) 41 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities (in thousands): T otal Governmental Funds Re ve nue s and O the r Source s Revenues: Sales T axes Property T axes Occupancy T axes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Other Sources: T ransfers In Face Amount of Bonds Issued Premiums on Issuance of Bonds T otal Revenue and Other Sources $140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 $ Expe nditure s/Expe nse s and O the r Financing Use s Expenditures/Expenses: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Interest on Bonds Interest on Leases Interest on Notes Cost of Issuance Capital Outlay Other Financing Uses: T ransfers Out T otal Expenditures\Expenses & Other Financing Uses Net Change for the Year $ 141,909 40,800 430 601,608 Long-term Revenues/ Expenses(1) $ $ Capital Related Items(2) Internal Service Funds(3) Long-term Debt (4) 49 (662) 78 $ $ $ (535) $ 68,855 $ 19,904 $14,384 20,540 7,017 67,428 $7,071 5,932 2,147 691 68,855 - 377 18,579 948 $75,077 231,364 38,788 56,573 $7,308 20,518 1,645 2,058 71,015 18,907 7 4,790 727 102,657 - 32,389 - - - 632,294 31,529 6,712 15,841 $ 62,143 $ 4,063 (30,686) $ (32,064) (102,657) - Eliminations (5) $ - Statement of Activities $ (40,800) (430) $ (41,230) (32,389) $ (32,389) $ $ $ $ - (21) (740) (322) (1,050) (71,015) - - - (73,148) $ 31,918 - $ 103,819 277,614 49,275 125,700 (32,389) 18,907 7 4,790 727 - (32,389) 580,839 - $ (Continued) 42 140,567 22,549 1,919 400 18,797 185,303 32,106 9,890 966 88,646 5,550 109,520 616,213 35,374 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (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 Rehab Loan Program &Tenant Revenue Total $ 49 (662) 78 $ (535) 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) $ (3,093) (28,436) $ (31,529) When capital assets that are to be used in the governmental activities are purchased or constructed 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 position decreases by the amount of depreciation expense charged for the year. Capital outlay for capital assets Depreciation expense Total $ 72,325 (78,992) $ (6,667) The net effect of miscellaneous transactions involving capital assets (donations, transfers and disposals) and investment in joint venture activity is to increase net position. Donated capital Change in equity interest for joint venture Loss on disposal of capital assets Total (3) $ 27,653 41,202 (45) $ 68,810 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 Change in net position $19,904 (15,841) $ 4,063 (Continued) 43 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (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 Community Facility District Bonds Principal repayments Total $ (37,550) (3,250) 71,015 $ 30,215 Governmental funds report bond premiums and deferred amounts relating to refunding when first issued. In the statement of activities these amounts are amortized. Amortization of deferred refunding amounts Amortization of bond premiums Premiums on bonds Total (5) $ (1,259) 3,392 (430) $ 1,703 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 $ (32,389) 32,389 $ - (Continued) 44 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 3. FUND BALANCE As of June 30, 2014 the fund balance details by classification are listed below (in thousands): Fund Balances: Nonspendable: Prepaid Costs Advances to Other Funds Nonspendable Sub-total Non-Major Governmental Funds General Fund $ 1,131 1,825 2,956 $ 23 23 Total Governmental Funds $ 1,154 1,825 2,979 Restricted: Debt Service Capital Projects Quality of Life Projects Streets Projects Public Safety Cultural-Recreational Community Environment Court Vehicle Replacement Restricted Sub-total 184 4 188 78,208 58,843 3,704 44,152 2,649 346 1,184 798 725 190,609 78,208 58,843 3,704 44,152 2,649 530 1,188 798 725 190,797 Committed To: Debt Service Capital Projects Cultural-Recreational Public Safety Building Safety Community Environment Vehicle Replacement Committed To Sub-total 1,347 137 1,484 370 6,631 1,752 3,396 6,499 2,731 21,379 370 6,631 1,752 3,396 1,347 6,636 2,731 22,863 Unassigned Total Fund Balances 72,683 $ (675) 77,311 $ 211,336 72,008 $ 288,647 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, 2014 as reported in Exhibit B-3 is 23% of General Fund expenditures budgeted for fiscal year 2014-2015. (Continued) 45 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 4. POOLED CASH AND INVESTMENTS At year-end, City cash totaled $5,115,925 which included $260,065 of petty cash. The carrying amount of the City’s deposits was $4,855,860 and the bank balance was $1,367,744. The entire balance was covered by federal depository insurance. The difference of $3,488,116 represents deposits in transit 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 offer four investment pools to participate in which are overseen according to Arizona State Statute by the State Board of Deposit. The City of Mesa participates in State Treasurer Investment Pools 7 and 700. Pool 7 is a short-term fund and Pool 700 is a medium-term fund; both funds invest only in products backed by the full faith and credit of the United States Government. At June 30, 2014 Pool 7 had a Net Asset Value of $1 per share and Pool 700 had a Floating Net Asset Value of $1.007 per share. The Pools carried weighted average credit ratings of AAA and AA+ respectively. 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’s investments at June 30, 2014 are as follows (in thousands): Investment Maturities (in Years) Investment Type U.S. Treasuries U.S. Agencies: Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal National Mortgage Assn Federal Farm Credit Bank City of Mesa Special Improvement District Bonds JP Morgan MMF Total Fair Value $ $ 240,874 Less Than 1 $ 12,976 1-2 $ 128,263 More than 2 $ 99,635 25,015 15,180 44,604 7,976 6,065 8,675 4,107 - 12,907 6,505 31,112 7,976 6,043 2,623 277 336,549 343 277 32,443 359 187,122 1,921 116,984 $ $ 9,385 - $ Concentration of Credit Risk % 71.57 % 7.43 4.51 13.25 2.37 0.78 0.08 100.00 % (Continued) 46 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Total Pooled City Cash and Investments at fair value are as follows (in thousands): Cash on Hand Carrying Amount of City Deposits Investments in Local Govt Invest Pool Repurchase Agreement Cash with Trustee (1) Cash with Fiscal Agent (2) Long-Term Investments Pooled Cash and Investments Less: Cash in Agency Fund Total City Pooled Cash and Investments $ $ 260 4,856 38,690 47,613 12,747 110,599 336,549 551,314 (14,061) 537,253 (1) Represents bond and note proceeds held with trustee in compliance with bond/note agreements. Proceeds are invested in the Local Govt Investment Pool and are used by the City for authorized capital projects. (2) Represents cash sent by the City to fiscal agents on June 30, 2014 for debt service payments due to bondholders on July 1, 2014. 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 2013-2014 of $698,706. This amount takes into account all changes in fair value (including purchases and sales) that occurred during the year. (Continued) 47 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 5. 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 (in thousands): Fund Governmental Activities: General Fund: Taxes Courts Other Customers Due from Other Governments: State Shared Revenues Other Non-Major Governmental Funds: Taxes Other Customers Restricted-Spec. Assessments Restricted-Other Restricted-Property Taxes Restricted-Due from Other Governments Due from Other Governments Internal Service Funds Customers Due from Other Governments Total Governmental Activities Business-Type Activities: Utility Customers Other Customers Due from Other Governments Total Business-type Activities Receivables $ 11,005 4,650 6,108 $ (2,503) (1,410) $ 8,502 4,650 4,698 - 5,465 3,585 3,592 1,853 5,886 75 611 68,044 26,792 - 3,592 1,853 5,886 75 611 68,044 26,792 26,878 3,976 2,992 33,846 $ $ Net 5,465 3,585 2,105 5 139,776 $ Allowance - $ $ $ (3,913) (1,102) (496) (1,598) $ $ $ 2,105 5 135,863 25,776 3,480 2,992 32,248 (Continued) 48 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Additionally, governmental funds record unearned revenue when resources have been received, but not yet earned At the end of the current fiscal year, the various components of unavailable and unearned revenue reported in the governmental funds were as follows (in thousands): General Fund Unearned Revenue Mesa Arts Center advanced ticket sales Grants received prior to meeting all eligibility requirements Amounts paid in advance $ 770 $ 125 895 Non-Major Funds $ 37 $ 1,900 7,819 9,756 Non-Major Funds Unavailable Revenue Rehabilitation Revolving Loans not yet due Amounts due from tenants not yet available Delinquent Property Taxes Special Assessments not yet due $ $ 73 181 313 5,886 6,453 Unbilled Accounts Receivable Unbilled utility service receivables are recorded in the year in which the services are provided. At June 30, 2014, unbilled utility service receivables are recorded in the Enterprise Fund as follows (in thousands): Electric Gas Water Wastewater Solid Waste $ $ 1,245 1,120 5,103 2,493 1,776 11,737 (Continued) 49 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 6. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The following interfund activities are included in the fund financial statements at June 30, 2014 (in thousands): Interfund Interfund Fund Receivables Payables General Fund $ 286 $ Non-major Governmental Funds 286 Total Governmental Funds $ 286 $ 286 The interfund balances at June 30, 2014 are short-term loans to cover temporary cash deficits in various funds. All interfund balances outstanding at June 30, 2014 are expected to be repaid within one year. The following advances are included in the fund financial statements at June 30, 2014 (in thousands): Advances to Other Funds $ 1,825 $ 1,825 Fund General Fund Non-major Governmental Funds Total Governmental Funds Advances from Other Funds $ 1,825 $ 1,825 The advances at June 30, 2014 are long-term loans to the Development Impact Fees fund to cover expenses which exceeded revenues received. The advances outstanding at June 30, 2014 are not expected to be repaid within one year. The following interfund transfers are reflected in the fund financial statements for the year ended June 30, 2014 (in thousands): Fund Governmental Funds: General Fund Non-major Governmental Funds Total Governmental Funds Proprietary Funds: Enterprise Fund Total Transfers Out Transfers In $ $ $ 16,080 16,309 32,389 109,520 141,909 $ 109,520 32,389 141,909 141,909 (Continued) 50 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Transfers from business-type activities to governmental activities on the government-wide statement of activities include a $90,000,000 operational subsidy from the Enterprise Fund to the General Fund. The remaining interfund transfers generally fall within one of the three following categories: 1) debt service payments made from a debt service fund but funded from an operating fund; 2) subsidy transfers; 3) open new funds and/or close old funds. 7. CAPITAL ASSETS A summary of capital asset activity, for the government-wide financial statements, for the year ended June 30, 2014 follows (in thousands): Balance July 1, 2013 Governmental Activities: Non-depreciable Assets: Land Infrastructure 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 $ Additions 278,120 22 168,373 446,515 $ 289,794 142,156 164,640 13,547 887,028 1,497,165 (74,494) (82,608) (115,878) (862) (407,965) (681,807) 815,358 $ 1,261,873 $ 19,278 3,270 77,304 99,852 $ (81,103) (81,103) 16,551 16,427 9,273 41,728 83,979 (90) (1,642) (6,516) (36) (2,547) (10,831) (8,663) (8,219) (9,453) (2,186) (50,801) (79,322) 4,657 80 1,451 6,524 19 33 8,107 (2,724) 104,509 Balance June 30, 2014 Retirements $ (83,827) $ 297,398 3,292 164,574 465,264 306,255 156,941 167,397 13,511 926,209 1,570,313 (83,077) (89,376) (118,807) (3,029) (458,733) (753,022) 817,291 $ 1,282,555 (Continued) 51 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Depreciation and Amortization expense was charged to governmental functions in the government-wide financial statements as follows (in thousands): 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 $ 12,199 17,363 5,938 43,492 330 $ Balance July 1, 2013 Business-type Activities: Non-depreciable Assets: Land Water Rights Collections of Art 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 Business-type Activities Capital Assets, net $ $ Additions 57,847 17,560 280,264 355,671 $ 130 106 117,753 117,989 79,322 Balance June 30, 2014 Retirements $ (3,810) (163,022) (166,832) $ 54,167 17,560 106 234,995 306,828 52,086 94,352 54,039 27,016 1,508,988 1,736,481 36,243 33,492 22,106 741 79,999 172,581 (594) (2,321) (2,587) (4) (1,814) (7,320) 87,735 125,523 73,558 27,753 1,587,173 1,901,742 (22,159) (42,303) (36,150) (17,203) (602,975) (720,790) 1,015,691 (1,620) (4,239) (4,748) (1,508) (51,799) (63,914) 108,667 299 1,689 2,453 518 4,959 (2,361) (23,480) (44,853) (38,445) (18,711) (654,256) (779,745) 1,121,997 1,371,362 $ 226,656 $ (169,193) $ 1,428,825 (Continued) 52 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Depreciation and Amortization expense was charged to enterprise functions in the government-wide financial statements as follows (in thousands): Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs District Cooling $ 5,942 4,675 26,161 21,124 407 1,932 489 235 887 1,615 447 $ 63,914 Construction in progress and related construction commitments are composed of the following (in thousands): Construction in Progress Governmental Activities General Government Public Safety Cultural-Recreational Community Environmental Warehouse, Maintenance & Services Total $ $ Commitments 29,515 6,449 6,754 121,604 252 164,574 $ 20,248 29,418 112,928 37,718 12,827 4,415 276 478 79 16,406 202 234,995 $ $ 1,401 3,614 2 1,437 30 6,484 Business-type Activities Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam Stadium/Fitch Complex Cubs Stadium District Cooling Total $ $ $ 211 710 138 2 18 21 5,470 12 6,582 (Continued) 53 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 For the year ended June 30, 2014, the City capitalized net interest costs of $6,280,832. Total interest expense in the Business-type Activities Enterprise Fund before capitalization was $51,084,767. Special Item – Gain on Sale of Capital Assets During the year ended June 30, 2014, the City sold land holdings in Pinal County with an historical cost of $3,809,706 for $23,329,786 which resulted in a gain of $19,520,080. In addition, the City sold various other capital assets resulting in an overall net gain of $18,696,518. While a gain on the sale of capital assets is not unusual in nature, the total net gain is reported as a special item as the City generally does not sell large amounts of land. 8. LONG-TERM OBLIGATIONS a. Changes in Long-Term Obligations The following is a summary of changes in long-term obligations (in thousands). Beginning Balances Additions Ending Balances Reductions Amounts Due Within One Year Governmental Activities: Bonds Payable: General Obligation Bonds Highway User Revenue Bonds Special Assessment Bonds with Governmental Commitment Community Facility District Total Bonds Payable Capital Leases Notes Payable Unamortized Premiums Post Employment Benefits Compensated Absences Governmental Activities Total $ $ 324,683 114,650 4,318 2,712 446,363 140 122,835 21,682 323,554 22,995 937,569 $ $ 37,550 3,250 40,800 430 43,192 24,059 108,481 $ $ (18,193) (6,945) (744) (65) (25,947) (68) (45,000) (3,392) (13,841) (20,959) (109,207) $ $ 344,040 107,705 3,574 5,897 461,216 72 77,835 18,720 352,905 26,095 936,843 $ $ 21,014 7,255 744 135 29,148 72 3,292 32,512 Business-type Activities: Bonds Payable: Revenue Bonds General Obligation Bonds Excise Tax Revenue Obligations Total Bonds Payable Notes Payable Unamortized Bond Premiums Post Employment Benefits Compensated Absences Business-type Activities Total $ $ 978,160 887 94,060 1,073,107 2,370 28,353 65,495 3,856 1,173,181 $ $ 36,385 36,385 258 6,770 3,233 46,646 $ $ (22,550) (282) (22,832) (126) (3,282) (2,170) (3,182) (31,592) $ $ 991,995 605 94,060 1,086,660 2,244 25,329 70,095 3,907 1,188,235 $ $ 23,860 131 23,991 128 601 24,720 (Continued) 54 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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 $9,379,003 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. b. Bonds Payable At June 30, 2014, long-term bonds payable consisted of: Classified in Governmental Activities on the government-wide financial statements: General Obligation Bonds Bonds Outstanding (In Thousands) $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. $ 1,413 $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. 45,968 $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. 1,500 $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. 9,425 $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 $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. 13,450 $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. 45,495 $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 (Continued) 55 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Bonds Outstanding (In Thousands) $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. $ 26,350 $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. 25,600 $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. 23,299 $8,915,000 2013 general obligation refunding serial bonds due in annual installments ranging from $30,000 to $3,250,000, plus semi-annual interest ranging from .7 percent to 5 percent through July 1, 2024. 8,885 $59,960,000 2013 general obligation serial bonds due in annual installments ranging from $1,635,000 to $12,675,000, plus semi-annual interest ranging from 1.5 percent to 4 percent through July 1, 2023. 58,325 $37,550,000 2014 general obligation serial bonds due in annual installments ranging from $1,050,000 to $5,575,000, plus semi-annual interest ranging from 2 percent to 3.6 percent through July 1, 2034. 37,550 Total General Obligation Bonds $ 344,040 Street and Highway User Revenue Bonds $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. $ 3,200 $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. 1,075 $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. 17,740 $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 semiannual interest ranging from 2.75 percent to 5.0 percent through July 1, 2023. 23,750 (Continued) 56 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Bonds Outstanding (In Thousands) $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, 2023. $ 1,175 $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 $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 $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. 29,915 $8,500,000 2013 street and highway user revenue refunding bonds, due in one installment of $8,500,000 plus semi-annual interest of 5 percent through July 1, 2024. 8,500 Total Street and Highway User Revenue Bonds $ 107,705 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. $ $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 2,345 1,229 $ 3,574 Community Facilities District $2,712,000 2013 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 1 Special Assessment Revenue Bonds, due in annual principle installments ranging from $62,000 to $95,000, plus semi-annual interest ranging from 4.6 percent to 5.3 percent through July 1, 2038. $ 2,647 (Continued) 57 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Bonds Outstanding (In Thousands) $3,250,000 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) General Obligation Bonds, due in annual principle installments ranging from $65,000 to $225,000, plus semi-annual interest ranging from 4.8 percent to 5.3 percent through July 15, 2038. Total Community Facilities District Bonds Total bonds payable recorded in governmental activities $ 3,250 $ 5,897 $ 461,216 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. $ 7 $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. 212 $ 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. 386 Total General Obligation Bonds $ 605 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. $ 3,000 $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 semiannual interest ranging from 3.40 percent to 5.25 percent through July 1, 2017. 22,310 $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. 17,890 (Continued) 58 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Bonds Outstanding (In Thousands) $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 semiannual interest ranging from 3.50 percent to 5.00 percent through July 1, 2019. $ 5,000 $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 $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. 40,325 $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 $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 $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. 58,075 $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 semiannual interest ranging from 4.0 percent to 5.25 percent through July 1, 2028. 126,965 $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 $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 $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. 8,275 (Continued) 59 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Bonds Outstanding (In Thousands) $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 $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 $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 $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 $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. 31,580 $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. 80,295 $47,290,000 2013 utility systems revenue bonds, due in one principal installment, plus semi-annual interest of 4.0 percent through July 1, 2037. 47,290 $36,385,000 2014 utility systems revenue bonds, due in two principal installments of $20,000,000 and $16,385,000, plus semi-annual interest of 4.0 percent through July 1, 2038. 36,385 Total Utility Systems Revenue Bonds $ 991,995 Excise Tax Revenue Obligations $94,060,000 2013 excise tax revenue obligation, due in annual principal installments ranging from $6,620,000 to $10,785,000, plus semi-annual interest of 5.0 percent through July 1, 2032. $ Total bonds payable recorded in business-type activities $ 1,086,660 94,060 (Continued) 60 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 The following tables summarize the City’s debt service requirements to maturity for its long term bonds payable at June 30, 2014 (in thousands). The deferred amounts on refundings are not included. Governmental Activities General Obligation Bonds Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 $ TOTALS $ Principal 21,014 17,156 17,923 41,764 13,406 76,177 95,225 61,375 $ 344,040 $ Interest 13,758 13,016 12,493 11,743 9,849 40,976 23,903 5,216 $ 130,954 $ Highway User Revenue Bonds Total 34,772 30,172 30,416 53,507 23,255 117,153 119,128 66,591 Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 474,994 TOTALS $ $ Special Assessment Bonds Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 2035-38 TOTALS $ $ Principal 744 745 745 335 335 670 3,574 $ $ Interest 178 138 98 68 48 39 569 Principal 7,255 7,585 7,900 8,375 8,715 49,350 18,525 - $ 107,705 $ Interest 5,186 4,884 4,503 4,110 3,693 11,627 1,307 - $ 35,310 Total 12,441 12,469 12,403 12,485 12,408 60,977 19,832 - $ 143,015 Community Facilities District $ Total 922 883 843 403 383 709 - Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 2035-38 $ 4,143 TOTALS $ $ Principal 135 150 155 160 165 940 1,180 1,505 1,507 5,897 $ $ Interest 293 274 270 266 261 1,191 949 623 197 4,324 Total $ 428 424 425 426 426 2,131 2,129 2,128 1,704 $ 10,221 (Continued) 61 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Business-type Activities General Obligation Bonds Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 2035-39 TOTALS $ $ Principal 131 84 67 181 34 108 - 605 Interest Revenue Bonds $ 21 18 16 13 5 9 - $ Total 152 102 83 194 39 117 - Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 2035-39 $ 82 $ 687 TOTALS $ $ Principal 23,860 24,800 26,070 31,880 34,825 165,730 209,270 262,945 212,615 991,995 $ $ Interest 47,460 46,224 45,015 43,827 42,277 187,315 143,718 90,891 19,167 665,894 $ $ Total 71,320 71,024 71,085 75,707 77,102 353,045 352,988 353,836 231,782 1,657,889 Excise Tax Revenue Obligations Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 2030-34 TOTALS Principal $ 20,870 42,355 30,835 $ $ 94,060 $ Interest 4,703 4,703 4,703 4,703 4,703 22,505 14,268 3,135 63,423 $ $ Total 4,703 4,703 4,703 4,703 4,703 43,375 56,623 33,970 157,483 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, 2014, 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, 2014 are $3,574,000. (Continued) 62 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 General Obligation Bonds The general obligation bonds are backed by the ultimate taxing power and general revenues of the City; however, $605,451 of these bonds at June 30, 2014 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 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, 2014 is (in thousands): 6% Bonds 20% Bonds $ 152,973 167,887 Total Available $ 320,860 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, 2014, the amount provided in the Replacement and Extension Funds equaled $25,273,850 which is in compliance with the bond provisions. d. Notes Payable Governmental Activities The City issued $122,835,000 of Highway Project Advancement Notes (HPAN) 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. As of June 30, 2014, $45,000,000 has (Continued) 63 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 been repaid to the City by ADOT, subsequently these HPAN notes have been paid off by the City. The remaining repayments of $77,835,000 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. 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, 2014 (in thousands): Governmental Activities Fiscal Year 2015 2016 2017 2018 2019 2020-24 2025-29 TOTALS Principal $ $ 14,085 14,800 15,525 33,425 77,835 Interest 3,892 3,892 3,892 3,188 2,447 2,527 $ 19,838 $ $ $ Total 3,892 3,892 17,977 17,988 17,972 35,952 97,673 Business-type Activities Interest Principal & Fees $ 128 $ 49 131 47 134 44 137 41 140 38 747 141 827 55 $ 2,244 $ 415 Total 177 178 178 178 178 888 882 $ 2,659 $ 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, 2014 (in thousands). (Continued) 64 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Governmental Activities Fiscal Year 2015 TOTALS Interest 3 Principal 72 $ $ 72 3 Total 75 $ 75 The assets acquired through capital leases are as follows (in thousands): Governmental Activities Asset: Machinery & Equipment Less: Accumulated depreciation Total f. $ $ 430 (277) 153 Short-term Debt The City had no short-term debt activity for the fiscal year ended June 30, 2014. 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 PhoenixMesa 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. h. Pledged Revenues I. Utility System Revenue Bonds The City has pledged future utility customer revenues, net of specified operating expenses, to repay approximately $1.865 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 2038. Annual principal and interest payments on the bonds were 44.6 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $1.658 billion. Principal and interest paid for the current year and total customer net revenues were $67,337,000 and $150,832,000, respectively. (Continued) 65 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 II. 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 40 percent of eligible revenues. The total principal and interest remaining to be paid on the bonds is $143,015,225. Principal and interest paid for the current year and total highway user tax revenues were $12,416,900 and $30,922,300, respectively. III. 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 $4,142,260. Principal and interest paid for the current year and total assessments collected were $961,400, and $861,366, respectively 9. REFUNDED, REFINANCED AND DEFEASED OBLIGATIONS 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, 2014 as reflected below is not included in the City’s financial statements (in thousands). Utility System Revenue Refunding Bond Issue dated February 1, 2002 $ 43,385 Utility System Revenue Bond Issue dated June 1, 2005 20,000 Utility System Revenue Bond Issue dated June 1, 2006 18,075 General Obligation Bond Issue dated June 9, 2005 8,705 Street and Highway User Revenue Bond Issue dated June 9, 2005 8,500 Total Refunded Bonds Outstanding $ 98,665 (Continued) 66 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 10. 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 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 $225,000 per contract year. There were no changes in insurance coverage during this fiscal year for any of the three Self-Insurance Funds. The Workers’ Compensation Fund does not have a stop loss receivable at June 30, 2014. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $763,596 with $307,416 received this current fiscal year. The Property and Public Liability Fund does not have a stop loss receivable at June 30, 2014, 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, 2014. Over the past three fiscal years the Fund has received settlements in excess of insurance coverage of $2,436,444 with $1,356,261 received this current fiscal year. 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. Changes in the balances of claims liabilities during the past two fiscal years are as follows (in thousands): Property & Public Liability Workers' Compensation Employee Benefits Total Unpaid Claims, 6/30/12 Adjustments to Reserves-FY 12-13 Claim Payments-FY 12-13 $ 13,030 1,165 (829) $ 18,718 6,675 (3,686) $ 5,587 48,062 (49,803) $ 37,335 55,902 (54,318) Unpaid Claims, 6/30/13 $ 13,366 $ 21,707 $ 3,846 $ 38,919 Adjustments to Reserves-FY 13-14 Claim Payments-FY 13-14 $ (486) (3,299) $ 4,186 (3,086) $ 53,014 (52,191) $ 56,714 (58,576) Unpaid Claims, 6/30/14 $ 9,581 $ 22,807 $ 4,669 $ 37,057 All unpaid claims are reported as current liabilities in the Statement of Net Position as the change in these amounts have already been expensed in the statement of activities. (Continued) 67 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 11. 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. The total sick leave balance recorded as a liability at June 30, 2014, is $10,616,584. 12. NET POSITION a. Restricted Net Position The government-wide statement of net position reports $103.6M of restricted net position, of which $47.9M is restricted by enabling legislation. b. Designated Net Position The net position 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 Position The deficit in the Workers Compensation Self-Insurance Fund consists of prior years’ deficit plus current year claims expenses exceeding revenues received. The City’s funding plan calls for yearly contributions from various funds to equal the years estimated claims and claim related expenses. Future claim liabilities are not considered in determining funding for each year. The deficit in the Warehouse, Maintenance and Services fund was a result of other post-employment benefit charges. (Continued) 68 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 13. 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, 2014 for these services are as follows (in thousands): Operating Revenues Functions Operating Expenses Depreciation and Amortization Other Operating Income (Loss) Electric Gas Water Wastewater Solid Waste Airport Golf Course Convention Center Hohokam /Fitch Complex District Cooling Cubs $ 31,198 38,600 112,003 66,457 47,452 3,813 1,622 2,057 36 1,142 174 $ 5,942 4,675 26,161 21,124 407 1,932 489 235 887 447 1,615 $ 22,983 26,778 40,997 21,689 32,431 2,410 2,052 2,825 1,992 970 706 $ 2,273 7,147 44,845 23,644 14,614 (529) (919) (1,003) (2,843) (275) (2,147) Total $ 304,554 $ 63,914 $ 155,833 $ 84,807 14. JOINT VENTURES The City currently participates in five joint ventures. The Greenfield Water Reclamation Plant and TOPAZ Regional Wireless Cooperative are managed by the City of Mesa, while the Subregional Operating Group, the Val Vista Water Treatment Plant, and Valley Metro Rail, Inc. are managed externally. (Continued) 69 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 The City's investment in these Joint Ventures as of June 30, 2014 is as follows (in thousands): Governmental Activities Valley Metro Rail Inc $ 124,417 TOPAZ Regional Wireless Cooperative 1,160 Subregional Operating Group Val Vista Water Treatment Plant Greenfield Water Reclamation Plant Joint Ventures Construction Deposits Total Investment in Joint Ventures $ 125,577 Business-Type Activities $ 94,259 61,974 61,561 4,805 $ 222,599 $ $ Total 124,417 1,160 94,259 61,974 61,561 4,805 348,176 Valley Metro Rail, Inc. “VMRI” The City currently participates in the Central Phoenix/East Valley Light Rail Transit (LRT) along with the cities of Phoenix, Tempe and Glendale. Valley Metro Rail, Inc. (VMRI) is the management agency that was incorporated to administer the joint agreement between the cities and has oversight responsibility for the planning, design, construction and operation of the system. The agreement provides voting rights for members of the representative cities, including passage of an annual budget. The City has ongoing financial responsibility as a result of the joint agreement including participation in the cost to construct and to operate the light rail project less any Federal reimbursements and operating fares. A total of $1,194,302,583 has been spent on this project through the fiscal year ended June 30, 2014, of which the City’s share and equity interest is $124,417,230. The City has received and accrued $56.8 million of funding from the Federal Transit Administration (FTA), Congestion Mitigation Air Quality (CMAQ) and Public Transit Funds (PTF) related to this project. 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. In May 2011, the City entered into an agreement with METRO for a developmental study to further extend the LRT system an additional two miles from Mesa Drive to Gilbert Road. Construction is expected to begin in 2016. The extension is expected to open in late 2018. Separate financial statements for the activity can be obtained through Valley Metro Rail Inc. at 101 North First Avenue, Suite 1300, Phoenix, Arizona, 85003. (Continued) 70 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 TOPAZ Regional Wireless Cooperative The City of Mesa currently participates with the City of Apache Junction, Apache Junction Fire District the Town of Gilbert, the Town of Queen Creek and Rio Verde Fire District (the Parties) in an intergovernmental agreement to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network) TOPAZ is a 700/800 MHz Network procured and built by the City of Mesa. 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 equity in the joint venture is $1,159,565 and is reflected in the governmental funds financial statements. Separate financial statements are not prepared. Total investment in the joint venture as of June 30, 2014 is (in thousands): City of Mesa Town of Gilbert City of Apache Junction Apache Junction Fire District Town of Queen Creek Rio Verde Fire District Total Joint Venture $ 1,160 255 60 29 15 5 $1,524 Wastewater Subregional Operating Group The City participates with the cities of Phoenix, Glendale, Scottsdale and Tempe in the Subregional Operating Group (SROG). SROG was formed pursuant to the Joint Exercise of Powers Agreement (JEPA) in order to govern the construction, operation and maintenance of a multi-city sanitary sewer system (the “System”). The System includes the 91st Avenue Wastewater Treatment Plant, the Salt River outfall Sewer, the Southern Avenue Interceptor and related transportation facilities. The City of Phoenix acts as the lead agency in SROG and is responsible for the planning, budgeting, construction, operation and maintenance of the plant in addition to providing 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 equity in the joint venture is $94,258,780 and is reflected in the proprietary funds financial statements. SROG has no bonded debt outstanding. 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. Water Val Vista Water Treatment Plant The City also participates with the City of Phoenix in the Val Vista Water Treatment Plant and Transmission Line. 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 (Continued) 71 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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 $61,973,625 and is reflected in the proprietary funds financial statements. The water treatment plant has no bonded debt outstanding. Separate financial statements for the activity can be obtained through the City of Phoenix, Finance Department, Financial Accounting and Reporting Division at 251 W. Washington Street, 9th Floor, Phoenix, Arizona, 85003. Greenfield Water Reclamation Project 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, 2014 is (in thousands): Mesa’s Share Gilbert’s Share Queen Creek’s Share Total Joint Venture $ 61,562 58,573 26,168 $ 146,303 15. RETIREMENT AND PENSION PLANS All benefitted employees of the City are covered by one of three pension systems. The Arizona State Retirement System is for the benefit of the employees of the state and certain other governmental jurisdictions. All benefited City employees, except sworn fire and police personnel, the Mayor and City Council, are included in the plan that is a multiple-employer cost-sharing defined benefit pension plan. All sworn fire and police personnel participate in the Public Safety Personnel Retirement System that is an agent multiple-employer 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 Defined Benefit Plan: a. Plan Description All the City’s eligible benefitted general employees participate in the Arizona State Retirement System (“ASRS”), a multiple-employer, cost-sharing defined benefit pension plan. ASRS 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. ASRS is administered in accordance with Title 38, Chapter 5 of the Arizona Revised Statutes. ASRS provides for retirement, disability, and death and survivor benefits. ASRS 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, P.O. Box 33910, Phoenix, Arizona, 85067-3910 or by calling 1-800-621-3778. (Continued) 72 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 b. Funding Policy 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. Covered employees were required by state statute to contribute for the years ended June 30, 2014, 2013, and 2012, 11.54 percent (11.30 pension plus 0.24 long-term disability), 11.14 percent (10.90 pension plus 0.24 long-term disability), and 10.74 percent (10.50 pension plus 0.25 long-term disability), respectively. The City’s covered employee contributions to the System for the years ending June 30, 2014, 2013 and 2012 were $16,909,221, $16,607,775, and $14,563,437, respectively, which were equal to the required contributions for each year. The City contributed equal amounts to ASRS for the same time period. Additionally, the City is required to pay an ASRS Alternate Contribution Rate (“ACR”) for retired members who return to work on or after July 1, 2012, in any capacity and in a position ordinarily filled by an employee of the City to mitigate the potential impact that retired members who return to work may have on the ASRS Trust Fund. The contribution rate for the year ended June 30, 2014 was 9.20 percent. The City’s ACR contributions to the System for the year ending June 30, 2014 were $80,349. Arizona State Retirement System Defined Contribution Plan: a. Plan Description Arizona Legislation passed House Bill HB 2562 which established a new defined contribution retirement plan (ASRS §38-955 Defined Contribution Retirement Plan “DC”) to cover public employees who were deemed ineligible to participate in the ASRS established Defined Benefit Plan. The plan was effective September 13, 2013. Employees participating in the new DC plan are also required to participate in the ASRS Long-Term Disability Program. The DC plan is a multiple-employer, profit sharing plan with ASRS as the Principal Sponsor and managed by Nationwide Retirement Solutions, Inc. The DC plan is administered in accordance with Title 38, Chapter 5 of the Arizona Revised Statutes. The DC plan provides for retirement, with disability, and death and survivor benefits provided through the ASRS Long-Term Disability Program. b. Funding Policy 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. Covered employees were required by state statute to contribute for the year ended June 30, 2014, 8.51 percent (8.27 contribution plus 0.24 long-term disability). The City’s covered employee contributions to the DC plan for the year ending June 30, 2014, were $26,691 which was equal to the required contributions for the year. The City contributed equal amounts to the DC plan for the same time period. (Continued) 73 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Public Safety Personnel Retirement System: a. Plan Description The City contributes to the Public Safety Personnel Retirement System (“PSPRS”), an agent multipleemployer public safety employee retirement system that acts as a common investment and administrative agent for the various sworn fire and police agencies within the state. All sworn fire and police personnel are eligible to participate in the plan. The plan provides retirement, disability benefits, and death benefits to plan members and beneficiaries. The PSPRS is jointly administered by the Fund Manager and 256 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 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). PSPRS members are required to contribute 10.35 percent of their annual covered salary. The City is required to contribute an actuarially determined rate expressed as a percent of covered salary and a distribution of the net earnings of the Fund. The City’s rates for the fiscal years ending June 30, 2014, 2013, and 2012, were 31.26 percent (29.66 pension plus 1.60 health care), 27.62 percent (25.94 pension plus 1.68 health care), and 23.12 percent (21.46 pension plus 1.66 health care), respectively, for fire personnel and 31.21 percent (29.39 pension plus 1.82 health care), 27.51 percent (25.63 pension plus 1.88 health care), and 23.34 percent (21.58 pension plus 1.76 health care), respectively, for police members. c. Annual Pension Cost Fire personnel contributed $3,193,706 ($3,159,985 regular members plus $33,721 DROP members) and police personnel contributed $6,224,577 ($6,126,569 regular members plus $98,008 DROP members) during fiscal year 2013-2014. For 2014, the City’s annual pension cost of $8,658,660 for fire and $18,474,328 for police 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, 2012 actuarial valuation using an individual entry-age actuarial cost method. The City is also required to pay a PSPRS Alternate Contribution Rate (“ACR”) for retired members who return to work in any capacity and in a position ordinarily filled by an employee of the City, unless the retired member is required to participate in another state retirement system and the retired member returned to work before July 20, 2011. The ACR rate is equal to the portion of the total required contribution that is applied to the amortization of the unfunded actuarial accrued liability for the fiscal year beginning July 1, based on the actuarial calculation of the total required contribution for the preceding fiscal year ended on June 30. The contribution rate for the year ended June 30, 2014 was 17.07 percent for both fire and police. The City’s ACR contributions for the year ending June 30, 2014 were $28,390 for fire and $66,331 for police. (Continued) 74 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 d. Three Year Trend Information for PSPRS (Excluding health insurance subsidy) Fire Fiscal Year Ending 2012 2013 2014 Annual Pension Cost (APC) $ 5,972 7,657 8,687 Percentage of APC Contributed 100% 100 100 Net Pension Obligation $ - Annual Pension Cost (APC) $ 11,583 16,692 18,541 Percentage of APC Contributed 100% 100 100 Net Pension Obligation $ - Police Fiscal Year Ending 2012 2013 2014 e. Actuarial Methods and Assumptions The actuarial assumptions for both fire and police included (a) a rate of return on the investment of present and future assets of 8.0 percent investment rate of return, (b) projected salary increases of 5.0 percent attributable to inflation, (c) additional projected salary increases ranging from 0.0 percent to 4.0 percent per year, attributable to seniority/merit. The amortization method is a level percent of payroll closed. The actuarial value of PSPRS assets was determined using techniques that smooth the market value of assets over time. PSPRS’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll over an closed period of 30 years, 24 years remaining as of June 30, 2012 (if the actuarial value of assets exceeded the actuarial accrued liability, then the excess was amortized over an open period of 20 years). f. Funded Status and Funding Progress The funded status of the plans (excluding Health Insurance Subsidy) as of June 30, 2014 (Latest actuarial date available) is as follows: (Continued) 75 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Fire 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 $ $ $ 299,681 164,241 135,440 54.80% 30,782 440.0% Police $ $ $ 542,745 278,811 263,934 51.4% 59,688 442.2% 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. g. Annual Other Post-Employment Benefits Cost (Health Insurance Subsidy) For 2014 the City’s annual Other Post-Employment Benefits (OPEB) cost of $1,083,360 for police and $495,243 for fire was equal to the City’s required contributions. Funded Status and Funding Progress The funded status of the Health Insurance Subsidy plans as of June 30, 2014 (Latest actuarial date available) is as follows (in thousands): Fire 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 $ $ $ 7,578 7,364 214 97% 30,782 0.70% Police $ $ $ 16,585 10,193 6,392 61% 59,688 10.71% 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 2014 and the two preceding years were as follows (in thousands): (Continued) 76 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Fiscal Year Ending 2012 2013 2014 Annual OPEB Cost $ 462 490 495 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - Annual OPEB Cost $ 945 1,105 1,083 Percentage of Annual OPEB Cost Contributed 100% 100 100 Net OPEB Obligation $ - Police Fiscal Year Ending 2012 2013 2014 Elected Officials Retirement: 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 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 was closed to new enrollees December 31, 2013 per Arizona Revised Statute A.R.S. §38-801. 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 Statute) provides for periodic employer contributions at actuarially determined rates and employee contributions of 13.0 percent of their annual covered salary. Incorporated city or town employers are required to contribute an amount sufficient to meet both the normal cost of a level-cost method attributable to the EORP, plus the amount required to amortize the unfunded accrued liability for the employer. Such amounts are to be determined each year by actuarial valuation and paid as a level percent of compensation. The contribution requirements for plan members are established and may be amended by the Fund Manager, a five-member board. The City’s rates for fiscal years ended June 30, 2014, 2013, and 2012, were 39.62 percent (July 1, 2013 – December 31, 2013) and 23.5 percent (January 1, 2014 – June 30, 2014), 36.44 percent, and 29.79 percent respectively. The City’s contributions to EORP for the fiscal years ending June 30, 2014, 2013, and 2012 were $47,033, $59,877, and $49,518, respectively, which were equal to the required contributions for each year. The City’s employees contributed $19,265, $18,896, and $15,010, respectively, for the same time period. (Continued) 77 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 16. POST-EMPLOYMENT BENEFITS In addition to the pension benefits described in Note 15, 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, 2014, approximately 1,700 former employees were eligible for these benefits, an increase of 85 participants from the prior year or a 5.3% 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. The unfunded actuarial accrued annual required contribution for current retirees as well as current active members for fiscal year 2013-2014 was $33,950,603. A liability of $4,600,746 is accrued in the businesstype activities financial statements; the remaining $29,349,857 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, 2013, Membership Consisted of: Retirees and Beneficiaries Receiving Benefits Active Employees Total 1,700 2,996 4,696 (Continued) 78 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 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. For fiscal year ended June 30, 2014, the City contributed $16,010,780 to the plan (approximately 70.5 percent of total premiums). Plan members receiving benefits contributed $6,694,056 or approximately 29.5 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, 2014 (in thousands): 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 $ $ 56,339 17,507 (23,884) 49,962 (16,011) 33,951 389,049 423,000 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, 2012 through 2014 were as follows: Fiscal Year Ended 2012 2013 2014 Annual OPEB Cost 82,463 83,569 49,962 Actual Contributions 14,328 14,677 16,011 Percentage of OPEB Cost Contributed 17.4 17.6 32.0 Net OPEB Obligation 320,157 389,049 423,000 (Continued) 79 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Funded Status and Funding Progress The funded status of the plan as of July 1, 2013 was as follows (in thousands): (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 $ 650,918 $ 650,918 0% $ 360,718 180.5% 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, 2013 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 • • Dental, Mental Health, Vision 5% Retiree contribution increase Same as medical trend 8.5% in 2013-2014, grading down by 0.5% each year to an ultimate rate of 5.0% (Continued) 80 CITY OF MESA, ARIZONA NOTES TO FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 17. SUBSEQUENT EVENTS On July 10, 2014 the City issued $ 3,367,000 of 2014 Eastmark Community Facilities District No. 1 (City of Mesa, Arizona) Assessment District No. 2 Special Assessment Bonds. These bonds are due in annual principal installments ranging from $87,000 to $225,000, plus semi-annual interest ranging from 4.5 percent to 5.4 percent through July 1, 2039. On October 15, 2014 the City issued $102,945,000 of Series 2014 Utility System Revenue Refunding Bonds (refunding $101,295,904 of the Series 2002, 2003, 2005 and 2006 Utility Revenue Bonds and accrued interest). The purpose of the issuance was to take advantage of lower interest rates and reduce future payments. Arizona Legislation passed House Bill HB 2050 which closed the ASRS §38-955 Defined Contribution Retirement Plan “DC” established by HB 2562 in 2013. The effective date of the plan closure was July 24, 2014. 18. RESTATEMENT OF BEGINNING NET POSITION For the fiscal year ending June 30, 2014, GASB Statement No. 65 Items Previously Reported as Assets and Liabilities (“the Statement”) was implemented. The implementation of the statement resulted in the City eliminating the bond issuance costs that were previously capitalized and amortized over the life of the related debt. The City’s government-wide net position and proprietary fund net position as of June 30, 2013, have been restated as follows (in thousands): Governmental Activities Business-Type Activities Enterprise Fund Net Position at 06/30/13, as Previously Reported GASB Statement No. 65 adjustment $ 774,761 (4,051) $ 655,766 (5,360) $ 655,766 (5,360) Net Position at 07/01/13, as Restated $ 770,710 $ 650,406 $ 650,406 (Concluded) 81 Required Supplementary Information Chicago Cubs Spring Training Opening Day 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, 2014 (in thousands) Fire Valuation Date June 30, 2012 2013 2014 Actuarial Value of Assets $ 166,996 170,547 164,241 Actuarial Accrued Liability (AAL) $ 252,197 268,821 299,681 Actuarial Value of Assets $ 277,907 283,841 278,811 Actuarial Accrued Liability (AAL) 436,074 472,691 542,745 Percent Funded 66.2% 63.4% 54.8% Annual Covered Payroll $ 28,075 31,008 30,782 Unfunded AAL as a % of Covered Payroll 303.5% 316.9% 440.0% Annual Covered Payroll 53,991 60,097 59,688 Unfunded AAL as a % of Covered Payroll 293.0% 314.2% 442.2% Funded Ratio (a/b) 0.0% 0.0% 97.0% Annual Covered Payroll (c) 28,075 31,008 30,782 UALL as a % of Covered Payroll (( b - a ) / c ) 25.4% 23.6% 0.7% Funded Ratio (a/b) 0.0% 0.0% 61.0% Annual Covered Payroll (c) 53,991 60,096 59,688 UALL as a % of Covered Payroll (( b - a ) / c ) 28.2% 26.3% 10.7% Unfunded AAL $ 85,201 98,274 135,440 Police Valuation Date June 30, 2012 2013 2014 Percent Funded 63.7% 60.0% 51.4% Unfunded AAL 158,167 188,850 263,934 Other Post-Employment Benefits (Health Insurance Subsidy) Fire Valuation Date June 30, 2012 2013 2014 Actuarial Value of Assets (a) $ 7,364 Actuarial Accrued Liability (AAL) (b) 7,129 7,331 7,578 Unfunded ALL (UALL) (b-a) 7,129 7,331 214 Actuarial Accrued Liability (AAL) (b) 15,222 15,823 16,585 Unfunded ALL (UALL) (b-a) 15,222 15,823 6,392 Police Valuation Date June 30, 2012 2013 2014 Actuarial Value of Assets (a) $ 10,193 82 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, 2014 (in thousands) Actuarial Valuation Date July 1, 2009 July 1, 2011 July 1, 2013 Note: Actuarial Value of Assets - Actuarial Accrued Liability (AAL) 916,616 992,016 650,918 Percent Funded 0.0% 0.0% 0.0% Unfunded AAL 916,616 992,016 650,918 Annual Covered Payroll 321,012 330,113 360,718 Unfunded AAL as a Percentage of Covered Payroll 285.5% 300.5% 180.5% The Actuarial Accrued Liability decreased by 34%. The primary reason for the decrease is the cost of coverage has not increased at the rate assumed in the prior valuation and per capita costs are actually assumed to be significantly lower than previously assumed based on this favorable experience. 83 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, 2014 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Occupancy Taxes Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ Actual Budgetary Basis Final 92,311 13,767 121,550 15,025 8,828 142 103 1,813 253,539 $ 92,311 13,767 121,550 15,025 8,828 142 103 1,813 253,539 $ 87,337 25 15,356 112,304 20,829 8,012 6 65 1,498 245,432 Variance with Final Budget $ (4,974) 25 1,589 (9,246) 5,804 (816) (136) (38) (315) (8,107) Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Total Expenditures 60,424 207,672 32,677 11,900 259 312,932 62,079 210,188 33,979 11,326 4,631 322,203 69,142 205,433 32,495 8,050 7,853 322,973 (7,063) 4,755 1,484 3,276 (3,222) (770) Excess (Deficiency) of Revenues Over (Under) Expenditures (59,393) (68,664) (77,541) (8,877) Other Financing Sources (Uses): Transfers In Transfers Out Total Other Financing Sources (Uses) 96,757 (20,532) 76,225 96,757 (24,338) 72,419 109,520 (16,080) 93,440 12,763 8,258 21,021 Net Change in Fund Balances 16,832 3,755 15,899 12,144 Fund Balances - Beginning 37,511 37,511 46,359 8,848 Fund Balance - Ending $ 54,343 See accompanying note to Required Supplementary Information 84 $ 41,266 $ 62,258 $ 20,992 CITY OF MESA, ARIZONA NOTE TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) 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, 2014 on the “GAAP basis” to the “budget basis” as follows: Net Change in Fund Balance-Budget Basis Exhibit B-3 $ Basis Differences: Compensated Absences Sales Tax Accrual Unrealized Gain on Investments Net Change in Fund Balance-GAAP Basis Exhibit A-5 15,899 (172) 7,840 125 $ 85 23,692 Combining Statements Auer Precision Cleanroom NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. 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. Eastmark Community Facility District accounts for the operations of the Eastmark Community Facility District which are paid from special assessments levied against the benefited properties. 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. Grants and Special Programs accounts for federal and state grant expenditures and other City programs. The principle financing source is federal and state grant revenues. 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. 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. 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. Quality of Life Sales Tax Fund accounts for expenditures of the voter-approved sales tax to improve the quality of life for Mesa residents. 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. 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. Eastmark Capital Projects accounts for the costs of construction of drains, basins, channels and other storm sewer improvements and street improvements in the Eastmark Community Facilities District. General Capital Projects accounts for the costs of general City construction projects. Law Enforcement Construction Fund accounts for the cost of public safety facilities. Parks Bond Construction accounts for the costs of park facilities and improvements. 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. 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. 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. 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. Eastmark Debt Service accumulates monies for the payment of the Community Facility District Bonds that are issued to finance the costs of improvements which are to be paid from special assessments levied against the benefited properties. General Obligation Bond Redemption Fund accumulates monies for the payment of principal and interest requirements of the City’s General Obligation Bonds. Highway Project Advancement Notes Fund accumulates monies for payment of principal and interest requirements for the Highway Project Advancement notes. Highway User Revenue Bond Redemption Fund accumulates monies for the payment of principal and interest requirements of the City’s Highway User Revenue 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. CITY OF MESA, ARIZONA EXHIBIT C-1 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2014 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Warrants Outstanding Accounts Payable Other Accrued Liabilities Due To Other Funds Advances Due to Other Funds Customer and Defendant Deposits Payable From Restricted Assets: Accrued Bond Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Special Revenue Funds Cemetery Development Impact Fees Eastmark Community Facilities District $ $ $ $ $ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Committed Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances 6,401 85 13 6,499 - $ $ 1,150 1,825 - $ $ 4 4 - $ $ $ 4,057 6 4,063 518 149 - - 1,825 - 667 - - - - 4 4 3,396 3,396 6,499 6,499 $ 1,147 3 - Environmental Compliance 6,499 (675) (675) $ 86 1,150 $ 4 $ 4,063 EXHIBIT C-1 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Fund Mesa Arts Center Restoration Mesa Housing Authority $ $ $ $ $ $ $ 2,218 1,307 1 1,799 10 5,335 253 - $ $ 7 2,910 2,917 373 45 286 - $ $ 1,368 3 1,371 13 - $ $ Quality of Life Sales Tax Street Sales Tax Total Special Revenue Funds 794 195 3,087 - $ 2,069 1,634 1 - $ 50,095 2,073 90 3 - $ 68,153 5,301 117 7,796 13 - 73 4,149 $ 3,704 $ 52,261 73 $ 81,453 8 450 1,205 - $ $ $ - 1,288 2,907 6,124 8 2,895 4,306 286 1,825 6,124 837 1,090 704 37 50 1,063 2,726 - 10,319 1,937 17,381 - - - 254 254 - - 254 254 10 3,804 431 4,245 2,213 2,213 1,321 1,321 1,169 1,169 3,704 3,704 3 41,939 41,942 4,149 $ 3,704 $ 52,261 5,335 $ 2,917 $ 1,371 $ 87 13 52,833 11,647 (675) 63,818 $ 81,453 CITY OF MESA, ARIZONA EXHIBIT C-1 (Continued) NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2014 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Warrants Outstanding Accounts Payable Other Accrued Liabilities Due To Other Funds Advances Due to Other Funds Customer and Defendant Deposits Payable From Restricted Assets: Accrued Bond Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Capital Projects Funds Eastmark Capital Projects General Capital Projects $ 3,268 - $ 7,287 10 - 3,268 $ 7,297 $ 60 3,201 - $ $ $ $ 657 - Law Enforcement Parks Bond Construction Storm Sewer $ $ $ 17,228 17,228 18 24 - $ $ 11,286 11,286 59 66 - $ $ - - 3,261 657 42 125 - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources - - - - - FUND BALANCES Nonspendable Restricted Committed Unassigned Total Fund Balances 7 7 10 6,630 6,640 17,186 17,186 11,161 11,161 - 3,268 $ 7,297 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 88 $ 17,228 $ 11,286 $ - EXHIBIT C-1 (Continued) Capital Projects Funds Streets $ 13,884 144 18,996 321 Vehicle Replacement $ $ 33,345 $ $ $ 2,310 546 - Debt Service Funds Total Capital Projects Funds Capital Lease Redemption Eastmark Debt Service General Obligation Bond Redemption Highway Project Advancement Notes $ $ $ $ 3,633 - $ 56,586 144 18,996 10 321 3,633 $ 76,057 $ $ $ 176 - 3,280 3,837 - - $ - $ 212 126 2,649 2,987 - $ $ 71 24,667 612 25,350 - $ $ 7,466 27,352 10,312 68,043 113,173 - 2,856 176 7,117 - 70 65 135 6,474 18,193 24,667 2,352 7,819 25,000 35,171 - - - - 2,647 2,647 313 313 - 30,489 30,489 725 2,732 3,457 10 59,568 9,362 68,940 - 205 205 370 370 78,002 78,002 3,633 $ 76,057 $ 33,345 $ $ $ - 89 2,987 $ 25,350 $ 113,173 CITY OF MESA, ARIZONA EXHIBIT C-1 (Continued) NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2014 (in thousands) ASSETS Pooled Cash and Investments Accounts Receivable (Net of Allowances) Accrued Interest Receivable Due from Other Governments Prepaid Costs Deposits Restricted Assets: Pooled Cash and Investments Cash with Fiscal Agent Cash with Trustee Accounts Receivable Due from Other Governments Total Assets LIABILITIES Warrants Outstanding Accounts Payable Other Accrued Liabilities Due To Other Funds Advances Due to Other Funds Customer and Defendant Deposits Payable From Restricted Assets: Accrued Bond Interest Payable Unearned Revenue Matured Bonds Payable Total Liabilities Debt Service Funds Highway User Special Revenue Assessment Total Debt Bond Bond Service Redemption Redemption Funds Total Nonmajor Governmental Funds $ $ $ $ 1 9,681 9,682 - $ $ $ 68 31 3,239 3,338 - $ - 7,818 61,857 10,312 5,888 68,655 $ 154,530 $ $ $ - 124,739 5,445 117 26,792 23 321 7,818 61,857 10,312 5,961 68,655 312,040 8 6,175 8,143 286 1,825 6,124 2,736 6,945 9,681 99 99 11,731 7,819 50,203 69,753 11,731 9,756 50,203 94,251 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue Total Deferred Inflows of Resources - 3,239 3,239 6,199 6,199 6,453 6,453 FUND BALANCES Nonspendable Restricted Committed Unassigned Total Fund Balances 1 1 - 78,208 370 78,578 3,338 $ 154,530 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 9,682 90 $ 23 190,609 21,379 (675) 211,336 $ 312,040 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, 2014 Special Revenue Funds (in thousands) Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Cemetery Development Impact Fees Eastmark Community Facilities District $ $ $ 97 58 155 3,172 32 3,204 - Environmental Compliance $ 2 2 10,667 24 1 10,692 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Cost of Issuance Capital Outlay Total Expenditures - - 54 - 388 1,462 5,190 2,447 - 41 41 54 234 9,721 Excess (Deficiency) of Revenues Over (Under) Expenditures 155 Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Sources (Uses) - Net Change in Fund Balances 155 Fund Balances - Beginning Fund Balances - Ending 3,163 6,499 971 - - 54 (52) 971 (729) 56 37 (3,146) (3,109) 6,344 $ (52) $ 91 (675) $ 4 2,425 $ 3,396 EXHIBIT C-2 (Continued) Special Revenue Funds Grants and Special Programs Highway User Revenue Fund Mesa Arts Center Restoration Mesa Housing Authority $ $ $ $ 1,894 6,596 182 814 7 1,042 2,585 13,120 284 14 298 Street Sales Tax Total Special Revenue Funds 17,964 7 17,971 $ 20,639 80 12 20,731 $ 24,751 189 248 281 221 25,690 $ 45,390 1,894 2 3,441 55,473 11,203 1,098 429 1,042 2,814 122,786 19,263 - 3,637 314 11 12,232 5,763 25,931 6,293 48,523 19,263 7,178 23,372 12,761 99,271 1,468 2,318 23,515 1,684 4,726 1,022 118 15,984 - 166 17,742 4,564 12,114 282 16,266 384 454 78 17,986 1,006 14,657 (156) - (12,418) (12,418) 1,006 2,239 3,239 $ 30,913 9 1 30,923 Quality of Life Sales Tax 4,245 70 (156) (26) $ 2,213 $ (15) (15) - (725) (725) 37 (16,289) (16,252) 1,468 1,593 7,263 1,477 1,184 2,236 40,349 56,555 1,321 $ 1,169 $ 3,704 $ 41,942 $ 63,818 92 CITY OF MESA, ARIZONA EXHIBIT C-2 (Continued) NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Revenues: Sales Taxes Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues Capital Projects Funds Eastmark Capital Projects General Capital Projects Law Enforcement Parks Bond Construction Storm Sewer $ $ $ $ - $ - - - - 4 66 - 11 11 70 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Cost of Issuance Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Sources (Uses) Net Change in Fund Balances $ - - - - - 226 5,480 5,706 8,930 8,930 209 2,022 2,231 135 14,497 14,632 234 234 (5,636) (8,919) (2,231) (14,632) (234) (20) 3,250 49 3,279 8,293 8,293 15,655 159 15,814 10,155 103 10,258 13,583 (4,374) (234) 3,603 15,535 234 (2,357) Fund Balances - Beginning Fund Balances - Ending EXHIBIT C-2 (Continued) (626) 2,364 7,266 7 $ 6,640 93 $ 17,186 $ 11,161 - $ - Capital Projects Funds Debt Service Funds Streets Vehicle Replacement Total Capital Projects Funds Capital Lease Redemption $ $ $ $ 13,863 74 3 39 13,979 14 190 204 13,863 74 17 105 201 14,264 - - 4 - - - 157 45,009 45,166 5,871 5,871 727 82,043 82,770 7 75 (31,187) (5,667) (68,506) (75) 11,740 119 11,859 3,225 3,225 11,518 (20) 40,800 430 52,728 75 75 (19,328) (2,442) (15,778) 49,817 5,899 84,718 3,457 $ 68,940 $ 30,489 $ Eastmark Debt Service General Obligation Bond Redemption Highway Project Advancement Notes $ $ $ - 22,500 780 11 23,291 3,663 12 3,675 - - 18,193 13,087 31,280 45,000 4,790 49,790 (7,989) (46,115) 20 20 8,221 8,221 - - 19 232 (46,115) - 186 138 124,117 68 65 131 196 - $ 195 195 (1) - $ 94 205 $ 370 $ 78,002 CITY OF MESA, ARIZONA EXHIBIT C-2 (Continued) NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Debt Service Funds (in thousands) Highway User Special Revenue Assessment Bond Bond Redemption Redemption Revenues: Sales Taxes $ $ Property Taxes Occupancy Taxes Special Assessments 861 Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues 861 Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Debt Service: Principal Retirement Interest on Bonds Interest on Leases Interest on Notes Cost of Issuance Capital Outlay Total Expenditures - Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers In Transfers Out Face Amount of Bonds Issued Premium on Issuance of Bonds Total Other Financing Sources (Uses) $ 45,390 22,500 1,894 1,062 3,441 72,999 11,277 1,878 458 1,147 3,026 165,072 - 5,763 25,931 6,293 48,523 71,015 18,907 7 4,790 94,719 71,015 18,907 7 4,790 727 94,804 276,760 (12,417) (100) (66,697) (111,688) 12,418 12,418 100 100 20,834 20,834 32,389 (16,309) 40,800 430 57,310 - (45,863) (54,378) - 124,441 265,714 - $ 78,578 $ 22,500 1,056 3,663 780 12 11 28,022 744 217 961 1 Fund Balances - Beginning $ Total Nonmajor Governmental Funds 6,945 5,472 12,417 Net Change in Fund Balances Fund Balances - Ending - Total Debt Service Funds 1 $ 95 $ 211,336 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-3 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET POSITION JUNE 30, 2014 (in thousands) ASSETS Current Assets: Pooled Cash and Investments Accounts Receivable Accrued Interest Receivable Due from Other Governments Inventory Prepaid Costs Total Current Assets Warehouse, Maintenance and Services Property and Public Liability Self Insurance $ $ Capital Assets: Buildings Other Improvements Machinery and Equipment Intangibles Infrastructure Construction in Progress Less Accumulated Depreciation and Amortization Net Capital Assets 1,122 128 5 5,841 1 7,097 2,061 430 6,489 3 32 252 (7,609) 1,658 Total Assets 9,812 15 510 10,337 - 8,755 10,337 772 10 24 40 - 1 783 3,786 5,795 9,645 Long-Term Liabilities Compensated Absences Post Employment Benefits Total Long-Term Liabilities 632 8,746 9,378 - Total Liabilities 10,161 9,645 Net Position: Net Investment in Capital Assets Unrestricted Total Net Position 1,658 (3,064) (1,406) LIABILITIES AND NET POSITION Current Liabilities: Warrants Outstanding Accounts Payable Accrued Expenses Other Accrued Expenses: Estimated Liability For Claims: Incurred-Not Reported Incurred and Pending Current Portion of Compensated Absences Total Current Liabilities $ 96 $ 692 692 EXHIBIT C-3 (Continued) Workers' Compensation Self Insurance Employee Benefits Self Insurance $ $ $ 6,316 6 204 6,526 48,650 1,977 68 50,695 Total $ 65,900 2,105 89 5 5,841 715 74,655 - - 6,526 50,695 76,313 42 96 - 466 1,192 210 532 2,100 220 6,232 16,575 22,945 4,669 6,537 14,687 22,370 1 39,910 - - 632 8,746 9,378 22,945 6,537 49,288 (16,419) (16,419) 44,158 44,158 1,658 25,367 27,025 $ 2,061 430 6,489 3 32 252 (7,609) 1,658 $ 97 CITY OF MESA, ARIZONA EXHIBIT C-4 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Warehouse, Maintenance and Services Operating Revenues: Charges For Services: Warehouse Fleet Support Services Printing and Graphics Self-Insurance Contributions: Employee City State Retirement System Other Miscellaneous Revenue Total Operating Revenues $ Operating Expenses: Warehouse Fleet Support Services Printing and Graphics Administrative Costs Claims and Premiums Paid Total Operating Expenses 7,380 20,137 782 Property and Public Liability Self Insurance $ - 304 14 28,617 3,509 3,509 7,334 21,224 937 29,495 969 642 1,611 Operating Income (Loss) Before Depreciation (878) 1,898 Depreciation (330) - (1,208) 1,898 Operating Income (Loss) Nonoperating Revenues (Expense): Investment Income Gain (Loss) on Disposal of Capital Assets 6 65 - Total Nonoperating Revenues (Expenses) 6 65 Income (Loss) Before Transfers and Capital Contributions (1,202) Capital Contributions 1,963 93 Change in Net Position - (1,109) Total Net Position - Beginning 1,963 (297) Total Net Position - Ending $ 98 (1,406) (1,271) $ 692 EXHIBIT C-4 (Continued) Workers' Compensation Self Insurance Employee Benefits Self Insurance $ $ - $ 7,380 20,137 782 4,400 98 4,498 14,578 44,304 4,001 532 63,415 14,578 52,213 4,001 934 14 100,039 930 4,848 5,778 4,288 54,954 59,242 7,334 21,224 937 6,187 60,444 96,126 (1,280) 4,173 3,913 - - (1,280) (330) 4,173 3,583 28 - 284 - 377 6 28 284 383 4,457 3,966 - 93 (1,252) 4,457 4,059 (15,167) 39,701 22,966 (1,252) - $ - Total (16,419) $ 44,158 $ 27,025 99 CITY OF MESA, ARIZONA EXHIBIT C-5 INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) 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 Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Contributions Net Cash Provided by / (Used) for Capital and Related Financing Activities Cash Flows from Investing Activities: Interest Received on Investments Net Cash Provided by Investing Activities Net Increase in Cash and Cash Equivalents 28,489 (20,892) (8,210) (613) $ 3,509 (4,528) (930) (1,949) (58) 93 - 35 - - 61 61 (578) Pooled Cash and Investments at Beginning of Year Pooled Cash and Investments at End of Year Property and Public Liability Self Insurance (1,888) 1,700 11,700 $ 1,122 $ 9,812 $ (1,208) $ 1,898 Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities: Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities: Depreciation Changes in Assets and Liabilities: (Increase) Decrease in Receivables (Increase) Decrease in Inventory (Increase) Decrease in Prepaid Costs (Decrease) Increase in Accounts Payable (Decrease) Increase in Other Accrued Expenses 330 Total Adjustments Net Cash Provided by/(Used for) Operating Activities $ 100 - (128) 268 (797) 922 (97) 35 (3,785) 595 (3,847) (613) $ (1,949) EXHIBIT C-5 (Continued) Workers' Compensation Self Insurance $ 4,499 (4,274) (398) (173) Employee Benefits Self Insurance $ Total 63,332 (56,728) (1,109) 5,495 $ 99,829 (86,422) (10,647) 2,760 - - (58) 93 - - 35 27 27 267 267 355 355 5,762 3,150 42,888 62,750 (146) 6,462 $ 6,316 $ 48,650 $ 65,900 $ (1,280) $ 4,173 $ 3,583 - - (47) 53 1,101 (83) 582 823 1,107 $ (173) 330 (211) 268 (144) (127) (939) 1,322 $ 5,495 (823) $ 2,760 101 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-6 AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Balance July 1, 2013 Additions PAYROLL AGENCY FUND Assets: Pooled Cash and Investments Total Assets Liabilities: Accounts Payable Accrued Payroll Payable Total Liabilities Balance June 30, 2014 Deductions $ $ 13,390 13,390 $ $ 629,340 629,340 $ $ 628,669 628,669 $ $ 14,061 14,061 $ 1,532 11,858 13,390 $ 44,697 388,731 433,428 $ 44,510 388,247 432,757 $ 1,719 12,342 14,061 $ $ 102 $ $ Supplemental Information Higher Education Starts Here Albright College Benedictine University Upper Iowa University Wilkes University CITY OF MESA, ARIZONA EXHIBIT D-1 GRANTS AND SPECIAL PROGRAMS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Budgeted Amounts Original Revenues: Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Contributions Miscellaneous Revenues Total Revenues $ Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Total Expenditures Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ Final 300 17,700 598 32,554 239 267 387 3,062 55,107 $ 300 17,700 598 32,554 239 267 387 3,062 55,107 Actual $ 1,894 6,596 182 814 7 1,042 2,585 13,120 Variance with Final Budget $ 1,594 (17,700) (598) (25,958) (57) 547 7 655 (477) (41,987) 36,364 9,768 1,363 200 7,317 55,012 36,761 8,720 1,394 228 6,521 53,624 1,684 4,726 1,022 118 4,564 12,114 95 1,483 1,006 (477) 7,458 7,458 3,239 (4,219) 7,553 103 $ 8,941 $ 4,245 35,077 3,994 372 110 1,957 41,510 $ (4,696) CITY OF MESA, ARIZONA EXHIBIT D-2 HIGHWAY USER REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Charges for Services Investment Income Total Revenues $ Final 32,394 32,394 $ Variance with Final Budget Actual 32,394 32,394 $ 30,913 9 1 30,923 $ (1,481) 9 1 (1,471) Expenditures: Current: Community Environment Capital Outlay Total Expenditures 20,148 20,148 20,148 20,148 15,984 282 16,266 4,164 (282) 3,882 Excess (Deficiency) of Revenues Over (Under) Expenditures 12,246 12,246 14,657 2,411 (12,418) (12,418) (12,418) (12,418) (12,418) (12,418) (172) (172) 172 172 Other Financing Uses: Transfers Out Total Other Financing Uses Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ - 104 $ - - 2,239 2,411 (26) $ 2,213 (198) $ 2,213 CITY OF MESA, ARIZONA EXHIBIT D-3 MESA HOUSING AUTHORITY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Budgeted Amounts Original Revenues: Intergovernmental Charges for Services Investment Income Miscellaneous Revenues Total Revenues $ Final 32,332 1 1 32,334 $ 32,332 1 1 32,334 Expenditures: Current: Public Safety Community Environment Capital Outlay Total Expenditures 149 33,745 33,894 203 33,606 628 34,437 Net Change in Fund Balances (1,560) (2,103) 1,659 1,659 Fund Balances - Beginning Fund Balance - Ending $ 99 105 $ (444) Variance with Final Budget Actual $ 17,964 7 17,971 $ 166 17,742 78 17,986 37 15,864 550 16,451 (15) 2,088 1,184 $ 1,169 (14,368) (1) (1) 7 (14,363) (475) $ 1,613 CITY OF MESA, ARIZONA EXHIBIT D-4 QUALITY OF LIFE SALES TAX SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Licenses and Permits Investment Income Total Revenues $ Expenditures: Current: Public Safety Total Expenditures Final 19,246 19,246 19,246 19,246 Net Change in Fund Balances - Fund Balances - Beginning - Fund Balance - Ending $ $ - 106 Actual 19,246 19,246 $ 19,311 19,311 (65) $ (65) $ 20,639 80 12 20,731 Variance with Final Budget $ 1,393 80 12 1,485 19,263 19,263 48 48 1,468 1,533 2,236 2,236 3,704 $ 3,769 CITY OF MESA, ARIZONA EXHIBIT D-5 STREET SALES TAX SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2014 (in thousands) Budgeted Amounts Original Revenues: Sales Taxes Licenses and Permits Charges for Services Fines and Forfeitures Investment Income Miscellaneous Revenues Total Revenues $ Expenditures: Current: General Government Public Safety Cultural-Recreational Community Environment Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Uses: Transfers Out Total Other Financing Uses Net Change in Fund Balances Fund Balances - Beginning Fund Balance - Ending $ Final 23,033 175 94 204 71 2 23,579 $ 23,033 175 94 204 71 2 23,579 Actual $ 24,751 189 248 281 221 25,690 Variance with Final Budget $ 1,718 14 154 (204) 210 219 2,111 4,863 319 11 28,377 470 34,040 5,065 319 11 24,216 1,583 31,194 3,637 314 11 12,232 7,178 23,372 1,428 5 11,984 (5,595) 7,822 (10,461) (7,615) 2,318 9,933 (725) (725) (725) (725) (11,186) (8,340) 1,593 9,933 28,388 28,388 40,349 11,961 17,202 107 $ 20,048 (725) (725) $ 41,942 - $ 21,894 Statistical Section Riverview Park Splash Pad 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. 108 Revenue Capacity These schedules contain information to help readers assess the City’s most significant local revenue source, the sales tax. 120 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. 123 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. 131 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. 133 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 POSITION BY COMPONENTS LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) GOVERNMENTAL ACTIVITIES Net Investment in Capital Assets 2004-05 $ 2005-06 769,924 $ 765,875 $ 2006-07 791,592 $ 2007-08 794,720 Restricted 68,487 84,386 95,107 86,252 Unrestricted 62,539 85,735 128,548 125,128 Total Governmental Activities Net Position $ 900,950 $ 935,996 $ 1,015,247 $ 1,006,100 424,821 $ 390,100 $ 366,498 $ 410,074 BUSINESS-TYPE ACTIVITIES Net Investment in Capital Assets $ Restricted 101,566 89,383 96,756 94,133 Unrestricted 219,104 268,388 308,375 308,216 $ 745,491 $ 747,871 $ 771,629 $ 812,423 $ 1,204,794 Total Business-type Activities PRIMARY GOVERNMENT 1,194,745 $ 1,155,975 $ 1,158,090 $ Restricted Net Investment in Capital Assets 170,053 173,769 191,863 180,385 Unrestricted 281,643 354,123 436,923 433,344 1,646,441 $ 1,683,867 $ 1,786,876 $ Total Primary Government $ 108 1,818,523 TABLE I (Continued) 2008-09 $ 791,523 $ 2009-10 844,777 $ 2010-11 2011-12 872,302 $ 913,702 $ 2012-13 902,397 $ 2013-14 866,332 92,533 86,955 39,296 41,257 56,719 60,555 91,363 3,651 (6,376) (96,986) (184,355) (120,803) $ 975,419 $ 935,383 $ 905,222 $ 857,973 $ 774,761 $ 806,084 $ 413,944 $ 434,814 $ 430,436 $ 412,016 $ 346,352 $ 393,720 82,697 47,011 55,873 69,739 37,795 43,023 278,892 271,706 258,131 254,189 271,619 178,702 $ 775,533 $ 753,531 $ 744,440 $ 735,944 $ 655,766 $ 615,445 $ 1,205,467 $ 1,279,591 $ 1,302,738 $ 1,325,718 $ 1,248,749 $ 1,260,052 175,230 133,966 95,169 110,996 94,514 103,578 370,255 275,357 251,755 157,203 87,264 57,899 1,750,952 $ 1,688,914 $ 1,649,662 $ 1,593,917 $ 1,430,527 $ $ 109 1,421,529 CITY OF MESA, ARIZONA TABLE II CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) EXPENSES 2004-05 2005-06 2006-07 2007-08 GOVERNMENTAL ACTIVITIES: General Government $ Public Safety 48,722 $ 204,366 44,568 $ 212,011 48,201 $ 232,100 63,633 292,396 Cultural-Recreational 62,870 65,389 64,592 72,999 Community Environment 86,363 97,613 91,664 99,415 Interest in Long-term Debt 15,504 16,061 18,037 19,083 417,825 435,642 454,594 547,526 Total Governmental Activities Expenses BUSINESS-TYPE ACTIVITIES: Electric 27,119 26,817 26,281 31,612 Gas 33,830 38,743 37,826 43,247 Water 54,248 54,111 59,965 59,225 Wastewater 47,799 67,181 60,603 61,293 Solid Waste 23,864 25,070 27,891 32,877 Airport 2,120 4,194 2,721 3,317 Golf Course 2,966 2,524 2,602 3,012 Convention Center 4,260 4,822 5,667 5,447 Hohokam Stadium/Fitch Complex - - - - Cubs Stadium - - - District Cooling - Economic Investment - Total Business-type Activities Expenses Total Primary Government Expenses 67 - 196,206 $ 614,031 659,171 110 769 - 223,529 $ - 1,090 - 224,646 $ 679,240 240,799 $ 788,325 TABLE II (Continued) 2008-09 $ 2009-10 54,226 $ 290,928 54,863 $ 288,929 2011-12 59,552 $ 273,320 2012-13 57,472 $ 287,918 2013-14 105,410 $ 287,451 103,819 277,614 67,039 54,010 54,550 57,171 61,717 49,275 121,736 104,096 106,434 97,593 129,164 125,700 18,659 20,013 21,078 21,631 23,443 24,431 552,588 521,911 514,934 521,785 607,185 580,839 27,634 27,106 26,817 29,751 28,897 30,044 35,992 35,466 36,020 34,275 35,653 35,020 68,956 80,915 82,378 74,162 103,432 93,871 80,349 70,228 63,613 68,540 91,739 65,637 31,953 31,504 31,462 32,485 33,694 32,908 3,703 3,944 3,972 3,737 4,300 4,343 3,083 2,715 2,679 2,589 3,353 2,555 4,558 4,158 3,849 3,486 3,946 3,060 - 7,408 8,324 8,525 9,094 2,879 - - 15 54 - 6,201 1,000 965 974 1,081 1,153 - - 3,653 - 976 - - 257,204 $ 2010-11 809,792 264,444 $ 786,355 260,094 $ 775,028 258,578 $ 780,363 111 318,842 $ 926,027 277,671 $ 858,510 CITY OF MESA, ARIZONA TABLE II (Continued) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) PROGRAM REVENUES 2004-05 2005-06 2006-07 2007-08 GOVERNMENTAL ACTIVITIES: Charges for services: Licenses and Permits $ 18,818 $ 23,145 $ 20,128 $ 23,342 Charges for Services 13,048 17,650 22,039 23,703 Fines and Forfeitures 9,247 9,049 10,277 10,761 117 282 433 324 Operating Grants and Contributions 60,813 68,784 74,498 63,787 Capital Grants and Contributions 25,513 16,777 44,858 21,916 127,556 135,687 172,233 143,833 Electric 30,984 36,113 34,519 34,148 Gas 35,131 44,089 45,250 46,540 Water 79,725 88,498 92,007 97,559 Wastewater 46,025 49,618 55,398 53,951 Solid Waste 36,639 38,899 42,895 46,168 1,941 2,087 2,954 3,192 Other activities Total Governmental Activities Program Revenues BUSINESS-TYPE ACTIVITIES: Charges for services: Airport Golf Course 2,328 2,522 2,457 2,448 Convention Center 2,571 3,728 4,746 3,658 Hohokam Stadium/Fitch Complex - - - - Cubs Stadium - - - - District Cooling - 193 229 Economic Investment - - - - 275 141 147 11 15,586 27,692 20,724 80,570 251,205 293,442 301,290 368,474 429,129 473,523 512,307 Operating Grants and Contributions Capital Grants and Contributions Total Business-type Activities Program Revenues Total Primary Government Program Revenues $ 378,761 55 $ NET (EXPENSE)/REVENUE Governmental Activities $ Business-type Activities Total Primary Government Net Expense (290,269) $ 54,999 $ (235,270) $ 112 (299,955) $ 69,913 (230,042) $ (282,361) $ 76,644 (205,717) $ (403,693) 127,675 (276,018) TABLE II (Continued) 2008-09 $ 2009-10 13,426 $ 2010-11 11,824 $ 2011-12 12,577 $ 2012-13 13,359 $ 2013-14 17,693 $ 18,797 24,740 20,419 20,304 25,779 27,675 32,106 10,215 10,135 11,820 11,294 9,885 9,890 78 9 8 18 2,945 400 63,055 72,812 65,284 60,355 55,312 29,514 35,436 30,343 31,461 23,503 25,049 20,714 . $ 146,950 145,542 141,454 134,308 138,559 111,421 35,313 33,079 33,138 34,625 31,075 31,198 41,708 38,924 41,370 39,139 39,125 38,600 95,995 98,806 102,215 113,418 111,933 112,003 54,720 57,699 59,659 64,544 64,413 66,457 46,762 46,685 47,538 47,631 47,369 47,452 2,959 3,125 3,318 3,271 3,484 3,813 2,310 2,265 2,250 2,169 1,472 1,622 2,687 1,971 2,826 2,122 2,597 2,057 6,161 6,074 5,496 36 52 825 - 174 1,092 975 1,142 - 148 - - 5,837 - - 834 984 945 - - - 101 210 25 2,126 9,401 9,056 31,222 17,782 10,774 15,814 7,997 17,331 314,611 307,367 310,271 332,850 325,485 330,941 461,561 452,909 451,725 467,158 464,044 442,362 (405,638) $ 57,407 $ (348,231) $ (376,369) $ 42,923 (333,446) $ (373,480) $ 50,177 (387,477) $ 74,272 (323,303) $ 113 (313,205) $ (468,626) $ (469,418) 6,643 53,270 (461,983) $ (416,148) CITY OF MESA, ARIZONA TABLE II (Concluded) CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) (in thousands) GENERAL REVENUES AND OTHER CHANGES IN NET POSITION 2004-05 2005-06 2006-07 2007-08 GOVERNMENTAL ACTIVITIES: Sales Taxes $ 112,529 $ Property Taxes 128,372 $ 155,817 $ 147,763 - - - - 1,857 2,190 2,390 2,395 Unrestricted Intergovernmental Revenues 90,868 103,849 113,049 122,561 Contributions Not Restricted to Specific Programs 10,726 12,206 14,038 14,746 Occupancy Taxes Investment Income 1,905 5,431 7,825 6,282 Miscellaneous 9,741 10,052 7,054 6,679 76,360 72,902 61,440 94,121 303,986 335,002 361,613 394,547 Transfers Total Governmental Activities BUSINESS-TYPE ACTIVITIES: Occupancy Taxes - - - - Investment Income 1,579 4,819 8,125 6,546 85 Miscellaneous 554 429 694 32,678 - - - (76,360) (72,902) (61,440) (94,121) (42,018) (67,529) (52,886) (86,881) $ 261,968 $ 267,473 $ 308,727 $ 307,666 $ 13,717 $ 35,047 $ 79,252 $ (9,146) 23,758 40,794 Special Item - Gain on Sale of Capital Assets Transfers Total Business-type Activities Total Primary Government Change in Net Position Governmental Activities Business-type Activities Total Primary Government 12,981 $ 26,698 $ 114 2,384 37,431 $ 103,010 $ 31,648 TABLE II (Concluded) 2008-09 $ 2009-10 126,520 $ 2010-11 121,557 $ 2011-12 121,046 $ 2012-13 126,644 $ 2013-14 137,280 $ 140,567 - 14,318 14,244 14,234 14,354 22,549 1,808 1,581 2,148 2,019 1,903 1,919 117,543 104,580 92,613 86,103 104,462 135,075 14,741 14,757 15,610 17,171 49,569 88,646 1,896 261 617 1,503 1,692 966 15,849 13,846 7,060 8,939 7,424 5,550 96,599 65,433 83,334 83,615 83,615 109,520 374,956 336,333 336,672 340,228 400,299 504,792 - - - - 825 851 508 839 850 860 1,453 407 - - - - 288 - - - - - 18,697 (96,599) (65,433) (83,334) (83,615) (83,615) (109,520) (94,298) (64,925) (82,495) (82,765) (81,930) (88,231) $ 280,658 $ 271,408 $ 254,177 $ 257,463 $ 318,369 $ 416,561 $ (30,682) $ (40,036) $ (36,808) $ (47,249) $ (68,327) $ 35,374 (36,891) (22,002) (32,318) (67,573) $ (62,038) $ (69,126) $ 1,894 $ 115 (8,493) (75,287) (55,742) $ (143,614) $ (34,961) 413 CITY OF MESA, ARIZONA TABLE III FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2004-05 2005-06 2006-07 2007-08 GENERAL FUND Reserved (1)(2) $ Unreserved 37,872 $ 61,257 $ 77,177 $ 84,886 19,310 27,994 57,030 50,283 Nonspendable - - - - Restricted - - - - Committed - - - - Unassigned - - - - Total General Fund $ 57,182 $ 89,251 $ 134,207 $ 135,169 $ 10,335 $ 8,392 $ 5,885 $ 8,643 ALL OTHER GOVERNMENTAL FUNDS Reserved Unreserved, Reported in: Special Revenue Funds 23,499 21,746 24,627 24,922 Capital Project Funds 15,681 18,611 17,568 11,143 Nonspendable - - - - Restricted (3)(4) - - - - Committed - - - - Unassigned - - - - Total All Other Governmental Funds $ 49,515 $ 48,749 $ 48,080 $ (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. 116 44,708 TABLE III (Continued) 2008-09 $ 2009-10 51,862 $ 74,711 2010-11 4,048 $ 92,187 - $ 2012-13 - - $ - 2013-14 - $ - - 2,956 - - 405 754 1,724 - - 1,992 2,012 284 188 - - 4,898 4,992 1,185 1,484 - - 93,875 78,035 50,426 72,683 $ 126,573 $ 96,235 $ $ 17,013 $ 53,674 $ $ 2011-12 101,170 - $ 85,793 $ 53,619 $ 77,311 $ - $ - $ - 24,816 31,871 - - - - 28,442 15,724 - - - - - - 2,906 84 55 23 - - 112,538 211,279 243,831 190,609 - - 19,166 16,360 23,005 21,379 - - - 70,271 $ 101,269 $ 134,610 (1) $ 227,722 117 (1,177) $ 265,714 (675) $ 211,336 CITY OF MESA, ARIZONA TABLE IV CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) (in thousands) 2004-05 REVENUES Sales Taxes (1)(2) Property Taxes Occupancy Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Income Capital Contributions Miscellaneous $ Total Revenues 112,259 1,857 5 18,818 153,369 13,048 9,247 1,353 9,562 2005-06 $ 128,372 2,190 5 23,145 178,553 17,650 9,049 4,376 9,633 2006-07 $ 2007-08 155,817 $ 2,390 417 20,128 190,826 22,039 10,277 6,463 6,366 147,763 2,395 1,218 23,342 193,585 23,703 10,761 5,178 6,422 319,518 372,973 414,723 414,367 38,364 182,224 54,762 56,953 - 36,731 190,762 56,188 60,080 - 40,662 210,542 54,711 65,314 - 48,112 233,507 57,765 66,616 - 7,692 15,369 62 62,392 8,857 16,181 234 56 79,317 8,358 18,151 57 77,475 25,871 19,230 58 77,309 Total Expenditures 417,818 448,406 475,270 528,468 Excess of Revenues Under Expenditures (98,300) (75,433) (60,547) (114,101) 104,643 (28,066) 21,930 640 - 106,254 (32,340) 26,410 2,004 - 99,901 (33,233) 30,682 573 - 147,478 (53,960) 15,450 195 - 6,746 26,420 (26,156) 6,402 25,482 (27,475) 6,911 - 2,529 - 106,157 106,737 104,834 111,692 EXPENDITURES General Government Public Safety Cultural-Recreational Community Environment Miscellaneous Expenditures Debt Service Principal Interest Issuance Cost on Refunding Bonds 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 Proceeds from Obligations of Capital Leases Proceeds From Refunding Issue Refunding Advance Payment to Refunded Bond Escrow Agent Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a percentage of Noncapital Expenditures $ 7,857 $ 6.51% 31,304 6.86% $ 44,287 6.68% (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. 118 $ (2,409) 10.01% TABLE IV (Continued) 2008-09 $ 2009-10 2011-12 2012-13 2013-14 126,520 $ 1,808 806 13,426 191,085 24,343 10,215 2,018 14,755 121,557 $ 13,886 1,581 923 11,824 190,731 20,419 10,135 191 13,675 121,046 $ 14,274 2,148 1,069 12,577 174,781 20,304 11,820 587 7,417 126,644 $ 14,323 2,019 996 13,359 168,433 25,779 11,294 1,284 7,573 137,280 $ 14,404 1,903 897 17,693 184,823 27,675 9,885 1,501 2,264 5,940 140,567 22,500 1,919 1,062 18,797 185,303 32,106 9,890 589 1,212 4,524 384,976 384,922 366,023 371,704 404,265 418,469 36,507 230,864 53,171 72,647 - 40,113 216,026 40,150 72,081 - 38,843 215,166 42,191 68,463 - 41,083 226,429 43,904 64,404 - 74,596 226,677 37,787 55,197 - 75,077 231,364 38,788 56,573 - 36,906 18,845 28 77,899 34,846 21,186 9 539 82,530 31,690 21,211 10 29 60,173 25,513 22,643 8 870 66,951 31,519 23,433 10 1,448 91,537 71,015 23,704 727 102,657 526,867 507,480 477,776 491,805 542,204 599,905 (141,891) (122,558) (111,753) (120,101) (137,939) (181,436) 155,697 (59,106) 61,830 437 - 149,437 (66,654) 30,865 45,000 402 869 128,065 (44,418) 29,320 360 - 121,459 (38,136) 27,290 77,835 8,027 8,250 147,818 (64,203) 62,672 3,681 - 141,909 (32,389) 40,800 430 - 67,238 (74,127) 17,415 (19,889) - 197,836 147,494 - - 158,858 $ 2010-11 16,967 12.42% - 159,919 $ 37,361 13.19% 113,327 $ 1,574 $ 12.67% 77,735 11.34% 119 $ 9,555 12.20% 150,750 $ (30,686) 19.05% CITY OF MESA, ARIZONA TABLE V SALES TAX COLLECTIONS BY CATEGORY LAST TEN FISCAL YEARS (in thousands) 2004-05 Utilities $ 2005-06 6,692 $ 2006-07 (1) 7,539 $ 9,116 2007-08 $ 9,668 Communications 3,241 2,839 3,939 4,312 Publishing 1,564 1,792 1,963 1,923 367 454 478 375 Contracting 12,074 14,581 21,424 19,301 Retail Sales Printing & Advertising 64,266 74,421 85,015 77,308 Restaurants & Bars 8,484 9,418 11,726 12,039 Amusements 1,071 1,210 1,457 1,349 14,380 15,786 20,534 21,369 118 332 165 119 Rentals Miscellaneous Total $ City Direct Tax Rate 112,257 1.50% $ 128,372 1.50% $ 155,817 1.75% $ 147,763 1.75% Note: Amounts shown include penalties and interest. Occupancy tax not included. (1) During FY 2006-07, 1/4 percent of the 1/2 percent voter-approved sales tax increase that was enacted in August 1998 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 120 TABLE V (Continued) 2008-09 $ $ 9,654 2009-10 $ 2010-11 9,757 $ 2011-12 11,104 $ 2012-13 11,878 $ 2013-14 12,549 $ 12,344 3,749 3,809 4,456 4,483 4,651 1,402 1,102 999 934 866 830 280 175 342 336 434 455 15,263 10,913 8,388 9,962 12,402 13,794 63,230 63,469 60,266 62,191 66,789 69,276 10,956 10,948 11,165 11,864 12,577 12,972 1,363 1,176 1,433 1,434 1,432 1,469 20,514 20,123 22,219 22,968 24,847 24,374 107 84 674 595 732 823 126,518 1.75% $ 121,555 1.75% $ 121,046 1.75% $ 126,645 1.75% 121 $ 137,279 1.75% 4,230 $ 140,567 1.75% CITY OF MESA, ARIZONA TABLE VI DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS City Direct Rate 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 1.50 1.50 1.75 1.75 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 6.60 6.60 6.60 5.60 5.60 % * Source: City of Mesa Tax & Licensing Office *Note: The State of Arizona increased its tax to 6.60% effective 6/1/10 for a 3 year period 122 CITY OF MESA, ARIZONA TABLE VII RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (in thousands, except per capita) Governmental Activities Year 2005 Municipal Development Corporation Bonds General Obligation Bonds $ 198,770 $ 9,970 Highway User Revenue Bonds $ 120,410 Special Assessment Bonds $ 36 Community Facility District $ - Capital Leases $ Notes Payable 24,968 $ - 2006 207,860 9,970 131,950 5,049 - 23,273 - 2007 223,115 9,970 142,460 8,798 - 22,989 - 2008 221,625 9,970 142,290 8,046 - 17,503 - 2009 267,063 - 140,265 7,294 - 9,730 - 2010 273,869 - 134,545 6,550 - 5,406 45,000 2011 281,514 - 128,515 5,806 - 2,166 45,000 2012 288,669 - 121,395 5,062 - 822 122,835 2013 327,265 - 120,942 4,318 2,712 140 129,435 2014 346,860 - 112,882 3,574 5,897 72 78 (1) Information on personal income and population is presented on Table XII. 123 TABLE VII (Continued) Business-type Activities Utility System Revenue Bonds $ 549,415 655,085 Excise Tax Revenue Obligation Bonds General Obligation Bonds $ 3,290 3,290 $ Municipal Development Corporation Bonds - $ 13,500 - 9,600 Notes Payable $ 921 760 Total Primary Government Capital Leases $ 21,641 4,301 $ 942,922 1,051,139 Percentage of Personal Income (1) 9.24 % 9.97 Per Capita (1) $ 2,090 2,309 723,185 3,290 - 5,100 589 2,869 1,142,365 10.54 2,483 767,445 3,290 - - 432 1,541 1,172,141 10.68 2,529 817,530 2,957 - - 333 158 1,245,330 11.03 2,677 857,435 2,691 - - 2,964 - 1,328,460 11.49 2,843 898,800 2,221 - - 2,731 - 1,366,753 13.06 3,101 952,500 1,601 - - 2,493 - 1,495,377 14.10 3,390 973,670 887 105,079 - 2,370 - 1,666,818 16.09 3,747 987,454 605 104,499 - 2,244 - 1,564,165 14.63 3,438 124 CITY OF MESA, ARIZONA TABLE VIII RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (in thousands, except per capita) General Bonded Debt Outstanding Secondary Assessed Value (1) Year 2005 2006 $ 2,648,163 2,921,999 General Obligation Bonds $ 202,060 Less: Amounts Available in Debt Service Fund $ 211,150 Total - $ - Percentage Of Secondary Assessed Value 202,060 7.63 % 211,150 7.23 Per Capita (2) $ 448 464 2007 3,083,070 226,405 - 226,405 7.34 492 2008 4,114,527 224,915 - 224,915 5.47 486 2009 4,793,082 259,895 - 259,895 5.42 559 2010 4,749,617 276,560 - 276,560 5.82 592 2011 4,094,037 283,735 134 283,601 6.93 645 2012 3,164,277 290,270 1 290,269 9.17 658 2013 2,770,422 328,152 138 328,014 11.84 739 2014 2,559,634 347,465 372 347,093 13.56 765 Source: (1) Maricopa County Finance Department Assessor's Office. (2) Population figures are found on Table XII. 125 CITY OF MESA, ARIZONA TABLE IX DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (1) JUNE 30, 2014 (in thousands) Proportion Applicable Debt Governmental Unit to the City of Mesa Outstanding (2) Percent (2) Amount Debt repaid with property taxes Maricopa County Community College District $ Mesa Unified School District No. 4 712,735 7.94 % 276,400 Gilbert Unified School District No. 41 Queen Creek Unified School District No. 95 $ 86.40 56,591 238,810 135 26.16 35 36,565 30.96 11,321 Higley Unified School District No. 60 61,195 95.00 58,135 Tempe Union High School District No. 213 80,225 20.00 16,045 Tempe Elementary School District No. 3 97,230 47.00 45,698 3,250 100.00 3,250 148,595 7.94 11,798 Eastmark Community Facilities District Other Debt: Maricopa County Subtotal, overlapping debt 441,683 City direct debt (3) 552,895 Total Direct and Overlapping Debt $ 994,578 (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 2013/14 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, Community Facility District Bonds, Deferred Amts on refundings, Capital Leases, Highway Project Advancement Notes, and Unamortized Bond Premiums 126 CITY OF MESA, ARIZONA TABLE X LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (in thousands) 2004-05 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 $ $ $ 529,633 $ 437,658 $ 486,463 $ 59,920 584,400 $ 488,650 $ 548,570 $ 162,531 $ 616,614 $ 412,662 $ 575,193 (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. 127 922,905 207,227 $ 33.08% $ 229,184 7.16% 203,952 $ 246,872 17,688 12.14% 16.38% $ 184,984 2007-08 22,453 95,750 17.37% $ 175,320 65.82% 91,975 Total Net Debt Applicable to the 20% Limit as a Percentage of the 20% Legal Debt Limitation Total Margin Available 48,805 2006-07 115,400 69.28% Total Net Debt Applicable to 20% Limit Margin Available for Future General Obligation Bond Issues for 20% Bonds $ 110,085 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 158,890 2005-06 715,678 22.45% $ 944,862 TABLE X (Continued) Secondary Assessed Value Legal Debt Margin Calculation for Fiscal Year 2013-14 $ 2,559,634 6% Bonds (1) $ Legal Debt Limitation Debt Applicable to Limit: General Obligation Bonds Total Net Debt Applicable to Limit Margin Available for Future General Obligation Bond Issues $ 153,578 $ 287,585 2009-10 $ 13,569 $ 274,016 958,616 $ 712,290 $ 986,306 $ 949,923 $ 679,427 $ 344,040 605 344,040 152,973 958,340 240,316 818,807 $ 540,398 $ 780,714 $ 188,487 $ 632,855 $ 343,955 $ 532,442 128 320,860 2013-14 166,225 $ 166,050 554,084 $ 253,349 $ 419,399 152,973 0.39% $ 511,927 344,040 $ 54.28% $ 153,578 605 300,735 45.65% $ $ 0.11% 288,900 $ 167,887 175 0.72% 34.00% $ 189,857 $ 2012-13 1,370 278,409 28.48% $ $ 2.17% 270,496 25.70% $ 278,913 245,642 2011-12 5,326 2.13% 246,326 $ $ 6,064 4.72% $ 284,977 2010-11 511,927 605 Total Margin Available 2008-09 20% Bonds (2) $ 167,887 67.20% $ 320,860 CITY OF MESA, ARIZONA TABLE XI PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS (in thousands) Utility System Revenue Bonds Operating Revenues (1) 2004-05 $ 2005-06 Net Revenue Available for Debt Service Operating Expenses 228,503 $ 254,216 156,578 $ 71,925 174,561 Debt Service Principal $ 310 79,656 Interest $ 340 Coverage Ratio 23,445 3.03 25,844 3.04 2006-07 270,070 175,942 94,128 340 29,305 3.18 2007-08 278,366 196,130 82,236 7,960 34,658 1.93 2008-09 274,497 197,992 76,505 9,815 37,225 1.63 2009-10 275,193 194,159 81,034 10,475 40,380 1.59 2010-11 283,921 190,441 93,480 12,585 42,814 1.69 2011-12 299,356 180,296 119,060 21,365 43,465 1.84 2012-13 293,915 241,128 52,787 21,630 46,412 0.78 2013-14 295,710 203,187 92,523 22,550 51,927 1.24 Highway User Revenue Fund Revenue Bonds Highway User Fund Debt Service Revenues 2004-05 2005-06 $ 35,370 38,285 Principal $ Coverage Interest 135 $ 135 Ratio 5,400 6.39 5,830 6.42 2006-07 40,975 135 6,401 6.27 2007-08 38,512 170 6,828 5.50 2008-09 34,260 2,025 6,823 3.87 2009-10 31,791 5,720 6,691 2.56 2010-11 32,053 6,030 6,365 2.59 2011-12 27,825 3,290 5,563 3.14 2012-13 30,046 6,145 5,627 2.55 2013-14 30,923 6,945 5,472 2.49 (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. 129 TABLE XI (Continued) Special Assessment Bonds Special Assessment Collections $ Debt Service Principal Interest 6 $ 12 $ Community Facility District Bonds Community Facility District Collections Coverage Ratio 3 $ 195 0.40 $ 188 12 185 0.96 851 343 357 1.21 1,710 752 457 1.41 1,202 752 417 1.03 923 744 377 0.82 1,088 744 337 1.01 996 744 297 0.96 897 744 257 0.90 861 744 217 0.90 Municipal Development Corporation Bonds $ 65 Coverage Ratio 7 131 0.99 Highway Project Advancement Notes Excise Excise Tax Debt Service Revenues (2) $ Debt Service Principal Interest Interest Principal Coverage Tax Ratio Revenues (2) Debt Service Principal 625 40.38 - - 3,900 479 42.83 - - - - 216,897 4,500 309 45.10 - - - - 226,910 5,100 108 43.57 - - - - 203,198 9,970 17 20.35 - - - - 449 464.30 127.48 - $ 3,400 - $ - $ - - 208,547 - $ Ratio 187,580 162,556 $ Coverage Interest - - - - - 200,873 - 1,576 - - - - 199,949 - 4,312 46.37 - - - - 213,309 - 5,404 39.47 - - - - 221,355 4,790 45.78 130 45 CITY OF MESA, ARIZONA TABLE XII DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sources: (1) (2) (3) (4) (5) Population (1) 451,223 455,151 460,155 463,397 465,272 467,355 440,677 441,160 444,856 454,981 Personal Income (2) (in thousands) $ 10,203,506 10,539,477 10,840,792 10,977,412 11,288,895 11,563,297 10,465,197 10,603,281 10,361,141 10,687,959 Per Capita Personal Income (3) Median Age (3) Public School Enrollment (4) $ 22,613 23,156 23,559 23,689 24,263 24,742 23,748 24,035 23,291 23,491 32.5 32.6 32.9 33.1 33.3 33.6 32.6 34.3 34.4 35.3 74,070 74,626 74,128 73,054 70,297 67,749 66,144 65,662 64,892 64,932 Unemployment Rate (5) 2005-2013 City of Mesa Development Services (estimate), 2014 ESRI Community Analyst 2005-2010 Claritas (estimate), 2011-2013 SitesUSA (estimate), 2014 ESRI Community Analyst 2005-2010 Claritas, 2011-2013 SitesUSA, 2014 ESRI Community Analyst Mesa Public Schools AZ Dept of Economic Security. Data is Phoenix - Mesa Metropolitan Area. Beginning in 2011 unemployment rate is not seasonally adjusted. 131 3.6 % 3.8 2.9 4.3 8.0 8.7 9.0 7.5 7.2 6.5 CITY OF MESA, ARIZONA TABLE XIII PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2014 Employer Employees Rank 2005 Percentage of Total City Employment Banner Health System 9,573 1 7.71 % Mesa Public Schools 8,770 2 Boeing 4,700 3 City of Mesa 3,519 Maricopa County Government 2,644 Wal-Mart Maricopa Community College Employees Rank Percentage of Total City Employment 6,100 2 3.01 % 7.06 10,000 1 4.94 3.78 4,300 3 2.13 4 2.83 3,700 4 1.83 5 2.13 - 2,533 6 2.04 1,775 1,951 7 1.57 - 0.00 Kroger (Fry's) 1,210 8 0.97 - 0.00 Gilbert Unified School District 1,087 9 0.88 - 0.00 842 10 Aviall Inc 0.00 6 0.88 0.68 - TRW/Vehicle Safety Systems, Inc. - 0.00 1,450 7 0.72 AT&T - 0.00 2,800 5 1.38 Empire Southwest Machinery - 0.00 1,000 8 0.49 Bashas' - 0.00 860 9 0.43 Special Devices - 0.00 750 10 Total 36,829 29.66 % Source: City of Mesa Office of Economic Development 132 32,735 0.00 0.37 16.18 % CITY OF MESA, ARIZONA TABLE XIV FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2004-05 2005-06 2006-07 2007-08 Function/Program General Government 1,005 934 979 966 Police 1,325 1,311 1,332 1,306 Fire 446 454 468 472 Cultural-Recreational 511 462 445 417 Community Environment 170 161 183 181 Energy Resources 129 115 125 132 Water Resources 148 156 177 166 Solid Waste 135 138 132 136 9 11 10 9 3,878 3,742 3,851 3,785 Airport Total Source: City of Mesa Budget and Research Division 133 TABLE XIV (Continued) 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 838 835 824 870 864 880 1,282 1,240 1,163 1,158 1,163 1,173 470 455 457 473 479 482 335 329 334 332 313 317 189 184 189 184 183 178 140 122 116 115 117 117 213 232 230 233 229 238 126 124 120 117 127 125 10 10 9 9 10 10 3,603 3,531 3,442 3,491 3,485 3,520 134 CITY OF MESA, ARIZONA TABLE XV OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2004-05 2005-06 2006-07 2007-08 Function/Program Police Major Crimes 25,853 24,904 22,437 21,388 Traffic Accidents 10,121 9,205 12,184 7,578 1,386 1,605 1,428 1,200 41,689 43,073 38,003 34,207 2,021 2,595 2,875 2,456 591 676 608 567 7,738 7,820 11,792 12,976 Fire Fires Rescue or Emergency False Alarms Hazardous Conditions Other Calls Libraries 193,722 233,836 266,839 275,449 Total Attendance Number of Registered Borrowers 1,208,594 1,195,075 1,161,887 1,165,451 Access to Electronic Resources 1,835,867 2,307,051 3,029,001 2,910,088 Electric Connections 15,652 15,806 15,723 15,215 Gas Connections 45,435 48,622 50,478 51,454 131,141 133,105 133,249 133,086 93.6 94.5 89.6 85.8 137.95 131.28 128.83 125.72 114,500 116,282 116,190 116,465 38.9 41.8 38.1 38.0 Customers Served 114,112 113,146 115,305 112,632 Refuse Collected (tons) Water Connections Average Daily Consumption (mgd)* Peak Daily Consumption (mg)** Wastewater Connections Average Daily Sewage Treatment (mgd)* Solid Waste 248,255 261,369 266,817 243,208 Recyclables Collected (tons) 36,264 32,869 38,660 39,296 Green Waste Collected (tons) 16,983 17,500 18,215 17,601 Falcon Field Average Number of Aircraft Based Aircraft Operations (annual) 922 924 901 934 255,069 271,295 261,623 337,178 * mgd - millions of gallons per day ** mg - millions of gallons 135 TABLE XV (Continued) 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 18,482 17,345 16,623 16,740 16,149 14,561 6,256 5,890 5,952 6,047 6,186 6,107 1,165 1,048 981 1,012 929 1,075 32,478 34,079 38,788 42,925 43,416 44,885 2,125 1,478 1,478 1,292 1,255 1,176 663 701 478 446 454 477 11,923 12,819 11,840 11,192 11,803 9,403 306,427 352,607 220,812 142,943 166,492 196,020 1,348,555 1,367,667 1,095,196 1,143,718 1,178,137 1,166,560 3,661,261 2,542,927 1,691,966 1,566,775 1,515,299 1,541,323 14,546 14,738 15,064 15,841 13,815 16,460 51,911 52,832 53,434 55,828 55,544 58,011 132,771 133,701 134,072 135,138 136,640 137,910 79.7 72.7 76.2 81.6 78.2 76.7 108.68 111.14 114.30 122.30 115.68 117.13 116,721 117,831 118,413 119,615 120,953 122,623 36.0 33.6 33.7 33.4 33.8 33.1 112,832 113,079 115,811 118,949 119,142 121,674 234,709 217,295 223,217 209,116 215,463 217,745 37,841 36,490 35,486 34,443 34,616 34,629 18,936 18,588 19,149 17,882 19,878 18,854 873 841 789 749 700 729 283,336 248,381 221,910 222,650 190,605 276,731 136 CITY OF MESA, ARIZONA TABLE XVI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2004-05 2005-06 2006-07 2007-08 Function/Program Police Stations Stations 4 4 4 4 321 285 351 368 17 17 17 17 3 3 3 3 Developed Parks (acres) 1,149 1,184 1,184 1,180 Undeveloped Acres 1,230 1,251 1,251 1,251 12 12 12 12 6 6 6 6 1,160 1,162 1,169 1,178 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 12 296 298 303 308 1,037 1,121 1,147 1,202 2,004 2,022 2,008 2,068 97 117 117 117 1,512 1,522 1,544 1,577 56 56 60 60 69 78 68 70 2 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 Golf Courses 137 TABLE XVI (Continued) 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 4 4 4 5 6 8 330 289 290 267 267 291 17 18 18 19 20 20 3 3 4 4 4 4 1,180 1,154 1,154 1,553 1,177 1,232 1,251 1,078 1,074 705 1,104 1,157 12 12 13 9 9 9 6 6 6 6 6 4 1,182 1,184 1,190 1,303 1,307 1,418 12 12 12 1 1 1 316 321 329 438 432 440 1,223 1,243 1,247 1,240 1,256 1,256 2,104 2,127 2,136 2,270 2,284 2,315 125 125 125 125 125 125 1,598 1,606 1,613 1,652 1,677 1,677 60 60 60 60 60 60 69 69 69 70 72 72 2 2 2 1 1 1 138 Financial Services Department P.O. Box 1466 Mesa, Arizona 85211-1466 (480) 644-2275 www.mesaaz.gov